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Report says Alberta will be upgrading 26 per cent of bitumen by 2025

EDMONTON - A labour group on Tuesday urged a government committee to support construction of new upgraders to stop oil conglomerates who want to "rip and ship" Alberta's resources.

The Standing Committee on Alberta's Economic Future also heard from an industry group that said market forces alone should decide whether a new upgrader is necessary, and from a project proponent who would benefit from provincial support.

The committee is trying to decide whether the province should renew its commitment to the Bitumen Royalty in Kind Program, or BRIK, in which the province forgoes royalties in favour of bitumen and then uses that bitumen to feed upgraders.

Alberta Federation of Labour president Gil McGowan told the committee that upgrading bitumen in Alberta should be a condition of resource development, not an option, because it creates jobs and adds value in Alberta.

"It is our resource and it is we, the citizens of Alberta, who should be seizing the value opportunity, not some foreign-based energy giant," McGowan said. "It may make all sorts of sense ... for Exxon and Sinopec to rip and ship our raw resources, but just because it makes sense for them, it doesn't mean it makes sense for Albertans."

McGowan said Alberta has traditionally upgraded roughly two-thirds of its bitumen, a figure that will drop to 47 per cent by 2017, according to the Energy Resources Conservation Board. He said an independent consultant's report prepared for the province estimated that by 2025, Alberta would be upgrading just 26 per cent of its own bitumen.

Government reports obtained through freedom of information requests show exporting raw bitumen captures 35 per cent of the value, McGowan said, while upgrading to synthetic crude captures 70 per cent of the value and refining to diesel and jet fuel nets 100 per cent of the value.

"At the same time, there is compelling evidence that moving up the value ladder will also generate more revenue for government to help pay for things that Albertans need, like health care or education," McGowan said.

The BRIK program was developed in 2007, one year after former Premier Ed Stelmach famously said "shipping raw bitumen is like scraping off the topsoil, selling it and then passing the farm on to the next generation."

Stelmach pledged Alberta would upgrade 72 per cent of its bitumen by 2016. In May 2010, the province announced the first BRIK-backed upgrader would be built by North West Upgrading northeast of Edmonton.

The province initially backed a $6.6-billion refinery proposed by Alberta First Nations Energy Centre, but pulled support in February 2012. Teedrum president Ken Horn said the BRIK program could help make the First Nations refinery a reality.

"What is being considered in this room today is whether to introduce a second round of brick barrels under a request for proposals," Horn said, highlighting the economic benefits of the projects. "(The province is) facing a lot of challenges. ... These particular projects could yield a tremendous amount of money for the Alberta government."

Neil Shelly, executive director of Alberta's Industrial Heartland, said "overall, we think (BRIK) is a great long-term strategy for Alberta.

"It helps diversify our markets, it provides long-term stability in the future and it's definitely the role of government. When industry acts, they're acting on behalf of an individual company," Shelly said. "What may not make sense to an individual company may make sense to the province as a whole."

Emilson Silva of the University of Alberta School of Business said he believes the North West Upgrader should go ahead but doesn't think the market will support a second BRIK-backed upgrader.

Martyn Griggs of the Canadian Association of Oilsands Producers said the organization thinks BRIK is a good program but won't comment on whether implementing it is the right political choice for Alberta.

Patricia Nelson, vice-chair of the In Situ Oilsands Alliance, said if building an upgrader makes economic sense, the industry will do it.

"If it doesn't make sense, they will not. And I think you need to have some faith. We've had some pretty good ... trends with industry players here in Alberta making this a world-class place for energy development," Nelson said.

"So keep the faith."

The committee is expected to table its findings on April 30.

The Edmonton Journal, Tuesday, Feb. 26, 2013
Byline: Karen Kleiss

A $2.4 billion drop in resource revenue has put Alberta on pace for a deficit of between $3.5- and $4 billion — one of the highest deficits in history, Finance Minister Doug Horner revealed Tuesday in the province's third quarter fiscal update.

The sea of red ink will be four times deeper than was forecast in the budget last February. The province initially predicted an $886 million deficit, but by the second quarter had increased its deficit forecast to $2.3 to $3 billion.

Now it's forecast to be $1 billion more, which will rival the $4 billion deficit the Don Getty government posted in 1986-87.

Horner blamed the ballooning deficit on the discounted price Alberta companies are getting for the heavy oil or bitumen from the oilsands, which has had a dramatic impact on royalties and taxes.

"We're seeing declining resource revenues in Alberta and that's, for the most part, a result of Alberta's market access problem," Horner told reporters at Calgary's McDougall Centre, "I know you have heard me talk a lot about the bitumen bubble. ... It is a bubble that is not going to pop any time soon and it is costing us a lot of money."

But he noted it is not just the differential between the price of Alberta heavy oil and West Texas Intermediate that is hurting the treasury, but also the higher exchange rate and lower land lease sales.

"It doesn't paint a pretty picture for the third quarter, and to be honest, it's not getting all that prettier," Horner said.

The new deficit projection doesn't include $1.1 billion the province is borrowing for the twinning of Highway 63 to Fort McMurray or the $4.1 billion already borrowed for various financial corporations and for lending to municipalities.

The sustainability fund which has covered four previous deficits has been reduced to $3.4 billion from a one-time high of $17 billion.

The flood of red ink prompted the government to simultaneously announce a three-year management salary freeze that it says will save taxpayers $54 million. Horner also announced plans to cut public sector managers by 10 per cent over the same three-year period.

While he said he didn't want to interfere in the ongoing collective bargaining, unions should take the management wage freeze as a sign of the times.

"We've been fairly consistent in saying that there is no new money," he said. "They should take that as a strong signal of what we have in mind."

The province froze MLA wages earlier this month, rejecting a one per cent cost of living increase to their $156,311 salaries.

Horner said his Conservative government has also found $600 million of in-year savings across all ministries.

Guy Smith, president of the Alberta Union of Provincial Employees, said he doesn't think the government should be blaming a $3.5 plus billion deficit on the discounted price of bitumen, which accounts for less than $1 billion of the shortfall.

"It seems rather strange that the minister of finance would tell Albertans that this is a long-term situation because it's probably not going to be," he said. "It seems to be very much a knee-jerk reaction to a situation that won't last."

Smith said Horner is obviously interfering in the collective bargaining process before it even begins and that rather than slash management jobs, he should be redeploying managers to the front lines to meet the province's rapidly growing population and its demand for more public services.

Alberta Federation of Labour President Gil McGowan said the finance minister appears to be more intent on finding scapegoats than solutions.

"It's clear they are desperate to blame anyone but themselves," he said. "It's time for the government to stop playing the blame game."

McGowan said the question Albertans should be asking is not where to cut, but why does the province have a deficit in a booming economy.

"The real cause of the problem has to do with years and years of cuts to taxes for high income earners and corporations, and years and years of royalty giveaways," he said. "It has nothing to do with how much we pay our public sector workers."

Wildrose Leader Danielle Smith said the fiscal update shows Premier Alison Redford's provincial budget is unravelling.

"We're seeing the budget was an absolute farce," she said.

She dismissed as "window-dressing" the government's plans to cut management by 10 per cent and to freeze their salaries.

Liberal critic Kent Hehr said it was folly to blame slumping oil and gas revenues for the financial problems, saying the government needs to budget more conservatively and change the tax structure.

"Everyone knows our revenue structure is broken," he said.

NDP critic David Eggen said Albertans are angry over the Tory government's bungling of the province's finances.

"They know our economy is growing," he said. "What's wrong with this government? Why did they miss the boat that's been sailing along in Alberta?"

The Calgary Herald, Tuesday, Feb. 19, 2013
Byline: Darcy Henton and Chris Varcoe

CALGARY - A research paper is reinforcing the idea that Canada's resource industry is at risk of being left behind internationally if it doesn't find a way to get oil to receptive markets in the Pacific Rim.

The report from the School of Public Policy at the University of Calgary says demand for heavy oil from Alberta's oilsands lies primarily in southeast Asia, but warns the window of opportunity will begin to close.

Author Michal Moore says Canada needs to find a way to get into those markets in the next two to five years.

"If we can get our products into the market in that stream we're going to be competitive," Moore, a professor of energy economics at the school, said Wednesday when the paper was released.

"The equivalent of being late is you have to take a bigger and bigger discount on your product, or switch and start supplying a more higher valued-added product."

The Alberta government has turned up the volume in recent weeks about the hole the oilsands oil discount is eating in the province's bottom line. Premier Alison Redford has warned of a $6-billion revenue shortfall this year because oilsands crude has been fetching a significantly lower price than the U.S. and global benchmarks.

She's also referred to the buildup of crude in Alberta as customers get a cheaper product elsewhere as a "bitumen bubble."

Moore says competition is an issue for Canada.

"There's a lot of that oil out there in the market. There's plenty of capacity in the Pacific Rim/Asian markets for heavy oil like ours, but it's not infinite and it's certainly competitive."

The Canadian Press, Wednesday, Feb. 13, 2013

Maya heavy oil from Mexico and Arab Heavy are very close to Alberta's product in weight and sulphur content, Moore said.

The challenge becomes getting Alberta oil to ports so it can be loaded onto ships and sent to willing customers in China, Japan or Korea. Moore said the most cost-effective way of doing that is through pipelines, but delays in the proposed Northern Gateway project to the West Coast present a problem.

Some Alberta heavy oil is already being processed at refineries in California. Moore also pointed to the possibility of shipping Alberta oil eastward to New Brunswick. And there is talk of a rail link to a port in Alaska.

New Brunswick Premier David Alward was in Alberta this week and said he'd welcome a pipeline carrying oilsands bitumen to the 300,000-barrel-per-day Irving Oil refinery in Saint John - the largest in Canada - with the possibility of exporting some of that crude by tanker.

But the Alberta Federation of Labour says Alberta should require energy companies to upgrade oil in the province before they are allowed to ship it.

Citing an Alberta Energy Department analysis obtained under freedom of information laws, the group argued Wednesday that oilsands mining projects with upgraders will become hugely profitable as the light-heavy oil price differential expands.

Federation president Gil McGowan said the Alberta government continues to approve in situ oilsands projects without requiring associated upgrading, which is flooding the U.S. market and driving down the price.

"These projects become less economically viable as the price difference between bitumen and crude expands," McGowan said in a release.

"And yet these projects have mushroomed throughout the province. We’re flooding the market, and these documents show that the government knows it."

Alberta NDP Leader Brian Mason said the government's refusal to increase Alberta's upgrading capacity is part of a "bitumen bungle."

"Here we have a clear message from the market, from industry, from policy analysts and from the government’s own research, yet Redford continues to bury her head in the oilsands and stubbornly insist that we can only talk about moving bitumen because that’s what is in the ground,� Mason said in a release.

CALGARY — Premier Alison Redford was ready to declare the inaugural Alberta economic summit a success Saturday even without a consensus from the prominent Albertans who spent the day hashing out the province's spending and revenue issues.

But the call of many participants to introduce a provincial sales tax left lingering questions from the opposition parties about the Tory government's intentions around a consumption tax.

The focus of the summit — called by Redford because the province is dealing with a major revenue shortfall due to lower-than-expected energy prices and a deep discount for Alberta bitumen — was the long-term future of the province's economy, not the March 7 budget.

Speaking to reporters following the seven-hour conference at Mount Royal University, Redford said she was intrigued by suggestions around increased delivery of services by the non-profit sector and greater use of public-private partnerships (P3s), as well as the emphasis on gaining new market access for Alberta energy.

She said the repeated emphasis on a sales tax by many panellists did not necessarily point the direction the province will ultimately take.

"I also heard a lot today about spending cuts, I heard about reducing provincial income tax or eliminating provincial income tax, reducing corporate tax," said Redford.

"Do we need to have a conversation about revenue? I don't know the answer to that yet. But I think there's a lot of smart people engaged in that room who want to keep having that conversation. We're going to keep talking to Albertans."

The summit saw over 350 Albertans from academia, the business community and the non-profit sector — as well as MLAs from all parties in the legislature — in attendance. The event was also streamed online and Redford touted the social media success of the summit, noting in her closing address that 72,000 individual Twitter accounts used the hashtag #absummit.

The event saw four five-person panels discussing the state of the provincial economy, the public's expectation of services, Alberta's revenue mix and the government's spending habits.

Many of the panellists argued for a consumption tax even if they differed over whether the province's $40-billion budget is out of line.

George Gosbee, president and CEO of AltaCorp Capital, said the province could no longer rely on natural resource revenues to pay for programs and government should introduce a five per cent sales tax, as well as consider bringing back the health-care premiums scrapped by former premier Ed Stelmach.

"We had a free ride and we had a great ride. Now's the time to get off of it," Gosbee said.

Other panellists who advocated a consumption tax included the former dean of the University of Alberta business school Mike Percy, interim dean Joseph Doucet and AIMCo CEO Leo de Bever.

Jack Mintz, director of the University of Calgary's School of Public Policy, said Alberta has a spending problem but does need a fundamental reform of the tax system.

He said a sales tax harmonized with the federal GST would be more efficient and should be introduced with the aim of gradually eliminating the provincial income tax entirely.

But Derek Fildebrandt of the Canadian Taxpayers Federation doubted the possibility of a revenue-neutral sales tax being implemented in the province and suggested the Tory government would face an electoral revolt if it introduced a PST.

"The government has no mandate to bring in a sales tax," he said.

"The premier, I imagine, likes her job in government."

Redford has said the government faces a $6-billion shortfall in revenue in 2013-14 because a glut of oil in the United States has depressed the benchmark West Texas Intermediate price of oil and widened the differential in price between WTI and Western Canadian Select, which includes Alberta bitumen.

The government has made gaining access to new markets, particularly in Asia, its priority. That means the provincial go-ahead for pipeline proposals such as the Keystone XL line to the U.S. Gulf Coast, Northern Gateway and an expanded Trans-Mountain pipeline in British Columbia, and a reversed line to Eastern Canada.

However, all those projects face fierce opposition because of the environmental impact of the oilsands.

Jim Prentice, a former federal Conservative cabinet minister who is a close ally of Redford, said in his keynote address that "energy leadership and environmental leadership are now two sides of the same coin."

"We will either be an environmental leader or we will have other jurisdictions dictate our environmental policies, dictate our energy policies and dictate the markets we are able to access," he said.

The tone of the debate was always civil but the most striking differences were seen on the last panel of the day, which dealt with government spending.

Tom Flanagan, the University of Calgary political scientist who managed the Wildrose campaign in the spring election, said the solution to the government's financial woes could be found 20 years ago.

The cross-the-board cuts of Premier Ralph Klein and Finance Minister Jim Dinning in the early '90s balanced the province's books and set the stage for the province's economic boom, he said.

But Gil McGowan, president of the Alberta Federation of Labour, said the Klein-era cuts devastated the province's infrastructure and services.

"Albertans are willing to make tough sacrifices when necessary. We're prepared to take it on the chin when we've been convinced it's the right thing to do, he said.

"But allowing yourself to get punched in the face when it's not necessary is not brave and it's not noble. It's stupid."

Wildrose Leader Danielle Smith said she was pleased overall with the summit and noted that most Albertans would have found at least one or two panellists they agreed with.

"I was disappointed to see how often the conversation turned to this being a revenue problem and the solution being either taking out debt or raising taxes," she said.

"I don't support a sales tax because it is regressive. It actually does hit the lowest income people the hardest."

NDP Leader Brian Mason was more blunt, suggesting the summit had been "stacked" to deliver a message favouring a sales tax and pipelines.

"But we didn't learn what it was that created the dependence on royalty revenue in the first place, which was of course cuts to income tax for the wealthy and for corporations. That didn't even come up," said Mason, who noted there was also little discussion about increasing refining in the province to deal with the differential issue.

"My sense is that they're trying to set the stage for a sales tax, which is not something we support."

The Calgary Herald, Monday, Feb. 11, 2013
Byline: James Wood

Alberta's current financial woes may offer a silver lining, says the Alberta Federation of Labour. Two weeks after Premier Alison Redford warned the province that resource royalties were expected to drop by $6 billion in the next fiscal year, AFL President Gil McGowan says Alberta's "bitumen bubble" could provide an opportunity for increased upgrading and refining jobs in Canada.

"The price of bitumen is low right now because we're flooding the market with bitumen," says McGowan.

"The solution they're proposing is building more pipelines to flood the market even further. That's just not how markets work," he said. "We need to refine the bitumen here, so that we're selling what the international markets want: synthetic crude."

McGowan justifies his arguments with a 2011 internal government report the labour group obtained through a Freedom of Information request. The report shows that the price difference between Alberta's heavy oil and the benchmark West Texas Intermediate grows, resource projects that both mine and upgrade bitumen locally become economically viable, while only mining becomes less economically beneficial.

"These documents paint a picture of a government that knows what needs to be done, but is afraid to act," said McGowan. "This 'bitumen bubble' has a silver lining, and the province knows it. They wrote the documents to prove it."

There are currently seven pipelines that carry oilsands crude to markets outside Alberta, with the majority heading to the U.S. Midwest.

The AFL, and several other Canadian labour groups, have argued against the proposed Keystone XL and Northern Gateway pipelines, instead favouring more domestic refining and upgrading operations. The AFL argues that building more refineries in Alberta, instead of relying on refineries in the U.S. and Asia, will create more long-term jobs and net better value for the oilsands, since the refined product garners a stronger price.

However, the day before the AFL released their documents, Suncor Energy announced its planned Voyageur upgrading project might not happen due to decreased demand for Canadian crude. A decision regarding the project will not be made until the end of March.

At the same time, North West Upgrading Inc. has partnered with Canadian Natural Resources Ltd. to build the $5.7-billion Sturgeon upgrader and refiner. The plan will provincially-owned bitumen to privately-owned refineries. The Sturgeon project will be the first refinery to be built in Alberta in approximately 30 years.

"By not requiring upgrading in Alberta, we're pumping out more of the wrong thing," McGowan said. "We're shipping good oilsands jobs elsewhere, when the economics of upgrading make a lot more sense."

Fort McMurray Today, Thursday, Feb. 7, 2013
Byline: Vincent McDermott

CALGARY - The inability to get western Canadian crude to the right markets is costing the country's economy dearly, according to a new report paid for by the Saskatchewan government.

Each stalled pipeline project means a loss to the Canadian economy of between $30 million and $70 million every day, said the report penned by the Canada West Foundation, a Calgary-based think-tank.

"The economic impact is just devastating," foundation CEO Dylan Jones said in an interview Thursday.

The Saskatchewan government paid $50,000 to commission the report.

Premier Brad Wall has been an outspoken supporter of new pipeline projects, most recently signing a letter, along with 10 U.S. governors, urging U.S. President Barack Obama to approve the Keystone XL pipeline.

Alberta's oilsands, the third-largest reserves on the planet, get most of the attention when it comes to the pipeline debate.

But Saskatchewan, which has considerable oil resources of its own, is affected by the pipeline pinch as well, Wall said in Regina.

"We hope that this helps get the message out, even to a greater degree than it is now, that we have a pipeline capacity issue in western North America and that's costing Saskatchewan people a lot of money," he said.

"Because of the pipeline capacity issue, we're losing up to 19 to 20 per cent return on the taxpayer's resource."

In recent months, oilsands crude has been trading at a painfully steep discount to both U.S. and global light crude benchmarks. It's a trend that has both eroded oilpatch profits and caused the Alberta government to warn of a $6 billion revenue shortfall this year.

At the heart of the problem is a lack of adequate pipeline capacity to get that crude to the markets that want it most. Proposals of eastbound, westbound and southbound pipelines are in varying stages of development, but environmental opposition and political wrangling makes their fates uncertain.

Most pipeline capacity out of Western Canada heads to the U.S. Midwest, which Jones calls "the worst place in the world to be selling oil" as booming production from areas like North Dakota floods the market.

The Canada West Foundation says new pipelines need to be built in the right directions.

A massive expansion to Trans Mountain and Enbridge's Northern Gateway proposal would enable crude to be transported to Asia via tankers from the West Coast, but they face stiff opposition within B.C. on environmental grounds.

TransCanada Corp. is awaiting final U.S. government approval for the northern leg of its Keystone XL pipeline, which would allow Canadian crude to flow to refineries on the Gulf Coast that are thirsty for heavy oil. Construction on the southern leg between Oklahoma and the Gulf is underway.

Refineries in eastern Canada and the U.S. Eastern Seaboard rely on pricey imported crude from overseas, which is hurting their economics. Both TransCanada and Enbridge have projects in the works to send western crude eastward through reconfigured pipes that are already in the ground. It's possible those lines could extend all the way to New Brunswick, home to Canada's largest refinery.

"If pipeline project proposals such as Trans Mountain, Keystone XL and Northern Gateway don't move forward, Canada will be foregoing $1.3 trillion in economic output, 7.4 million person-years of employment and $281 billion in tax revenue between now and 2035," said Michael Holden, the foundation's senior economist and author of the report.

While most of the benefits would accrue to Alberta, Holden said those three projects would add a combined $84 billion to economies elsewhere in Canada.

The report calls on provinces to work together to tackle the problem, the way Alberta Premier Alison Redford and New Brunswick Premier David Alward did earlier this week in touting an eastbound oil pipeline.

Keith Stewart, climate and energy campaign co-ordinator at Greenpeace, says the Canada West Foundation report "misses the point."

"If we want to avoid climate chaos, we have to stop building fossil fuel infrastructure like new tar sands pipelines," he said.

"Canada can, and should be a winner by building the climate-safe, green energy economy that our kids need and deserve."

The Alberta Federation of Labour also has a different view of the issue.

The group said in a report earlier this week that Alberta should require energy companies to upgrade oil in the province before they are allowed to ship it.

Federation president Gil McGowan said the Alberta government continues to approve in situ oilsands projects without requiring associated upgrading, which converts bitumen from the oilsands into light oil refineries can use. That's flooding the U.S. market and driving down the price.

Environmental opposition has been particularly strong to pipelines that would ship oilsands bitumen, the thick, tarry stuff that needs to be diluted in order to flow.

And that alone might force governments to take a hard look at upgrading and refining opportunities at home, said Wall.

"There's all manner of politics, some of it based on reality, some of it not," said Wall.

"If we can't get pipelines built because of it, we just have to start not moving bitumen, but moving a refined product."

Times Colonist, Thursday, Feb. 7, 2013
Byline: Lauren Krugel, The Canadian Press with files from Jennifer Graham in Regina

CALGARY - Public sector unions are bracing to fight impending provincial cutbacks driven by a multi-billion dollar cash crunch.

And a prominent economist said Premier Alison Redford's TV address to Albertans Thursday fails to come to grips with a looming budget shortfall larger than the province is letting on.

Even before Redford's speech, the Alberta Federation of Labour was readying a public relations offensive to offer alternatives to slashing spending on crucial programs, said president Gil McGowan.

"The public sector unions have been meeting the past couple of weeks to discuss the implications of the budget and, like a lot of Albertans, we're prepared for the worst," McGowan said Friday.

Alberta's fiscal chickens are coming home to roost after years of tax-slashing for wealthier Albertans and a resource revenue giveaway to a wildly profitable energy industry, he said.

"Our provincial GDP is literally 75% higher than the rest of the country, yet we can no longer afford even to have run-of-the-mill services," said McGowan. "I call it the great Alberta disconnect."

After meeting with Finance Minister Doug Horner last Tuesday, McGowan said it's clear areas like education and health care won't be spared drastic action in the budget expected in March.

"Everything we've heard is suggesting the budget won't be as bad as what we saw in the (Ralph) Klein years, but worse than anything we've seen since," he said.

University of Calgary economist Dr. Jack Mintz said Redford's TV address muddied the fiscal waters, and unmentioned obligations like financing requirements could see a shortfall of $8-$10 billion.

"This government has considerable credibility problems as far as their budget plan," he said.

Even with budget cuts averaging 5% over all departments - or a $2-billion slim-down - an ocean of red ink will remain because the discount on Alberta bitumen will also persist for years, added Mintz.

"If they don't make major cuts this years, the sustainability fund will be depleted and they'll be borrowing because they don't want to take it from the heritage fund," he said.

Educators watched Redford with considerable interest, hoping the province's commitment made to them last year in a three-year funding pact will hold in March, said Calgary public school board vice-chairman Lynn Ferguson.

"We are certainly aware of the economic challenges facing the province," said Ferguson.

"I would hope since education is a consistent priority for Albertans, that value would be reflected even in a difficult budget year."

SunNews, Friday, Jan. 25, 2013
Byline: Bill Kaufman, QMI Agency

Public sector unions are girding to fight impending provincial cutbacks driven by a multi-billion dollar cash crunch.

And a prominent economist says Premier Alison Redford's TV address to Albertans Thursday fails to come to grips with a looming budget shortfall larger than the province is letting on.

Even before Redford's speech, the Alberta Federation of Labour was readying a public relations offensive to offer alternatives to slashing spending on crucial programs, said AFL President Gil McGowan.

"The public sector unions have been meeting the past couple of weeks to discuss the implications of the budget and like a lot of Albertans, we're prepared for the worst," McGowan said Friday.

Alberta's fiscal chickens are coming home to roost after years of tax-slashing for wealthier Albertans and a resource revenue giveaway to a wildly profitable energy industry, he said.

"Our provincial GDP is literally 75 percent higher than the rest of the country yet we can no longer afford even to have run-of-the-mill services," said McGowan.

"I call it the great Alberta disconnect."

After meeting with Finance Minister Doug Horner last Tuesday, McGowan said it's clear areas like education and health care won't be spared drastic action in the budget expected in March.

"Everything we've heard is suggesting the budget won't be as bad as what we saw in the Klein years but worse than anything we've seen since," he said.

University of Calgary economist Dr. Jack Mintz said Redford's TV address muddied the fiscal waters, adding unmentioned obligations like financing requirements could see a shortfall of up $8-$10 billion.

"This government has considerable credibility problems as far as their budget plan," he said.

Even with budget cuts averaging 5% over all departments — or a $2 billion slim-down — an ocean of red ink will remain because the discount on Alberta bitumen will also persist for years, added Mintz.

"If they don't make major cuts this years, the sustainability fund will be depleted and they'll be borrowing because they don't want to take it from the heritage fund," he said.

Educators watched Redford with considerable interest, hoping the province's commitment made to them last year in a three-year funding pact will hold in March, said Calgary public school board vice-chairman Lynn Ferguson.

"We are certainly aware of the economic challenges facing the province," said Ferguson.

"I would hope since education is a consistent priority for Albertans, that value would be reflected even in a difficult budget year."

She noted there's a possibility the province could delay funding building projects, noting her district has 16 projects including modernizations and new schools, one of them a northeast high school.

"I would like them to know in a growing community like Calgary, new schools are always needed," she said adding 24 Calgary communities have no public schools.

Ferguson also voiced some concern about the fate of its full-day kindergarten program.

Redford said an unforeseen discount on the province's bitumen is largely to blame for the fiscal gap.

But the AFL's McGowan echoed right-wing critics like the Wildrose Party in arguing that situation has long existed.

"That differential between world oil and bitumen prices has existed for years," he said.

The Calgary Sun, Friday, Jan. 25, 2013
Byline: Bill Kaufman

CALGARY - Public sector unions are bracing to fight impending provincial cutbacks driven by a multi-billion dollar cash crunch.

And a prominent economist said Premier Alison Redford's TV address to Albertans Thursday fails to come to grips with a looming budget shortfall larger than the province is letting on.

Even before Redford's speech, the Alberta Federation of Labour was readying a public relations offensive to offer alternatives to slashing spending on crucial programs, said president Gil McGowan.

"The public sector unions have been meeting the past couple of weeks to discuss the implications of the budget and, like a lot of Albertans, we're prepared for the worst," McGowan said Friday.

Alberta's fiscal chickens are coming home to roost after years of tax-slashing for wealthier Albertans and a resource revenue giveaway to a wildly profitable energy industry, he said.

"Our provincial GDP is literally 75% higher than the rest of the country, yet we can no longer afford even to have run-of-the-mill services," said McGowan. "I call it the great Alberta disconnect."

After meeting with Finance Minister Doug Horner last Tuesday, McGowan said it's clear areas like education and health care won't be spared drastic action in the budget expected in March.

"Everything we've heard is suggesting the budget won't be as bad as what we saw in the (Ralph) Klein years, but worse than anything we've seen since," he said.

University of Calgary economist Dr. Jack Mintz said Redford's TV address muddied the fiscal waters, and unmentioned obligations like financing requirements could see a shortfall of $8-$10 billion.

"This government has considerable credibility problems as far as their budget plan," he said.

Even with budget cuts averaging 5% over all departments - or a $2-billion slim-down - an ocean of red ink will remain because the discount on Alberta bitumen will also persist for years, added Mintz.

"If they don't make major cuts this years, the sustainability fund will be depleted and they'll be borrowing because they don't want to take it from the heritage fund," he said.

Educators watched Redford with considerable interest, hoping the province's commitment made to them last year in a three-year funding pact will hold in March, said Calgary public school board vice-chairman Lynn Ferguson.

"We are certainly aware of the economic challenges facing the province," said Ferguson.

"I would hope since education is a consistent priority for Albertans, that value would be reflected even in a difficult budget year."

Sun News, Friday, Jan. 25, 2013
Byline: Bill Kaufmann

The President of the Alberta Federation of Labour is offering some free financial advice to the Redford government as it wrestles with rising red ink.

AFL boss Gil McGowan says the governing Tories only have themselves to blame for the financial mess the province is in.

McGowan tells 660News, Alberta is among the richest jurisdictions in the world and there is no excuse for the government to be running a deficit.

He says it's time Alberta imported something from south of the border, namely the current fiscal cliff discussions.

McGowan is calling for an increase to tax rates especially for corporations and for the government to increase it's take from the sale of resources.

The AFL fears the Redford government will do what previous government's have done to erase the red ink, freeze employee wages while gutting programs and services.

On Wednesday Alberta's finance minister admitted the government might not be able to fulfill it's promise to balance the 2013 operating budget.

660 News, Thursday, Dec. 30, 2012
Kevin Usselman