Unfortunately, there is not too much the County of Barrhead can do to recoup taxes owed to the municipality by Trident Exploration Corp.
That is what county manager Debbie Oyarzun told councillors at their May 7 meeting.
The Calgary-based natural gas abruptly announced April 30 that it had ceased operations abandoning approximately 3,650 wells, 240 facilities and 500 pipelines across Alberta and leaving 33 employees and 61 contractors looking for work.
“They are our second-biggest oil and gas operator accounting for nine per cent of our municipal tax revenue,” she said.
For the 2018 tax year, this accounted for about $650,000 in revenue.
Oyarzun noted this amount was less than previous years because Municipal Affairs lowered the linear assessment rate for oil and gas companies. Linear assessment is the value the province places on the oil and gas wells, pipelines and electric power systems that are in a municipality.
Not included in the $650,000 is the $124,000 the province requires the county to collect for education and senior’s housing. When everything is totalled including penalties for late or nonpayment the county Trident owes the county $1.7 million.
At the time of the announcement, Oyarzun noted they were actively negotiating with the company to come up with a payment schedule.
She also said she was in the process of arranging a meeting with seven other municipalities in a similar situation in hopes of coming up with a group solution.
Oyarzun added the chances of the county being able to recoup their losses is negligible due to a recent Alberta Court of Appeal decision in the case of Northern Sunrise County versus Virginia Hills Oil Corp.
The case questioned whether municipal property taxes for “linear property” constituted secured claims in insolvency proceedings.
The court rejected this claim and found that there is no statutory lien for linear property taxes under Alberta’s Municipal Government Act.
She noted a January Supreme Court of Canada Redwater decision also makes it unlikely the county be able to collect any of its outstanding taxes.
The high court ruled energy companies must fulfil environmental obligations before paying back creditors in the case of insolvency or bankruptcy, overturning lower court decisions that had favoured bankruptcy law over provincial environmental responsibilities.
On May 3, the Orphan Wells Association, which takes care of wells in Alberta when the owner can’t or won’t, through a Court of Queen’s Bench application was appointed the accounting firm PricewaterhouseCoopers as receiver of Trident’s assets.
“With respect to Trident the environmental liability piece that amounts to $329 million so by the time they portion that out even their secured creditors won’t’ be safe let alone unsecured creditors,” Oyarzun said.
However, she said Trident’s ceasing operations will help the county recoup some of the $118,000 they submitted to the province for education through the Provincial Education Requisition Credit (PERC) program.
“The PERC program isn’t bottomless, it has a budget, but we hope to be able to get back that portion back,” she said.
Coun. Darrell Troock suggested linking Road Use Agreements to taxes owed by industry, most notably by energy companies.
“The second after an oil company is supposed to give us money, we cancel all Road Use Agreements and stop them from travelling on our roads,” he said. “If we did that we would have something to negotiate with.”
Reeve Doug Drozd said he wasn’t sure how successful that would be, noting Alberta Energy Regulator’s (AER) authority would supercede that of the county’s in directing oil companies in removing its assets as part of the shuttering process.
Coun. Bill Lane said one of his biggest concerns is that Trident well sites would be the target of vandalism.
The AER has been made aware of this concern, said Oyarzun.
She added council were able to insulate ratepayers from a potentially large mill rate increase due to the lost revenue from Trident through its tax stabilization reserve fund but noted this fund has been largely depleted.
On the positive side, Oyarzun said revenue due to Trident’s demise will be replaced, at least in part, by linear assessment tax from the new powerline that Pembina Pipelines is building, as well as new residential properties and tenants at the county’s industrial park.
Troock then asked if the county could charge energy companies for a road use agreement if and when a company acquired any of Trident’s assets.
Oyarzun said they could do so in the form of a deposit, but added any funds collected could only be applied to damages to the road.
“We can’t take it to pay for unpaid taxes,” she said.
