Albertans are used to the ups and downs of the resource industry, but the latest upswing has happened very quickly
Slowly say it out loud: twenty-eight billion dollars.
When you think about it, it’s a huge amount of money.
If you could save $10,000 every single day, it would take you more than 7,600 years to get to that amount.
Alberta’s government only needs one because of oil and gas.
The current fiscal year, which ends on March 31, is expected to bring in $28.1 billion from royalties and other fees related to them. Even with inflation taken into account, that is by far the province’s biggest annual haul from its many non-renewable resources.
Trevor Tombe, an economist at the University of Calgary, said, “It’s hard to say enough about how big these numbers are.”
It’s also hard to get your head around. Most people don’t deal with such huge amounts of money every day, so they almost lose their meaning.
Albertans are used to booms and busts, so this may seem like just another ride on the resource rollercoaster. But even by those standards, this most recent upswing has been huge, and it has happened very quickly.
The new provincial budget will be released on Tuesday. One of the most important questions will be what to do with all this extra money.
Here are five important things to know about the current royalty ride that will help you understand how much money the province now has and how quickly its luck has changed.
1. It’s the biggest turn for the better ever
Two years ago, Alberta’s finances were looking very, very different.
When the government made its budget for 2021–2022, it thought that it would only get $2.9 billion from non-renewable resources.
What actually happened blew those hopes out of the water. In the next year, the province made a mind-blowing $16.2 billion.
Tombe said, “We’ve never seen such a huge change before.”
“The change in our budget balance—from a pretty big deficit to a small surplus to a big surplus now—is the biggest change in a Canadian province’s budget balance in Canadian history.”
The trend kept going up during the 2022–2023 fiscal year, which is almost over. Things also look pretty good for the years 2023–2024.
When the new budget comes out on Tuesday, we’ll get updated estimates, but the way things are going, the current fiscal year will bring in more money from oil and gas than any other.
even when inflation is taken into account.
2. We’re talking real dollars here 
Some of you might think, “Of course these numbers are high; inflation is high right now.”
What about the real dollar values?
Well, those are also new records.
Taking inflation into account, Alberta’s income from non-renewable resources has never been higher.
In terms of real income, the current fiscal year is way ahead of all others—even 2005/06, which was a boom year when the provincial government gave every Albertan “prosperity checks,” also called “Ralph Bucks” after then-premier Ralph Klein.
The recent rise in royalties is caused by three main things: high oil prices, record amounts of oil production, and the completion of several large oilsands projects, which means they have to pay a higher royalty rate.
Today’s cash flow is very different from what it was like just a few years ago.
3. The last downtur
Think back to 2015, which is a long time ago.
Remember the well-known “look in the mirror” remark?
Jim Prentice, who was prime minister at the time, said this on a CBC radio call-in show.Alberta@Noon.The topic was the dire financial situation the province was facing at the time.
The province was hit hard by the drop in oil prices around the world. There were big worries about budget deficits and a deeper recession.
Prentice tried to get Albertans ready for the hard times that were coming. He warned over and over that the drop in oil prices would hurt the province’s finances by $7 billion.
He responded with a budget that cut spending and raised taxes, and then he called a general election.
Voters didn’t agree with Prentice’s ideas, so they gave him a shocking loss. This marked the end of a 43-year Progressive Conservative dynasty and, in the long run, the end of the party itself.
Alberta had a brand-new NDP government, which now had to deal with the same money problems.
Over the next four years, both oil prices and government income stayed low.
During the one term of the NDP government, the province’s income from non-renewable resources was one of the lowest it has ever been.
The new UCP government, led by Premier Jason Kenney and elected in 2019, didn’t do much better at first. Oil prices stayed low, and then the COVID-19 pandemic made things even worse for the economy.
which makes the recent change even more interesting.
4. About $6,200 for each perso
If the province gave everyone in Alberta an equal share of the $28.1 billion it expects to get from non-renewable resource sales this year, that would be about $6,200 per person.
Tombe thinks this helps show how big Alberta’s recent windfall really is, because it’s hard to understand the difference between a million and a billion, let alone 10 or 20 billion.
“They all sound like they’re about the same size,” Tombe said. “That makes it hard for us to talk about it.”
“Breaking it down on a per-person basis, for a family of four, it’s equivalent to $2,000 a month. “That is a lot of money.”
But when you look at it this way, Alberta has had even bigger breaks in the past.
Even though the province has never gotten more money from royalties than it does now, it has also never had as many people as it does now.
In the late 1970s and early 1980s, when a global supply shock sent oil prices through the roof, the province made more money from oil and gas per person than it does now.
Peter Lougheed, who was prime minister at the time, made the decision in 1973 to switch to a price-sensitive royalty system, which made these incomes go up even more. Before that, royalties were always paid at the same rate. By the end of the 1970s, most of the money the Alberta government got came from oil and gas royalties.
5. It’s not like the 1970s, but the effects of that boom are still felt
Even though Alberta has a lot of money now, it doesn’t compare to how things were in the province almost 50 years ago.
In the late 1970s, between half and three-quarters of all government revenue came from oil and gas royalties, which is a huge amount compared to what it is today.
Using this measure, things were at their worst in 2015/16, when non-renewable resources only made up 6.5% of the provincial government’s total income.
Since then, they’ve gone back up to almost 37%.
But governments are still getting money from that boom in the 1970s.
The Alberta Heritage Savings Trust Fund was set up in 1976 with all of that extra money from royalties.
Since then, the fund’s investment earnings have been used to pay for capital projects and start other provincial endowments. The fund has also given the province’s general revenue tens of billions of dollars.
“That’s all because of the savings from fifty years ago,” said Tombe.
With Alberta’s new growth, Tombe thinks it’s time to have a similar, forward-looking attitude.
“It’s very important to think about how we can solve our long-term problems with these short-term gains,” he said.
When Budget 2023 comes out on Tuesday, we’ll know more about what the province plans to do with all that money.