Alberta moves to force oilpatch to pay owed taxes above ‘threshold’ total

By COLLIN GALLANT on March 21, 2023.

cgallant@medicinehatnews.com@CollinGallant

The provincial government says it will make being up to date on local property taxes a condition when new permits are issued by the Alberta Energy Regulator – an effort to clear up years-old unpaid tax bills and long-standing complaints from rural government leaders.

They have called for help since commodity price crashes in the late 2010s to help collect local tax bills, and a lobby group for rural municipalities says the total has grown to $220 million owed to local governments across Alberta.

A new directive, announced Monday, would see companies produce information showing they do not exceed a “minimum threshold,” or have a repayment plan in force before applying to drill new wells.

“Our government is serious about addressing the ongoing problem of unpaid municipal taxes,” stated Municipal Affairs Minister Rebecca Schulz in a release. “This problem has lingered for far too long, and while some viable companies have started to pay their back taxes, others are still not getting the message.”

Energy Minster Peter Guthrie is also quoted outlining the program developed by the two ministries.

It states the province believes about $70 million may be recovered due to the measure.

About $90 million is now considered not collectable, and of the remaining $130 million, about $76 million is owed by companies still in operation.

Repayment agreements are already in place for accounts totalling $48 million.

Municipalities in the southeast told the News on Monday they consider most of the energy companies operating in their jurisdictions to be solid corporate citizens, and have escaped large exposure, but unpaid taxes are difficult to grapple with.

Cypress County officials told the News the total amount of unpaid taxes outstanding from 2015 to 2022 is about “about $2 million.”

“We are not owed any arrears by operational oil and gas companies,” read a statement.

“All arrears owing to us are by companies that have claimed bankruptcy”

Cypress County struck repayment agreements with its two largest oil and gas operators several years ago to clear up amounts owing, and those had been honoured through 2022.

Officials with the County of Forty Mile state that cumulatively from the past five years, about $3.3 million is owed in uncollected taxes on oil and gas sites.

Each year, about $500,000 is added in amounts owed from about 30 companies, ranging from “very minimal” to more substantial amounts. The whole represents about 5 per cent of the county’s operating budget, and that loss in income is covered by the larger tax base.

“Some of it may never be recovered, but if we can clear up some of the larger accounts, that will go a long way to helping other ratepayers,” said County of Forty Mile chief administrator Keith Bodin.

The County of Newell reported to the News that it has written off $1.16 million in unpaid taxes and is still owed $343,000.

NDP Municipal Affairs critic Joe Ceci said the issue has lingered while local county and municipal district leaders have called on the UCP government to deny new licences. The same should be done to ensure companies are meeting requirements to properly abandon leases for well sites and other oilpatch facilities, he said.

“Today’s announcement is an attempt by Danielle Smith and the UCP to paper over their disastrous record on this issue on the eve of an election and shows they can’t be trusted,” said Ceci in a statement.

Over time the province has also covered a portion of unpaid education tax requisition owed by counties to the province.

Four years ago, the government offered a new production drilling credit as as an off-set to increasingly tight margins in the oilpatch while it studied how oil and gas facilities are assessed for taxation purposes.

“Although only a small number of companies avoid their property tax payment obligations, this issue has had major fiscal impacts on rural municipalities across Alberta,” said Rural Municipalities of Alberta president Paul McLauchlin. “We are optimistic that this change will have an immediate positive impact in rural Alberta. We look forward to working with the AER and relevant ministries to determine how our members can support the AER in enforcing this new requirement.”

Some companies have argued that market value calculations do not properly account for wide fluctuations in market prices, which would affect profitability and value of facilities when reserves are considered.

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