Oil and gas companies owe rural municipalities more than $80 million in unpaid taxes in 2019, leaving rural taxpayers to take up the slack, according to a new survey by the Rural Municipalities of Alberta Association (RMA).
In Mountain View County, there was total outstanding oilfield accounts of $431,310.31 as of Dec. 31, 2018. That represents about one per cent of total taxes and requisitions collected in the municipality last year.
RMA president and Mountain View County councillor Al Kemmere says the situation is creating hardships for local governments trying to make ends meet.
“Rural municipalities provide the core infrastructure that allows Alberta’s resource industries to reach Alberta’s resources and then transport those resources to national and international markets,” said Kemmere.
“A revenue shortfall like the one from these unpaid taxes hinders that ability of these municipalities to provide this core infrastructure.”
Conducted in January and February, the survey had responses from 54 of the RMA’s 69 member municipalities, including Mountain View County.
Oil and gas companies pay property taxes on the oil and gas infrastructure that they own with much of this infrastructure on property not owned by the companies, such as well sites and pipelines, he said.
The current tax recovery system in Alberta does not allow for easy recourse for tax collection for these types of infrastructure, unlike options for properties, he said.
“This has left a significant hole in rural municipal budgets throughout Alberta who rely on taxes from industrial activities,” he said.
“Rural municipalities often have little recourse to recuperate these unpaid taxes as many of these companies have declared bankruptcy and municipalities are low on the list of beneficiaries from an asset sale.
“When oil and gas companies fail to pay their property taxes, the burden falls on the rest of the tax base to cover the difference to ensure that core services and infrastructure can continue to be provided for the betterment of the community.”
The taxes are not paid, either through company bankruptcy or by viable companies choosing not to pay, he said.
The Sundre Petroleum Operator’s Group (SPOG) is not aware of any of its member companies having outstanding municipal taxes owing in Mountain View County for 2018, says executive director Tracey McCrimmon.
SPOG is a collection of oil and gas companies with operations in the district. It also includes associate members such as Mountain View County and the Town of Sundre.
The RMA would like to find a solution to the problem, either through improved legislated tax recovery options in the municipal government, or through the Alberta Energy Regulator, which oversees oil and gas development in the province, said Kemmere.
RMA members recently passed a resolution calling on the AER to “ensure that there are no outstanding municipal property taxes before licenses are transferred including licensed properties declared as ‘orphan sites,'" he said.
The association is also asking for broadened tax recovery powers, he said.
“Municipalities need an early detection system that can identify if oil and gas operators are struggling before it gets to the point where there is no money to pay these taxes,” he said.
The Canadian Association of Petroleum Producers (CAPP) represents oil and gas companies across Canada.
Ben Brunnen, vice president Oil Sands, Fiscal and Economic Policy with CAPP, provided the following comments to the Gazette:
“The oil and natural gas industry across Canada is facing numerous competitiveness challenges including constraints on market access and the resulting negative impact on prices. The industry has weathered a consistent and dramatic drop in investment since 2014, with spending expected to drop another 10 per cent in 2019.
"Barriers to competitiveness have had a significant impact across the entire Canadian economy. Small to medium-sized oil and gas enterprises, a vital component of Alberta’s oil and natural gas sector, face the same competitiveness challenges as larger firms, yet their ability to mitigate these challenges is limited."
Canada’s oil and natural gas sector competes for investment in a global context, and a competitive fiscal framework is essential to position the industry as a strong place to invest, he said.
"Next to royalties, municipal taxes represent the highest costs to industry in Alberta, and it is important that municipalities work with oil and gas companies to establish tax rates that are equitable and competitive. Resolving market access constraints is also key to rebuilding investor confidence," he said.
