Pumpjacks west of Lacombe. (Advocate file photo)

Energy royalty tax break questioned

Lacombe County reeve notes oil and gas industry already being subsidized by municipalities

Lacombe County’s reeve questions why the province is considering more tax breaks for the energy industry on top of those already provided.

The UCP government is moving ahead with the Liability Management Incentive Program, which would issue up to $100 million in credits that eligible companies could use to apply against royalties earned from new production.

Lacombe County Reeve Barb Shepherd said rural municipalities have already been giving oil and gas companies tax breaks at the province’s direction.

“I think that it is important to remember that the rural municipalities of this province have already ‘subsidized’ the industry with a provincial government mandated property tax holiday,” said Shepherd in a recent email. “We have not yet seen the end of the tax holiday so let’s not forget that is still in place.

“It is my belief that if the province moves ahead with the Liability Management Incentive Program they must reinstate the municipalities’ ability to collect the requisite taxes that they have foregone for the past few years.”

In October 2020, the provincial government unveiled a series of tax breaks, including a three-year property tax exemption for companies drilling new wells and building new pipelines.

The province also eliminated its tax on well drilling equipment, lowering the tax assessments for less productive oil and gas wells, and extending a recently introduced 35 per cent assessment reduction on shallow gas wells into 2024.

Since the latest tax breaks are linked to royalties from new production, it appears the program is also intended to encourage new drilling along with cleaning up old sites. However, well drilling activity is already on the rise because of rising world oil prices.

“My question is why do we need to incentivize drilling when that is normally a function of the market of the day?” asks Shepherd.

Shepherd acknowledged the issue is complex and there are many “information gaps that have led to more questions than answers.”

She wants to see the government sit down with municipal representatives soon to fill them in on all of the implications of the incentive program.

Lacombe County is among the many Alberta municipalities that is owed unpaid oil and gas property taxes.

Rural Municipalities of Alberta (RMA), which represents 69 counties and municipal districts, polled its members last year and found $254 million in taxes were owed to municipalities by energy industry companies, many of them solvent and operating. In District 2, which includes more than a dozen municipalities, including all of the central Alberta counties, $64 million was owed.

RMA has done another survey this year and expects to release the results soon.

Meanwhile, the Opposition NDP repeated their call for Premier Danielle Smith to drop the program, criticizing her for backing a project she had pushed for as a lobbyist and would give energy companies more tax breaks when many are reaping record profits.

On Monday, NDP energy critic Kathleen Ganley pointed out that then-energy minister Sonja Savage and current minister of environment and protected places said in 2021 that the program didn’t align with Alberta’s polluter-pay principle.

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