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Cypress County has declared a state of emergency.
cgallant@medicinehatnews.com@CollinGallant
The province is prepared to cancel a portion of education taxes paid on dry, shallow natural gas wells and pipelines in the southern Alberta, it announced late Tuesday, in an effort to stabilize the sector.
The lobby group of rural municipalities welcomed the move but also stressed adjusting property tax revenue they rely on is not a long-term solution.
A total of $23 million will go toward offsetting the education portion of tax bills that the Municipal Affair Ministry stated are out-of-touch and putting stress on operators.
Minister Kaycee Madu said that a review of how wells are assessed is also underway following criticism and lobbying from industry, but lowering some fixed costs will take place this year.
“Our government is taking swift action to support shallow gas producers, protect municipalities and ensure a fair assessment model is in place for wells and pipelines,” he said in a release. “This initiative will prevent further company failures and job losses in our province.”
Essentially, up to 65,000 older, lower-production, higher-cost gas wells be eligible for a 35 per cent reduction. The majority are located in 15 counties, including the counties of Cypress, Forty Mile, Newell, the Special Areas, and a number in central Alberta.
Al Kemmere, president of the Rural Municipalities Association of Alberta, stated in a government release that tax burden is not the core cause of industry woes, but could be an area of “short-term” aid.
“We’re pleased with the Government of Alberta’s announcement, as it helps the shallow gas industry without unfairly penalizing rural municipalities. That said, in the long term, property tax should not be seen as a tool for relief.”
Cypress County alone collects about $14 million each year in combined property taxes from top five oil and gas firms that operate in the area.
Since the measure covers only the educational portion, which is remitted to Edmonton, it won’t affect revenue counties keep for municipal purposes, said Cypress County corporate services director John Belanger.
“Gas operators in Cypress County are already beneficiaries of one of the lowest municipal mill rates in the province,” said Belanger. “Cypress County is encouraged by the province’s actions and will continue to work with both the government and industry to ensure an equitable tax system.”
All property tax calculations rely on assessed value, but companies and industry groups say a steep decline in the value and even viability of dry, shallow gas wells in an age of bountiful liquid natural gas finds, hasn’t been applied.
In the recent downturn, counties have also written off a significant amount of taxes owed as firms go bankrupt or fall behind.
Since 2015, the province has forgiven a portion of education tax to municipalities on uncollectible bills. The new program will apply to wells owned by firms still in operation as part of recommendations in an eight-month-old report on aiding the industry.
Last fall, the previous government adopted the “Roadmap to Recovery” strategy for the natural gas sector, which lays out problems and potential solutions to counteract prolonged low prices.
The United Conservatives vowed in their recent platform to build on the recommendations, which include property tax overhauls to address fixed costs among other measures.
MLA Dale McNally, who holds the new position of associate minister of natural gas, brought up the assessment issue on June 18 in the legislature.
“The dry gas producers in this province are absolutely hurting,” he said. “The Minister of Municipal Affairs … has done a stellar job of stepping forward and partnering with us to work on this, but it’s a difficult situation.”
The provincial report states that legacy producers and communities with a large shallow gas base faces “an existential threat” to the business models and that will expand to threaten municipal financing.
Local counties will continue to collect the municipal portion of tax amounts, but need to pass a bylaw to implement the relief program, and report to the province.
Counties will also have to report related pipelines (linear assessment) that tax by a central industrial assessor.
