Alberta municipalities continue to shoulder a financial burden of unpaid oil and gas property taxes, as Kneehill County wrote off almost $800,000 in uncollectible property taxes at their regular council meeting July 21.
Councillors read a report from Director of Corporate Services Bill McKennan describing a considerable amount of property taxes owed by oil and gas companies and the fact that this money is uncollectible.
The first memo referred to Trident Exploration’s $219,274.66 owed to Kneehill County on 31 tax rolls.
McKinnon stated the municipality has no choice but to write the debt off.
“Trident Exploration Ltd. went into receivership early last year due to the very low gas prices,” stated McKennan in his report to council.
“During the receivership process, a new owner is sought out and some of the assets were purchased by Ember Resources, who already hold a large part of our industrial/linear assessment base in the county.
“During the sale process, the court ordered that Ember pay the 2019 taxes from the date of purchase at a prorated amount and they are to be provided the assets free and clear of any tax debt.
The date of possession by Ember of those Trident assets was Nov. 1, 2019.
Therefore, Ember has paid the county a prorated amount on these assets in the amount of $40,359. They did not pay any penalties.
“Council will recall that the courts have made decisions that directly affect a municipality’s ability to remain a secured creditor for collection as indicated in the Municipal Government Act.
The Virginia Hills decision was not given the opportunity to be heard by the Supreme Court so municipalities do not have any recourse when it comes to linear tax arrears.
The Redwater decision is another that has affected the oil and gas sector.
Both of these decisions were reflected in the court order of the approved sale of Trident assets to Ember Resources.
“The total request for cancellation is the balance of 2018 and 2019 levies and penalties on these rolls totalling $219,274.66.
“In addition, we will need to void all 2020 penalties on these rolls which amount to $29,416.24 (to June 30).”
McKennan also stated education taxes billed by the provincial government to Kneehill County should have been paid by Trident Exploration.
He said a program exists for the county to recover costs.
Reeve Jerry Whittstock summed up the problem succinctly. “We don’t have a choice here,” said the reeve. “The company is bankrupt and we will never collect.”
Councillors unanimously wrote off Trident Exploration’s $219,274.66 owing, and also agreed to apply for the education tax help and void any penalties applied for 2020.
Over $500,000 unpaid
McKennan presented a second item listing nine tax rolls belonging to defunct oil and gas companies that, together, owed Kneehill County $577,991.76.
McKennan stated, sadly, legal opinions about these debts is that the county will never collect them.
“The companies have gone into bankruptcy proceedings and the wells have been handed to the Orphan Wells Association for reclamation or will be soon,” stated McKennan in his report.
“The county has exhausted all attempts to collect these amounts owing. The total request for cancellation is the balance of 2018, 2019 arrears and 2020 levies on these rolls totalling $577,991.76.”
Alarmingly, McKennan noted Kneehill County budgeted for $1.1 million in the 2020 budget for uncollectible debts such as these; in the two items above at the July 21 meeting alone, the total was almost $800,000.
McKennan made a somber prediction that councillors will see more of these issues coming to them in the future.
Councillors unanimously approved writing off the debt, applying for education tax help and removing any current tax penalties.
Stu Salkeld, Local Journalism Initiative reporter