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Alberta surplus $10-bln
Monday, February 27, 2006
CALGARY Alberta's surplus is set to surge past $10-billion as high energy prices, and the private sector's unprecedented scramble to buy exploration rights, push the province into uncharted fiscal territory.
The price of natural gas, the source of most of Alberta's royalty income, spiked in the early winter, significantly beyond the government's projections. That could mean hundreds of millions in extra revenue, even though prices have fallen recently.
More concrete is the windfall from the frenzy of bidding for land rights in the northern oil sands, already $1.5-billion beyond budget with a month of sales still to come.
Even without additional natural-gas revenue, Alberta is headed toward a $10.2-billion surplus, by far the highest for any province.
As the surplus grows, so does the criticism of the government's failure to spell out a long-term plan for making the most of its energy riches. "We're kind of making it up as we go along," said Roger Gibbins, president and chief executive officer of the Canada West Foundation.
Finance Minister Shirley McClellan will give her latest estimate of the size of Alberta's bulging coffers today as she delivers the third update of the fiscal year. Until she does, the official surplus is $5.9-billion, four times as big as originally projected.
Impressive as that number is, it dramatically understates the size of Alberta's riches since it disregards $2.8-billion in unbudgeted outflows, including $1.3-billion in cheques sent to Albertans last month.
With all that spending accounted for, the province has a surplus of revenue over original budgeted spending of $8.7-billion.
Several years of buoyant commodity prices have allowed Alberta to pay off its debt, pay out heating rebates, set up a $2.9-billion "sustainability fund" for excess resource revenues, embark on billions in infrastructure spending, announce $1-billion for cancer research and treatment -- and even send out $400 cheques to most Albertans in late January.
Premier Ralph Klein has been subject to criticism from conservatives for returning the province to the free-spending ways of the last energy boom of the 1980s, when deficits and debt ballooned as commodity prices shrank.
Recently, Mr. Klein has begun to talk about saving more of Alberta's royalty income, promising to add $1-billion to the Heritage Savings Trust Fund, which would be the first injection of capital in two decades.
More saving could be on the way: Mr. Klein said last week that he would like to see additional cash socked away in the Heritage Fund in the forthcoming budget for the fiscal year that starts April 1.
Many voices in the province have been pushing for just such a move, with the Canada West Foundation among the loudest. But for Mr. Gibbins, the amount is definitely too little, perhaps too late.
His foundation has recommended that Alberta save half its energy income every year, but Mr. Klein has ruled out such an aggressive move.
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