'This has gone on long enough': RMA wants oil and gas taxes paid

Paul McLauchlin - RMA President Rural Municipalities of Alberta President Paul McLauchlin discusses the Alberta government's amendments to abandoned well requirements

Rural Municipalities of Alberta President Paul McLauchlin talks with Alberta Primetime host Michael Higgins about amendments the province is making concerning abandoned wells.

Michael Higgins: The Alberta government plans to relax a rule requiring energy companies looking to buy viable oil and gas wells from bankruptcy proceedings to first pay all the previous producer’s tax arrears. The initial order, made in response to unpaid bills to municipalities, now appears to have caused unintended consequences.

What's your understanding of why the order is being amended? How do you boil this down for member municipalities looking to you for answers?

Paul McLauchlin: Well, really simply, the direction would be that assets are found, defunct companies are found within the Orphan Well Association, these are producing assets that could get back and pay taxes, can pay surface leases, and the ability to take those assets and sell them, they're attached to all the other assets, and ultimately the taxes. And so the change would require the elimination of the need to pay all the taxes and allow that asset to actually move out and back be back in production.

Michael Higgins: So where does that leave all the unpaid taxes that rural municipalities are looking for?

Paul McLauchlin: The stark reality is we haven't really changed. This was a move to attempt to help things and it did in many cases. What we learned is you can actually operate an oil and gas facility in the province of Alberta without drilling or without transferring assets. So in December of this year, $253 million in unpaid taxes, our ask hasn't changed. We want Directive 67, which is something that's made by the AER to be a compliance issue for operating an oil and gas facility in the province of Alberta. You shouldn't be permitted to operate an oil and gas facility in the province of Alberta without paying your taxes. That's our simple ask of the AER through the energy ministry. And that's our hope of actually solving this problem once and for all.

Michael Higgins: So is this change? A step forward? A step back? What would you call it?

Paul McLauchlin: I think it'd be an understanding that the policy has not necessarily done what it's intended to do. These companies, by the time they've hit receivership, are drained so significantly that there is nothing literally left. These assets have an extremely large tax burden so we're asking for prompt response. The reason why these tax burdens are so high is because the AER hasn't taken this as a compliance issue. So to solve this problem is enforcing the payment of taxes. Two companies have fallen in the last six weeks, $45 million are owed to my members that will have to be written off. We can't deficit budget so that money comes out of, actually, all ratepayers in Alberta. So this is pretty significant just in the last six weeks. We're worried a bunch more will fall and again, these companies continue to operate and these tax bills get higher if they're permitted to operate.

Michael Higgins: What degree of communication have you had with Minister Brian Jean over the change in direction here? Was there consultation beforehand?

Paul McLauchlin: Well, leaked is the wrong word, but a FOIP document. I don't believe the minister had actually released that just yet until it became part of the media churn. So we've been definitely talking with the ministry. I haven't changed my position. My members definitely want to have this addressed by the ministry. I think we're moving forward and I'm very confident that there's a recognition by the minister that this needs to be fixed once and for all and that's the one step to do so.

Michael Higgins: Where is the dollar figure at now? I know in the past we've talked about the quarter billion dollar mark. How much higher is it at this point?

Paul McLauchlin: I would say within that $253 million. This recent loss of $45 million is within that number. Has that number increased? I mean the problem is, again, that year over year, this increases and I think that we need to really pull the pin on this discussion. I think this has gone on long enough. We've looked at other policy changes, whether it's special liens, or this minister order, I think that the only answer is exactly going back to what I stated earlier. To operate the facility you need to pay your taxes and I will add surface leases because I think that's an important part of the puzzle too.

Michael Higgins: In terms of putting context on this, how much of a difference would it make if all those tax dollars were paid? What do those dollars represent for your membership?

Paul McLauchlin: The sad reality is that if these taxes aren't paid, all Albertans suffer. We cannot deficit budget, so that money comes out of reserves, it comes out of actually the ratepayer’s pocket to be quite honest. And this is the bridges, the roads, the ancillary infrastructure in the schools, the pools, these are all the pieces and money that flows. So that $45 million loss that'll be written off, that's 45 bridges, that's a significant amount of road improvement. So we're all impacted by that and in many cases this is going to become, if this continues status quo, this will become an existential threat to many municipalities. They have to generate this money to break this off. That is pretty significant to the bottom line of all these municipalities. This is s a serious situation that needs prompt action by this government

Michael Higgins: Beyond unpaid tax bills, where do you feel this leaves the cleanup of old oil and gas wells?

Paul McLauchlin: I do applaud the ministry of having a discussion and the premier wants to have this. This is a difficult discussion that has had to have happened 10 years ago, but we need to move on, we need to talk about that today. So as recent as today I've had conversations around this legacy of oil and gas, what does the future of oil and gas look like in this province? I think we need to be creative. I think we need to agree to disagree. We need to find ways to solve this because the status quo is not working and we're having a situation that's untenable for municipalities, untenable for the industry, and ultimately Albertans. So we need to talk about the future of oil and gas in this province. I believe that we can do so but we need to get together around the table. And that will strike off this fall as Minister Jean has proposed. So I think these are going to be difficult conversations but conversations we need to have.

Michael Higgins: And more broadly speaking, what degree of dialogue has there been between rural municipalities and the provincial government in the weeks since the close of the spring sitting and contention that we've talked about before over legislation like Bills 18 and 20? What efforts have been made to smooth over any rough waters?

Paul McLauchlin: To have a successful provincial government you have to have successful municipal governments and vice versa. And I think that what we've learned is that there was not the level of consultation and dialogue that should have occurred on those three acts. We can maybe disagree upon that but we are working forward and trying to establish better engagement, better communication. The stark reality is that the folks that I represent, rural Alberta, we're starting to lose our voice by the hyper-urbanization occurring right now. It's pretty real problem. But we're important part of the bigger puzzle, the economics, the oil, the gas, the renewables, all these files are attached to us. And we really see this need to actually create this dialogue and this conversation. We're out here, we're working really hard, and we need to work with this government to be successful.