NEWS FILE PHOTO A sign denotes an abandoned gas well near the eastern end of Balmoral Street in Medicine Hat in this April 20, 2018 file photo. Alberta Municipal Affairs has confirmed the city's gas utility will not be able to apply for provincial tax relief program for wells located within the municipality of Medicine Hat.
cgallant@medicinehatnews.com@CollinGallant
The City of Medicine Hat gas utility will not be able to apply for provincial tax relief program for wells located within the municipality of Medicine Hat, the News has confirmed with Alberta Municipal Affairs.
Additionally, an overview of the program, obtained by the News, suggests the city’s struggling shallow gas production company may only be entitled to about $150,000 of relief on 1,300 wells in operates outside city limits but within Alberta.
That is only about half the amount local administrators had hoped for when the Alberta government announced the program in late June, while the figures also show the breadth of problems facing shallow gas producers who pay linear taxes and counties that collect them.
About $23 million from Alberta’s general revenue would cover the difference, thereby leaving counties, which collect education tax, whole this year.
Municipal Affairs officials told the News on Wednesday that the program applies to rural not urban wells, meaning those within city limits, and the program is still being refined.
Rural administrators were supportive of the program when it was announced, but some have expressed reservations about longer term changes to assessment process that would affect municipal tax revenue in low-population areas.
“There’s a widespread consensus that (the assessment process) needs updating,” said spokesperson Tim Gerwing. “Going forward, we think, that it will create more stability for industry and municipalities.”
The city’s gas business also pays about $120,000 per year in combined municipal and education taxes to the City of Medicine Hat in 2018, according to required disclosure.
Last week a schedule of wells broken down by county, and companies by exposure, was presented to the County of Newell council.
It shows that 1,289 wells operated by Medicine Hat, mainly in Cypress County, Vulcan and Special Areas, could see $146,741 in education taxes cancelled, if those councils adopts a motion to take part in the program.
Cypress County itself is home to 21,470 qualifying wells, owned by various companies, who cumulatively would be able to receive $2.3 million in education tax back this year.
In late June, the province announced it would provide one-year relief to some producers who operate low-production wells by covering portion allotted to education taxes.
That tax rate is set by the province and the assessment on linear property, like well sites and pipelines, done by provincial assessors.
Some companies have argued and lobbied for years that outdated assessment procedures don’t take into account the higher cost and lower production of the shallow gas sector that has seen low pricing for years.
Figures also show that Cypress County officials are correct in their assertion that their mill-rates, which are charged against assessment to determine tax bills, are already low compared to other locations.
For example, on the wells at issue, Cypress County collects about $5.2 million in municipal taxes, while the County of Newell collects $6.25 million, despite having 6,500 fewer wells.
Those two rural municipalities have more than half the 65,000 wells listed.
In terms of companies, coal-bed methane producer Ember Resources would see the biggest benefit from the relief program at $2 million.
Following Ember are Canadian Natural Resources ($1.95 million) and Torxen, a private company formed in partnership with Schlumberger to own former Cenovus properties northwest of Brooks ($1.28 million).
IPC Alberta, which bought the rights from Cenovus to the Suffield Block in early 2018, could also see up to $1.02 million in tax relief.
Canlin ($633,000) and Pinecliff ($347,00) are other companies on the list with major operations in the Southeast Alberta.
Also on the list is Trident Exploration, which ceased operations in May.
About 1,800 of their wells are on the list, making them eligible for about $346,000 from the tax relief program.
The Special Areas is the site of 8,100 wells that generate $2.6 million in tax revenue for the provincially-administered area north of Cypress County.
Five other counties, including Wheatland County and Red Deer County, also collected more than $1 million of such wells annually.
