Oil field pump jacks in rural Southern Alberta, Nov. 9, 2022.TODD KOROL/The Globe and Mail
Alberta’s oil and gas sector owes rural municipalities $251.5-million, spurring calls for the energy regulator to stop acting as a cheerleader for industry and clamp down on rogue operators who refuse to pay their bills.
The unpaid tax bill grew by more than $40-million in 2023, according to a report released Tuesday by the Rural Municipalities of Alberta, which drew numbers from a 2023 survey of its members. Seven municipalities have unpaid tax burdens of more than $10-million from the oil and gas industry, while the average hovered around $4-million. In all, municipalities have written off more than $187-million in unpaid oil and gas taxes since 2015.
The problem of unpaid taxes dates back years, but became particularly acute when commodity prices took a nosedive during lockdowns owing to the pandemic. In late 2019, oil and gas companies owed Alberta rural municipalities $173-million in unpaid taxes. In October, 2020, in the face of a continued economic squeeze, the Alberta government announced a three-year property tax vacation on new wells and pipelines. Producers also no longer have to pay a well-drilling equipment tax.
But operators have continued to rack up the tax bills, even as the oil and gas sector raked in record profit over the past two years.
Rural Municipalities of Alberta president Paul McLauchlin said the problem boils down to the Alberta Energy Regulator’s failure to penalize operators who fail to cough up their taxes.
“That’s not a regulator, that’s a cheerleader,” he said in an interview. “If you truly are acting on behalf of Albertans as it relates to the oil and gas industry, and you’re allowing this behaviour to exist on the landscape, it’s quite shocking.”
The province has taken steps to try and curb the problem of unpaid taxes. The steps include amending the Municipal Government Act to clarify that municipalities have a secured status to recover unpaid taxes during bankruptcy or insolvency hearings, and ordering the regulator to no longer approve licence transfers or new licences for companies with outstanding property tax arrears above $20,000.
Both changes were steps in the right direction, Mr. McLauchlin said. However, neither moves targeted companies that remain operational and profitable, but are not in a position to expand.
The regulator is aware of the companies that are failing to pay their bills, Mr. McLauchlin said, “so this isn’t an information conversation – it’s an action conversation.”
The Alberta Energy Regulator said in an e-mail Tuesday it is using information reported by municipalities and collated by the province to identify energy companies that have municipal tax arrears. But municipalities remain responsible for the collection and enforcement of their municipal taxes, it added.
Federal oil and gas emissions cap shines harsh spotlight on Alberta’s lack of action
“We encourage the Rural Municipalities of Alberta to continue discussions with the government regarding unpaid municipal taxes,” it said.
For Mr. McLauchlin, the growing number of unpaid bills is particularly galling in the face of solid commodity prices and increased drilling activity.
The Canadian Association of Petroleum Producers, a lobby group, released a report Tuesday forecasting that capital investment for the oil and gas sector will reach $40.6-billion this year. That’s a slight rise from the estimated actual investment of $39-billion for 2023.
Association president and chief executive Lisa Baiton said in an interview that the numbers represent “cautious optimism” for the sector, with current oil production at record levels in anticipation of the Trans Mountain expansion completion in the second quarter of this year.
And with LNG Canada on track to start exporting natural gas around the middle of next year, she expects natural-gas drilling to pick up this year as well.
“Those are some really big or significant major projects coming online. That has a positive impact for industry and for the country, and is is keeping folks committed to a relatively stable investment stream,” she said.
Still, Ms. Baiton said the sector remains cautious, largely because of uncertainty surrounding Ottawa’s proposed emissions cap and other green policies.
In Alberta specifically, the sector is expected to maintain a steady investment level at $29-billion, with oil sands’ contribution at around $13.3-billion.
In the face of that kind of positive investment news, Mr. McLauchlin said he’d like the energy regulator to strong-arm the small subset of the sector that isn’t paying its bills and ask the government for more tools to help it do so.
“You hear one side of the industry saying: ‘We’re going to invest, let’s go hard.’ Well, let’s have the discussion around the other side of the industry that, truth be told, are being kept alive by a cheerleader,” he said.
“Our regulator, for some reason unknown to me, is just trying to change the narrative of what’s going on in the industry.”