Energy sector wins temporary tax reprieves as Alberta government tries to spur drilling

The provincial government announced a series of measures Monday aimed at helping the beleaguered oil and gas industry, including a three-year property tax exemption for companies drilling new wells and building new pipelines. 

The province is also eliminating 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 for three years, Municipal Affairs Minister Tracy Allard announced.

"Alberta needs to be as competitive as possible to attract investment into our communities," she said in a release.

"We know our municipal partners are committed to do their part to create jobs and support Albertans through this challenging economic time. We are working to secure a brighter future for our province by supporting both industry and communities."

The measures reflect an effort on the part of the province to achieve what the head of the Rural Municipalities of Alberta, Al Kemmere, called a fair balance between supporting the energy sector and keeping rural counties fiscally viable.

"RMA looks forward to working with the Government of Alberta and industry in the coming years to ensure that rural municipalities can address their viability and continue to do their part to support industry competitiveness in a way that reflects a strong partnership," he said.

Earlier this year, the province laid out four possible new taxation models aimed at providing relief to Alberta's struggling oil and gas companies by reforming the assessment process for their wells and other operations.

But the RMA reacted with alarm and said 69 counties and municipal districts could have lost up to 40 per cent of their tax base under such plans.

Allard, newly installed as minister of municipal affairs in a summer cabinet shuffle, said last week that she had put the brakes on its proposed revamp of the way oil and gas operations are assessed for taxation. And she said consultations will continue.

"I feel with our decision today, we have balanced the needs of both municipalities and the oil and gas industry," Allard said as she announced the changes in a virtual news conference. 

"We tailored this solution based on what we heard."

The province says it will continue its work with municipalities and industry groups to determine how best to update the assessment model for the longer term, after these three-year measures have concluded.

Tim McMillan, president and CEO of the Canadian Association of Petroleum Producers (CAPP), applauded the interim measures.

"The Alberta government's action to incent new drilling and provide relief to mature wells is a crucial step to help restore investor confidence and preserve and create jobs for Albertans," he said in a release.

"Rural Alberta is key to the success of the oil and gas industry and we are committed to continuing to work with the municipalities and the province on this issue going forward to rebuild our energy industry and bring prosperity back to Alberta."

Kemmere said there are still important issues that need to be addressed.

"One of the biggest challenges with this whole process is the unpaid taxes," he said, noting that municipalities were out $81 million two years ago and $173 million last year.

"If we don't fix that in the near future, all these modifications are going to be for naught."