Premier projects up to $14B in lost revenue this year
Premier Jason Kenney says the province only expects to bring in $600 million in oil and gas revenues this year, while overall revenues will plummet by $13 to $14 billion.
The premier made the remarks in an interview with Calgary Herald columnist Don Braid ahead of a scheduled fiscal update set for August 27.
Finance Minister Travis Toews’ office confirmed to AB Today that the premier’s numbers are in line with the ministry’s estimates.
The budget had previously ballparked non-renewable resource revenues to be in the $5-billion range, accounting for about 10 per cent of the province’s projected $50-billion haul.
If overall revenues drop to around $36 billion, as Kenney suggested, $600 million in resource royalties would account for just 1.6 per cent of the total.
The combination of the pandemic and a price war between Saudi Arabia and Russia drove Western Canadian Select prices so low that at one point this spring a barrel of crude was trading at a negative value. The budget banked on US$58 per barrel for West Texas Intermediate, the world benchmark for oil prices.
Prices have slowly recovered but were only averaging US$33.97 per barrel for WCS in June, an 18.6 per cent reduction year over year. In May, oil production was 14.3 million cubic metres, a 14.6 per cent drop from the year before. The number of new oil wells being drilled was down 75 per cent in April.
In an interview with AB Today, NDP Finance critic Shannon Phillips said the UCP’s numbers were “fantastical projections” and “farcical” from the start.
“Behind all of the big numbers, the talk around budgets and projections, there are people, hundreds of thousands of them,” Phillips said, pointing to job losses.
Year over year 265,900 fewer Albertans had jobs in June, an 11.3 per cent decrease.
Finance minister says corporate tax cut is not to blame
Amid the pandemic, the government deferred some tax and premium payments and waived tourism levies. And with more Albertans out of work, fewer income taxes will be collected.
The UCP also expedited a big cut to the corporate tax rate — it hit eight per cent on July 1, a year and a half ahead of schedule.
A spokesperson for Minister Toews said neither the deferrals nor the corporate tax cut are expected to make a notable dent in revenues.
“Any decrease in corporate income tax revenue as a result of accelerating the Job Creation Tax Cut is expected to be relatively small given the downward impact COVID-19 and the low oil price environment will have on [corporate income tax] revenues this year,” his office said.
The government recently created the Invest Alberta Corporation, aimed at diversifying the economy and attracting new investment to the province. It also brought in the Innovation Employment Grant to replace the scrapped NDP tax credits for tech and innovation.
Phillips said economic diversification should be the “centrepiece” of economic recovery, not a “boutique sideshow.”
She accused Kenney of taking recovery advice from “rich dudes in a corner office” who are not facing the hardships of the pandemic in the same way as working class people.
Toews is scheduled to provide a fiscal update on August 27.