A six-year streak of provincial budget deficits in Alberta ended in 2021 thanks to higher oil and natural gas prices that drove a five-fold increase by government royalties, according to an annual treasury review.

AECO

In the Alberta provincial treasury annual review for the year ended March 31, 2022, Finance Minister Jason Nixon reported record royalties of C$16.2 billion ($13 billion), up from C$3.1 billion ($2.5 billion) in 2020-2021.

The new Alberta royalty record topped the previous high, C$14.3 billion ($11.4 billion) in 2005-2006, by 13% and accounted for one-fourth of the treasury’s 2021-2022 total revenue of C$68.3 billion ($54.6 billion).

The fossil fuel bonus enabled the Alberta government to blow away its gloomy forecast of a 2021-2022 deficit of C$18.2 billion ($14.5 billion), made in early 2021 during the early days of the global Covid-19 pandemic, economic slump and energy price low. Instead, the provincial treasury recorded a 2021-2022 surplus of C$3.9 billion ($3.1 billion). 

“Sound fiscal management will continue to direct our decision-making for investing and spending,” said Nixon.

The Alberta oilsands led the provincial revenue gain. Bitumen royalties increased nearly six-fold to C$11.2 billion ($9 billion) in 2021-2022, up from C$2 billion ($1.6 billion) in 2020-2021.

Provincial royalties from natural gas and modest legacy volumes of conventional oil from naturally flowing wells grew to C$4.6 billion ($3.7 billion), up from C$1.1 billion ($880 million) the previous year.

International events took a string of sharp turns for the better for the Canadian mainstay oil and gas supplier province beginning in mid-2021, according to the treasury review.

“As Covid-19 restrictions began to wind down, demand for energy returned rapidly while production could not keep pace, causing energy prices to jump when various supply chain issues were already sparking inflation,” the report said.

“When Russia invaded Ukraine, global responses included limiting imports from one of the world’s largest energy producers, further eroding supply and raising prices. These factors impacted 2021-22 Alberta government finances dramatically.”