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Updated: Thu, 18 Apr 2013 16:02:19 GMT | By The Canadian Press, cbc.ca

Pipelines needed despite narrower price gap, Oliver says



Pipelines needed despite narrower price gap, Oliver says

Despite a dramatic improvement in the price Alberta producers are getting for their crude oil, Natural Resources Minister Joe Oliver is still pushing hard for market-opening pipeline expansions, such as the controversial Keystone XL project.

"There are inevitably gyrations in price. The price of the commodity, as everyone in Alberta knows, do have a cyclicality — sometimes a profound one," he told reporters following a speech hosted by the University of Calgary.

The difference between the Western Canadian heavy oil benchmark and its lighter American counterpart was around $40 per barrel late last year. A heavy oil discount is not unusual, given it's tougher to refine — but the size of the gap was seen as painfully high by both government and industry.

- Why Canada just pumps out cheap, unprocessed crude

It's a phenomenon the Alberta government dubbed the "bitumen bubble" when explaining the hit it was taking to its revenues and the resulting budget squeeze. The main problem, it said, was with bottlenecks in getting the crude to markets that will pay the best price, such as the U.S. Gulf Coast and Pacific Rim countries.

The discount has since narrowed to below $14 — a much more normal and manageable level. West Texas Intermediate, the key U.S. light oil benchmark, was just below US$88 on Thursday, a bit of a rebound from the four-month lows it hit earlier in the week.

The gap has closed as crude volumes moving to market by rail in recent months have increased — something Oliver describes as "helpful" but no replacement for pipeline transport over the long-term.

Oliver says he's "cautiously optimistic" that the U.S. government will approve the $5.3-billion Keystone XL pipeline, which would enable some 830,000 barrels of mostly oilsands crude to flow to Texas refineries.

- Check out our interactive map of Canada's existing pipeline network

A key hearing was taking place in Grand Island, Neb., on Thursday, where both backers and opponents of the pipeline were commenting on a draft State Department report last month.

Some of those against the pipeline said they were preparing possible acts of civil disobedience should it be approved.

Nebraska has been a major battleground for the project. After an earlier iteration of the pipeline was rejected by Obama last year, its builder, TransCanada Corp. came up with a new route to address ecologically concerns, such as a spill's potential impact on the crucial Ogallala aquifer.

Washington to rule on Keystone

The draft State Department environmental assessment flagged no major environmental issues with the new route. A decision is expected as early as the summer, though many observers say it may be closer to the fall.

Oliver will be in Washington and New York next week to stump for the project.

If it isn't ultimately approved, Oliver said he expects Canada and the United States continue to have a solid economic relationship.

"My view is of course that this is a very important project for our country and we think that it's beneficial for both countries and therefore we very much want to see it go ahead and we made that clear to the U.S. administration," he said.

"However, we have the largest bilateral commercial relationship in the entire world — $1.8 billion of trade every day, every three seconds a truck crosses the border — and we do not want anything to undermine that relationship."

Oliver made his remarks after announcing a $15-million contribution to the University of Calgary to create an international policy program, which will study issues such as diversifying exports to Asian markets, among other things.

"Essentially, they will be providing academic and intellectual insight into some of the critical issues that confront Canadian energy policy going forward."

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