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Why Rachel Notley’s crude-by-rail plan is risky and possibly unnecessary

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The Alberta government has once again intervened in the energy sector, signing contracts to spend $3.7 billion to ship more oil out of the province by rail, but industry experts say the plan is risky.

The province announced Tuesday it has signed contracts with CN Rail and CP Rail to lease 4,400 rail cars to move oil across North America and to international markets.

Consider it an expensive insurance policy against a repeat of last year’s oil price woes. 

In 2018, demand for crude-by-rail surged and the private sector didn’t have the capacity to boost shipments fast enough. As a result, there was a backlog of oil in the province and prices plunged, costing the industry and the government a hefty amount of potential revenue.

Premier Rachel Notley wants to prevent that from happening again. 

Hundreds of oil tank cars wait to be loaded at a terminal near the border between Alberta and Saskatchewan. (Dave Rae/CBC)

What’s different now is that by the time the majority of the government’s rail cars arrive in 2020, Alberta should have more pipeline capacity to export oil, and the private sector will likely also continue to ramp up its ability to move oil by rail.

That’s why industry experts say the government’s commitment to spend billions of dollars on crude by rail is a gamble. In fact, it may prove to be an unnecessary investment and put a significant amount of taxpayer money at risk. 

“There’s no reason why private sector companies couldn’t have done this on their own — and, in fact, they have been doing it on their own,” said Robert Cooper, with the institutional sales and trading team at Calgary-based investment firm Acumen Capital Partners.

Publicly traded Cenovus and Imperial Oil have also invested heavily in expanding crude-by-rail export capacity out of Alberta.

So it’s the rail companies that stand to benefit most, Cooper says. “What the government has basically done is bolster CN and CP’s oil-by-rail profits for the next three years.”

Full capacity by mid-2020

Under the government’s plan, the first shipments are expected to start in July and get up to full capacity by mid-2020. Provincial officials say the program will cost an estimated $3.7 billion over three years and generate a profit of $2.2 billion in increased royalties and tax revenue. But if the industry’s current investments pan out, there will be no need for the province’s plan, and it could fall short of the expected profit. 

Building new export pipelines has proven to be difficult for industry. However, the oilpatch has reason to believe there will be more pipeline space soon. 

By the time the bulk of the rail cars arrive in Alberta, Enbridge’s Line 3 pipeline replacement project is scheduled to begin operating and add 370,000 barrels of export capacity.

Canada set several records in 2018 for shipping oil by train. (Dave Rae/CBC)

Enbridge is also looking at several other ways of building more export pipeline space in the next few years.

The company wants to create about 200,000 barrels per day by using drag-reducing agents in its pipeline. Upgrades to pumping stations could add another 125,000 barrels per day of capacity.

Enbridge may also convert its Southern Lights pipeline, which currently imports diluent, to export oil. That would produce 150,000 barrels per day of pipeline space.

Added together, Enbridge could increase pipeline export capacity in Western Canada by 845,000 barrels per day in the next few years. That amount dwarfs Alberta’s rail strategy of adding up to 120,000 barrels per day of export space by train.

“It looks a little bit like an act of desperation by a government trying to be seen to be doing something, and the timing is probably going to be off,” said Cooper.

‘Not without risk’

One benefit of the government’s plan to lease rail cars is that it provides another option to oil producers in the province who can’t afford to sign their own long-term contracts with railways to ship oil.

“This is to help ensure smaller producers are not left out of the system over the next few years,” said Kevin Birn, a Calgary-based analyst with energy research firm IHS Markit.

The crude-by-rail plan follows several other initiatives by Notley and her government to help the beleaguered oilpatch, such as subsidies for new petrochemical plants, partial upgrading facilities and new refineries, while also curtailing oil production, among other measures. 

The government’s rail car plan is clearly designed to make sure more of Alberta’s oil gets to market, but the thousands of tankers may not be needed.

“It’s not without risk,” said Birn. “We are putting taxpayer dollars on the line here.”

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City staff propose ‘gold belt’ to hem in future Ottawa development

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The City of Ottawa is about to have a second marathon debate about where to allow future suburbs to be built, and this time staff propose hemming in development by creating what’s being dubbed the “gold belt.”

Eight months after city council decided to expand the urban boundary by 1,281 hectares to help house a growing population, senior city planners have released the map of which properties should be developed — and which property owners stand to see values soar if their lands are rezoned. 

They include areas north of Kanata on March Road, near the future Bowesville O-Train station in the south end, and at the southern edge of Orléans.

Scoring rural properties on such things as how close they are to transit and how costly it would be to build pipes and roads proved a challenge over the past several months, however.

“The easy land has been gobbled up in years past, in previous boundary expansions,” said Coun. Scott Moffatt, who belongs to a group of councillors that meets about the new official plan. “So now we’re looking at those leftover pieces and where we can [grow], knowing council was clear we would not be touching agricultural lands.”

270 hectares short of goal

Staff struggled to come up with all 1,281 hectares council approved adding in May 2020 because they had too many issues with “sub-optimal” lands.

Instead, they recommended converting 1,011 hectares of rural land to urban for now to meet provincial requirements, and then spending the next five years studying three options for making up the 270-hectare shortfall.

That opens the door to creating an entirely new suburb. 

For instance, one option involves a huge parcel near the Amazon warehouse southeast of the city where the Algonquins of Ontario envision a community of 35,000 to 45,000 people called Tewin, which they would build with developers Taggart.

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How an Ottawa woman built a majestic snow dragon in her front yard

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OTTAWA — You may sometimes feel winter drag on, but one Ottawa woman is not letting that dim her creativity.

Dr. Mary Naciuk is family doctor and rural emergency room physician. She spent some of her free time this weekend building a majestic snow dragon in front of her south Ottawa home.

“It’s just fun to get outside and do something creative,” she told CTV News on Sunday.

There was plenty of snow to use, after Ottawa saw a record 21 cm of snow on Saturday.

She said that after her husband cleared the driveway, the pile of snow left behind lent itself to being turned into a magnificent dragon, but it takes more than just the right kind of snow to make a sculpture like this.

Naciuk tells CTV News a shovel, a butter knife, a spoon and even a blowtorch were used to give the dragon its sharp edges and defined scales.

“Anything pointy with a small detail is really hard to do with just your fingers or the butter knife and spoon I was using, so (the blowtorch) just makes a fine point,” she said.

Her son tweeted about it on Saturday and Naciuk says many people have stopped to take a look.

My mom has reached the pass me a blowtorch and shovel and watch me make a snow dragon stage of the pandemic

(I was only allowed to shovel piles of snow) pic.twitter.com/aphZotpHiC — Tom Naciuk (@NaciukThomas) January 16, 2021

“A lot of people stop on their way to the ice rink and have a look and take pictures. It’s kind of fun,” she said.

It was a welcome relief to spend some time working on something creative outdoors, Naciuk said.

“Get outside, get some exercise, clear your mind, do something that is not COVID for a few hours. It obeys all the rules. It was great,” she said, adding that the dragon took her about five hours to build.

She’s been on the front lines of the COVID-19 pandemic for months. 

“It’s been a steep learning curve. It’s been exhausting,” she said. “A lot of the time is learning how to deliver care to people and maintain all the precautions that we need to. That’s been hard. A lot of people are not able to work from time to time, so we fill a lot of extra shifts. It’s been a lot more hours of work than it used to be, that’s for sure.”

Naciuk returns to work on Monday after a weekend of respite but says if the conditions are right—a nice mild day, a good snowfall, and some free time—another sculpture may well appear.

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Keeping the vaccines flowing, staying at home, and a new American President: Five stories to watch this week

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OTTAWA — The rollout of COVID-19 vaccines in Ottawa continues, but there are questions about supply. How are police and bylaw handling the new stay-at-home order? And, a day of prayer for a beloved spiritual leader.

CTVNewsOttawa.ca looks at five stories to watch this week.

Vaccine rollout continues

Residents of Ottawa will continue to roll up their sleeves for COVID-19 vaccines but there are new questions about how much supply the city will have.

Last week, it was announced that Pfizer would be cutting shipments of its COVID-19 vaccine to Canada in half over the next month because of an expansion of its European factory. That means it’s unclear how many additional doses Ottawa will be receiving in the coming weeks.

On Saturday, Mayor Jim Watson told the CTV News at Six that between 5,800 and 6,000 doses were expected in the city on Tuesday, but now he’s unsure if that will be delivered.

The City’s vaccination teams have visited all 28 of the city’s long-term care homes and are expected to begin working with residents and staff of the city’s high-risk retirement homes soon.

Will COVID-19 cases keep climbing?

It has now been three weeks since the provincewide shutdown began in Ontario and it remains to be seen if Ottawa’s curve will start to bend toward lower rates.

The number of active cases of COVID-19 in Ottawa more than doubled in the first two weeks of January and the number of people in hospitals nearly quadrupled. However, the number of new cases per 100,000 residents over a seven-day period has been slowly dropping in the past few days.

It is still too early to tell whether the stay-at-home order that came into effect on Jan. 14 has had any effect on transmission.

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