Original Published 11:32 Mar 28, 2022
By Jennifer Henderson, Local Journalism Initiative Reporter
Unpaid oil and gas taxes have been increasing despite a rebound in oil prices, says a rural municipal expert, and now rural communities want stricter penalties for companies who aren’t paying their taxes.
In January and February the Rural Municipalities of Alberta (RMA) conducted a survey of its 69 members and found that, since 2021, there has been a 3.3-per-cent increase in the overall amount of unpaid oil and gas taxes.
Unpaid oil and gas taxes due to municipalities have continued to climb since the recession hit the province in 2015
“I know there is a boom now, but anything above $60 or $70 a barrel, you should have the cash flow to enter into payment plans,” RMA president Paul McLauchlin said. “About half of the companies that owe this money are still operating.”
Currently oil sits at $111 per barrel.
Rural municipalities have few tools at their disposal to recoup that tax money and last week, during the spring convention, municipalities voted to lobby the province for more help getting their money back.
The municipalities want to partner with the Alberta Energy Regulator to ensure they can consider payment of property taxes when reviewing licence approval and transfer applications between companies. Rural communities want the ability to provide the regulator with real-time data as it relates to these unpaid property taxes.
McLauchlin said rural communities want unpaid property taxes to be part of the financial test for whether a company can operate in the province.
“What we’re asking them … is to require a company regulated by the [energy regulator] to pay all current and historical municipal property taxes in full as a condition of operating in the province of Alberta,” McLauchlin said.
Overall, rural municipalities are currently facing an overall unpaid oil-and-gas property-tax burden of $253 million, up 3.3. per cent from last year. Between 2020 and 2021 unpaid taxes increased by 46.7 per cent, and the previous year it jumped by 213.2 per cent.
The average rural municipality faces an unpaid tax burden of $3.6 million from the oil and gas industry. Six communities have unpaid taxes of more than $10 million.
Even as the debt from oil and gas companies grows, municipalities have written off some of it, totalling $131 million since 2015, and rural communities have repayment agreements in place with the industry for another $43 million.
Even though these taxes remain unpaid, the oil and gas industry continues to grow. New drill wells increased by 135 per cent from 2020 to 2021, a report from RMA said.
Last year the province introduced a bill to allow municipalities to place special liens on oil and gas owners and operators that owe taxes, which applies to land with pipelines and equipment.
Companies have 120 days to pay their taxes, and if they don’t a special lien will be enforced. The liens apply for all of the debtor’s property in the municipality.
The lien also will bump a municipality up on the priority list for creditors to be paid out if the company goes bankrupt.
McLauchlin said the bill was a good tool, but municipalities want other measures put in place to ensure municipalities can get their money.
Right now, local governments are left with piling interest on the unpaid property taxes, but McLauchlin said if companies aren’t paying their taxes to start with, increasing the interest payments isn’t an effective tool.
For landowners, municipalities can eventually seize property and sell it to recoup costs if taxes go unpaid for years, but because oil companies lease land, there isn’t anything a municipality can seize.
“Basically, it’s been a loophole. It’s never really been a problem until 2015,” McLauchlin said.
But the president is determined to help solve the problem.
“I will not relent and this will get dealt with one way or another because enough is enough.”
Reprinted with permission from the St. Albert Gazette, St. Albert, Alberta