During the Alberta government’s mid-year fiscal update, Finance Minister Travis Toews couldn’t stop smiling as he announced the royalty revenue roller coaster had once again begun its long prayed-for ascent towards the heavens.
Since former Premier Peter Lougheed’s time, legend had it that one day, Alberta would be flush with oil revenues so big that it might actually pay for all those little luxuries like education, and healthcare.
Progressive Conservative Premier after Progressive Conservative Premier held a little prayer in their head that it would be they who would be blessed with overseeing the black gold rush that would allow them to spend more while asking for less, or make poor decisions and have “free” money to cover their losses.
Alberta’s long-term plan for financial security was in a caveat that once capital investments in developing Alberta’s resources were finally paid off, the government would hit pay dirt. Oil and gas developers understood the rules and laughed their way to the bank with continued investment in new projects that kept the royalties low and increased their capacity for production.
When the great oil price crash began, it was unlike anything Alberta had seen before. The projected dive in prices, due to over-supply and a power struggle within the ranks of OPEC+, would not be a deep drop and sharp climb – no – at that point, the end of the crash was nowhere in sight.
After OPEC decided to continue to flood an already over-supplied market in November 2020, oil and gas developers shelved new projects in the province in an attempt to wait out the race to the bottom.
This decision, as well as an exodus in oil and gas development companies since, put Alberta on the right path to finally reach the long-awaited pay day, when oil and gas developers would reach “pay out status” and their royalty commitments would shower the Alberta government with lots, and lots, of sweet gravy.
Premier Jason Kenney set the stage at the Rural Municipalities of Alberta fall conference on Friday, saying his government had predicted oil revenues would be around $200 million in 2021. In the fairy tale that is Alberta, this major miscalculation is deemed a gift from the Gods, or God, or whomever grants Alberta free money under a conservative government.
Who among us doesn’t think the Jameson’s will be a-flowing in the Ministerial offices tonight?
Toews said that resource revenues were projected to be a glorious windfall of $10.8 billion for the provincial treasury, a number that would help drop the annual deficit to just below the previous government’s $6 billion; praise be.
But when it came to increased investment in oil sands developments, Toews said that companies should invest, for it was clear that the world needed more Alberta energy, but admitted he couldn’t say if they agreed with his analysis.
Unfortunately, that’s the thing about reaching “pay out status” – it means developers are not investing more money. It means they made a calculated analysis that they will make more money paying out higher royalties than developing Alberta’s resources.
A week ago, most people would have said that it won’t be the UCP’s problem.
In a province where money means more than almost anything else, I wouldn’t be so sure.
This post contains opinion.
Deirdre Mitchell-MacLean is a political podcaster and commentator.
Connect: @Mitchell_AB for more, or @politicalRnD
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