Alberta Budget 2025: Major Oil Producer Stakeholder Brief

Executive Summary

Alberta Budget 2025 enters a period of significant fiscal challenge for the province and its oil producers, projecting a $5.2 billion deficit driven by falling resource revenue and U.S. trade uncertainty. The government assumes WTI at US$68/bbl (down from US$74 in 2024-25) with a widened light-heavy differential of US$17.10/bbl and 10% tariffs on Canadian energy exports. Despite these headwinds, bitumen production is forecast to grow to 3.56 million barrels per day, and programs like the Alberta Petrochemicals Incentive Program (APIP) and Carbon Capture and Storage (CCS) initiative continue. The $4 billion contingency fund signals the government is prepared to deploy additional fiscal measures if trade conditions deteriorate further.

Top 5 Relevant Budget Measures

1. Bitumen royalty revenue projected at $12,830M -- a decline of $4,029M or 23.9% from 2024-25, reflecting lower WTI prices, a wider differential, and trade conflict assumptions. Every US$1/bbl change in WTI shifts revenue by approximately $750M.

2. U.S. tariff baseline of 10% on energy products -- the budget assumes ongoing tariffs on Canadian energy exports with retaliatory Canadian measures on consumer goods. The $4 billion contingency is partly designed to absorb tariff-related economic fallout.

Alberta Petrochemicals Incentive Program (APIP) at $311M over three years -- with $181M allocated for 2025-26 alone, supporting value-added petrochemical investment in the province.

Carbon Capture and Storage initiative at $36M in 2025-26 -- funded through TIER revenue, supporting two CCS projects. TIER spending of nearly $646M over 2025-28 supports emissions reduction and clean technology.

Energy and Minerals ministry operating at $892M -- maintaining regulatory capacity through the Alberta Energy Regulator (AER) and Alberta Utilities Commission (AUC), with energy industry levies contributing $453M.

Risks

Trade conflict escalation. The budget models a moderate scenario with 15% tariffs on goods and 10% on energy. An escalation to the previously threatened 25% on non-energy goods or higher energy tariffs would compress margins further. The government acknowledges significant uncertainty remains over the trajectory and duration of tariffs.

Wider differential pressure. The light-heavy differential assumption of US$17.10/bbl is significantly wider than the US$13.20/bbl in 2024-25. While TMX has helped, U.S. tariffs specifically applied to Canadian heavy oil imports could exacerbate this spread, particularly if U.S. refiners seek alternative heavy crude sources.

Regulatory cost trajectory. TIER regulation covers approximately 600 facilities and 60% of Alberta emissions. While Alberta promotes this as a competitiveness tool, compliance costs for large emitters may increase as reduction targets become more stringent. Surface rights compensation payments are now budgeted at $25M per year, adding operational cost clarity but also confirming ongoing obligations.

Labour market tightness. Despite the 7.4% unemployment rate provincially, skilled trades and technical workers remain in high demand. Public sector compensation is forecast to increase from $25.7B in 2024-25 to $26.5B in 2025-26, which sets private sector expectations higher.

Fiscal framework constraints. Three consecutive deficit years ($5.2B, $2.4B, $2.0B) with taxpayer-supported debt rising from $85.4B to $98.4B by 2027-28 could constrain future energy sector programs if the government faces pressure to cut spending.

Opportunities

TMX and market diversification. The government explicitly commits to advocating for optimization of new and existing infrastructure to access new markets. TMX has increased coastal export capacity, and the budget positions Alberta as promoting energy security for North American and global markets.

Value-added investment. APIP at $181M in 2025-26 alone represents a substantial incentive for petrochemical and downstream processing investment. Dow's $11.6 billion Path2Zero project, referenced in the economic outlook, demonstrates the scale of investment the program is designed to attract.

Weaker Canadian dollar. The exchange rate assumption of 69.6 US cents per CAD (down from 71.7) increases the Canadian dollar value of oil revenues. This natural hedge benefits producers with costs denominated in Canadian dollars and revenues in U.S. dollars.

Natural gas price recovery. The forecast of C$2.50/GJ (up from C$1.20/GJ in 2024-25) and rising to C$3.10/GJ by 2026-27 significantly improves economics for gas-weighted producers and supports gas plant operations associated with oil sands facilities.

Innovation and technology investment. TIER-funded spending of $646M over three years supports clean technology development. Companies positioned to access these funds for emissions reduction projects can reduce compliance costs while maintaining production growth.

Likely Government Intent

The government is positioning Alberta as a resilient energy jurisdiction that can weather trade disruption through diversified infrastructure, competitive fiscal policy, and continued production growth. The budget narrative emphasizes that the energy sector constitutes a relatively high share of GDP and that Alberta will fare better than other provinces due to industry composition. The decision to assume moderate rather than severe tariff scenarios, combined with a doubled contingency fund, suggests the government wants to project confidence while maintaining fiscal flexibility. The continued APIP and CCS funding signals that value-added and lower-carbon investment remain priorities, aligning with the government's international advocacy for Alberta as a responsible energy producer.

Immediate Questions to Ask Ministries

1. Energy and Minerals: What is the government's contingency plan if U.S. energy tariffs escalate beyond the assumed 10%? Is there a trigger point for deploying the $4B contingency specifically to energy sector support?

2. Environment and Protected Areas: What changes to TIER benchmarks or compliance obligations are anticipated for the next compliance period, and how does the $646M in TIER spending over 2025-28 compare to projected TIER fund revenue?

3. Energy and Minerals: What is the status and timeline for APIP applications currently in the pipeline, and are there changes to program eligibility criteria under Budget 2025?

4. Treasury Board and Finance: How does the government model the sensitivity of the deficit to differential widening beyond US$17.10/bbl? Each US$1/bbl change in the differential impacts revenue by approximately $740M.

5. Jobs, Economy and Trade: What specific measures under the new border interdiction program and trade advocacy strategy are directed at maintaining energy export competitiveness?

48-Hour Action Checklist

• Distribute internal briefing note on budget assumptions (WTI US$68, differential US$17.10, exchange rate 69.6, 10% energy tariff) to finance, planning, and government relations teams
• Compare internal production and price forecasts against government assumptions for variance analysis
• Review APIP project timelines against $181M allocation in 2025-26 to confirm expected incentive flows
• Contact Energy and Minerals ministry officials to schedule post-budget briefing on tariff response measures
• Assess CCS project eligibility against remaining $36M allocation for 2025-26
• Prepare executive summary for board of directors on three-year fiscal outlook and energy sector implications
• Review hedging strategy against government WTI forecast trajectory ($68, $71, $71.50 over three years)

30-Day Monitoring Checklist

• Track U.S. tariff developments weekly and assess deviation from government baseline assumption of 10% on energy
• Monitor TIER fund balance and spending announcements for changes to clean technology programming
• Follow bitumen production data relative to the 3,558 thousand barrels per day forecast for 2025
• Engage industry associations on collective advocacy regarding tariff response and market access
• Review quarterly fiscal updates for changes to oil price or differential assumptions that affect royalty projections
• Monitor exchange rate movements against the 69.6 assumption and assess impact on Canadian-dollar revenue
• Track capital plan spending on transportation infrastructure that supports energy corridors ($8.5B over three years)

Suggested Message Frames

Frame 1 -- Economic Resilience: Alberta's oil sector demonstrates resilience in the face of trade uncertainty. With diversified export routes through TMX, growing production forecasts, and a competitive fiscal environment, the sector remains the province's economic engine and a critical contributor of $12.8 billion in royalty revenue.

Frame 2 -- Investment Partnership: The province and industry share a common goal of maintaining Alberta's energy investment advantage. Continued APIP funding and CCS incentives demonstrate productive collaboration between government and industry to build value-added capacity while managing emissions.

Frame 3 -- Fiscal Stewardship: A responsible approach to tariff uncertainty -- reflected in conservative price assumptions and a doubled contingency -- protects both the province's fiscal position and the investment climate that supports energy sector growth. Industry supports prudent planning that maintains program continuity through volatile periods.

Opposition Narratives to Anticipate

"Deficit is proof of over-reliance on volatile resource revenue." Critics will highlight that the $5.2B deficit is driven primarily by a $4B drop in bitumen royalties, reinforcing arguments about the need for revenue diversification. Counter with data showing Alberta's total tax burden remains among the lowest in Canada and that the fiscal framework was designed for revenue volatility.

"Energy tariff response is inadequate." Some may argue the 10% energy tariff assumption is optimistic and that the government should have modeled worse scenarios publicly. The $4B contingency partially addresses this, but expect pressure for more detailed scenario planning.

"CCS and APIP benefit large producers disproportionately." There may be criticism that petrochemical incentives and carbon capture programs primarily benefit large integrated producers rather than smaller operators or the broader economy. Emphasize the job creation and supply chain benefits.

"TIER compliance is too lenient." Environmental advocates may argue that TIER revenue is being spent on industry supports rather than ambitious emissions reduction. The $646M in TIER spending over three years should be positioned as meaningful investment in clean technology.

Data Points to Monitor

• WTI spot price relative to the US$68/bbl budget assumption
• WCS-WTI differential relative to the US$17.10/bbl assumption
• Monthly bitumen production data relative to 3,558 thousand barrels per day forecast
• U.S. tariff policy announcements and actual rates applied to Canadian energy
• Canadian dollar exchange rate relative to the 69.6 US cents assumption
• TIER fund balance and compliance payment levels
• APIP application volumes and approval timelines
• Quarterly fiscal update revisions to resource revenue projections
• TMX throughput data and tidewater pricing spreads
• Labour market indicators: unemployment rate trajectory toward 7.4% forecast