Alberta's oil and gas tax policies threaten rural viability, municipalities say

Pumpjacks draw oil out of the ground near Olds, Alta., Thursday, July 16, 2020. THE CANADIAN PRESS/Jeff McIntosh

The Rural Municipalities of Alberta (RMA) says a series of Government of Alberta policy decisions have cost its members $332 million in tax revenue over the last three years, and the group is urging the province to make changes to ease the financial strain on rural communities.

“This is not just about taxes—it’s about the long-term viability of rural Alberta. Municipalities need stable revenue streams to support roads, bridges, and services that benefit both residents and the oil and gas industry. Instead of that, we’re seeing the implementation of policies that equate to a handout of companies, many of which, quite frankly, don’t need them,” said RMA President Paul McLauchlin.

McLauchlin said policy decisions that cut costs for the oil and gas industry failed to consider the impact on the rural communities those companies operate in.

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RMA identifies four issues that have resulted in lost revenue it says threatens long-term rural sustainability: the elimination of the well drilling equipment tax, a 35 per cent property tax reduction on shallow gas wells, a temporary tax holiday on new wells, and millions in unpaid taxes from the oil and gas industry.

The well drilling equipment tax rate was set to zero in 2020, one of several government of Alberta incentives it said were needed to keep the province’s energy sector competitive during an economic downturn.

Though the tax was originally slated to return in 2024, Municipal Affairs Minister Ric McIver notified municipalities in December that the province intended to eliminate the tax rather than reinstate it.

The tax can net municipalities up to $25,000 per well, and its absence has been a huge hit to rural coffers. Athabasca County has estimated it missed out on $430,000 in income from wells drilled in 2021 alone.

An RMA survey of its members found that at the end of 2023, oil and gas companies owed at least $251 million in unpaid municipal property taxes.

“If the policies were designed to spur a particular type of growth or activity in specific regions, municipalities may be open to supporting them. Instead, we see broad industry subsidization, with no reporting or measurement of if or how the reduced tax payments led to more activity, or whether money saved was reinvested in Alberta,” McLauchlin said.

RMA says it will be releasing a series of reports in the coming weeks that highlight the financial impacts these policies have had on rural municipalities and make policy recommendations to the province.