Premier Rachel Notley announced Sunday that a short term reduction in oil production will come into effect early next year as the province wrangles with the oil price differential. The reduction amounts to 325,000 barrels a day of raw crude and bitumen, or about 8.7 per cent of daily production.

Notley blamed the oil price gap on the federal government’s failure to build pipelines resulting in the province producing 190,000 raw crude oil and bitumen barrels per day that cannot be shipped out.

“Every Albertan owns the energy resources in the ground, and we have a duty to defend those resources. But right now, they’re being sold for pennies on the dollar. I can’t promise the coming weeks and months will be easy,” said Notley in a news release.

The curtailment is seen as a way to reduce volatility and narrow the price differential by at least $4, adding an estimated $1.1 billion to government revenue for 2019-20.

The Alberta Energy Regulator will start the reductions starting in January 2019 which will apply to both oil sands and conventional.

The initial curtailment of 325,000 barrels per day is expected to drop over the course of 2019, with an estimated average of 95,000 barrels a day once excess storage is cleared.

Reaction to the curtailment from United Conservative Party leader Jason Kenney and Alberta Party leader Stephen Mandel was swift. 

“Today’s situation is the direct result of the failure to build pipelines in recent years - including the cancellation of multiple viable pipeline projects by the Trudeau Liberals,” said Kenney. “ It’s truly outrageous that our province has been brought to the point where such a grave decision must be considered.”

Mandel too called out the federal government’s inaction on getting a pipeline built saying, “Albertans interests have been harmed by the close relationships of the NDP with their federal counterparts and overreliance on goodwill with the Federal Government.”

Notley said that she expects the cuts to remain in place until the 35 million barrels of oil currently sitting in storage because of what she describes as “unsustainable” transportation bottlenecks are shipped to market.

The province also expects a deal in the works to purchase its own railcars to transport oil will help with the backlog next year.