Alberta to require oil and gas companies to pay property taxes before approving energy licenses
The Alberta Minister of Energy announced this week that he had issued Ministerial Order 043/2023, pursuant to Section 67 of the Responsible Energy Development Act, directing the Alberta Energy Regulator (“AER”) to develop a process to ensure that municipal property taxes are paid prior to approving any licence transfers.
The AER will consult with Alberta Energy and Alberta Municipal Affairs to determine a threshold amount of municipal property tax arrears, above which new restrictions on transfers would be applicable. The AER is required to implement its new process by April 30, 2023. The AER has announced that it has received the order and will provide more information in the coming weeks.
Once the new process comes into force, if the transferor or the transferee of a licence for approval for energy development has municipal tax arrears for the previous fiscal year in excess of the threshold amount, it must either reduce its arrears to below the threshold, or it must adopt a payment plan acceptable to the relevant municipalities.
The ministerial order does not limit the AER’s consideration of property tax arrears to the licences which are the subject of the transfer. It appears that if the licensor or licensee is in arrears, those arrears must be brought into compliance before the transfer will be approved, even if the arrears relate to a property not being transferred.
Agreements for the transfer of petroleum and natural gas rights often deal with licence transfers as routine post-closing matters. Energy lawyers will have to carefully review the final process published by the AER, and thereafter ensure that property taxes are diligenced in the transaction and that provisions are made for the payment of municipal taxes, if required prior to or concurrently with the closing of the transaction. Closing procedures will have to contemplate the right of the AER to require the payment of property taxes as a condition to closing. Where appropriate, the standard forms of transfer documents (such as the CAPL Property Transfer Procedure) will have to be reviewed and modified to account for the new process.
For more information on the development of this process and how it may affect your business please contact any member of our Energy and Natural Resources group.