Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(}function setPanelState(o){dom.root.classList[o?"add":"remove"](,dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

Alberta's Premier Alison Redford on Monday Nov. 26, 20

Lars Hagber

After a dramatic jump in Alberta's projected deficit this year, critics are slamming the Reford government's forecasts for oil and gas prices as far too rosy – arguing it is an unwelcome departure from the practices of past governments, which managed volatile commodity revenues by preparing for the worst.

Premier Alison Redford's government is scrambling to explain the gaping discrepancy between the energy price projections in its budget 12 months ago and the third-quarter update earlier this week that showed a shortfall this fiscal year of up to $4-billion.

Reliant on oil and gas for about 30 per cent of its revenues, the Alberta government places almost all of the blame on lower-than-expected land sales and prices for natural gas and oil that came in at less than predicted. For instance, in its budget last February, it pegged the price of North American crude, a benchmark for revenue projections, at an average of $99.25 for the fiscal year, but had to revise its expectation in the update to $91.82. A wider-than-expected gap between Alberta's abundant heavy oil and other North American crude has compounded the problem, it says.

Story continues below advertisement

Energy price predictions by Alberta governments have not always been spot-on. However, the Official Opposition says the Progressive Conservatives have lost their way from the Klein-era budget forecasts, which regularly predicted revenue on the low side.

"Year after year after year, they managed to get surpluses. They were obviously doing something different than this current government is doing," Wildrose Leader Danielle Smith said. "They would go out and get a number of forecasts from the most credible analysts, and then they would choose the lowest amount."

For instance, in the 2006 budget – the year premier Ralph Klein left office – the government chose an oil price near the low end of an average of energy price forecasts from banks, analysts and national forecasting agencies. Forecasters, on average, pegged West Texas intermediate at $59.92 U.S. per barrel. The Klein government used $50 a barrel as its budget estimate.

This strategy was criticized by groups who wanted the Klein government to spend more on health, education and social programs. A report from the left-of-centre Parkland Institute in 2006 said revenues were underestimated in almost all of Mr. Klein's 13 years in office.

In contrast, the Redford government's oil forecast the February, 2012, budget was just a notch lower than the average of all the estimates.

Ms. Smith said the Klein strategy was better because a more conservative forecast meant surpluses instead of deficits when oil or gas prices confounded predictions. "That's the approach that you have to take when you have such wild variations over the course of a year."

However, Alberta Finance Minister Doug Horner said no one expected Bakken oil production in the United States, which competes for pipeline capacity with Alberta exports, to ramp up as quickly as it has in the past 12 months. He said there is a different mix of energy revenues compared to the Klein days, when natural gas ruled – and the province is now much more dependent on revenues from the oil sands. He said the government has not changed the way it forecasts the price of oil.

Story continues below advertisement

"We took the mid-range, which is what we've always done," Mr. Horner said in an interview on Wednesday.

Ms. Smith said she would like to say the government will make better predictions in its new budget coming up on March 7, but she doesn't believe that will be the case.

Last year, energy companies were forced to change their projections too. By May, 2012, Suncor Energy Inc. officials said they expected to sell oil for $10 to $15 per barrel less than their earlier WTI forecast of $95 per barrel.

Michael Moore, an energy economics professor at University of Calgary, said that in any resource based economy, the swings of commodity prices are outside government control. He said the Redford government is like any other jurisdiction in North America: "They're using the most optimistic projection that they can."

Judith Dwarkin, chief energy economist in Calgary for ITG Investment Research, said forecasts are never realized, but "the onus on [the government] is to be realistic."

Ms. Dwarkin added "the deficit is a function of both spending as well as revenues … this is just a piece of the picture."

Story continues below advertisement

To Wildrose, the reason the government numbers last February have not matched reality is "an overhyped and overinflated" platform in last April's election. Facing damning polls and a raft of political controversies, the Progressive Conservatives pulled out all the stops, promising no deficits, no new taxes – but also pledging oil-sands technology research, dozens of new schools and 145 new family health-care clinics.

So far, resource revenues are $2.4-billion under forecast.

"I would have to say that nobody in the industry, nobody in other governments, saw this revenue issue coming as fast and as hard as it has come," Mr. Horner said.

Report an error Editorial code of conduct
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to If you want to write a letter to the editor, please forward to

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies