Small drillers, rural counties clash over declining oil revenues

Gas war in the county. Randy Dosch, with a natural gas well in his field in Cypress County, Alberta, on Sept. 26. (Photo by James O’Connor/ThePress)

Aproposal by the provincial government to change how oil and gas wells in Alberta are assessed could give massive tax breaks to oil and gas companies at the expense of revenue for rural Alberta municipalities, potentially cutting services for rural residents.

Cypress County Reeve, Dan Hamilton isn’t sure exactly how Cypress County,  in the southeast corner of the province, will deal with a loss in revenue, but warns services could be eliminated.

“As of right now, we haven’t put anything into process, [but] we have had some special meetings to see what we can do, where we can do it, and what we can do to replace it.

“Obviously, we are going to have to do some kind of pay for service,” said Hamilton.

“It will possibly drop some services down, and then you will just have to pay to get some of those services, such as dust control for homes. If this were to take place, it could possibly be that you would have to pay for it in front of your house, versus the county subsidizing it.”

Cypress County’s loss under the new proposition in revenue is projected to be up to $7.8 million, approximately 20 per cent of the county’s revenue, with major tax hikes needed to make up the difference.

A proposed tax hike for residential properties of 181 per cent, and a proposed hike of 1,550 per cent, for farm and ranch property taxes would need to be implemented to keep Cypress County viable.

I believe it will help free up money for oil companies that could put be put into the wells and area to improve them so they hopefully won’t get shut down. – Jared Sweet

Hamilton went on to say that the provincial government should leave the current system of taxation in place for the well-being of rural municipalities.

“The biggest solution is don’t touch it, it isn’t broken. It has been going for 25 or 30 years the way it has been running.

“It’s hard for us in Cypress County because we have the second lowest mill rate in Alberta. We have wells out here that only pay $32 a year in taxes to the municipality, so for an oil or gas company, saying that $30 is going to break them, well there’s something else going on.”

Jared Sweet, a contract gas well operator in Cypress County, believes the proposed changes will benefit oil workers and farmers and ranchers who have gas wells on their land.

“Right now, I believe it will help free up money for oil companies that could put be put into the wells and [the surrounding] area to improve them so they hopefully won’t get shut down.”

Sweet also believes that the change in assessment could help smaller oil and gas companies stay competitive.

“It will definitely help the smaller companies, and they will actually get a better chance of staying, compared to the bigger guys.

“This way they maintain their wealth for the farmers and ranchers.”

Cypress County area rancher Randy Dosch, believes that farmers and ranchers will see a significant drop in revenue from oil and gas wells on their land.

“The big thing about oil and gas wells is that some ranchers and farmers have quite a few wells, and they bring in maybe 20 to 30 per cent of their income that way.

“That could be quite a drop in their income, but I guess that’s what to be expected. It wasn’t supposed to be there forever. It’s going to hurt some people worse than others,” Dosch said.

Less tax on gas. A natural gas processing plant in Cypress County, on Sept, 26. It is one of many that process natural gas from smaller wells used on farmers and ranchers land. (Photo by James O’Connor/The Press)