February 10, 2012 / 11:09 PM / 6 years ago

Alberta ponders impact of massive budget surpluses

CALGARY, Alberta (Reuters) - Alberta Finance Minister Ron Liepert dangled the prospect of massive budget surpluses on Friday, a day after delivering what was promised to be the province’s last deficit budget and said the oil-rich region needs to consider the impact of its prosperity on the rest of the country.

In a speech to a Calgary business audience, Liepert said strong oil prices and an expected rise in output from the oil sands will swell the provincial treasury, leaving the government with multibillion-dollar budget surpluses that may attract the attention of less-prosperous governments.

“If we start to run surpluses that run into the double digits (billions of dollars) we’re going to have a big problem federally,” he said.

Liepert, who will not run in a provincial election expected this spring, said he expects the province’s wealth, if his forecast holds, will cause tensions with the rest of Canada but did not say what he thinks Alberta and other governments should do to alleviate the possible friction.

“I think its something we should start to think about,” he told reporters. “I don’t want to leave the impression that it’s around the corner, but stuff happens fast ... We have to talk about savings and how to, I would say, contribute back (to the rest of the country).”

The minister’s expectation for ballooning provincial revenues comes on burgeoning income from oil sands producers, who are set to nearly double production from the world’s third largest crude reserve to 3 million barrels per day in 2020.

In his budget for the 2012-13 fiscal year, Liepert forecast the province would run a C$886 million ($886 million) deficit, its fifth-straight shortfall. But he said the province would report a C$952 million surplus the following year, rising to C$5.2 billion in 2014-15, the end of his forecast period.

Most of the revenue growth will come on a rising contribution from the energy sector. Royalties from oil sands producers are expected to rise from a forecast C$4.36 billion in the upcoming fiscal year beginning April 1, to C$9.9 billion in 2014-15, according to budget documents.

Liepert said that as production continues to rise past his forecast period, surpluses will also increase on climbing oil sands production and his government’s plan to restrain the growth of its spending.

($1=$1.00 Canadian)

Reporting by Scott Haggett; editing by Rob Wilson

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