When Finance Minister Bill Morneau tabled the federal government’s budget in Ottawa Wednesday afternoon, Albertans still struggling from the nosedive taken by oil prices in 2014 were watching closely to see how the oil sector would factor into it.
At first glance, Alberta Premier Rachel Notley appeared to be cautiously pleased with the budget and didn’t highlight any glaring omissions in terms of what her government was looking for.
“It came out pretty much the way we expected to see it,” she said. “You tend to expect the kind of detail in federal budgets that you have in provincial budgets but that’s not the way it rolls.”
One of those areas where Notley said she wanted more details was with regard to tax changes mentioned in the budget that would impact drillers and companies involved in oil exploration.
“The first take on it is that it’s a net benefit for the first couple of years and then it could potentially start to look like a net loss,” she said. “We’re going to dig into to it to find out more about what that means to the industry overall and what it means in particular in Alberta and how much of that will be impacted in Alberta… if we need to do more lobbying, we’ll do that too.”
The federal government says exploratory drilling has had an increasingly higher success rate and usually leads to production so “expenses associated with oil and gas discovery wells will be treated as Canadian development expenses, which are deducted gradually over time, rather than as immediately deductible Canadian exploration expenses, unless and until they are deemed unsuccessful.”
The budget also says the government will “remove the tax preference” that lets smaller oil and gas firms “to reclassify Canadian development expenses as immediately deductible Canadian exploration expenses when they are renounced to flow-through share investors. This will ensure that these development expenses, which create an asset of enduring value, are deducted gradually over time.”
The budget also set aside $30 million for Alberta’s oil industry, money Notley said she has been “strongly advocating for over the past few weeks and months.”
“We will leverage this money to aim more resources at putting Albertans back to work and reclaiming more orphan wells,” she said.
“We’ll have more details to roll out in the days to come but generally speaking, yes, the idea was to focus on orphan well reclamation and to find a way to kick-start getting those particular oilfield workers and service workers back to work while of course doing the work that needs to be done to deal with a very large and longstanding liability that we have in the province of Alberta.”
According to Edmonton-Riverbend’s Conservative MP Matt Jeneroux, who also pushed for money in the budget to deal with orphaned wells, there is currently 50,000 to 60,000 abandoned oil wells in the province.
At a news conference held at the Alberta legislature Wednesday afternoon, Notley was pressed by a reporter on explaining the discrepancies in oil price projections between her government’s budget and the federal Liberals’ budget. For example, the Liberals are projecting $12 a barrel less for oil than the Alberta NDP is for 2019.
“I think historically, the federal government – if there is any error, generally speaking in the past – they generally underestimate a little bit so we’re certainly going to dig into it,” Notley said. “As things stand now, we’re pretty confident in the numbers that we’ve put forward.”
Notley also applauded Ottawa for continued supports for Fort McMurray as it recovers from last year’s wildfires and for mentioning a goal of improving water on First Nations, something her NDP government also addressed in its budget last week.
The Liberals’ budget made mention of Calgary’s Green Line LRT but didn’t get into specifics. Notley suggested she hopes Ottawa will make public transit funding commitments clearer.
“You can bet that we’re in both of their corners (Calgary and Edmonton) on that matter (public transit) and it’s just a question of getting into the details.”
The premier said she was also pleased the Liberals committed to investing more into child care for Canadians.
“We were aware that this money was likely to be forthcoming and that will work out to be between $40 million and $70 million for Alberta this year,” she said. “We anticipate being able to scale up the work that we are doing with our pilot projects on child care that we announced earlier.”