County of Newell Reeve Molly Douglass speaks about concerns about the province's direction on shallow gas well taxation on Friday. (CHAT News photo).

By Alex McCuaig

Creating a budget hole

Counties warn of ‘dire’ situation due to government’s tax policy

Jul 31, 2020 | 4:50 PM

COUNTY OF NEWELL, AB – A battle is brewing between rural municipalities and the Alberta government over changes in how counties tax shallow gas producers.

The province unilaterally announced a 35 per cent cut in the municipal tax rate on shallow gas infrastructure last year despite protests over the move.

Rural municipalities are now warning that continued tax cut or an increase in it by the province will punch a hole in their budgets and result in cuts in service or increases in local residential taxes.

The two counties which will be impacted hardest by the move will be Cypress and Newell counties which rank first and second respectively in total shallow gas wells in the province. Cypress County also has the lowest tax rate followed by the County of Newell.

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It’s a situation the reeve of the County of Newell says might be indicative of how large oil and gas companies run their business rather than how counties tax them.

“If you can not pay your taxes as a business – especially as a huge business, oil and gas – then there must be something amiss in your business plan,” said Reeve Molly Douglass.

Douglass says it would help to see how this tax cut would benefit struggling junior oil and gas operators along with local service companies and drillers.

“But it would appear that there is just a few of the really big companies that are going to benefit,” said Douglass.

Brooks-Medicine Hat MLA Michaela Glasgo says it’s been a turbulent time for the industry and she understands the impact to counties.

And that there needs to be balance on decision making for both sides.

“I think that’s what is really important when we are drafting legislation, coming up with government policy – that we have that consultation and we make sure that we have a policy that works,” said Glasgo. “Not just for people in Edmonton, not just for people in one industry but for everyone.”

Cypress County officials have scheduled a news conference on the issue which Reeve Dan Hamilton describes as “dire” for the municipality.