Assessment Model Review

The Government of Alberta has proposed changes to the assessment model that is used to determine the value of regulated properties such as oil and gas pipelines and wells. These changes would significantly reduce Lamont County’s tax revenue and may impact not only the long-term viability of our municipality, but also that of the entire region.

Lamont County Council and senior administration are extremely concerned about the potentially devastating impact that this decision could have to the county, as it would force us to examine reductions in services and increases to property taxes as a means to offset some of the revenue loss.

October 19, 2020 Update - Government of Alberta 

Tracy Allard, Minister of Municipal Affairs, announced a decision had been made that would be a compromise between industry and municipalities, stating:

"Supports to energy companies will include an exemption from property taxes for three years when drilling new wells and building new pipelines. The government will also eliminate the Well Drilling Equipment Tax provincewide for new drills. 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."

Watch the news conference below, or read the full news release.


Impacts on Lamont County

Based on the various potential changes presented by the province, Lamont County would be required to increase the residential tax rate by between 43.3% and 81.4%, and the non-residential tax rate by between 9.4% and 19.3%, or reduce full-time employment by between 15.0% and 28.2%. Lamont County may be forced to enact a combination of all three changes, as well as reduce service levels and intermunicipal collaboration agreements to remain viable.

The scenarios proposed by the Government of Alberta would reduce Lamont County tax revenues by 5% - 9%; up to $2 million would need to be cut from overall revenues in the first year alone. Read the official news release here.

Assessment_info_sheet_FINAL-1  Assessment_info_sheet_FINAL-2

Information from the Rural Municipalities Association (RMA)

RMA is concerned with the impacts that each of the options will have on rural municipalities, and strongly believes that the assessment model is not the appropriate tool to support the oil and gas industry. RMA believes that there are a many alternative options that would better address industry competitiveness without compromising the ability of municipalities to provide services and remain viable.

Please visit the RMA Assessment Model Review webpage for information on the review process and RMA’s concerns with the changes currently under consideration, including:
  • Assessment Model Review Outcomes Summary
  • Assessment Model Review Position Statements
  • RMA Assessment Model Review Depreciation Summary
  • RMA Alternative Industry Incentive Approaches – Summary

Letter Writing Campaign

Assessment Model Letter-Writing CampaignJoin us in our letter-writing campaign to our MLA and the Government of Alberta! Tell our elected officials what you think about the shifting of tax burden from oil and gas companies to municipal ratepayers.

Submit your letter at www.LamontCounty.ca/Speak-Up
and make your voice heard!

Lamont County's Response - Suggested Alternate Solutions

In response to the Government of Alberta's proposed Assessment Review, Lamont County has written a letter to the Minister of Municipal Affairs with many alternate solutions that would better address industry competitiveness without compromising the ability of municipalities to provide services and remain viable.  

These solutions include:

1) Uncollected Taxes - We agree with the RMA stating, “Legislative changes to allow higher priority on municipal tax collection, and MGA adjustments to introduce additional tax collection tools”.
  • Prior to a licensee/ownership change of any regulated property in Alberta. The Alberta Energy Regulator should then request a company to produce a municipal tax certificate indicating that they are “whole” (i.e. no arrears, paid in full) to that jurisdiction. Otherwise the sale/transfer of assets is not approved.
  • Potential to have the municipality added as a secured creditor in legislation. Enables and gives municipality more authority in the courts in uncollected taxation matters.
2) Clarify Property Taxes - In the Virginia Hills Decision, the Court determined that the phrase "property taxes" in section 348(d)(i) of the MGA does not include taxes on linear property. In order to resolve this apparent ambiguity, we suggest that section 348(d)(i) should be amended to clarify that "property taxes" means all taxes imposed pursuant to a property tax bylaw, including linear property taxes.

3) Clarify Property that is subject to the Special Lien
- Another issue identified by the Court in the Virginia Hills decision was the question of what specific property is subject to a special lien in the case of property taxes on linear property. The Court's concern here is that any form of security, in this case a special lien, must attach to some specific asset. To avoid this issue, the MGA could be amended to:
  • Expand the definition of assessed person in respect to linear property as set out in section 304 to include both the operator and the owner of linear property; and
  • Amend section 348(d)(i) to clarify precisely what "...land and improvements to the land..." are subject to the special lien. For instance, the provision could be amended to state that the special lien attaches to "...all of the assessed person's interests in any land or improvements within Alberta...", or alternatively to "...the assessed person's interest in the land or improvements that are the subject of the unpaid tax..." .
4) Enforcement Powers - In the Virginia Hills Decision, the Court noted an apparent ambiguity that arises in the MGA due to the fact that the MGA provides a specific enforcement mechanism to sell land that is subject to a special lien for unpaid property taxes in Part 10, Division 8, but that no such enforcement mechanism is established that would allow for a municipality to sell linear property.
  • To rectify this apparent ambiguity, the MGA could be amended to create or recognize a specific enforcement mechanism that would allow municipalities to sell linear property that is subject to a special lien for unpaid taxes. 
5) Reduce Depreciation in Current Model – In the current assessment model, property taxes are highest in the first few years of production. Companies wanting to reduce their risk in new investments would prefer to have a tax break in the first years of operation to ensure they at least get their initial capital investment returned. This would also help encourage new investment. Conversely, municipalities have ongoing operational costs that require consistent funding, and hence prefer long term stable revenue; a static tax assessment would provide this certainty in the long run. If the Province is determined to reduce taxation for companies, a lower depreciation number coupled with a tax credit in the first 5 years, would enable companies to get their initial capital investment returned and would encourage new investment while providing long-term stable income for municipalities.

6) Linear Depreciation on Wells
- The depreciation levels and curves for Linear property and Machinery and Equipment are proposed to change in the AMR scenarios. Specifically, of note is linear wells. All producing wells in the Province of Alberta should be analyzed to better represent actual economic conditions. Potentially different depreciation curves based on the differing well types may be a better approach at maintaining equity for the Linear assessment of Wells. An actual depreciation-based review of wells in Alberta would be an appropriate review of how these wells differ in their actual ages and not an average of all well types in Alberta.

Download Lamont County's letter to the Minister of Municipal Affairs to read the entire response.