On October 29, 2021, Ric McIver, Minister of Municipal Affairs, introduced Bill 77 to the legislature. If passed, Bill 77 would see portions of the Municipal Government Act amended. Of particular note are proposed changes to restore a special lien giving municipalities priority to collect unpaid property taxes from oil and gas companies.
This change is being proposed in light of the Alberta Court of Appeal decision in Northern Sunrise County v Virginia Hills Oil Corp, 2019 ABCA 61. The Court of Appeal found there was no statutory lien for linear property taxes under the Municipal Government Act. Since that decision, municipalities have been left without an effective legal mechanism to collect unpaid taxes on oil and gas properties such as pipelines and wells (i.e., "linear property").
The issue is made more stark when considering the value of unpaid taxes. A recent survey conducted by the Rural Municipalities of Alberta found that a number of oil and gas firms owe approximately $245 million in unpaid property taxes to approximately 69 municipalities. This represents a 42% increase from 2020 and triple the $81 million owing in 2019.
Bill 77 would restore the ability of municipalities to place a special lien against both owners and operators of oil and gas companies, whether operating or bankrupt, that have not paid property taxes to the municipalities in which they operate. The special lien would give municipalities priority on the list of creditors to be paid out should the company be bankrupt, as well as:
- assign liability to both the owner and operator for unpaid property taxes;
- introduce a 120 day redemption period to enable negotiation of payment arrangements;
- apply to all the debtor's assessable property within the municipality; and
- apply to any unpaid taxes on linear property and oil and gas machinery and equipment currently owed including past years, and any future unpaid taxes.
The majority of oil and gas companies operating in Alberta pay their municipal property taxes and as such will not be impacted by these proposed amendments. However, companies unable to pay their taxes may wish to contact their local municipality and discuss the special lien and how it will impact them.
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