Starland County, a rural northwest suburb of Calgary, saw unpaid taxes on its properties from oil and gas companies worth $ 3 million last year, a big hit in its annual $ 15 million budget.
In Stettler County, current taxes not paid by power companies are $ 4.7 million.
And in Woodlands County, northwest of Edmonton, tax debts from power firms were $ 4.2 million last year, largely linked to problems with two producers – including one that failed in 2019.
In Starland Country, these unpaid taxes have led to difficult budget decisions, including spending cuts and higher taxes.
Reeve Steven Wannstrom said the delinquency bill totaled $ 3m in each of the last two years, mostly tied to Trident Exploration Corp., a gas producer that went into admission last spring.
“We got a $ 6m hit and we’re not a big circuit when you look at 20-25 percent of your tax base. So that’s a lot to do,” he said Thursday.
“That hurt us.”
Earlier this week, the Alberta Rural Municipalities (RMA) said about $ 173m in property taxes owed by oil and gas companies owes 69 municipalities across the province, up 114 per cent from last year.
At the heart of petroleum oils, the Buffalo Regional Wood Council reports that since 2016, there have been $ 19m in property taxes, interest and unpaid fines from four oil and gas companies operating in the region – two of which are bankrupt.
Last year, the bill totaled $ 4.9 million.
City executives say many of these tax problems are related to failing producers, such as Houston Oil & Gas Ltd.-based Trident and Calgary, but some companies have been unwilling or unable to pay. due to a decline affecting the sector.
In the Taber Municipal District, Reeve Merrill Harris said that as of last month, about 15 power companies had failed to pay their taxes for 2019, totaling $ 2.1 million.
“There are probably a number of valuable operating companies in our municipality that have just not paid this year,” he said.
To shine a spotlight on the issue, former Alberta Liberal leader David Swann held a news conference this week, stating that he will stop paying his own property taxes until the industry is forced to choose its own board.
“Who knew that paying taxes in Alberta was a possibility?” He told reporters.
The RMA is also bringing the heat to the province, saying the flaws in the system are allowing some companies to shift their financial burden to the municipality with little consequence.
It also comes as Energy Minister Sonya Savage prepares to unveil new policies related to oil and gas licenses, including issues of increasing responsibility, while the number of orphaned wells in the province has jumped in recent years.
Prime Minister Jason Kenney told reporters this week that municipalities have the opportunity to take legal action against people with unpaid tax bills.
Part of the wider issue stems from the fact that a number of shallow gas producers, in particular, have been anxious, leading to some bankruptcies, he added.
But municipal leaders say they have no effective means of pursuing unpaid property taxes on energy companies, as opposed to their ability to seize the property of a non-paying resident for several years.
“We are calling for a change to the Municipal Government Act that treats everyone the same. . . when it comes to tax collection, “RMA President Al Kemmere said Wednesday.
Al Kemmere, president of RMA Speaking at Alberta Rural Communities at the Shaw Conference Center on November 20, 2018 in Edmonton. Shaughn Butts / Postmedia
Lawyer Gregory Plester with Brownlee LLP, who has represented municipalities in such tax cases, said they “have very little legal opportunity … to recover unpaid property taxes owed by oil and gas companies – and none theirs is not typically very effective. “
Provincial legislation allows local governments to seize assets, though troubled companies usually have some valuable property available to grab, and they are regulated by the EAR, which often prevents these seizures from being obtained, he said in a statement.
Municipalities may file a lawsuit in civil court, but the process can be expensive and leave local governments with a judgment that cannot be enforced because the company has limited liquid assets.
During a bankruptcy process, most of the unpaid property taxes are considered an unsecured claim, lagging behind secured creditors due to recent court rulings, he added.
In addition to a long decline in dealing with the sector, energy producers say part of the problem stemmed from the property tax valuation process, which they say has overestimated the value – and their taxes – associated with real estate. especially in shallow gas wells.
“We are in a place where we have to reassess our municipal tax burden if we show up and direct investment in this province and work,” said Ben Brunnen of the Canadian Petroleum Producers Association.
Kenney’s government agreed last summer that the system was “broken” and reduced municipal taxes on shallow gas wells and pipelines by 35 percent, while covering the $ 23m for affected communities. It is not covering revenue decline this year.
Alberta Premier Jason Kenney gestures as he speaks to Arn’s equipment in Calgary on Tuesday, January 21, 2020.
Doug Dafoe, CEO of Ember Resources Inc., a private natural gas producer in Alberta, said the rating system is unfair and a permanent solution is needed to fix it.
“Our total value estimated before the 35 percent decrease was something in the order of $ 1.8 (billion) and $ 1.9 billion. We’re not worth it – I wish we were – but we’re not worth $ 1.8 billion or $ 1.9 billion, “Dafoe said, adding that his company has paid all its taxes.
“We have mature assets and … these assets will last for a long time, as long as we do not exceed them.”
Provincial officials say they are wondering if changes to municipal powers are needed for tax recovery. A review of the evaluation model is already underway.
The province has a difficult road ahead as it implements a series of changes and balances opposing interests. Of course, she wants to see an industry that is competitive, capable of attracting investment and creating jobs.
But it also needs to take significant steps to ensure that power companies are paying their tax bills for rural municipalities across Alberta.
Chris Varcoe is a Calgary Herald columnist.