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This is a question a lot of people have asked us and the reality is it's quite
simple we take all of the public sector forecasters, the private sector
forecasters, we get industry information
some of it confidential because it is competitive
would put those all together in a list, we look at what the median average is for that
we take a look at what the volumes are, we take the average, take it
a notch down. That's what we come up with. In fact, you know, the federal government uses
the same sort of system. They were a little higher than we were in January of
2012. Saskatchewan was a little higher than we were in 2012, so
it's not something that the Government of Alberta just comes up with one day. We
actually use industry and the private forecasters to come up with our number.
It impacts us dramatically because the structure of our royalty regime has
changed. At one time, Albertans will recall, that natural gas was king
We were generating 8 billion dollars worth of royalties just from natural gas alone.
Today, natural gas royalties are less than a billion because gas is cheap and
it's plentiful.
Today, the royalty structure that we have is 75 per cent based on
oil sands.
Oil Sands is dependent on one customer: that's the United States.
And in the United States, they've increased their own production, so they
don't necessarily need our oil. So, rather than saying how much will they pay us
for it, they're saying how much will we take to get it off our hands and that means they're
discounting a tremendous amount to our oil. It's about a 30 billion dollar hit
to the Canadian economy, so to Alberta's revenues, it's severe.
Well, we're looking at a number of different areas and in terms of how
we're going to manage the situation for the medium term.
Certainly, when we did our around-the-province tour, the 9 open houses
across the province, we had the 6 thousand respondents from our online
survey. Albertans told us something very clearly and that was get
our own house in order. Take a look at how we can rein in spending and spend
responsibly before we dig into their pockets for anymore.
So, we're taking a very aggressive approach ministry-by-ministry, program-by-
program
to ensure that we're getting taxpayers' dollars value from programs and
services that deliver
and it's going to be a very aggressive approach to our spending
first.
We're looking at how we do things. Can we do things differently, structurally.
The results-based budgeting initiative
has been accelerated because you know we wanted to do something on our expenditure
side before, to do smart spending,
and that was results-based budgeting. So, we're going to accelerate that, and be much
more aggressive on.
I think Albertans should expect that this is going to be a tough budget.
This is going to be something where we're going to have to make some very
difficult choices.
We're going to have to make choices on programs that have been
around for some period of time.
But
the reality of the situation is that we have a severe situation on our revenue side,
we have made some progress on the expenditure side over the last
number of years — we're going after accelerate that,
we are going to have to be very aggressive and rein in our spending,
because frankly, that's what Albertans told us they want us to do,
and
that's what I'm working on.