Natural gas propelled Alberta, Canada’s chief gas producing province, to a record government budget surplus of C$8.7 billion (US$7.8 billion) in the 2005-06 fiscal year that ended March 31.

Gas stood out as the province’s richest revenue stream by a wide margin in annual accounts released by Finance Minister Shirley McClellan. At C$8.4 billion (US$7.6 million) for the year, gas royalties were 24% of total Alberta government revenues of C$35.5 billion (US$32 billion).

Gas contributed 78% of total provincial production royalties of C$10.8 billion (US$9.7 billion), which also included C$1.46 billion (US$1.3 billion) from conventional oil and C$950 million (US$855 million) from the oilsands. Conventional oil production is aging and shrinking.

Oilsands projects pay only a nominal 1% royalty until construction costs are covered, then only a 25% rate on net revenues after operating expenses. Gas royalties continue to follow the customary form of a government share in gross production revenues on a complex sliding scale that can approach 30% for the oldest and richest fields.

Gas accounted for 59% of total Alberta nonrenewable resource revenue of C$14.3 billion (US$12.9 billion), including a record C$3.49 billion in sales of mineral rights.

The rights auctions are not analyzed according to the drilling targets driving the sales. But gas accounts for about 70% of Alberta field activity.

The government poured the surplus into capital projects for a rapidly growing population and industry, as well as expanded public services and an array of special funds such as health care research endowments. But the province also spent a hefty C$634 million (US$571 million) on a gas rebate program that kept Alberta consumers from feeling the worst effects of the price increases that drove up commodity prices and royalties.

Alberta’s 2005-06 gas royalties were worth C$2,625 (US$2,362) for every one of the 3.2 million men, women and children who resided in the province. The gas royalties also exceeded total personal income taxes — at C$6 billion (US$5.4 billion) the province’s second-biggest single revenue source — by 40%.

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