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They note, however, that as more and more oil moves out of Canada on railway cars to make up for the lack of pipeline capacity, the discount between WCS and WTI should shrink to an average of US$21.60 per barrel. This would reduce the cost to Canadian economy to roughly $10.8 billion this year, or 0.5 per cent of GDP, and $7 billion next year, or an estimated 0.3 per cent of GDP.

Scotiabank called the delay of new export pipelines and the large discounts that it has triggered, “a self-inflicted wound.”

“The sooner governments move to allow additional pipeline capacity to be built, the better off Canada will be,” Scotiabank economists Perrault and Johnston wrote.

Kinder Morgan Canada’s $7.4-billion Trans Mountain expansion, TransCanada Corp.’s US$8-billion Keystone XL and Enbridge Inc.’s $8.2-billion Line 3 replacement project are the three major export pipelines that could shrink the discount considerably, the bank said.

Photo by Ben Nelms/Bloomberg

While all three have been approved by the Canadian government, they remain mired in court challenges from environmental groups or local communities, and have delayed their anticipated in-service dates. Line 3 is also awaiting approval from regulators in Minnesota.

Enbridge president and CEO Al Monaco said last week that surging oil production and limited pipeline capacity means the Line 3 project will be completely full when it is finished construction in 2019, if the regulators approve the project by the second quarter.