Tax relief welcome to local oil and gas companies

By Deirdre Mitchell-MacLean Times Contributor

Oil and gas companies have been going through a difficult time since the downturn and rural Alberta is no different.
What is different this time is the number of companies that can no longer afford to pay their property tax bills.
When Trident Exploration Corp. folded in May, not only did their asset wells, pipelines and facilities become public liabilities, but their taxes also went unpaid. In nearby Kneehill and Starland counties, it left the coffers lacking.
“Since 2013, Kneehill County has seen its overall assessment decline by 25 per cent or approximately $500 million in assessable properties,” stated a press release from Kneehill County.
Matthew Kreke, chief administrative officer in Starland County, said the accumulative loss “amounts to 20 per cent or just over 20 per cent of our revenue.”
Wheatland County relies on non-residential taxes for almost 78 per cent of its tax revenue. The county has a lot of wells.
Shawn Roth, senior adviser, external communications with Alberta Energy Regulator, dug up some numbers recently.
“Currently Wheatland County has 7,956 active wells, 1,267 inactive wells, (and) 1,586 abandoned and reclaimed wells,” he said.
Active and inactive wells are assets that are currently owned and maintained by an active company. Reclaimed wells don’t necessarily mean they went through the Orphaned Well Program as some companies reclaim them fully after they are shut down. Assets being looked after are not the ones surface rights groups in the province are concerned about.
“Action Surface Rights has been concerned about the clean up costs for some time,” said Darryl Bennett with Action Surface Rights. The estimated costs, he noted, “vary between $35 and $100 billion dollars.”
Bennett expressed doubts all companies are financially capable of meeting the costs, especially as the downturn continues.
The provincial government, added Bennet, has made it easier for businesses to obtain licenses but has yet to rectify the “backlog of landowner claims to (the Surface Rights Board) for unpaid rentals.”
In early July, the Alberta government announced additional tax relief for rural oil and gas companies that may still be feeling the pinch of low gas prices.
Doug Dafoe, CEO of Ember Resources operating in Wheatland County, said relief was both “welcome and badly needed.”
“We have struggled for years with a property tax assessment system that drastically over-values our wells and pipelines for tax purposes,” said Dafoe. “We appreciate how quickly the new government has recognized the severity of the problem and acted to protect this vital industry in central and southern Alberta.”
The tax relief for shallow gas producers in rural Alberta is supposed to be a temporary measure to assist companies while market prices remain low.
“To ensure municipalities don’t suffer from lost revenue, the province will reduce the amount of education property tax they pay to the government,” reads a statement on the government of Alberta’s website.
The counties of Kneehill, Newell, Starland and Wheatland are included in the municipalities offering the discounted tax rates.