Both the Government of Alberta and a rural municipality’s lobbying group seemed to agree with the oil and gas industry this past week that unpaid property taxes in industry are becoming a problem.

The Rural Municipalities of Alberta (RMA) which lobbys for rural municipalities in Alberta Mar. 7 released a statement titled, “Another year, another mountain of unpaid property taxes.” In the press release RMA noted the problem of some oil and gas companies not paying their municipal tax bills appears to be growing quickly.

“RMA has conducted a member survey identifying that as of Dec. 31, 2022, approximately $268 million in property taxes currently owed to rural municipalities by oil and gas companies have gone unpaid. This represents a 6.1 per cent increase from amounts reported for the 2021 tax year, and a whopping 231.5 per cent increase from the 2018 tax year.”

Two rural municipalities in the ECA Review’s coverage area, the County of Stettler and Kneehill County, have both been vocal about the amount of unpaid property taxes owed to them and the amount of unpaid property taxes they’ve been forced to write off because they had no other recourse. Both municipalities have reported several times in their regular council meetings they’ve lost millions of dollars in revenue due to unpaid property taxes in the oil and gas industry.

Issues raised at council meetings include the fact property tax bills include provincial requisitions such as education tax which is pre-paid by municipalities. If they’re unable to collect that requisition later from property owners, local taxpayers are left holding the bag.

Both rural municipalities also lamented the fact that when an oil and gas company declares bankruptcy or otherwise goes out of business, there are few options for municipalities to collect any of the money owed to them.

In a Mar. 15 statement to the ECA Review Larry Clarke, Reeve for the County of Stettler, stated, "“We support RMA and believe all partners need to pay their taxes to a municipality in the current tax year. We have very reputable companies choosing the County of Stettler to operate in, but a few bad actors can very much affect our financial baseline and result in all other ratepayers having to make up the shortfall.

"This isn’t fair and requisitions that are collected by us must paid out to schools, policing, seniors housing and recreation. These payments are made out of our revenue stream. If we can’t collect these payments our only recovery is to set up a payment plan for tax recovery, or to write-off taxes, which then makes us eligible to be paid back for the school tax portion only.

"Payment plans are helping correct the shortfall but do not come without a cost. They are labour intensive and cost the municipality in administration time and legal fees. We will continue to work with and lobby our Alberta government to make all companies accountable in paying their respective taxes and land lease rentals. This needs to be a requirement to operate in the Province of Alberta.”

In a Mar. 13 statement to the ECA review Kneehill County CAO Mike Haugen noted, "The county currently has $5,637,593 in outstanding taxes from existing oil and gas companies. This is revenue that that county has to date not received. Since 2019 Kneehill County has written off $9,097,386 in unpaid taxes and penalties. We write these taxes off when it becomes impossible for us to collect them, either through the company ceasing to exist or the courts determining that we are not entitled to any remaining assets.

"Whenever a taxpayer of any kind doesn’t meet their tax obligations this puts pressure on the remainder of the tax base. For the most part, Kneehill County has been able to manage service levels, but this does cause concern for the future the ability to keep current with infrastructure replacement and renewal, something everyone including industry relies on. The non-payment of some taxes is a further stress on municipalities as revenue has already been lost through provincial decisions that have eliminated the well drilling tax previously paid to municipalities, altered the assessment on a number of oil and gas facilities so as to reduce taxes, and granted the oil and gas industry a tax holiday on new development until 2025. Each one of these changes reduced county revenues by millions of dollars and the total grows each year.

"The County is also concerned as some companies are choosing to unilaterally alter negotiated agreements with landowners as well. We believe this to be a bad faith practice in which a large corporate entity is attempting to pressure local landowners into accepting less money than what the company previously agreed to pay. At this time it does not appear that this is of any concern to the Alberta Energy Regulator.

"Kneehill County actively pursues companies that are not paying their taxes. When able, the County has secured multi-year payment agreements in order to attempt to mitigate the problem. As municipalities have not been given the tools to enforce compliance, this often means a negotiated payment structure/settlement in addition to the time required to pursue it. Some companies continue to ignore advances from the county and simply choose to operate without payment of taxes."

Kneehill County Reeve Jerry Wittstock added, "Most oil and gas companies are responsible and fulfill their obligations to the municipality and to local landowners. It’s a few that are bad actors. To date, municipalities have not been given the necessary tools with regards to industry bad actors. We, along with the Rural Municipalities of Alberta and other counties, have asked the province to take steps as little has been done to date. We believe that there are simple steps that the province and the Alberta Energy Regulator could take which would resolve this issue, but neither of those entities seems interested in considering the municipal tax or landowner issues when it comes to licensing oil and gas activities being conducted by known bad actors. The AER seems unconcerned with the impacts of those entities on our communities and people. A simple check done by the AER during the licensing/approval process to confirm that a company was in good standing would in large part solve this issue and would require very little time or resources from municipalities to provide the needed information."

New laws coming?

The provincial government this week echoed remarks made by the RMA, drawing attention to its own survey results Edmonton says were collected last fall.

On its website the Government of Alberta stated last fall’s survey was in step with RMA’s findings. “The survey collected detailed and updated information regarding the extent of unpaid taxes and which companies have not paid these taxes,” stated the provincial government. “The current survey results represent information reported to the province by municipalities in fall 2022 and is based on a point in time – December 31, 2021 – with a status that has most likely changed since that date.

“Lost municipal revenue due to unpaid taxes on oil and gas property has been a consistent concern for rural municipalities in recent years.

“A cumulative $220 million in unpaid taxes has been reported by municipalities, with $130 million in tax arrears and the remaining $90 million in cancellations. The majority of these taxes will not be recoverable outside insolvency proceedings because they are owed by companies no longer operating, or because the taxes have already been written off by municipalities, or both.

“The efforts municipalities took to collect and share information in the 2022 Municipal Affairs Survey, along with the data released by the RMA, and information provided by Alberta Energy, has helped form a more accurate picture of the overall situation involving unpaid property taxes from oil and gas companies. Government will continue to work with municipal associations and stakeholders to monitor and address the situation, including consideration of whether additional regulatory measures are needed.”

Both RMA and the provincial government noted many companies in arrears make attempts to pay their property taxes through payment plans, for example.

At the time of transfer

Alberta’s Minister of Municipal Affairs Rebecca Schulz stated in a Mar. 7 press release unpaid taxes owed to municipalities from oil and gas companies operating in Alberta may be addressed when licenses transfer.

“We are aware of the recent survey results from the RMA,” stated Schulz. “We agree with the RMA’s assessment that the problem of unpaid oil and gas taxes to rural municipalities is unacceptable. We are consulting with industry, municipalities and landowners as we actively explore options to ensure taxes and are paid as a condition of license transfer.

“The Alberta Energy Regulator has a critical role to play in solving this problem. We worked with the AER and strengthened the regulatory framework so that it has the option to consider company records for property taxes and surface lease payment when determining a company’s eligibility to hold a license.

“These recent survey results from the RMA are broadly consistent with the government’s own research into this issue. The vast majority of companies operating in Alberta’s energy sector pay their local property taxes but some have not, leaving municipalities with hard decisions about raising taxes for other taxpayers or cutting services. We will be in contact directly with delinquent companies, reminding them of their tax responsibilities.”

Should be paying their taxes

When contacted by the ECA Review Mar. 10 the Canadian Association of Petroleum Producers (CAPP) acknowledged it was aware of the issue.

“CAPP unequivocally agrees that all companies should be paying their taxes and fees to municipalities. Rural municipalities are where the oil and natural gas industry operates and where people in the industry work and live,” stated an email from Jay Averill, CAPP spokesperson.

“The revenues generated from the industry to municipalities play a significant role in maintaining the quality of life for rural communities which can support the industry in attracting and retaining the talent we need.

“CAPP also acknowledges that we continue to see the lagging effects of a multi-year downturn for the oil and gas sector with many related insolvencies having a long-term impact on the municipal system. We are committed to continuing to work with the province’s liability management system and municipalities to ensure Alberta remains a place where the industry and the economy can continue to thrive for years to come.”

Stu Salkeld, Local Journalism Initiative Reporter, East Central Alberta Review