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Alberta leases 4,400 rail cars to clear oil glut

February 19, 20191:25 PM Reuters0 Comments

Alberta has leased 4,400 rail cars in its latest, multi-billion-dollar move to clear a glut of crude that depressed prices, Premier Rachel Notley said on Tuesday.

Notley, who faces a spring election, said Alberta would start putting cars into service as early as July, 2019. Canadian National Railway Co and Canadian Pacific Railway will haul a combined initial volume of 20,000 barrels per day that will reach 120,000 bpd by mid-2020.

The three-year plan will cost Alberta C$3.7 billion ($2.80 billion), consisting of buying oil, leasing rail cars, and purchasing rail and loading services. Notley claims the province will earn gross revenues of C$5.9 billion from the re-sale of oil for export and higher royalties and taxes to produce net revenues of C$2.2 billion.

Alberta's rail investment is part of a broad rescue package for its oil industry, which has struggled with high costs and an environmental toll from extraction that has spurred some foreign majors to withdraw. Pipelines have become congested due to opposition from environmental and indigenous groups that has stymied expansion projects.

About three-quarters of the cars will be the DOT-117J model, featuring thicker steel than some types. The remainder will be DOT-117R cars retrofitted to meet some of the DOT-117J standards, but a type that U.S. railroad BNSF Railway Co is phasing out after a derailment in Iowa last year.

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