Municipalities not happy about Alberta changes to unpaid oil and gas property taxes

STETTLER – Over the past several years municipalities in Alberta, particularly rural ones, have been unhappy about how unpaid property taxes in the oil and gas industry have been handled. 

One of the few options open to rural municipalities to recover any of the taxes owed to them has been weakened by the Government of Alberta.

The week of July 15 the Canadian Press (CP) reported Premier Danielle Smith’s UCP government will relax rules on how unpaid property taxes are handled when oil and gas assets changes hands. 

Minister of Energy Brian Jean confirmed in an email to the CP his office is changing the way unpaid property tax bills owed to municipalities will be handled when it comes to primarily defunct oil and gas companies because it’s causing industry to shy away from buying assets. 

Over a year ago Jean’s ministry sent a letter to the Alberta Energy Regulator (AER) suggesting that before oil and gas assets change hands, any existing unpaid property taxes should be taken into account.

According to a 2024 AER letter obtained by the CP through FOIP legislation, that direction has had a chilling effect on asset transfer in the oil and gas industry. 

"If the (order) continues to be applied as written ... there is a high risk that any sales processes contemplated will either not be initiated or will not be successful in transferring assets to new parties," the CP quoted the AER letter as saying.

Therefore it looks like the energy minister will backtrack, although exactly what he plans to do was not made clear.

It’s common knowledge in Alberta that the oil ands gas industry, especially among small and mid-level companies, is quite fluid; that is, companies come and go on a regular basis with assets and liabilities left in their wake.

While municipalities have powers granted them by the provincial government’s Municipal Government Act (MGA) when it comes to recovering unpaid property taxes, not so when it comes to energy industry property owners who find themselves in that situation. 

In fact, local governments can do almost nothing in those situations.

The County of Stettler has been noteworthy in its criticism of unpaid oil and gas industry property taxes, noting in its meetings the municipality has been left holding the bag for millions of dollars.

Reeve Larry Clarke stated municipalities have an iron in this fire and should be part of the decision-making process. “Before decisions such as this are made by AER and Alberta government, more consultation has to be had with affected municipalities and the Rural Municipalities Association (RMA) as we are the support and infrastructure where these wells, pipelines and facilities are located and will produce,” stated Clarke in a July 16 email.

“If taxes are not paid by these companies, odds are land lease rentals to our residents and the good tax paying folks of Alberta have also not been paid so they are really paying twice and have no say or input into these decisions. 

“As I have always said, you don’t see many oil or gas wells in cities of Calgary or Edmonton.”

County Chief Administrative Officer (CAO) Yvette Cassidy noted the County of Stettler wants to work with the energy industry.

“The County of Stettler wants oil and gas to pay their property taxes,” she stated in a July 16 email. “However, in the past we have worked with producers in our area that have proven track records of paying their property taxes and supporting their communities with purchasing assets from a defunct company or purchasing viable assets from the orphan well association.

“We believe viable wells that can be put back into production benefit our farmers with lease revenue, the county with property taxes going forward, and our oil and gas companies.  

“By doing this we have in the past forgiven the back taxes associated with the well and once the asset transfers to the new company we start to accrue ‘new’ property taxes.

“We are well aware that once a well or pipeline goes to the Orphan Well Association no revenue will be generated for farmers or property taxes the county. We need the Province to step up and pay municipalities and farmers for back taxes and lease payments without taking viable oil and gas wells out of service.”

Stu Salkeld is a Local Journalism Initiative reporter with The Canadian Press.