Woodlands County wants AER to allow full financial disclosure from oil and gas companies

Whitecourt, AB, Canada / XM 105

Jan 21, 2021

Erika Chorostil

Woodlands County will be sending a proposed resolution and letter asking the Rural Municipalities of Alberta (RMA) membership to lobby the Alberta Energy Regulator (AER) to change their directive to allow for full disclosure of oil and gas companies’ financial situations.

Currently, the AER uses a debt ratio formula to determine whether a company has enough cash flow to purchase assets from another company, even if the company buying still owes outstanding taxes. The formula is defined as AER Directive 006 – Licensee Liability Rating Program and License Transfer Process.

Woodlands County would like the criteria changed to ensure that the entire financial picture of an organization is reviewed and not solely their ability to produce cash flow from oil and gas production.

The resolution comes after the County recently received a letter from an oil and gas company offering to pay its outstanding tax arrears at a discount. Council learned the company had recently purchased more assets from a former bankrupted company.

Woodlands County Mayor John Burrows says the resolution is another step in trying to collect outstanding taxes that are owed from companies.

“One of the things that they (AER) don’t look at is taxes that are owed,” says Burrows. “And there is at the moment, right across the province, there is over $200 million owed right now to municipalities through oil and gas. That’s a lot of money.”

Burrows calls the practice of not counting debts against the companies “ridiculous.”

“If you’re looking at a company and you’re looking at what their debt ratio is and then saying, ‘well we don’t count that $2 million that they owe in taxes as a debt,’ that’s ridiculous. That is a debt that needs to be paid and it directly goes to whether or not that company is functional.”

Burrows says the County continues to lobby the province on the issue but was told that the AER is independent of the government.

“We’ve talked to the province about this before and the province has said no, they are a third-party independent corporation that we appoint people to but they don’t exist as an arm of the provincial government so we can’t tell them what to do.”

Burrows adds that because of this, the County has decided to lobby the RMA to go directly to the AER and say they need to change their formula because the current format is “unacceptable.”

“We’re asking them (AER) to include taxes owed in their debt calculation when they look at the purchasing, and if they don’t have that then it’s not a true, accurate representation of whether or not the company can or can’t afford an asset.”

Woodlands County is now in its third year of having uncollected taxes from oil and gas companies, and Burrows explained they are sitting at between $12.5 million and $12.9 million in lost revenue from those companies.

Once the resolution is sent to the RMA, the membership will vote on whether they want the RMA to focus on the issue, and it would become a collective effort of all member municipalities to then lobby the AER.

-Erika Chorostil.