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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1941 Act was repealed and the acreage tax set at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.
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