Edmonton

Bills adding up from resource companies not paying up

The Alberta government is now grappling with how to deal with outstanding debts by resource companies that haven’t paid their education property taxes or annual lease payment cheques to landowners.
Some small and mid-sized resource companies are leaving a trail of debt. (CBC)

The Alberta government is grappling with how to deal with outstanding debts by resource companies that haven't paid education property taxes or annual lease payments to landowners.

The bills, already in the millions of dollars, are adding up and have the potential to become much bigger.

"The province recognizes the downturn in the energy sector has caused a rise in the amount of uncollectable municipal property taxes from companies," Municipal Affairs spokesman Tim Seefeldt said in an email. 

"Municipal Affairs is working with Treasury Board and Finance, Energy, and municipal association partners to examine options for addressing these concerns."

Municipal governments have increasingly been appealing to the provincial government for help to cope with the the economic downturn that has left them covering the shortfall of tax revenue.

Adding to the problem, Canadian Natural Resources Limited this week appealed to municipal governments across Alberta for a 30 per cent cut to its property taxes.

For the county of Stettler, that cut would amount to about $1.3 million, according to Yvette Cassidy, the county's assistant chief administrative officer.

That would be on top of $735,000 owed to Stettler County from a mid-sized resource company that hasn't paid its property taxes in two years, said Cassidy.

“We’ve had two full years of dealing with the price collapse," said Brad Herald with the Canadian Association of Petroleum Producers. (CAPP)

The county commenced legal action against the company, which is still acquiring new land leases, to try and seize its assets.

"By not paying their taxes, they have caused hardship for the county of Stettler," Cassidy said. Counties have few options under the law to recover outstanding debts from resource companies, she added. 

Stettler isn't alone, Al Kemmere, president of the Alberta Association of Municipal Districts and Counties (AAMDC),  says the problem is occurring across Alberta.

"The cash gets tough and the taxes become an item that just don't get paid," says Kemmere who has noticed the practice increasing over the past five years.  

Difficult choices

The downturn in the economy is forcing struggling companies to make tough decisions, according to the Canadian Association of Petroleum Producers (CAPP).

Brad Herald, vice- president of Western Canada operations for CAPP, says the number of small and mid-sized operators running into trouble is definitely on the "uptick".

"We've had two full years of dealing with the price collapse. That certainly makes it one of the deepest challenges our sector has seen this century," he said. 

"It's enterprises that are in distress at one level or another...From paying your heat and lights to your people and your office space, they're making some very difficult choices."

The standoff between resource companies and municipalities has been building over the past year.

In a commentary from March 2016, Tim McMillan, president and CEO of CAPP, wrote about the need for municipalities and the oil and gas industry to work together during tough economic times.

"Today, municipal taxes are the No. 2 government cost on Alberta's oil and gas industry, second only to royalties. To put this into perspective: in 2014, industry paid an estimated $1.1 billion in municipal property taxes. Property taxes in rural and specialized municipalities increased $60 million a year between 2010 and 2014, the equivalent of a seven per cent annual increase. This is impacting companies' ability to keep people working."

The problem of non-payment by resource companies is also being felt by landowners. The Alberta Surface Rights Board says this year alone, it has received four times the number of applications compared to a normal year.

As of Aug. 3, 2016, there were 780 applications filed by landowners who weren't being paid their annual lease payments, and another 400 applications are in a backlog waiting to be processed, said board chair Gerald Hawranik.

"In the 11 years prior to 2015, there were an average of 360 applications to the board, and we recommended payment of about $550,000 annually (from the province) to landowners," he said. 

"In 2015, we've seen a spike to 764 applications, and recommended payment of $1.7 million in 2015."

Hawranik predicts if current trends continue, the province could find itself covering $4 million of missed payments to landowners.

Despite paying out about half a million dollars a year to landowners to cover delinquent surface agreement cheques from resource companies, the Alberta government has been able to recover just a small fraction of what it's owed through debt collection.   

Jo-Anne Nugent, spokeswoman for Service Alberta, said between 2009 and 2016, Crown Debt Collections has recovered $121,476 from resource companies on behalf of Alberta Environment and Parks.

About the Author

Kim Trynacity is an award-winning journalist and CBC Alberta's provincial affairs reporter. You can reach Kim by email at kim.trynacity@cbc.ca or on Twitter @ledgewatcher

now