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Red Deer County owed $8 million in unpaid oil and gas taxes

County council wrote off nearly $2.3 million in unpaid taxes to access provincial tax credit
Red Deer County council voted on Tuesday to write off nearly 42.3 million in unpaid oil and gas taxes to qualify for $443,000 in provincial tax credits. (Advocate file photo)

Despite rebounding world energy prices, Red Deer County is owed more than ever in unpaid oil and gas taxes.

About $8 million in taxes remained unpaid at the end of 2022.

On Tuesday, county council voted unanimously to write off just under $2.3 million in unpaid oil and gas taxes. The move allows the municipality to recoup $435,000 in education taxes levied on oil and gas properties that the county had to collect on behalf of the province but did not actually receive from companies. Another $8,600 in industrial taxes can also be recouped.

Since 2019, the county has written off $7.8 million in taxes to receive $1.3 million in tax credits from the province.

Several county councillors expressed their frustration with the latest tax write-off.

“It’s not a good story. It’s not good news for us as a municipality,” said Coun. Christine Moore.

The write-off is necessary though for the county to receive the province’s refund through a program rolled out several years ago when oil and gas tax liabilities began soaring, putting some energy industry-dependent municipalities in a precarious financial position.

“At least it’s something,” said Moore of the $443,549 tax credit.

Coun. Brent Ramsay also voiced his concern with adding another tax write-off to the county’s books.

“I know this is one always gets the public a little excited because it’s not a nice-looking line item. But it’s necessary.”

Ramsay said unpaid oil and gas taxes is a top issue for the Rural Municipalities of Alberta (RMA), which represents the province’s 69 counties and municipal districts, and he is optimistic there could be some help coming.

“Hopefully, in the next few months we’ll see improvements in this area,” said Ramsay.

Mayor Jim Wood wants council to consider reviving a county tax payment plan that was rolled out during the pandemic to help companies in tax arrears settle their bills by reducing late payment penalties for companies committing to a repayment schedule.

“That’s something we could definitely look at again,” said county corporate services director Heather Surkan.

Collecting the unpaid taxes has been a headache for Red Deer County and another municipalities. The RMA surveyed its members in February 2022 and found $253 million in taxes were owed by oil and gas companies. Another survey has just gone out and a new tally is expected by the end of this month.

Surkan said the county has already sent in its numbers.

Meanwhile, the county continues to do what it can to chase the tax delinquents. While taxes may be written off to get the government credits, the county does not stop pursuing the companies that owe money.

It is a difficult job and takes a considerable amount of staff and legal time, Surkan told council.

Provincial legislative changes that make it easier for municipalities to place liens on oil and gas assets have proven cumbersome and of limited value.

“We’re struggling with the actual operation of these new tools,” Surkan told council.

Amendments passed in 2021 automatically apply a lien to oil and gas properties with outstanding taxes. However, municipalities must still get in line behind debts owed the province, including the Alberta Energy Regulator and the Orphan Well Association. If insolvency proceedings don’t generate enough money to pay secured creditors, municipalities remain out of luck.

As well, liens can only be applied to assets within the municipality owed taxes. If those assets are not sold, the municipality cannot collect.

“We are still in discussions with our legal team to investigate the possibility of other steps or tools we could use to recover these outstanding tax dollars,” said Surkan.

Collecting oil and gas taxes has been made even more difficult by the complicated financial dealings, bankruptcies and asset buying and selling triggered by the energy industry downturn.

One of the biggest failures was Trident Exploration Corp., which shut down in 2019 and walked away from its 4,700 wells. At the time, the company had nearly $330 million in abandonment and reclamation obligations.

Trident owes Red Deer County $2.5 million and counting. Even though the company has ceased to exist and most of its assets sold off, the county must still collect taxes on former Trident assets.

To further muddy the tax waters, in some cases the new owners of oil and gas assets are not responsible for past unpaid municipal taxes.

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