Alberta Energy: Struggling Companies Seek Tax Relief from Municipalities

As Alberta’s energy industry continues to struggle amid low oil prices, oil and gas companies are exploring alternative ways to remain competitive, and as a recent article on Canadian Natural Resources Ltd. indicates, it’s not just junior producers who are seeking relief.

In the spring of 2016, requests were made from Canada’s largest heavy oil and natural gas producer to most Alberta municipalities where it operates, seeking a 30% reduction in property tax levies for their assets. These requests, and others made by others in industry, have made the local newspaper in Calgary, as noted in this link from an August 17, 2016 article in the Herald.

Throughout the article, reference is made to the undue burden that some municipalities feel that a tax cut for a major energy company would place upon its residential ratepayers. This is obviously a key concern.  Another aspect that is not mentioned is the timing that these requests were made.  The late winter and early spring months are when municipalities review budgets in order to set tax rates for the upcoming tax year and many budget requirements are likely already in place by March/April.

Even more recently, in a bold move to cope with tax levy’s that they are unable to pay, Perpetual Energy has offered their oil and gas assets to counties throughout Alberta in exchange for covering their property tax bills. Read the full article for further details on this unexpected proposal here.

While CNRL, Perpetual Energy and others in industry have not yet been successful, AEC's advice would be that energy companies and stakeholders continue to engage municipal personnel in discussions regarding the current economic environment. A high level of engagement has helped and has proven beneficial on the assessment side of the equation, as industrial assessors have begun to more readily recognize and accept issues such as low throughput and under-utilization at group facilities.  There have also been minor victories in some circumstances related to mill rate reductions, such as the Municipal District of Greenview's decision to reduce the mill rate for industrial ratepayers by more than 7% this year. 

AEC remains very active in lobbying efforts in this regard through our involvement in the Canadian Property Tax Association and other. For more information on how you can get involved, please contact your AEC practitioner or Jill McKenna at 403.456.0109 or by email.