Alberta Finance Minister Iris Evans delivered the province's first-quarter economic outlook Wednesday in Edmonton. (CBC)

Alberta is facing a deficit of $6.9 billion due to a continuing drop in natural gas prices, Finance Minister Iris Evans confirmed Wednesday in releasing her first-quarter update for the 2009-10 fiscal year.

The deficit is now $2.2 billion more than the $4.7-billion shortfall Evans forecast in her budget in April.

"This is … not a good-news story for Alberta. But it's still a better news story in Alberta than it is anywhere else in the country," Evans said in a news conference at the Alberta legislature.

Lower natural gas prices are mostly to blame for the revenue drop. The budget used a price of $5.50 per gigajoule in its projections. It now sits at $3.75 per gigajoule. (A gigajoule is a metric measurement of energy use. It is equivalent to the energy provided by 26.1 cubic metres of natural gas.)

Alberta has also been affected by higher-than-expected unemployment numbers.

The Alberta economy contracted 2.5 per cent in the first three months of the fiscal year, more than the 2.2 per cent that was projected in the April budget.

"Overall, our figures this year show that we have experienced a sharper recession but we expect a stronger recovery next year," Evans said.

The province plans to rely on its $17-billion sustainability fund to make up any shortfalls. However, withdrawals from the fund mean it will be worth $9.3 billion at the end of the 2009-10 fiscal year.

During the news conference, Evans insisted the fund will not run out before the economic situation improves over the next three to four years.

"In a manner of speaking, we borrow from ourselves. So we will spend more of our sustainability fund but we will not — we will not — run out of our sustainability fund."

Evans is also calling on government ministries to find ways to save $430 million, double the $215 million they were asked to trim from their budgets in advance of next year's budget.

Alberta has spent a lot in recent years, Evans acknowledged, but it was necessary to make up for a big population jump and to catch up on infrastructure projects.

"So did we do something wrong? Well, our critics will tell you that we did," she said. "There were a lot of things that needed doing. There were a lot of people who didn't have their schools, their hospitals, their roads … you can't put that many people in place without building infrastructure."