News Desk

Canada mulls rail car buy

Oil being moved on rail cars in Canada

Canada’s federal government is considering a proposal from its main oil producing province of Alberta to share the cost of buying rail cars to move oil stuck in the region because of a lack of pipeline capacity, said two sources with direct knowledge of the matter.

The lack of pipelines has caused Western Canadian oil producers to struggle to move oil to refineries in the United States, resulting in record low prices for Canadian crude. That has prompted the Alberta government to take urgent measures to shore up the industry, which drives its economy and accounts for significant government revenues.

The province has proposed adding enough rail cars to ship an additional 120,000 barrels per day (bpd) of crude oil, with the first round of cars to be in service in July 2019 and the full capacity online by October 2019, running until 2022, the sources said. However, the federal government in the capital of Ottawa has some reservations about the plan, the sources added.

The Alberta government estimates the one-time capital cost of adding the extra rail capacity at about C$350 million ($264.6 million), with the total operating costs spread over three years estimated at about C$2.6 billion, the sources said.

Those costs would be partly offset by charging oil shippers to use the cars, generating some C$2 billion for the governments, they added.

The 120,000 bpd of rail capacity is nearly equal to the current amount of stranded supply.

A spokeswoman for Alberta Premier Rachel Notley would not confirm the details of the proposal, but said the premier has previously said she wanted to add 120,000 bpd of capacity.