Pipeline squeeze ‘devastating’ Canadian economy

Report suggests stalled pipeline projects costing the Canadian economy up to $70 million a day.

February 8, 2013   by The Canadian Press

CALGARY—The inability to get western Canadian crude to the right markets is costing the country’s economy dearly, according to a new report paid for by the Saskatchewan government.

Each stalled pipeline project means a loss to the Canadian economy of between $30 million and $70 million every day, said the report penned by the Canada West Foundation, a Calgary-based think-tank.

The Saskatchewan government paid $50,000 to commission the report.

Premier Brad Wall has been an outspoken supporter of new pipeline projects, most recently signing a letter, along with 10 US governors, urging US President Barack Obama to approve the Keystone XL pipeline.

Alberta’s oilsands, the third-largest reserves on the planet, get most of the attention when it comes to the pipeline debate.

But Saskatchewan, which has considerable oil resources of its own, is affected by the pipeline pinch as well, Wall said in Regina.

“We hope that this helps get the message out, even to a greater degree than it is now, that we have a pipeline capacity issue in western North America and that’s costing Saskatchewan people a lot of money,” he said. “Because of the pipeline capacity issue, we’re losing up to 19 to 20 per cent return on the taxpayer’s resource.”

Oilsands crude has been trading at a deep discount to both US and global light crude benchmarks recently, a trend that has eroded oilpatch profits and caused the Alberta government to warn of a $6 billion revenue shortfall this year.

At the heart of the problem is a lack of adequate pipeline capacity to get that crude to the markets that want it most. Proposals of eastbound, westbound and southbound pipelines are in varying stages of development, but environmental opposition and political wrangling makes their fates uncertain.

Most pipeline capacity out of Western Canada heads to the US Midwest, which Jones calls “the worst place in the world to be selling oil” as booming production from areas like North Dakota floods the market.

The Canada West Foundation says new pipelines need to be built in the right directions.

A massive expansion to Trans Mountain and Enbridge’s Northern Gateway proposal would enable crude to be transported to Asia via tankers from the West Coast, but they face stiff opposition within BC on environmental grounds.

TransCanada Corp. is awaiting final US government approval for the northern leg of its Keystone XL pipeline, which would allow Canadian crude to flow to refineries on the Gulf Coast that are thirsty for heavy oil. Construction on the southern leg between Oklahoma and the Gulf is underway.

Refineries in eastern Canada and the US Eastern Seaboard rely on pricey imported crude from overseas, which is hurting their economics. Both TransCanada and Enbridge have projects in the works to send western crude eastward through reconfigured pipes that are already in the ground. It’s possible those lines could extend all the way to New Brunswick, home to Canada’s largest refinery.

While most of the benefits would accrue to Alberta, Holden said those three projects would add a combined $84 billion to economies elsewhere in Canada.

The report calls on provinces to work together to tackle the problem, the way Alberta Premier Alison Redford and New Brunswick Premier David Alward did earlier this week in touting an eastbound oil pipeline.

©The Canadian Press