Alberta’s political leaders are promising to loosen the province’s purse strings as they woo voters with oil-sands wealth and predictions of crude prices rising to $108 a barrel.
Premier Alison Redford’s Progressive Conservatives, who have held power for more than 40 years, say they’ll spend almost C$4 billion ($4 billion) on 50 new schools, 140 medical clinics and post-secondary education. The leading contender, the Wildrose Alliance led by Danielle Smith, promises a C$300 “energy dividend” for each Albertan by 2015. Both parties say they’ll pay for their pledges with growing oil sands royalties.
At stake is management of Canada’s third-largest economy, where more jobs were created last year than in any other province, and home to companies like Calgary-based Suncor Energy Inc. (SU), which spent almost C$7 billion in capital spending last year, the most among Canadian firms.
Wildrose says it will hold government spending growth below the rate of inflation and use surpluses to increase the province’s royalty fund, called the Heritage Fund, to C$200 billion by 2032 from about C$15 billion. The Conservatives pledge to invest in infrastructure, education and health and create budget surpluses.
Alberta is forecasting a return to surplus next year after five years of deficits. While neither party is talking about changes to taxes or royalties, whichever one wins will need to reduce Alberta’s dependence on oil revenues, said Ron Kneebone, professor of economics at the University of Calgary’s School of Public Policy. That may mean higher taxes.
“Governments shouldn’t be budgeting based on oil prices,” he said. “I don’t view either party as having a sensible spending policy. Neither has said they will limit energy price volatility in the budget -- and Alberta has a lot of that.”
The leaders of the major parties will hold a televised debate tonight in Edmonton, the provincial capital. Redford, 47, is emphasizing fiscal management in her campaign. “Albertans expect their government to treat their tax dollars with the same care and respect they do,” she said in a statement on the Conservative party’s website. The election “is about making sure we are providing the right services at the right time in the right way.”
Smith says her party’s energy dividend will ease pressures families are facing. “By giving Albertans a direct share in our resource wealth, we are helping make life more affordable for students and helping parents get a head start on their children’s education,” she said in a statement on the party’s website.
Close in Polls
A Leger Marketing poll conducted April 5 - April 8 showed Wildrose with 36 percent support among decided voters, followed by the Conservatives with 34 percent, and the Liberals and new Democrats with about 13 percent each. Leger didn’t report a margin of error for the survey of 902 Albertans because it was conducted online.
Alberta’s oil fortunes -- and risks -- contrast with the economic situation in Ontario, Canada’s largest province, where the government is slowing spending growth on health care, seniors and education. Alberta, home to 3.7 million people, relies on oil and gas revenue for almost 30 percent of its C$40- billion annual budget.
The province, home to the world’s third-largest oil reserves, will record a budget shortfall of C$886 million in the fiscal year that began April 1 and return to surplus the following year, Finance Minister Ron Liepert forecast in February. The economy is projected to grow by 3.8 percent in 2012, compared with a 2 percent growth forecast by the Bank of Canada for the country as a whole.
Liepert’s February budget was based on an average price for the benchmark West Texas Intermediate crude of $99.25 a barrel this year, rising to $106.25 in 2013-2014 and $108.25 by fiscal 2015. Every $1 increase in the price of oil adds C$223 million to government coffers, the finance ministry estimates.
Wildrose, which shares its name with the provincial flower, is budgeting C$2.5 billion less in oil revenue than the government’s estimates through fiscal 2014, according to Heather Hume, a spokeswoman for the party. That puts the average price at less than $100 a barrel, according to Bloomberg calculations.
Crude for May delivery rose $1.68, or 1.5 percent, to settle at $102.70 a barrel on the New York Mercantile Exchange yesterday. Prices are up 3.9 percent this year.
The U.S. Department of Energy expects WTI crude to average $105.75 next year, up from an average of $105.72 this year, according to its Short-Term Energy Outlook published April 10.
Oil-sands companies are undergoing an expansion that will more than double output from the bitumen fields of northern Alberta to 3.5 million barrels a day by 2025, according to the Canadian Association of Petroleum Producers. Imperial Oil (IMO), the second-largest oil producer in Canada by market value, is spending C$8.9 billion to build its Kearl project, while Cenovus Energy Inc. (CVE) will increase spending by 23 percent this year to about C$3.4 billion.
The election marks the first time leaders of the two most popular party are women. British Columbia and Newfoundland, on opposite coasts, also have female leaders, as does the northern territory of Nunavut.
The Progressive Conservatives came to power in 1971 under then-leader Peter Lougheed. Since then, the party has overseen a nine-fold increase in the size of the economy, while the population has more than doubled. Redford is the fifth Conservative premier in that time.
Wildrose, which claims both libertarian and social- conservative political mantles, was formed in 2008 and held 4 seats in the 83-seat legislature when the election was called, including two defectors from the Progressive Conservative party. The Conservatives had 66 seats, the Liberals held 8, the New Democrats 2, the Alberta Party 1, there was one independent and one vacancy.
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