The tax assessment system is “broken” according to one energy company operating within the borders of Paintearth County.
AlphaBow Energy submitted a letter to County of Paintearth council which was reviewed during their Nov. 2, 2021 meeting. The letter disputed the company’s assessed taxes and wished to open a dialogue with the county to rectify the matter.
“They think they’ve been assessed, and taxed, in excess of what their assets are worth,” said Chief Administrative Officer Michael Simpson.
“Their request is, in my opinion, they want you to cancel some of their taxes. They don’t feel they are assessed fairly. There are ways they can appeal their assessments, they are just choosing not to.”
In Alberta, oil and gas properties are assessed by the provincial government and the Alberta Energy Regulator. Municipal taxes are then set based on those assessments provided by the province.
“Asset values as assigned to active sites are unrealistically high and some elements of values assigned tend to increase over time even though the true value for all elements of our oil and gas assets declines as the resource is depleted,” was written in the AlphaBow Energy letter to the county.
“Additionally, some of the sites are marginal and very near end-of-life and yet the taxes continue to increase instead of reflecting the reality that the asset retirement obligation probably exceeds the remaining value and thus they are not an asset but a liability.”
According to the document, the assessed value of their 2019 inactive sites was just over $1 million, which resulted in a tax bill of just over $18,000 for 2020. This is contrasted by an assessment report from the Alberta Energy Regulator for the same year which found the company held just over $1.07 million worth of liabilities on its books, making the assessed taxes seemingly unfair.
“Even though both assessments are provided by the Government of Alberta, there is considerable difference between the value assigned by the AER to inactive sites and the value assigned for municipal tax purposes,” the letter continued.
“It is unreasonable that the Government of Alberta would have two different views of the value of a single site.”
While there is an assessment appeal process in place, the company described it as “cumbersome, restrictive and more costly than the taxes assessed. This is so severe that frequently it is not worthwhile trying to work within the system to ensure the assessments are appropriate.”
The company finished the letter on a positive note, saying they wish to work with the municipality.
“AlphaBow would welcome any discussion that would result in fair property taxes based on realistic asset values as we go forward,” the letter stated.
“Even though we wish the energy economic situation was different, we must govern ourselves based on the realities we are facing today.”
Council felt themselves unsympathetic with the oil company. With oil and gas prices going up of late, increasing sector revenues, the feeling at the council table was that if the company wanted the assessment changed, it should go through proper channels.
“Everyone is getting taxed too heavily, in their opinion,” said Reeve Stan Schulmeister.
“I don’t think we’re Santa Claus here.”
In a motion put forward by Coun. Diane Elliot, council voted to not cut any of their outstanding taxes and referred the company back to the province go through the proper assessment review process.