WHEREAS the Government of Alberta’s Well Drilling Equipment Tax provisions do not address municipal infrastructure impacts associated with rejuvenation work on existing well sites; and
WHEREAS rural municipalities are responsible for the control, management and repair of local road infrastructure; and
WHEREAS the implementation of new oil and gas recovery techniques is intensifying the impacts on local infrastructure; and
WHEREAS new recovery techniques may have a significant nuisance impact such as dust, traffic disruption and noise on municipal residents; and
WHEREAS municipal staff time required to administer oil and gas exploration requests has significantly increased with the development of unconventional oil and gas reserves;
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.
It is expected that horizontal drilling and multi stage fracturing will become common in the oil and gas shale plays in Alberta. These include the Horn River and Cordova deposits in the extreme North West as well as the Montney, Colorado and Bakken areas that extend collectively to the Montana border.
It is also likely that existing oil and gas fields that contain vertical wells will be “reworked” with horizontal drilling techniques in order to improve production.
Hydraulic fracturing or “hydro fracking” has been used in the production of vertical oil and gas wells since the 1950’s. However the use of this process has dramatically increased since the general adoption of the horizontal drilling system. The process uses a series of pumps to force a fluid into a horizontal well bore at such pressure that the rock surrounding the perforated bore casing is splintered to the extent that hydrocarbons can be pumped to the surface of the ground.
Extensive fracturing allows considerably more hydrocarbons to be recovered from a basin than with conventionally drilled vertical wells. Moreover existing vertical wells, especially those drilled into “tight rock” formations can be rejuvenated using a combination of horizontal drilling and hydro fracking.
Depending on the length of the well bore as many as 20 fractures may be required per well. This amounts to large volumes of fracturing fluid and materials required. Up to 3000 cubic meters of fluids can be required per site and all of this material must be trucked on site creating significant impacts on municipal infrastructure.
The AAMDC has no active resolutions pertaining to this issue.
The Well Drilling Equipment Tax (WDET) is a municipal tax authorized by provincial regulation which provides municipalities with a way to offset the costs of repairing damage to roads from well drilling equipment and activity. It is a one-time tax on oil and gas wells, charged to the leaseholder of the well in the year the well is drilled, regardless of whether the well goes into production. The WDET is separate from the property assessment and taxation process, and is levied only by specific bylaw set by the municipality.
The WDET is currently under review and is being analyzed to determine if it is still meeting the policy goals of the province and providing appropriate balance between the needs of municipalities and industry. Expiration of the WDET Regulation has been extended from December 31, 2011 to December 31, 2012 to enable completion of the review. Municipalities and other stakeholders will be consulted during this review process.
In August 2013, Municipal Affairs completed a consultative review of the Well Drilling Equipment Tax (WDET) where the AAMDC proposed changes such as the inclusion of existing well sites undergoing major reworkings. The outcome of the review resulted in a one-year extension of the current regulation to allow time for a more comprehensive review in coordination with the Municipal Government Act and did not include provisions for high intensity, reworking of existing well sites. This resolution is deemed Unsatisfactory and the AAMDC will continue to advocate for this change when the government undertakes its next review of the WDET and through the MGA review process.