Premier Urges Albertans to Accept an Embarrassment of Riches

The new year will open in Canada's chief natural gas-producing jurisdiction with its residents collecting a double bonus just for living in Alberta thanks to 2005 gas royalties of C$9 billion, more than double the amount projected. The funds will be dispersed to citizens despite a survey showing a majority would rather the government kept the money and spent it on services.

On top of "price protection" rebates to local distributors which are projected to cut home-heating bills by 40%, the provincial government will tap surplus royalties largely collected on gas production to pay out a C$1.3 billion (US$1 billion) cash "prosperity dividend."

In the absence of the consumer rebate scheme January gas bills would be C$436 (US$370) in Alberta's political capital, Edmonton, and C$479 (US$407) in the gas industry headquarters, Calgary, according to 2005 year-end rate filings by Direct Energy Regulated Services, the principal supply provider. The price protection plan cuts the charges to C$268 in Edmonton and C$311 in Calgary.

The consumer subsidy, which runs October through March this heating season, costs the government an estimated C$50-$115 million per month depending on market prices for gas. But Alberta gas royalties are currently projected to top C$9 billion -- or an average C$750 million for every one of the 12 months in the current provincial budget year ending March 31.

Price increases more than doubled 2005-06 Alberta government gas royalties from initial forecasts of C$3.6 billion when the budget was originally prepared last winter.

The windfall prompted Alberta Premier Ralph Klein to declare a cash prosperity dividend of C$400 apiece for the province's 3.25 million residents. The plan calls for the checks to be in the mail in January, in time to pay Christmas expenses that retail industry analysts predict will be high this year in Alberta because shoppers flocked to the stores more than anywhere else in Canada.

The affluence bordered on embarrassing in some quarters, and many Albertans made it known they felt the money could be spent better on improving public services.

When Klein announced the dividend, a poll showed a 54% majority of Calgarians opposed the bonus checks and favored putting the money into health, education, welfare and services that need to catch up to the growing economy such as roads and policing. Even in somewhat less affluent Edmonton -- an industrial, civil service and university town rather than a corporate and finance capital like Calgary -- 48% said the government should keep the money and use it for worthy public services.

The mood prompted the premier's office to spend C$65,000 (US$55,250) on newspaper advertisements. The ads were an open letter from Klein that urged Albertans to accept the checks with a clear conscience because there was still plenty of money left for higher purposes. And the cash did not have to be blown on shopping sprees. "You might choose to save for your children's future," the letter said. "You might choose to donate to a charity of your choice."

Only time and market developments will tell whether the chief Canadian gas-producing province is still understating its gains.

A tidal wave of unexpected cash washed up when late summer hurricanes caused natural gas supply scares and price spikes by damaging production in the Gulf of Mexico.

Canadian gas export revenue for September alone hit C$3.4 billion (US$2.9 billion) - an 88% jump from C$1.8 billion (US$1.5 billion) in the calmer September of 2004, show trade records kept by the National Energy Board.

Monthly pipeline deliveries to the United States rose 4% to 299 Bcf. But September export prices shot up 81% to an average C$10.47 (US$8.90) per gigajoule from C$5.80 (US$4.90) in the same month of 2004.

More than half of Canadian gas goes to the U.S., and Alberta accounts for about 80% of production. Provincial royalties average about 22% and range as high as 30%, depending on the vintage and costs of production as well as prices in a complex sliding scale formula.

Copyright 2005 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.


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