+ RMA Rural Municipalities
of Alberta

Resolution 6-24S

Interim Funding for Lost Oil and Gas Revenue

Date:
April 1, 2024
Expiry Date:
February 28, 2027
Active Status:
Active
Sponsors:
Clearwater County
District:
2 - Central
Year:
2024
Convention:
Spring
Category:
Energy
Status:
Sent to Government
Vote Results:
Carried
Preamble:

WHEREAS the Government of Alberta initiated a three-year property tax holiday on new wells and pipelines, eliminated the Well Drilling Equipment Tax (WDET) and implemented a 35% assessment reduction for shallow gas wells and pipelines and additional depreciation adjustments for lower-producing wells; and

WHEREAS these incentives were introduced as temporary measures to support oil and gas industry needs, boost the industry’s competitiveness, and incentivize investment; and

WHEREAS municipalities experienced three years of reduced revenue because of these temporary measures resulting in decreased service levels, increased tax rates for residential, non-residential, and agricultural properties and increased risks to sustainable revenue-sharing agreements between rural and urban municipalities; and

WHEREAS municipalities have absorbed provincial downloads associated with policing, affordable housing, and other provincial services, in addition to losses in oil and gas revenue, based on the need to help the oil and gas industry and the province address fiscal challenges; and

WHEREAS the Municipal Government Act allows for municipal councils to pass a bylaw imposing a WDET to be assessed on the equipment used to drill a well for which a license is required under the Oil and Gas Conservation Act; and

WHEREAS the Government of Alberta has communicated there are no plans to reinstate the WDET and that the assessment reduction and additional depreciation adjustments are to continue until regulated assessment models for wells are updated; and

WHEREAS the Government of Alberta requires municipalities to budget up to five years in advance; and

WHEREAS unpredictable industry property tax incentives make long-term municipal budgeting extremely difficult;

Operative Clause:

THEREFORE, BE IT RESOLVED that the Rural Municipalities of Alberta advocate for the Government of Alberta to reinstate the Well Drilling Equipment Tax and eliminate the thirty-five percent (35%) assessment reduction and additional depreciation adjustments for lower-producing wells.

Member Background:

In 2020, the Government of Alberta implemented property tax incentives for the oil and gas industry to promote investment and economic activity in the energy sector. As a result of these incentives, municipalities have faced significant financial shortfalls due to reduced oil and gas tax revenues. This has caused concern about their continued financial viability and service level sustainability.

Municipalities understood that these incentives were temporary measures until the Assessment Model Review was completed and new assessment models for regulated property were developed.

While it is appreciated that the property tax holiday on new wells and pipelines is over, the loss of revenue from the continued elimination of the WDET and, the continuation of the assessment reduction and additional depreciation adjustments for mature oil and gas assets for an indefinite period will cause further assessment base loss resulting in continued reduction of oil and gas revenues.

Municipalities rely on oil and gas property tax revenues to fund infrastructure that the oil and gas industry utilizes daily. To offset this revenue loss, municipalities may have no choice but to increase tax rates, reduce service levels and incur debt, which shifts the tax burden from the oil and gas industry on to all other businesses and residents who are already facing an affordability crisis.

The Government of Alberta recently announced re-initiation of an assessment model review which is currently at phase one (proposed engagement plan) with no timeline in place for completion. While the review is underway, municipalities are still at risk of further revenue loss with the temporary measures in place. Meanwhile, according to the Alberta Energy Regulator, oil production and new wells placed on production has been steadily increasing since 2021 (https://www.aer.ca/providing-information/data-and-reports/statistical-reports/st98/crude-oil/production). There is also a significant increase in natural gas production and new wells placed on production since 2021 (https://www.aer.ca/providing-information/data-and-reports/statistical-reports/st98/natural-gas/production).

Municipalities recognize the oil and gas industry is critical to Alberta as they are a valuable member of the community and a major source of economic activity, jobs, and tax revenue. Municipalities also recognize they have supported the industry and the province in addressing their fiscal challenges over the last three years by absorbing the impact of reduced assessment values and the elimination of the WDET. Now that the Assessment Model Review has been restarted with engagement scheduled for early 2024, and that oil and gas production is increasing, it would be beneficial to municipalities to have opportunity, at least until the review is completed and assessment models are updated, to raise revenue to offset new costs associated with oil and gas industry growth.

RMA Background:

4-22: Well Drilling Equipment Tax Regulation

THEREFORE, BE IT RESOLVED that the Rural Municipalities of Alberta request the Government of Alberta reintroduce a Well Drilling Equipment Tax Regulation or otherwise provide funding to restore municipal revenue streams that assist with recovering costs for maintenance of public infrastructure from active industry participants.

Click here to view the full resolution.

Back to Resolutions Database