+ RMA Rural Municipalities
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Resolution 5-15F

Recovery of Linear Property Tax Arrears

November 18, 2015
Expiry Date:
December 1, 2018
Active Status:
Mackenzie County
4 - Northern
Municipal Governance and Finances
Vote Results:
Carried as Amended

WHEREAS municipalities in Alberta are governed by the Municipal Government Act, RSA 2000. C. M-34 established by the Province of Alberta; and

WHEREAS municipalities in Alberta are dependent on property tax revenues to provide essential municipal services; and

WHEREAS the property taxes remain the main source of revenue for municipalities, as the provincial and federal transfers are diminishing, while the downloading and offloading of services and programs continues; and

WHEREAS the ability of a municipality to recover linear property tax arrears is affected by both provincial and federal legislation; and

WHEREAS the current legislation has limited the recourse available to a municipality to recover tax arrears owed from oil & gas companies, which predominantly arise from linear property; and

WHEREAS the issue of broadening and strengthening the power of municipalities to collect and recover non-property taxes has been raised in the Municipal Government Act review currently being conducted by the Government of Alberta;

Operative Clause:

THEREFORE BE IT RESOLVED that the Alberta Association of Municipal Districts and Counties (AAMDC) requests the Government of Alberta to amend the Municipal Government Act (MGA), and other provincial legislation to broaden the tax recovery power of municipalities to collect linear property taxes by granting a lien in favour of the municipality as follows:

  1. A lien equivalent to that granted to the Alberta Energy Regulator (AER) by s. 103 of the Oil and Gas Conservation Act (OGCA) that being: “on the debtor’s interest in any well, facilities, and pipelines, land or interests in land, including mines and minerals, equipment and petroleum substances” and the power to garnish funds owed to the debtor;
  2. A lien which ranks in priority (or equivalent) to the lien granted in favour of the AER by s. 103(2) of the OGCA;

FURTHER BE IT RESOLVED that the AAMDC requests the Federation of Canadian Municipalities to request the Government of Canada to amend the federal Bankruptcy and Insolvency Act to recognize municipal linear property taxes and other municipal non-property taxes as a secured interest in priority to other unsecured interests;

FURTHER BE IT RESOLVED that the AAMDC request the Province of Alberta to provide a credit reimbursement to compensate for the Education Property Taxes that becomes uncollectable due to linear property bankruptcy.

Member Background:

Mackenzie County has been challenged with collection of significant tax arrears from an oil & gas company.   The County has encountered significant obstacles in collection of outstanding tax arrears, which are created by the existing restrictions within the current legislative documents.  As the result, the County’s prospect for collecting $1.4M in taxes is bleak.

ALBERTA Municipal Government Act (MGA)

The regime for collecting taxes not related to land, including linear property tax arrears, is set out in Part 10, Division 9 of the MGA. In that Part, section 438(1) states that a municipality may recover arrears through (i) the seizure process prescribed in the MGA, or (ii) through a civil action against the debtor.

The assets of the debtor that may be seized by a municipality in order to recover linear property tax arrears are limited and need to be broadened.  This will often affect the ability of a municipality to recover the arrears, particularly where the debtor does not own sufficient “goods”.

The limitations of section 440 and 441 are made clear by comparing those provisions to the provision of the Oil and Gas Conservation Act, RSA 2000 c. 0-6 which grant a lien to the Alberta Energy Regulator. Section 103(2) of the Oil and Gas Conservation Act creates a lien in favour of the Regulator on the “. . .debtor’s interest in any well, facilities and pipelines, land or interests in land, including mines and minerals, equipment and petroleum substances”. The MGA does not create this type of detailed lien in favour of a municipality with respect to linear property tax arrears. More particularly, the MGA does not provide a means for a municipality to effectively recover linear property tax arrears against the pipeline that is being taxed or against mineral rights held by the debtor. Instead, the recourse provided by the MGA is limited to the goods owned by the debtor.

Further, while the Oil and Gas Conservation Act permits the AER to garnish funds owed to the debtor (s. 103), no similar remedy is available to a municipality with respect to linear property tax arrears.

A municipality would be better able to recover linear property tax arrears if a municipality could recover against all of the property of the debtor.

Also, a municipality’s ability to actually seize and sell the goods of debtor to satisfy linear property tax arrears is often frustrated by the actions of the AER. In order to prevent the goods of the debtor from being sold, the AER now takes the position that once the AER has issued closure or abandonment order with respect to an oilfield site, no one, even a municipality exercising seizure rights established by the MGA, may remove goods from that site. The AER often issues closure or abandonment orders when a company encounters financial difficulties and this often coincides with the accumulation of linear property tax arrears. As the valuable assets of the debtor company are often limited to the machinery and equipment located at its oilfield sites, the AER’s position can cause difficulties for a municipality from recovering any of the linear property tax arrears that are owed.


Once a person or a corporation enters bankruptcy, the distribution of the assets of the bankrupt is governed by the BIA. Sections 86 and 87 of the BIA limit most provincially created securities that are intended to promote the priority of a municipal or other debt over other creditors. While section 348 of the MGA may state that tax arrears have priority over other debt obligations, this priority is limited by the BIA. The BIA does not affect municipal claims for property tax arrears with respect to land as those arrears give rise to an interest that can be registered pursuant to the Land Titles Act. Contrastingly, linear property tax arrears do not give rise to a similar interest and therefore do not constitute a secured interest pursuant to the BIA.

RMA Background:

The AAMDC has no active resolutions directly related to this issue.

Government Response:

Municipal Affairs: The Government of Alberta is undertaking a comprehensive review of the Municipal Government Act (MGA). Since the review began in 2012, the Alberta Association of Municipal Districts and Counties has been a valued partner in the process, including participation in focused policy discussions among key stakeholders in 2014 and 2015 to identify issues, generate options and express recommendations to Cabinet.

An issue that was identified is the significant financial implications for some municipalities in the non-collection of property taxes in arrears, particularly taxes levied against industrial property.

Alberta Municipal Affairs recognizes this issue is likely to develop in scale, given the current economic conditions in Alberta, and is committed to working with other ministry partners to determine the best approaches to supporting municipalities in collecting this revenue.

Energy: Alberta Energy, Alberta Environment and Parks, and the Alberta Energy Regulator are undertaking a review of the management of energy infrastructure liabilities in Alberta. Actions related to what happens when energy companies go bankrupt should be dealt with through that review, and not the Municipal Government Act review.

There would be implications for how environmental liabilities are managed in Alberta if municipalities are granted liens to collect linear property taxes. It is critical that any changes are reviewed through a systems approach, as one change can impact many other programs.


In 2016, Alberta Municipal Affairs had convened an inter-ministry working group consisting of representatives from Municipal Affairs, Energy, Treasury Board and Finance, Education, and the AER. The purpose of this working group was to address the concerns identified in resolution 3-16S and resolution 5-15F. More specifically, the working group explored how the suite of tools available to municipalities to recover unpaid linear property taxes could be expanded, as well as possible legislative or regulatory solutions to relieve or exempt municipalities from paying provincial education property tax requisitions on linear properties in which the municipality has not been able to gather tax revenues from the property owner.

Early in 2017, the working group completed their research and Government of Alberta staff internally developed options for the Minister of Municipal Affairs based on the working group’s findings. In fall 2017, the Government of Alberta announced the Provincial Education Requisition Credit (PERC) program, under which municipalities who have no choice but to remit requisitions to the Government of Alberta for unpaid education property taxes on linear oil and gas properties, may apply to receive a credit equivalent to the amount of the requisition. PERC is funded through the Alberta School Foundation Fund’s net asset fund.

At this point, PERC extends to the 2019 tax year, and is capped at $10 million per year. As of March 2018, 37 applications had been processed and approximately $3 million of credits had been issued. The creation of PERC meets the request in the third operative clause of this resolution.

The Government of Alberta has not amended the Municipal Government Act (MGA) to broaden the tax recovery powers of municipalities, and municipal powers to seize assets to account for unpaid linear property taxes continues to rank lower in priority than that of the AER and other organizations.

Similarly, RMA has received no indication from the Government of Canada of a willingness to amend the federal Bankruptcy and Insolvency Act to place municipal interests above other non-secured interests.

RMA assigns this resolution a status of Accepted in Part and will continue to advocate on all aspects of this resolution.

Provincial Ministries:
Municipal Affairs
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