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Back in February of 2020, Jason Kenney’s United Conservative Party government made a bet that the average price of a barrel of West Texas Intermediate crude that fiscal year would be US$58.

In a province where royalties from oil and gas are a significant proportion of government revenues, that figure was one of the basic assumptions in the province’s annual budget. Mr. Kenney’s critics accused him of being too optimistic. “Magical thinking,” NDP Leader Rachel Notley said.

The critics turned out to be right, more right than any of them could have imagined.

When the pandemic hit that March, the price of a barrel of WTI crude literally fell through the floor. With demand crashing and the world awash in oil, the price momentarily hit a low on April 19 of minus US$37.63 – which technically meant you would have to pay someone to buy your crude – before closing the day at US$16.94.

For most of 2020, a barrel of WTI crude sold for less than US$40; it only rose above US$50 in January, 2021.

You can’t fault Mr. Kenney for failing to predict the future two years ago. He was only making the same bet on the same volatile commodity as every other Alberta premier.

There is no provincial fiscal planning in Canada that is more nerve-racking than Alberta’s. It’s like an annual visit to a casino, where the player puts all their money on a single bet – that may come up golden, break even or crap out.

That was the story again in Alberta last week, when the Kenney government tabled its latest budget. When oil prices collapsed in 2020, Alberta’s 2020-21 deficit exploded to $17-billion. But with the WTI price now sitting above US$90, Alberta is betting that the average price in 2022-23 will be US$70, leading to a surplus of $511-million – the province’s first surplus in eight years.

The government is thereafter predicting modest annual surpluses of close to $1-billion a year.

Suddenly, the sun is shining in Alberta again. Another boom is under way. In fact, it may be a double boom.

The province gives a break on royalties to oil sands companies until they reach what is called “payout status,” when their cumulative revenue exceeds cumulative costs, including capital investment. Producers have started hitting that threshold. One analysis in The Globe and Mail found that, going forward, every one-dollar increase in the price of WTI crude will produce an additional $500-million in provincial royalty revenue, compared with $215-million eight years ago.

For now, Mr. Kenney and the UCP are enjoying their casino winnings. After two years of cutbacks that didn’t make them very popular, they have big spending plans, especially on health care. Their fiscal windfall is also a political windfall as they head into an election in 2023. And the longer oil prices stay above their US$70 peg, the bigger the windfalls.

After difficult years, Albertans are also enjoying a return to better times. But they should be asking themselves, how long can this last?

Alberta has a long history of spending 100 per cent of its resource revenues – and often more than 100 per cent, even during booms – rather than salting some of its winnings away for a rainy day. The province is one of Canada’s highest spenders on a per-capita basis. It also has among the lowest personal tax rates and no provincial sales tax. In good years at the craps table, oil and gas fills the gap. In bad years, huge deficits ensue.

Mr. Kenney promised in last week’s budget to continue reducing Alberta’s per-capita spending to bring it in line with other provinces. And he says the surpluses expected in the next three years will go toward provincial debt reduction.

But he avoided the bigger question: How long can the province continue to play the oil lottery? Every boom eventually goes bust. And given the global goal of getting off fossil fuels, at some point the bust will be permanent.

Alberta expects to take in $13.8-billion from oil and gas royalties this year, a huge sum that no other province can count on. At least some of that could be saved in the long-neglected Alberta Heritage Trust Fund. There, it would generate a stable source of revenue, forever. Just look at Norway: After socking away some oil revenues each year for decades, it has a sovereign wealth fund worth US$1.4-trillion.

Instead, like premiers before him, Mr. Kenney is avoiding the politically hard work of giving Albertans what they deserve: a fiscal future that isn’t a roll of the dice.

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