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Drinking and Gambling Outpace Oil, NatGas Revenues in Canada's Top-Producing Province

Natural gas royalties have faded to account for just one-fifth of government profits that also include gambling, liquor and recently legalized marijuana in Canada’s chief energy-producing province.

Alberta treasury accounts released Wednesday forecast gas royalties will shrink to C$466 million ($350 million) for the 2018-19 fiscal year that ends March 31.

Five times more revenue -- C$2.3 billion ($1.7 billion) -- is projected from sponsorship, distribution, sales and taxation of popular personal habits fulfilled by the government agency Alberta Gaming, Liquor and Cannabis (AGLC).

The 2018-19 provincial gas royalty forecast dwindles to C$199 million ($149 million) or 31% off the C$645 million ($484 million) collected in 2017-18.

The dim current-year outlook is 95% below the provincial gas royalty peak of C$8.5 billion ($6.4 billion) in 2005-06. At the time, Alberta production fetched an annual average of C$8.42/MMBtu ($6.32/MMBtu) and gas royalties stood out as the provincial treasury’s top earner.

The Alberta government supports producers in gas pipeline expansion and toll reduction cases before the National Energy Board (NEB). But prices remain low due to a Canadian supply glut and competition from abundant unconventional production in the United States.

The treasury accounts register a severe drop by the provincial gas benchmark, the Alberta Reference Price (ARP) -- a weighted average of production for all destinations compiled by the government for royalty collection purposes.

For 2018-19, the ARP has fallen to C$1.15 per gigajoule ($0.90/MMBtu) -- down by 37% from the 2017-18 average of C$1.82/GJ ($1.43/MMBtu), which was already 78% below the 2005-06 peak.

Strong oil prices in the first half of 2018-19, propped up by the province with enforced production cuts, partially offset the downward spiral by natural gas, shows the treasury’s quarterly statement released by Alberta Finance Minister Joe Ceci.

With a provincial election scheduled for this spring, his New Democratic Party (NDP) regime’s financial update predicts treasury revenues will “improve significantly” starting in 2021, after one more lean spell in the 2019-20 fiscal year that starts April 1.

As of 2023-24, when the NDP vows to eliminate provincial budget deficits if re-elected, Ceci’s forecast shows total Alberta government oil and gas revenues, including drilling and production rights sales, jumping by 124% to C$12.3 billion ($9.2 billion). Provincial spending is projected to grow by a far lower 18% to C$66.5 billion ($50 billion).

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