Alberta acts against energy firms who collectively owe $268 million in unpaid back taxes

Alberta is taking action to force oil patch companies to pay their municipal taxes, starting with reminders from provincial ministers to those in arrears.

Alberta acts against energy firms who collectively owe $268 million in unpaid back taxes
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Alberta is taking action to force oil patch companies to pay their municipal taxes, starting with reminders to those in arrears from provincial ministers.

Earlier this month, Rural Municipalities Alberta (RMA) said energy firms owed $268 million in back taxes as of last year — up 6% from 2021.

In addition, unpaid taxes increased from $38 million to $53 million during the same period, with the province writing off $150 million as unrecoverable.

Energy Minister Peter Guthrie intends to issue a ministerial order under the Responsible Energy Development Act that blocks companies from acquiring or transferring licences on wells or other assets if their unpaid taxes exceed a threshold. 

"While most companies pay their taxes regularly and on time, a few delinquent companies owe overdue property taxes," said Alberta Energy Minister Peter Guthrie.

"That's 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."

The Alberta Energy Regulator (AER) and Alberta Municipal Affairs (AMA) have yet to decide on that threshold, but those who exceed it will face collections once established.

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.

Before signing off on the idea, Municipal Affairs critic Joe Ceci wants more details on the proposed threshold, stating the policy is "ok."

The UCP said the measure would reduce unpaid taxes and reassure municipalities and Albertan companies that are financially healthy and able to meet their tax obligations.

"It's too little too late," Ceci told reporters. "They should have been acting a lot quicker."

In April 2021, the AER shut down the operations of the foreign-owned enterprise SanLing Energy after years of not paying landowners, municipal taxes or local vendors. It owed $67 million in security payments to the AER concerning well sites and infrastructure decommissioning.

Despite the outstanding issues, AER's compliance dashboard flagged SanLing six times previously for failure to decommission 2,266 wells, 227 facilities and 2,170 pipelines. 

It also did not adhere to regulator orders to complete a detailed operation plan for its suspension tenure.

Municipal Affairs Minister Rebecca Schulz reassured Albertans that the UCP "is serious about addressing the ongoing problem of unpaid municipal taxes."

"This problem lingered for too long, and while some viable companies started to pay their back taxes, others are still not getting the message," said Schulz, adding this will have real consequences for those delinquent companies. 

"In Alberta, we pay what we owe, and it's time to pay up."

Paul McLauchlin, president of RMA, said the move could solve up to 80% of the problem.

"I would give the program an A," he said. 

"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," added McLauchlin, who acknowledged that setting a threshold instead of requiring companies to pay what's owed is a compromise. 

He said many energy companies struggle to survive despite high oil prices, with 41% of unpaid taxes owed by companies currently operating in Alberta.

"We've got some fundamental realities in this industry — excessive liabilities and low asset values. We understand the struggles folks are in."

McLauchlin said the announcement sets some guidelines and best practices for making good on unpaid taxes.

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 RMA is pleased to see the province taking action to hold oil and gas companies accountable for paying property taxes."

"Companies are under extreme pressure to correct their books," he said. "We're optimistic this change will have an immediate positive impact in rural Alberta."

Gabrielle Symbalisty, a spokesperson with Alberta Energy, said a letter from the ministers was sent to a list of companies with unpaid municipal taxes.

The UCP said Municipal Affairs and the AER would work together to create an annual list of companies whose unpaid municipal taxes exceed the threshold amount. The AER would then target companies on the list to provide proof of tax payment.

The Alberta government commended the approach, claiming it provides the most effective opportunity to collect taxes owed without increasing red tape for the many companies already paying their taxes as required.

Along with the liability management framework, the UCP has taken other actions to address the issue of unpaid taxes by oil and gas companies.

Municipal Affairs has restored a special lien in legislation to give municipalities priority over other creditors and has provided the RMA with a $300,000 grant for resources and training related to the special lien.

Municipal Affairs also 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 uncollectible taxes on oil and gas properties.

The UCP conducted the Unpaid Oil and Gas Property Taxes survey in 2022. It found a cumulative $220 million in unpaid taxes reported by municipalities, with $130 million in tax arrears 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 municipalities or both have already written off the taxes.

Several oil and gas companies failed to pay Stettler county over $85,000 in property taxes, ultimately forcing its council to write it off last December 14.

Wolf Coulee Resources Inc., Quattro Exploration and Production, Challenger Development Corp., Canadian Oil and Gas International, Rockbridge Energy Alberta and Aeraden Energy Corp collectively owe the municipality $85,613.64 dating back to 2018. 

A smaller but significant portion of unpaid taxes, approximately $76 million, is owed by companies still operating and is potentially recoverable, including through repayment agreements.

Municipalities reported they already have repayment agreements to help collect $48 million in unpaid taxes.

The UCP said there's further potential for municipalities to recoup another $28 million from operating companies.

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