Alberta Premier Jim Prentice is applying a form of water torture by delivering the grim news in a steady trickle.
In preparing Albertans for a round of harsh spending cuts and possibly the unthinkable - higher taxes - he has estimated his government faces a revenue shortfall of C$16.2 billion in the next three fiscal years unless there is a dramatic recovery in oil prices.
Some observers have issued a reminder that it was only two years ago when then-premier Alison Redford warned the so-called “bitumen bubble” - the gulf between West Texas Intermediate and Alberta bitumen prices - would cost the coffers C$6 billion.
But that dire outlook quickly evaporated as crude prices recovered and government spending resumed apace.
Although mindful of that misjudgment, Prentice is preparing for the worst by naming a seven-member cabinet committee to lay the foundation for the 2015-16 budget and recommend limits on hiring and spending.
“We’ll tighten our belts before we ask Albertans to tighten theirs,” he told reporters.
Prentice said the committee, including himself as chair, is a “tough, talented and experienced group that understands the scope of the challenges we’re facing.”
Action questioned
Brian Mason, the finance spokesman for the New Democratic Party, offered a different interpretation, dubbing the committee the Bad News Bears, questioning why Prentice had not included independent experts on the committee.
A Liberal Party spokesman, Kent Hehr, said the government was already at the point of “cutting to the bone, instead of really being honest and fixing the fiscal structure rather than applying slash and burn policies that kill the capacity of this province to do the things we need to do.”
Prentice left the possibility of higher income taxes and user fees on the table, suggesting that if the revenue shortfall is C$6.2 billion in 2015-16 the government could not possibly cut spending by that amount without throwing Alberta into a recession.
Dec. 31 deadline scraped
His agenda apparently does not include calling on a nervous petroleum industry for help.
Instead he has scrapped a Dec. 31 deadline to announce changes to Alberta’s climate-change framework even as President Barack Obama again hinted that carbon emissions from the oil sands will influence his decision on the Keystone XL pipeline.
The province extended the C$15-per-metric ton levy on heavy GHG emitters that was set to expire at the end of 2014 to June 30, 2015.
Prentice, who has been a strong advocate of improving Alberta’s global image as an environmental steward, said 2015 will be a “critical year,” referring to a United Nations climate change conference set for late 2015 in Paris.
But rather than settling for a “short-term fix” by raising the levy, he committed his government to “make sure it’s done properly” in consultations with both industry and environmental organizations to settle on a 25-year policy.
However, he is likely to have the framework in place when he visits Washington, D.C., in January to continue lobbying for Keystone XL and for a climate change summit in Quebec in the spring.
Pembina questions progress
Chris Severson-Baker, acting regional director for the Alberta-based Pembina Institute, an environmental think tank, said Alberta isn’t “making progress on the climate front given the flaws in the current strategy and the absence of critical programs that would be needed,” including the phasing out of coal-fired power, improving energy efficiency, developing renewable energy sources and raising the price on carbon.
What Prentice does not have to worry about is a serious challenge from Alberta’s three opposition parties - Wildrose, New Democratic Party and the Liberals - having been handed an indefinite tenure in power.
Two years ago, Wildrose under leader Danielle Smith had surged ahead of the governing Progressive Conservatives in opinion polls and appeared certain to defeat a party that had held office since 1971.
Instead, a sudden shift in public trust in Wildrose saw Redford easily retain power until she faced a barrage of criticism for abusing the use of public money that forced her to resign this year.
Government in disarray
Prentice won the Progressive Conservative leadership four months ago and inherited a government in disarray and at its lowest point on record in the polls.
He pulled off a swift and unexpected turnaround in party fortunes, winning four by-elections to fill vacancies in the provincial legislature and causing a rift in the Wildrose caucus that saw two members of the legislative assembly cross the floor to join Prentice’s government and one quit to become an independent legislator, followed a few days later by Smith and eight other Wildrose MLAs, leaving the once potent political force with only five members of the legislative assembly.
The assumption, given an exodus that has no precedent in Canadian politics, is that Prentice has neutered the only offence opposition Alberta has seen in 43 years, leaving him free to implement his own policies unchallenged. What he has no control over is when and to what extent crude prices will recover.
