Outline of History of the Canadian Pacific Railway's Land Grants (Page 4)

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Mineral taxation

In 1936 the Alberta government began seriously to look into the matter of taxing mineral rights. Although enactment of legislation covering mineral right taxation was delayed for two or three years, an Act, known as The Mineral Taxation, 1938, (Statutes of Alberta 1938, Chapter. 5) was passed, assessing the owners of minerals at the rate of one-third of a cent per acre. In 1941, the rate was increased to one-half cent per acre, and in 1945 the 1941 Act was repealed and the acreage tax set at “not exceeding 5¢ per acre". Actually the tax applicable to 1945 was one cent per acre. In 1946 it was raised to 1½¢ per acre, which rate has remained in effect up to the present time.

The Act provided that every owner of minerals was required to submit to the government a list of the lands under which he considered he owned minerals, and to state which of the minerals (if not all) he owned. Knowing that this information was soon to be required by the government, the Land Branch undertook the preparation of a Basic Mineral Record, which required the full time of six men for something over two years. Copy of the basic record was supplied to the Alberta government in February 1948, along with the Company's cheque for the preceding year's taxes at 1½¢ per acre, and an undertaking was obtained from the government that the Company would be protected against forfeiture in any cases where errors or omissions were later found to exist. Adjustments in the basic record continued to be made as errors and discrepancies between the Company's records and those of the Land Titles Office were brought to light, and tax payments adjusted accordingly.

The Saskatchewan government enacted ''The Mineral Taxation Act, 1944'' calling for payment of an acreage mineral tax of three cents per acre. At the time of the enactment, this exceeded the revenue being obtained by the Company from its mineral rights in that Province, and as a result the Company contested the validity of the Saskatchewan Act, contending that it was confiscatory. The litigation extended over a period of three or four years, and had the effect of tying up settlement of the issue and payment of the tax. Eventually in 1952, as a result of an adverse decision in the Supreme Court of Canada, the Company dropped its action (rather than continuing on to the Privy Council) and negotiated a settlement with the Saskatchewan government under which the government agreed to accept surrender of the Company's rights where these were limited to ''Coal'' or ''Coal and Valuable Stone'' underlying approximately 770,000 acres, together with payment of the seven years' outstanding taxes on the mineral rights retained. The surrender of these coal rights was confined to areas in which no commercially valuable coal was known to exist, and resulted in an annual saving of approximately $23,000 in the Company's tax bill.

Reverting to Alberta, a similar surrender of 705,000 acres of coal rights had previously been made in 1948, in areas in which coal was not considered to exists. This resulted in an annual saving of slightly over $10,000 per year.

In addition to the acreage tax, the Acts of both Provinces provide for a tax introducing lands, the formula being based on a mill rate (presently 8 mills) on an assessed value which is calculated as being 1½ times the value of the preceding year's production. Manitoba has a similar Production tax, but as yet no acreage tax.

Up to the time of the discovery of Leduc in February 1947, Imperial Oil's exploration department had drilled well over 100 dry holes throughout Saskatchewan and Alberta, at a cost reported as totalling some $23 million. At one point, in the Viking-Kinsella area, they had drilled some 30 gas wells on the fringe of Northwest Utilities Ltd.'s gas reserve area, with the idea of constructing an extraction plant in order to provide feedstock for blending with low-grade Montana crude oil for processing into gasoline, in their Alberta refineries. This plan, however, was rendered unnecessary with the discovery of Leduc and Redwater.

The Leduc discovery sparked a rush of entrants, both large and small, into the Alberta theatre, and soon most of the major oil companies had established themselves in Alberta in what was to become the first really intensive search for oil in Western Canada. The demand for oil rights controlled by the Company became very active, and practically all of the Company's rights not already under commitment were taken under reservation or lease (mostly the former). During the early days of development in the Leduc field Imperial Oil's problems were many, as there were not sufficient drilling rigs in the country to enable them to fulfill their drilling obligations to their lessors, and it became necessary for the Company and the Alberta government to agree to certain waivers in this connections on the understanding that both the government and the Company lands would be drilled on a proportionate basis as far as it was physically possible to do so. The situation ceased to exist within a year or two as additional drilling rigs became available. It should be noted here that during the period when Imperial was unable to protect our rights by drilling welts to offset welts drilled on adjoining lands, they readily agreed to payment of compensatory royalties.