Nisku, AB, March 8, 2019 –
The Rural Municipalities of Alberta (RMA) have recently conducted a survey that identifies that an unprecedented $81 million in property taxes
from oil and gas companies have gone unpaid. This is a unique challenge that has not been experienced by municipalities in Alberta before. The survey, conducted in January and February 2019, had responses from 54 of the RMA’s 69 members municipalities that cover the landscape of rural Alberta.
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 (i.e. well sites & pipelines via lease or easements). The 2014 downturn in the price of oil has seen many companies fall on hard times. 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. This has left a significant hole in rural municipal budgets throughout Alberta who rely on taxes from industrial activities.
“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 Al Kemmere, President of the Rural Municipalities of Alberta. “A revenue shortfall like the one from these unpaid taxes hinders that ability of these municipalities to provide this core infrastructure.”
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. Unpaid taxes, either by bankruptcy or by viable companies that simply choose to not pay, are causing major challenges for Alberta’s rural municipalities in meeting their obligations.
“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,” said Kemmere.
Rural municipalities need a solution to address this issue specifically for oil and gas properties, either through improved legislated tax recovery options in the Municipal Government, or through the Alberta Energy Regulator. Members of the RMA have recently endorsed a resolution calling on greater oversight and accountability from the oil and gas industry, and the Alberta Energy Regulator. Resolution 5-18F asks the AER to ensure that there are no outstanding municipal property taxes before licenses are transferred including licensed properties declared as “orphan sites”. RMA members have also asked for broadened tax recovery powers.
Kemmere 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.”
The Rural Municipalities of Alberta (RMA) is an independent association comprising Alberta’s 69 counties and municipal districts. Since 1909, the RMA has helped rural municipalities achieve strong, effective local government. The RMA provides Advocacy and Business Services (including RMA Trade, RMA Fuel and RMA Insurance).
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