'Freehold' landowners fear huge tax hike

Hardly mentioned in all the royalty flap is that the Review Panel has recommended a tax on freehold lands which the Provincial Government has NO OWNERSHIP in.

Article below:

http://www.edmontonsun.com/News/Alberta/2007/10/17/4582501-sun.html

By JEREMY LOOME, LEGISLATURE BUREAU

Alberta's proposed new energy royalty rates could seriously hurt small property owners by massively hiking taxes on production on their land, an advocate says.

That's because they're considered "freehold" land owners: they own the land on which oil or gas is being produced, instead of it being owned by the Crown. There are over 50,000, says Ponoka resident Elfe Pedersen, and many will be hurt by the proposals.

"Under this, people who have been paying on the lower end of the sliding scale - the 1% or 2% - would be paying a flat rate of 6%, which is just unfair," she said. "I can understand why they would want to address royalties, but why should we be included in that? We don't pay royalties."

In fact, the Freehold Owners Association didn't put forward recommendations to the review panel because it didn't think it would be included in any proposed legislation, Pedersen noted.

Premier Ed Stelmach will announce how much of the report it plans to adopt during a television address next Monday.

They've had no luck trying to rectify that omission, Pedersen said, with letters and requests for meetings to several ministers going ignored. At the very least, the owners would like the province to increase the current $1,600-and-below income exemption.

The government isn't commenting on the report until after Stelmach's address. But Liberal energy critic Hugh MacDonald said the landowners have a valid point.

"The $1,600 exemption, our research indicates, has not been changed for over 25 years and it's just too low. It's not fair to small producers, and the exemption should increase as the price increases."

About half the freehold owners are already below that rate, he noted, and many more would be had it been changed in a timely fashion.

But MacDonald stressed large freehold landowners, like EnCana, should have to pay substantially more. About 38% of EnCana's land is freehold, and yet despite paying a maximum tax rate on it of 6.7%, the company has complained loudly about increases, said MacDonald. It wouldn't even have that land if it hadn't started its life as a Crown corporation, he said, before it was passed off to private interests.

"We have to level the playing field for other operators who didn't have that advantage coming in and who are paying much higher rates as a result," he said. "How can they compete with that?"

Pedersen noted freehold owners are being treated unfairly in the first place, because they already pay income tax. To be further taxed on something they already own "is a tax on a tax," she noted.