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Gas tax relief extended into 2020

Posted on December 27, 2019 by 40 Mile Commentator

By Collin Gallant

Alberta Newspaper Group

A tax relief program for shallow gas producers will be extended into next year, the province announced Thursday, while a larger review of how such wells and pipelines are assessed for local tax purposes takes place.

In June, the Ministry of Municipal Affairs announced it would discount local taxes by 35 per cent – equal to the education tax portion – on certain assets in 2019.

In southeast Alberta alone, the total may have reached $10 million, but the difference was remitted to counties and municipal districts from the province’s general fund.

That left no change in local government finances, but rural administrators expressed concern about how greater assessment changes would affect general municipal tax revenue.

Statements by the head of the Rural Municipalities of Alberta Association on Thursday appeared glad that a review would not be rushed in before next year’s tax deadlines

“While rural municipalities are concerned about their 2020 and future budgets … the RMA truly appreciates the Government of Alberta’s decision to engage us further in consultation so we balance industry competitiveness with municipal viability,” said president Al Kemmere.

Municipal Affairs Minister Kaycee Madu stated the 2020 discount “mirrors similar assistance provided in 2019,” while producers continue to struggle with low prices and high cost of production.

“We are now shifting our focus to the long term,” stated Associate Minister of Natural Gas Dale Nally. “Providing the same property assessment reduction in 2020 as in 2019 will allow us to work with industry to fix Alberta’s assessment model, without having to rush the process.”

A preliminary analysis of the 2019 program from the Rural Municipalities Association shows that most qualifying wells were located in southeast Alberta.

Cypress County (21,500 wells and pipelines) and County of Newell (14,000), collect a combined total of $15 million in local taxes from shallow gas wells, including $4.5 million for the education portion and more than $10 million for municipal purposes.

Producers have long argued that assessment rules – written in 2005 – no longer capture a fair picture of asset value or profitability.

The City of Medicine Hat’s gas production unit estimated that the 35 per cent local tax break on its assets in various counties could total up to $200,000.

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