The provincial government’s plan announced last week to provide short-term relief to the Alberta shallow gas industry by reducing some of the expenses companies face is welcome news, says Al Kemmere, president of the Rural Municipalities of Alberta and a Mountain View County councillor.
The government’s plan will provide forgiveness of a portion of municipal property taxes on specific wells and pipelines identified by the government.
“Shallow gas companies are in a tough situation, and it’s been essential to work with the government of Alberta and industry representatives to come up with short-term solutions to support the industry,” Kemmere said.
“We recognize that municipal and education property taxes are not the core cause of the industry’s struggle, but are likely the only area in which short-term relief can be found, so we are pleased with the government’s announcement as it helps the industry without unfairly penalizing rural municipalities.
“In the long term, property taxes should not be seen as a tool for relief."
Municipalities collect education property taxes on all taxable properties on behalf of the province. Those taxes are transferred directly to the Alberta School Foundation Fund to support operational expenses for schools.
Announced last week, the one-year plan will permit municipalities to “reduce overall property taxes for companies, and it allows companies a temporary reduction in operating expenses, while also ensuring that municipalities will still receive a portion of property taxes from impacted companies in order to adequately provide municipal services,” he said.
The government says it is undertaking the program to protect jobs at the local level.
“We are asking you to reduce taxes on shallow gas wells and pipelines by 35 per cent,” the province said in a press release. “We will cover the resulting municipal revenue loss by reducing the amount of education tax required to be sent to the province by an equivalent amount.
“We know the assessments need to be revised and many of these companies that your residents rely on for jobs, lease payments, and local spending are in a desperate situation. So we are taking steps to prevent bankruptcies and protect jobs.”
The program will see more than $23 million in education property tax credits given back to municipalities.
“Many shallow gas producers are in a precarious financial situation as a result of prevailing market conditions, and the impact of high operating expenses, including property taxes.”
The industry has told the province that relief is needed to prevent company failures, job losses, impacts on rural communities, and abandonment of reclamation liabilities, the province said.
Kemmere said a strong oil and gas industry goes hand in hand with sustainable rural communities.
“We’re pleased to support the government of Alberta’s short-term solution to support the shallow gas industry, and we look forward to being part of discussions as to how shallow gas companies can thrive in rural Alberta for many years to come,” he said.
The RMA represents 69 rural municipalities, including Mountain View and Red Deer counties.
Municipal representatives, including Mountain View County reeve Bruce Beattie, met with government ministers on July 2 to discuss the plan.
The new plan was brought up for discussion at the July 3 council meeting.
“For 2019 the bottom line is it is a zero cost to the municipality,” Beattie said. “In 2020 that will be a different situation because the province is in the process of reviewing the assessment of those facilities and they are anticipating an adjustment to the assessment that will result in a 35 per cent loss in tax revenue based on our current taxation rates.
“So we have a grace period this year, and then next year we are going to be faced with how we deal with that loss in revenue.”
Beattie says he is concerned that other industries may also soon seek relief from the province in the same way the shallow gas companies now have.
“Then it will become a question of how do we deal with those requests,” he said. “Those are decisions council is going to be faced with in the coming years. It’s changing times so we will see what happens.”
A long-term solution to the problems facing gas companies needs to be found, said Kemmere.
“Property tax should never be conceived as a tool to make these companies viable; they need to come up with other solutions, other than just the tax component,” he said.
