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article imageAlberta buying rail cars as Notley ponders oil production cuts

By Karen Graham     Nov 29, 2018 in Politics
With global credit ratings at stake, Canadian oil producers are waiting on a decision by Alberta over cutting oil production. The decision should come within days. Premier Rachel Notley has announced a plan to go ahead with buying two oil trains.
On Wednesday, global credit rating agency DBRS warned that if Canadian crude oil prices continue to stay low and show no improvement, it could negatively affect the credit ratings of energy companies that rely on Western Canadian oil, reports CBC Canada.
The situation with Canadian oil prices has been compounded because of global and U.S. oil prices dropping, something President Donald Trump has encouraged. According to Toronto-based DBRS, this has put oil producers under even "greater duress."
If the bottlenecks making it difficult to get Canadian oil to U.S. markets continues, producers who rely on Canadian Western crude are at risk of "a material degradation in cash flow and resulting key credit metrics."
Auburn University
"This has happened quickly and it is of concern," Victor Vallance, senior vice president of energy at DBRS said in an interview. "And if it stays this way for some period of time, it will likely cause us to take action on our ratings and lead to downgrades."
Vallance said the agency would determine within six months whether action would be necessary. The Alberta government has been working to find a short-term fix, even as the price for Alberta crude fell to about $10 a barrel - about $40 less than it should be getting when compared to other world oil prices.
At one time, Alberta was losing $40 million a day because of the price differential, but with oil prices so low today, the province is losing $80 million a day.
Rachel Notley addresses the Alberta NDP Council on January 31  2015.
Rachel Notley addresses the Alberta NDP Council on January 31, 2015.
Alberta government fights back
On Wednesday, Alberta Premier Rachel Notley announced her government’s plan to buy its own rail cars in order to get Alberta crude oil to market. The province is buying enough new rail cars to ship another 120,000 barrels of oil a day, without the federal government’s help.
Notley was in Ottawa Wednesday and made the announcement just steps away from Parliament. She did not meet Prime Minister Justin Trudeau and did not get a federal commitment to help with the rail purchase.
Notley said the federal government has not even responded to the request to help buy more rail cars. “The federal government should be at the table on this,” she said. “There’s no excuse for their absence.”
Notley's government is already in talks with a third-party to buy enough rail cars and locomotives to put two more oil trains a day on the tracks. The details of the purchases and who the government is negotiating with are being kept secret, pending the outcome, but Notley said the deal will be final within weeks.
Federal government's response
Vanessa Adams, a spokeswoman for Natural Resources Minister Amarjeet Sohi, insisted the federal government is helping in other ways. “We are focused on ensuring that every barrel of Alberta oil gets its full value," said Adams. That is why our Government has made addressing this national issue - and increasing market access in general - an urgent priority," Adams said in a statement provided to CTV.
Sohi had a meeting on Wednesday with  B.C. Metis Federation on the Trans Mountain Pipeline and how t...
Sohi had a meeting on Wednesday with B.C. Metis Federation on the Trans Mountain Pipeline and how the federal government is moving forward and responding to the court’s decision in the right way
Natural Resources Minister Amarjeet Sohi
Adams pointed to government support for Keystone XL, Line 3 and the Trans Mountain Expansion Project as evidence of this commitment.
The leader of the opposition in Alberta, Jason Kenny, gave his own speech on Wednesday, addressing the oil price differential in a press conference. “This is a real threat. I’m talking to buttoned-down, experienced, old hands in the energy sector. They’ve seen ups and downs – they’ve never seen anything like this before,” he said.
Kenny suggests that oil producers cut production by about 10 percent, or 400,000 barrels a day. This idea have been floated for the last few weeks, and during an episode of CTV’s Power Play, Notley told host Don Martin that her government has been “leaning into and considering” cutting oil production “for well over a month now."
“We anticipate being able to give people some sense of where we’re moving on this in the very immediate term,” she said. When asked what she met by "immediate," Notley said within the next few days.
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