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Barges sit on the Mississippi near Vicksburg, Miss., on Jan. 28, 2013, waiting for traffic to open after a barge carrying oil struck a railroad bridge.Melanie Thortis/The Associated Press

America's Big River could be a new passage for Canadian heavy oil in the race to bypass pipeline jams and get Alberta bitumen to refineries on the Gulf Coast.

MEG Energy Corp. said Thursday it has a new plan to transport Canadian crude by inland waterway, barging the bitumen down the Mississippi River beginning later this year.

The diluted bitumen, the company said, will likely travel from northern Alberta to Bruderheim, near Edmonton, then be transported by rail or pipeline to Chicago canals, and finally move onward to the Mississippi River system – where it will be loaded onto the barges to be shipped to refineries in the Gulf of Mexico area where crude prices are higher.

Plans that will see Canadian crude floated down the U.S. waterway, where billions of dollars of commodities are shipped each month, is another sign of tactics companies are willing to employ in the face of a dearth of pipeline capacity, a situation compounded as oil production in the U.S. ramps up.

Getting Alberta crude to the United States is seen as key in helping to get a better price for Western Canadian select (WCS), which is trading at a huge discount to West Texas intermediate (WTI), the most commonly traded North American crude. WCS sold at a 16-per-cent discount to WTI at the beginning of 2012, and there's now a 33-per-cent gap.

While companies hope the pipeline congestion could ease in the next six to 18 months, they're still making alternative plans that include rail, trucking and now, barging.

As production and capacity ramp up over the course of this year, MEG said it will be able to move up to 40,000 barrels a day by both rail and barge. Mid-sized MEG, of which Chinese state-owned enterprise CNOCC Ltd. owns a 17-per-cent stake, wants to increase its revenues this year by both decreasing production costs and increasing the price-per-barrel it receives.

"With the idea that the barges and the rails can reach multiple refiners, it's a fundamental shift in how the business is run," MEG chief executive officer Bill McCaffrey said during financial results conference call. "And that is very, very exciting and it's a 2013 topic."

MEG spokesman Brad Bellows said the per-barrel shipping cost is in the teens of dollars, and barging is even a few dollars cheaper per barrel than transporting by rail.

The announcement from Calgary-based MEG Energy follows earlier news this week that Valero Energy Corp. is considering using Mississippi River barges to ship heavy sour Canadian crudes to Texas refineries this year.

Valero spokesman Bill Day said the Mississippi has always been used to transport crude by barge. However, there's never before been a need to use the flat-bottomed boats – that have transported all manner of goods for centuries – to ship Alberta bitumen down U.S. waterways.

"It does sound crazy until you consider the alternative is to put a whole lot of crude onto a very, very large ship halfway around the world, and sail it on the ocean for a month to six weeks, and then off-load it in a huge gigantic batch," Mr. Day said of the various transport options being pursued by the energy industry.

Although the refinery giant would rather see the Keystone XL pipeline built through the U.S., the idea this year is that Valero would bring Canadian crude by rail to a terminal in Hartford, Ill. , and "then put it on barges and send it down to the Mississippi to a refinery that we have in Louisiana," said Mr. Day.

Whether the plan goes ahead or not depends on if it makes economic sense.

"The Canadian crude is price-advantaged to the point where right now it looks like it would be feasible to go by rail and barge," Mr. Day said.

Analyst Andrew Potter of CIBC World Markets said that the new shipping methods will allow MEG to ramp up deliveries to the Gulf of Mexico and East Coast earlier than previously expected. Mr. Potter said that's a financial benefit, and "also helps remove risk if Keystone XL is delayed further."

Worries about crude spills and growing greenhouse gas emissions from the oil sands have held up the construction of pipelines that would take Canadian oil to U.S. markets. However, shipping down the Mississippi is not without its environmental concerns.

Facing the worst drought in decades, Mississippi shippers have watched with increasing concern in recent weeks as river channels have narrowed. Barges must take extra care to avoid running aground. With low water levels, the U.S. government has paid to have rock formations removed so that commodities such as coal, steel and grain can safely pass. A cleanup on the Mississippi continues this week following a light crude spill from a barge that hit a railroad bridge on Sunday near Vicksburg, Miss.

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