Varcoe: UCP’s message of financial continuity in Alberta lands, as acquainted checks stay forward

A theme of financial stability proved enticing for a province that’s come via a number of lean years following the preliminary collapse of oil costs 9 years in the past, 1000’s of layoffs, after which the pandemic

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UCP Chief Danielle Smith started her first official marketing campaign announcement this month in entrance of a house in Calgary’s southern suburbs, pledging to chop private taxes and proceed Alberta’s financial restoration.

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“Alberta’s financial system is booming,” she mentioned on the occasion in Auburn Bay.

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“We’re going to be relentlessly targeted on jobs and financial system and funding and bringing individuals right here.”

On Monday, Smith’s message of financial continuity helped propel the United Conservative Celebration to its second consecutive majority authorities, defeating Rachel Notley’s NDP.

Other than Smith’s promise to create a brand new eight per cent tax bracket on revenue earned beneath $60,000 a 12 months, she additionally vowed throughout the 28-day race to proceed balancing the province’s funds books.

A theme of financial stability proved enticing for a province that’s come via a number of lean years following the preliminary collapse of oil costs 9 years in the past, 1000’s of layoffs, after which the pandemic.

But, with the brand new tax minimize costing the treasury an estimated $1 billion, and different guarantees — resembling extending the 13-cent-a-litre gasoline tax vacation via the 12 months — an instantaneous problem for the following finance minister will likely be to maintain the province in surplus territory.

Smith will even must forge a plan to place the province for longer-term progress, funding and jobs amid an evolving financial system.

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Again in February, beneath Smith’s first funds as premier, the province projected U.S. benchmark oil costs would common US$79 a barrel via this fiscal 12 months.

On Monday, costs for West Texas Intermediate (WTI) crude closed practically $6-a-barrel beneath that mark.

On the income entrance, each $1-a-barrel change within the value of WTI oil over the course of the funds 12 months alters provincial revenues by $630 million.

“There’s not lots of margin to manoeuvre,” Alberta Central chief economist Charles St-Arnaud mentioned Monday.

The funds forecast a $2.4-billion surplus, together with a $1.5-billion contingency for emergencies.

With wildfires persevering with to burn within the province and the potential for different sudden bills, the federal government will doubtless want oil costs to common about $75 a barrel this 12 months to steadiness its fiscal books, mentioned College of Calgary economist Trevor Tombe.

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But, there are key playing cards in Alberta’s favour.

The inhabitants is rising and migration into the province stays robust, which can propel extra financial exercise.

Whereas U.S. oil costs are down from funds estimates, the worth low cost dealing with Western Canadian Choose heavy crude has narrowed, which can help provincial coffers.

A pumpjack is seen near Calgary.
A pumpjack is seen surrounded by canola on the japanese fringe of Calgary. Photograph by Jim Wells /Postmedia

The broader financial system can also be performing nicely.

Alberta’s GDP is forecast to develop by 2.4 per cent this 12 months, in contrast with simply above one per cent for the nation, mentioned Marc Desormeaux, an economist with Desjardins.

Smith has promised to not increase company revenue taxes, retaining the speed for corporations at eight per cent, whereas the NDP deliberate on rising it to 11 per cent.

The UCP additionally pledged to double the monetary capability of the Alberta Indigenous Alternatives Corp. to $2 billion, and supply an extra $100 million to the Alberta Enterprise Corp.

Whereas the latest volatility of power markets will likely be a urgent short-term challenge for the brand new authorities, there are longer-term financial constructing blocks that should be put in place.

Billions of {dollars} in new power tasks have been introduced involving hyd
rogen, petrochemicals, biofuels, and carbon seize, utilization and storage (CCUS) developments, though many initiatives haven’t been sanctioned but.

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These developments will deliver new funding and jobs into Alberta and additional cement the province’s place as an power superpower.

A Shell employee walks past the company's new Quest Carbon Capture and Storage facility in Fort Saskatchewan, Alta.
A Shell worker walks previous the corporate’s new Quest Carbon Seize and Storage facility in Fort Saskatchewan, Alta. Photograph by Todd Korol /Reuters

Nevertheless, with the US rising the incentives for such power developments, it’s placing strain on Ottawa and the provincial authorities to match these choices.

“We’re on the precipice of the following power increase, however it’s additionally a window that may shut,” mentioned Marla Orenstein, director of the Pure Sources Centre on the Canada West Basis.

Ottawa has provided an funding tax credit score price as much as 50 per cent for capital spending on new CCUS tasks.

Will the UCP authorities additionally provide substantial incentives to see giant tasks transfer forward, such because the $16.5-billion carbon storage hub proposed by the Pathways Alliance group of oilsands producers?

“That is large infrastructure, large jobs, large spending,” mentioned Rory Johnston, founding father of the Commodity Context e-newsletter.

“But it surely’s additionally going to be large {dollars}, large costs, and we simply must lastly get via this negotiation with Ottawa.”

Smith has talked about increasing the province’s present Alberta Petrochemical Incentive Program (APIP) to incorporate carbon seize developments. 

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That may require a degree of co-ordination with the Trudeau authorities.

Throughout the marketing campaign, Smith additionally mentioned her authorities will struggle the federal authorities’s try to maneuver ahead with a net-zero energy grid by 2035, saying it will be too costly.

“That’s a very essential one to observe. It’s going to value Alberta greater than another provinces as a result of we nonetheless rely a lot on fossil fuels, and 2035 will not be very distant,” mentioned Jackie Forrest, govt director of ARC Vitality Analysis Institute.

Lastly, any plan for the province’s financial future must look out throughout an array of promising sectors, and map out how the province can additional develop and export its experience, mentioned Alberta Chambers of Commerce CEO Shauna Feth.

“Take a look at all the things that’s occurring in our province round issues like AI, cleantech, fintech, you identify it,” Feth mentioned Monday afternoon.

“We h
ave now all of those different pockets of unimaginable assets on this province, that we simply want to begin determining easy methods to easy methods to make the most of them.”

Chris Varcoe is a Calgary Herald columnist.

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