Arrears of Municipal Taxes by Oil & Gas Companies

Res #: 3-21M
Number: 3
Year: 2021
Midterm: Yes
Expired: No
Responses Received: Yes
Departments: Saskatchewan Ministry of Energy and Resources

WHEREAS increasingly oil & gas companies are defaulting on their tax payment obligations for municipal and education purposes, thus forcing both governing bodies to lower the level of service to their ratepayers; and

WHEREAS oil & gas companies use municipal infrastructure to access their facilities that provide revenue; and

WHEREAS by defaulting on their tax obligations oil and gas companies are not providing the necessary funds to municipalities for the upkeep/repair and upgrade(s) to the same municipal infrastructure they use to produce their revenue; and

WHEREAS an increasing number of oil & gas companies are having their assets sold through court orders that often contain” vesting orders” that not only protect the purchasers from paying both municipal and education tax arrears, but also include direction from the Courts to have these tax arrears written off; and

WHEREAS the amount of oil and gas taxes that have been written off to date by the responding 18 R.M.’s is $4,519,448.04 in municipal taxes and $1,154,835.93 in education taxes; and

WHEREAS the amount of outstanding arrears of oil & gas taxation of the responding 31 R.M.’s is $9,778,117.05 in municipal taxes and $3,736,495.14 in education taxes; and

WHEREAS changes must be made to where these Vesting Orders are not given a chance to become “Case Law” or at the very least a “Loophole,” as a way for oil & gas companies to avoid their tax obligations.

BE IT RESOLVED that SARM lobby the Government of Saskatchewan to legislate that municipalities can register a lien against oil and gas licenses and to provide for a procedure to realize on that lien.

Responses From: Saskatchewan Ministry of Energy and Resources

March 1, 2022

Our government is aware of the challenges that certain municipalities are facing when it comes to collecting royalty and taxation revenue from some companies operating on their land. At the same time, we remain mindful of the importance of the oil and gas sector to our province’s economy and the extent to which national and international pressures have hampered resource sectors in recent years.

The Oil and Gas Conservation Regulations, 2018 (s. 1 33{5}), allow the Ministry of Energy and Resources (Ministry) to share a purchaser’s information with an RM when taxes owing have been in arrears for a period of 12 consecutive months. It is important to note in these circumstances, specifically:

  • Oil purchaser information is collected by the Ministry and provided to an RM upon request.
  • Gas purchaser information is not collected by the Ministry, as it is not required for the purposes of royalty and/or tax calculations. Unfortunately, therefore, requests from RMs for such information cannot be accommodated.

There is no authority for the Ministry under The Oil and Gas Conservation Act (OGCA), or regulations, to enforce payment of these types of debts (i.e., RM taxes). The Act and regulations provide enforcement tools, such as suspension of operations, only where there is non-compliance with respect to specific obligations under the OGCA. The obligation of oil and gas companies to pay debts tied to a private contract, or under the auspice of other legislation such as The Municipalities Act, is not contemplated under the OGCA.

That said, we continue to enhance our oversight of the oil and gas sector and recently announced The Financial Security and Site Closure Regulations (FSSCR), expected to come into force in 2022, which provide the basis for additional financial scrutiny of oil and gas licensees.

As additional changes to the FSSCR and other oil and gas legislation are considered, we will continue to examine opportunities to further strengthen obligations and eligibility requirements for holding an oil and gas license.

Hon. Bronwyn Eyre – Minister of Energy and Resources