The Alberta government is hoping a growing tide of oil sands production will help change a gusher of red ink on its public accounts to black.

On March 16, the province tabled its annual budget, posting a C$10.3 billion (US$7.71 billion) deficit it blamed on low oil prices. But it only tells half the story. It is a stunning change of fortune for a province once considered to be the economic engine of the country and its richest, at a time when oil sands production is predicted to grow by more than 400,000 bpd this year.

Though the shortfall was larger than expected, oil revenues were actually 54% higher, at C$3.7 billion (US$2.77 billion) in the fiscal period that ends March 31 from C$2.4 billion (US$1.8 billion) the prior year. It is a far cry from 2006, when Alberta collected nearly C$15 billion (US$11.23 billion) in non-renewable resource royalties.

Then the main driver was natural gas, which accounted for nearly C$9 billion (US$6.74 billion) in revenue. This year gas is only projected to reap C$455 million (US$340.58 million).

By contrast, royalties from conventional oil and bitumen are forecast to rise to C$5.85 billion (US$4.38 billion) in 2020 from C$1.68 billion (US$1.26 billion) last year, underscoring the transition in Alberta’s resource base from natural gas to oil.

The government is budgeting for West Texas Intermediate (WTI) oil to average US$55 per barrel this year and US$59 in 2018, rising to US$68 by 2020. Critics complain the forecasts are overly optimistic, given that crude prices have failed to climb much above US$50 thus far in 2016.

Further, critics complain that Alberta is far too reliant on oil and gas given that every dollar under the government’s oil price forecast amounts to C$310 million (US$232 million) in lost revenue from public coffers.

As home to 80% of Canada’s petroleum production, oil prices are obviously the main driver of the province’s fortunes. But even more than oil prices, rising oil output – especially oil sands – will have a bigger impact on the bottom line in future years.

The new budget predicts oil sands production will jump to 2.9 million bpd in 2017, 3.2 million bpd in 2018 and 3.3 million bpd by 2020. Offsetting those gains, conventional oil is predicted to drop from 524,000 bpd last year to 416,000 bpd this year and 394,000 bpd in 2020. Overall oil exports are anticipated to climb 16% or 600,000 bpd over the next two years, according to the government’s economic outlook.

Ironically, revenues will grow faster than actual oil sands production owing to changes in the royalty framework enacted this year. Existing oil sands projects will move to a higher royalty bracket as they pay out capital costs. That means oil sands royalties are projected to hit C$2.54 billion (US$1.9 billion) before reaching C$3.19 billion (US$2.39 billion) in 2018-19 and C$5.26 billion (US$3.94 billion) in 2019-2020.

Carbon taxes are expected to bring in an additional C$9.6 billion (US$7.19 billion) over the next five years.

Another bright spot is the province’s nascent petrochemical sector. In a bid to diversify the economy, the government offered up C$500 million (US$374.27 million) in royalty credits to upgrade methane and propane into higher value products such as polypropylene. Three facilities worth C$6 billion (US$4.49 billion) have been approved to date, creating 4,000 construction jobs and 245 positions to operate the facilities.

It is a longer-term view that sees better days ahead. Overall government revenues are projected to rise to C$51.8 billion (US$38.77 billion) by 2020 from C$45 billion (US$33.68 billion) this year.

But that will not be enough to prevent the provincial debt from doubling to more than C$71.1 billion (US$53.22 billion) by 2020 from C$32.6 billion (US$24.4 billion) today.

That is the crux of the dilemma: whether it is better to cut public services such as roads and hospitals while waiting for oil prices to recover. It is a road that taxpayers – who own the resource – been down before. Boom and bust is not just a slogan in Alberta, it is a way of life.