Alta.’s oil tax repayment plan called into doubt

Rural municipalities question the effectiveness of a recent directive to force energy companies to pay their property taxes

The Alberta government is directing a provincial regulatory body to deal with unpaid municipal taxes by oil and gas companies.

However, the The Alberta Energy Regulator is a provincial regulatory body tasked to deal with unpaid municipal taxes by oil and gas companies. The provincial auditor says it is not being accountable, landowner advocacy groups claim it’s not following legislation and First Nations want it disbanded.

The provincial auditor says it is not being accountable, landowner advocacy groups claim it’s not following legislation and First Nations want it disbanded.

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As well, a rural municipal reeve recently questioned if the ministerial order to the AER will be enough to rectify a situation that has left counties in the province being owed more than $265 million, according to the Rural Municipalities Association.

“As long as the companies are paying their royalties, they can keep on rolling,” Cypress County reeve Dan Hamilton told councillors during an April 18 council meeting.

“That was a loophole that was hidden that they found afterwards. So, all that big hoopla at RMA was crap.”

In an emailed statement, an energy ministry spokesperson disputed Hamilton’s claim, saying the ministerial order is not connected to royalties.

RMA president Paul McLauchlin said that’s the problem Hamilton was referring to because companies can continue to renege on their commitments to municipalities if they continue to pay royalties.

“Dan (Hamilton) is not incorrect in the statement that if you are not licensing a new facility or transferring facilities, the government hasn’t provided a ministerial order to force them to pay,” said McLauchlin.

“I think that he is exactly correct. The fact is you can sit there and not pay your taxes and still operate if you’re not licensing or transferring assets.”

Rural municipal leaders heard of the ministerial order to the AER at the RMA’s spring convention in March. It was billed as a strategy that “strengthens the AER’s approach by making payment of municipal taxes a necessary and mandatory condition for approval, based on available data,” according to a government news release.

Premier Danielle Smith, who is also one of the MLAs representing Cypress County, reiterated the point at the spring meeting.

“The new directive creates a condition where companies will not be able to transfer or get new well licences unless the regulators are satisfied the taxes have been paid,” Smith said in her address to RMA.

“And we hope this is just enough of a stick to pay their taxes and to make sure the municipalities are made whole.”

However, a revised regulatory AER directive issued on April 13 in response to the ministerial order regarding eligibility for holding licences said outstanding tax and leaseholder payments “may” be used when determining whether a company poses an unreasonable risk.

“(Energy) minister (Pete) Guthrie has directed the AER to make the payment of owed municipal taxes a necessary condition for approval of licenses to oil and gas companies. This condition will be applied to all well licence applications and transfers,” read the statement from the energy ministry.

The AER said it won’t comment on the government’s statement in its release regarding “mandatory” requirements for scofflaw companies to repay outstanding taxes.

Questions to the energy ministry regarding the “mandatory” wording of its release weren’t responded to at all.

McLauchlin said the latest AER directive’s language, which says it “may” look at the issue of unpaid taxes rather than “shall,” is also a frustration for the RMA.

“What the ministerial order has basically told the AER to do is to actually go to the ‘shall,’ ” said McLauchlin.

“But there are parts of the industry that are a house of cards. If it was ‘shall,’ there’s probably a lot of companies that will be insolvent.”

What’s needed is legislation and a review of the AER to ensure that a fully implementable strategy is found and executed as well as MLAs willing to advocate for a solution.

“This needs to be an election issue to really look at the public interest of our resource industry,” he said.

“I think we need to have this conversation now.”

Independent MLA Drew Barnes, who also represents Cypress County, spared no quarter in his criticism of both the government and the AER’s handling of the issues surrounding the regulatory regime governing the oil and gas industry.

“It’s up to the provincial government to make sure that relationship between oil and gas and landowners and the public — the people that own the resource — is strong,” said Barnes, who has yet to indicate whether he’ll run in the May election.

“And we’ve seen four years where the UCP government has neglected to use their time, their majority in the legislature.”

Albertans go to the polls May 29.