After hitting the pause button on plans to help Alberta’s oil and gas companies by reducing taxes levied by rural municipalities, the provincial government said it has come up with a solution that will help both sides.
“I feel with our decision today, we have balanced the needs of both municipalities and the oil and gas industry,” said Municipal Affairs Minister Tracy Allard. “It was tapping into the collective wisdom of the leadership across Alberta’s municipalities and industry that helped us land here today.”
No property taxes will be charged on new wells and pipelines for three years “to kickstart investment for the energy here in Alberta,” she said during a news conference Oct. 19. “This will be reflected in the 2021 assessed values, and applied for taxation in 2022, 2023 and 2024,” she said.
Other measures by the provincial government include eliminating a tax on well drilling equipment.
“It will provide effective incentive for future investment decisions for our industry partners at a time when we need it more than ever,” she said.
Alberta’s energy industry has been hard hit by everything from plunging oil prices and the COVID-19 pandemic to a growing world movement to minimize climate change.
As a result, the provincial government had proposed giving the industry a break on property taxes, with four potential tax models unveiled in July. The initiative alarmed rural leaders, who feared that a mainstay of their tax base would be given away at the expense of rural landowners such as farmers.
President Al Kemmere of the Rural Municipalities of Alberta (RMA) agreed at the news conference that it is important to have both a “good, strong oil and gas industry” as well as good, viable municipalities.
“This is about trying to find that balance and the government I believe has a found a balance at this point to try and mitigate the costs and mitigate the challenges at the same time,” he said.
The changes are nowhere near the previous tax models, he said, adding Allard has pointed out that “the significant changes in this will take place further down the road rather than immediately, especially when it comes to the well drilling tax and the new taxes on new drills.”
But he added “this is going to be a challenge for my members, because when you see the reduction in the assessed value of the property that immediately plays onto the tax roll of those municipalities, when we see a tax holiday for new drills, those incentives are great incentives to help industry and I credit them for that — but the challenge is those municipalities are going to be out those tax dollars.”
One of the biggest problems faced by rural municipalities is unpaid taxes, he said. “We’ve seen $81 million two years ago, $173 million last year, of unpaid taxes, and if we don’t fix that in the near future, all these modifications are going to be for naught because it is going to leave my member municipalities without that ability to make sure that the tax collection is treated the same way as every other taxpayer,” he said.
Although it varies, the largest portion of the budgets of rural municipalities typically goes toward maintaining and improving rural roads and bridges vital to agriculture, said Kemmere during an earlier interview. After consultation with rural municipalities and other stakeholders, the provincial government put the process on reset, he said.
Allard said “this was a very complex and nuanced decision, as each factor caused a domino effect. We had to think about the proposed assessment changes and how they would impact things like education taxes, municipal collaborative frameworks, police funding, seniors and recreation funding, and ultimately, all ratepayers, both commercial and residential ratepayers.”