Kenney Sticks to Opposing Alberta’s Rail Plan Amid Pipeline Delay

(Bloomberg) -- United Conservative Party Leader Jason Kenney, who will be challenging Alberta Premier Rachel Notley in an election this year, continues to oppose the current government's plan to get into the crude-by-rail shipping market despite a one-year delay to a key crude oil pipeline.

Enridge Inc. on Friday said its Line 3 oil pipeline expansion won't start up until the second half of 2020, about a year later than originally planned. That makes the addition of rail capacity, which Alberta's government is committing C$3.7 billion ($2.8 billion) for, a more important driver of Canadian oil prices going forward, according to Michael Loewen, an analyst at Bank of Nova Scotia.

“Yes, incremental rail is necessary,” Kenney said in an interview. “It's especially necessary now that we have a yearlong delay on the Line 3 replacement, but this is not something the government needs to do.”

Notley last month said the province would lease tank cars and purchase service from rail providers, then buy oil from producers and ship it to refineries across North America. The province projected it would turn a C$2.2 billion profit on the venture.

Alberta's energy ministry responded to news of the Line 3 delay over the weekend by saying that the uncertainty of pipeline projects is why it implemented the crude-by-rail plan and called on Kenney to “stop his reckless attempt to sabotage this plan for his own political self-interest.”

Kenney, who will face off against Notley in an election that must happen by May 31, said that the private market already was responding to the lack of rail-shipping capacity. He said he's spoken to numerous large and small producers who agree with his assessment, without naming them.

The government's plan serves only to bid up the price of crude-by-rail service and is “a classic example of a solution in search of a problem,” Kenney said.

While Kenney has supported other government interventions into the industry, such as the federal government's purchase of the Trans Mountain pipeline and Alberta's mandated oil-production cuts, he said in an interview with Bloomberg even before the details of the rail program were announced that he was skeptical about spending public money on the venture. In a speech last month after Notley fleshed out the plan, he announced that he would cancel the entire program if he won office, saying that the program was too costly and too risky.

“We've not been closed minded about necessary government action, but on this one, we really think it's impossible to justify,” Kenney said Monday.

To contact the reporter on this story: Kevin Orland in Calgary at korland@bloomberg.net

To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Carlos Caminada, Catherine Traywick

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