August 24th, 2019

Bylaw needed to use gas well tax exemption

By COLLIN GALLANT on July 10, 2019.

NEWS FILE PHOTO
Medicine Hat City Hall is seen in this undated photo. Medicine Hat will need to pass a local bylaw to exempt itself from paying provincial education property tax on gas wells within city limits.

cgallant@medicinehatnews.com@CollinGallant

Medicine Hat will need to pass a local bylaw to exempt itself from paying provincial education property tax on gas wells within city limits.

Administrators are chalking up the unusual procedure to the city’s unique position as both the local taxing authority and a petroleum exploration company, but also say the cumulative benefit could be between $250,000 to $400,000 to the struggling business unity.

“At this point we don’t know how many wells would qualify or if all of them will, but it’s a rough number,” said Brad Maynes, the city’s energy commissioner.

“It’s a material number, definitely, and very much appreciated.”

Last week, the province announced it would set aside $23 million in funding for shallow gas producers so that portion – collected by local governments then forwarded to Alberta Education – on wells could be cancelled.

That’s to help shelter producers with high-cost, low-production dry natural gas wells that are plentiful in southeastern Alberta.

Cypress County has up to 21,000 wells that could qualify for the program and could reduce only the educational, not municipal portion on tax calculations the province and industry says are out of date.

In 2018, the City of Medicine Hat’s gas production company paid about $1.4 million in property taxes on its Alberta wells and gathering infrastructure, according to recent disclosure.

That included $170,000 to the municipal corporation of Medicine Hat, $830,000 to Cypress County, and smaller amounts to the counties of Forty Mile and Vulcan as well as the Special Areas Board.

Only about one-third of that relates to education tax portion, and the total includes oil well assessments, which are not eligible for the program.

The province stated in its announcement that the program will help bottom lines of struggling gas producers while longer-term solutions are sought, including greater exports to capture higher prices, as well as a long-term review of tax assessment and fixed costs.

Newell County Reeve Molly Douglas told the Brooks Bulletin this week that the greater concern is long-term changes to linear assessments could cause upheaval in the rural tax assessment base.

Counties and municipal districts rely heavily on taxes charged on pipelines, transmission lines and other energy infrastructure, and use the huge assessment base to offset the tax burden on farms and relatively small population bases.

In Cypress County about 70 per cent of the overall assessment base comes from non-residential properties and just 3 per cent from farms, and one-quarter residential.

This year they further separated “small business” properties for a differentiated rate from linear and larger industrial accounts.

The energy industry that’s been stressed to find savings as prices for their products languish at decade lows has also increasingly lobbied for changes to taxation.

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