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Unpaid oilpatch taxes rise again despite industry boom, say rural municipalities


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By Bob Weber in Edmonton

Unpaid municipal taxes from the Alberta oilpatch keep rising despite the industry’s boom, the province’s rural communities say.

“This is the worst ever,” said Paul McLauchlin, president of Rural Municipalities of Alberta, which released the data Tuesday. “We’ve got a serious problem.”

The group says energy companies now owe towns and villages in which they operate a total of $268 million. That’s up more than six per cent from last year and up 261 per cent since 2018, when the association began keeping track.

As well, the rate of nonpayment is increasing.

McLauchlin said there was $53 million left unpaid in 2022 and $38 million in 2021.

The growing tax debt is occurring at a time of record profits in the industry. McLauchlin said nearly half the unpaid taxes are due from operating companies.

“You’ve got the highest commodity prices in a generation, free cash flow like no one’s ever seen. You think that people would pay their bills.”

It’s the third year the municipalities have released a tally of unpaid taxes.

Previously, the province’s United Conservative Party government told the Alberta Energy Regulator that it “may” use factors such as tax arrears in ruling on whether to allow transfers of energy assets. Municipalities can submit statements of concern on applications for licence transfers if the companies involved have unpaid taxes.

Municipalities can also attach liens to property if taxes go unpaid.

McLauchlin said that’s no longer enough.

“I don’t think you can use kid gloves to deal with this. I don’t think ‘nudge, nudge, please pay’ is working,” he said. “You need to use regulation and you need to use enforcement.”

Municipal Affairs Minister Rebecca Schulz said the province is aware of the survey results and agrees with the Rural Municipalities of Alberta that the problem of unpaid oil and gas taxes to rural municipalities is unacceptable.

She said the government is consulting with industry, municipalities, and landowners to explore options to ensure taxes are paid as a condition of license transfer.

“The vast majority of companies operating in Alberta’s energy sector pay their local property taxes but some have not, leaving municipalities with hard decisions about raising taxes for other taxpayers or cutting services,” Schulz said in a release Tuesday night.

“We will be in contact directly with delinquent companies, reminding them of their tax responsibilities.”

Jay Averill, spokesman for the Canadian Association of Petroleum Producers, said the industry knows it needs to pay its taxes.

“The revenues generated from industry to municipalities play a significant role in maintaining quality of life for rural communities,” he said in a statement.

“(The association) also acknowledges that we continue to see the lagging effects of a multi-year downturn for the oil and gas sector. We are committed to continuing to work with the province’s liability management system.”

The Alberta Energy Regulator said in an email Tuesday night that it does not have jurisdiction to enforce payment of these taxes.

“Municipalities are responsible for collecting and enforcing unpaid municipal taxes.”

Last March, when the municipalities released their 2021 total, a spokesman for Alberta Energy Regulator said the agency is working with municipalities and the province to find solutions but can only implement government policy.

But McLauchlin calls the regulator “complicit” in the problem. He said many of the remaining tax deadbeats, most of which are not members of industry associations, are companies so marginal the regulator is afraid to crack down on them and force them to close their doors before they’ve cleaned up their wells.

Those wells would then go to the Orphan Well Association, which already has a backlog of unremediated wells that has forced the Alberta and federal governments to bail it out.

McLauchlin said the tax tally and the growing environmental liability of unreclaimed wells on the Alberta landscape are linked.

“(The regulator) uses surface payments and property tax to prop up companies that shouldn’t be operating,” McLauchlin said. “That’s why they’re not enforcing it.

“If they were, (the companies) wouldn’t meet their environmental responsibilities and these companies would go into some level of receivership.”

In 2020, the federal government provided $1 billion for well cleanup in Alberta. The province also requires operators to remediate a certain percentage of their wells every year and has introduced programs that allow the industry to concentrate their cleanup efforts in one area to improve efficiency and reduce cost.

But environmental liabilities continue to grow. Alberta needs to figure something out, McLauchlin said.

“What are we doing here? What’s our plan?”

This report by The Canadian Press was first published March 7, 2023.

— Follow Bob Weber on Twitter at @row1960

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Alberta’s province wide state of emergency ends as wildfire situation improves

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Saskatchewan landowners fight against illegal drainage washing out land, roads

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WAWOTA, Sask. — Lane Mountney spreads a map over his kitchen table at his farmhouse in southeast Saskatchewan, pointing to yellow and orange arrows slithering across the document. 

Many of the arrows represent existing channels and ditches, moving across fields and out of wetlands to drain water. The arrows eventually make their way to a creek, causing what he describes as a deluge of problems downstream. 

“All these years, guys have gotten away with draining water and the next guy figures he can get away withit,” Mountney said in an interview at his farm near Wawota, Sask., about 200 kilometres southeast of Regina. 

“If this keeps going like it has, I don’t know what Saskatchewan’s going to look like in 10 years.”

Mountney’s map depicts what’s called the Wawken Drainage Project, a plan developed by the local watershed group that has since been taken over by the Water Security Agency, which is responsible for overseeing drainage in Saskatchewan. 

The project is nearly 14 square kilometres and contains 880 wetlands of various sizes representing a total of 2.4 square kilometres of water. 

A project document indicates that 88 per cent of these wetlands have been drained, partially drained or farmed. About 12 per cent remain intact.

Most of this water is supposed to flow into a creek that runs through a parcel of Mountney’s land. 

The plan developers believe the creek can handle the flows, but Mountney is not convinced. 

Last year, he and his wife, Sandra Mountney, dealt with flooding ontheir horses’ pasture. They decided not to use their well water at the time because it was yellow. 

“They were very excited to tell us that nobody inside the project area is going to lose acres, but they haven’t even looked at who’s going to lose acres miles down the line.” Sandra Mountney said. 

Brent Fry, who farms grain and livestock, said it’s common for his land to flood for three days when people upstream get 50 millimetres of rain. 

He said it has caused roads and access points to erode.

“There are about four farms out there and all they’re doing is draining whether they’ve got permission or not,” Fry said. “I don’t even know what to do because the government’s not doing anything — they’re siding with the big guys.”

Farmers have drained water in Saskatchewan for generations and many have done so illegally by digging ditches without permits.  

Most producers drain because it allows them to grow more crops, helping them pay for land that has become increasingly expensive. However, it has caused yearly flooding for people downstream. Roads also wash out and habitat gets lost.

At the Saskatchewan Association of Rural Municipalities convention in February, reeves passed a resolution asking the Water Security Agency to require those who are illegally draining to remediate their unapproved works. 

Saskatchewan legislation requires upstream landowners to receive permission from those downstream when they want to drain, but many say that’s not happening. 

Sandra Mountney said the Water Security Agency hasn’t been taking concerns seriously.

“It’s hard to know who’s really protecting our waterways,” she said.

The Wawken project began about three years ago but hasn’t been completed. It’s among many drainage projects underway.

Daniel Phalen, a watershed planner, worked on the project as technician before he left for another job. 

He said landowners had been draining water with no permits before the plan. His job was to determine how many wetlands were drained and what works had already been done. 

Phalen said the plan was to put in structures that would slow down the drainage to reduce problems downstream. 

It’s unclear what work had been done on the Wawken project to mitigate flows since Phalen left. The Water Security Agency did not respond to a request for comment.

Phalen said projects can get held up if affected landowners don’t come to an agreement. Expropriation is allowed but it’s rare, he said.  

Another nearby drainage plan, known as the Martin project, has stalled because of landowner concerns.

Researchers have estimated Saskatchewan has lost half of its total wetlands over time for crop production. 

Phalen, who also worked on the Martin plan, said it was concerning to see the number of wetlands sucked out. 

“The Water Security Agency doesn’t have the manpower to do much about it,” Phalen said. “There’s such low enforcement already that if they had any policies in place, people would just drain anyways. It’s kind of a scary problem to be in.”

Sandra Mountney said she’s worried about losing wetlands because they help recharge groundwater supplies and filter contaminants — particularly important when it’s dry. 

The Water Security Agency has released a drainage management framework that aims to prevent flooding and ensure Saskatchewan retains a “sufficient” number of wetlands. 

Leah Clark, the Interim Executive Director of Agriculture Water Management, told attendees at a Saskatchewan Farm Stewardship Association meeting earlier this year that 43 per cent of wetlands are retained within approved projects. She added the province has “thriving” wildlife populations.

However, she said under the policy, landowners would be able to select which wetlands to retain.

“It will achieve a working landscape for landowners to continue to use their land for farming and ranching. This approach will allow for new development while retaining current drainage,” she said. 

Phalen said Saskatchewan could look to Manitoba for solutions to retain wetlands. 

Manitoba has historically drained most of its wetlands in the agricultural regions, he said, but the province has since developed a policy where landowners are paid for retaining them. 

“You know, $100 an acre is not a ton of money, but it’s another incentive to help producers,” he said. “It’s such a complex problem where you got this huge financial incentive to drain.”

Lane Mountney said regulations just need to be enforced. 

“It’s almost too late,” he said. “They should have been out there checking stuff before we got this point.” 

This report by The Canadian Press was first published June 4, 2023.

Jeremy Simes, The Canadian Press

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