In recent years, the Government of Alberta has implemented several policy initiatives to reduce oil and gas industry costs at the expense of municipal revenue, resulting in a loss of $332 million in rural municipal tax revenue between 2021 and 2023. While RMA members have long supported the industry, ongoing revenue erosion threatens municipal viability.
Reductions in municipal revenue are a growing concern for RMA, as rural municipalities have limited ways to generate income and declining provincial grants. Sustainable funding is vital for operations and infrastructure, like roads and bridges that support Alberta’s oil and gas industry. When policies such as the removal of the Well Drilling Equipment Tax or unpaid industry taxes cut into revenue, it’s not just numbers—it impacts roads, essential services, and the future of our communities.
Between October and November 2024, the RMA ran a weekly “Below the Drill” campaign to uncover how provincial policies are impacting municipal revenues and the future of rural Alberta, with each week exploring different policies. The weekly campaigns are shown below.
To supplement the “Below the Drill” campaign, the impacts of all provincial oil and gas subsidization policies are compiled below in an interactive data format.
Section 388 of the Municipal Government Act allows for municipal councils to pass a bylaw imposing a well drilling equipment tax (WDET) to be assessed on the equipment used to drill a well for which a license is required under the Oil and Gas Conservation Act. The rules for calculating the WDET are established through regulation by the Minister of Municipal Affairs. This regulation allows municipalities to collect a one-time WDET from companies based on the depth of wells drilled. The intent of the WDET is to allow municipalities to fund infrastructure maintenance to offset the impact of increased industrial traffic associated with drilling oil and gas wells.
For several years, RMA members have struggled with unpaid property taxes from some oil and gas companies. Municipalities assess taxes on industrial assets, including oil and gas wells, pipelines, and other associated infrastructure. Unlike residential or commercial properties, municipalities lack mechanisms to enforce payment of taxes on oil and gas properties, and to this point, measures taken by the Government of Alberta to compel companies to pay have been ineffective. Even if municipalities were able to seize oil and gas properties, it is unlikely to occur due to associated liability and environmental risks.
As an incentive to the shallow gas industry, the Government of Alberta (GOA) announced a 35% assessment reduction for shallow gas wells and associated pipelines. For the purposes of this initiative, shallow gas wells are defined as less than 1,500 metres in depth and produce only gas (no condensate). This policy took effect in 2019 and was originally intended to be in effect for three years. This GOA initiative came at a time of very low natural gas prices and was an attempt to decrease costs for operators with assets that are typically lower producing.
Through several policy initiatives intended to reduce property taxes paid by the oil and gas industry, the Government of Alberta (GOA) has effectively chosen to subsidize the industry using municipal tax revenues. RMA’s Below the Drill campaign explored four policies by quantifying and explaining the impacts that each had on municipal finances and operations. RMA members have a long history of partnering with and supporting the oil and gas industry to drive Alberta’s economic growth, but at a certain point, municipal viability is threatened when already limited revenue sources continue
to be eroded.
It’s time for a balanced approach to oil and gas policies—one that doesn’t leave municipalities struggling. Contact your local MLA and tell them it’s time for fair policies that support municipalities and protect your community’s future.
