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ECONOMY: Forecast for another $8.5 billion surplus, but dark clouds loom
        (AlbertaIndex, August 28, Thursday) --- Alberta is forecasting another large surplus of $8.5 billion in 2008-09, but unlike three years ago, the province has to worry about rising costs, climate change and the possibility of a downward revision if oil and gas prices plunge.
        In releasing the province’s First Quarter Update, Finance and Enterprise Minister Iris Evans said the forecast surplus now stands at $7 billion higher than predicted in Budget 2008. While that may sound like finding alot of loose cash under the mattress, it falls far short of private economists’ earlier predictions for a surplus of $11 to $12 billion based on oil and gas prices at a much higher level than where they are now.

Already, the provincial government has set aside $2-billion of that surplus to fund carbon capture and storage projects which are unlikely to yield any immediate economic benefits or returns on capital. Another $2-billion will be invested in energy-saving public transit initiatives, also known as ‘Green TRIP’.

Evans said $2.5 billion will be placed into savings, boosting government savings this year to $3.1 billion.

Revenue in 2008-09 is forecast to be $46.6 billion, an $8-billion increase from budget, primarily due to higher resource revenue. The total also includes a $487-million increase to the corporate income tax revenue forecast, largely attributable to a stronger outlook for corporate profits.

Resource revenue is up $7.1 billion from budget due to higher oil and gas revenues and land sale income. Oil royalties are forecast to be $3.5 billion higher than budgeted, while natural gas royalties are $3 billion higher and land sales are $627 million higher. Oil prices are forecast to average US$119.25 per barrel, up $41.25 from budget, and natural gas prices are forecast to average Cdn$8.50 per gigajoule, $1.75 higher than budget.

Surplus allocations include $3.1 billion to savings, including $525 million to the Alberta Heritage Savings Trust Fund for inflation-proofing, and another $2.5 billion to be allocated at a later date.

Expense is forecast to be $38.1 billion, an increase of just over $1 billion, or three per cent, including increases for disaster/emergency assistance, natural gas rebates, and capital grants.

“Alberta’s economy continues to do well despite a general slowdown in global economic activity. The additional revenue from the surplus gives us the opportunity to address the priorities of Albertans, including caring for our environment through the carbon capture and Green TRIP funds,” she said.

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