Alberta's premier warned on Thursday that the Western Canadian province faced a C$6 billion ($6 billion) shortfall in revenue due to deeply discounted prices for its crude oil but offered no specifics on how to prevent falling deeper into the red.
Alberta's financial forecasts have been thrown into disarray by fast-growing output from its vast oil sands and limited pipeline capacity to move it to markets in the United States and elsewhere. That has pulled the price of a barrel down to less than half that of international benchmark Brent oil.
The situation has prompted Premier Alison Redford and her government to warn of a tough budget on March 7, and raised questions about her ability to meet a promise of erasing its budget deficit in the upcoming fiscal year.
In an eight-minute televised address, Redford explained the reasons for the sharply reduced take from Alberta's biggest industry and pledged not to raise taxes to make up the difference, but did not say where she will cut spending.
In fact, she made note of strong desire in the province of 3.8 million people for new roads, schools and healthcare facilities.
"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," she said.
Alberta is Canada's largest oil-producing province and the largest foreign energy supplier to the United States, and had become used to boom times until the oil market weakened last year.
Redford has been an enthusiastic promoter of TransCanada Corp's contentious Keystone XL pipeline, which would carry Alberta's crude to refineries in Texas.
The project took a series of steps forward this week as the governor of Nebraska approved a new route for the long-delayed project through the state and 53 U.S. senators urged U.S. President Barack Obama to approve it. However, Obama's decision is not expected for several months.
Alberta is considering a host of other potential routes to new markets that could lead to higher returns, but Redford cautioned that long-term solutions will not be quick.
In the meantime, Alberta, which derives 30 percent of its overall revenue from the oil industry, will be C$6 billion short of its revenue target for the upcoming fiscal year, she said.
Recently, the bitumen crude from the oil sands has sold for more than $40 a barrel below U.S. light crude, leading the Bank of Canada this week to also point out the national economy was feeling the effects as well.
"It will take focus and determination over the next several years to open new markets. And that is job one for my government," Redford said.
The Progressive Conservative government, in power since 1971 and re-elected last year, is being pilloried by its opponents for forecasts they say that have been far too rosy, for relying too heavily on the fortunes of a highly cyclical industry and for tapping debt markets.
"It doesn't do any good to talk about how we might have pipelines four or five or six years from now," said Danielle Smith, leader of the opposition Wildrose Party. "What is the plan over the next three or four or five years to get us accustomed to this new reality of lower energy prices and lower revenues?"
Redford was vague as she cautioned about upcoming spending cuts in programs and services "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."