Alberta orders oilpatch companies to pay unpaid taxes to municipalities
Threshold will be set by Alberta Energy Regulator and Alberta Municipal Affairs
The Alberta government is taking steps to force oilpatch companies to make good on their unpaid municipal taxes, including sending reminders from provincial cabinet ministers to those in arrears.
"Our goal is to reduce unpaid taxes throughout the province," Energy Minister Peter Guthrie said in a release.
Earlier this month, Rural Municipalities Alberta released figures showing that energy firms owed $268 million in back taxes in 2022, a figure that is up more than six per cent from 2021.
The pace of nonpayment has also increased. There was $53 million left unpaid last year, up $15 million from the previous year.
In addition, the organization said its members have written off another $150 million in unpaid taxes as unrecoverable.
On Monday, Guthrie said in a news release he'd issued an order that blocks companies from acquiring or transferring licenses on wells or other assets if their unpaid taxes exceed a threshold amount. That threshold is yet to be determined and is to be set by the Alberta Energy Regulator and the municipal affairs department.
The order says before the AER can license a company to drill a well, or allow the transfer of a licence to another company, the regulator must check to see if any company involved is named on a provincial list of tax delinquents.
The company must either pay what's owed above the threshold, make a repayment plan for the outstanding balance, or transfer the responsibility for the debt to the licence's new owner, the order says. The order takes effect on April 30, 2023.
"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," said Municipal Affairs Minister Rebecca Schulz in a statement.
Schulz was unavailable for comment Monday, and Energy Minister Guthrie refused to answer reporters' questions at the legislature.
Paul McLauchlin, president of Rural Municipalities Alberta, said the crackdown could help municipalities recover up to $120 million in unpaid taxes. The rest of the money is owed by insolvent companies.
"I would definitely give the program an A," McLauchlin said.
He acknowledged that setting a threshold instead of requiring companies to simply pay what's owed is a compromise. Despite recent high oil prices, McLauchlin said many energy companies are struggling to survive.
"We tried nudging," McLauchlin said. "We tried peer pressure. We tried 'hint, hint.' We've tried statements of concern. And this is a bigger regulatory hammer than we've had to date."
McLauchlin said Monday's announcement at least sets out some guidelines and best practices for making good on unpaid taxes.
He added that both Guthrie and Schulz have said they will personally communicate with the heads of non-paying companies to tell them it's time to settle up.
McLauchlin has been pushing the Alberta government to give the AER new powers to restrict licensing to tax delinquents for several years.
Previous municipal affairs ministers had resisted, hoping steps like restoring municipalities' ability to place a special lien on properties would help resolve the problem. They said maintaining an updated provincial list of companies in arrears was too complex.
NDP municipal affairs critic Joe Ceci said Monday the government delayed the move for too long.
Ceci says the decision is inconsistent with the province's planned pilot project to pay oil companies $100 million over three years to clean up older, inactive well sites.
"We think we should incentivize good actors," he said.
The Canadian Association of Petroleum Producers, a lobby group for oil and natural gas companies, said in a statement that all companies should be paying taxes and fees owed to municipalities.
Spokesperson Jay Averill said the group is reviewing the new AER directive with members.
"We are committed to continuing to work with the province's liability management system and municipalities to ensure Alberta remains a place where the industry and the economy can continue to thrive for years to come," Averill said in the statement.
With files from Janet French