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The other multi-billion dollar Alberta government oil scandal: Crude-by-rail
68 Plays3 years ago
Independent consultant and crude-by-rail expert Samir Kayande joins us to talk about the $2.3 billion dollars (and counting) the government of Alberta has lost on crude-by-rail. Is there a rail yard somewhere with thousands of empty rail cars? Quite possibly, the government has told us nearly nothing about this debacle. When they have told us anything about it, they've lied. We dig into this huge scandal.
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Transcript
Introduction and Podcast Recommendation
00:00:00
Speaker
Hey folks, you're listening to the progress report on the Harbinger Media Network, and just a quick message before we get into it. We're one of several very good and very excellent left-wing podcasts on the network, and a new episode that I want to recommend is Tech Won't Save Us. Mar Hix, the author of Your Computer is on Fire, joins Paris Marx to talk about how both the UK and the US are using and have used computing to extend their imperial reach.
00:00:22
Speaker
And that's the kind of content you'll get at Harbinger. We're challenging corporate and liberal media dominance with a political point of view that you won't find anywhere else. Get access to exclusive shows and other supporter-only content at HarbingerMediaNetwork.com. Now, on to the show.
Alberta's Oil and Gas Challenges
00:00:50
Speaker
Friends and enemies, welcome to the Progress Report. I am your host, Duncan Kinney. We're recording today here in Amiskwijiwiskaigen, otherwise known as Edmonton, here in Treaty Six territory. And today, we're talking about something that doesn't get nearly enough press.
00:01:06
Speaker
And I think it says something about the province we live in that I could be talking about a multi-billion dollar oil and gas government boondoggle that our provincial government is involved in. And the follow up question to that statement is, which one?
00:01:21
Speaker
And so while Keystone XL gets the majority of the headlines, and for good reason, it's a sexy story. The government of Alberta made a billion dollar bet on Donald Trump winning an election. That's justifiably a very big story and the money seems to be gone forever. The other billion dollar oil and gas boondoggle that the province of Alberta is involved in gets a little less press and it's crude by rail.
00:01:48
Speaker
And I think it gets a little less press for reasons that our guests and I are going to get into. But it's actually costing us more money and has featured just some tremendous whoppers when it comes to lies from our government. And to help better understand this issue, we've brought Samir Kayande onto the Progress Report. Samir, welcome to the show. Hey, Duncan. Good to be here.
00:02:10
Speaker
So Samir, you're a Calgary-based independent consultant. You were recommended to me by our mutual friend Blake Shafer. You have a deep knowledge of this crude by rail issue. So how did you come to be someone who knows what the hell is going on with crude by rail?
00:02:26
Speaker
So in my last job, I was responsible for basically predicting what pipeline capacity will need to be added in order to move oil in a variety of different basins, so across North America. And my clients were institutional investors, so large money managers.
00:02:52
Speaker
And so crude by rail was a byproduct of that interest in pipelines, because as you know, pipelines are getting harder and harder to build, not just here, but everywhere in North America. And so rail has to pick up the slack. And so suddenly, instead of being somebody who's an expert on pipelines, I also have to know a little bit about moving crude other ways, including by rail.
00:03:19
Speaker
Very cool. And so you're a free agent then. You're not currently employed by this past client of yours or this past employer of yours and you're free and clear. You've got your opinions. You've studied the issue closely, but you're not like on the government side or on the UCP side. You're not unlike some oil company side.
00:03:35
Speaker
Uh, no, that's right. Um, I, I mean, I, I have a variety of clients, but nobody right now is involved in, uh, in crude by rail. Very cool. And, and just to be clear off the top two, you, you were not a fellow traveler, uh, like myself, you, you and I call yourself a socialist. The point of this podcast is not to argue about capitalism, but I mean, there'll probably be a couple of side conversations is all I'm saying, but, but you wouldn't, you wouldn't identify yourself as a socialist. Is that fair to say? Uh, that is very fair to say. Yes.
00:04:06
Speaker
We could figure out where our commonalities are, though. Of course, of course. We're talking about crude by rail here. One of the reasons why I think this issue has not perhaps blown up, despite the fact that it's billions of dollars that have been lost, is that there's just a bit of confusion about the terms, about what we're talking about. Let's establish a base level of facts.
00:04:31
Speaker
and agreed upon timeline here just to kind of like demystify some of this stuff. So, Samir, take us back to those heady days of early 2019.
The Crude by Rail Initiative: Origins and Opposition
00:04:41
Speaker
What was the justification from the Alberta NDP government, the Alberta government at the time, which was run by the Alberta NDP, what were they saying why they need to do this? Why did they jump into this plan?
00:04:53
Speaker
Yeah, so going back to late 2018 now, there was a disaster unfolding in oil pricing in Alberta. And in terms of disasters, because as we all know, this was a very big issue, is that the price of oil in Alberta was very low compared to the price of oil elsewhere in the world.
00:05:16
Speaker
We call this wide differentials, right? Basically, and the reason for that is that production had grown and pipeline capacity had not. And pipeline capacity, of course, had not grown for a whole pile of reasons that depend entirely on your politics as far as who's to blame. But the bottom line is that building pipelines is very hard, production had been added, and the pipeline capacity wasn't there.
00:05:43
Speaker
And so now this all came to a head all at once in late 2018. And so there were two things the government did at the time. One was supported by the UCP and the industry at large, which is production curtailments, meaning that producers were only allowed to produce less than the amount of oil that they could produce.
00:06:06
Speaker
The second piece was that if you think about this that, okay, there's a lack of transportation capacity, then let's get more transportation capacity. And that's better for everyone because it means that you don't have to curtail producers, which means jobs and it means royalties. And this is a very big deal.
00:06:26
Speaker
Um, because the way to think about it is that the Alberta government actually owns roughly, you know, like a share of every barrel produced in this province. And that royalty income is what, you know, funds our schools and our healthcare and keeps our taxes low, Alberta Advantage, all that stuff.
00:06:46
Speaker
Great. A stubborn advantage we all know and love. Yeah. Yes. I mean, I just want to interrupt for a second. I mean, this is a political decision. There are other jurisdictions that don't fund their government operations with non-renewable resource revenue. This has been a political decision over the years that's been made. But anyways. Yeah, no. We can cut our deal. Basically, they don't have it. We have it. We use it. We use it for that purpose. And frankly, I mean, Alberta,
00:07:11
Speaker
Has done well, like we could we could let the money sit in millionaires hands instead and we don't So the bottom line though is that okay, so there's This crude by rail deal that was announced and it was massive in the scale of these sorts of of moving oil by rail right 120,000 barrels a day four-year term
00:07:37
Speaker
It cost $3.7 billion. These are very big numbers. And at the time, it was justifiable.
00:07:50
Speaker
I think, and I liked the deal at the time that it was announced, without knowing any of the details, it's like you have to make a decision very quickly, you know, are you going to not produce? Are you going to give up all these jobs? Or are you going to invest in infrastructure in order to move this oil? And the government made the decision to invest in the infrastructure and not only the UCP, but also every oil producer in Canada hated the deal.
00:08:22
Speaker
So someone was like, we see this thing that needs to happen and none of you like it. We're going to fucking do it anyways. Allow me to just push back for a second too, because again, I think the argument you're making here, which is that the government of Alberta, the people of Alberta have a share in the collective kind of wellbeing of the oil and gas industry.
00:08:43
Speaker
While that is true in a minor extent, it is certainly not true in how much of that share actually goes to us and how much of that actually goes to working class people. Whereas the owners of these companies tend to do quite well and a certain subset of shareholders
00:09:02
Speaker
and owners tend to do quite well when the oil and gas industry is doing well. And there is the side effect of these temporary well-paying jobs. But again, there's no nationalized oil. There's no Alberta energy company. There's no Petro Canada. There's no actual direct stake in pulling oil out of the ground. It's all just trickle down economics.
00:09:24
Speaker
It's not more than trickle down, though, man. Because here's the thing, Duncan. Investing in oil has been a disaster for 10 years. You could argue, actually, that an oil company is a socialist collective run for the benefit of its workers' management and the royalty owners.
00:09:54
Speaker
It's not managed by the workers. It's not run by the workers. The benefits don't accrue to the workers. Here go. I mean, come on, come on, man.
00:10:03
Speaker
And, hey, oil and gas investors have been shattered. They've been eviscerated. And royalty income has continued to go up and wages have continued to go up. In light of- Royalty income goes up, I mean, not really. I mean, there was this whole royalty review that didn't really change anything.
00:10:27
Speaker
I mean, so here's the thing though, higher prices are better than low prices for Albertans. This is the system that we've set up. I agree. We can agree on that. Higher prices are better than low prices. And I would make the argument actually that if I'm an oil producer and I'm giving
00:10:47
Speaker
As part of the terms of trade, I owe the government a 20% share of every barrel of my production. I should be demanding that the government move its share of oil and pay for it.
00:11:03
Speaker
because these pipelines and all this infrastructure has been built basically by producers in order to move through the pipeline companies, but it's producers who ultimately stand behind those contracts and pay the transportation tools. And so basically, I really think that the failure of oil and gas companies to get on board with a coup by rail is one of these
00:11:28
Speaker
It is really rare for something to be so ideological. Usually when you say something is ideological and you scratch the surface a little bit, it's like economic self-interest.
00:11:43
Speaker
But in this case, the government is stepping in with $3.7 billion in order to move a substantial amount of oil and guarantee that movement for four years and hence reduce the pressure on oil differentials and make it easier for producers to make money as well as increase royalty income. That's why I like the deal when it was announced.
00:12:07
Speaker
I think we're there. Just to summarize though, the government of Alberta tried to give the oil and gas industry a cookie and the oil and gas industry smacked the plate out of their hands. Socialism. They were mad at it for socialism reasons. I have some notes on this in the back half of the podcast, but again, this is kind of like the half-assed socialism. This is socialism gone wrong.
00:12:34
Speaker
What are the broad strokes of these crude buy rail contracts? What did the government of Alberta actually sign up for, and what are you getting when you ... What did the government of Alberta get when they signed that $3.7 billion agreement for whatever it was, 4,400 rail cars? How did that actually work? How do those agreements work? Who makes money? Who do they sign it with? Give us the mechanic of it.
00:12:54
Speaker
So, we don't know, right? Like, we don't know who the rail car deals with, but usually what you're doing is you're leasing rail cars. Or in this case, you were leasing rail cars. For sure. We got CPC and rail. We got leasing 400, 400, 400 rail cars. That's about it. That's all we know. But I mean, you know how these things kind of work. Like what's the broad, like generalities around it.
00:13:20
Speaker
So you have a lease for the rail cars, and those are generally fixed price, right? Like you acquire those rail cars and you pay a certain fixed fee for leasing them for the term. You would have to have some sort of loading terminals set up, which exists in the Edmonton and Fort McMurray area, a whole bunch of places where there's access to rails.
00:13:47
Speaker
You would need storage and logistics infrastructure. You would probably need somebody to manage all of this because the government obviously has no competence in shipping oil by rail.
00:14:04
Speaker
And the most important piece, of course, is you would need agreements with the rail companies on how much oil you're going to move. And, you know, I make this analogy when I talk about rail. Rail is a turtle business, right? Like it is slow and steady and by being consistent, you win the race and you keep your costs low.
00:14:27
Speaker
And so rails place a very high premium on the ability to consistently and reliably deliver. And so there would probably be something in terms of like a guaranteed fee.
00:14:48
Speaker
That is due for a particular period of time as well as possibly incentives and penalties to make sure that the government is delivering its oil on a specific schedule. Does that all make sense? The other thing... The railways made money no matter what, essentially. Whether there was railways with train cars on them or not, the money was in their hands, the contract was signed, maybe with some minor hedging language on blah, blah, blah. But by and large,
00:15:15
Speaker
If you're signing a big billion dollar deal with a couple of railways, it's like, we don't care if your actual train cars are on the track or not. We will clear the space for you. We will make it happen. But like, yes, up to you kind of thing. Exactly. That's exactly. These are these are weddings, right? Like you don't you can't get a wedding venue without guaranteeing a guest count up front. And you know what kind of wine you're getting and whether you're getting, you know, the beef or the cheaper chicken.
00:15:42
Speaker
Now the other piece that I don't know is that you need like destinations and you need infrastructure at that destination in order to offload. There may need to be like maybe your
00:16:00
Speaker
maybe you're railing to like halfway up the Mississippi River and then barging at the rest of the way. Like those are the sorts of things that are very specific and we just don't know what that looked like. And the reason I mentioned that is because when CNRL was quoted publicly on, hey, are you going to take some of these contracts? They pointed out the lack of destination certainty as being one of the issues that they saw with the Elburger rail contract.
00:16:26
Speaker
I would think, though, that destination flexibility also has value. And so if you're not walking in your destination, that means it's more flexible. So I don't know, like, kind of how that works. But bottom line, like at a high level, sorry, I'm getting way too wrapped up in the details. The railways, you're paying them, you're paying for the rail car leases, you're paying for some terminaling, and that all adds up for this massive volume of 120,000 barrels a day of $3.7 billion over four years.
00:16:55
Speaker
And I like your wedding analogy, right? The Alberta NDP had essentially put a whole bunch of money down that a whole bunch of oil was going to flow by rail over four years. And then the analogy that I think that you used in one of our pre-interview conversations was pipelines are different. Pipelines are much more like a dinner reservation, right? Can you explain that?
00:17:16
Speaker
Yeah, okay. So the Enbridge Mean Line pipeline is more like a dinner reservation. And this is part of the problem, right? Is because if you're going out for dinner on New Year's Eve, maybe like if you want to make sure that your night goes as planned, maybe you make two reservations.
00:17:32
Speaker
and the poor restaurant, like their table goes empty, but that's not your problem. And the Enbridge mainline, which is the largest offtake option out of Western Canada, operates more like a restaurant reservation system, right? And so they run into a lot of problems, especially when differentials are very wide and producers and shippers aren't getting access to the pipeline network. They've got all these extra reservations and then they have to like,
00:18:01
Speaker
And then suddenly you get to the point where it's like, okay, I need your oil, put up or shut up. And it's like, oh, actually, I don't need to ship right now. Thanks. That was part of the problem that was going on in 2018. And Duncan, that is a whole huge other conversation about what the main line needs to look like.
00:18:20
Speaker
Um, and it's actually out of the progress reports purview, to be honest, how Enbridge is doing on its main line. But, but I think it's a useful detail. I think it's a useful analogy to, to, to just to place the gravity and the weight of these contracts in comparison to what you would get out of something like, like you were talking about the Enbridge main line, but the other part of this conversation. So I think we've kind of nailed down what you're getting and the terms of the deal, but I think it's also worthwhile to, to nail down the timeline here and feel free to jump in at any point.
00:18:50
Speaker
with any comments or riffs or if I get anything wrong. Here is what we know. As we were saying, late 2018, there's this government is talking about and the oil industry is talking about all this
00:19:04
Speaker
the wide spreads, right? And something must be done about this. The government brings in, as you said, curtailment, which was quite popular and mostly well-loved by industry, though certain sections of the industry hated it. And then in February of 2019, just a few months before the election in April of 2019, the Alberta NDP government announces, makes the announcement that they've done this deal with two railways, CP and CN Rail, at least 4,400 rails for a year, $3.7 billion agreement. That's when we first learned about it, February 2019.
00:19:33
Speaker
The first shipments were expected to start by July. Full capacity was expected to happen in middle of 2020. And again, it was 120,000 barrels per day was the expected thing. This was framed as a medium term strategy to get crew to market while pipelines were being built.
00:19:50
Speaker
It really was, I think, important to emphasize that this is the dying days of the Alberta NDP's time and power. I think the rate got dropped literally in the end of February, either the end of February or beginning of March, and the election was in April. I could be a little off on those timelines, but I know the election was in April.
00:20:12
Speaker
Like the timelines of this are fraught, right? Because it's campaign season and in the Jason Kenny and the used to be instantly come out against these, this crude by rail arrangement, you know, they say, well, what do you remember what they were saying?
00:20:30
Speaker
Oh, the government shouldn't be interfering in the free operation of markets. Basically, they didn't think they should be doing it regardless of whether industry needed it or wanted it, right? And whenever I talk to producers, like, you know, like,
00:20:46
Speaker
The oil industry isn't a monolith, right? There are a vast number of distinctions between how they think that they should be regulated and run based on their size and their estimates, a whole bunch of things, right? So when you think about things like carbon tax, for example, there's actually a lot of distinctions between how different oil companies feel about the carbon tax, depending on who they are.
00:21:15
Speaker
But it turns out that in this whole crude by rail thing, it was pretty universal that every oil company hated it. And to this day, I don't really understand why. Because again, the more transportation capacity that exists out of this basin, the higher prices are going to be. And if that transportation capacity is built on the back of somebody who is not you, then it's free. And so you should want that.
00:21:42
Speaker
Yeah, the state took a huge risk so that the government, so that private producers could make more money and they still didn't give a fuck and they turned their nose up at it. Yeah, it's very strange. Yeah. And Kenny, and Kenny rode that wave and Kenny sensed this in the industry and he, you know, campaigned against the crude by rail from the very beginning. He said he would reverse it. He said he would do value for money, blah, blah, blah. He very clearly campaigned against these crude by rail things and these crude by rail contracts. And when he won the election in April of 2019,
00:22:11
Speaker
Uh, you know, there was a lot of, it took a little while, uh, you know, and there's some, there were some headlines in the interim about what they were up to, but I mean, everyone, everyone knew that they didn't want these things and they were desperately trying to get rid of them. And in February 11th, February 11th of 2020, uh, about a month before, uh, the pandemic kicked off.
00:22:30
Speaker
Kenny announced that he had offloaded all of the crude by rail contracts to the private sector. Big splashy headline. We did it, folks. Mission accomplished. They said the loss was $1.3 billion. They were bragging that this is a quote, that through tough negotiations, this government had reduced the loss for taxpayers by $500 million. This is entirely on the NDP. They never should have made that deal. We have managed to reduce the damage.
00:22:58
Speaker
Yes. How true was that headline? How true was that line about the damage?
00:23:08
Speaker
Oh, God.
Economic Manipulations and Government Transparency
00:23:10
Speaker
Okay. So the government is in a unique position that no other owner of these rail contracts could possibly be in, meaning that the government has the power to curtail production. Right. And so think about
00:23:28
Speaker
Think about the problem here. If I want to buy those crude by rail contracts from the government, like let's say I want to pay full value for them. I think actually it's a screaming deal and I want more of it. That wasn't true, but let's- Hypothetical. Yeah. Hypothetical. Okay. Now, the thing is that crude by rail makes more money when there's more constraints in pipelines.
00:23:49
Speaker
Right? Like the wider the differential goes, the lower the oil price here is relative to the oil price in the Gulf Coast, the more money crude by rail makes. But the government can control that. The government can say, you know what, I've got a wide differential here and that's costing me a lot of money. And that means less money for like, depending on your ideology, less money for low taxes or less money for schools and nurses. Right?
00:24:14
Speaker
Either way, there's no government in the world that will be okay with that. And so you've got a situation here where you're buying something from the government where the government can eviscerate your economics just simply by wanting to do it.
00:24:35
Speaker
Um, and so it's a weird situation where the crude by rail contracts actually held by the government have more value Than if they're sold so simply by making the decision that hey, I want to sell this you're cutting the value of those contracts significantly and by significantly I would I mean that combined with the very public like we think these are a bad deal We think these are awful. We want we're gonna get out of it statements by by Kenny and the UCB
00:25:04
Speaker
Yeah, no. Look, if you hate your condo board, you should list your condo very quietly and just say, hey, no, this place is great. Don't do that. Instead of taking out an advertisement in your community's paper saying, this condo sucks ass, never buy here. Oh, I'm selling my condo. Yeah, you're cutting yourself off at the knees, right? No, don't do that.
00:25:28
Speaker
And you cut yourself off at the knees with your public statements and you also, as you've laid out, you face this structural kind of disadvantage and just that curtailment existed, curtailment was happening, and that there was a government had a finger. Government could manipulate the spread if they wanted, right?
00:25:47
Speaker
Yeah, that's right. And so, you know, short of an agreement from the government that they would not curtail, which first of all, I couldn't count on. And secondly, they would never do. You could probably bet on the fact that these crude by rail contracts, the minute you decide to sell them are cut in half.
00:26:04
Speaker
It's the whole lemon problem. It's also similar to the lemon problem when you buy a car and it's a month old and you're selling it. It's like, well, wait a second. Why are you selling this month old car? I just didn't want it. I just don't want it anymore. Yeah, right. You don't want it anymore. There's a problem with the car.
00:26:18
Speaker
Um, and, and, and that's kind of, you know, so it's, it's a twin problem, right? Okay. So now we're bearing the lead here, Samir, which is that the government lied. The government did not in fact get out of the, they did not actually in fact sell all of the crude by rail contracts. They only got rid of 40% of them. No, they didn't. I mean, the auditor general said, uh, no, you don't get to claim these as sales because you didn't actually sell them.
00:26:46
Speaker
Well yeah, so here's the thing about when you sell something. Like if I sell that condo now to my brother-in-law and he agrees to pay me $2,000 a month in rent, but if he moves out then I can't go after him.
00:27:04
Speaker
It's not really a sale. And that's the sort of thing that accountants and someone like the Auditor General would be very focused on. Was this a true situation where the government just sold this off, walked away, has no further obligations?
00:27:26
Speaker
And according to the Auditor General, at least, you're right. There's either not a complete sale or there's a nature of obligations in the future that mean that you can't account for it that way.
00:27:39
Speaker
Yeah. And just to go back to the timeline. So February, the government announces that they've sold all of them. They swear 1.3 billion loss, you know, it's, it's a sad, regrettable loss, but we'll take it. In August of 2020, it comes out that, you know, one, one, there's just very little transparency around these deals. So it's coming out in drips and drabs, but the losses have increased to $2.1 billion. And it also comes out that, uh, whoopsie, they didn't actually sell all of those contracts that the whole sell thing may have been incorrect.
00:28:06
Speaker
And then in November of 2020, the auditor general comes out and releases one of their quarterly reports. And essentially it says, yeah, that's $637 million that you say you got for divesting of your crew by rail contracts. That never actually happened. And that just goes on the books.
00:28:24
Speaker
Then finally, on the timeline, budget 2021 comes out, our latest budget, and the crude by rail losses have mounted to $2.3 billion and potentially climbing. There's an additional $1.4 billion in crude by rail provisions built into the budget for this year and for next year.
00:28:42
Speaker
And as you pointed out, Samir, that brings the total of potential losses from the crude by row contract to $3.7 billion, the entire dollar amount of the contract as it was signed back, back in 2019. And I mean, I surely hope like this, this is, this is my fear, right? Like I surely hope that that's, that caps the loss, that, that it's actually not going to be greater than that for whatever reason, right? Cause, um,
00:29:12
Speaker
We know so little that we don't know whether the 3.7 is actually like whether that's the end of it or not.
00:29:22
Speaker
Yeah, it is a, we don't know pretty much anything about this except when the losses get booked. Uh, but we have no transparency into these contracts and, and, and, you know, next budget cycle, you know, budget 2022 would be like, Oh yeah. Well, we're still continuing to lose money on these, but you don't get to know why or how.
00:29:47
Speaker
And the other thing I'm wondering about, I don't know if this is your next question, Duncan, but are we actually getting, did we ship any oil? Yes, this is literally my next question on the note. So Samir, my question to you is, has the government of Alberta, since the UCP took over, actually moved any oil in these billion dollar crude by rail contracts that the government of Alberta signed?
00:30:16
Speaker
I don't know. We did. We have no idea. We have no idea. Like in my mind, there is a huge rail yard somewhere full of just empty crude by rail cars that are just, that have just been sitting there since April 2019. Is that, is that plausible?
00:30:34
Speaker
Yeah, I mean, if I were in charge of managing this, if I wasn't moving the oil, I would try and sublease those cars, but the pandemic hit and the demand for rail cars is lower than it was two years ago.
00:30:54
Speaker
When you're faced with a bad, like, okay, so here we are, we've got these contracts, we're paying for the, we're paying for the rail capacity. It seems as though it's the least that we should do that we should be using that capacity to move the oil.
00:31:10
Speaker
Um, because you're paying for it anyway. And so the incremental cost of, you know, like say, it means that you, it costs you an extra two or $3 a barrel in order to actually take advantage of the contract. It seems to me that that is actually like a workable deal, like that, that, that should work and you should be able to get that.
00:31:35
Speaker
back in terms of buying oil and selling it and managing the logistics. But it's such a large contract that you would think that somebody would be noticing if the oil were moving or not. Statistics from the government of Canada, the Canadian energy regulator, are at an aggregated level.
00:32:01
Speaker
Um, but basically like, I think this month we might be like two months ago, sorry. You might be peeking out at like 130 or 140,000 barrels a day of oil moved in total, uh, by rail. Um, so it seems strange to me that that incorporates, you know, it doesn't seem as though that's enough to incorporate like 120,000 barrels a day that the Alberta government owns.
00:32:25
Speaker
Well, to be fair, they only own 70,000 barrels per day of rail contracts. They did manage to get rid of 50,000, but still 70,000 barrels per day of oil by rail contracts is still a shitload. And there's a funny little detail from the announcement that Rachel Notley made back in February of 2019, which was that she said that one out of every 10 or 11 rail cars will be repainted with an Alberta logo.
00:32:47
Speaker
Pretty sure I didn't happen. Pretty sure that didn't happen. But, but I just want to reiterate that it is, you study the stuff, you know, this, it isn't mind boggling to me that it is plausible, even, even halfway plausible that there is a rail yard full of empty crude by rail cars that is just sitting there because this government refuses to do anything about it. Or if they are.
00:33:13
Speaker
Tell us, that's a fucking scandal. You're just sitting on $70,000 worth of barrels per day worth of rail car leases and you're just like, nah, we don't believe that government should be doing this. Who fucking cares? You paid for it. This is the heart of why this story makes me so fucking angry, is that this is a huge fucking scandal. Regardless, even though we don't know the details, even though we don't know if there's a huge, we don't know if there's a huge valley of rail cars just stocked of things, just sitting there empty.
00:33:44
Speaker
there was a moment in the last budget lockup where we got a remarkable bit of information out of senior government officials. And just to set the context for these government lockups or these budget lockups.
00:33:57
Speaker
They set up these like embargoed interviews. It's you on a phone call with a bunch of other journalists and they make available senior government officials to you. To answer questions, because you get this like 400 pages worth of figures and facts and shit. You want to be able to ask questions and they give you the opportunity to ask questions to these folks. And assistant deputy minister with energy is answering questions about these crude by rail contracts.
00:34:20
Speaker
And in this conversation, this is an exchange that blew my mind. This ADM for energy said that by their own calculations, their worst case scenario for crude by rail was that it lost $2.7 billion. And the best case scenario for crude by rail was that it lost $2.3 billion. And so we're currently sitting on $2.3 billion as a loss. Yeah.
00:34:46
Speaker
even if you're breaking even, even if you lose 400 million, that is better than losing 2.3 billion. And as an ad, as a, as a sidecar to that, you're actually moving the oil around. Like, you know, for the past decade, every fucking oil producer in this province has been screaming and whining about not having enough transportation capacity, about not having enough egress. There's some fucking egress for you. Yeah. And the government is just saying, nah,
00:35:16
Speaker
I mean, yeah, it's, I mean, I hope that, I really hope it's just not a matter of spite, right? That it was the previous government that did this and therefore I want no part of it and we'll just like let the real cars rust. Because yeah, like if you've paid for, like it just seems to be good government that if you've paid for something, you should use it.
00:35:42
Speaker
as long as it doesn't cost extra. And if that's the answer, then I would think that the government would say that that's the answer. But if instead, as a first
00:35:58
Speaker
question that I would have to make sense of what's going on here is really that one is how much oil is actually moving under the contracts. Like let's boil away everything else but we've got them we've got you know and we control apparently 70,000 barrels a day of that. First of all how much do we actually control and secondly how much are we moving.
00:36:19
Speaker
I've got confirmation on the 70,000 barrels per day. I did send an email to Energy and one of their communications people got back to me. That 70,000 barrels per day number was accurate as of budget 2021. If there's been any change to that, the government hasn't made any announcement on it. Again, this is just absolutely fucking wild. I am not a big, the government needs to move oil around for trickle down economics reasons, but at least
00:36:43
Speaker
If you're moving oil around, you can conceivably make the benefit that there's some benefit for Albertans. If those oil cars are just sitting in a fucking yard somewhere, not doing anything, that is just rank incompetence. You know what I'm getting from all this, Samir, now that I think about this, is heavy burn after reading vibes. Have you ever seen that movie?
00:37:06
Speaker
Uh, have seen burn after 18. It's totally, it's that that's the best colon movie. It really like, it's so good. It is a fantastic Cohen brothers movie. I've come around on it, especially after I like, when I watched it the first time we came out, I was like, yeah, whatever. It's, it's like, it's okay. But given all of the stupidity of the past, when was the movie made like 2008 or something? Like decade or so of just like of rank stupidity we've seen from our government, our elected officials, it really hits home.
00:37:34
Speaker
And so I think the best way to end this podcast is on a burn after reading note, which is what did we learn? What did we learn? I don't fucking know. Yeah, I don't fucking know. I think secrecy and complexity are your friends if you're a government trying to keep a lid on a $2 to $3.7 billion scandal. Yeah.
00:38:01
Speaker
loudly campaigning against and then promising to get out of those contracts no matter what puts you in a bad position, negotiation-wise. For the NDP, I think this is a lesson for them as well, is that if you're going to nationalize something, whole-ass nationalize it. Don't half-ass nationalize it. If you believe there's a market failure and a public good to be had, just take it over. Buy shit. Start a company. Start a Crown Corporation. Leasing
00:38:30
Speaker
Crude by rail car, releasing all of these crude by rail cars was a half measure that even if Samir thought it was a good idea, even if the pointy heads in energy thought it was a good idea, it was always going to be a big risk. You're putting that much money on the line and the oil market being what it is in Western Canada, it was a risky venture. If you're going to do a risky venture like that, actually get something of tangible value in the long term for the people of Alberta.
00:38:58
Speaker
She's once these once his deal expires in a couple years. It's just it's just money down the drain. I Mean, it's your show, right? So I'm not gonna push too hard on that. But like we we can disagree on that III honestly think that You know given the circumstances of the time It was
00:39:23
Speaker
Leasing as well, I think, made a whole lot more sense than buying, just because of the temporary duration of this. The whole idea is that you buy three years, and by then Trans Mountain Expansion will be built, and Bridge Find 3 will be built. You will have solved the problem in other ways.
00:39:43
Speaker
So this was really a stopgap. And so, like, and frankly, look, Duncan, I'm an enemy of nationalization, right? And so, you know, we can go ahead and disagree on that. But I would say that once you're left with the situation, once you've got it, once you've inherited it, it is, you know, really incumbent to do something prudent.
00:40:08
Speaker
and make use of the situation that you've got, rather than hoping that if you just scream and yell, it'll go back to some sort of past where this wasn't a problem.
00:40:21
Speaker
Fair enough. I hear you. I think that's a great place to end it.
Conclusion and Call to Action
00:40:24
Speaker
Sameer, you know, what's the time to plug your pluggables? What's the best way for people to follow along with your crew by rail analysis and people lefties need to get the insight and analysis into the world. Oh, I'll make lefties so angry. My Twitter feed is actually where I have my best stuff.
00:40:46
Speaker
And you'll find stuff there are like a lot of it is some of it is general interest like a lot of it is like specifically financial focused and how to make money in the market and that sort of thing. But then there is like a lot I'm tweeting a lot about COVID right now. And, and, and, you know, like, yeah, it's, you know, Twitter's evolved into like actually a really good platform, surprisingly, and talking with
00:41:15
Speaker
I use it every day. Well, yeah. What's your Twitter handle? At Samir Kayande. Very easy. We'll put it in the show notes. And folks, if you like this podcast and you want to keep hearing this podcast, there's a couple easy things you can do to make that happen.
00:41:30
Speaker
One thing is to share it and to tell your friends about it. Word of mouth advertising is the best way to get the word out on something. And so yeah, you know, put it on a cassette tape and share it with your grandma. I'm sure she still has a tape recorder or tape tape deck in her house. Or just, you know, one of the easier ways is to just click some buttons on your phone and share it with a friend.
00:41:52
Speaker
The other big way to help us is you can join the nearly 500 other folks who help keep this independent media project going, and you can become a monthly donor. And it's very easy to do that. You go to theprogressreport.ca slash patrons, put in your credit card and contribute. There's a link in the show notes. It's very easy. Also, if you have any notes, thoughts, comments, things you think I need to hear, things you think I screwed up on, I'm very easy to get a hold of. You can reach me on Twitter at Duncan Kinney, and you can reach me by email at dunkincayatprogressalberta.ca.
00:42:19
Speaker
Thanks so much to cosmic family communist for the amazing theme. Thank you for listening and goodbye.