What a difference a year makes. In February, 2012, Alberta’s outspoken finance minister, Ron Liepert, told a Calgary Chamber of Commerce audience that a “gusher” of oil sands revenue was coming the government’s way and that $5-billion budget surpluses could be the standard by 2014.
If oil prices stayed strong, he told the downtown crowd, the province’s biggest problem would be friction within confederation brought on by the imbalance of Alberta’s massive wealth.
Fast-forward 13 months. Mr. Liepert has retired from politics, and cabinet ministers don’t spend their time worrying about a fiscal imbalance between the provinces. Instead, they’re grappling with a spartan budget featuring an operational deficit of almost $2-billion this year and a return to debt on the books. In addition, the province will borrow a total of $11.6-billion over the next three years to pay for schools, roads and hospitals.
On Friday, Mr. Liepert’s successor, Doug Horner, made his way to Calgary’s sandstone Hyatt Regency building for an Alberta tradition: the day-after-the-budget address from Alberta’s finance minister to the Chamber of Commerce.
Mr. Horner’s restrained speech emphasized the quandary of a stable, growing provincial economy contrasted with the discounted prices Alberta producers are receiving for their heavy oil. He laid out future years of wage freezes in the public sector, savings and low-interest borrowing from the capital markets. He also touted the fact that Thursday’s budget contained no new taxes.
Mr. Horner also said the government is being more conservative than the energy industry in predicting the cost of the discount for Alberta oil in comparison to the prices paid for other North American crudes.
(As a result of recent pipeline congestion that has made it increasingly difficult to get Canadian heavy oil to its best markets, Alberta producers have been receiving a more heavily discounted price – or differential – for their crude.)
“We felt that we needed to be quite prudent on that,” Mr. Horner said.
But critics argue the government’s problem is spending, not a lack of revenue, and that overly optimistic predictions for energy prices last year are the root of many of the government’s financial problems. Some audience members, recalling Mr. Liepert’s 2012 “gusher” address, said Mr. Horner’s austerity should have been in place a year earlier.
Bill Kaufmann, a retired geologist and oil executive, said Mr. Liepert’s 2012 budget reminded him of the late 1980s and early 1990s, when Don Getty was premier and government oil and gas predictions skewed high and were often never realized.
“You can say that the bitumen bubble was a surprise,” Mr. Kaufmann said, referring to the phrase Premier Alison Redford has used to describe the discount price for Canadian heavy oil.
“But it wasn’t much of a surprise,” he said. “There’s no excuse for high-balling it.”
Ben Brunnen, chief economist for the Calgary Chamber of Commerce, said the 2013 budget is what Albertans should have got in 2012.
This year, “there’s a stronger connection to what’s actually probably going to happen. Last year was definitely a little bit rosy in terms of the revenue forecast,” Mr. Brunnen said.
As for Mr. Liepert, he said in an interview on Friday that he doesn’t regret his words and he still believes the massive oil-induced government surpluses he predicted last year will come to be. It might just take longer than he thought.
“It’s just a matter of meeting the ability to get product to market,” Mr. Liepert said. “Obviously, it’s not going to happen as quickly as our officials were forecasting last year.”