Oil bust could mean skyrocketing property taxes

Some Alberta municipalities are being hit hard as oil companies stop paying

With oil prices bottoming out around $30 a barrel, oil companies are scrambling to save money — sometimes at the expense of farmers.

“Some companies are just deciding not to pay the annual rentals,” said Daryl Bennett, who represents the Action Surface Rights Association in southern Alberta.

Last year, the Surface Rights Board had more than 750 new applications and gave landowners over $1.5 million to repay defaulted rents, said Bennett, who spoke at the recent Alberta Federation of Agriculture annual general meeting.

“That’s just the tip of the iceberg. There should have been thousands and thousands of new applications.”

But while lost rents are a short-term frustration for farmers, the long-term effect this will have on rural municipalities is much bigger.

“If you as a landowner don’t get paid by a company, it’s not that big of a deal. The minister of finance will ensure that you get your money,” he said. “The implication to counties and municipalities is what you should be concerned about.”

Right now, counties in Alberta get two streams of oil and gas revenues. The first is through linear property assessments.

“That’s generally all the pipelines, power lines, that type of stuff. Currently, there’s $845 million being assessed to the operators in the province that goes to counties,” said Bennett.

“A lot of these companies that are going bankrupt are not paying their linear assessments to their counties and municipal districts.”

And 25 per cent of the linear tax assessment goes toward education — money that has to be paid by the county “whether they collect it or not from the oil and gas operators.”

Counties also do local tax assessments, which fund their operating budgets. “An oil lease is assessed at higher rates than you are for your property taxes, and that’s collected by the municipality.”

In some municipalities, between 60 to 90 per cent of their total budget depends on oil and gas tax revenues. For instance, oil and gas tax revenues make up 68 per cent of the budget for the County of Taber.

“The County of Taber has estimated that if it was to lose its linear assessments paid by oil and gas, it would have to increase its property taxes by 350 per cent on everybody else to make up that loss,” said Bennett. “They’re going to have their budgets drastically cut in some cases. Then what do they do? Do they raise taxes or do they lay off people?”

Reduced oil and gas tax revenues will create a “snowball effect” in these counties — “they lay off more people, those people don’t pay taxes, real estate prices go down, property assessments go down, and it just continues on and on.”

And counties are starting to get worried, he added.

“Some of these companies that have gone bankrupt owe $15 million to $20 million to various counties.”

Until the oil market corrects itself, Alberta’s farmers will need to tighten their belts, regardless of whether they rent land to oil companies, said Bennett.

“As landowners, you can get your revenues back, but I think you need to be concerned about what’s happening in the industry and how this may impact your property taxes and the abilities of your counties and municipalities to function as they have in the past.”

About the author

Reporter

Jennifer Blair is a Red Deer-based reporter with a post-secondary education in professional writing and nearly 10 years of experience in corporate communications, policy development, and journalism. She's spent half of her career telling stories about an industry she loves for an audience she admires--the farmers who work every day to build a better agriculture industry in Alberta.

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Comments

  • Alberto13646

    ” Could mean…”?
    What happened in 1979, 1989, 1994, 2009? Use some journalism.

  • Diana Daunheimer

    As I understand and have experienced, landowners are getting exploited in Alberta and there is no help. No help from the Action Surface Rights Assc, or the Surface Rights Board, or the AER, or your municipal government, provincial or federal governments and certainly not from synergy. Alberta Environment or Alberta Health Services will not assist you either. If you have any sort of damage to your health, home, water, land, livestock, air or otherwise resulting from oil and gas operations, the burden, both physically and economically will be yours. Unless of course, you are one of numerous cases of settlements with gag orders, or participated in ADR with the AER.

    Other landowners only incur losses, especially those that have no surface rights in the first place. Furthermore, landowners can not say no to industry. You have to let industry on your land, it is called Right of Entry and it is absolute.

    Any person or organization, including a municipal government, that has unmitigated losses, harm, contamination or any type of unresolved dispute with an oil and gas company will have to take them to court, which from experience, is a brutal process that rarely ends in what can be considered a success. If the company is insolvent, good luck in getting your share no matter who you, the banks will have it all, particularly in this write down environment.

    Start asking some questions to landowners and farmers that have leased their lands for fracking, you will hear regret and ire. There has been a great deal of deceit from industry about the benefits, economics, impacts, safety, regulations, reclamation and impacts of industrial operations. Our community is riddled with leaking, suspended energy wells that still have top soils push backs in place 4 years later. Its a big, ugly, costly mess, that will in fact be the burden of the taxpayer because organizations like the AER, SRB, NEB and our municipal government failed to collect the appropriate taxes and royalties to ensure adequate coverage for all infrastructure needs and damages associated with industrial development. Meanwhile each organization is overtly reliant on industry income that is unsustainable.

    This compounding short-fall continues, as the NDP have gutted royalties and increased subsidies for unconventional resource extraction, entrenching this cycle even deeper.

    If you are a landowner and you sign your land over to an oil and gas company in the next decade, you are fool hardy. If an oil and gas company forces their way on your land-if you live atop any probable shale play in Alberta you might as well expect it-then you have my condolences and warnings; leave while they drill, frack and well test. If they are routinely venting or combusting sour gas, move.

    http://www.ernstversusencana.ca/oil-bust-could-mean-skyrocketing-property-taxes-for-ordinary-residents-farms-some-alberta-municipalities-hit-hard-as-oil-companies-stop-paying-a-devils-bargain-rural-environmental-injustices-an