As the energy industry booms again, oil and gas companies have no excuse for not paying more than $250 million in outstanding municipal tax bills, says Rural Municipalities of Alberta.
The organization representing 69 municipalities recently surveyed its members and found $253 million is owed to its members, up three per cent from last year and more than triple from 2018, said RMA president Paul McLauchlin on Tuesday.
“We are at the highest commodity prices since 2007 now. Literally, you cannot have more value from these assets, more cash flow for these companies in the last 15 years.
“It’s incredible to imagine that people are still not paying their taxes. It makes no sense at all.”
In Ponoka County, where McLauchlin is reeve, more than $2 million is owed.
Most oil and gas companies pay their bills, but there are a few “bad actors” who are not and it is having a big impact on many municipalities through recent tough economic times, he said.
Especially galling for many municipal leaders is that nearly half of the money is owed by operating oil and gas companies at a time when profits are soaring.
McLauchlin said the Alberta Energy Regulator (AER) is best positioned to make companies pay what they owe and need to do more to exercise their authority.
“We’re asking the AER full out. We believe they have the tools and the regulations to do this and that’s where we’re going to spend all of our energy,” he said.
“They have the capacity to ask the simple question: ‘Have you paid your taxes?’ If you have not paid their taxes you will not be permitted to operate or have a licensed facility in Alberta. It’s quite simple.”
Reached for comment, an AER spokesperson said the regulatory body would be responding on Wednesday.
In a bid to help rural municipalities balance their books, the provincial government passed legislation restoring the power of municipalities to put a special lien on companies who owe money.
“There’s interest in that,” said McLauchlin. “(But) the oil and gas industry is so complicated the utility of it isn’t going to be super effective in all cases.”
While about half of RMA members say they would like to pursue liens they face in an industry where many assets are jointly owned by multiple companies, some of them numbered companies and some registered in offshore tax havens.
In many scenarios, the cost of chasing outstanding bills outweighs the benefits of recouping the cash.
At the end of 2021, Red Deer County had $7.7 million in outstanding taxes — $6.4 million in linear taxes, which mostly includes energy industry infrastructure. The county wrote off $1.4 million in bad debt in January.
To encourage companies to settle up, the county rolled out a tax payment plan in late 2020, which gives companies 12 to 18 months to work out a plan to pay their back taxes.
The program has proven successful and the amount outstanding is down $700,000 from a year earlier.
County corporate services director Heather Surkan told council in a budget update on Tuesday that the unpaid taxes is “somewhat concerning.”
Like many others, Red Deer County is looking at special liens, however, many questions remain.
“A lot of municipalities are unsure of how we are going to be able to use that special lien power to collect dollars,” she said.
A tax payment plan was rolled out in November 2020 to give energy industry companies more time to pay outstanding taxes. Firms will be given 12 to 18 months to work out a plan to pay their back taxes. Other than the taxes, their accounts must be in good standing.
To encourage companies to pay off their debts, a 16.9 per cent interest charge will be applied as usual. When companies have paid off their taxes, the interest rate will drop to six per cent retroactively.
Property taxes are critical to the survival of many rural municipalities, says the RMA. Seventy per cent of Alberta roads and 60 per cent of its bridges are maintained by rural municipalities and they provide other infrastructure that is critical to the energy industry’s success.
“What some in the industry and government don’t understand is that without rural municipalities the oil and gas industry would be nowhere near as successful in Alberta as it currently is.”
Unpaid taxes just add to the financial pressure rural municipalities are already feeling. Revenues have been whittled down by a three-year tax holiday on newly drilled wells, the elimination of a well drilling equipment tax and a 25 per cent reduction in Municipal Sustainability Initiative grants, a key source of funding for many communities.
On the expense side, rural municipalities have had to pick up an increasing share of policing costs and have growing responsible for affordable housing and other provincial services.
“To say that municipalities have made sacrifices to support the industry and the government is a huge understatement,” McLauchlin said.