A pair of Central Alberta municipalities have joined a legal fight to improve their chance of recovering unpaid oilpatch property taxes.
“We’ve had a quite a number of energy companies over the last few years, either go into receivership or declare bankruptcy,” said Lacombe County manager Tim Timmons.
“This is a problem. With the downturn in the economy and the decrease in commodity prices a lot of energy companies are just finding it difficult to make ends meet.”
About $300,000 to $400,000 in taxes have been lost because the companies are not paying.
Among them is Manitok Energy Inc., which operates a number of oil or natural gas wells in the county and declared bankruptcy last year. The company owes the county $28,339 in back taxes and penalties.
Many other rural Alberta municipalities are in the same boat and 11 have launched a legal challenge to improve their chances of recovering tax dollars.
Alberta municipalities have been considered secured creditors when attempting to recover unpaid taxes from an insolvent property owner. However, a 2017 Alberta of Queen’s Bench ruling deemed municipalities unsecured creditors when it came to linear properties.
That status leaves Lacombe County far down the line when money becomes available, usually because a bankrupt company is sold to another oilpatch player. The bankrupt properties — many of which are still producing oil or natural gas — are often unloaded at bargain basement prices.
“So, the net return to creditors is minimal,” he said. “Secured creditors, typically lending institutions such as banks and mortgage companies have secured creditor, which we don’t have.
“We just want to make sure we’re getting our fair share and our ratepayers are not adversely impacted by it.”
Timmons said the municipalities have hired a lawyer who will argue on their behalf to the Alberta Court of Appeal that the municipalities should be considered secured creditors.
“We’ll have to wait and see how that one plays out in the courts,” he said.
“I don’t know how this one is going to turn out. It’s going to be interesting to see because it could be relatively precedent setting when it comes to future receiverships and bankruptcies.”
A lawyer for some of the municipalities said in an email the case was expected to go before a judge in June.
Timmons said the issue extends beyond rural municipalities.
“A lot of the urbans, particularly the big ones, would have linear properties (typically pipelines and rights of way) and oil and gas facilities within their respective boundaries as well.”
Athabasca County, Clearwater County, County of Forty Mile, County of Grande Prairie, Cypress County, Kneehill County, Lac La Biche County, Saddle Hills County and the Municipal Districts of Taber and Greenview are the others involved in the legal action.
pcowley@reddeeradvocate.com
Like us on Facebook and follow us on Twitter