The Alberta government spent another $22 million on unpaid land rent for oil and gas operators in 2021

The Alberta government continues to reimburse landowners tens of millions of dollars in unpaid rent on behalf of delinquent oil and gas companies, The Narwhal has learned.

Last year alone, the government paid more than $22 million on behalf of oil and gas companies, according to data from the province’s Land and Property Rights Tribunal, an independent tribunal that handles landowner claims for land rent. That brings the total paid by government on behalf of companies to nearly $72 million since 2010.

Data obtained via a freedom of information request shows that just $100,000 of those funds — less than half a per cent of the total paid out in 2021 — were recovered from oil and gas companies last year.

That means that for oil and gas companies unable, or unwilling, to pay their land rent, the Alberta government paid it for them — without repayment — more than 99 per cent of the time in 2021.

There has been a more than 3,000 per cent increase in the amount of money the government has paid out on behalf of oil and gas companies annually since 2010.

Shaun Fluker, an associate professor of law at the University of Calgary and recently announced nomination contestant for Alberta’s NDP in Airdrie-Cochrane, told The Narwhal he’s hopeful high energy prices this year will mean a reduction in the amount taxpayers are paying on behalf of oil and gas companies in land rents, but noted the industry has a long history of “privatizing the gains and socializing the losses.”

The oil price paid to many Alberta producers, known as Western Canada Select, was US$79.10 a barrel on average in February, 75 per cent higher than a year earlier, according to the Alberta government — and far higher than the negative oil prices seen at the beginning of the pandemic.

“You’ve got tens of millions of dollars being paid by taxpayers,” Fluker said. “Now that oil and gas prices have jumped way back up, that just makes this look even more problematic.”

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Mike Hartfield, the director of operations of Alberta’s Land and Property Rights Tribunal, which handles unpaid land rent claims, confirmed to The Narwhal by email that the amount paid out to landowners on behalf of oil and gas companies in 2021 is unprecedented, and said the tribunal “is preparing for 2022 application volumes and amounts directed for payment to be similar to 2021 amounts.”

Alberta oil and gas companies also owe $253 million in unpaid municipal taxes

These funds are in addition to unpaid property taxes owed to rural municipalities. In March, Rural Municipalities of Alberta announced its members, made up of rural counties and municipal districts across the province, were now owed $253 million in unpaid taxes from oil and gas companies. 

Rural communities have written off more than $130 million in unpaid taxes since 2015.

According to 2022 data from the Rural Municipalities of Alberta, nearly half of unpaid taxes stem from companies that continue to operate oil and gas infrastructure.

“Companies are reporting record profits, and the province has turned a projected large deficit into a budget surplus, nearly entirely due to an increase in resource prices and energy industry investment in the province,” Paul McLauchlin, president of Rural Municipalities of Alberta, said in a statement about unpaid taxes. 

“It was unfair when the industry was struggling, and it’s even more unfair now.” 

Alberta government pays land rent on behalf of oil and gas companies

Land rent is a critical way farmers and landowners are compensated for the loss of their land when it is occupied by oil and gas infrastructure, something they ultimately do not have the power to refuse.

As part of this arrangement, when an oil and gas company cannot — or will not — make its land rental payments, landowners can apply to the Alberta government to have the government pay rent on the company’s behalf. 

Once a landowner’s claim is verified by the tribunal, the minister of environment and parks issues payments to landowners from the government’s general revenue stream.

The government’s Surface Rights Board, which previously handled landowner applications, was folded into what’s called the Land and Property Rights Tribunal in June of 2021, as part of the UCP government’s push for “red tape reduction.”

One tribunal now oversees claims that were previously dealt with by four separate entities — the Land Compensation Board, Municipal Government Board, New Home Buyer Protection Board and Surface Rights Board. The government claims the new arrangement will save $500,000 annually.

Fluker suggests the “timing was poor” on folding together multiple boards, especially given that the Surface Rights Board had a “significant backlog” of claims to sort through.

Mike Hartfield, with the Alberta’s Land and Property Rights Tribunal, told The Narwhal by email that landowners can expect to wait as little as four months for their claims to be processed, or may be delayed if there are other factors, including “underlying complexities.” For example, he said claims could be delayed in a case when a company disputed the allegation that their bills were not up to date.

Though the tribunal itself cannot ensure companies repay the Alberta government, as it refers all payments to the minister of environment and parks and the debt becomes one owed to the Crown, the tribunal can prevent an oil and gas company from accessing a property where it has not paid rent, Hartfield said by email. This, he noted, “may encourage repayment.”

An operator who has had their access rights terminated can apply to the tribunal to have its access reinstated by providing proof of full payment of outstanding land rent, Hartfield added.   

Spokespeople for Alberta Environment and Parks and the energy minister’s office did not respond to The Narwhal’s requests for comment.

‘Improved system’ to ensure precarious oil and gas companies can’t keep drilling 

According to the Alberta government, there are approximately 459,000 oil and gas wells across the province, 156,000 of which are active. Another 90,000 are inactive and 82,000 more have been permanently sealed but not yet reclaimed.

Though the majority of wells drilled are not the subject of claims by farmers and landowners over unpaid land rents — there were 6,100 applications to the Land and Property Rights Tribunal in 2021, according to data provided to The Narwhal — the process can be a headache for those that are dealing with insolvent or unco-operative companies on their land.

“Alberta’s government is committed to supporting landowners and ensuring they are compensated for the oil and gas activities on their land,” Paul Hamnett, press secretary to Alberta Environment and Parks Minister Jason Nixon, said in an email to the Financial Post last summer. In October, Energy Minister Sonya Savage told Reuters the government was looking at ways to help landowners owed unpaid land rent. “It’s an underlying problem that’s been decades in the making that we are addressing,” she said at the time.

The government now claims it has put in place “an improved system” to ensure financially precarious companies don’t receive permits to drill oil and gas wells in the first place. It’s liability management framework, it says, will “assess the capabilities of oil and gas operators to meet their regulatory liabilities obligations, prior to receiving regulatory approvals, and enable the regulator to reach out proactively to provide support before operators are struggling.”

With the release of what’s called Directive 067 last April, the Alberta Energy Regulator signalled it would begin taking into account outstanding debts owed for municipal taxes and land rental payments, as part of its assessment of whether a company “meets the eligibility requirements for acquiring and holding AER licences or approvals.”

“The important thing about Directive 67 is that it only looks good on paper,” Fluker said, noting he has concerns about transparency and whether the regulator is actually using the discretion that the new directive grants it.

In response to questions from The Narwhal, Adrian Mrdeza, a spokesperson for the Alberta Energy Regulator, wrote by email that the government’s new liability management framework enables the regulator to take a “holistic approach when assessing the capabilities of oil and gas operator[s] to meet their regulatory and liability obligations prior to granting the company regulatory approval.”

But, Mrdeza added, that comes with caveats — especially when it comes to land rent, also known as surface lease payments.

“The [regulator] can request information from companies on unpaid municipal taxes and surface lease payments when we are determining if the company is eligible to hold or maintain a licence,” Mrdeza wrote, but added the regulator “is not involved in the collection of unpaid surface leases and does not have jurisdiction to refuse an application or take action against a company if they fail to pay their surface lease agreement.” (Spokespeople for the minister of energy and the minister of environment and parks did not respond to questions about the regulator’s jurisdiction to deny licences in these circumstances.)

“This looks like a really helpful tool,” Fluker said, but added he is concerned it’s “just going to be a paper tiger and wasn’t really going to be used.” 

“The [regulator] certainly has the ability to make a big difference here, but I certainly don’t see that happening at the moment.”