Province to review how it values industrial property

CALGARY The Alberta government plans to review key planks of its property tax regime for the oil and gas industry, opening the door to potential changes at a time that several companies have waged a public campaign for tax breaks.

Pending budget approvals, Municipal Affairs intends to revisit the way it assesses the value of industrial property, including resource wells and pipelines, in 2017.

The important calculation in setting property tax bills has attracted opposition from oil and gas producers who argue the assessed value of many of their assets far outstrips their economic worth.

While some industry officials said they’re hopeful a review would usher in desired changes, one Calgary-based natural gas producer has forged ahead with a formal appeal of its $24-million bill on the grounds of what it calls flawed math and an unfair system.

Doug Dafoe, president and chief executive of Ember Resources Inc., said he is prepared to take his case to the Court of Queen’s Bench to argue Alberta’s property tax regime unfairly targets low-productivity wells, including Ember’s shallow gas assets.

Dafoe is pushing for an assessment he believes is more in line with the value of Ember’s wells and pipelines, but he acknowledges that if his company pays less, other taxpayers — potentially homeowners, farmers or competitors — could pay more.

“We shouldn’t have to put up with wrong math,” he said. “We don’t know how they got to that number (the assessed value). That’s not the value of what we’ve got; that’s not the cost of what we’ve got …

“Why should we have to pay taxes on that basis?”

Ember has joined a growing chorus of resource producers that have taken their pleas for tax relief public in the middle of an oil price rout that has drained industry profits.

Municipal Affairs spokesman Jerry Ward said the planned review is not a response to lobbying efforts but is a routine recalibration of property assessments. The last one was conducted more than a decade ago, he said.

With one exception, county governments have so far rejected the industry’s appeals for relief, arguing farmers and ranchers have not previously asked them for property tax breaks when faced with mad cow disease, drought or hail.

Al Kemmere, president of the Alberta Association of Municipal Districts and Counties, said the industry has already seen some relief this year, noting several of his members have reported declines in the assessed values of oil and gas assets in their counties.

The assessments were downgraded due to existing adjustments that take into account diminishing replacement value of wells and pipes. One county lost more than $1 million in tax revenue.

Kemmere said he doubts his members would support any changes to the assessment system that would shift the tax burden from one sector to another.

“Every sector could argue they are unfairly burdened,” he said. “The (oil and gas) industry right now is feeling the burden somewhat extra because their revenues have definitely taken a hit, and I can sympathize with that.

“But there are a lot of people who are struggling to pay their taxes right now because they lost their jobs or lost their businesses.”

The Canadian Association of Petroleum Producers said it plans to press government in the coming weeks — ahead of the review — to have property assessments more responsive to commodity prices, which means assessed values of assets would be lower in downturns, such as the current rout, but also higher in better times.