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Rural Municipalities Take the Hit as Alberta Cuts Taxes for Gas Producers

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Alberta’s rural municipalities already straining to make up for deadbeat fossils’ unpaid property tax bills, will be expected to shell out C$20 million per year in lost revenue from 2020 on, under a tax rebate for shallow gas well developers introduced by the provincial government.

The new tax model, unveiled in July by Associate Minister of Natural Gas Dale Nally, asks the communities to cut property taxes 35% for qualifying gas wells within their borders. The program will help an estimated 160 companies operating nearly 70,000 gas wells and pipelines across 74 municipalities.

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While most of the companies are small, Alberta-based operators, the Globe and Mail says [2] the list includes bigger tar sands/oil sands producers like Cenovus Energy and Canadian Natural Resources Ltd., colossal fossil ExxonMobil, and bankrupt gas producer Trident Exploration [3].

“Natural gas producers have called the program a saviour, saying it will help keep them afloat as they grapple with low prices, limited pipeline capacity, high production levels, and inadequate access to storage,” the Globe reports. “But the program worries rural municipalities, which are already facing a combined $81-million unpaid property tax tab [4] run up by oil and gas companies after five dismal years for the sector.”

Stettler County councillor James Nibourg “emphatically supports the oil and gas industry,” the Globe writes, and “he and his colleagues are now searching for creative ways to deal with a budget shortfall, including service fees, reduced services, and increased taxes.” But the paper adds that it “doesn’t sit well with many municipalities that shallow gas producers were singled out for help over other areas of the energy sector, such as drilling and services companies, as well as agricultural producers battered with a record early snowfall and torrential rains.”

The Globe cites Vulcan, Alberta and Lacombe County as two other communities facing serious financial hardship. In Vulcan, Chief Administrative Officer Nels Peterson “is preparing his municipality for a $400,000 hit to tax revenue, or 2.5% of the annual operating budget. Road maintenance, fire, and administrative services will all be placed under the microscope if Vulcan can’t plug the tax shortfall come 2020, when the province withdraws its fiscal support for the program.”

Lacombe County “has an understanding this is a challenging time for energy producers and we are on board with helping them out any way we can, but we didn’t think this was the most effective mechanism,” said County Manager Tim Timmons.

At least one fossil executive told the Globe his company was over-taxed, based on a wildly inflated assessment of its asset value. Nally contended the program countered over-taxation, high fees from the Alberta Energy Regulator, and low gas prices.