A2A Railway poses share of risks and rewards. Will it come at expense of taxpayer dollars?
The notorious price war that saw oil trading in the negatives had politicos and experts questioning whether Alberta's struggling oil and gas sector would recover.
Though oil prices have partially rebounded, trading now at 39.17 USD/bbl, according to West Texas Intermediate (2:13 pm EST), this remains a far cry from the $58/bbl projected in the Alberta 2020 budget.
Additional concerns also remain on the risk associated with the Alberta government's $1.5-billion equity investment into Keystone XL. A $6-billion loan guarantee for the pipeline project in 2021 echoes the same criticism made by the United Conservative Party of Alberta of their predecessors crude-by-rail plan and the failed investment by the former PC's on the Sturgeon refinery, totalling nearly $4-billion.
While crude-by-rail provided a temporary solution to the pipeline bottleneck, competition with agriculture to transport products to eastern and international markets muddled things further, as did low commodity prices and interprovincial disputes over the Trans Mountain Expansion.
Given the precedent set, concerns will also arise if government grants and loan guarantees are made to the $22-billion Alaska-to-Alberta Railway. With $15-billion worth of railway projected to be built in Alberta, the risk associated would surmount previous investments made by the current and previous governments.
According to Aaron Wudrick, federal director of the Canadian Taxpayers Federation, "It's worth asking whether the government should be backstopping it at all because there's a lot of risk. If it's such a bulletproof investment there should be plenty of private parties willing to bankroll it. If there aren't, that's a serious concern!"
"As the project progresses, it is anticipated that A2A Rail will seek investment from infrastructure funds, Sovereign Wealth groups, and private investors. Additionally, A2A Rail is looking into several government-issued grants and loan guarantees in both the U.S. and Canada to assist in providing the risk capital needed to develop the railway," according to the website of the Alaska to Alberta Railway Development Corporation.
The Alberta Institute, a think tank based in Calgary, raised concerns on the possible investment breakdown for the A2A Railway. "The ability for Alberta to export the wide variety of resources and products we produce is vital for our province's future, and for the unity of Canada," says its president, Peter McCaffrey. "New connections to our trading partners - such as this Alaska-Alberta rail line - are fantastic news so long as they are being constructed with private money, rather than taxpayer subsidies."
The mammoth 2,570-kilometre railway, who received an unexpected presidential permit from U.S. President, Donald Trump, seeks to primarily transport commodities like oil, grain, and ore and transport containerized goods. It also aims to develop a new railway connecting the Alaska Railroad and Alaska's tidewater, to the resource-rich region of northern Alberta.
The project is expected to create 18,000 jobs for Canadians and provide a more efficient route for trans-Pacific shipping that links Alberta to world markets, particularly in Asia, and will also create new economic development opportunities for a wide range of businesses, communities and Indigenous communities in Canada and Alaska. It is also expected to unlock $60 billion CAD in additional cumulative GDP through 2040 and lift household incomes by an average of 40 percent.
A2ARail founder and chairman Sean McCoshen announced in July that he would also commission a detailed land survey along the railway's proposed route throughout the Alberta segment. The project is expected to face several fund-raising and regulatory hurdles moving forward.
