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The Alberta government is projecting a modest recovery for its oil sector in the coming years, as increased production and a steady rise in oil prices continue to bring the province back from the depths of a recession that began five years ago.

The provincial budget, released Thursday, paints a relatively favourable picture for the oil sector, even as Finance Minister Travis Toews explained that his government took a conservative approach to its forecast.

A fiscal document awash with public-sector cuts and reductions to municipal funding, predicts moderate growth for an energy sector expected to hold the line on short-term spending and investment.

“This is not a boom-time scenario. This is a very cautious revenue scenario,” Mr. Toews said.

The 2014 oil-price crash and resulting recession hit the industry hard, leading to the shedding of tens of thousands of jobs and billions of dollars from the province’s economy. Fiscal woes were further compounded when transport challenges widened the oil-price differential to $52 a barrel in late 2018.

In 2020, the province expects increased pipeline capacity and rising rail shipments to boost crude-oil production by around 178,000 barrels a day (b/d). The budget projects prices for West Texas Intermediate to increase to $63 a barrel by 2022-23, up from $57 this year. However, the price differential is also expected to grow by about $4 to $18.40 a barrel. New in-situ sites are likely to bring another 197,000 b/d online between 2021 and 2023, taking Alberta’s crude-oil production to nearly 4.1 million b/d.

The bottom line for Alberta’s coffers is an estimated $6.5-billion in resource revenues in 2019-20, increasing to $8.6-billion in 2022-23.

As Albertans grapple with the impact of the budget’s 2.8-per-cent overall spending cut, they’ll also fork out an estimated $1.5-billion to cover the crude-by-rail program cancelled by the Kenney government.

That plan by the previous NDP government would have seen the province purchase and ship 120,000 barrels of oil a day out of Alberta.

Mr. Toews said the fiscal risks of the program were untenable, but denied that his government was showing its bargaining chips by including the $1.5-billion figure as it tries to offload the contracts back to the private sector.

When it comes to energy and non-energy investment, the budget has corporate tax cuts and national pipeline expansions setting the stage for medium-term gains, with real and total oil exports estimated to grow by 3 per cent.

The moderately rosy outlook is tempered by the fact that Alberta is still dealing with the fallout of the 2015 recession. Although non-residential business investment is expected to rise by almost $12-billion and corporate profits by $26-billion between 2020 and 2023, those numbers are still below 2014 levels.

Conventional oil and gas investment is forecast to decline by about 20 per cent this year after posting modest growth of 4 per cent in 2018. Non-conventional investment is also expected to decline by 3.5 per cent, representing the fifth consecutive year of contraction.

Still, the government expects oil and gas investment to turn a corner in 2020 with a 4.5-per-cent rebound as producers ramp up drilling and production ahead of Enbridge Line 3 coming online.

Market access continues to be a problem, so much so that officials prepared an alternative scenario in which the Enbridge Line 3, Trans Mountain and Keystone XL pipeline projects are all cancelled. That reality, according to the government, would see a $5-billion hit to Alberta’s finances between 2019 and 2023 because of lost resource revenues and income taxes.

Alberta also built alternative models in the case of a global recession.

“We recognize that we live in a world of great volatility, and pipeline completion has to be one of those issues,” Mr. Toews said.

If pipelines are delayed or a global recession hits, he said that his government “is very prepared to take a look at our options and move in the direction of additional spending restraint.”

With global talk turning increasingly to the climate crisis, Alberta’s budget held little detail on what the emission-heavy province will do about it, except for a promise to eventually develop a strategy that “strikes the right balance between environmental protection and economic growth.”

Asked about Alberta’s plans on the climate front, Mr. Toews pointed only to the new Technology Innovation and Emissions Reduction (TIER) system, into which big emitters will pay $30 a tonne.

“That legislation is on its way. It’s going to be a comprehensive program that will target our heavy emitters and account for approximately half of our carbon emissions,” Mr. Toews said.

Under the program, regulated facilities will have the option to reduce their emissions, submit emission offsets or reduction credits, or pay directly into the TIER fund.

The first $100-million and half of the remaining cash paid into the fund will be used for emission-reduction projects overseen by Emissions Reduction Alberta, including new technologies for oil sands extraction, and research and investment in carbon capture, utilization and storage.

The government claims TIER will significantly reduce emission compliance costs and achieve greenhouse gas reductions comparable to the previous policies of the former NDP government.

It’s expecting TIER to bring in $1.9-billion over the next four years, $1.2-billion of which will fund emission-reduction programs. That includes $324-million for carbon capture and storage projects and $116-million for an oil sands innovation fund.

The government has earmarked $672-million of TIER to help pay down Alberta’s deficit and $80-million to an agency described as an energy war room established by the government.

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