Saskatchewan’s budget affected by low oil prices
Province’s mid-year fiscal update an improvement on first-quarter estimates
The Saskatchewan deficit grew over the last quarter and the finance minister says fluctuations in the discounted price of Canadian oil has her concerned.
While oil prices were higher earlier in the year, they have been on a downward trend in recent weeks, leading Saskatchewan to shave almost $88 million off of its first-quarter oil-and-gas revenue projections.
Higher prices for West Texas Intermediate were almost entirely offset by a widening of the differential that heavier Canadian oil sells for on global markets.
“We’re now in kind of uncharted territory and we’re seeing a differential that we have not seen for a longer period of time,” Finance Minister Donna Harpauer said Thursday as she released the mid-year fiscal update. “That’s concerning as we build our next budget.”
Despite those headwinds, Harpauer said the government still plans to balance the books by next year.
The mid-year fiscal update pegs the deficit at $348 million, up $42 million from first-quarter estimates. But that figure is still $17 million lower than projected on budget day.
Overall, revenue is up more than $138 million from the spring budget, but expenses are forecast to be $121 million higher. Nearly half of that latter figure is because of increased pension expenses.
Over-supply and access to markets outside the U.S. are to blame for the lower price of Canadian oil.
Harpauer said it has been two years since the federal government approved the Trans Mountain pipeline expansion from Alberta to B.C. but nothing has happened since. She said having the pipeline, which would triple capacity on the line, would help.
“We can’t impress (enough) upon the citizens of this country — not just the citizens of Saskatchewan — how important this capacity would be,” Harpauer said.
It’s the same argument that is being made next door in Alberta, where Premier Rachel Notley announced Wednesday that her government plans to buy enough new rail cars to ship another 120,000 barrels of oil a day.
Harpauer said she understands Alberta’s desperation, but doesn’t believe transporting oil by rail is the answer. She also doesn’t see Saskatchewan following a similar path because she said the province has the rail line capacity.
“I’m not sure what else we can do,” Harpauer said. “We are a bottle-necked, landlocked province and we need transportation capacity. And to me the safest is pipelines.”
Opposition NDP Leader Ryan Meili said he’s concerned by the government’s refusal to take part in discussions like the ones Alberta is having around oil.
“Talk to our neighbours in Alberta and the experts they’ve had on this, and actually be part of that conversation rather than just sniping from the sidelines,” Meili said.
Meili also expressed concern with the government’s spending and said the province’s debt has tripled in the last four years.
A provincial sales tax hike to six per cent from five in the 2017 budget is boosting revenue and hurting people, he said.