+ RMA Rural Municipalities
of Alberta

Resolution 5-07S

Municipal Franchise Agreements With Natural Gas Cooperatives

January 1, 2007
Expiry Date:
March 31, 2010
Active Status:
Industry and Resource Development
Vote Results:

WHEREAS currently and in the future, economic activity in Alberta will encourage urban municipalities to annex lands from rural municipalities; andWHEREAS the bulk of those lands to be annexed will have rural natural gas co-operative franchises associated with them; andWHEREAS in most cases, the urban municipality will have a municipal franchise agreement in place with a regulated utility and upon annexation, the rural franchise rights belonging to the co-op will terminate allowing the regulated utility to serve in the annexed area; andWHEREAS natural gas co-operatives are locally owned, promote local employment, and are governed by members who are municipal rate payers and residents; andWHEREAS members of these natural gas co-operatives, who have enjoyed the rights and privileges of co-op membership, will be forced to give up their membership and receive gas services from a regulated utility that generally does business for profit from a centralized location; andWHEREAS the only way to preserve the rights of the co-op membership in the natural gas co-operative is for individual rural municipalities to grant a municipal franchise agreement to the natural gas co-op for areas adjacent to or that surround an urban municipality so that upon annexation, the urban municipality will be required to maintain that municipal franchise with the gas co-op for the annexed area and that these co-op members will be able to voice their preference for service when the municipal franchise agreement comes up for renewal;

Operative Clause:

THEREFORE BE IT RESOLVED that the Alberta Association of Municipal Districts and Counties support the initiative of the Federation of Alberta Gas Co-ops Ltd. by encouraging its member municipalities to enter into municipal franchise agreements with natural gas co-operatives.

Member Background:

In 1973, the government of Alberta passed legislation to create a Rural Gas Program that would facilitate the extension of gas service to towns, villages and farming communities, and to set up rural utilities as member-owned cooperatives to operate member owned rural utilities. Rural Alberta was divided into gas franchise areas with boundaries determined by population density, municipal and natural boundaries. The Rural Gas Program has been an unprecedented success and filled a void not serviced by regulated utilities. Today the Federation of Alberta Gas Co-ops Ltd.’s membership consists of 88 members with 59 natural gas co-operatives, 19 municipally owned systems, 4 county owned systems and 6 First Nations systems.The unprecedented growth in Alberta has encouraged urban municipalities to annex lands from rural municipalities. Many urban municipalities have franchise agreements in place with regulated utilities. When an annexation occurs, typically the franchise rights of the natural gas co-operative and, in turn, its local member-owners terminate, and the regulated utility gains the franchise right to provide service. If the natural gas co-operative loses its franchise rights upon annexation these rights cannot be regained. The local autonomy of the membership in that area is lost and instead of member-owners they become customers, losing their rights of membership.Urban municipalities are currently lobbying the government to restrict the ability of rural municipalities to develop lands close to urban areas. In essence, there will be a move to “urbanize” areas with the bulk of economic activity being restricted to the urban centre and not the rural area.The franchise agreement that a rural municipality would enter into with a natural gas co-operative would not cover the entire rural municipality, but only covers the area adjacent to, or surrounding, an urban municipality where it is anticipated that annexation may occur so that the co-op’s rural franchise rights in that specific area are protected.The government department that oversees natural gas co-operatives supports this initiative as a way for the natural gas co-operatives to maintain their franchise rights.

RMA Background:

The AAMDC has no resolutions currently in effect with respect to this issue.


A member bulletin was issued in November 2007 encouraging municipalities to enter into municipal franchise agreements with natural gas cooperatives. A letter advising of this bulletin was also sent to the Federation of Alberta Gas Co-ops.

Provincial Boards and Organizations:
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