Four important things buried in the numbers of Alberta's 2018 budget

There are countless stories contained in the 170-page budget document but we’ve picked out four that seem particularly salient at this point in Alberta’s history.

Figures on debt, oil, corporate profits and carbon pricing that may surprise you

Albertans’ hold contradictory and conflicting attitudes about public finances and balancing the province's budget. (Jeff McIntosh/Canadian Press, Google Maps, Darryl Dyck/Canadian Press, CBC)

Alberta's latest budget document is a dry read — 170 pages filled to the brim with tables, charts and figures — but buried in all those numbers are some important facts about our province.

There are countless stories contained in those pages but we've picked out four that seem particularly salient at this point in Alberta's history.

Let's start with the big one.

Debt.

This one can be a bit confusing, because there are two different figures you're likely to hear — total debt and net debt.

Here's a brief explanation of the difference.

Total debt vs. net debt

Alberta's total debt is expected to reach $54 billion this year.

That's the amount of money the province owes for all the various types of borrowing it has done — and continues to do.

Finance Minister Joe Ceci plans to continue running deficits for the next five years and, by 2023/24, the total debt is projected to hit $96 billion.

But Ceci prefers to talk about a different measure: net debt.

This looks at both sides of the province's balance sheet — not just financial liabilities, but also financial assets such as the Heritage Fund, endowments and cash reserves.

The difference between assets and liabilities is the province's net debt, which is forecast to be $30.5 billion this year and $56 billion by 2023/24.

Net debt is what economists and bankers often look at, because it makes for easier comparisons between provinces. This is typically done by dividing net debt by the total size of a province's economy – also known as its gross domestic product (GDP).

Alberta used to be the only province in the country with more assets than liabilities  but no longer.

The interactive graph below shows you how our financial position compares to the past, and to other provinces.

(If the graph isn't showing up on your device, click here to open it in a new tab.)


As you can see, Alberta's debt situation really started to go downhill in the wake of the latest oil-price crash.

And while prices have rebounded to a degree, the province's revenues aren't following suit.

Oil is up but royalties are down

When it comes to oil, there's good news and bad news in the budget.

First the good news.

Oil sands production is on the rise. Producers are expected to pump out 3.2 million barrels of bitumen per day in the upcoming fiscal year. That's up 11 per cent from the year before.

Oil prices are also expected to rise, with West Texas Intermediate forecast to trade at $59 per barrel, on average. That's up from $54 the year before.

Now, the bad news.

In spite of the growing oil production and higher oil prices, the province expects to take in less resource revenue.

Total revenues are estimated at $3.8 billion for the fiscal year, down from $4.5 billion in 2017/18.

The biggest hit comes in bitumen royalties, which are expected to fall by 24 per cent.

This is due largely to "a widening of the light-heavy oil price differential," according to the budget document.

In other words: the discount on Canadian crude, which stems largely from the difficulty in getting that oil to market.

"Without sufficient pipeline capacity, Alberta's growing bitumen production is being transported by more costly and less safe rail, increasing the light-heavy differential, lowering prices for producers and government revenue," the budget document reads.

Corporate income is surging but still well below its peak

Another good news, bad news situation here.

Alberta companies are returning to profitability and that's translating into more money for the provincial government.

Corporate income tax revenues are expected to grow by 18.1 per cent in the upcoming year, and by an average of 12.1 per cent over the next three years.

That should push them to $5.7 billion by 2020/21, according to the budget projections.

The bad news?

That's still slightly less than the government took in back in 2014/15. And back then, the corporate income tax rate was at 10 per cent, compared to its current level of 12 per cent.

Finance Minister Joe Ceci says that shows just how bad of a recession Alberta recently emerged from.

Corporate profits fell by 64 per cent in 2015 and 46 per cent in 2016, according to the budget documents.

They bounced back in 2017, with an estimated growth of 91 per cent but corporate tax revenues came in lower than expected last year, as companies carried losses back against income taxes paid in previous years.

Some large emitters will pay a lot more in carbon pricing

A new regulation on power plants, oil sands operations, and other large emitters of greenhouse gases kicked in on Jan. 1.

It's called the Carbon Competitiveness Incentives (CCI) and it replaces the Specified Gas Emitters Regulation (SGER), which was brought in by Ed Stelmach's PC government back in 2007.

This is not the carbon tax that you pay on your heating bill or at the gas pump. It's a separate program that applies only to industry.

You can read more on the differences between CCI and SGER in this in-depth story, if you're interested in the nitty-gritty details.

Suffice it to say, here, that some in the industry have welcomed the new regulation while others have bristled at it.

That's because the most efficient facilities – those who emit the fewest greenhouse gases per barrel of oil or megawatt-hour of electricity produced – actually stand to make money under CCI.

Facilities with the most carbon-intensive operations, by contrast, can expect to pay more.

And the budget gives us a sense of just how much more.

Total payments under CCI are expected to grow to $541 million this year.

That's up 158 per cent from the year before.

Under both the former system and the new one, the money is paid into a technology fund that supports research and innovation aimed at reducing Alberta's greenhouse gas emissions.

Recipients have included universities, municipalities and major players in the oil and gas industry.

For more on Alberta's financial situation, check out some of these recent stories from CBC's The Road Ahead budget series: