Rural municipalities seek unpaid oil-and-gas property tax

·3 min read

The Rural Municipalities of Alberta (RMA) is calling for reform so municipalities can collect unpaid property taxes from oil-and-gas companies.

Unpaid energy taxes across the province amount to $245 million, up 42 per cent from $173 million in 2020 and up from $81 million in 2019, according to RMA.

“Rural municipalities can’t have deficits, so if we have a loss of tax revenue we have to draw upon other sources of income to balance the tax flow,” said RMA president Paul McLauchlin.

“A lot of municipalities have been forced to go to their reserves, and the problem is that the reserves are designated funds for capital replacement.”

With the provincial budget unveiled recently set to slash the Municipal Sustainability Initiative by 25 per cent over the next three years, McLauchlin said infrastructure pressures on municipalities will increase.

While in the past there have been delays in energy companies paying taxes, he said the issue of non-payments has only emerged in the past five years.

“We’re all aware there’s been a downturn in the oil-and-gas industry, but I think in some cases companies must be making a choice not to pay, with full understanding we don’t have mechanisms to collect,” he said.

“A large majority of companies are paying their taxes, so I think there’s a choice being made among a minority of companies.”

According to RMA, municipalities are adversely affected by a loophole that prohibits them from placing special liens or to use other tax recovery methods on linear property.

While it’s possible some companies find municipal taxes are too high, McLauchlin said non-payment as “civil disobedience” is unfair to ratepayers.

Sexsmith is currently seeking to recover $94,38 in unpaid taxes on an abandoned Firenze Energy well.

The town is currently engaging legal counsel after having considered applying for compensation through provincial programs, said mayor Kate Potter.

Sexsmith had looked at the designated industrial requisition credit (DIRC) and provincial education requisition credit (PERC).

Under these programs the province covers the education requisition, but not most other property tax.

McLauchlin said PERC and DIRC aren’t sufficient to solve the challenges posed to municipalities.

“The problem with PERC and DIRC is that’s meant for companies that are bankrupt or are in receivership,” he said.

Many companies not paying their taxes aren’t in receivership, he said.

The County of Grande Prairie has grappled with uncollected energy tax, said reeve Leanne Beapre. At one point in the last couple years $2 million in tax was outstanding.

Beaverlodge mayor Gary Rycroft said uncollected energy tax isn’t an issue in his town.

RMA called on the Alberta government to reform the Alberta Energy Regulator’s approval process, to consider if a company applying for a project has any outstanding taxes.

McLauchlin added companies can enter into payment plans with municipalities when they arrive in an area.

The legislature can also amend the Municipal Government Act to allow tax recovery on linear property, according to RMA.

Municipalities are required to pay the education requisition to the provincial government on behalf of energy properties, even if the companies don’t pay the taxes. RMA suggested removing this onus on municipalities.

Brad Quarin, Local Journalism Initiative Reporter, Town & Country News