Plenty of finger pointing, little transparency, in province’s $2.1B crude-by-rail losses


The Alberta government is out $2.1 billion after unloading crude-by-rail contracts signed by the previous government, but the process and the reasons for the staggering loss are mired in secrecy. 

The revelation also comes months after Premier Jason Kenney said the government had already rid itself of the contracts by selling them to the private sector at a loss of $1.3 billion.

Both the previous NDP government and the current UCP government put blame for the losses squarely on the other party. 

Kavi Bal, a spokesperson for Energy Minister Sonya Savage, said the government was finalizing agreements in February when Kenney announced the offloading of the contracts. 

“When market conditions dramatically shifted, as a result of COVID-19 and the international energy price war, the process to reassign the contracts was delayed,” he said by email.

“The NDP government should have never entered these deals and forced this type of risk onto the Albertan taxpayer. It was a terrible gamble with taxpayer dollars.”

Costs were climbing

Bal says if the government had continued to carry the contracts — leasing crude rail for transport over CP and CN rail lines — the estimated cost was $2.3 to $2.7 billion.

“To date, we have fully divested 50,000 barrels per day of crude-by-rail capacity,” he wrote. 

“This leaves approximately 70,000 bpd of contracts that require the last step of reassignment to be completed.”

A government official familiar with the process said the government had to hold on to the rail cars and crude and that the double whammy of the pandemic and the price war was the reason the government had to hold on to the contracts past February.

Storage and other costs rose throughout that time. 

Economists advised the government to proceed with offloading the contracts at a loss due to those costs, as well as a narrower price differential and poor prospects for a recovery in the near future, said the official. 

NDP response

The NDP, which entered into the contracts in 2019, says the loss of billions of dollars is the direct result of mismanagement by the current government. 

“I don’t know anyone who would want to walk into a negotiation saying ‘I will pay anything.’ But that’s what he did, because it was our money,” said Shannon Phillips during a news conference on Friday, describing Kenney’s campaign pledge to rid the province of the contracts.

She said Kenney misled Albertans when he announced the contracts had been divested in February and failed to notify the public when the costs ballooned. 

“I reject any responsibility on the part of our government to get our bitumen to market for a price that keeps people working in this province and addresses some of the very serious challenges that our oil and gas sector was facing at the time when we executed those agreements,” said Phillips when questioned about her party’s role in the losses.

Economist calls for transparency

Blake Shaffer, an economist at the University of Calgary, says the central problem is a lack of transparency. 

He says the previous government should not have entered into the contracts and he believes they deserve the bulk of the blame. He also says the NDP should have at least let Albertans know more details based on the risks involved. 

Likewise, he wants to see more accountability for the current losses, which he calls “shockingly large,” and some clarity on how the UCP government is going about selling off the contracts. 

“I understand there’s going to be lots of things that happen in government that lacks some transparency, just simply for ease of execution and commercial sensitivity,” said Shaffer. 

“But when we sign up for a two-billion-dollar loss and the time span is a little over a year, I think that’s about five hundred dollars per every Albertan. We deserve to know a little bit more about what happened.”

Shaffer says accountability and transparency is key when government tries to enter the private market and points to the current government’s investment in Keystone XL as another example of an opaque, and risky, move.





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Johny Watshon

Life is like a running cycle right! I am a news editor at TIMES. Collecting <a href="https://usanewsupdate.com/" target="_blank" rel="noopener noreferrer">News</a> is my passion. Because my visitors have the right to know the truth and perfectly.

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