The Government of Alberta is showing support for struggling shallow gas operators in the province by offering them a tax break.
Shallow gas companies will receive more than $23 million in support through cancelling 35 per cent of property tax for qualifying properties, and according to a press release, for the municipalities that will not be able to collect these taxes, the province will reduce the amount of education property tax they pay to the government.
“You can’t tax business into bankruptcy. Unlike the previous government, which sat on its hands, our government is taking swift action to support shallow gas producers, protect municipalities and ensure a fair assessment model is in place for wells and pipelines. This initiative will prevent further company failures and job losses in our province, as we saw recently with Trident Exploration, while creating a more viable system for industry and government,” said Kaycee Madu, Minister of Municipal Affairs.
Earlier this year, Trident Exploration ceased operations, and with this, they left their tax obligations to Starland County unfulfilled. They failed to cover its taxes last year and this year, which equaled about $3 million from each tax year.
Reeve Steve Wannstrom said the program only applies to this tax year, which doesn’t help with losses from the previous year. He also said there was no assurance for the coming years.
“The relief on the education tax is a short term band-aid to get us through before we take more of a hit,” he said.
He adds it will take a motion of council for the county to participate in the program, and council has not yet discussed the program.
Al Kemmere, president, Rural Municipalities of Alberta, said “We recognize municipal and education property taxes are not the core cause of the industry’s struggle, but are likely the only area in which short-term relief can be found, so we’re pleased with the Government of Alberta’s announcement, as it helps the shallow gas industry without unfairly penalizing rural municipalities. That said, in the long term, property tax should not be seen as a tool for relief.”
Wannstrom also wonders what properties will qualify, especially the former assets of Trident.
“My question at the end of the meeting is if AER is straightening out all those ones that Trident has given up, the pipelines and the wells, and are divvying them out to other companies, how fast are they doing this, and if it is done soon, will we at least get half of the year taxes?” he said.
Ember resources operates many assets in the area that were once owned by Encana. CEO Doug Dafoe welcomes the announcement.
“Minister Madu’s announcement of interim municipal tax relief is welcome and badly needed. We have struggled for years with a property tax assessment system that drastically over-values our wells and pipelines for tax purposes,” he said. “We appreciate how quickly the new government has recognized the severity of the problem and acted to protect this vital industry in central and southern Alberta. We look forward to working with Municipal Affairs toward a longer-term solution beginning in 2020.”