Non-renewable resource revenues comprise a significant portion of Alberta’s total revenue. These revenues facilitate a high level of government spending per-capita, and prior to 2009, contributed to a 14-year stretch of surpluses. Since 2009, bitumen royalties have occupied the largest share of resource revenues. Given that revenues are both volatile and finite, provincial governments have an incentive to maximize their value. There is a widely held perception in Alberta that bitumen extraction does not add value, and that instead, value arises from downstream activities such as upgrading and processing.
Since Peter Lougheed led the Progressive Conservatives to victory over the Social Credit party in 1971, successive governments have attempted to diversify the province’s resource-based economy. Using a “forced growth” approach to economic diversification, provincial governments targeted specific industries and firms to assist. Many of these initiatives, however, have failed, costing Albertan taxpayers hundreds of millions of dollars. An agreement made under the province’s Bitumen Royalty-in-Kind (BRIK) program is one of the latest examples of the province acting as an entrepreneur. The agreement between the Northwest Redwater Partnership and the provincial government is, in essence, a loan guarantee that has facilitated the construction of the 150,000 barrel per day Sturgeon Refinery. It is estimated that over the lifetime of the project that the refinery will result in a total liability of $26 billion dollars.