WHEREAS legislation has been in place since 1948, authorizing municipalities to implement an oil well drilling equipment tax bylaw; and
WHEREAS those rural municipalities in Alberta that have implemented an oil well drilling equipment tax bylaw have received funding from this source to assist with the costs of maintaining roads in a safe driving condition for all traveling public and repairing municipal roads used by oil well drilling equipment; and
WHEREAS rural municipalities require this source of funding to enable them to continue to improve road infrastructure used by the well drilling industry; and
WHEREAS municipalities are using the well drilling equipment tax revenue in a prudent manner to make infrastructure improvements to road networks used by the well drilling industry and desire to continue to receive revenue through the said source; and
WHEREAS it has been suggested that TRAVIS is an alternate source of revenue that is able to replace the Well Drilling Equipment Tax Regulation, however, TRAVIS is a means of providing one-stop shopping for transportation permits and is not connected to the well drilling equipment tax in any way;
THEREFORE BE IT RESOLVED that the Alberta Association of Municipal Districts and Counties request the Province of Alberta to retain the current Oil Well Drilling Tax Rate Regulation;
FURTHER BE IT RESOLVED that the AAMDC request the province to review this legislation on an annual basis to ensure that the rates are adequate and the vertical and horizontal footage be included to meet the needs of rural municipal costs to repair and maintain roads used by oil well drilling equipment.
The Well Drilling Equipment Tax Rate Regulation (WDET) has been in place since 1948. The WDET was introduced to provide municipalities with revenue to offset the cost of maintaining or repairing roadways used by oil and gas well drilling equipment. The heavy equipment that is required to drill and set up oil and gas wells can do varying degrees of damage to roads, depending on weather, size of equipment and time of year. The WDET is a one time tax charged to the leaseholder of the well in the year in which it is drilled, whether or not the well goes into production. Calculation of the tax is based on the length of the well casing and the rates set out in the regulation.
The last rate change to the WDET was in 2008, when an approximate 200 percent increase was phased in over a three year period (2008-2010). The previous rates had been set in 1977. Approximately 40 municipalities reported amounts in the Well Drilling equipment Tax portion of their financial returns from 2003 to 2010. There may be more municipalities that levy the WDET but do not report the revenue in that area of their financial returns. In 1998 the MLA Industrial Property Assessment Review Committee recommended in its final report that the WDET should be replaced by an alternate method to reimburse municipalities for the damage to roads as a result of overweight traffic.
It is now being suggested that Transportation Routing and Vehicle Information Services (TRAVIS) may be a replacement for WDET, however, as stated in the AR48619 APPROVAL REQUESTED FROM MINISTER ON TRAVIS MULTI-JURISDICTION LETTER AND COMMUNIQUE: “TRAVIS MJ is a one-stop-shop oversize/overweight permitting system”. The intent of this program is to make it easier for the transportation industry to obtain permits and does not in any way reflect on the municipalities need for funds to repair and upgrade local infrastructure for use by industry. Nor does the TRAVIS system address the use of local infrastructure by loads which are of legal weight but which, due to their intense use of infrastructure over a short time period, place excessive wear and tear on local roads and bridges.
WDET allows municipalities to apply funding to not only maintain but also to improve local infrastructure in areas where improvements are needed to accommodate industry using the local road network. Road use agreements with industry typically address surface repairs of roads – grading the ruts, applying gravel to the surface, however, over the longer term the subsurface of the roadway deteriorates due to heavy use and requires more in-depth repairs. Funds from WDET do not pay entirely for these repairs, however, they do assist with the financial burden.
Resolution 7-11F: THEREFORE BE IT RESOLVED that the Alberta Association of Municipal Districts and Counties request that the Alberta Government expand the Well Drilling Equipment Tax provision in the Municipal Government Act to include high intensity, major reworking of existing well sites.
The AAMDC recently surveyed members regarding their input for the upcoming review of the WDET Regulation.
In 2012, Municipal Affairs will undertake a review of the Well Drilling Equipment Tax (WDET) Regulation that will include discussions with municipalities, industry and their respective associations.
The review will look at possible alternatives to the WDET Regulation, which includes the Transportation Routing and Vehicle Information System (TRAVIS), but no decision on the continuation or replacement of the WDET Regulation will be made before discussions with stakeholders take place.
Details of the review will be communicated to stakeholders as they are finalized.
In February 2013, Municipal Affairs undertook a consultative review of the Well Drilling Equipment Tax (WDET). The AAMDC took a lead role in this review through the organization of efforts of the rural municipal representatives. Following a one year extension of the WDET, stakeholders were reconvened in the Spring of 2014 to find a permanent solution. The AAMDC submitted a proposal to the Government of Alberta and has participated in continued discussions on the topic through the MGA Review Focus Group. The AAMDC expects a decision from the province by the end of the 2014 calendar year.
While the key parts of this resolution have been met, the AAMDC deems this resolution as Accepted in Principle as the province has not yet agreed to review the regulation on an annual basis.