NEWS PHOTO COLLIN GALLANT Shallow gas wells, such as this City of Medicine Hat well located in Cypress County, could be subject of taxation changes which some rural officials say could greatly affect their revenue.
cgallant@medicinehatnews.com@CollinGallant
Officials from 15 Alberta counties with the most exposure to the depressed shallow natural gas sector – including Cypress and Newell – met Wednesday to strategize ahead of a promised provincial review of how gas wells are assessed for property tax purposes.
The meeting, held in Three Hills, was the first face-to-face gathering of municipal officials after a tax relief program for the struggling producers was announced in late June.
It was meant to discuss individual assessment practise and share information, but also map out a “going-forward” strategy and best way to express potential local ramifications of tax changes, according to Newell County Reeve Molly Douglass.
“There’s no one who would argue that we don’t need an assessment review done – one hasn’t been done in decades – but we’re concerned about what it could mean for the rest of linear assessment,” she told the News on Thursday, saying changes could handcuff local government’s ability to collect tax revenue.
“The (province) has a lot of information to go through, and times are tough, but, hey, we’re all in this together.”
In June the province announced it would cover the education portion of property tax requests on wells that owners argue are over-valued in outdated regulations, and therefore over-taxed.
It was described as a “much-needed, short-term relief to our producers” in a sector in “dire straits,” while longer-term solutions for the ailing industry were examined.
The particular funds, about $23 million, will be made up by general revenue in the education budget, thereby having no effect on county finances.
However, the same wells represent between 20 to 25 per cent of the the annual municipal tax revenue in Newell and Cypress counties, and if general assessment regulations change, it’s likely municipal revenue will as well.
In Cypress County, 21,470 such wells provided a cumulative municipal tax revenue of $5.17 million in 2019 – about one quarter the total $23 million collected in property taxes in 2018.
In Newell County, the cumulative municipal tax bill of $6.25 million on about 14,000 wells represents one-fifth of total municipal tax revenue.
Five other counties affected by the education tax program collect between $1 million and $4 million in municipal taxes on the wells in question.
Cypress County officials did not respond to an interview request on Thursday, but have previously said its mill rates on such industrial property already ranks among the lowest in the province, and they would work to support the industry and all taxpayers.
Douglass said changes to one portion of the assessment base will need to be picked up by others, including residential and business ratepayers.
Earlier this summer, the association of tax assessors in Alberta sent a letter to members stating its position that such a heavy focus on a single sector of the assessment base undermined principles of fairness.
Industry officials have long argued that a drop in commodity value of natural gas – about 90 per cent over 10 years – should be reflected by a major reduction in taxes, which would lower fixed costs in the struggling sector.
That current program, launched by Alberta Municipal Affairs, is still being developed. Ministry officials did not respond to an information request on Thursday.
“Alberta’s natural gas industry has been hurting for years due to extreme low prices, inaction by previous administrations and an outdated property tax model,” said Dale McNally, Alberta’s associate Minister of Natural Gas, in a release from the program announcement.
“We will continue to bring all stakeholders to the table to find collaborative solutions on this critical issue,” he concluded.
The party’s election platform promised to study and follow through on recommendations on a late 2018 report to the then-NDP government on how to best reduce bottle-necks and boost prices of the commodity.
