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Alberta On Hook for Millions in Unpaid Oil and Gas Leases

eryn.rickard/Wikimedia Commons
eryn.rickard/Wikimedia Commons

The woes of Alberta’s oilpatch are becoming a headache for its municipalities, provincial treasury, and landowners, CBC News reports, as oil and gas companies in distress miss payments ranging from taxes to power bills.

“The Alberta government is grappling with how to deal with outstanding debts by resource companies that haven’t paid education [and] property taxes or annual lease payments to landowners,” the broadcaster reports. “The bills, already in the millions of dollars, are adding up and have the potential to become much bigger.”

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One sore point is taxes owed to the municipalities where oil and gas companies have facilities and operations. “The cash gets tough and the taxes become an item that just don’t get paid,” Al Kemmere, president of the Alberta Association of Municipal Districts and Counties, told CBC.

Municipal governments have asked the province for help, even as at least one oil company asked earlier this year for an across-the-board 30% cut in property taxes.

Landowners are also being stiffed. One complained recently that his electrical supplier, Alberta’s Epcor, had added charges to his bill that had been incurred by a now-defunct energy company that drilled a well on the owner’s land. (The Alberta Utilities Commission is working to close the regulatory loophole that allowed Epcor to do so, CBC News reports.)

More significant to many landowners are missed lease payments they are owed by oil and gas companies. By the end of August, three times as many landowners had registered lease defaults with the Alberta Surface Rights Board as the average “in the 11 years prior to 2015,” board chair Gerald Hawranik told CBC.

Because the province of Alberta guarantees lease payments to landowners, it may be on the hook for as much as $4 million in defaulted payments in 2016, Hawranik speculated.

“It’s enterprises that are in distress at one level or another,” said Brad Herald, western vice-president of the Canadian Association of Petroleum Producers (CAPP). “From paying your heat and lights to your people and your office space, they’re making some very difficult choices.”