David Tian is a geologist and the owner of a junior oil and gas company in Calgary.Danielle Smith has warned that Alberta’s 2026 provincial budget will likely run a deficit, citing persistently low oil prices and rapid population growth driven by immigration. While those factors are real and measurable, they represent only part of a more complex economic picture.Alberta’s fiscal vulnerability is not new. The province has long depended heavily on resource royalties. When oil and natural gas prices fall, provincial revenues decline sharply. However, the current economic strain cannot be attributed solely to commodity cycles or demographic pressures. Structural barriers — particularly regulatory burdens across federal, provincial, and municipal levels — are increasingly shaping investor confidence, capital flows, and job creation.Prolonged Low Gas Prices and Industry StrainNatural gas prices in Alberta have remained depressed for several years. There is no clear indication that prices will rebound to levels that would materially strengthen junior oil and gas producers in the near term. At the same time, oil prices have shown renewed volatility and weakness.Junior producers — which form a significant portion of Alberta’s energy ecosystem — are facing: 1) Reduced cash flow; 2) Limited access to capital; 3) Tightened lending conditions; and 4) Rising compliance costs.If these companies fail, wells may be transferred to the Orphan Well Association, reducing long-term resource productivity and increasing abandonment liabilities. Thousands of direct and indirect jobs could be affected.Yet while commodity prices are cyclical and largely beyond provincial control, regulatory policy is not. I will give three cases as examples..Case I: A $200 Million Opportunity LostOne Alberta start-up company signed a Memorandum of Understanding worth approximately $200 million USD with an overseas company based in Hong Kong and Singapore. The plan was straightforward: 1) Acquire shut-in gas wells from the Orphan Well Association; 2) Build a gas-to-power facility; and 3) Develop a data centre operation.The first tranche of $5 million USD had already been deposited in a Canadian bank more than a year ago. However, the project became subject to extended federal reviews related to anti-money laundering compliance and national interest considerations.After more than a year without a clear conclusion, the overseas investor redirected its capital to the United States. Within three months, the project had commenced operations there.At a time when Alberta is seeking diversification and high-tech investment, this case illustrates how prolonged federal review timelines can redirect capital elsewhere — particularly to jurisdictions perceived as more predictable.Case II: Regulatory Burdens and Security DepositsThe Alberta Energy Regulator (AER) plays a critical role in environmental protection and public safety. However, junior producers argue that regulatory rigidity during periods of low commodity prices exacerbates financial stress.Key concerns raised by industry participants include: 1) high security deposit requirements when start-ups acquire mature assets; 2) limited flexibility in accessing deposited funds; 3) administrative delays; and 4) perceived adversarial enforcement culture..In Case I above, nearly $1 million in security deposit was reportedly required for the start-up to take over shut-in gas wells from the Orphan Well Association inventory, despite the fact that assuming abandonment liability reduces OWA’s burden.Security deposits are designed to ensure eventual site reclamation and protect taxpayers. Yet critics argue that if deposits are excessively large or inflexible, they restrict operating liquidity and may accelerate corporate distress — ironically increasing the risk of orphaned wells.The policy challenge is balance: safeguarding environmental obligations without unintentionally pushing viable operators toward insolvency.Case III: Municipal Red Tape and Delayed Energy DiversificationIn another case, a junior company operating a dozen shut-in gas wells signed a gas sale agreement in early 2025 to supply a 10 MW power plant supporting a data centre project. The project received approval from the Alberta Utilities Commission (AUC) in mid-2025.However, the facility has yet to begin operation due to municipal-level administrative delays.Data centres represent one of the fastest-growing sources of global electricity demand. Alberta possesses several competitive advantages: 1) abundant natural gas supply and low gas price; 2) relatively low land costs; 3) cold climate conducive to cooling efficiency; and 4) established energy infrastructure..Yet without streamlined permitting at the municipal level, such projects risk missing market windows. In capital-intensive industries like data infrastructure, time certainty often matters more than tax incentives.Structural Economic Questions Beyond Oil PricesAlberta’s deficit forecast may be influenced by cyclical resource weakness, but it is crucial to also address structural issues. These include the predictability and time-bound nature of regulatory timelines, the speed of permitting compared to US states, the effectiveness of security deposit frameworks in protecting the public while enabling company operations, and the coordination or duplication of federal, provincial, and municipal processes.While reducing “red tape” has been a recurring political promise since Jason Kenney was elected in 2019, many industry participants argue that meaningful structural change has been limited.Immigration: Pressure or Opportunity?Population growth increases demand for housing, infrastructure, and public services, placing short-term pressure on provincial budgets. However, newcomers also: 1) expand the labour force; 2) increase consumption; 3) strengthen tax bases; 4) support long-term economic growth.The fiscal outcome depends less on immigration volume and more on job creation and capital investment. If regulatory burdens discourage investment, population growth can amplify fiscal stress rather than relieve it.A Path Forward: Regulatory Reform Without DeregulationCutting red tape does not imply weakening environmental standards or financial safeguards. Instead, it can involve implementing statutory decision timelines, adopting risk-based regulatory approaches, establishing transparent security deposit formulas, enhancing inter-agency coordination, and setting municipal permitting benchmarks..If Alberta wishes to maintain its energy leadership while expanding into high-demand sectors such as data centres and gas-to-power integration, regulatory predictability may be as important as royalty structures.Alberta’s 2026 deficit warning reflects real economic pressures. Low oil and gas prices constrain revenues, and population growth increases spending demands. But commodity cycles are only one side of the story.Regulatory efficiency, capital mobility, and intergovernmental coordination play decisive roles in shaping economic outcomes. When capital can move across borders within months, policy delays become economic costs.If Alberta is to protect jobs, preserve long-term resource value, and capture emerging opportunities such as data infrastructure, fiscal balance will require more than waiting for higher oil and gas prices. It will require structural reforms that align environmental responsibility with economic competitiveness — and deliver on long-promised red tape reduction across all three levels of government.To balance the budget, one needs to do two things: reduce expenses and increase revenue at the same time. To increase revenue, you need to improve the regulatory competitiveness!David Tian is a geologist and the owner of a junior oil and gas company in Calgary.
