Unpaid Oil & Gas Taxes
Municipalities require a source of revenue to maintain infrastructure and provide services. For all municipalities in Alberta, property taxes are the largest source of revenue. Rural municipalities are highly dependent on property tax revenue from the industries operating within their boundaries, and much of the revenue collected is used to maintain the roads, bridges and other services that industry relies on.
As of February 2021, Alberta’s rural municipalities are facing approximately $245 million in unpaid taxes from the oil and gas industry. The Municipal Government Act lacks tools to allow municipalities to recover unpaid taxes from oil and gas companies, and as such, many municipalities are being forced to reduce service levels or raise tax rates on other property types to subsidize the shortfall.
In 2020, after pausing the Assessment Model Review, a plan that would’ve reduced oil and gas assessments, then-Municipal Affairs minister Tracy Allard said they’ll attempt to come up with a solution during the three-year review of the assessment plan. Instead, the Minister of Municipal Affairs, announced a tax exemption for new wells and pipelines in an effort to attract more investment and incentivise job creation in the industry. The impact of this relief in 2021 is a loss of $725,000 for the County of Wetaskiwin. Since the change in Municipal Affairs Minister in January 2021, it is unclear the future of the three-year review of the assessment plan.
Impacts of Unpaid Oil & Gas Taxes
Over the last 6 years, the County of Wetaskiwin has accumulated $3,219,343 in unpaid oil and gas taxes. The County of Wetaskiwin No. 10 manages 2,028 kilometres of roads and 96 bridge sized culverts, 91 standard bridges and 10 major bridges for a total of 197 structures.
Municipalities have no choice but to recover every dollar not paid in property taxes by the oil and gas industry from other property taxpayers in the form of increased tax rates or reduced service levels. Over the last few years, the County has tried to delay this reality by spending from reserves, reducing capital projects and finding greater organizational efficiencies. However, if the current trend does not change, the County would be forced to raise residential and non-residential property taxes just to maintain the current level of service.
Municipalities are required to collect education property taxes, which they then forward to the Government of Alberta to contribute to Alberta’s education system. Municipalities must forward a set amount based on property assessment regardless of whether they are able to actually collect taxes. The County has forwarded $363,413 in education property taxes to the province that we were unable to collect from oil and gas companies over the last 6 years. In that same time period, the County has also paid approximately $30,000 in Senior Requisition we never collected. The County has recently written off $1,980,343.36 in unpaid oil and gas taxes in order to access provincial relief.
In cases when oil and gas companies approach us to inform us of their challenges in paying property taxes, we are willing to work with them on flexible payment agreements.
The County of Wetaskiwin recognizes the challenges facing the oil and gas industry and has a long history of partnering with companies operating in the area to grow the rural economy. We are willing to work with struggling companies on solutions but cannot move forward constructively when some oil and gas companies are willing to shift their tax commitments to the detriment of other property owners.