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Rural municipalities call for end to oil industry tax break

Municipalities say makes no sense to maintain tax breaks when industry thriving

Rural municipal leaders say it is time to restore a tax break put in place when the energy industry was struggling with plunging world oil prices.

Alberta Municipal Affairs Minister Ric McIver told municipal leaders in a letter following that convention that a three-year tax holiday on new wells and pipelines will be lifted as planned after the 2024 tax year.

However, a well equipment tax dropped at the same time will not be coming back.

“I feel like we’re still catering to the oil industry and the last couple of years have been pretty good to them and they’re still riding on the backs of our ratepayers,” said Lacombe County Reeve Barb Shepherd.

Well equipment tax revenue is plowed directly into the county’s road programs, she said.

“To me that’s the support for the infrastructure that is needed while those guys are driving their heavy equipment up and down our roads,” she said.

“They’re not going to reinstate that and I’m not sure why.”

In Lacombe County, the tax generated on average $25,000 per well.

“We’re not talking about chump change here. For some municipalities, it will probably be in the magnitude of several hundred thousand dollars.

Municipalities have also been awaiting a promised assessment review of oil and gas properties but there has been nothing so far.

A 35 per cent reduction on shallow wells and pipelines introduced in 2019 is also continuing as is are depreciation adjustments for lower-producing wells that result in lower tax bills.

“These two measures were intended as a bridge to the implementation of new assessment models and will therefore be extended until the Assessment Model Review is completed and the regulated assessment models for wells are updated,” McIver says in his letter to Lacombe County.

Rural Municipalities of Alberta chair Paul McLauchlin said he has brought the issue up numerous times with government.

“It’s actually really disappointing. Really, it’s using municipal tax to incentivize drilling, which makes sense when you have a low oil and gas price.

“But the problem we have with it is when you have a high oil and gas price you’re actually leaving money on the table because wells don’t need to be incentivized when the price is high.

“The intent of that tax is to assist in the upkeep, care and attention of roads that are in the service of the drilling activities.”

McLauchlin said he has told various government ministers that continuing the tax break amounts to incentivizing an industry already incentivized by high commodity prices.

“That does not make sense. It’s just not recognizing that commodity prices drive the industry.”

He has so far not received a convincing answer as to why some tax breaks remain in place.

“I think there is an extremely powerful oil and gas lobby that has the ear of government and somehow has convinced this government taxes are a bad thing.

“(However) taxes pay for the infrastructure that helps the oil and gas industry.”

McLauchlin said rural municipalities are happy to do their share and forgo some tax revenues when the province’s premiere industry is struggling. But that is not the case now.

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