On March 26, 2015, the Minister of Finance and the President of
the Treasury Board, the Honourable Robin Campbell, presented
Alberta's 2015 Budget – notably, revealing very few
direct implications for the Oil & Gas Industry. This blog
focuses on areas of interest to persons involved in the Oil &
Gas sector and is not intended to provide a comprehensive overview
of the Budget.
Brief Overview of the 2015 Budget
The 2015 Budget is focused on mitigating the current revenue gap
with responsible spending, a shift in the revenue structure, and
reliance on the contingency account. The price of Alberta's
public services will be brought in line with the national average,
in part by implementing a user pay philosophy through a Health Care
Contribution Levy, increased fees for land titles and motor vehicle
services, and increased fines for traffic violations. Alberta will
continue to boast Canada's lowest overall taxes, holding
constant corporate tax rates and personal income tax rates for
individuals with taxable income below $100,000, but increasing tax
on fuel, tobacco and liquor.
Implications for the Oil & Gas Industry
While the Budget itself will not directly impact the Oil &
Gas industries, it raises three points of interest to persons
involved in the Oil & Gas sector.
No changes to corporate income tax, the oil and gas royalty
structure, or incentives for research and development.
Continually decreasing reliance on non-renewable resource
Insight into Alberta's forecasts and the factors that form
the basis for those forecasts.
Direct Monetary Implications
The 2015 Budget does not make any changes to the corporate tax
rate or the current oil and gas royalty structure and as a result,
the Budget should not have any direct implications on corporations
in the industry. There is also no mention of incentives for
corporate-level research and development.
Reduced Reliance on Non-renewable Resource
In an effort to manage the inevitable revenue volatility
associated with a resource dominated economy, the government is
implementing a revenue structure that will have less reliance on
resource revenue and fund a higher proportion of programs and
services from taxes and user fees.
Not only is Alberta reducing its reliance on resource revenue in
the short-run out of apparent necessity, but even as Alberta's
revenue stabilizes, the government plans to aggressively continue
reducing reliance on that revenue to support program spending. By
2019-20, the government projects that only 50% of such revenue to
be used for budgeting purposes, leaving the other 50% for
investment in infrastructure, reduction of debt and savings.
Alberta is broadening its revenue base by introducing a long
term plan to reduce reliance non-renewable resource revenue. Not
only does the Budget reduce reliance during this economic downturn,
but the plan contemplates continued reduction and sustained
Alberta's revenue forecast is based on the West Texas
Intermediate oil price (WTI), which averages US$54.84/bbl in
2015-16, $62.80 in 2016-17 and just under US$84/bbl by 2019-20. The
government also references the Western Canadian Select price (WCS),
a benchmark price for heavy oil (bitumen), noting that it has not
declined as dramatically as WTI, which has positively impacted
revenue. However, Alberta forecasts an expanded differential due to
projections of increased production, more projects and expanded
projects, and insufficient access to Texas refineries and coastal
ports. The following chart shows the figures used for the price,
production and revenue forecasts in the Budget.
Alberta Government Oil Assumptions and Forecasts 2014-20
Source: Alberta Government, Fiscal Plan – Budget
Alberta expects prices to rebound in the second half of 2015 as
supply is lowered due to less drilling in North America, reduced
investment elsewhere and production disruptions in war-torn
regions, while demand continues to pick up. The government cited
the following as assumptions (in addition to those listed above)
which have factored into its price forecasts: economic growth in
disparate regions around the world, pipeline or refinery outages,
storage and speculative market activities by traders, investment
and drilling decisions by producers, economic sanctions, OPEC
market-manipulation and simple weather-related production
While the 2015 Budget was largely silent on matters affecting
the Oil & Gas industry in the short term, its progressive
revenue plan, forecasts and assumptions provide some insight into
the future of Alberta's economy and the potential for changes
to those matters in the future.
Canada is a constitutional monarchy, a parliamentary democracy and a federation comprised of ten provinces and three territories. Canada's judiciary is independent of the legislative and executive branches of Government.
The Government of Alberta recently announced a number of policy changes that will impact the Alberta Electricity Market, composed of its generators, transmitters, distributors, retailers, electricity consumers and wholesale electricity market.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).