Yesterday, the provincial government announced that it would be stepping in to ease tensions between companies extracting oil and gas and rural municipalities.
Earlier this year, rural municipalities in Alberta claimed that oil and gas companies had $173 million in unpaid taxes. While some of those unpaid taxes were a result of companies going bankrupt or into receivership, some were because companies just weren’t paying.
The unpaid taxes had forced some municipalities to cut services (read: job cuts) or increase taxes on other properties to make up the revenue shortfall, making other taxpayers subsidize the oil and gas companies.
When pressed by the media, Jason Kenney, the premier of Alberta, said at the time that “You can’t wring money from a stone. The best solution, in our view, is to create a future for those companies that are struggling.”
And I guess that future is here.
In yesterday’s announcement, the government outlined 4 changes to taxation of oil and gas wells:
- 3-year property tax exemption when drilling new wells and building new pipelines
- Elimination of the Well Drilling Equipment Tax for new drills
- Lower assessments for less productive oil and gas wells
- Continue with the 35% assessment reduction on shallow gas wells for 3 years
Both the Rural Municipalities of Alberta and the Alberta Urban Municipalities Association consider this a balanced approach:
This announcement reflects an effort to achieve a fair balance between enhancing oil and gas industry competitiveness and supporting municipal viability.Al Kemmere, president, Rural Municipalities of Alberta
AUMA is encouraged Alberta’s government listened to feedback from municipalities and understands the importance of striking a balance between local government costs and industry competitiveness.Barry Morishita, president, Alberta Urban Municipalities Association
These measures are temporary and will be reassessed in 2023.