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Rural municipalities owed $250M in taxes by oil and gas companies

Oil and gas companies operating in rural Alberta municipalities now owe more than $252 million in unpaid municipal property taxes
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Pumpjacks draw oil out of the ground near Olds, Alta., on July 16, 2020.

Oil and gas companies operating in rural Alberta communities now owe more than $252 million in unpaid municipal property taxes, according to a survey conducted by the Rural Municipalities of Alberta (RMA).

In the 2023 property tax year, about $43 million in unpaid taxes was added to the amount oil and gas companies already owe to rural municipalities. Though this is a slight decline from the $50 million of new arrears recorded in 2022, RMA president Paul McLauchlin said it is a sign of an ongoing lack or industry regulation and accountability.

"While government and industry supporters typically question the RMA’s survey results by arguing that the total unpaid tax amount includes legacy tax arrears that will likely never be collected, an additional $43 million in new unpaid taxes in 2023 indicate quite clearly that this is an active, ongoing issue that continues to make it more difficult for rural municipalities to provide the infrastructure and services that oil and gas companies, as well as other industries and rural resident, rely on," McLauchlin said.

“This issue is not settled; companies continue to profit from Alberta’s resources while ignoring their community obligations and funnelling profits to executives and shareholders.”

Recent changes not enough to solve problem

To address the problem of unpaid millions in municipal property taxes oil and gas companies owe to municipalities, the Alberta government has brought in two major changes in recent years. Municipalities now have a secured status, allowing them to use a special lien to recover unpaid taxes. The Alberta Energy Regulator (AER) was also ordered to not approve license transfers or new licenses to companies owing more than $20,000 in property taxes.

The RMA said these policy changes are a step in the right direction, but noted that only 10 per cent of surveyed members said they had been able to use the special lien status to recover outstanding debts. 

Dozens of companies are operating with few assets, and high liabilities, according to the RMA, creating a situation where the Orphan Well Association would likely be overwhelmed if companies were obligated to immediately pay outstanding property taxes.

“I’ll be blunt. Rural municipalities and all other companies and individuals paying property taxes are being used. We are being used by a small number of zombie oil and gas companies to not only subsidize the taxes they don’t want to pay, but to prop up their very existence. The AER has allowed these companies to operate for such a long time, with such poor financial management, that they are now unequipped to deal with the consequences of them failing,” said McLauchlin.

The RMA is calling on the Government of Alberta to prevent companies from operating if they have unpaid property taxes, and proposing that enforcement be phased in over the coming months based on ability of a company to pay and other factors.

"A phased enforcement approach is a reasonable strategy that will give companies more time to get their financial house in order, with defined timelines and consequences for inaction. Allowing this problem to continue unchecked while offering Band-Aid solutions is simply unfair to Albertans, and will allow a few bad actors to continue to damage the reputation of Alberta’s oil and gas industry,” McLauchlin said.


About the Author: Brett McKay, Local Journalism Initiative Reporter

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