Edmonton

'We were blindsided': Energy companies owe one Alberta county millions in unpaid taxes

Woodlands County faces a $4.3-million revenue shortfall after oil and gas companies failed to pay their taxes to the municipality last year.  

Woodlands County is owed $4.3 million in unpaid taxes

Woodlands County in northern Alberta is owed $4.3 million in back taxes by two oil and gas companies. (Woodlands County/Facebook)

Woodlands County faces a $4.3-million revenue shortfall after two oil and gas companies failed to pay taxes to the municipality last year.  

To make matters worse, taxes for this year are due in June, and if those companies don't pay up again the county expects the shortfall to double, to a total of $8.6 million, said Mayor Ron Govenlock.

"We were blindsided," he said. "The problem really didn't surface until we started getting into the budget deliberations. The value of the two particular industry players that are oil and gas is so substantial that it represents in excess of 20 per cent of our tax income.

"So it certainly got the attention of council at that particular point."

Eighty percent of the county's tax revenue comes from forestry and other companies. This is the first time major companies have failed to pay, Govenlock said. 

The company that owes the bulk of debt is still operating, though the mayor said he wouldn't name the business for legal reasons. 

The other company, Trident Exploration, ceased operations on April 30.

Woodlands County, about 150 km northwest of Edmonton, is among a growing number of municipalities trying to collect back taxes from oil and gas companies.

The Rural Municipalities Association said based on responses from 54 Alberta municipalities, energy companies collectively owe $81 million in unpaid taxes from 2018.

The Regional Municipality of Wood Buffalo around Fort McMurray has $14.5 million outstanding, according to the RMA.

The Canadian Association of Petroleum Producers, which represents most oil and gas companies in the country, declined an interview with CBC about the issue.

'We were taken advantage of'

Govenlock said his municipality plans to lobby the province to tighten regulations, so it can better enforce payment of taxes from energy companies.

"It put us in a position where the money has been allocated or already expended before we were able to establish the taxation level," he said.

The municipality would likely have to layoff staff and cut back services if it can't collect over the next few years, he said. It would also have to consider raising property taxes in future budget discussions.

The municipality has limited options to collect the owed tax, Govenlock said.

With property taxes, the municipality can take over ownership when a landowner goes into arrears. But the energy companies operate on Crown land, so the municipality can't take that same step.

The other problem, he said, is that Trident has several orphan wells now that the company is in receivership, and if the county tried to take over the company's assets it could be left with the legal battle over the clean-up of those wells.

"Our first objective was to work with the energy companies to try to accommodate their financial realities, by saying we can make payments over time and we want to see the industry succeed," he said.

"It's a vital component for employment in our area as the tax base that it generates, but we were taken advantage of."

With files from Kyle Bakx