Quote:
Originally Posted by Wormius
Also from that article from Kenney:
Does he think that is realistically going to happen? I think its fine, if we provide producers with transport at-cost, what is the issue?
I think Kenney is trying to kill the energy industry in Alberta with this idea, or is he expecting that CPC is going to win the election and force through a pipeline?
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Kenny's statement does have evidence to support it as Cenovous was signing long term rail deals to ship barrels. What the NDP approach does is takes the risk that a pipeline will get approved off of the table for these corporations. If a pipeline gets approved being stuck shipping at $18 would be pretty brutal when the pipeline ships at $9.
Because this risk exists and the long term liability of rail contracts is a big risk companies outside of the majors can't really take advantage.
I think the business case is pretty sound here the more I think of it. The government is betting against medium term increases in pipeline capacity. They are putting a ceiling on the diff and allowing for increased production. If additional pipeline capacity is created they profit off of the decreased differential if not they profit off of the rail shipping.
So this deal is mainly a trading of upside from pipelines in the medium term to cushion the downside risk while supporting smaller companies.
The big way the government could lose a lot of money is if WTI drops so that an $18 diff does not allow for profitable oil production in the volumes recovered to use the lines.
Do I like that the government has reached this point? Absolutely not. Does this intervention into markets make sense? Probably given the failure of governments to allow pipelines to be built.
Kenny takes an interesting position here that is consistent with his conservative positions of limit interference in markets but will be a tough sell politically as his best argument was that Notley failed the Oil Industry, now it appears that his plan is do less.