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CALGARY and EDMONTON — With no place to transport burgeoning supplies of crude oil, Canada’s energy industry, and the provinces and investors that depend on it, has reached a moment of crisis as profits bleed from one of the country’s most economically important sectors.
Alberta Premier Alison Redford on Thursday said there’s been a “monumental shift” in the economics of Alberta oil, as delays in the construction of new pipelines pinch the thick profits that have long sustained both the energy industry and the broader Western economy. Alberta this week warned depressed prices for its crude resulting from choked markets for its landlocked oil could lead to bigger deficits and spending cuts for the government.
Alberta needs new pipelines to reach new markets and give its oil sector a boost, “because this is about a product that we need to get to market,” Ms. Redford said. Economic woes are spurring a “profound change in the way that Canadians look at the world, the way we look at our economy,” one she hopes will win support for pipeline projects.
Record discounts for Albert crude in recent weeks are now spurring a strong new push by the oil patch to make the case that more needs to be done, and fast.
“We’re at a spot today where we need more capacity as soon as we can possibly get it online,” said Russ Girling, chief executive officer of TransCanada Corp., the Calgary pipeline company whose Keystone XL project which would carry Alberta oil to the Gulf Coast, and has been delayed for more than a year after critics raised concerns about the impact of a potential spill on a critical U.S. freshwater aquifer.
Environmental concerns have similarly created uncertainty over Northern Gateway, the Enbridge Inc. pipeline proposal to the British Columbia coast.
In the meantime, the financial picture for the entire country is being muddied as Canadian crude becomes a dollar-store brand, sold on the cheap. Some now say the entire country is being hurt, to the advantage of others.
“Any time you are producing a non-replaceable commodity at a 50-per-cent discount to world pricing, and you are unable to access that pricing, you’re losing money. It is a wealth transfer from the producer to the buyer,” said Sandy McIntyre, chief executive officer at Sentry Investments in Toronto. “So we’re giving … 1.6 per cent of GDP subsidy to buyers of our oil. Is that smart?”
For the rest of this article, please go to the Globe and Mail website: http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/alberta-bolsters-pipeline-push-as-price-gap-pinches-profit/article6613827/