Western Canada: Alberta budget bets on oil to bring province out of economic slump – The Globe and Mail

Good morning! Its James Keller in Calgary.

Albertas United Conservative Party government delivered a budget this week that defied expectations and painted a relatively optimistic picture for the province in the coming years.

There were plenty of signs before the budget that the provinces fortunes had taken a turn. Oil prices have been on a steady downward slide and several banks and outside analysts had downgraded their projections for the provinces economic growth. Unemployment has been hovering above 7 per cent around where its been for two stubborn years.

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That led to fears that there would be even deeper cuts than what the government proposed four months ago in its 2019 budget, which introduced steep cuts in some areas, spending freezes in others, and widespread cuts to the public service.

But Finance Minister Travis Toews instead tabled a budget that largely stuck to last years plan. Health and education budgets remain flat (which critics have said is the same as a cut) and while there are cuts sprinkled throughout the budget, things dont look that different from October.

How did the government do that? Largely by betting on oil. The budget predicts a substantial recovery in the oil and gas sector in the next three years, with resource royalties almost returning to where they were before the recession. It predicts strong economic growth and unemployment shrinking to 5.1 per cent.

Getting there will be no small feat. The price of the West Texas Intermediate oil benchmark currently sits around US$45 a barrel. Oil prices have been hit hard by the coronavirus outbreak and there remains global uncertainty about how long those effects will last.

A drop in the price of WTI of just US$1 cuts $355-million from provincial revenues.

The government is also projecting that its corporate tax cut which will slash the rate from 12 per cent under the previous government to 8 per cent when the cuts are fully implemented will breathe more life into the economy and, in turn, boost tax revenues.

The GDP growth projections are higher than some private-sector forecasts, and the unemployment rate targets are beyond what both the Conference Board of Canada and Stokes Economics have predicted.

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University of Calgary economist Trevor Tombe says he was shocked by the budgets assumptions, particularly when it comes to oil prices, which are difficult to predict and can fluctuate wildly. He notes that the government didnt update its economic projections since the last budget in October and in some cases, such as unemployment, the new numbers are more optimistic.

Weve been seeing a gradual deterioration of Albertas economic conditions and the expectations for growth by many forecasters," he said, noting that there is increasing economic uncertainty around the world.

It was stunning. I cant imagine what the explanation is.

Kelly Cryderman writes that Albertas dependence on oil makes it particularly vulnerable to other factors, such as the economic fallout from the coronavirus: "What might have been viewed as a reasonable forecast from the Alberta government just a few weeks ago now feels optimistic. "

Gary Mason says the latest fiscal plan lays bare the quagmire that Alberta finds itself in: Naturally, this all assumes that projections for the price of oil over that period remain viable. (Insert laugh line here.) The province has ridden the oil and gas roller coaster for so long now it doesnt know how to get off.

This is the weekly Western Canada newsletter written by B.C. Editor Wendy Cox and Alberta Bureau Chief James Keller. If youre reading this on the web, or it was forwarded to you from someone else, you can sign up for it and all Globe newsletters here. This is a new project and well be experimenting as we go, so let us know what you think.

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Around the West

WETSUWETEN TALKS: Talks among senior government officials and Wetsuweten Nation hereditary chiefs aimed at resolving a B.C. pipeline dispute resumed on Friday, with officials striking an optimistic tone amid some signs of rail traffic getting back to normal. The talks, which began on Thursday, followed weeks of disruption that began after police on Feb. 6 started enforcing a court injunction on a B.C. logging road to clear the way to Coastal GasLink work sites.

LONE WOLF: The last time Cheryl Alexander saw the wolf Takaya, his limp body was being carried away from a backyard in Victorias high-density neighbourhood of James Bay. His life, just on the edge of the urban environment, offered a rare glimpse into something wild. But our coexistence with these apex predators is uneasy and complex. The end of his story is unknown.

MINING SUIT: The Supreme Court of Canada has ruled that Vancouver-based mining company Nevsun Resources Ltd. can be sued in Canada for alleged human-rights abuses abroad, a decision that is being welcomed by rights activists but broadens the potential legal liability for many Canadian corporations. About four years ago, the Eritreans launched a suit against Vancouver-based zinc and copper miner Nevsun in the lower B.C. court. The plaintiffs alleged that they were subject to forced labour, slavery and torture during the construction of Nevsuns Bisha mine in the east African country of Eritrea. The allegations have not been proved in court.

GRETA STICKER: RCMP in central Alberta say a decal that appears to show a well-known teenage climate activist in a sexual act is not child pornography. The decal bears the logo of X-Site Energy Services below a cartoon figure seeming to depict 17-year-old Greta Thunberg of Sweden. The companys general manager, Doug Sparrow, has denied having anything to do with the stickers.

MEDICARE TRIAL: A marathon legal battle that could ultimately change the future of Canadas health-care system concluded in Vancouver on Friday, more than a decade after it began. B.C. Supreme Court Justice John Steeves is now left to decide whether British Columbians should be able to pay for faster access to necessary medical care, a move that opponents say threatens medicares central organizing principle that health-care access should be prioritized based on need and not the ability to pay.

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SURREY POLICE: The British Columbia government has given Surrey permission to create a police board and take a number of other steps as it works to create a municipal force to replace the RCMP.

VIRUS IMPACT: Most of Calgarys city councillors had lunch at a restaurant in Chinatown this week to try to help reduce fears about the new coronavirus. Businesses in Chinatowns across Canada have reported a drop in activity since COVID-19 hit China in January and started to spread around the world. At Ho Wan Restaurant in Calgary, the owners son, Jason Zhang, says business is down about 70 per cent.

ALBERTA PARKS: The Alberta government wants to hand off management of 164 provincially run parks to outside groups. Modernizing Albertas parks system is long overdue, Jess Sinclair, spokeswoman for Environment Minister Jason Nixon, said Friday.

VANCOUVER NIGHTCLUBS: When the Caprice Nightclub closed on Granville Street two years ago and was replaced by the Colony, a multilevel bar with table tennis and arcade games, that marked a shift in Vancouvers downtown to a different generation. The downtowns new residents and visitors prefer lower-key bars to clubs. They are lining up for lunches at new quick-service restaurants such as Tractor, SMAK and Field & Social, rather than sitting down for something more elaborate. They love artisanal coffee bars such as Quantum or Matchstick. They really, really love Japanese food. Thats the picture of Vancouvers downtown revealed in a new study released Thursday, part of an effort by the Downtown Vancouver Business Improvement Association to understand how its territory is changing.

PROPOSED PROJECT: A judge has issued a stay of a court order that required the Alberta government to make an immediate decision on a proposed oil sands project near Fort McMurray. Prosper Petroleum Ltd. has been waiting 19 months for the province to decide on its Rigel project, while similar projects have been approved in a third of the time.

TECK FRONTIER: Natural Resources Minister Seamus ORegan is on a hastily scheduled tour through Alberta as he tries to contain the backlash from the cancellation of the proposed Frontier oil sands mine. As his colleague Environment Minister Jonathan Wilkinson continues to distance the Liberals from the cancelled project, Mr. ORegan is making a full-court press in the Prairie province to allay concerns and affirm his governments commitment to the oil patch.

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Opinion:

Shiri Pasternak and Irina Ceric on the injunctions involved in the Coastal GasLink dispute: It is now increasingly clear that the injunction is a legal tool of political expediency. It has an almost arbitrary authority to empower law enforcement to contain and criminalize people by securing vague geographical boundaries and broad powers of removal, often indefinitely. In the hands of industry and governments alike, the injunction, still billed as an extraordinary legal remedy, has emerged as the all-too-ordinary response to Indigenous assertions of jurisdiction and solidarity.

Pam Palmater on Canadas history of depriving Indigenous groups of land and resources: The real issue has always been about the land. The way forward is recognition of our right to be self-determining over our own lands and resources. Anything less is just the same old Indian policy that invites more uncertainty and social conflict. Canada can do better. Its time to move past genocide and work toward respect for Indigenous land rights.

Globe Editorial on school shortages in downtown Vancouver: All fast-growing areas experience some strains. Yet governments consistently manage to plan and build roads, sewers and power for new communities, before people move in. There are no signs warning prospective condo buyers that, caveat emptor, your new home wont be getting electricity, running water or flush toilets until the 2030s. In contrast, schools in some growing urban neighbourhoods are being treated as a non-essential service.

Adrienne Tanner on why Vancouver school building hasnt kept pace with condo building: "The provincial government points out that the Olympic Village school is now the VSBs top capital priority. But the school might have been built quicker if the VSB had considered a money-saving proposal put forward by the province. The province proposed closing Queen Elizabeth Annex as a public facility and leasing the space to a French school in search of a home. That plan would have freed up money for capital projects such as the school at Olympic Village. The VSB rejected the idea, ergo the Olympic Village school remains a patch of dirt.

Andrew Leach on Teck Frontier: But now, Frontier will not move ahead. And there may not be another mine project on the horizon to force the provinces hand. If thats the case, we may yet come to rue the day Mr. Lindsay signed that letter, killing a symbol that housed so much potential, for better or worse.

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Western Canada: Alberta budget bets on oil to bring province out of economic slump - The Globe and Mail