Dear Editor,
I am a 20-year resident of Rocky View County and also a 40-year employee in the oilpatch. I would like to comment on the current proposals to property tax assessments levied to the oil and gas companies in Alberta.
The current oil and gas property tax assessment process has not been updated in two decades and does not fairly represent the true market value of the assets. While the value of companies' natural oil and gas reserves assets have decreased significantly over the past decade, taxes levied on these companies have continued to increase. Specifically, one oil company that I work for has an enterprise value – the amount somebody would pay to purchase the company – of $100 million dollars. Tax assessments came in at $600 million dollars.
This is representative of what all oil and gas companies have been experiencing for years. I don’t think anybody in this county would be agreeable to receiving assessments on their properties at six times higher than what you could sell them for. This type of disparity has always existed but historically oil companies have gone ahead and paid the bills anyway. They are now requesting they be treated fairly as these inequities are no longer sustainable. Oil and gas companies are going under, properties are being shut in or abandoned and companies are pointing to high property tax costs as a cause. As companies close their doors, taxes increase for those remaining to make up for the lost tax revenues.
While the value of companies' natural gas and oil reserves assets have decreased significantly over the past decade, taxes levied on these companies have continued to increase. Between 2008 and 2018, revenues collected from municipal property taxes nearly doubled from $3.8 billion to $7.4 billion. During this same period, oil and gas enterprise value has fallen from $380 billion in 2008 to $117 billion in 2020. Meanwhile, the value of oil and gas assets fell by 70 per cent. Older wells and pipelines get assessed as if they are new. A comparable gas well in Alberta is assessed more than 20 times higher than it was in British Columbia
Oil companies have cut jobs, salaries for those still employed, renegotiated with suppliers and cut capital spending to survive. For many companies, 65 per cent of the total annual operating costs are incurred and remain in the communities they work in for the economic benefit of those communities.
Counties must take a hard look at their operating costs in an effort to align their budgets with realistic assessments for all payers in the county. It is worth noting that as of December 31, 2018, Alberta municipalities had $17 billion in their reserve funds.
At the end of the day, this issue is not about a tax grab by municipalities or a tax break for oil and gas. It’s about creating a sustainable property tax framework so Alberta-based energy companies can be competitive and generate revenues for all levels of government. Most importantly, it’s how we can protect and create jobs in Alberta, especially rural Alberta.
Lorie Lindberg
Division 5
