UPDATE 1-Discounted bitumen prices hit Alberta's coffers
* 2012-2013 deficit could be C$2.3 bln-C$3 bln
* Revenues currently C$1.4 bln lower than expected
* Heavy crude discounts have been around $30 under WTI
CALGARY, Alberta, Nov 28 (Reuters) - Deep price discounts on the crude wrung from Alberta's oil sands are taking their toll on the western Canadian province's finances, the government said on Wednesday, as it warned that its deficit could still be more than triple its initial projection.
In a second-quarter budget update, the Conservative government of Canada's biggest energy-producing province said it expects its 2012-2013 deficit will be between C$2.3 billion and C$3 billion ($2.3 billion and $3 billion), with revenues for the first six months tracking C$1.4 billion below expectations.
It originally planned for a deficit of C$886 million, but realized by the end of the first quarter that the likely shortfall was widening.
Finance Minister Doug Horner blamed a series of factors, including global economic problems, the high value of the Canadian dollar versus the U.S. dollar and lower-than-expected land lease sales to energy companies.
But he singled out unusually wide differentials between the price of U.S. benchmark light oil and Canadian heavy oil as the most painful factor.
Western Canada Select heavy blend, a widely quoted grade of oil, has sold recently for around $30 a barrel under West Texas Intermediate, up from around $13 under WTI a year ago.
Meanwhile, WTI is weaker than it was a year ago, a double whammy for Canadian oil producers.
The discount is the result of tight pipeline capacity to the U.S. Midwest and scant access to other markets, such as the U.S. Gulf Coast and Asia, given delays in projects that would open up the new regions for Canadian supply.
"The biggest factor affecting our resource revenue right now is the lack of market access for our oil," Horner said.
"We have one customer and one means to ship our product to them. On the other hand, our customer has many different suppliers to choose from. This is not a good situation to be in and it's costing us dearly."
Alberta is an enthusiastic proponent of such contentious proposals as TransCanada Corp's C$5.3 billion Keystone XL pipeline to the southern United States and Enbridge Inc's C$6 billion Northern Gateway line to the Pacific Coast.
Meanwhile, the government said its expenses for the first six months of the year were C$293 million higher than expected due to the need to fund relief from forest fires and severe hailstorms.