The Rural Municipalities of Alberta (RMA) has conducted a member survey identifying that, as of December 31, 2023, at least $251.8 million of municipal property taxes have gone unpaid by oil and gas companies.

This marks the sixth consecutive year that the RMA conducted the survey and unfortunately, the 2023 results indicate that a small number of oil and gas companies operating in Alberta continue to ignore their legal obligation to pay municipal property taxes.

“Year after year, rural municipalities provide clear, documented and verifiable evidence that a select group of property owners are simply choosing not to pay their property taxes, and year after year, the problem drags on due to a lack of industry regulation and accountability. While all other property owners in the province face strict penalties for non-payment of property taxes, oil and gas companies continue to exploit legislative and policy loopholes and hide behind an industry regulator that has, for many years, refused to hold some companies accountable for poor business decisions, high liability risks, and a lack of concern for the public interest,” said Paul McLauchlin of the Rural Municipalities of Alberta.

While the Government of Alberta has taken some steps to close loopholes and empower municipalities to enforce payment of taxes, the survey results indicate that their impact has been minimal.

For the 2023 property tax year, rural municipalities are facing roughly $43 million in unpaid taxes. In last year’s survey, that amount was approximately $50 million. While a 14 per cent reduction in new tax arrears is a step in the right direction, it by no means indicates that the problem is anywhere near solved.

“While government and industry supporters typically question the RMA’s survey results by arguing that the total unpaid tax amount includes legacy tax arrears that will likely never be collected, an additional $43 million in new unpaid taxes in 2023 indicate quite clearly that this is an active, ongoing issue that continues to make it more difficult for rural municipalities to provide the infrastructure and services that oil and gas companies, as well as other industries and rural residents, rely on,” McLauchlin further explained.

“This issue is not settled; companies continue to profit from Alberta’s resources while ignoring their community obligations and funnelling profits to executives and shareholders.”

In recent years, the government has taken two notable steps in an attempt to curb unpaid taxes. The first was to amend the Municipal Government Act to clarify that municipalities have a secured status (a special lien) to recover unpaid taxes during bankruptcy or insolvency hearings.

The second was to order the Alberta Energy Regulator (AER) to no longer approve licence transfers or new licences for companies with outstanding property tax arrears above $20,000. While both changes were steps in the right direction, neither target the companies that have the resources to remain operational and profitable, but are not in a position to expand their holdings.
“In recent years, the government has made two legislative and policy changes intended to deal with property tax non-payment by some oil and gas companies. While these have led to modest improvements in the situation, they are far from a solution,” McLauchlin said.

“One change focuses on helping municipalities recover taxes from bankrupt or insolvent companies, and the other restricts the ability of companies to grow their asset base if they have taxes in arrears. While both help on the margins, neither target the companies at the root of the problem: the zombies that continue to operate, but have no interest in growing. These companies often cut costs anywhere they can: in tax payments, in surface leases, in safety initiatives, in reclamation preparation. These are the companies that are a risk to rural municipalities and all Albertans, but are allowed to continue to pull Albertans’ resources from the ground and funnel profits out of the province.”

While the simple solution would be to revoke a company’s licence if it has property taxes in arrears, the AER’s hands-off approach to regulation has led to a situation where dozens of companies are operating with virtually no assets and very high liabilities.

“I’ll be blunt. Rural municipalities and all other companies and individuals paying property taxes are being used. We are being used by a small number of zombie oil and gas companies to not only subsidize the taxes they don’t want to pay, but to prop up their very existence,” said McLauchlin.