Alberta estimates $23MM in new tax cuts for shallow gas producers

Alberta municipal affairs minister Kaycee Madu speaks in Edmonton in July 2019. Image: Government of Alberta

The Government of Alberta says it is “taking swift action to support shallow gas producers” by working with municipalities to reduce 2019 taxes on wells and pipelines.

The province expects that industry will receive more than $23 million in total support from the tax relief.

The initiative will prevent further company failures and job losses as were seen recently with Trident Exploration, municipal affairs minister Kaycee Madu said in a statement on Tuesday.

In early May the bankrupt natural gas producer ceased operations, abandoning more than 4,400 wells.

The company said that its liquidity had been exhausted by the combination of extremely low natural gas prices with high surface lease and property tax payments.

Trident also said it was unable to complete a restructuring and sales process with its lenders as a result of the the recent Supreme Court ruling that bankrupt oil and gas companies cannot walk away from the environmental obligation of orphan wells.

The Alberta government estimates that 65,000 wells in predominantly 15 municipalities qualify for savings under its new tax relief.

The plan was cautiously endorsed by Al Kemmere, president of Rural Municipalities of Alberta.

“We recognize that municipal and education property taxes are not the core cause of the industry’s struggle, but are likely the only area in which short-term relief can be found, so we’re pleased with the Government of Alberta’s announcement, as it helps the shallow gas industry without unfairly penalizing rural municipalities,” Kemmere said in the Government of Alberta statement.

“That said, in the long term, property tax should not be seen as a tool for relief.”

Tristan Goodman, CEO of the Explorers and Producers Association of Canada, said the government’s plan is much-needed positive news.

“This announcement is rapid and decisive leadership from this government on the natural gas file is a demonstration of their commitment to protect Alberta jobs and we welcome this measure.”

Municipal Affairs will soon provide a list of affected wells to municipalities and companies, the government said.

It also indicated plans to update the tax model for linear property such as pipelines, which is determined by the province.

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