Alberta’s government is offering much needed relief to its struggling natural gas industry. In particular, municipal tax rates on shallow gas and pipelines will be reduced by 35%. Read the release below from the Alberta Government:
The Government of Alberta is acting swiftly to provide urgent, timely tax relief for shallow gas producers in dire straits.
Economic mismanagement from the previous administration combined with low commodity prices have left natural gas producers on the brink of bankruptcy. As part of government’s overall action plan, immediate steps will be taken to work with municipalities to reduce 2019 taxes on shallow gas wells and pipelines. Shallow gas producers will receive more than $23 million in total support extended from this tax relief.“You can’t tax business into bankruptcy. Unlike the previous government, which sat on its hands, our government is taking swift action to support shallow gas producers, protect municipalities and ensure a fair assessment model is in place for wells and pipelines. This initiative will prevent further company failures and job losses in our province, as we saw recently with Trident Exploration, while creating a more viable system for industry and government.”
While property taxes go to municipalities, the assessment model for linear property such as pipelines is determined by the province. The model has not been updated since 2005, despite tremendous changes in the natural gas sector.
“Alberta’s natural gas industry has been hurting for years due to extreme low prices, inaction by previous administrations and an outdated property tax model. Our government committed to protecting Alberta’s natural gas industry and this measure is a tangible solution that will provide much-needed, short-term relief to our producers. We will continue to bring all stakeholders to the table to find collaborative solutions on this critical issue.”
Municipal Affairs will soon provide a list of affected wells to municipalities and companies.
“We recognize that municipal and education property taxes are not the core cause of the industry’s struggle, but are likely the only area in which short-term relief can be found, so we’re pleased with the Government of Alberta’s announcement, as it helps the shallow gas industry without unfairly penalizing rural municipalities. That said, in the long term, property tax should not be seen as a tool for relief.”
When these companies go bankrupt, it’s not just the employees who suffer – leaseholders, local communities and provincial revenues are all affected. This initiative makes it clear that Alberta’s new government is focused on removing barriers to the success of the energy sector.
“This announcement is much-needed, positive news for Alberta’s natural gas sector, and for all Albertans. Rapid and decisive leadership from this government on the natural gas file is a demonstration of their commitment to protect Alberta jobs and we welcome this measure.”
Quick facts
- About 65,000 wells qualify.
- The wells are predominantly found in 15 municipalities.
- Municipalities will continue to collect the remainder of property taxes from shallow gas companies, which go directly into their local budgets.
- This decision addresses fixed costs as referenced in the Natural Gas Advisory Panel’s Roadmap to Recovery report