RURAL RESIDENTS FRUSTRATED WITH JUSTICE SYSTEM
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THURSDAY, JANUARY 30, 2020 || NEWS || SPORTS || CENTRAL ALBERTA BUSINESS || FEATURES || ENTERTAINMENT
Innovative technology showcased at central Alberta site BY PAUL COWLEY ADVOCATE STAFF
Photo by PAUL COWLEY/Advocate staff
The group that represents rural municipalities says its members need more power to make oil and gas companies pay their taxes.
Unpaid taxes plague municipalities BY PAUL COWLEY ADVOCATE STAFF
Rural municipalities need the regulatory muscle to squeeze oil and gas companies that don’t pay their tax bills, says their association’s president. Al Kemmere, president of Rural Municipalities of Alberta, said the amount of taxes owed by oilpatch companies ballooned to $173 million last year from $81 million a year earlier, based on a survey of its 69 county and municipal district members. “We were quite surprised it increased as much as it did,” said Kemmere, who is a councillor in Mountain View County. Much of the missing cash is because of bankruptcies in an industry pummelled by low oil and gas prices for years. However, what really irks municipalities are the delinquent taxes owed by companies still operating and able to pay up. “A majority of this ($173 million) was from those still operating and not paying their taxes,” Kemmere said. Ponoka County Reeve Paul McLaughlin went as far as to call the reluctance of companies to pay their municipal bills a “tax revolt.” Kemmere wouldn’t go that far, but said, “we need to fix the legislation that allows oil and gas companies to not pay.” If homeowners do not pay their property taxes, the municipality can seize their property and auction it off to recoup what is owed. It rarely gets that far, because those owing usually pay up in the end. “We don’t have that same mechanism if companies continue operating and don’t pay,” said Kemmere. “We can’t force them.” Premier Jason Kenney has suggested municipalities have the tools for enforcement. “We don’t believe we do,” said Kemmere, who said the association wants to meet with the municipal affairs minister and the premier to discuss the issue. “If they say we have the tools (to collect taxes), I want them to show us those tools.” Exactly what sort of changes are needed to give municipalities the power to force tax payment is unclear. Seizing oil and gas company assets is likely not the answer. How would one municipality seize part of a pipeline that spans multiple municipalities? Not
to mention, the difficulty of sorting out the often opaque and complex ownership agreements around oilpatch assets. Something the Rural Municipalities of Alberta has been requesting for years are regulations that require companies to fulfill their tax obligations before they sell assets to another company. A ploy companies have used in the past is to transfer their liabilities — which often include well cleanup costs as well as unpaid taxes — to a smaller company, which then goes bankrupt. Those assets can be sold to cover some liabilities, but municipalities fall sixth or seven on the list of secured creditors. Mountain View County, which wrote off about $500,000 in oil and gas taxes this past year, is in better shape than many, Kemmere said. The Municipal District of Smoky River, northeast of Grande Prairie, has an operating budget of $9 million and $3 million in unpaid energy industry taxes. In Red Deer County, just under $4.1 million in bad debts from oil and gas players are on the books. Last November, Lacombe County wrote off $600,000 in uncollectable oil and gas company taxes, on top of $374,000 previously written off. The County of Stettler was hard hit by the bankruptcy last year of Trident Exploration. The company had become the county’s biggest taxpayer and its demise slashed 25 per cent from its municipal tax base. Unpaid taxes are only one of the financial challenges facing rural municipalities. The province has asked municipalities to reduce the tax bill for shallow gas oil producers. At the same time, rural and small municipalities are being asked to contribute toward policing costs for the first time. Last week, Ponoka County wrote off $250,000 in unpaid taxes from a pair of energy companies that went bust. Kemmere is concerned unpaid taxes, coupled with increased costs, could spell big trouble for some municipalities. “Potentially, we’ve got income at risk and extra expenses. It’s exactly the opposite of what you would hope it would be.” The viability of some smaller municipalities could be at risk if the trend does not change, he said.
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A geothermal project described as a huge underground radiator is proving its technology. Eavor Technologies Inc. completed drilling a pair of 2.4-kilometre deep wells connected by a pair of underground pipelines for its closed-loop geothermal system last September. Now being tested, the $10-million demonstration project east of Rocky Mountain House circulates liquids through kilometres of underground well bores, picking up heat before returning to the surface. The heated liquid can then be used for heating or to create power using heat-to-energy technology. Eavor president and CEO John Redfern said testing carried out while the wells were drilled and connected went well, and now work is underway to test and demonstrate the technology’s thermosiphon effect. The thermosiphon effect is a natural process that sees warmer liquids rise as colder, denser liquids are introduced. That creates a continuous circulation of a benign liquid with high heat-retention properties without the need for pumping. A small pump is needed only to get the circulation started and then it continues on its own. “From what I understand, everything is within two per cent of predicted in the (geothermal) model as we put it though its paces,” said Redfern. “It’s a lot of fun to go out there and feel the heat radiating out of the pipe as the fluid moves around without any pump pushing it.” Redfern said there has been lots of interest in the technology, including the Alberta government, which has invested $2 million. Another $13 million has been raised through other investors, including companies such as Precision Drilling and Shell New Energies. “Even during the drilling phase, we had 14 different groups from 11 different countries come through and tour the construction phase of it,” he said. “Obviously, there’s going to be more people coming through. “We’ve been marketing it for a year up to this point.” Redfern said the first commercial project is expected to be built in Bavaria. “We’ve got a deal there to take over a traditional failed geothermal (system).” Eavor’s technology allows it to create a system using holes drilled by other geothermal companies that did not meet their technical needs. “It’s almost as if you had a technology that if anyone ever drilled a dry hole in the oilpatch, you come in and say, ‘I can make that work,’” he said. “That’s sort of what we have on the geothermal side.” Eavor is already going through the application process in Germany, which is phasing out its coal power. Japan, Italy, France, Netherlands, the Caribbean, the U.S. and Canada have also shown interest.
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