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A hefty amount owing with outstanding oil taxes on M.D. land

Posted on November 22, 2017 by Taber Times

By Cole Parkinson
Taber Times

The M.D. of Taber has continued to deal with the abandoned oil sites located throughout the area.

Council had come forth with a request for decision on two companies who still have outstanding taxes due.

Petro Viking Management Corp. and Canadian Oil & Gas International Inc. (COGI) both have taxes due that range in different sums.

In the case of Petro Viking, the amount owed is not enough to warrant further steps taken.

“The recommended option is no further tax recovery steps with respect to Petro Viking arrears be taken given that they are no longer a growing concern. We can write off the Petro Viking tax arrears to the sum of $25,729.72,” said Derrick Krizsan, CAO for the M.D. of Taber at the M.D.’s regular meeting on Nov. 7.

Reeve Brian Brewin added hiring lawyers would create a financial burden on the M.D. and would likely negate the money they would receive for the remaining taxes.

“The recommendation for this one is to basically write it off, it’s a smaller amount and we would probably spend more on lawyers than what we would end up getting,” said Brewin.

COGI on the other hand, still owes a significant amount in tax arrears, totalling $323,837.78.

With the tax amount being quite high with the COGI, council wants to proceed further and continue to monitor the receivership proceedings of COGI.

One point brought up about COGI, was taking away their access to a well still on M.D. lands, as council says they still have some in operation.

“What happens if we take away their access? If that’s all you have is access, the threat of taking away access. That’s all we really have as a municipality is the access to the wells. If they are producing from the wells and receiving revenue and they’re not paying,” said John Turcato, councillor for Division 2.

While they liked the method in theory, they weren’t sure of the legal ramifications with this. They decided to check with lawyers to see what they could do legally with the run wells.

Overall, there are 46 properties on M.D. land that have been abandoned and right now M.D. administration is working with Municipal Affairs to come to a conclusion.

“We had 46 properties that had assessments done and the province has indicated there is no corporate entity to assess. That’s one of the factors that we’re dealing with Municipal Affairs on right now. The issue is they have thousands of these across the province and they are hoping to collect school foundation tax on those linear properties and it is probably in the area of tens if not millions of dollars at stake that comes out of provincial taxation if they can’t tax us for those,” said Krizsan. “If we were to send out these 46 notices, we would send them and they would come back undeliverable. We would pay the school foundation fund portion of the property tax. We would write off a municipal portion, school foundation is about 40 per cent and municipal is about 60 per cent. Next year, we would take the 40 per cent that was uncollectible of the school foundation and redistribute it over the property tax class. So viable companies would be picking up the school foundation fund from the previous year.”

The fact that regular businesses are being brought into the fold because of certain oil companies’ tax arrears is a big concern for council.

“That’s what is frustrating, it isn’t just oil companies that are hit. It’s all legitimate businesses who are having to pick up this,” said Brewin.

Along with that concern comes the fact that the abandoned properties that pertain to oil aren’t passed on when someone else starts operating on it.

“The difference being, if it’s a legitimate business other than an oil company, you can collect on your taxation and the property gets sold. But not for oil, which is what I‘m saying, so even if that gets passed on to someone else, they start operating on it, they don’t have to pay the back taxes. So the citizens have had to pay for and yet never get reimbursed,” said Turcato.

Moving forward they hope to see some changes to this process in order to not run into this situation again, which has happened all over the province.

On suggestion was to make tax property the exact same as linear properties so that the back taxes transfer to the property owner and not to the tax payers.

“What we’re saying is undertake the same process for linear properties and oil and gas. Before you transfer a licence, check with the municipalities and say ‘have these guys paid their property taxes?’ If they haven’t, don’t transfer the licences,” said Krizsan. “They want it to be our problem, not their problem.”

Since their meeting earlier this month, the Alberta government has announced they will be supporting municipalities by providing a tax credit for uncollectible education property taxes on oil and gas properties.

“I heard loud and clear during my visits to rural communities this summer that they are facing tax recovery challenges. So we made this a priority and worked with the Alberta Association of Municipal Districts and Counties to come up with this solution. I am proud that we are able to make a difference and support municipalities,” said Shaye Anderson, Minister of Municipal Affairs in a press release sent out for the announcement.

The Provincial Education Requisition Credit (PERC) will be retroactive to 2015, when oil prices began to fall and the credit will be operational until 2019. Municipalities, like the M.D. of Taber who have written off municipal property tax for oil and gas facilities will be eligible to apply for a credit on the education component of their property tax with the first deadline coming on Jan. 18, 2018.

“The AAMDC is very appreciative of Minister Anderson and his cabinet colleagues, listening to municipalities about this challenge. Having to pay education tax to the government that couldn’t be collected has created significant financial challenges for our members. With the government’s support, municipalities can now focus on other matters, as we look forward to the long-term solution to this issue,” said Al Kemmere, president of the Alberta Association of Municipal Districts and Counties in the same press release.

This credit will only be applied to the Petro Viking tax arrear once the M.D. does indeed write it off as the PERC only applies to write offs with the credit being funded through the Alberta School Foundation Fund.

No cost estimate has been provided yet as they can’t determine it until they receive applications, but there is a cap of $10 million per year.

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