Edmonton Alberta - Premier Jason Kenney's new government will cancel $3.7 billion worth of oil-by-rail contracts entered into by former premier Rachel Notley's NDP government just weeks prior to calling the election with CN, CP, and some other rail partners, a senior member of the premier's staff confirmed Friday evening.
 
The source says the government received legal opinions, from both government and external lawyers, stating that the Alberta government can break these recent contracts through legislation, particularly because Kenney warned the CEOs of Canada's two largest railways in writing and publicly that he would not consider his government to be bound by a contract entered into by the NDP in an attempt to salvage its election chances.
 
Reached Friday night, Kenney's press secretary, Christine Myatt, provided a written statement via email confirming the news revealed by the senior staffer.
 
"We have been clear from the beginning, these contracts, which were rushed into by a desperate government on the eve of an election should never have been signed, by the government, or by the railways," said Myatt.
 
"There was no reason why private companies couldn't have stepped up to carry more oil by rail. That is still our position. If these contracts cannot be transferred to the private sector on acceptable terms, our government will do what is necessary to protect Alberta taxpayers."
 
Kenney made it known on 1 Feb 2019, the first day that Notley could have legally called the election, which ended up being held on 16 Apr 2019, that if elected he would examine all contracts entered into by the province to ensure they were in the best interests of the province and its citizens, something he called a "value-for-money review."
 
On 19 Feb 2019 Notley announced that she had signed contracts with CP and CN to lease 4,400 rail cars to move oilsands crude to North American markets.
 
That same day, Kenney reiterated his position that if elected, and he was 20 points ahead in the polls at that point, he would examine the contracts to ensure they were a good deal for Albertans.
 
The next day, on 20 Feb 2019, Kenney sent letters to the CEOs of both companies warning them he would cancel the contracts if they are found to be not in the public interest.
 
"If elected, a United Conservative government will do everything within our power to cancel the NDP's reckless $4 billion expenditure of borrowed tax dollars to interfere in the market," said Kenney.
 
He said oil companies would ship more oil by rail if it were profitable and pointed out, rightly, that Alberta couldn't afford the deal since the NDP was running huge multi-billion dollar annual deficits leading to a debt expected to hit $96 billion by 2024.
 
The senior official said while he can't reveal details within the contract, he could say what was not there.
 
In Notley's rush "to attempt a Hail Mary pass to buy an electoral victory," her now-defeated government "entered into very poorly negotiated contracts."
 
The contracts, says the senior staffer, don't appear to contain the "sorts of warranties and exit clauses that somebody entering into a multi-billion dollar deal would have that would provide graceful exits from the contract.
 
This deal really locks the government in, with no option but the nuclear option, if they want to get out.
 
"Thorough analysis shows that the government significantly overpaid for the services, but the terms are confidential," the source said.
 
Nevertheless, it was revealed that CN and CP entered into $2.2 billion of the $3.7 billion plan.
 
"The parties, particularly CP and CN, signed cynical and exploitative terms, taking advantage of an outgoing government that was willing to do a deal for political reasons and on any terms," said the staffer.
 
"If the rail companies were prudent, they would have held off because Jason Kenney made it clear what his intentions were. He made no secret of it, they were put on notice the day the deal was signed and before they started taking steps to fulfil the contract."
 
It's never great for investor confidence when one government kills deals made by previous governments.
 
Tim McMillan, president and CEO of the Canadian Association of Petroleum Producers, has often said in the past that the cancellation of Northern Gateway pipeline by Prime Minister Justin Trudeau "was the most damaging thing that's been done to our economy."
 
Trudeau who unilaterally killed Enbridge's Northern Gateway pipeline in July 2017, after it had withstood years of rigorous and costly regulatory processes and was passed in the House of Commons, shook investor confidence that has never recovered, and is warier than ever with the fed's looming Bill C-69, the Impact Assessment Act, that critics say unamended will make large energy projects and pipeline construction impossible.
 
But this cancellation differs markedly.
 
The contract holders were duly warned and little time had passed.
 
Judging from a statement made by CN spokesman Jonathan Abecassis, it doesn't appear that the rail giant plans to antagonize Kenney's new government.
 
"CN strongly supports the premier's desire to get Alberta oil to market and we want to be part of that solution going forward."
 
It's a vague statement but magnanimous.
 
CP did not return any messages or calls by Postmedia.
 
The hope of the Kenney government, which will hold its speech from the throne on Wednesday, is that if oil by rail makes sense, private industry will step up and make it happen.
 
Licia Corbella.