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Alberta oil-sands projects are also hitting 'payout' – the point where costs are recovered and oil prices are high enough that royalties paid to the province dramatically increase.Jeff McIntosh/The Canadian Press

Next week’s Alberta budget will be one for the ages: There is the turnaround of oil prices dramatic enough to eliminate the deficit, and maybe even bring about a surplus; likely more money for health care and consumer relief on natural-gas bills; and the spectacle of the Premier scrambling to hang onto power.

Alberta’s budget is one of the first out of the gates in Canadian budget season. The Throne Speech is Tuesday, and the budget drops on Thursday. The boost to Alberta government coffers is still driven by oil, which many had written off as a commodity in decline.

Instead, a pandemic-era economic rebound is driving massive global demand. Climate concerns weigh against the building of brand new, multibillion-dollar bitumen projects. But Canada remains a major exporter to refineries in the U.S., where soaring gasoline prices – in part because of fears about a Russian invasion of Ukraine and oil supply disruptions – has put the environment-focused Biden administration in the cringey position of pleading with oil producers to boost their output.

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Alberta oil-sands projects are also hitting “payout” – the point where costs are recovered and oil prices are high enough that royalties paid to the province dramatically increase. Those non-renewable resource revenues, which also include royalties from other commodities such as coal and natural gas, are likely to reach a record. For this year and probably next, barring an oil price shock, the Alberta government is looking at a gusher of cash.

The United Conservative Party has had the extreme challenge of governing through a pandemic and the dramatic oil price drop when demand plummeted in early 2020. It’s likely headed into a much easier period before a provincial election in 2023, at least as it relates to the province’s finances.

Former premier Rachel Notley noted this dramatic change in oil fortunes in the long campaign to get her old job back: “In my first year in office, WTI was [US]$28 dollars and it never went higher than $65. But today? It’s over $90, and analysts expect it to keep climbing,” she said this week.

Former premier Ralph Klein used to say that when a politician said “maybe” he actually means “yes.” In that vein, Alberta Finance Minister Travis Toews’s comment to The Globe and Mail in December that a balanced budget in fiscal year 2022-23 is “certainly not out of the question” makes it a near certainty. Even the deficit for the current fiscal year, pegged at more than $18-billion one year ago, could shrink to around $3-billion, said University of Calgary economist Trevor Tombe.

“This is – on an inflation-adjusted, per capita sense – the largest upward revision in provincial finances in Alberta history,” Prof. Tombe said of the 2021-22 fiscal year.

He added that Alberta might be the only province to eliminate its deficit in the coming fiscal year – and in fact, he expects a not-insignificant surplus – as governments crawl out of the hole of spending billions to hold the line on health care and the economy through the pandemic.

But as always, the high oil prices that have swooped in to save the Alberta budget are double-edged. Oil heading higher than US$90 per barrel will eventually slow global economic growth. Within the province, job growth hasn’t yet corresponded to the oil price growth.

The UCP will be under pressure to show that actual people, not just companies and governments, will be better off. If the jobs do come, the gravitational pull of a reinvigorated oil industry could squeeze other sectors, like tech or agriculture, and put pressure on work being done to diversify the provincial economy.

And Albertans face inflationary pressure as it relates to food and gasoline and, increasingly, housing that is similar to other parts of the country.

What many Albertans want to see from the budget, too, is a plan well beyond the next couple of years. “A budget is how a government sets the stage for medium- and long-term prosperity,” said University of Alberta economist Chetan Dave.

This includes the question of whether the province will ever adopt more stable forms of revenue, such as a sales tax. Others want to see a plan to bolster postsecondary institutions after recent cuts, or the outline of a proposal to contribute more oil and natural-gas revenues to the long-neglected Heritage Savings Trust Fund.

But short-term political considerations are likely to loom large. Long before an election, Jason Kenney will have to endure a contentious by-election in Fort McMurray-Lac La Biche on March 15 – where all the candidates are campaigning against him in one way or another. Then comes the UCP leadership review in April, where he will face his most vociferous critics – his own party members.

The budget will see the UCP government offer political carrots. Mr. Toews has signalled that health care will be a priority, telling CTV, “we have a Health Minister right now that’s looking into options for expanded health care capacity in those areas where we have really been pushed over the last number of months.” Mr. Kenney said definitively this week that a natural-gas rebate program will be announced in this budget, although the opposition NDP questions how effective such a program will be.

And while the new infusion of oil wealth means Mr. Kenney has also lost some of his authority to argue that his province is getting a raw deal when it comes to equalization or other federal programs, he’s still intent on taking Ottawa to task.

This week it became clear that he’s positioning himself as the leader of the provinces who oppose the Trudeau government decision to use broad emergency powers to clear out so-called “Freedom Convoy” blockades. “Freezing people’s bank accounts without due process violates natural justice,” he said. “This overreach creates a dangerous precedent.”

The Premier knows he needs to start firing up supporters, and that widespread anger over his handling of the pandemic is too entrenched to be mollified solely by the balm of a balanced budget.

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