The province has a history of ramping up spending during the good times, and that locks in expenditures for the inevitable bad times. Unfortunately, two things are true about Alberta and Albertans. Creating a $15-billion hole in the budget is no small thing. The inevitable question is how to get there. This is a radical new vision of where Alberta could go. Given that Alberta's budget forecasts at least $15 billion per year in resource revenue for the next three years, and given those figures should remain healthy because of higher royalty rates that will be paid by most oilsands projects, within a decade Alberta could save $150 billion more.īy my estimates, the fund would generate $10 billion per year in interest income from a much more reliable source of revenue for the Alberta government, in perpetuity. Rather than the dramatic swings Alberta has experienced of late, this revenue stream would be much more consistent. With a principal of just over $17 billion in 2021-22, Alberta got approximately $1 billion in investment income. In fact, until recently Alberta has consistently used the interest from what little it has in the Heritage Fund as general revenue, with a bit retained to inflation-proof the fund. What the value of those resources will be in 30 years is anyone's guess. But technological obsolescence as we move toward a net-zero world is a concern for our high-cost and high-carbon resources. Alberta has a century's worth of oil and gas reserves. In the mid-1970s, when then-premier Peter Lougheed first made the case for why the Heritage Savings Trust Fund was needed, he compared the spending of resource revenue to selling the house to pay for the groceries.Īlberta should maximize resource revenue's value over time because, as a form of capital, it is finite. As such, this revenue should be viewed differently than just another income stream the government relies on. Or to put it another way, it is the conversion from natural capital to financial capital. They are the conversion of an asset in one form (physical molecules) into another (dollars)." The Hirsch report rightly notes that "income from natural resource royalties are not, in fact, income. While this conversation is overdue and welcome, there is a fundamental issue that must be part of it. Outgoing Finance Minister Travis Toews recently said he'd like to see a more in-depth review of Alberta's " volatile revenue structure." Meanwhile, the Alberta NDP have released a plan, authored by former ATB Financial economist Todd Hirsch, that recommends capping the amount of resource revenue used for government operations. This recent volatility perhaps offers a moment to reconsider how Alberta manages its resource revenue. A ride this wild will push even Alberta's comfort levels. Within two years, the province's books swung from a $17-billion deficit to a $10.4-billion surplus, and now more modest surpluses are forecast. Then they rose and peaked above $122 US per barrel in June 2022 - only to be nearly cut in half shortly thereafter, before a surprise overseas production cut brought prices back to the $80 range. This column is an opinion by Geoff Salomons, a PhD candidate at the University of Alberta researching provincial resource wealth. For more information about CBC's Opinion section, please see the FAQ.Īlberta's revenue roller-coaster continues.ĭuring the pandemic in 2020, history was made when oil prices went into negative territory.
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