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UPDATE 2-Canadian province Alberta allows extra oil output moved by rail

(Adds Suncor comment)

Oct 31 (Reuters) - The Canadian province of Alberta said on Thursday it would allow companies to produce additional oil if they move it by rail, easing curtailment rules that were designed to reduce transport bottlenecks.

The special production allowance takes effect in December, Energy Minister Sonya Savage said in a statement.

“The special allowance program will protect the value of our oil by ensuring that operators are only producing what they are able to move to market,” Savage said.

Alberta introduced mandatory production curtailments from Jan. 1 this year to ease congestion on export pipelines. In August, Premier Jason Kenney’s government extended those curtailments into 2020 because of slow progress in building new pipelines.

The curtailments are a rare government intervention into Canada’s oil industry in an attempt to shore up prices and stem an exodus of frustrated investors and foreign companies. On Thursday, Calgary-based oil and gas producer Encana Corp said it would shift its headquarters to the United States to attract a larger investment pool.

Major producers, including Suncor Energy and Canadian Natural Resources Ltd, suggested in July that the government allow them to boost output above curtailment limits if that incremental production is exported by rail.

The allowances will be based off average rail shipments by producers in the first quarter of 2019.

Suncor Chief Executive Mark Little said the company planned to move an additional 30,000 barrels per day (bpd) by rail within a couple of months, and estimated there is additional crude by rail capacity of 200,000 bpd to 300,000 bpd available.

“This is a very positive development because the whole purpose of curtailment was to reduce production to align with takeaway capacity,” Little said on a quarterly conference call. “When everybody has all their production flowing, then they’re incented to grow their production.”

Railways moved 310,146 barrels of oil per day in August, according to the most recent data from the Canada Energy Regulator, up 35% on the year, but shy of a record 353,789 bpd moved in December.

Reporting by Rod Nickel in Winnipeg, Manitoba, Editing by Bernadette Baum and Bill Berkrot