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CALGARY, Alberta, April 22 (Reuters) - Alberta, Canada's top energy-producing province, projected a C$1.6 billion ($1.58 billion) budget surplus on Tuesday and made good on plans to eliminate health care premiums as a booming oil and gas industry keeps powering the economy.

The Conservative government of Premier Ed Stelmach cut its expectations for oil prices for its 2008-09 budget -- even as U.S. crude hit a record just below $120 a barrel -- but said it still expects resource revenues to rise by C$700 million, helping to fuel a 15th straight surplus.

Overall revenue in the Western Canadian province of 3.5 million people should rise by C$800 million to C$38.6 billion, it said.

Spending is pegged at C$37 billion, up C$3.3 billion, or 9.7 percent, from the last budget, as the government struggles to keep up with a boom that has caused strains in social programs and infrastructure like roads and schools.

The province, whose oil sands represent the largest oil deposits outside the Middle East, expects economic growth to tail off a bit from its recent pace and may average 3.2 percent over the next four years, Finance Minister Iris Evans said.

"Though the United States may show less demand during this time for our services and goods, our strong foundation of investment will continue to fuel growth, create wealth and expand new markets," Evans said in her budget speech.

She said Albertans will no longer pay annual premiums for access to the public health system, starting Jan. 1, 2009.

The government has said for months that it would make the move as revenues piled up with surging oil prices.