Alberta Government Announces Tax Relief For Shallow Gas Producers

Some Alberta natural gas producers struggling with record low commodity prices and high operating costs will get a break in the form of some tax relief, the provincial government said Tuesday. 

Immediate steps will be taken to work with municipalities to reduce the industrial property tax on shallow gas wells and pipelines by 35 per cent for the 2019 tax year, it said. About 65,000 wells, mainly in 15 municipalities in central and southern Alberta, will receive more than $23 million in total support.

This short-term relief will help shallow gas producers cut costs, protect jobs and remain competitive while dealing with the economic pressures facing the natural gas industry, said the government.

To offset the lost revenue to municipalities, the province will reduce the amount of education property tax they pay to the government.  Municipalities will continue to collect property taxes from shallow gas producers and the money will go into their local budgets.

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.

The government worked with the Explorers and Producers Association of Canada (EPAC) to determine which companies would benefit the most from the tax relief.

A list of qualifying shallow gas wells will be provided to affected municipalities and companies. Municipalities will then have to pass a bylaw to implement the tax relief program, report natural gas pipelines related to qualifying wells and report the total amount of tax cancellation to the Municipal Affairs department.

“This announcement is much-needed, positive news for Alberta’s natural gas sector, and for all Albertans,” Tristan Goodman, president and chief executive officer of EPAC, said in a statement welcoming the measure.

“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,” Kaycee Madu, minister of municipal affairs, said in a news release.

The initiative, he said, will prevent further company failures and job losses in Alberta as in the recent case of Trident Exploration Corp. while creating a more viable system for industry and government.

“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,” Al Kemmere, president, Rural Municipalities of Alberta, said in a statement. “That said, in the long term, property tax should not be seen as a tool for relief.”

While the industrial property tax reduction will provide much-needed, short-term relief to producers, the government will continue to bring all stakeholders to the table to find collaborative solutions on a critical issue, Dale Nally, associate minister of natural gas, said in a statement.