November 22, 2018 / 5:22 PM / 23 days ago

Desperate to move crude, Alberta may buy trains alone if Canada balks

WINNIPEG, Manitoba (Reuters) - Alberta is willing to buy trains itself to help clear a backlog of crude oil if Ottawa decides not to back the Canadian province’s proposal to split the costs of new rail cars, Premier Rachel Notley said on Thursday.

Notley said Alberta had asked Prime Minister Justin Trudeau’s government to help pay for additional rail capacity to move an additional 120,000 to 140,000 barrels per day. Notley said Alberta had not received an answer from Ottawa.

Full pipelines have stranded much of Western Canada’s expanding crude output, driving down the price U.S. refineries are willing to pay.

“Ottawa needs to join Alberta to help ease the economic pain,” Notley told oil well drillers in Calgary.

“If Ottawa won’t come to the table, then we’ll get it done ourselves .. If it takes buying trains to (move more oil to market) then that’s what we’re going to do.”

Reuters reported exclusively late on Wednesday that Alberta has asked Ottawa to share the C$350 million ($265.4 million)capital cost, and C$2.6 billion in operating costs over three years of buying rail capacity to move more crude, starting in July 2019.

Sources briefed on the matter say federal officials are cool to the idea, suggesting that by the time any new cars came on line the worst of the glut should be over.

Trudeau, speaking later in Calgary, did not respond directly when asked about Alberta’s proposal. He said oil executives were focused on tax breaks and adding pipeline capacity.

“There are many things that are beyond our control here,” he told reporters, citing refinery shutdowns and the fact Canada exports almost all its oil to the United States.

“This is very much a crisis,” he added. Trudeau’s Liberals could lose Alberta seats in a federal election set for October 2019 if voters decide he did not do enough to help.

Finance Minister Bill Morneau also showed little evident enthusiasm when asked by reporters about Notley’s request, saying “that’s a discussion that might go forward in Alberta.”

Low prices are costing the Canadian economy C$80 million a day, according to Alberta. Companies that service oil producers are “on life support,” said Mark Scholz, president of the Canadian Association of Oilwell Drilling Contractors, which hosted Notley’s speech.

Several Canadian crude producers, including Cenovus Energy, have curtailed production and asked Alberta to mandate cuts for other producers.

Notley said the province is considering several options to improve prices. Mandated production is opposed by producers who own refineries to process the cheap oil, such as Suncor Energy and Imperial Oil.

The premier said Alberta would have liked greater recognition of the industry’s struggles in the federal government’s fiscal update, which Morneau delivered on Wednesday without including specific new measures to help the sector.

A spokesperson for Canadian National Railway Co could not be immediately reached. Canadian Pacific Railway declined to comment.

Notley said Alberta has short-listed six projects to partially upgrade oil, worth a combined C$5 billion if all proceed. Upgrading reduces the thickness of bitumen so it does not require blending with lighter oil to move in pipelines, freeing up space.

($1 = 1.3189 Canadian dollars)

Additional reporting by David Ljunggren in Ottawa; Editing by Frances Kerry and Sandra Maler

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