County of Barrhead reeve Doug Drozd is hopeful the province will take a second look at a plan to change the linear taxation assessment model for the oil and gas energy.
Drozd came to the determination after participating in a Sept. 2 group meeting at the Metis Crossing in Smoky Lake County with the newly appointed Municipal Affairs Minister Tracy Allard as well as multiple MLAs from the region, including Athabasca-Barrhead-Westlock MLA Glen van Dijken, Fort Saskatchewan-Vegreville MLA Jackie Armstrong-Homeniuk and Bonnyville-Cold Lake-St. Paul MLA David Hanson. Also in attendance were representatives from the municipalities of Athabasca County, Westlock County, Thorhild County, Lac La Biche County and the County of Minburn as well as Rural Municipalities of Alberta (RMA) president Al Kemmere.
"[Allard] did not make any promises that there would be any changes coming out of this. I have a deep-down feeling that they are going to press pause and address this," he said.
The meeting, which was hosted by van Dijken, was called so municipalities could express their concerns over the province's plan to change the amount of property taxes they can collect from energy companies that have the infrastructure in their jurisdiction.
Depending on which of the four models the province selects the RMA estimates that rural municipalities could lose anywhere between $127 and $382 million in tax revenue in 2021.
Scenario A, would see a 14 per cent reduction in non-residential linear assessments for rural municipalities; Scenario B, 16 per cent; Scenario C 19 per cent and Scenario D, which was proposed by industry a 24 per cent overall assessment decrease.
"We [County of Barrhead], if this were to go forward, are in a better position than a lot of municipalities," Drozd said, noting compared to some municipalities the county has relatively little oil and gas infrastructure in its jurisdiction.
But that doesn't mean, the change wouldn't hurt the county coffers.
In a special July 30 meeting, county manager Debbi Oyarzun said it is estimated that the County of Barrhead would lose from three to five per cent of its total assessment base equating to between $30 million and $52 million which equates to an estimated $500,000 to $900,000 loss in tax revenue.
The potential loss in linear tax revenue comes at a time when the province is increasing rural municipalities policing costs. Starting this year, counties and municipal districts and communities under 5,000 will have to start paying a portion of their policing costs.
In 2020, municipalities will have to contribute 10 per cent. Their share will rise every year until it reaches 30 per cent of policing costs by 2023.
The funds, in part, will be used to add 200 additional civilian support workers and 300 RCMP officers. For the County of Barrhead in 2020, this means an extra $133,492 increasing to just over $400,000 in 2024.
Drozd added the proposed change in linear assessment model would compound the problem of shortfalls in taxation due to energy companies falling into arrears, noting this is something the municipal representative brought to the MLAs attention.
"The Redwater ruling that gives municipalities no recourse to step in and take the assets of oil and gas companies if they go into bankruptcy," he said.
The Supreme Court of Canada (SCC) ruled in January 2019 energy companies must fulfil environmental obligations before paying back creditors in the case of insolvency or bankruptcy, overturning lower court decisions that had favoured bankruptcy law over provincial environmental responsibilities.
The SCC ruling followed a similar Alberta Court of Appeal decision in the case of Northern Sunrise County versus Virginia Hills Oil Corp.
The case questioned whether municipal property taxes for “linear property” constituted secured claims in insolvency proceedings.
The court rejected this claim and found that there is no statutory lien for linear property taxes under Alberta’s Municipal Government Act.
"[The ruling] puts us first on the unsecured list, which means municipalities will not get anything," he said. "We all expressed the need to do something about this because no matter what the assessment rates are, it does no one any good if they go bankrupt as there is nothing left for us."
The municipalities also told the MLAs there is an increasing number of energy companies that are viable and solvent that are deliberately choosing not to pay their taxes.
"We were looking for some recourse on that," Drozd said.
He added municipalities are asking for more information on the proposed assessment models, noting the only information they have is for the first year.
"We have no idea what it might look like five or 10 years down the road," Drozd said.
The other issue they discussed was one that was actually brought up van Dijken. He said industry and large urban municipalities don't understand how important linear assessment is for rural municipalities.
van Dijken said in an urban centre when they bring in an industry they are able to plan for it, creating an industrial section, so that services can be brought into the area economically.
"In the case of rural Alberta municipalities, they have no say where oil and gas goes," Drozd said. "Municipalities are left scrambling to build the infrastructure to support it."
All that being said, Drozd noted municipalities understand the importance of the energy industry to the province.
"We don't want to harm the industry. [Municipalities] understand how important the industry is to the province and everyone in the room understood the necessity of changing the assessment model," he said, adding the proposed changes are not the answer.
Drozd reiterated the main ask by the municipalities was that the province start the process over again and that rural municipalities needed to have more representation at the table.
He added that although Allard did not tip her hand, it seems like the decision has been delayed indefinitely to allow the minister to talk to more municipalities.
Which is a good sign, Drozd said as municipalities were told the government would make a decision by the end of August and the new model would be implemented in the new year.