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Rural municipalities look to new premier for unpaid oil and gas taxes help

March survey showed more than $250 million owed municipalities
FILE - A cow walks through a field as an oil pumpjack and a flare burning off methane and other hydrocarbons stand in the background in the Permian Basin in Jal, N.M., Oct. 14, 2021. (AP Photo / David Goldman)

Rural Municipalities of Alberta president Paul McLauchlin hopes Alberta’s new premier is serious about tackling unpaid oil and gas taxes.

When the RMA last surveyed its 69 counties in municipal districts and counties last March, more than $250 million in back taxes was owed them by oil and gas companies, most of which were solvent and still operating.

In one of her first news conferences as premier, Smith said she is keen on working with the energy industry to help them meet their tax and well cleanup obligations.

“We’re very encouraged that she acknowledged it and understands that it is causing issues,” said McLauchlin.


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RMA representatives hope to meet soon with the premier, new energy minister Pete Guthrie, and other cabinet members to discuss the problem and how it might be addressed, he said. It is also sure to come up at the RMA’s fall convention set for Nov. 7-10 in Edmonton.

Despite the positive change in the energy industry’s fortunes thanks to rising oil prices, tens of millions of unpaid taxes are still outstanding by a small percentage of problem companies.

“It’s still an issue. People keep asking me, ‘Oh, you’re good now — right?’ And surprisingly, we’re not,” he said. “I don’t have the statistics, but anecdotally, it’s not much better than it was a year ago, sadly enough.”

“Even folks in the industry cannot understand why surface leases and taxes aren’t being paid. They’re alarmed by it,” he said, adding that some companies jointly own assets with companies that aren’t paying their tax share.

It is too early to see if Smith has any new approaches to offer, he said.

The RMA believes the solution is for the Alberta Energy Regulator (AER) to exercise its authority to not issue drilling licences to any company that has not met its surface lease and tax obligations.

“(The AER) will not do it. I don’t understand why they won’t do it but they have no interest in doing it as it stands right now.”

RMA members passed a resolution at its spring conference calling on the province to direct the AER not to issue licences to companies unless their tax and lease debts are paid and to develop a better system so municipalities can more easily share information on unpaid taxes.

Smith said recently that in speaking with pipeline companies, they have told her among the problems they face is that pipelines often cross a number of municipalities and the “mill rate goes all over the map and they want to try to get some certainty there.

“That’s one of the things that I challenged them is to come up with a joint proposal to see if we could move quickly to make some of those amendments and that will, I think, make it easier for our energy companies to be in compliance with their obligations.”

Smith said she also has spent the last 18 months advocating for a royalty credit program that would help address the $30 billion in unfunded liability on industry books.

Smith said Alberta should start with some of the worst wells and flare pits that have been around since the 1960s and develop a process on how to get those cleaned up.

“If we can do that and reduce the liability rating on our small- and mid-sized producers I think that will allow them to access capital, which will allow them to do more drilling.

“I’m highly motivated to see if we can start a pilot project on that program to see if it will help initiate and build on some of the reclamation work that was done through COVID.”

A $1-billion federal cleanup funding was not all used because of some “internal inefficiencies,” she said.

“But I don’t think we want to lose any of that momentum. If we can make sure we develop a program where the companies that get rewarded are the ones that are in compliance on their municipal tax bill and in compliance on their landowner lease bill then I think that will benefit, not only the municipalities to rely on those dollars but also the companies that want to do continued drilling.”

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