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Record-high oil and gas prices continue to bolster Alberta’s books, with the province forecasting a $12.3-billion surplus for 2022-2023 in its midyear fiscal update, released Thursday.

The surplus is almost $1-billion less than forecast in the province’s previous fiscal update in August, but is still about $11.8-billion more than forecast when the 2022-2023 budget was tabled in February. That budget was released the same day that Russia invaded Ukraine, kicking off a global energy crisis and supply fears that sent commodity prices skyrocketing to record highs.

Alberta Premier Danielle Smith used the province’s recent energy windfall to announce a series of measures earlier this week designed to help ease the burden of rising inflation, including direct payments to families and seniors. The optimistic financial forecast also comes six months before the provincial election in May, which will be Ms. Smith’s first campaign since taking over in October from Jason Kenney as Premier and United Conservative Party Leader.

The global energy situation has benefited Alberta’s coffers immensely.

Total revenue for 2022-2023 is forecast at $76.9-billion, which is $14.3-billion higher than the initial budget. Of that, non-renewable resource revenue is expected to hit $28.1-billion – that is $12-billion higher than in the previous year, and by far the highest in the province’s history. About 70 per cent of that comes from bitumen royalties, which are forecast to hit $19.4-billion in 2022-2023

The substantial increase is owing to the higher oil price from the tight global demand-supply balance and the war in Ukraine. More projects are also moving to “post-payout” status, which means they will pay royalties on a higher net revenue formula in 2022-2023 and subsequent years.

The North American benchmark West Texas Intermediate oil price has held above US$85 a barrel since mid-October, but it continues to be volatile. Still, the province has forecast WTI at US$91.50 for 2022-2023, dropping to US$78.50 in 2023-2024 and US$73.50 in 2024-2025.

The decreasing prices are based on slower demand growth because of global economic weakness, the impact of inflation and increasing interest rates, and the uncertainty from the continuing conflict in Ukraine, as well as because of supply growth.

With oil prices expected to soften over the three-year forecast, Alberta’s non-renewable resource revenue is forecast to decrease to $19.2-billion in 2023-2024, and then to $16-billion in 2024-2025.

Still, the mid-year fiscal update released Thursday predicts that Alberta will stay in the black until at least 2025, with surpluses of $5.6-billion and $5.3-billion forecast for 2023-2024 and 2024-2025, respectively.

Finance Minister Travis Toews said Thursday that the surplus was good news for Albertans, because it allows for a timely response to the affordability crisis many families are facing.

Around half of the $2.5-billion in increased spending over the 2022-2023 budget – or around $1.3-billion – will be used for inflation-relief measures announced by Ms. Smith this week.

The Premier’s announcement outlined $2.4-billion of supports, including cash payouts of $600 to seniors and for each child in a family for households earning less than $180,000 a year, as well as suspending the consumer fuel tax for six months and giving rebates for electricity and natural gas. Government officials insisted Thursday that the total amount of spending on those programs is covered off in provincial books.

Other significant increases to spending come from the higher costs of selling higher-priced and more volumes of oil, funding for collective bargaining agreements, and the oil and gas site rehabilitation program.

Mr. Toews said by “investing in savings and reducing debt for future generations,” the UCP government continues to make Alberta “the best place to live, work and raise a family.”

But those savings don’t seem guaranteed.

The new government under Ms. Smith’s leadership has paused a plan announced in August to use the oil and gas windfall to put almost $3-billion into the province’s Heritage Savings Trust Fund – representing the largest ever single-year investment, comprising $1.7-billion from the surplus and $1.2-billion in investment earnings from the fund.

The fund was established in 1976 with revenue from non-renewable resources. The idea of the fund is to use cash from Alberta’s non-renewable resources to invest in savings for current and future generations.

Mr. Kenney’s government announced a plan to inject billions into the fund. At the time, the government framed the $2.9-billion investment as a sure thing, though the fiscal update of the day said the plan would “continue to be evaluated as the fiscal year unfolds,” taking into account factors such as interest rate changes and inflationary pressures.

But the government is still mulling over how much – if any – of the surplus will go into the fund. Mr. Toews said Thursday that decision will hinge on a new “fiscal framework” that the government is developing to guide how surpluses are spent – whether they’re used for repaying debt, spending on infrastructure or channelling into the heritage fund.

“We’re holding our options open, because we’re committed to developing a transparent fiscal framework,” he said, adding more details will be included in the 2023 budget.

Even with a global recession looming, Thursday’s fiscal update projected that Alberta is well-positioned to weather economic challenges, thanks to strong levels of investment and growth in non-energy business output, which have bolstered export revenues and corporate profits.