On May 24, 2016 the Alberta government introduced Bill 20 – Climate Leadership Implementation Act (the CLIA). The CLIA establishes the legislative framework for Alberta's new carbon tax (referred to in the CLIA as the carbon levy). While many details are still to come in regulations that have not yet been released, the CLIA sets out Alberta's approach to broad-based carbon pricing, which is comprised of the following major elements:
- An Alberta economy-wide carbon pricing regime in the form of a carbon levy on various types of fuel, at a rate of $20/tonne of greenhouse gas (GHG) emissions for 2017 and $30/tonne for 2018 and subsequent years.
- A rebate program which will see rebates issued to 6 of 10 Alberta households, which the government asserts will offset the incremental costs of the carbon levy on such households.
- A reduction to Alberta's small business corporate income tax rate from three percent to two percent.
- The use of carbon levy revenue to fund initiatives to reduce GHG emissions, to support Alberta's ability to adapt to climate change and for rebates or adjustments related to the carbon levy to consumers, businesses and communities, including the rebate program for households described above. In addition, the CLIA establishes Energy Efficiency Alberta as a Crown corporation that will develop and deliver programs and services promoting energy efficiency and small scale renewable energy projects.
What does it apply to?
The price per tonne of GHG emissions translates into a carbon levy expressed as a price per volume of fuel, set out in the table below.
Carbon Levy Rates
|Type of Fuel||Carbon levy rate for 2017||Carbon levy rate for 2018 and subsequent years|
|Aviation gas||4.98 ¢/L||7.47 ¢/L|
|Aviation jet fuel||5.17 ¢/L||7.75 ¢/L|
|Bunker fuel||6.36 ¢/L||9.55 ¢/L|
|Butane||3.56 ¢/L||5.34 ¢/L|
|Coal coke||$63.59 /tonne||$95.39 /tonne|
|Coke oven gas||1.40 ¢/m3||2.10 ¢/m3|
|Diesel||5.35 ¢/L||8.03 ¢/L|
|Ethane||2.04 ¢/L||3.06 ¢/L|
|Gas liquids||3.33 ¢/L||4.99 ¢/L|
|Gasoline||4.49 ¢/L||6.73 ¢/L|
|Heating distillate oil||5.51 ¢/L||8.27 ¢/L|
|Heavy fuel oil||6.35 ¢/L||9.53 ¢/L|
|High heat value coal||$44.37 /tonne||$66.56 /tonne|
|Kerosene||5.14 ¢/L||7.71 ¢/L|
|Locomotive diesel||5.94 ¢/L||8.90 ¢/L|
|Low heat value coal||$35.39 /tonne||$53.09 /tonne|
|Methanol||2.18 ¢/L||3.26 ¢/L|
|Naphtha||4.49 ¢/L||6.73 ¢/L|
|Natural gas||$1.011 /GJ||$1.517 /GJ|
|Raw gas||$1.15 /GJ||$1.72 /GJ|
|Pentanes plus/condensate||3.82 ¢/L||5.73 ¢/L|
|Propane||3.08 ¢/L||4.62 ¢/L|
|Refinery gas||3.77 ¢/m3||5.65 ¢/m3|
|Refinery petroleum coke||$63.86 /tonne||$95.79 /tonne|
|Upgrader petroleum coke||$58.50 /tonne||$87.75 /tonne|
Generally, the carbon levy is applied when fuel is imported into Alberta, sold within Alberta, removed from oil and gas related infrastructure (i.e., a refinery, terminal, gathering system or processing plant) within Alberta, or flared or vented in Alberta.
In addition, in some cases the carbon levy may apply when fuel is consumed within Alberta, whether that fuel was purchased within Alberta or not, including consumption of locomotive diesel, gasoline or diesel by interjurisdictional carriers (e.g., trucking companies), and aviation gas and aviation jet fuel used for flights that originate and terminate within Alberta.
Who has to pay the carbon levy?
To collect the carbon levy, the CLIA imposes payment and remittance obligations on persons throughout the fuel supply chain.
The carbon levy is imposed on persons engaged in the aforementioned activities in respect of fuel, subject to limited exemptions, as summarized below. The person responsible to pay, collect or remit the carbon levy depends on the type of fuel and its use. Typically persons that deal in bulk fuel, such as purchasers of fuel at refineries or terminals, importers of fuel into Alberta, natural gas distributors will be obligated to remit the carbon levy. The CLIA provides mechanisms, either through exemption licenses or refunds, to permit fuel to move through the supply chain without incurring multiple incidences of carbon levy. In some cases, consumers will be obligated to self-assess the carbon levy (for example, oil and gas producers and midstreamers that vent or flare gas or who remove fuel from the supply chain for their own consumption). The remittance rules are, however, complex and require examination according to the specific circumstances.
Are there exemptions to the carbon levy?
The CLIA exempts:
- fuel purchased by the holder of a license permitting tax exempt purchases of fuel;
- fuel that is imported into Alberta for delivery to a refinery or terminal;
- fuel that is purchased and sold between large manufacturers/refiners/importers, for delivery to a refinery or terminal;
- fuel that is exported from Alberta in bulk;
- fuel that is consumed by large industrial emitters (i.e., facilities that emit 100,000 tonnes or more of GHG emissions annually which are subject to emission reduction requirements under the Specified Gas Emitter Regulation (Alberta));
- marked fuel (e.g., purple gas) used in farming operations;
- fuel that is not put into a fuel system that produces heat or
energy and is not flared or vented, when used:
- as a raw material or an industrial process that produces other fuel;
- as a raw material in an industrial process that produces another substance that is not used as fuel; or
- as a solvent or diluent in the production of crude bitumen or other substances.
What else should you be aware of?
The CLIA is sweeping in both its scope of application and the powers and remedies that are granted to the Minister to administer and enforce it. For example the CLIA includes:
- liability for directors and their delegates for failure by a corporation to remit carbon levy amounts;
- a broad registration requirement that applies to any person who engages in an activity to which the carbon levy applies. The Minister can refuse to register or renew and can cancel or suspend a registration, where a person has contravened the CLIA, or any law in force in Alberta or in another jurisdiction that governs the collection or payment of a carbon levy or tax;
- powers for government officials to search vehicles, businesses and any property therein (including computer files) without warrant;
- powers facilitating the government's collection of unpaid
carbon levy including:
- liability for trustees in bankruptcy, receivers and similar entities who dispose of property of an entity that owes amounts in respect of the carbon levy (a "debtor"); and
- the ability to compel a bank or other lending institution that the Minister suspects may advance funds to a debtor, or any third party that has a payment obligation to a debtor, to advance funds or pay such amounts to the Minister;
- a comprehensive suite of penalty provisions, including potential fines and/or imprisonment for offences under the legislation.
The CLIA is now before the Alberta legislature and if passed in its current form will come into effect January 1, 2017. A number of further implementation details will be set out in regulations, which have yet to be released, which will include the timelines within which carbon levy amounts must be paid and/or remitted.
The CLIA is a complex piece of legislation that will affect all Albertans and particularly those whose businesses pertain to fuel supply chains. Bennett Jones has developed further analysis with respect to the CLIA and its implications and stands ready to assist clients who wish to gain a better understanding of the CLIA, and the risks and opportunities it presents.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.