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

Lars Hagberg/For The Globe and Mai

Alberta's projected deficit is on track to be four times larger than its original forecast, and the government argues it could not have predicted how quickly oil markets would swing against the province.

The Progressive Conservatives, led by Alison Redford, expect to run a deficit of between $3.5-billion and $4-billion in the fiscal year, up $1-billion from the forecast it reiterated in December.

The government's April budget, delivered before the province's April election, called for a shortfall of $886-million. The new figure was revealed in Tuesday's third-quarter update.

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Alberta also announced a three-year salary freeze for management in the public sector, effective April 1, saving $54-million. It plans to reduce the number of public-sector managers by 10 per cent over the same period.

The province richest in oil and natural gas says geography is to blame. Energy companies operating within its borders are stymied by a pipeline shortage and a glut of crude pumped out of North Dakota's Bakken formation, dragging down the price producers receive for their oil.

Canadian crude is worth less than the North American benchmark, which itself is worth less than the world price. This so-called differential has been hurting oil companies for over a year, pinching their bottom lines and forcing some to defer decisions on projects.

Limited market access has been a long-standing issue.

"We could see this coming," Alberta Finance Minister Doug Horner said about the province's oil transportation woes. "What we couldn't see – what most industry, the federal government, the Saskatchewan government, and ourselves – did not see was the speed at which the production in the Bakken and the blockage would happen."

Alberta's resource revenue for the first nine months of the fiscal year was $2.4-billion lower than expected, the government said. Its overall revenue shortfall hit $763-million. Alberta also collects cash from natural gas, coal, and land sales. These have also slumped, although royalties from bitumen and oil dominate the province's budget.

West Texas Intermediate oil, the North American benchmark, closed at $96.69 (U.S.) a barrel Tuesday, with oil produced in Canada selling for about $26 less, according to Bloomberg. Brent crude, the international benchmark, ended the day at $117.52.

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Experts, including those the government consulted when preparing its budget, issued warnings about oil prices last year. "The potential for wide and volatile differentials could result in [oil sands] operators delaying or cancelling unsanctioned projects," international energy research firm Wood Mackenzie said June 3.

Official Opposition Leader Danielle Smith slammed the government, which will release its next budget March 7.

"The budget that was put forward last year is completely unravelling. We knew it did not contain projections that were remotely within the realm of achievable," she told reporters Tuesday. "The budget was an absolute farce."

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