Municipal Access to Property Tax Revenues
Municipalities rely on property taxes to fund infrastructure, services, and municipal operations. Because rural municipalities have low populations and high levels of industrial activity, RMA members receive most of their property taxes from non-residential properties, and in particular oil and gas properties such as wells and pipelines. In recent years, legislative and regulatory loopholes have weakened the ability of municipalities to collect property taxes on oil and gas properties. Based on the RMA’s recent member survey, as of December 2022, rural municipalities face an unpaid oil and gas property tax burden of $268 million. In March 2023, the Government of Alberta issued a ministerial order through which the Alberta Energy Regulator must now require companies with a history of property tax non-compliance to show proof of property tax payments before selling or acquiring licences. While the RMA is hopeful that this action will reduce the scale of tax non-payment, it is much too early to know whether it will be effective.
The Government of Alberta has also made a number of other policy decisions recently that have taken crucial property tax tools away from municipalities. In 2020, the province eliminated the Well-Drilling Equipment Tax (WDET). The WDET provided support to rural municipalities to offset sudden costs associated use of municipal infrastructure by drilling rigs and other industrial equipment.
In 2019, rural municipalities collected $23 million in WDET revenue. In 2020, this was suddenly no longer available. As drilling has increased dramatically since 2020, rural municipal infrastructure is being impacted like never before and municipalities have no revenue source available to offset new costs.
Also in 2020, the Government of Alberta implemented a property tax holiday for newly drilled oil wells. This holiday exempts new wells and pipelines from taxation until the 2025 tax year. Although this holiday was introduced to help mitigate the effects of 2020’s economic downturn on the oil and gas industry and promote growth, it is no longer necessary as the industry is in a boom phase with record profits and high levels of new drilling.
While oil and gas investment is a huge part of Alberta’s economy, oil and gas companies should have the same property tax payment expectations as all other property owners in the province. The solution to this issue is simple: require oil and gas companies to pay property taxes that ensure the roads, bridges, and other municipal infrastructure they rely on can be properly maintained.