In 2023, oil and gas should bring in 26% of the province’s income
The strong prices for natural resources are again a big reason why Alberta has a balanced budget.
In fact, 2022 was the best year ever.
The amount of money made from non-renewable resources hit an all-time high of $27.5 billion. With an estimated $18.4 billion, the coming year would be the second-highest on record.
It’s also known for being very dangerous. In 2020, when oil prices went down, the province’s natural resource income was only $2 billion.
At a time when there are questions about the future of the oil and gas industry, a push toward diversification, and federal initiatives to speed up the reduction of emissions, Alberta’s budget doesn’t show much of a long-term plan on these fronts.
What’s in the budge
Even though there aren’t many details in some places, there are plans for petrochemical and hydrogen projects, carbon capture and storage, and fixing up old oil well sites.
The budget for 2023 says that the price of a barrel of oil will be around $79 US and will go down to $73.50 US over the next three years. Over the past three months, the benchmark West Texas Intermediate (WTI) price has gone from $71 US per barrel to $82 US per barrel.
In 2023, oil and gas contributions are expected to bring in about 26% of the province’s income. According to predictions, it was 36% last year. In 2023–24, the budget says that money from natural resources will drop by $9 billion.
Travis Toews, who is in charge of Alberta’s finances, didn’t say how the province could keep providing planned public services if oil prices fell below estimates.
In the last few years, reducing emissions, capturing carbon, and finding other sources of energy have become big topics at the national and provincial level.
From the TIER industrial carbon tax fund, the budget sets aside $387 million over five years for carbon capture and storage (CCUS) projects. Carbon capture facilities will get an extra $246 million over three years from the Capital Spending Plan. This is promised in a separate line item.
“This will go toward the Quest and Alberta Carbon Trunk Line projects, which have already stored more than 10 million metric tons of CO2. Also, an extra $2.3 million to help Alberta Energy with its new CCUS business functions,” “said a statement from Gabrielle Symbalisty, who works as a press secretary.
Andrew Leach, a professor of economics and law at the University of Alberta, is keeping an eye on three things: the upcoming election, what the federal government does, and how the business world reacts.
“How serious is the business about this?” Or do they just want the government to tell them that these projects will have value no matter what?
No ‘Rstar
Premier Danielle Smith’s plan to give $100 million in royalty credits to companies that clean up old well sites (which they are already required to do by law) was not funded in this week’s budget.
Toews says that’s because RStar, which is now called a “liability management program,” is still just a plan that needs to be talked over with people.
But the document did mention it. “Effective liability management” is how the Environment Department will handle its responsibilities for cleanup and restoration.
The budget gives the Orphan Well Association (OWA) an extra $60.5 million.
Carbon capture, petrochemicals, and hydroge
The Alberta Petrochemical Incentive Program and its grants will get $484 million over three years from the budget for 2023. The premier has said that she is thinking about how to make the initiative bigger.
The Hydrogen Center of Excellence will get a grant of $5 million to help develop technology.
The budget mentions CCUS projects that are already going on, like the Pathways Alliance and their $16.5 billion facility that is still being built. The deadline for this project is 2030, but the consortium has warned that this deadline could be pushed back if the government doesn’t make big investments and give tax breaks this year.
Alberta has given permission for 25 CCUS projects to be looked at and possibly built.
Leach said, “Another thing we’ve heard from industry is how long it will take to get these projects up and running.”
“Therefore, it might not even be in the budget for the next two or three years.”
Smith has also decided to keep giving money to the Canadian Energy Centre, which is often called the government’s “war room” for energy issues.
The energy ministry says that its budget of $12 million this year comes from a larger budget of $27 million for “allocated industry advocacy.”
Projects and productio
Alberta’s government also says it wants to increase the amount of oil the province sends to the world market. In documents that go along with the budget, it says that it wants to use 3.7 percent of the world’s oil by 2024. In 2021, the rate was 3.3%.
Last year, the province exported $158.3 billion worth of energy goods, which is a 59 percent increase from the year before. The government says that this number shows that the industry is in good shape. Inflation and Russia’s war in Ukraine have also affected the markets.
In the middle of the investment and list of possible projects, Alberta and Ottawa have been fighting over who is responsible for giving subsidies and incentives to industry to get it to invest in CCUS and reduce emissions.
In a recent letter to Prime Minister Justin Trudeau, the premier of Alberta, Danielle Smith, offered to work with the federal government to get these investments, but only if Alberta had a say in policies that could affect oil and gas.
The federal government is getting ready to pass a law that will explain how to help oil and gas workers find other jobs. It also wants to put a limit on emissions, which the province and the oil industry say is a de facto limit on production.
The TIER carbon tax on industries in Alberta is expected to bring in less money. The budget says that recent changes to it are likely to push companies to use other credits and options for cutting emissions. It is expected that TIER will make less than half as much money in 2025 as it did in 2022 ($637 million vs. $303 million).
The province uses the TIER fund to help other projects that reduce emissions and to pay down its debt.
Diversification plans are mentioned in Alberta’s budget, but details on a long-term plan for energy and the environment are likely to come later, maybe after Ottawa fills in its plans and private projects get closer.