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Reporters watch on monitors as Alberta Premier Alison Redford addresses the province in Calgary on Jan. 24, 2013.JEFF MCINTOSH/The Canadian Press

Canada's economic engine is sputtering, with sinking oil prices and a pipeline bottleneck driving a "bitumen bubble" that's cutting deeply into Alberta's bottom line, Premier Alison Redford says.

The province's oil and gas royalties are now expected to fall $6-billion short of projections in the coming year, Ms. Redford said Thursday evening. That would amount to a 45-per-cent drop at a time when economies across Canada continue to sag and the federal government dials back revenue projections – underscoring how closely national fortunes are tied to the energy sector.

The sharp revenue decline will also spur the continuing national debate over pipelines, heading east or west, which Ms. Redford argues are the only way to reduce reliance on American buyers, reach new markets and fetch a higher price for Western Canadian oil.

"We have a duty to ensure that our resources, especially Alberta oil and gas, get to new markets at a much fairer price," Ms. Redford said while delivering the news in a special television address Thursday evening, which cost taxpayers $55,000. "We absolutely must find ways to get Alberta oil to multiple customers around the world and get a competitive price."

Market access, however, is not a new problem in Alberta, and Ms. Redford's critics say she's now paying the price for overestimating revenue in last year's pre-election budget.

Meanwhile, the Premier continues to not give specifics about what she'll do to return Alberta to surplus. Instead, she's sticking to a series of promises that leave no clear way to eliminate an expected multi-billion-dollar deficit.

In Thursday's televised address, she simply said "we'll live within our means," warning vaguely of some cuts but pledging not to "take an axe to government spending across the board." The Premier also made overtures about the province having a "conversation" and rethinking its fiscal framework at a time when oil and gas revenues are spent immediately, covering about 30 per cent of the provincial budget.

"Quite simply, we have to put Alberta's finances on a more stable footing," she said.

Finally, she suggested she wouldn't abandon her election spending promises. "Our government was elected to keep building Alberta. To focus our spending on the priorities that you told me were important. And that's exactly what we'll do," she said.

She also pledged to begin saving oil and gas revenue once again, tucking it away in the stagnant Heritage Savings Trust Fund. A plan to do so will be included in the March budget, her spokesman said.

In short, she continues to cling to her promises, despite the dire warnings. And critics say they're mutually exclusive – she can't preserve spending, avoid deep cuts, save extra money, not raise taxes, avoid taking on non-infrastructure debt and wean Alberta off oil and gas all at once.

"This is essentially the same recycled lines we've been hearing from her for over a year. She still doesn't seem to have any of the answers," Official Opposition Leader Danielle Smith, of the right-wing Wildrose Party, said in an interview. She favours spending cuts to balance the budget. "She still seems to want to have it all."

It's a complicated series of issues hurting the province's bottom line. Essentially, Alberta is getting less and less for its oil, even though the North American benchmark price remains relatively strong. That's because Alberta's oil has always sold at a discount, one that's quickly growing as Alberta's sole primary customer, the United States, faces an oil glut.

That gap has hovered between $30 and $40 in recent weeks, meaning Alberta is getting about $50 to $60 a barrel for its oil on a given day. It had forecast $83 per barrel, and a gap of $16. And "the trend is getting worse," Ms. Redford said.

Alberta has little leverage to demand the full North American benchmark price, West Texas Intermediate, without an ability to sell elsewhere, such as Asia, Ms. Redford said.

The Premier announced she'll host an Alberta Economic Summit next month – before her March 7 budget release – looking at ways to overhaul the province's fiscal formula, and will host a town hall on Jan. 28.

While Ms. Smith favours spending cuts, Liberal Leader Raj Sherman and New Democrat Leader Brian Mason have advocated for increasing taxes. Alberta's tax rates are the lowest in Canada. Ms. Redford said her "preference" is for no new or higher taxes, but she's left the door open to hikes in 2014.

Dr. Sherman said Ms. Redford overestimated last year's budget. "It's typical. They get Albertans' hopes up the day before the election and dash them the day after," he said, adding the $55,000 was a waste of money when the Premier might simply have called a press conference.

Mr. Mason feared service cuts would be inevitable. "She's put herself in a box that can only be solved by large deficits and significant service cuts … And I think she's going to pay a very big price for this," he said.

The source of the $6-billion figure, however, is unclear. In citing it, Ms. Redford's Twitter account pointed to a Globe and Mail article. The article referred to a "very loose" estimate from FirstEnergy Capital Corp. that $4-billion to $6-billion in taxes and royalties, for all provinces and the federal government, would be lost in a year given the price-gap for western oil. The FirstEnergy estimate was made when the gap was roughly $35. On Thursday, it had narrowed to $32. Asked about the figure after the speech aired, Ms. Redford's government said The Globe was cited but wasn't the source of the figure. The FirstEnergy estimate "happened to corroborate our internal forecasts which stand at $6B and are worsening," Stefan Baranski, Ms. Redford's spokesman, said in an e-mail.

Ms. Redford's paid TV address took a page from the book of her predecessors, Ed Stelmach and Ralph Klein. Both took the airwaves to address voters directly. The Redford speech follows an e-mail message sent to PC supporters on Wednesday. Her finance and energy ministers, meanwhile, have been touring the province warning of tough times ahead.

The Alberta government is frequently bailed out by non-renewable resource revenues, either in natural gas, oil or through the sale of land leases. Without that, the government would need higher taxes, deep cuts or both to balance the books. Spending in the province has ballooned since its debt was paid off in 2004, far outpacing its population and economic growth. As such, Canadian Taxpayers Federation Alberta director Derek Fildebrandt says Ms. Redford should be cutting spending, not complaining of dropping oil prices. "We do not have a shortage of money," he said.

The government wouldn't say how significantly energy revenues will be affected in the current fiscal year, which ends March 31. That information will be included in the quarterly fiscal update, which is scheduled to be released next month.

Editor's note: The Wildrose Party primarily favours spending cuts to balance Alberta's books. Incorrect information appeared in an earlier version of this story. This online version has been corrected.

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