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The project’s private booster, Alberta-based Liricon Capital Ltd., along with co-developer Plenary Americas – owned by the giant Caisse de dépôt et placement du Québec – have argued it is 'uniquely low-risk to taxpayers.'Chris Bolin/The Globe and Mail

Alberta has punted an ambitious plan to build a passenger rail link between Calgary and Banff back to the private proponents of the project – saying that as it stands, the financial risks for the province are too high.

The current plan underestimates the capital costs of the project – currently pegged at about $1.5-billion – and what will be required from the province in terms of an annual financial contribution, according to Alberta Transportation Minister Prasad Panda. It overestimates the potential ridership, he said, adding a construction schedule that envisions the service running in the mid-2020s is unrealistic.

“At this moment, as it’s presented, it’s passing on all the risk to Alberta taxpayers,” Mr. Panda said in an interview Wednesday.

In the past, the idea of the Calgary-Banff rail project has generated excitement from provincial officials, including Invest Alberta, the entity created to promote tourism, tech, energy, agriculture and other sectors.

Backers of Calgary-Banff train say they need Parks Canada to get on board

The Transportation Minister said he likes the idea of the project, which could reduce the number of people driving to ever-more-crowded Banff National Park. It could help diversify the province’s economy by boosting the tourism sector. And proponents say it would lower greenhouse-gas transportation emissions by reducing the vehicles going to the park, and could be North America’s first hydrogen-powered passenger train system.

“Those things are good. But it shouldn’t be pie-in-the-sky,” Mr. Panda said.

The project’s private booster, Alberta-based Liricon Capital Ltd., along with co-developer Plenary Americas – owned by the giant Caisse de dépôt et placement du Québec – have argued it is “uniquely low-risk to taxpayers.” They have said construction costs will be lower and timelines shorter than many big projects because of the existing railway corridor. In the past three years, the idea of the rail project has been a rare point of agreement for the provincial and federal governments.

But the financial implications for the province have come under recent scrutiny from Alberta’s transportation department and cabinet, including Premier Jason Kenney – who will leave provincial politics in October.

“We want a realistic proposal, a feasible proposal,” Mr. Panda said, adding his office has sent a letter to the proponents this week outlining its position.

“If they can assume those risks, and if they can raise private capital, without penalizing Alberta taxpayers, we’ll reconsider it.”

Mr. Panda added there’s still an outstanding question of what the federal contribution to the project will be. So far, it’s only the Canada Infrastructure Bank that has said it’s prepared to provide a loan for half the $1.5-billion capital cost.

The proposed rail service would mean building a dedicated passenger rail line as a twin to the existing Canadian Pacific Railway Ltd. track to avoid impeding the near-constant shipping of freight. The line would begin at the Calgary airport and make stops downtown, and in Cochrane, the Morley reserve of the Stoney Nakoda Nations and Canmore.

Liricon and Plenary submitted a proposal on the Calgary-Banff rail project to the Alberta government and the Canada Infrastructure Bank in November. Under that plan, part of the capital costs and interest would be paid back – once the service is actually up and running – by the province. It would pay $30-million annually for 50 years. Alberta would eventually own the project, but a yet-to-be-named private entity would build and operate the service.

As envisioned by Liricon and Plenary, half of the $1.5-billion in capital required for the project will be provided by the Infrastructure Bank, with remaining 50 per cent being provided through a combination of debt from private lenders, and from Liricon and Plenary themselves.

Last month, Liricon managing partner Jan Waterous put out a news release that said a new ridership study that shows the $30-million in annual payments from the province might not be necessary if the park encourages mass transit-use with strategies such as raising the park entry fee for private passenger vehicles, or expanding bus and shuttle service between park attractions.

Ms. Waterous – who with husband Adam owns the Mount Norquay ski resort located in the park as well as the long-term lease on the Banff train station – said the study they commissioned found the train could carry up to 11 million passengers a year by 2035, five times more than originally projected in Liricon’s first proposal. The train system could be integrated with regional transit systems, and be a part of tourist packages with the country’s major airlines, she added.

In a message on Wednesday, Ms. Waterous said the letter from the province this week is part of the back-and-forth on the project.

“Not surprisingly, the Alberta government wants to reduce the cost to the taxpayer, and our ridership study shows that this is possible,” she said, adding she doesn’t believe the province has responded to all of the proponents’ updated plans.

“This is just part of the process of a complex project where ongoing dialogue with the government is paramount.”

However, Mr. Panda said the proponents want Alberta government to backstop early project development costs, and assume financial risks for the project that will be outside of the province’s control. He said the province’s annual costs, based on his department’s analysis, would be “much more” than $30-million – as would the upfront capital cost estimate of $1.5-billion.

Consultations and regulatory approvals are likely to take much longer than forecast. And Mr. Panda also highlighted that the proponents have yet to reach formal agreement with CPR. For instance, space is constrained in downtown Calgary, and new land will be needed to accommodate a second set of tracks.

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