Kneehill County writes off over $1 million more unpaid oil and gas taxes

·3 min read

Kneehill County council wrote off over $1 million in unpaid property taxes owed by oil and gas companies which brings the total unpaid in 2020 to almost double estimates.

The decision to write off $1,052,001.95 was made at the Oct. 27 regular meeting of council.

Director of Corporate Services Bill McKennan presented a report to councillors stating property taxes on 15 tax rolls should be written off plus the penalties cancelled.

“The accounts in this request for decision are companies that have gone into bankruptcy proceedings and the wells have been handed to the Orphan Wells Association for reclamation or will be soon,” stated McKennan in his report.

“There is no ability for the county to collect.

“The ability for the municipality to collect on tax arrears relating to industrial and linear tax accounts has become extremely difficult based on decisions of the courts.

The Virginia Hills decision regarding the validity of linear tax arrears has made it impossible for municipalities to collect any amounts owing.

“The Redwater decision has also affected the oil and gas sector due to the expectations of any monies left from a bankruptcy be paid first to the Alberta Energy Regulator (AER) for reclamation purposes.

Municipal collections are no longer a priority as legislation provided for in the past due to these decisions.”

He stated Kneehill County exhausted all avenues trying to recover the unpaid tax revenue.

McKennan stated another problem continues for municipalities in Kneehill’s position, and that includes prepayment of taxes like the education requisition that the municipality should have recovered through its own tax collection. The local taxpayers are now left holding the bag for this money.

“The County will be able to apply for the requisition credits with the province and be reimbursed for approximately $146,492 of this amount,” stated McKennan.

“These credits will be applied for in January when the grant period is open. Once received, they will show as a 2021 revenue.

“The amount of 2020 penalties to be reversed is approximately $268,306. By reversing these amounts in the 2020 general ledger, we are not artificially showing revenue that will not be collected.”

He added that the credit programs available for municipalities are only a fraction of what the education requisition amount was.

More bad news, noted McKennan, was that the amount of lost revenue due to unpaid property taxes turned out to be much more in 2020 than the county anticipated.

“In anticipation of this situation, the county operating budget for 2020 provided for a $1,100,000 cancellation budget,” stated McKennan.

“To date council has approved $985,000 in industrial cancellations and the addition of this cancellation request will put us $940,000 over budget.”

Reeve Jerry Whittstock noted the council may as well approve the write off because there was no alternative.

“I guess we really don’t have a choice, do we?” the reeve asked.

Councillors unanimously approved writing off $1,052,001.95 in unpaid property taxes, cancelling the late penalties and applying for provincial help with the unrecoverable education tax.

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