Municipalities say Alberta oilpatch policies harming tax base, public interest

A pumpjack draws oil underneath a canola field as a haze of wildfire smoke hangs in the air in Cremona, Alta., Friday, July 16, 2021.THE CANADIAN PRESS/Jeff McIntosh

Alberta's United Conservative government is trying to increase production from the province's declining conventional oil and gas fields at the expense of local tax bases, environmental oversight and the public interest, says the group representing rural municipalities.

Rural Municipalities of Alberta held a town hall meeting earlier this month to discuss the impacts of enacted and upcoming policy changes that they fear will cost them hundreds of millions of tax dollars, weaken rules over failing wells and hamstring regulatory authority.

"Does (industry) need to be stimulated on the backs of rural Albertans?" asked association president Paul McLauchlin. "That's the choice that's being made."

• The information you need to know, sent directly to you: Download the CTV News App

The group has identified five government policies it fears could harm its members.

It says the relaxing of a ministerial order requiring companies to pay municipal taxes before being able to transfer well licences could see unprofitable wells shifted from one unstable company to another, allowing industry to avoid paying for their cleanup.

"There is a risk that allowing assets to more easily be transferred ... could result in assets being transferred to companies that are not well-positioned to operate them responsibly," says a briefing document for association members provided to The Canadian Press.

Municipalities are also concerned about a strategy to keep older, declining wells in production. McLauchlin said the government seems to believe that municipal taxes and regulatory requirements are what's keeping those assets from profitability and plans to reduce both.

"They've said we want a reduction in municipal taxes and that's the solution to revive these old assets," he said. "The rhetoric within industry is that 'We would make it if it weren't for taxes,' which is completely false."

He said moves such as a three-year tax holiday on new wells and pipelines has already cost municipalities nearly $9 billion in reduced assessments. At the end of last year, municipalities were owed $252 million in unpaid property tax.

The province is also reviewing how assets in regulated industries are taxed.

"There are already challenges related to the review scope and process," says the group's document.

The group is also concerned about possible changes to the Alberta Energy Regulator. A report to Premier Danielle Smith from oilpatch insider and conservative activist David Yaeger suggests the regulator should only evaluate technical considerations of project applications.

That would leave the public interest entirely out of those deliberations, said McLauchlin.

"I think it's shocking they want to do that. They would just become complicit and part of the whole industry.

"Who is actually working for Albertans?"

Finally, the association points to ongoing oilpatch support through mandated municipal tax holidays. The briefing document says that between 2021 and 2023, four provincial decisions made without consultation cost rural municipalities $332 million in lost revenue.

"It was done for us -- 'Hey guys, just so you know, you're giving a cut,'" McLauchlin said.

McLauchlin said other values should count as well as energy production.

"I don't care about production if we're going to have oil and gas companies that don't fulfil their environmental obligations or don't pay their taxes. I don't want them."

He said he's voiced his concerns to Smith, Energy Minister Brian Jean, Environment and Protected Areas Minister Rebecca Schulz, Municipal Affairs Minister Ric McIver and a parade of senior bureaucrats.

Jean acknowledged the concerns and said all parties want productive wells in the hands of companies that can pay taxes.

"We are looking for practical solutions to historical issues that nobody was prepared to deal with and have been ignored for decades," he said in an email.

"We will have more on this in the coming weeks."

The briefing documents say municipalities could probably adapt to any one of those changes on their own, but "the cumulative impacts represent significant challenges for rural municipalities."

McLauchlin said the revenue cutbacks come as his members face other significant costs. About $4 billion is needed in bridge repair and maintenance alone.

The province has also increased other expenses, such as policing.

"We are probably going to have municipalities go bankrupt, which hasn't happened since the '30s," McLauchlin said.

He said he has "100 per cent support" for his concerns.

"It's a false narrative that taxation is a limitation to resource extraction but the government is using that false narrative to drive that discussion."

This report by The Canadian Press was first published Aug. 22, 2024.