Trump issues surprise permit for early-stage Alberta-to-Alaska rail line, but hurdles remain

© Provided by Financial Post The Alberta-to-Alaska rail project has been in the works since 2015 and has the backing of Alberta government.

CALGARY – A surprise U.S. Presidential Permit over the weekend for a $22-billion early-stage project to build a new rail line between Alberta and Alaska delighted Prairie politicians and the oilpatch desperate for new oil export routes.

U.S. President Donald Trump announced on Twitter that, based on the recommendation of Republican U.S. Senator Dan Sullivan and Representative Don Young, he would issue a presidential permit for the proposed Alberta-to-Alaska Railway. “Congratulations to the people of Alaska and Canada!” he tweeted.

The unexpected presidential permit brought the nascent project immediate attention, though it has been in the works since 2015 and has the backing of Alberta government, which is supportive of infrastructure that will move more of its oil, gas and other commodities to export markets.

“This is the first gate,” said JP Gladu, president of the Alberta-to-Alaska Railway Development Corp., or A2A Rail. “The fact that this is signed now is a really great signal to us. It’s a signal for both countries about the route.”

But Gladu, who until earlier this year was the president of the Canadian Council for Aboriginal Business, acknowledged the real work lies ahead for the $22-billion project, especially the regulatory process in Canada and the U.S. and raising financing in challenging capital markets.

Currently, A2A Rail is conducting aerial surveys of the proposed route and preparing a project description with engineering firm HDR Inc. before submitting the Fort McMurray, Alta.-to-Anchorage, Alaska rail line to federal regulators. An existing Alaska Railroad connects Fairbanks in central Alaska to the deep-water Anchorage port in the southern part of the state.

“Ports in southcentral Alaska are four days closer to Asia than any other port on North America’s coast,” according to a map on the company’s website. “As a result, the A2A Railway will become a critical import/export link in the Pacific.”

There are still many details to finalize, including the exact path the new train line would follow and what the locomotive engines would burn for fuel. Gladu said the company is looking at the feasibility of hydrogen-powered engines, which is an early-stage technology.

Raising capital is a challenge for many resource projects right now but the company’s ownership group, Winnipeg-based McCoshen Group, has raised enough money for the “front-end of the project” as the company prepares to begin the regulatory process, Gladu said.

In the long-run, he said A2A Rail is setting aside a 49 per cent equity stake in the project for Indigenous communities along the route interested in partnering on the project. To that end, the company has been talking to federal, territorial and provincial governments about the possibility of providing financial backstops to Indigenous communities that may be interested in buying a stake.

Transport Minister Marc Garneau and Natural Resources Minister Seamus O’Regan’s offices did not respond to requests for comment on the railway line proposal.

Gladu said the Alberta government has supported the project enthusiastically as its viewed as a new trade route for oilsands bitumen, which would help make the railway viable.

“The government of Alberta is glad to see the approval of the U.S. Presidential Permit for the A2A Rail project,” said Kavi Bal, spokesperson for Alberta Energy Minister Sonya Savage. “We support the development of trade corridors that can unlock new markets for many of Alberta’s products including oil and gas, new mineral production and agriculture.”

Calgary-based A2A Rail hopes to break ground on the rail line in the middle of the decade and be in service before 2030 on the project, which would wind from Fort McMurray through the southern part of the Northwest Territories before turning northwest and cutting through Yukon and Alaska.

In addition to oilsands crude, Gladu said the route will also allow for the export of grains and mined products from northern Canada.

“Bitumen is one of the table stakes of how the economic modelling goes,” Gladu said, but added: “We’ll be pulling in other products along the line.”

He said the project, if built, would also allow remote First Nations communities to import building materials and other products that are prohibitively expensive in northern Canada.

“It’s to lower costs for northern communities,” Gladu said. “It’s expensive in the North because of transportation, so being able to bring up building products for Indigenous communities is an advantage.”

Source: Financial Post