The Alberta government is banking on strong growth in the oilsands while betting against resurgent markets for either conventional oil or Alberta's abundant natural gas.
That's the fiscal plan for the next three years as laid out in the Alberta 2017-18 budget released on Thursday.
As Alberta budgets always do, this one begins and ends with the oil price.
The Alberta finance ministry is counting on a U.S. benchmark oil price of $55 US a barrel over the next year, rising to $59 US in 2018-2019 and $68 by 2020. Oil has spent much of the last three months above the $50 US mark before falling in early March to around $48 US, where it remains.
While Alberta's budget estimates are based on crude oil prices in Texas, the province is preparing for the decline of its own conventional crude assets and is instead going all-in on bitumen-producing regions such as Fort McMurray.
The new budget predicts Alberta's bitumen production will grow by more than 400,000 barrels per day over next year, a dramatic jump that is partially accounted for by last year's temporary shutdown of oilsands facilities during the Fort McMurray wildfires.
Oilsands production to reach 3.3 million barrels by 2020
Long-term, the government expects oilsands production to surpass 2.9 million barrels per day over the coming year, eventually reaching 3.2 million barrels in 2018-19 and 3.3 million barrels by 2020.
"Overall, more than 600,000 barrels per day of new production is expected to lift real oil exports by 16 per cent over the next two years," according to the economic outlook. "Growth in 2017 will also be buoyed by a return of production that was deferred because of the Wood Buffalo wildfires."
At the same time, the government expects its share of royalties from oilsands production to reach $2.5 billion over the next 12 months, before hitting $3.2 billion in 2018-19 and $5.2 billion in 2019-2020.
Those leaps in government revenues compared with actual oilsands production growth are largely due to the NDP government's incremental royalties structure, which will see more legacy oilsands operations enter a higher royalty bracket as their production costs come down and revenues rise again.
Meanwhile, the 2017-18 budget anticipates a drop in Alberta's conventional crude oil production from the 524,000 barrels per day expected one year ago, to 416,000 barrels per day next year and 394,000 barrels by 2020.
For Alberta's shale gas drillers, the budget doesn't offer an overly rosy outlook either, with the government expecting natural gas prices to remain below $3 per gigajoule until 2020, and likely beyond.
Of course, that is good news for Alberta's growing petrochemical industries, which use natural gas as a feedstock to manufacture plastics and various chemicals. It's also good news for Alberta ratepayers as the government's phase-out of coal-fired power plants means increased reliance on natural gas in the province's electricity sector.
What's not in the fiscal plan
With all its reliance on the oilsands to bankroll a big chunk of government spending over the next three years, the budget contains no new infrastructure announcements for Fort McMurray or for reconstruction in the Athabasca oilsands region as a whole.
The region's economy has slowed and its population has shrunk in the wake of the May 2016 wildfires that ravaged parts of the city and temporarily shut down nearby oilsands sites.
On March 10, the Regional Municipality of Wood Buffalo passed a $469-million operating budget that was eight per cent smaller than its 2016 operating budget.
Already this year, the municipality has served layoff notices to more than 120 staff and eliminated more than 160 jobs, citing the need to reduce staffing costs due to the poor economy and slow recovery from the wildfire.
The budget also offers no help with cleaning up orphaned and abandoned oil wells in the province.
As of last year, Alberta was peppered with nearly 150,000 inactive and otherwise abandoned oil wells. The problem is not specific to any one region of the province and shows no signs of improvement as Alberta's conventional oil production declines and independent operators disappear.
Currently, the reclamation of unwanted oil wells is handled by the Orphan Well Association, a primarily industry-funded group whose inventory of inactive sites has skyrocketed since the oil price slump began in mid-2014.