Rural leaders from around Alberta gathered Thursday at the legislature in Edmonton to protest proposed changes to how oil & gas companies are taxed. (Curtis Herzberg)

By Josh Hall (Twitter: @Vancan19)

"flabbergasted"

Counties warn of “disastrous consequences” if province approves oil & gas tax breaks

Jul 31, 2020 | 3:27 PM

Tax changes being eyed by the provincial government for the oil & gas industry could be the death knell, or close to it, for many of Alberta’s rural municipalities.

Rural Municipalities of Alberta (RMA) says the United Conservative government is proposing four sets of changes to the assessment of wells, pipelines, and machinery and equipment properties.

The province based its review assuming the assessment system could be manipulated, RMA writes in an advocacy piece on its website, to reduce costs for the oil & gas industry through reduced assessment and taxation.

RMA says despite providing significant analysis showing significant fiscal and viability impacts on municipalities, as well as the limited competitive benefits to industry, options presented by government reflect a lack of focus on the important role of property taxes in municipal operations.

Lacombe County Reeve Paula Law says the worst case scenario could force a 39 per cent residential tax increase upon ratepayers.

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“We’re very concerned. The energy industry is looking for Scenario D, which will have the highest impact. It will also have a significant effect on our urban neighbours,” Law explains.

“We’ve just gone through a two-year process working with our urban neighbours on intermunicipal collaborative frameworks. The ink is barely dry on those agreements which cover cost-sharing for facilities our citizens use. When revenue gets significantly reduced, that’ll make it difficult to pay what we’ve agreed to. Then the education requisition comes out and if assessments are down, it’ll have to be picked up elsewhere because it still must be paid back to the province. That’s where urbans will see increases.”

Law says more details are needed from the province, but she did meet with Lacombe-Ponoka MLA Ron Orr this week to express concerns.

“Some municipalities will have a very difficult time absorbing this, and RMA has proposed some different options,” she notes. “We’re very concerned because nothing says the money energy companies will save is going to stay in Alberta. It also appears only very big energy companies will benefit. Smalls and middles won’t and those are the ones that support their communities.”

RMA estimates that under the four scenarios, Alberta municipalities will lose hundreds of millions of dollars, with Lacombe County at risk to lose more than $365 million under the most severe option — and increases likely annually.

Alternatively, RMA proposes an array of policy tools to enhance oil and gas industry competitiveness. Any tools implemented, it says, should be evaluated on five principles, including equitable cost-sharing, equitable benefits-sharing, tangibility, sustainability, and transparency.

“Seventy per cent of the proposed benefit of these changes is going to just 27 oil and gas companies out of the nearly 800 oil and gas companies that are affected by these changes,” write Steve Wannstrom, reeve of Starland County. “This means that in some cases smaller operators will actually end up paying more.”

Wannstrom says “disastrous consequences” are in store for rural municipalities if the changes are approved.

Brazeau County Reeve Bart Guyon writes of county council’s “shock and deep concern” in reaction to the proposal. He says the changes would be “nothing less than a disaster for rural Alberta.”

“We have serious concerns that this is a bigger threat to our community than the Bighorn Back Country Proposal, and that it may even spell the end of our municipality and our local oil and gas sector,” he says.

Essential services such as roads, water, wastewater, and refuse collection will all fall on the province, he says.

“The domino effects will include loss of population, the shutdown of recreation facilities, and an inability to attract residents, leading to the closure of other public necessities like schools and hospitals.”

Red Deer County Mayor Jim Wood was one of about 30 rural leaders who attended the Alberta legislature Thursday for what he describes as more of a gathering than a protest.

He says while Red Deer County’s efforts to diversify over the years mean it’s not at risk of going belly up, it could force a municipality that’s stuck to zero per cent property tax hikes to go with one near 30 per cent next time around.

“We’re in a bit of a pickle here — not from poor planning, but because someone from the province made a unilateral decision without consultation, though I’m sure they had consultations with the Canadian Association of Petroleum Producers,” says Wood, vehemently adding that he is not anti-oil.

“We understand oil prices are low and likely will remain low — they’re struggling, but we must find a different way to help them get through.”

Asked if the proposals were a surprise, Wood admits it was more of a shock.

“I’m flabbergasted to think the minister of municipal affairs would be in favour of this, and that other members of caucus would be in favour. This could kill rural Alberta,” Wood remarks. “Where are our rural MLAs? I’m wanting to hear very shortly what the rural caucus is saying about this particular issue. I’d like to see our own MLA standing up to say this isn’t right. That has to happen right away.”

RMA believes municipalities have until late-August to provide feedback to the province.