Struggling oilpatch leads to $600,000 Lacombe County tax writeoff

Bankruptcies in oil and gas industry biggest reason for unpaid tax bills

Alberta’s oilpatch struggles led Lacombe County to write off another $600,000 in unpaid tax bills Thursday.

That’s on top of about $374,000 in oil and gas property taxes dating back to 2016 that had already been deemed uncollectible and written off this past December.

Michael Minchin, county manager of corporate services, said Thursday most of the unpaid tax bills are connected with industry bankruptcies, some of which have taken years to finalize.

Anticipating the financial pressure large unpaid tax bills would put on the budget, the county had built up a special account to offset tax losses. About $504,000 of the latest unpaid taxes will come from that account, and the remaining $95,828 will be absorbed in this year’s budget.

The writeoffs from 10 companies do not include payments that will not be collected through a provincial government program that encouraged municipalities to reduce taxes for shallow gas companies by 30 per cent.

Under the terms of the program, the Alberta government will offset lost taxes by reducing the school requisition by the same amount.

That compensation has not been offered for next year and municipalities have expressed concern about how their budgets will be affected.

Minchin said tracking down who owes what has not been easy for municipalities, or the provincial government. It is not uncommon for as many as five companies to have part ownership of a single well.

Recent court decisions have also complicated tax collection for municipalities. A much-watched Supreme Court of Canada decision earlier this year said oil and gas companies must fulfill their environmental obligations before paying back creditors.

“As a result, municipalities have a much lower position in the bankruptcy process,” said a report Minchin prepared for council.

An Alberta Court of Queen’s Bench decision earlier this year also handicapped municipalities’ efforts to get their back taxes when an oil or gas company’s assets are sold off in bankruptcy.

The decision says a share of money raised from the sale of a well can only go to the municipality where the well is located.

Municipalities had argued a company’s assets should be treated as a single pool that could be distributed to various jurisdictions.

There appears to be some light at the end of the tunnel.

“The good news is there has been a fairly limited number of bankruptcies in 2019,” Minchin told council.

From 2016 to 2018, oil companies were being hit the hardest and made up most bankruptcies. Natural gas companies are now the ones feeling the pain.

“That’s as much a product of really low gas prices, more than anything,” he said.

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