The Alberta government is still planning to press on with a tax cut in next year’s budget despite big ticket spending items and volatile resource revenues, Premier Danielle Smith said Wednesday.
Speaking at the International Pipeline Conference in Calgary, Smith said it’s important for Alberta to get off the boom and bust cycles of oil and gas prices.
And while that means holding the line on spending, it also means moving up the value chain for Alberta’s traditional natural resource industries.
“I’m hoping that we can get our budget to a point where we're able to balance at lower price levels, because we do have to get off this, this roller coaster,” she said.
“We can't keep increasing our spending when we get windfall revenues. So we've been very restrained in how we manage our year-over-year operating increases. But we're feeling pretty good about being able to accelerate the tax cut. We've got a process that we're going through internally to identify areas that are lower priority so that we can put them to higher priority, which includes tax cut and some of our other spending initiatives.”
It comes as oil prices have come off recent highs and tested multi-year lows. North American benchmark West Texas Intermediate was off nearly three per cent on Wednesday to dip below USD$69.80. Alberta’s signature Western Canadian Select was changing hands for about $57.
The Treasury Department is banking on a WTI price of $75 to break even. Every dollar over or below that mark is worth about $630 million to the bottom line.
After the UCP’s second-quarter fiscal update, Finance Minister Nate Horner had been projecting a $2.9 billion surplus based on a WTI price of about $76.50.
That level of confidence was partly why Smith last week opened up the taps by $8.6 billion to increase education spending over seven years.
On Wednesday, Smith said it’s still possible to achieve those targets provided Alberta can find ways to move up the value chain for products like natural gas — which was trading for just five Canadian cents earlier this week.
Because Alberta is essentially a natural gas basin — even more than oil — it’s important to find new uses for more than 200 trillion cubic feet of resource in the ground.
But even though the gas price is low, it’s also an opportunity to find new and innovative feedstocks for value-added products like petrochemicals, ammonia, fertilizer and even hydrogen. Lower natural gas prices also add value to oil production and helps make electricity rates cheaper.
That, in turn, provides incentive for relocating massive AI and data centres to Alberta.
“So I think our solution is finding more ways to be able to use resources that we have, exporting, using them locally, and helping all of these uses,” she said.