Alberta’s energy minister is issuing a ministerial order that calls on the Alberta Energy Regulator to require oil and gas companies to pay taxes owed to municipalities before approving licence transfers or new licences.
Global News has asked the province if there are any additional powers in place to hold companies who aren’t seeking licence transfers or licences accountable.
The Alberta government’s 2022 survey of oil and gas companies found $220 million in unpaid taxes reported by municipalities, with $130 million in tax arrears (including penalties and interest) and $90 million in cancellations.
“Many of these taxes will not be recoverable outside insolvency proceedings because they are owed by companies no longer operating or because the taxes have already been written off by municipalities, or both,” the United Conservative government said in a news release Monday.
About $76 million of those unpaid taxes are owed by companies that are still operating, the province said, meaning that money is “potentially recoverable, including through repayment agreements.”
Municipalities have repayment agreements in place to help collect $48 million in unpaid taxes, the province said.
The ministerial order was issued under the Responsible Energy Development Act, requiring the AER to receive evidence that municipal taxes have been paid when approving licence transfers or new licences.
“While most companies pay their taxes regularly and on time, there are a few delinquent companies that owe overdue property taxes,” Energy Minister Pete Guthrie said. “That is why we’re putting in place this ministerial order – to continue building on our recent work. Our goal is to reduce unpaid taxes throughout the province.”
Under the ministerial order, companies will have to confirm that their unpaid municipal taxes across the province do not exceed the maximum threshold allowed or that they have a repayment agreement in place whenever they apply for new licences or for licence transfers because they’re seeking to sell their assets, the UCP government said.
The maximum threshold has not yet been determined. The province says it will be set after reviewing the AER’s analysis of current licensee information related to unpaid municipal taxes, and in consultation with municipal affairs and energy.
Unpaid municipal taxes from the Alberta oilpatch keep rising despite the industry’s boom, the province’s rural communities say.
“This is the worst ever,” said Paul McLauchlin, president of Rural Municipalities of Alberta, which released the data on March 7.
“We’ve got a serious problem.”
The group says energy companies now owe towns and villages in which they operate a total of $268 million. That’s up more than six per cent from last year and up 261 per cent since 2018, when the association began keeping track.
As well, the rate of nonpayment is increasing.
Previously, the province’s UCP government told the AER that it “may” use factors such as tax arrears in ruling on whether to allow transfers of energy assets.
Municipalities can submit statements of concern on applications for licence transfers if the companies involved have unpaid taxes. Municipalities can also attach liens to property if taxes go unpaid.
“The RMA is pleased to see the province taking action to hold oil and gas companies accountable for paying property taxes,” McLauchlin said in a news release Monday.
“Although only a small number of companies avoid their property tax payment obligations, this issue has had major fiscal impacts on rural municipalities across Alberta,” he said.
“As 41 per cent of unpaid taxes are owed by companies that are currently operating, we are optimistic that this change will have an immediate positive impact in rural Alberta.
“We look forward to working with the AER and relevant ministries to determine how our members can support the AER in enforcing this new requirement,” McLauchlin added.
The province said its municipal affairs ministry and the AER will work together to create an annual list of companies whose unpaid municipal taxes exceed the threshold amount.
Companies on this list will be targeted by the AER to provide proof of tax payment.
The Opposition NDP called the directive late and hypocritical.
“For years, the UCP let the issue of unpaid municipal taxes grow and ignored calls from rural municipal leaders and the Alberta NDP to use the power of the AER to withhold licences from these bad actors,” NDP municipal affairs critic Joe Ceci said in a statement.
“The government could withhold licenses to incentivize the cleanup of wells, and in fact, rural municipal leaders have been calling for this tool to be used. Instead, Danielle Smith wants to give away $20 billion of Albertans’ money to delinquent companies for something they are already obligated to do.”
–With files from Bob Weber, The Canadian Press