Premier's address forecasts multi-billion dollar losses from 'bitumen bubble'
Published Thursday, January 24, 2013 7:29PM MST
Last Updated Thursday, January 24, 2013 10:53PM MST
In the wake of a grim financial forecast for Alberta, Premier Alison Redford addressed the province and revealed plans to hold an economic summit to find solutions for the loss of revenue from the low price of Alberta oil.
Premier Redford’s eight minute address mainly focused on her party’s plan to diversify the market for Alberta bitumen – as revenues from that resource have been suffering due to competition from U.S. oil.
Redford also revealed she would host a summit in February to work on solutions for the province’s financial future.
At the start, Redford talked about a subject she had already spoken about publicly in recent weeks – on the financial losses the province was taking as a result of the price difference between U.S. and Alberta oil products.
Back on Jan. 14, Redford and Finance Minister Doug Horner talked about the revenue gap between Alberta bitumen, also known as Western Canada Select, and West Texas Intermediate.
At the time, the price of the Alberta product was at about $51 per barrel, while the price of the U.S. product was closer to $93 per barrel – and the difference was costing the province $75 million in potential revenue each day.
At the beginning of her speech, Redford said 30 percent of Alberta’s budget is funded by revenues from oil and gas.
Redford said Alberta was on a ‘bitumen bubble’ because of the growing price difference, and would collect $6 billion less in revenue in 2013 because of it, comparing the total loss to the provincial budget for education.
The 2012 provincial budget projected the province would bring in about $13.3 billion in resource revenue.
As a result, Redford talked about the restraints the province was under in terms of the resource, how the province essentially only sells oil to the U.S., which is affecting the price.
The premier pledged to “Continue to fight for a Canadian Energy Strategy that gets our oil both to the west and east coast in Canada, to the refineries in the U.S. Gulf Coast and to markets overseas – particularly growing economies in Asia.”
Redford went on to say her government plans to invest a portion of resource revenue in the Heritage Fund – for the first time in 25 years.
While she referred to difficult decisions her government would have to make going into the next budget, Redford gave no specifics, but said it was not good enough to raise taxes or cut spending.
The premier said some programs and services would change, but gave no specifics on what would change, or to what extent the changes would be made.
She went on to say “we’ll hold the line on spending, and live within our means.”
Opposition parties, critics respond to address
“The Redford PCs have tied the education of our children, the care of our sick, to the price of a barrel of oil,” Liberal Leader Raj Sherman said, following the address.
Sherman, other party leaders and critics were quick to respond to the address, and the lack of details on what the government has planned for the province.
“We have a major revenue problem, we have to address the issues of taxation, we have to address the issues of carbon tax and we have to address the issues that Albertans don’t own their province anymore,” Sherman continued.
“People are going to be wondering and nobody is going to want to see essential services cut,” Elisabeth Ballermann, President of the Health Sciences Association of Alberta said.
“Who are you going to cut?” Ballermann continued. “We can’t get people out of hospitals because we don’t have long-term care beds. We can’t get people out of our hospitals because we don’t have enough community care providers, we have people going into hospitals because they don’t have adequate community care.
“So in my area, who are you going to cut?”
It’s a sentiment echoed by NDP Leader Brian Mason, who called the province on the dependence on oil revenue.
“Tonight’s address is to prepare Albertans, blaming others,” NDP Leader Brian Mason said. “But in fact that the responsibility is clearly on the Progressive Conservative government for mis-estimating revenue from oil.”
As for Redford’s reference to working on opening Alberta oil up to more markets, Official Opposition and Wildrose Leader Danielle Smith questioned the party’s short-term plans.
“It doesn’t do any good to talk about how we might have pipelines four, five, or six years from now,” Smith said in Calgary. “What is the plan over the next three, four or five years to get us accustomed to this new reality of lower energy prices and lower revenues?”
“I don’t think we’ve seen any answers out of this premier, and hopefully we’ll be able to see something on March 7.”
The provincial budget will be tabled in the legislature on March 7.