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Ralph Klein's government will send Albertans a "prosperity bonus," one of a number of measures in its long-awaited announcement on how it will spend the billions of dollars it's reaping from energy royalties.

Based on private-sector forecasts that the province's year-end surplus is headed toward $7-billion, the pool of money for bonuses could be as high as $1.4-billion.

Mr. Klein would not provide details yesterday on the amount of the bonus or who would receive it.

In recent months, the Conservative government has been criticized for its lack of vision about how to use a growing surplus without creating jealousy among the country's cash-strapped provinces.

Calling it an "unprecedented windfall," Mr. Klein told reporters yesterday after emerging from a closed-door caucus meeting in Cold Lake that the government plans to "spread the money around three ways" and they will be just about even.

The debt-free province, which has the lowest taxes in the country, wants to use its unallocated surplus on infrastructure projects and rebates.

The rest will be stuffed into savings.

Last month, the government announced that its expected surplus was about $2.8-billion. However, a recent Globe and Mail analysis using private-sector commodity price forecasts indicated that Alberta's year-end surplus is headed toward $7-billion, a calculation that was made by taking into consideration only the extra royalties the province is collecting.

Mr. Klein said that although the projected $2.8-billion has already been earmarked for such things as roads, schools and special education funds, any extra surplus money that is pumped into the treasury for the rest of the year will go toward the caucus's new financial blueprint.

If current oil and gas prices don't fall significantly, windfall revenues could amount to at least $4.2-billion. That would mean $1.4-billion would be allocated for the proposed "prosperity bonus."

Mr. Klein stressed that the bonus wouldn't be permanent and would be "predicated on windfalls only." He expects that the cheques could be mailed out as early as next year and likely wouldn't be that large.

He said that he received "pounds of mail" from Alberta residents who asked for the rebate. Albertans currently receive an energy rebate automatically when natural gas prices hit a certain point.

Rebates have been a controversial idea kicked around by the Klein government for months, although even as late as last month Finance Minister Shirley McClellan said that she preferred cutting tax cuts versus cutting cheques.

The idea of issuing an annual dividend cheque -- a practice that Alaska has used since 1982 -- was also discussed yesterday by the Tory caucus but rejected because of the uncertainty of natural-resource revenues, the Premier added.

Possible tax relief -- on both corporate and personal income -- is also likely on the way in Alberta, but those discussions are part of a separate review process the government is undertaking, Mr. Klein told reporters later. A report on the province's entire tax structure is expected to be released this fall.

Ms. McClellan said she is confident that the party has established "principles" and "guidelines" that will finally let the public know how the province's overflowing coffers will be used. "I hope it gives everybody a better understanding of what there is to spend," she said.

In the coming months, bureaucrats and Tory caucus and cabinet members will fine-tune how the surplus will be divided, she added.

In recent months, the Klein government has received a lot of advice, both unsolicited and solicited, about how it should use its ballooning surplus.

Former Alberta premier Peter Lougheed recommended recently that the government squirrel away half of its energy windfall, arguing the extra billions should not be spent or used to cut taxes.

Mr. Lougheed, whose Conservative government created Alberta's Heritage Savings and Trust Fund in 1976, has told reporters the time has come for the provincial government to resume paying significant amounts into that nest egg because future generations also have a claim on the province's resource wealth.

The fund is now worth about $12-billion.

The Canada West Foundation, a Calgary-based think tank, has also recommended an aggressive saving strategy.

The Canadian Taxpayers Federation's Alberta spokesman, Scott Hennig, said he is disappointed that the Klein government still hasn't nailed down its long-awaited plan to reduce taxes, but is happy that the rebate will at least "put money back in the pockets of Albertans."

While the future of Alberta's surplus has been a hot topic in that province for months, it recently gained national attention after Ontario Premier Dalton McGuinty mused last month to reporters that the wealth is becoming "the elephant in the room" and that the growing regional economic disparity needs to be debated.

The comment partly prompted Mr. Klein to warn the federal government and other politicians to "lay off" any talk of possibly "raiding" Alberta's treasury.

Although Prime Minister Paul Martin said there are no plans to target Alberta's oil and gas royalties, the topic is nevertheless a sensitive political issue in the province.

Many Albertans still blame the infamous 1980 national energy program for wreaking havoc on the province's economy in the 1980s.

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