Oil and gas companies now owe Alberta rural municipalities $173-million in unpaid taxes, leading to complaints the provincial government is treating the sector differently to other property owners and businesses.
But the Canadian Association of Petroleum Producers (CAPP) says the rapidly growing figure is a symptom of a larger, underlying problem – a property tax system that overvalues oil and gas assets.
The current unpaid tax bill is double what industry players owed to small communities in 2018. Al Kemmere, president of the Rural Municipalities of Alberta, told The Globe and Mail the issue is causing a “high level of frustration” among his members.
“Right now it feels like industry is getting more recognition for their plight than municipalities are,” Mr. Kemmere said.
Under recent policy changes made by Alberta’s United Conservative government, rural municipalities will this year be required to cut taxes for shallow gas producers by 35 per cent. Municipalities are also being asked to foot some of the bill for policing services as part of the province’s plan to add more RCMP officers to rural areas.
The new policies, he said, are “making municipal sustainability a bigger and tougher challenge all the time.”
Mr. Kemmere would like to see a mechanism that allows municipalities more freedom to seize or put a lien on properties belonging to companies with unpaid bills “so that there’s not a special case for oil and gas companies, and the rest of the taxpayers carry the burden for them.”
He also wants to sit down with Municipal Affairs Minister Kaycee Madu to explain the effect UCP policy changes have had on rural municipalities’ long-term planning and day-to-day operations.
“When my members start getting really grumpy about these things, he has to understand why,” Mr. Kemmere said.
Ben Brunnen, fiscal and economic policy vice-president with CAPP, an industry lobbyist group, doesn’t dispute that unpaid taxes are a problem for rural municipalities. But he argued the root of that problem is the fact Alberta’s oil and gas assessment model overvalues industry assets and doesn’t properly take into account depreciation.
Mr. Brunnen pointed to the example of an Alberta oil sands operation, which he said would pay about $2-million less in property taxes were it located next door in Saskatchewan.
“If we’re seeing companies in a place where they can’t afford to pay their taxes, there’s a disconnect in terms of the economic strength and competitiveness of our industry,” Mr. Brunnen told The Globe.
“These are not insignificant decisions for companies and it’s an indication of how desperate some of these companies are from an economic viability perspective. We have an issue and we’re at risk, economically, as a province if we don’t correct it.”
Mr. Kemmere appreciates that some of the companies electing to not pay their bills are in a fiscal tight spot.
“But at the same time, this is starting now to ripple down. Some of my members, it’s putting them close to the line of viability too, and I don’t think we should allow oil and gas companies to put municipalities in that vulnerable situation,” he said.
Mr. Madu said in a statement that his government knows unpaid taxes are having an effect on rural communities and it is addressing the issue.
“We are working to identify potential tools that may help balance the interests of municipalities with the economic realities facing many employers since the 2014-15 downturn [in oil prices],” he said.
“This issue is complex, particularly given some of the companies involved have long since gone out of business. Although we have taken immediate steps to provide industry and municipalities with short-term support in these difficult economic times, we know we cannot kick the can down the road.”
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