Alberta Municipal Affairs minister Rebecca Schultz has made a statement on $268 million in unpaid taxes by some oil and gas companies to rural municipalities.
"We agree with the Rural Municipalities Association’s (RMA) assessment that the problem of unpaid oil and gas taxes to rural municipalities is unacceptable," says Schultz in a statement issued late yesterday afternoon. "We are consulting with industry, municipalities, and landowners as we actively explore options to ensure taxes are paid as a condition of license transfer."
“The Alberta Energy Regulator (AER) has a critical role to play in solving this problem," her statement continues. "We worked with the AER and strengthened the regulatory framework so that it has the option to consider company records for property taxes and surface lease payment when determining a company’s eligibility to hold a license."
Schultz was reacting to the results of a survey of rural municipalities on taxes left unpaid by oil and gas companies. As of December 31, 2022, approximately $268 million was outstanding, 6.1 per cent higher than the 2021 tax year, and 231.5% higher than 2018.
Schultz says the RMA survey results are broadly consistent with the government’s research into this issue. She says they will be in direct contact with delinquent companies.
"While the problem of unpaid oil and gas taxes persists for many Alberta municipalities, we have recently seen payment plans established from 25 companies for municipalities to receive approximately $48 million in owed taxes. Our government will provide support as needed to municipalities as they create payment plans to recover unpaid taxes where possible."
“Our government will continue working with municipalities and the RMA to explore other options for tax recovery, including ways to promote payment agreements and provide specific direction to the AER within its regulatory framework.”
Both Schultz and RMA president Paul McLauchlin agree the vast majority of companies in Alberta's energy sector are solid corporate citizens and have paid their taxes, but the ones who don't have left some rural municipalities with hard decisions on whether to raise taxes, cut services, or both.
In an interview this morning, McLauchlin says eight rural municipalities are on the ropes because of these unpaid taxes.
"If this continues down the path it's on, you'll have insolvent municipalities," he says.
McLauchlin says if he was a betting man, and you asked him what the results would be in January, he would not have predicted this.
"You know, the increase is terribly alarming. You're looking at the highest sustained commodity price in a generation, free cash flow like we've never seen in the industry, record profits, record royalties record revenue compared to any other provincial jurisdiction in the history of Canada, and on top of this, we have increasing unpaid tax and surface leases."
He says there are about 258 oil and gas companies with a liability management ratio of less than one, which means they have more liabilities than assets. The companies that owe surface lease payments and aren't paying taxes are typically in that group.
"I think Last of Us is quite a telling show. These are zombie companies, so they are walking in the dark, they're barely alive, the AER doesn't want to pull the pin on them and the ER is knowingly allowing them to get interest-free loans in the form of unpaid taxes and surface leases to continue their operation. So the AER is, you know, I've used the term complicit, but they're keeping these companies alive because they don't want them to shift to the orphan well fund."