Wood Buffalo rejects Nexen's $19.6-million request for tax relief for non-operating upgrader
Wood Buffalo municipal council rejected Nexen Corp.'s request Tuesday for $19.6 million in municipal tax relief for its Long Lake upgrader, which has been closed since January 2016 when an explosion killed two workers.
Nexen's general manager of Canadian operations, Scott Chalker, told councillors the upgrader was only operational for 14 days before it was destroyed in the explosion and hasn't returned to operation since.
"A fair decision from council will help support a viable business," Chalker said.
Coun. Sheldon Germain said while the municipality cancelled residential property taxes for homes destroyed or left unoccupied by May's wildfire, Nexen's issue is not the same.
"This is not a natural disaster," Germain said. "This is a different situation."
Mayor Melissa Blake also said if council waived municipal taxes for Nexen, it might be required to do the same for other companies.
"I am quite concerned that if we make this decision here tonight, the next time there's a disruption we will be obliged [to do the same.]"
A report to council indicates the Long Lake facility requested tax relief under Alberta's Municipal Government Act. The act allows councils to cancel, defer or reduce property taxes.
Nexen requested the tax break after the explosion "rendered an upgrader facility inoperable," the report says.
Rejection recommended by staff
Municipal staff had recommended councillors reject the request.
The municipality has cancelled the collection of municipal property taxes for homeowners whose homes were destroyed by the Fort McMurray wildfire, but it has not cancelled taxes for industrial properties. It doesn't cancel taxes when industrial properties experience damage to machinery.
"Approval of this request may set a process whereby council is cancelling property taxes when machinery and equipment is taken out of commission but [would] have no ability to assess and tax new equipment brought into service until the forthcoming tax year," the report says.
The recommendation came after Wood Buffalo cut more than 160 staff positions in January due to a budget shortfall.
The municipality also made $41.8 million in cuts to its 2017 operating budget.
Municipal administrators blamed the job and budget reductions on a sluggish economy, a shrinking tax base and expenses from last May's wildfire.
Nexen is a wholly owned subsidiary of the Chinese state-owned China National Offshore Oil Corporation Ltd. The company has hit significant stumbling blocks in its oilsands operations in recent years.
The Long Lake explosion killed maintenance workers Drew Foster and Dave Williams.
The men were refitting the valves on a compressor in the gas compression building in the hydrocracker unit, where hydrogen is combined with partially upgraded oil to remove sulphur and make synthetic crude oil.
Foster, 52, died on site. Williams, 30, died after being hospitalized in critical condition in the burn unit at the University of Alberta Hospital in Edmonton.
The explosion came six months after a July 2015 incident in which a pipeline spilled five million litres of water, sand and bitumen at the facility. The Alberta Energy Regulator ordered Nexen to suspend operations on 95 pipelines at the site.
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