Keystone Saga Takes Toll on Alberta as Oil Holdups Worsen
(Bloomberg) -- Pipeline bottlenecks aren’t just hurting the companies operating in Canada’s oil patch -- they’re taking a bite out of government coffers as well.
Alberta said the recent slump in heavy Canadian crude prices, caused by a lack of adequate pipeline space, may cost the oil-rich province about C$500 million ($390 million) in lost royalties during the current fiscal year. A wider discount to U.S. oil also is costing producers as much as C$40 million in revenue a day.
The slide in Canadian oil prices accelerated in November after an outage on TransCanada Corp.’s Keystone system, worsening transportation holdups that get worse every year as regulatory delays stall projects like the controversial Keystone XL extension and Kinder Morgan Inc.’s Trans Mountain expansion.
“It’s time for us to get on the same page as a country and get these pipelines built,” Alberta Finance Minister Joe Ceci said at a news conference.
Yet, not all of the rally in global oil prices is going to waste for Alberta. The economy is booming, with the province now estimating it grew 4.5 percent last year, the fastest rate in Canada and more than the 2.6 percent it initially projected. In 2018, the economy will expand 2.8 percent, according to a budget update released Wednesday.
The province’s job market, hit hard by the three-year oil industry downturn, by December had recovered all the headcount lost during the recession. The unemployment rate is set to drop to 6.8 percent this year, from 7.8 percent in 2017.
As a result of the economic recovery, the government is generating higher-than-expected revenue from oil-production royalty payments and from land sales to drillers. That helped the projected deficit for the year ending March 31 to narrow to C$9.07 billion, down by about C$1.4 billion from Alberta’s initial forecasts.
Premier Rachel Notley has said the province’s budget will return to balance by the 2023-2024 fiscal year.
The government also is being helped by higher electricity prices, which allowed it to trim C$771 million in liabilities that it had booked for the Balancing Pool, a government-created corporation that’s helping manage the province’s transition to a competitive electric power-generation market. The province also removed a C$500 million cushion it had placed in the budget to protect against volatile revenues.
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