Unpaid taxes by the oil and gas industry has reached a crisis point for Alberta rural municipalities, says Paul McLauchlin, president of the Rural Municipalities of Alberta (RMA).
A survey conducted by RMA has identified that approximately $245 million is currently outstanding to rural municipalities from oil and gas companies, and provincial legislation limits the actions they can take to recover the money. Fifty-seven per cent of these companies continue to operate.
Climbing from an estimated $173 million last year and $81 million the year before, RMA says it is threatening the ability of rural municipalities to provide core infrastructure and services. For some counties, it has become a question of viability.
"The go-forward is shocking," says McLauchlin. "I could use the term quarter-billion dollars of unpaid municipal taxes. That is a big deal for all of the municipalities in this province."
"If it continues on this trajectory, we're dealing with a viability conversation, and I think that that's a very huge conversation for a lot of municipalities. This is a very significant stressor on some of the folks that we represent."
Unlike most residential and commercial property, municipalities aren't allowed to place liens or use other tax recovery tools on linear property, leaving rural municipalities powerless to recoup the outstanding taxes.
There are some good reasons why. Should municipalities place liens upon properties where assets of oil and gas companies are located, it would impact the landowners, like farmers, not the companies. Additionally, many oil and gas assets move from one site to another.
RMA believes the Alberta Energy regulators could make it a requirement for all outstanding municipal taxes to be paid before companies acquire or transfer energy licences or are given additional approvals.
Also attached to these properties are educational taxes. Like urban municipalities, rural municipalities collect the funds on behalf of the province. Should any be outstanding, the municipality is required to cover the cost, in essence, passing that bill on to other ratepayers.
The Alberta government created the Provincial Education Requisition Credit (PERC) to provide municipalities with an education property tax credit equal to the uncollectable education property taxes on delinquent oil and gas properties. It was originally designed to run from 2015 to 2019 but has since been extended two years.
Millions have been recouped this way, but it's a burdensome process. First, municipalities must to write-off the taxes, hold them as a liability, then apply to be compensated through PERC, if funds are available.
RMA says most oil and gas companies pay their taxes on time. McLauchlin can't help wonder what they think of the companies who don't.
"Some of them have to be upset that there's a bunch that aren't paying their taxes and are still operating on the landscape. It's got to be tremendously frustrating to portions of the industry that are doing what they should do."
"The real concern I have is really what's the offset of this? And the offset is unpaid oil and gas taxes eventually get offset to the regular ratepayers."
"The fact is that the average rural Albertan doesn't want to pay someone else's taxes."
He says RMA isn't in a scrap with oil and gas companies or Alberta Municipal Affairs. Rather, they are looking for solutions.
"We note that it's complex, but it's also provincewide, and it's also getting worse. So, immediate solutions need to be found. Then we need to backfill all those holes that exist because we need to future-proof this for any situations that may occur in the future."
McLauchlin is from Ponoka County and says they have an open-door policy for those behind on tax payments.
"We're compassionate. We're looking for some prudent solution-focused results and that's how we function, that's how we work as a municipality. And truth be told, that's how all municipalities work. We just want to make sure we're building our communities and not offsetting burdens onto our ratepayers."
He says there are ongoing discussions with Alberta Municipal Affairs on the issue.