Alberta’s non-renewable resource revenue is forecast to hit a record $27.5-billion in the financial year ending March 31, catapulting the province’s overall revenue to a new high of $76-billion.
The province’s windfall, outlined Tuesday in the 2023 budget tabled by Finance Minister Travis Toews, provides a fiscal boost for Alberta’s ruling United Conservative Party just two months ahead of an election slated for May. It places the province squarely in the black, forecasting a surplus of $2.4-billion for the 2023-24 fiscal year.
Revenue increased $13.4-billion from the 2022 budget, mainly owing to a $13.7-billion jump from resource income in the wake of sky-high oil and natural gas prices after Russia’s invasion of Ukraine one year ago. Demand for fossil fuels also grew as economies recovered from the COVID-19 pandemic, helping Alberta’s balance sheet.
And while the province expects oil prices and demand to return closer to historic norms over the next year, resource revenue estimates in Tuesday’s budget are the second-highest in Alberta government history, driven by elevated oil and natural gas prices owing to an uncertain global economic outlook and tight oil demand-supply balance.
The forecast assumes prices will begin to decline in 2023-24, tempering the amount of money landing in the province’s coffers from bitumen, conventional crude oil and natural gas.
Still, royalty levels continue to rise in Alberta, with 65 of the province’s 111 active oil sands projects now in postpayout status (which means they pay a higher percentage of royalties on their revenues). Two more projects are expected to reach payout in 2023, four more in 2024 and another one in 2026.
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Tuesday’s budget assumes the North American benchmark West Texas International oil price will average US$79 a barrel in 2023-24, about US$11.50 lower than forecast for 2022-23. Prices are expected to continue to fall, dropping to US$73.50 by 2025-26.
And while the province axed spending on climate preparedness projects from its carbon tax on large emitters, it boosted the amount of cash earmarked for technology, innovation and carbon capture.
Carbon capture and storage is seen as a salve for the fossil fuel-based economy, which is facing pressure from investors and the market to lower its environmental footprint. A coalition of oil sands companies called the Pathways Alliance, for example, says the technology will be key in its goal to lower its net greenhouse gas emissions to zero by 2050.
The oil and gas sector has lobbied provincial and federal governments hard for support for carbon capture and storage projects, and in 2022 Ottawa released details of a new tax credit to encourage their construction.
In Alberta, support for the technology in Tuesday’s budget includes $387-million over four years for new projects through the carbon tax, and $2.3-million to support new capture and storage business functions at Alberta Energy, including more staff.
The two commercial projects in operation in the province will also get $246-million. They include Shell’s Quest project at its Scotford upgrader outside Edmonton, which captures emissions from oil sands upgrading, and the Alberta Carbon Trunk Line, a 240-kilometre pipeline that carries CO2 from the Sturgeon Refinery and the Nutrien Redwater fertilizer plant to enhanced oil recovery projects in central Alberta.
The government is also exploring expanding the Alberta Petrochemical Investment Program to help support carbon capture and storage development by covering eligible capital costs. And it has budgeted $12-million for the Canadian Energy Centre, the “war room” to promote the energy sector, which was created by the UCP government after it won power in 2019.
Mr. Toews acknowledged on Tuesday that Alberta’s revenue structure remains volatile because of its dependency on non-renewable resource revenues.
“That’s our reality right now. At the same time, we’ve focused on creating a business environment that would attract investment and further diversify the economy,” he said.