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Premier's Address to Albertans

January 24, 2013

Good evening.

In the last election, I made a commitment to speak directly with Albertans when important issues arise and listen carefully to your advice.

Tonight, I want to start one of those conversations.

As Premier, I'm proud to lead a province that has achieved so much.

We're creating jobs and attracting thousands of new Albertans each year, in part, because our taxes are the lowest in Canada.

We live in safe communities and we're able to provide world-class health care for people like my dad and quality education for our kids, like my daughter Sarah.

Alberta has been a steady star in turbulent waters, but even we're not immune to economic forces beyond our borders.

Today, 30% of our budget is funded by revenues from oil and gas.

This means we are vulnerable to swings in resource prices — as we have seen with natural gas prices in the past, and now the price we receive for Alberta oil.

This time last year, private sector economists, industry experts and banks forecasted that West Texas Intermediate oil — the benchmark price for oil in North America — would average $100 a barrel in 2012.

The federal Conservatives, our neighbours in Saskatchewan and our government used that benchmark as the basis for our budget forecasts.

In fact, we forecasted the price to be slightly lower just to be safe.

Now Texas oil ended up averaging $94 last year — and that difference in price alone, has cost the province almost $1 billion in royalty revenues since April.

But, it isn't the price of oil in Texas that is causing the real problem.

Historically, the price we receive for our oil has been a few dollars lower than Texas oil, and that differential had been manageable.

But since September, that gap in the differential has grown considerably and the trend is getting worse for the foreseeable future.

The vast majority of our oil is now bitumen from the oilsands.

And because of rapidly growing levels of oil production in the United States, and the fact we have virtually nowhere else to sell our oil but to the U.S. market, Alberta is getting just over $50 dollars a barrel for our oil.

This "bitumen bubble" means the Alberta Government will collect about six billion dollars less in revenue, this year alone.

To put that in context, that's equivalent to all of our government's spending on Education each year.

So as we prepare this year's budget, it means we have to make some very difficult choices.

When Albertans elected our government last April, you placed your trust in us to manage in both good and in challenging times, to protect Alberta's gains, while building for the future.

You gave our government a clear mandate to keep investing in services that support our families and our communities — the communities where we live. You told us to continue building the new roads, schools and health facilities we need.

And we are listening.

Despite falling oil revenues, I give you my commitment that as we deliver our long-term economic plan for Alberta, we will be thoughtful in our approach and we will deliver on these priorities.

It's not good enough to simply take an axe to government spending across the board.

That would mean vulnerable Albertans get hit the hardest.

And it is not good enough to take the easy way out and raise taxes.

Last year, we initiated a Results Based Budgeting process — a process that challenges every dollar the government spends, while making sure the programs and services we provide are getting results for Albertans.

I've instructed every one of my ministers to speed up this review.

In this year's budget, we'll hold the line on our spending and we'll live within our means.

But our population is growing quickly. We know that living in this province. Last year alone, we welcomed 95,000 new Albertans to our province — which is equivalent to adding a city the size of Red Deer in just a single year.

So while it may sound relatively painless to hold our overall spending levels, it's not.

As a result, some programs and services will change — especially those that are not sustainable over the long term.

Quite simply, we have to put Alberta's finances on a more stable footing. A province as prosperous as Alberta should not be as susceptible as we are to swings in the price of oil and gas.

It's why I will continue to fight for a Canadian Energy Strategy that gets our oil both to the West and East coast in Canada, to the refineries in the U.S. Gulf Coast and to markets overseas — particularly growing economies in Asia.

We have a duty to ensure that our resources — especially Alberta oil and gas — get to new markets at a much fairer price.

These are our assets and we need to sell them for the highest price possible. And that means we absolutely must find ways to get Alberta oil to multiple customers around the world and get a competitive price.

But this won't happen overnight. It will take focus and determination over the next several years to open new markets. And that is job one for my government.

And through all of this, as we make the tough, but thoughtful decisions to live within our means, we have a plan to once again begin investing a portion of our resource revenue in the Heritage Fund — the first time that will have happened in over 25 years.

We will build on the legacy that Premier Lougheed laid down for us — a legacy premised on fiscal conservatism with a strong social conscience that has built Alberta into the greatest place in Canada to live, bar none.

Working together, and with your support — we'll work through the effects of the bitumen bubble and put Alberta on a more secure footing.

But make no mistake about it — our government was elected to keep building Alberta. To focus our spending on the priorities that you told me were important. And that is exactly what we'll do.

I look forward to continuing our conversation directly with you in the weeks ahead. We will listen and we will act.

Next month, I will lead the first annual Alberta Economic Summit that will bring together leading thinkers from across Alberta. We'll hear from industry experts, business and not-for-profit sector leaders and academics from our colleges and universities. Most importantly, we will hear from people like you, who are passionate about sharing ideas and finding solutions. This summit will not solve everything in one day, but it will allow us to continue our conversation.

I don't expect your advice to be unanimous. It usually isn't in most families. But I am prepared to make the tough decisions that must be made to protect all that we've achieved together, while not losing sight of our duty to future generations.

Thank you for spending a few minutes with me this evening.

Good night.

Premier Alison M. Redford, QC