Energy Minister Pete Guthrie is issuing a ministerial order under the Responsible Energy Development Act requiring the AER to receive evidence that municipal taxes have been paid when approving licence transfers or new licences.
“While most companies pay their taxes regularly and on time, there are a few delinquent companies that owe overdue property taxes. That is why we’re putting in place this ministerial order – to continue building on our recent work. Our goal is to reduce unpaid taxes throughout the province.”
“Our government is serious about addressing the ongoing problem of unpaid municipal taxes. This problem has lingered for far too long, and while some viable companies have started to pay their back taxes, others are still not getting the message. This direction to the Alberta Energy Regulator will have real consequences for those delinquent companies. In Alberta, we pay what we owe, and it’s time to pay up.”
The departments of Energy and Municipal Affairs have worked together on this directive. Companies will now have to confirm that their unpaid municipal taxes across the province do not exceed the maximum threshold allowed or that they have a repayment agreement in place whenever they apply for new licences or for licence transfers because they’re seeking to sell their assets.
This measure will help reduce unpaid taxes and reassure municipalities and Albertans that companies are financially healthy and able to meet their tax obligations.
“The RMA is pleased to see the province taking action to hold oil and gas companies accountable for paying property taxes. Although only a small number of companies avoid their property tax payment obligations, this issue has had major fiscal impacts on rural municipalities across Alberta. As 41 per cent of unpaid taxes are owed by companies that are currently operating, we are optimistic that this change will have an immediate positive impact in rural Alberta. We look forward to working with the AER and relevant ministries to determine how our members can support the AER in enforcing this new requirement.”
Under Alberta’s liability management framework, which launched in 2020, the AER revised their licence eligibility requirements to include a more holistic assessment of a company’s financial health that is applied through the life cycle of an asset. The new directive strengthens the AER’s approach by making payment of municipal taxes a necessary and mandatory condition for approval, based on available data.
The maximum threshold will be determined after reviewing the AER’s analysis of current licensee information related to unpaid municipal taxes, and in consultation with Municipal Affairs and Energy.
Municipal Affairs and the AER will work together to create an annual list of companies whose unpaid municipal taxes exceed the threshold amount. Companies on this list will be targeted by the AER to provide proof of tax payment. This approach provides the most effective opportunity to collect taxes owed without increasing unnecessary red tape for the many companies already paying their taxes as required.
- Along with the liability management framework, other actions the Alberta government has taken to address the issue of unpaid taxes by oil and gas companies include:
- Municipal Affairs has restored a special lien in legislation to give municipalities priority over other creditors and has provided the Rural Municipalities of Alberta with a $300,000 grant for resources and training related to the special lien.
- Municipal Affairs continues to deliver the Provincial Education Requisition Credit (PERC) program, which gives municipalities a break on their education property taxes by giving them credit for uncollectable taxes on oil and gas properties.
- The government conducted the Unpaid Oil and Gas Property Taxes survey in 2022 and found these key findings:
- A cumulative $220 million in unpaid taxes has been reported by municipalities, with $130 million in tax arrears (including penalties and interest) and the remaining $90 million in cancellations.
- Many of these taxes will not be recoverable outside insolvency proceedings because they are owed by companies no longer operating or because the taxes have already been written off by municipalities, or both.
- A smaller but significant portion of unpaid taxes, approximately $76 million, is owed by companies that are still operating and is potentially recoverable, including through repayment agreements.
- Municipalities have reported they already have repayment agreements in place to help collect $48 million in unpaid taxes. There is further potential for municipalities to recoup another $28 million from companies that are still operating.