Both government regulation and legal wrangling over a new pipeline mean the unpopular program will continue.
The Alberta government has extended its policy of imposing production caps on oil companies by a year as delays in constructing new pipelines continue.
Alberta’s Energy Minister, Sonya Savage, said Tuesday that, while she regretted the decision, curtailment was necessary in the current economic context.
The program was introduced by the former NDP government as the price gap between western Canadian heavy crude and US light oil rose to more than US$40 a barrel in late 2018, hitting both company profits and provincial government revenues.
Both the province and industry players insist that the crux of the issue is the inability to export Canadian oil for as long as regulatory and legal challenges leave new pipeline projects in limbo.
The curtailment in production was only meant to last until the end of 2019, but Alberta will now extend it by a year as a consequence of the legal wrangling over Enbridge’s Line 3 Replacement project to the US Midwest, which would add 370,000 barrels of daily export capacity.
“This, on top of the untimely deaths of Northern Gateway and Energy East, means that Alberta remains at risk of producing more crude oil than we are able to move,” Savage said, before describing what she called Prime Minister Justin Trudeau’s “political failure” on the energy issue.
Savage stated that without the production limits, there would be 150,000 more barrels produced daily than could be exported.
Savage also said that in order to reduce the impact on smaller players, the limits will only apply to companies that produce more than 20,000 barrels a day.
The revamped curtailment program is set to take effect in October.