Municipal Affairs minister wants responsible entities to take over viable wells

Municipal Affairs Minister Ric McIver speaks with Alberta Primetime host Michael Higgins about the concerns raised by municipalities about collecting unpaid oil and gas well taxes.

This interview has been edited for length and clarity.

Michael Higgins: How are you addressing the RMA’s latest concerns over the handling of oil and gas well tax arrears?

Ric McIver: This has been ongoing for a period of time and we've tried to address it a couple of times but clearly since there's outstanding, unpaid taxes, there's more work to do. A couple years ago, the previous time I was municipal affairs minister, we passed, I think it was Bill 7, which actually put the municipalities in a better position to recover some of, or all in some cases, what they were owed in court. What the municipalities told me was that was helpful, but not yet helpful enough because of course, there's still unpaid oil and gas taxes going on. To be clear the vast majority of companies in the oil and gas business are responsible citizens, they pay their taxes, they pay their bills, they look after their responsibilities, environmental, financial, etc., without any problems but there is a minority who are causing disproportionate pain to, amongst others, municipalities by just not paying their bills. It isn't right, everybody has to pay their taxes, and I would say maybe most of us don't like paying our taxes but we all do. We certainly like the services that taxes provide. So we need to keep going after these bad behaving companies until we put an end to what is currently going on.

MH: Why then relax the rules on the sale of certain wells that municipal taxes are left unpaid and that's leaving municipalities with a shortfall? So if there are viable wells that are destined for maybe abandonment, they’re maybe not selling because there are still taxes owing on it, and the new buyer doesn't want to pay the extra taxes.

RM: I'm not sure that you characterize it correctly when you say relaxing the rules. It's something that is under discussion right now between the Alberta Energy Regulator and the energy ministry and the municipal leaders. I think what you characterize as relaxing the rules, it's a way to squeeze as much value for taxes for municipalities as can be squeezed, to make sure that they get paid as much as possible.

Now the fact is, on the number, and I won't even quibble for what number the municipalities use and get some $251 million but that does include a number of things that they're aware of, for example, the taxes owed by companies that haven't operated or haven't been in business for, in some cases, a number of years. In other cases, companies that are essentially insolvent and there's only a matter of time until they tip over from that into being gone. All of that is a problem but in terms of being as productive as we can in partnership with municipalities the real objective at this point is, first of all, those who behaved badly, get them out of business, because anybody else that doesn't pay their taxes doesn't get to carry on indefinitely operating their business. And the ones that are operating viable entities, viable wells, viable production facilities, have to be required to pay their taxes or they need to cease to be able to operate the way they are now.

One of the things that I don't think has been decided yet but that's been under discussion, is to get as much money for municipalities as possible. If a well is operating, it's viable, they're producing enough to make money, to get it in the hands of a responsible operator. Because the irresponsible operators that are operating some of them now are not paying anything. So if you get them in the hands of a responsible operator then the responsible operator will start paying the taxes. I guess what you call a relaxation is a consideration, and I don't think it's been decided yet but it is under discussion, and including the municipalities because they are affected by it. If a responsible operator gets a hold of these producing wells they will start paying the taxes from this day forward and because otherwise the other option is to not collect anything and have the well go unproduced forever and then everybody loses, including those that hold jobs there all the way around. So under the circumstances, we're trying to do the best we can for municipalities and with their input, to be clear.

MH: There is still this sum total of more than $250 million. What hope do municipalities have, though, that that figure won't continue to rise?

RM: I don't think anybody knows for sure whether it will or not, which is why we need to work together with them to try to put an end to those that behaved badly, to put all wells, producing and otherwise, in the hands of a responsible entity and those that aren't paying their taxes, get them out of business. They need to go and we need to work with municipalities on further mechanisms to make that happen. All these dollars that are owed are important and I guess we'll have to work with the municipalities to find out how many of those are simply unpaid taxes and what percentage of that is fees and penalties that the municipalities have piled on to unpaid taxes. And municipalities certainly have the right to add fees and penalties onto entities that don't pay their taxes but if the entity is financially insolvent we need to actually work with them to get down to how much is actually collectible and then collect it. And also make sure that the producing wells are in the hands of the responsible entities, which is the vast majority, to put an end to what has been bad behavior of a number of operating and non operating companies.

MH: We had the mayor of St. Albert on recently. Cathy Heron expressed concern over delays in the provincial and federal governments coming to an agreement on the Canada Community Building Fund, federal dollars for municipal infrastructure projects. You've now renewed that agreement with Ottawa. To what degree did it need to be renegotiated?

RM: Big time. It started out, this fund, the Canada Community Building Fund, started out as gas tax based on the amount of gasoline purchased in each jurisdiction, 15, 20 years ago. I don't know exact number of years. But the fact is, it's been a very positive program through the federal government, where they feed the money to municipalities through the province and it's been working great. Basically with complete flexibility for municipalities to spend the money on whatever their infrastructure needs have to be but this time around the federal government added on a whole bunch of conditions where it wouldn't have worked at all for many municipalities and they were cutting deals directly with municipalities. The fact is the conditions that they added on would have been much less advantageous for the municipalities, a lot more red tape. So we negotiated with the federal government, we didn't get it right back to where it was before with complete flexibility with municipalities but we did get it back, I'd say, 90 per cent of the way to a place where it's flexible enough that every municipality will get the money, they'll be able to use it for infrastructure needs that they have, and we were happy to have been able to negotiate back close to where we were before. And we're grateful to the federal government and we'll move as quickly as we can now to get that money in the hands of municipalities. And really the delay that Mayor Heron was talking about was really brought on by the federal government by putting all kinds of red tape that did not exist in this ongoing program.