The Rural Municipalities Association (RMA) is looking for new legislation to allow them to collect 250 million dollars in unpaid taxes from oil and gas companies.
“This has been a growing issue,” said Paul McLauchlin, president of the RMA. “It's only been the past three years that RMA has actually been canvassing our members to find out what exactly the the extent is of unpaid taxes and shockingly we were at 70 million, then 130 million in 2019 and then in 2020 we canvassed to our members and all every single municipality of the 69 municipalities we represent responded, and, and came up with the figure of $250 million dollars in unpaid taxes.”
With this large bill did not come the means to collect it, however, due to the nature of the surface leases that these companies use to collect the desired resources.
“A lot of folks have asked me, well how can someone not pay their taxes. Your typical landowner if they don’t pay their taxes, we have provisions under the municipal government act to address those issues,” said McLauchlin. “We can use a court order seizure and actual sale of your asset to actually allow us to get the money back that's owed to us. The problem with oil and gas facilities, there are a couple of things, like that these facilities are on surface leases, they don't actually own the land underneath them so there's not really an ability to seize an asset. We don't have the ability to use normal tools that we have.”
While this hasn’t been an issue previously, the downturn of oil and gas in previous years has caused a select few companies to exploit this loophole to avoid paying what they owe while oil is trading at a “very healthy price,” said McLauchlin.
“Very few companies are doing this, but this really paints the industry with a bad brush. It’s not common for companies to not pay the tax and the majority do pay, so it really just puts a bad light on the industry,” said McLauchlin. “The industry is full of good corporate citizens and the environmental social governance piece is an important part of the conversation. I'm always concerned that it's pitting municipalities against oil and gas companies. This is a small number of companies that are choosing to do this and it's not representative of the partnership we have with the oil and gas industry in Alberta.”
The fact that only a few companies have not paid did not stop these unexpected costs from having a very serious impact on the affected municipalities, some of which are in financial distress after depleting their reserves to try and cover this bill.
“It's distressing to my members, when taxes are not paid. We actually have to draw money, we can't deficit budget, like other levels of government so we actually have to have a real budget or non deficit budget. In order to accommodate those dollars in unpaid taxes we actually have to use our reserves,” said McLauchlin. “Our reserves are not intended for that; our reserves are actually intended for capital replacements or replacing the bridges, the roads and other assets that we have. We haven't been retaining those reserves as capital replacement, we haven't retained those for the purposes of replacing taxes that are lost because of the inability to to capture them and you know, a bridge is a million dollars.”
The RMA is currently seeking new legislation, to allow municipalities to collect unpaid taxes from these companies, and in an ideal world, to prevent these companies from undertaking new sites until all backtaxes have been paid.
“We were hoping for legislative changes in the last setting of the legislature and we're very hopeful that there'll be some changes soon that can allow us to correct this wrong and, and get back to the business to do what we have to do and I'm sure we cause less harm to the people that I represent,” said McLauchlin.