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Alberta Offers Gas Producers One-Time Tax Relief

Cenovus

The Conservative Alberta government will provide natural gas producers in the province with a one-off 35-percent tax cut on shallow gas well and pipeline operators for the current fiscal year, Alberta media report, citing a “broken” assessment system.

“We looked at the situation and said that everyone agrees that the assessment system is inaccurate and so we’re going to act now to bring that down to what we think the true level should be and then we’ll commit to a proper full review of that system for the next municipal tax year,” an unnamed government official said as quoted by the Calgary Herald.

The problem with the assessment system, according to the government, is that it overvalues natural gas assets, the same official said, adding that 35 percent was approximately the extent of the overvaluing.

Alberta’s natural gas industry, though overshadowed by the oil sands’ pipeline woes, has been suffering its own blows, including low gas prices and high lease and property taxes. There have been numerous bankruptcies in the industry in the last few years. The latest was Trident Exploration Corp. which threw in the towel in May, abandoning as many as 4,700 wells.

Also in May the industry suffered a hard price blow when TC Energy—formerly TransCanada—began maintenance on the Nova pipeline system. From US$1.30 (C$1.70) per thousand cu ft, gas prices dropped to just US$0.22 (C$0.28) within a single week.

In a bid to help pro up the industry, the Conservative government also appointed an Associate Minister of Natural Gas—a first for the province—to focus specifically on the natural gas industry, which, thanks to growing demand for LNG, could have a substantial growth potential.

“They absolutely have felt like the second cousins to Big Oil. And here’s the reality, if we can get natural gas to global markets, it’s a game changer for Alberta,” said Dale Nally, the natural gas associate minister.

By Irina Slav for Oilprice.com

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