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County of Stettler councillor raises alarm over continual oil and gas tax write-offs – part one

In 2017, oil and gas tax write-offs were over $1.1 million

By Kevin J. Sabo

For the Independent

The Alberta oil and gas sector is going through some tough times right now, and that is carrying over to municipalities through uncollected linear assessment taxes.

Since 2017, the County of Stettler has been forced to write off around $1.8 million worth of oil and gas revenue.

That figure is revenue that the County was anticipating, but unable to collect, with the shortfall having to be made up from other ratepayers.

“They’re going through some tough times, and we understand that,” said County of Stettler Coun. James Nibourg.

At issue is that after the Alberta Court of Appeals released its decision in the case of Northern Sunrise County vs. Virginia Hills Oil Corp., more commonly known as the Virginia Hills Decision, municipalities became unsecured creditors.

This means that in the case of oil and gas companies dissolving through bankruptcy, municipalities moved to the back of the line for the collection of taxes.

“Taxes on these properties don’t have to be paid,” said Nibourg.

“We’re talking (hundreds of) thousands of dollars. In 2020, it’s $58,000 we had to write off, one of our smaller numbers.”

In 2017, oil and gas tax write-offs were over $1.1 million.

In 2018, that number was down to $511,000. In 2019, it dropped again to $120,000.

The County is not alone in this situation, with oil and gas companies owing municipalities around $173 million in uncollected taxes.

Municipalities, and the various levels of government, calculate requisitions that need to be paid off of projected revenue from linear tax assessments, and when that revenue doesn’t show up, the County, and many other municipalities around the province, are forced to pay them anyways.

By writing off the bad debt, through the Provincial Education Requisition Credit program, municipalities are able to get a small portion of the education credit back.

According to County of Stettler Chief Administrative Officer Yvette Cassidy in the Dec. 9th County of Stettler council meeting, that amount may only amount to about $1,000 recovery on the $58,000 written off.

The other outstanding requisitions, such as seniors’ housing, recreation, ambulance, and policing all still have to be paid based on the projected revenue, not the actual revenue, leaving the County in a deficit situation, and ultimately, leaving the costs to fall onto the other ratepayers.

Also, just because oil companies go bankrupt and are unable to pay their taxes does not take away the fact that their infrastructure is still in place in the County, often being purchased by other companies for steeply discounted prices.

And the roads into that infrastructure still have to be maintained by County of Stettler Public Works crews.

“(With that money written off), we can’t collect that money anymore,” said Nibourg.

“It’s death by 1,000 cuts. Every time we turn around, we’re not able to collect. If we didn’t plan on the money being there in the first place, that would be a different story, but that’s part of what we budget on.”

These continual write-offs and proposed changes by the Province will be explored further next week.