Canadian heavy oil is being treated like a second-class citizen in the global energy world.

Canadian heavy is "doubly discounted" against global benchmarks because it's largely sold into a single market in the U.S. Midwest, where prices have been significantly depressed compared with oil prices elsewhere in the world.

If pipeline capacity can be added to take oil to new markets it could generate at least another $131 billion to Canadian GDP from 2016 to 2030, including $27 billion in extra government revenues, predicts a new study from the School of Public Policy at the University of Calgary.

Eliminating the existing discount, or price differential, would generate close to $10 billion a year in added economic activity if Canada's 1.5 million barrels per day - growing to more than three million by 2020 - of oilsands production was simply treated like Mexican Maya.

Apparently, Canadian oil is looking for a little r-e-s-p-e-c-t. And about another $10 a barrel.

The question of exactly how much money Canadian companies and governments are leaving on the table, even with West Texas Intermediate at more than $93 per barrel, has been debated for months as the traditional global benchmark WTI has declined in price and prominence.

"It's time to get our products priced at a world price," said Michael Moore, one of the authors of the study released Thursday.

"In a sense, you can say that we are doubly discounted from what is available on the world market," he said.

If the reason for the price discount is evident to the authors, the solution is equally clear: pipeline capacity to new markets.

Enter Keystone XL and Northern Gateway.

The controversial proposals from Calgary's TransCanada Corp. and Enbridge Inc. to the U.S. Gulf Coast (Keystone) and B.C. coast (Gateway) are at the forefront of capacity additions and reversals of existing lines proposed to address the issue of discounted North American crude.

If the issue is relatively straightforward, it's also hugely important. The energy sector is a key driver of Canada's economy and the study said the economic impact of new oil markets could be equal to one per cent of annual GDP.

Growing volumes from the oilsands and the Bakken light oil play have overwhelmed the refining capacity in the U.S. Midwest and forced down local prices. To secure the higher prices, western Canadian crude needs access to tidewater ports.

That's increasingly easier said than done.

As TransCanada has seen with the politicized debate in the United States that's delayed a decision on Keystone XL until after the 2012 presidential election or Enbridge is facing with unprecedented public hearings for Northern Gateway across northern B.C., getting a pipeline approved is no easy feat these days.

It's all part of a broader campaign by environmentalists against "dirty oil."

Time magazine recently concluded 2011 was the year of the protester and public pressure is already delaying critical infrastructure projects.

A report earlier this week from Greenpeace warned against investing in oilsands producers as the protests against the pipelines "could be the undoing of the industry's lofty ambitions."

Moore, meanwhile, suggests the U.S. Midwest bottleneck at Cushing, Okla., should be eliminated by 2016 after Keystone, and other pipelines, are moving Canadian heavy to refineries on the Gulf Coast.

Mexican Maya, for example, has largely the same physical characteristics as oilsands crude (heavy and sour) but trades at a discount to higher value Light Louisiana Sweet (LLS) crude than the under-pressure WTI.

In fact, Moore suggests LLS should eventually replace WTI as the North American benchmark crude.

The study forecast new pipeline capacity to the West Coast via the Northern Gateway and TransMountain expansion should fully come onstream by 2020. The differentials for Asia are even better than the continental U.S. and could be as high as $14 per barrel by the end of the study period in 2030.

Crude from the oilsands has a long way to travel to market and, like heavy or ultraheavy oil from Venezuela, Mexico or the Middle East, requires additional refining.

Failure to maximize netbacks from relatively expensive producing areas is a major issue and easing of pipeline constraint would lead to lower transportation costs. Moore said challenging economics essentially rule out adding significantly more oil refining in Alberta.

"We're a whole lot more competitive if we are priced closer to that world market," said Moore, who noted half of the oil bound for the West Coast is likely to go to under-utilized California refineries and the other half to northern Asia.

The rewards of pipelines to new markets are too great for Canada to ignore, Moore said, and must be a national priority.

Stephen Ewart is a Herald columnist.

sewart@calgaryherald.com