WHEREAS the current oil well assessment rates include the cost of pumps. Low producing oil wells already receive up to 90 per cent extra depreciation (10 per cent assessment remaining); AND WHEREAS the Well Assessment Review Committee failed to reach an agreement; AND WHEREAS Alberta Municipal Affairs staff has independently proposed to remove the pump costs from the oil well assessment which would grant the oil companies an unlegislated tax exemption for this type of equipment;
THEREFORE BE IT RESOLVED that the Alberta Association of Municipal Districts and Counties urge the Government of Alberta to make any amendments necessary to legislation, regulations and guidelines to update the linear oil well assessment well rates and ensure that the costs of pumps remain in the revised rates
Alberta Municipal Affairs staff has been working with various stakeholder working committees to review and update various linear assessment rates. The Well Assessment Review Committee however, could not reach consensus as to which costs should be included and which costs should be excluded from the assessment rates. Currently the costs of pumps on oil wells are part of the assessment rates. Extra depreciation is applied when oil wells are low producers. Factors varying from 15 per cent to 100 per cent are applied to their assessment depending on the oil well’s production and oil wells with zero production have a factor of 10 per cent. In Northern Sunrise County all producing oil wells have pumps as standard equipment. Alberta Municipal Affairs is seeking regulation change to remove the cost of the pumps from the rates. If they go ahead with this, it would result in a loss of millions of assessment dollars for both municipalities and provincial school funding throughout Alberta (for Northern Sunrise County that means a loss of over $46 million in assessment). Removing the pump costs would also lead to legal arguments regarding the assessable improvement which currently falls under the definition of pipeline under the Alberta Municipal Government Act: Sec. 284(1)iii(d) well head installations or other improvements located at a well site intended for or used for any of the purposes described in paragraph (c) or for the protection of the well head installations. The County recommends that the pump cost remain within the linear property assessment. This issue was discussed in the fall of 2004 by the stakeholder working group that took part in the well property component of the regulated industrial assessment rate review. The municipal and industry representatives in this group held strongly differing views. Municipalities wanted to see pumping equipment included in the assessment, while companies wanted to see the equipment excluded. Both sides put forth arguments in support of their positions. Municipal Affairs is considering this issue along with other matters related to the industrial assessment rate review. The ministry is committed to keeping municipalities and industry informed, and a final decision on this and other matters will be made after stakeholders have had an opportunity to provide feedback.
The linear oil well assessment well rates were updated for the 2007 assessment year. The costs of pumps remain in the revised rates.