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Oil and gas extraction sector contributes $53B to federal finances

Alberta’s total gross fiscal contributions totalled almost $561 billion between 2007 and 2019
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Nearly 62 per cent of Alberta voters endorsed removing equalization from the Constitution in a recent referendum.

Constitutional scholar Ted Morton, a former Alberta finance minister, argues that the province has leverage to force the issue. Others argue that equalization has a weak constitutional status, which makes reform easier than often presumed.

Part of what drives unhappiness with equalization for some Albertans is the notion that a significant portion of federal tax revenues originate in traditional ‘have’ provinces such as Alberta.

Alberta’s resource extraction is significant, and much of its revenues (as well as other economic activity and taxes) end up in provinces such as Quebec via federal transfers.

But in Quebec, resource extraction is discouraged and will soon be banned. The fact that some Quebec politicians have called Alberta oil “dirty” also factors into the dissatisfaction.

One of us has previously written a number of reports on equalization and transfer payments over the years, including suggested reforms.

But here, we’ll look at what Alberta’s oil and natural gas extraction sector has paid into federal coffers.

According to Statistics Canada, Alberta’s total gross fiscal contributions to the federal government totalled almost $561 billion between 2007 and 2019. Subtract federal transfers to the Alberta government and to Albertans, as well as federal spending in Alberta, and the net transfer to the federal government from Alberta has been $272 billion.

Alberta’s oil and gas sector contributed $53 billion of that $272 billion, or about 19 per cent of the net fiscal contribution to the federal government.

This $53 billion doesn’t include all oil and gas activity, only the extraction sector in Alberta. It includes only federal corporate tax revenues from Alberta’s oil and gas firms ($35.5 billion) and the federal personal income taxes of Albertans directly employed in the sector ($17.4 billion).

It excludes direct and indirect revenues from pipelines and other oil and gas economic activity. It also doesn’t include federal taxes on production and products, such as GST, excise taxes, duties, import taxes, air transportation tax, gasoline and motive fuel taxes, and the like that the Alberta extraction sector paid over the period.

(We chose this narrower comparison because of the lack of available data from Statistics Canada on other federal taxes on oil and gas production.)

The contribution of the Alberta oil and gas extraction sector to federal finances has ranged from an annual high of $3.7 billion to a low of $2.5 billion.

Looking at national oil and gas extraction, 88 per cent of all personal income tax paid to the federal government between 2007 and 2019 came from Alberta. And 89 per cent of all corporate income tax paid from oil and gas extraction came from Alberta.

If Alberta’s oil and gas extraction sector is ‘phased out,’ not only does a major contributing sector to federal government finances diminish significantly, so does nearly 90 per cent of federal tax revenues from the oil and gas extraction sector in Canada.

In a previous research paper, we detailed gross revenue contributions to all Canadian governments from the oil and gas sector, looking at data between 2000 and 2019.

We found that Canada’s wider oil and gas sector paid almost $505 billion between 2000 and 2019 to federal, provincial and municipal governments. That was almost as much as what two other major industries, real estate and construction, paid into government coffers over the same period.

Mark Milke and Lennie Kaplan are with the Canadian Energy Centre, an Alberta government corporation funded in part by taxes paid by industry on carbon emissions. They are authors of $53 billion to Ottawa: The Alberta oil and gas sector’s contribution to federal government finances, 2007 to 2019.