Foothills County will take a smaller hit from provincial tax incentives to the oil and gas sector than what had initially been proposed.
Harry River Cambrin, Foothills County municipal manager, said the announcement on Oct. 19 was far from the blow rural municipalities would have faced if the provincial government had not made alterations to its original four-scenario plan.
“That proposal has been totally changed,” said Riva Cambrin. “We haven’t seen the numbers yet but it seemed it is going to be quite minor as to what they have officially proposed.”
Riva Cambrin said there will be a small impact, possibly around one per cent on its 2020 budget of approximately $75.4 million.
Tracy Allard, Alberta Minister of Municipal Affairs, announced on Oct. 19 it has worked with representatives from rural municipalities on the new proposal aimed at providing tax breaks to get the oil and gas industry working again.
The tax dollars being cut would have gone into rural municipalities’ coffers.
The proposed supports for oil and gas companies include an exemption from property taxes for three years when drilling new wells and building new pipelines.
Additionally, the government will lower assessments for less productive oil and gas wells while continuing the recently-introduced 35 per cent assessment reduction on shallow gas wells for three years.
The Province will also eliminate the Well Drilling Equipment Tax across Alberta for new drills.
“There aren’t too many wells being drilled in our area anyway, so it is not a huge amount for us,” Riva Cambrin said. “It will affect other municipalities more so.”
Allard said the original four scenarios could have resulted in a seven to 20 per cent reduction for rural municipalities.
Riva Cambrin estimated it would have hit Foothills County by about eight per cent.
He said the new tax breaks for the energy sector could pay dividends for the County in the future.
“Certainly, activity would employ people,” Riva Cambrin said. “On its own each site isn’t a large producer for us, but it all helps when it is on the industrial commercial side.”
He said Foothills County, unlike other rural municipalities in the province, aren’t as dependent on oil and gas.
“We are more of a residential tax base rather than linear,” Riva Cambrin said.
He estimates the County received about eight per cent of its revenue from oil and gas in the past.
Riva Cambrin added some municipalities in the province receive as much as 40 per cent of their revenue from the oil and gas sector.
Allard said the new proposal was done through talks with all the players.
“We heard from municipalities that if we continued with the four scenarios, they would be forced to raise taxes or cut services or both,” Allard said. “And we heard from oil and gas producers that if we did not address their tax concerns, they would no longer remain viable.”
She said municipalities and the oil and gas sector continue to have a mutually dependant relationship.
“Municipalities need a strong oil and gas industry to create jobs for residents,” Allard said. “The energy industry needs municipalities to provide communities so there workers can live, raise a family...”
Allard said the goal ultimately is to create jobs and investment for Albertans.
She said the Province will also be looking at the issue of unpaid municipal taxes from the energy sector.
Al Kemmere, president, Rural Municipalities of Alberta, said the fact some oil and gas businesses are not paying their taxes has been a major concern over the past three years.
