Alberta announces curtailment relief for crude shipped by rail
October 31, 2019
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Alberta operators will be provided with special production allowances to increase oil production – if additional oil is moved by rail – in order to meet increasing demand.
“The special allowance program will protect the value of our oil by ensuring that operators are only producing what they are able to move to market,” states Alberta’s Minister of Energy, Sonya Savage. “Pipeline delays ultimately have constrained market access and dampened investment in our oil sector. This program will lead to more production and increased investment, benefitting industry, our province’s bottom line, and, ultimately, Alberta taxpayers.”
Many oil producers are capable of producing more than their curtailment limits permit and this allowance will enable operators to use all available rail capacity in Alberta.
Industry approached government with a proposal to ship more crude by rail in exchange for curtailment relief. This short-term approach will help address the continued lack of takeaway capacity caused by pipeline delays that are negatively impacting Alberta’s oil and gas sector.
The Alberta government will work with operators to set the special production allowance baseline, which will be based off the operator’s Q1 2019 average rail shipment.
Here is a breakdown of the special production allowance:
- In effect starting the December production month.
- An allowance will be provided using a simple application process for operators who plan to increase their production and intend to move it by rail.
- Operators must move all the additional production by rail and cannot overproduce their allowance.
- Volumes moved under an allowance by rail cannot be nominated onto pipelines.