Explanatory Notes Relating to the Draft Regulations Amending the Fuel Charge Regulations

Published by

The Honourable Chrystia Freeland, P.C., M.P.
Deputy Prime Minister and Minister of Finance

August 2022

Preface

These explanatory notes describe the proposed Draft Regulations Amending the Fuel Charge Regulations. These explanatory notes describe these proposals, clause by clause, for the assistance of Members of Parliament, stakeholders and their professional advisors.

The Honourable Chrystia Freeland, P.C., M.P.
Deputy Prime Minister and Minister of Finance

hese notes are intended for information purposes only and should not be construed as an official interpretation of the provisions they describe.

Table of Contents

Fuel Charge Regulations

Clause 1

Fuel Charge Regulations
1

Clause 1 would amend the heading before section 1 of the Fuel Charge Regulations (the Regulations) so that it reads "Interpretation and Application".

This clause is deemed to come into force on August 10, 2022.

Clause 2

Definitions

Fuel Charge Regulations
1

Clause 2 provides that section 1 of the Regulations is amended to add the new definition "bio-aviation fuel".

The term "bio-aviation fuel" means a particular substance that is derived entirely from biological matter available on a renewable or recurring basis. However, the particular substance may contain water if the proportion of the water does not exceed 1% of the particular substance. It may also contain other substances, materials or things if the combined proportion of those other substances, materials or things does not exceed 6% of the particular substance. The particular substance must also be suitable for generating power by means of an aircraft engine when used

• on its own;
• after being blended with aviation gasoline or aviation turbo fuel;
• after being blended with an aviation gasoline-like blendstock to produce aviation gasoline; or
• after being blended with an aviation turbo fuel-like blendstock to produce aviation turbo fuel.

The new definition "bio-aviation fuel" is deemed to come into force on August 10, 2022.

Clause 3

Definition of marketable natural gas

Fuel Charge Regulations
1.1

Section 3 of the Greenhouse Gas Pollution Pricing Act (the Act) sets out a definition for the term "marketable natural gas". Clause 3 would add new section 1.1 to the Regulations, which modifies the meaning of that term in section 3 of the Act. Under this modified definition, marketable natural gas means natural gas that meets the specifications for pipeline transport and sale for general distribution to the public.

New section 1.1 is deemed to come into force on January 1, 2020.

Aviation fuel that contains bio-aviation fuel

Fuel Charge Regulations
1.2

Section 8 of the Act outlines standard reference conditions for measuring fuels under Part 1 of the Act and sets out special rules for determining quantities of fuel when blended with certain renewable fuels. Subsection 8(8) of the Act provides that a quantity of a type of fuel prescribed by regulations is to be determined in a manner prescribed by regulations if conditions prescribed by regulations are met. New section 1.2 sets out rules for determining a quantity of aviation gasoline or aviation turbo fuel that has been blended with bio-aviation fuel (see commentary in section 1 of the Regulations).

New section 1.2 applies if a quantity of fuel that is aviation gasoline or aviation turbo fuel contains a particular proportion of bio-aviation fuel (expressed as a percentage). In such a case, the quantity of fuel is calculated by multiplying the number of litres that the fuel would occupy at 15°C by the result of 100% minus the particular proportion of bio-aviation fuel.

This section is deemed to come into force on August 10, 2022.

Natural gas that contains hydrogen

Fuel Charge Regulations
1.3

Section 8 of the Act outlines standard reference conditions for measuring fuels under Part 1 of the Act and sets out special rules for determining quantities of fuel when blended with certain substances. Subsection 8(8) of the Act provides that a quantity of a type of fuel prescribed by regulations is to be determined in a manner prescribed by regulations if conditions prescribed by regulations are met. New section 1.3 sets out rules for determining a quantity of marketable natural gas or non-marketable natural gas that has been blended with hydrogen.

New subsection 1.3(1) applies if a quantity of fuel that is marketable natural gas or non-marketable natural gas contains a particular proportion of hydrogen (expressed as a percentage). In such a case, the quantity of fuel is calculated by multiplying the number of cubic metres that the fuel would occupy at 15°C and 101.325 kPa by the result of 100% minus the particular proportion of hydrogen.

New subsection 1.3(2) applies if a quantity of fuel that is marketable natural gas or non-marketable natural gas contains a particular combined proportion of hydrogen and biomethane (expressed as a percentage). In such a case, the quantity of fuel is calculated by multiplying the number of cubic metres that the fuel would occupy at 15°C and 101.325 kPa by the result of 100% minus the particular combined proportion of hydrogen and biomethane.

This section is deemed to come into force on August 10, 2022.

Clause 4

Rebate — fuel removed from listed province

Fuel Charge Regulations
5.1

Section 48 of the Act provides that the Minister of National Revenue must pay a rebate if circumstances prescribed by regulations exist or conditions prescribed by regulations are met. In such a case, the Minister of National Revenue must pay the rebate to a person prescribed by regulations, a person of a class of persons prescribed by regulations or a person meeting conditions prescribed by regulations. The amount of such a rebate is to be determined in the manner prescribed by regulations. New section 5.1 of the Regulations sets out rules in respect of such a rebate, for the purposes of section 48.

New subsection 5.1(1) applies if a quantity of fuel is, at a particular time, removed from a listed province and brought into another province by a person that is neither registered nor required to be registered as a distributor in respect of that type of fuel. The quantity of fuel must have been delivered at an earlier time in the listed province to the person by a registered distributor in respect of that type of fuel. In such a case, the Minister must pay a rebate to the registered distributor in respect of the quantity of fuel, the listed province and the reporting period of the registered distributor that includes the particular time, if the following conditions are met:

• a charge under section 17 of the Act was payable by the registered distributor at the earlier time in respect of the quantity of fuel and the listed province and that charge was taken into account in the determination of the net charge for the reporting period of the registered distributor that includes the earlier time;
• during the period that begins at the earlier time and ends at the particular time, the quantity of fuel is not further processed, transformed or altered in the listed province except to the extent reasonably necessary or incidental to its transportation;
• if the other province is a listed province, a charge under section 19 or 20 of the Act was payable by the person at the particular time in respect of the fuel and the other province and that charge was taken into account in the determination of the net charge for the reporting period of the person that includes the particular time; and
• the person provides to the registered distributor, and the registered distributor retains, evidence satisfactory to the Minister that the quantity of fuel was removed at the particular time from the listed province and that the conditions in paragraph (b) and, if applicable, paragraph (c) are satisfied.

New subsection 5(2) provides that the amount of the rebate payable under subsection (1) is equal to the amount of charge referred to in paragraph (1)(a) that applied in respect of the quantity of fuel removed from the listed province.

New subsections 5(3) and 5(4) set out circumstances in which the rebate under subsection (1) is not payable. Subsection (3) provides that a rebate under subsection (1) is not payable to the extent that the fuel is removed from a listed province in the supply tank of a vehicle. Subsection (4) provides that a rebate under subsection (1) is not payable if the quantity of fuel that is removed from a listed province otherwise than in the supply tank of a vehicle is gasoline, kerosene, light fuel oil or propane and the quantity of the fuel does not exceed 1000 L.

This section applies in respect of fuel that is removed from a listed province after August 9, 2022 if the fuel was delivered by a registered distributor after that date.

Clause 5

Combustible waste burned at covered facility

Fuel Charge Regulations
28

Section 27 of the Act provides that a charge that would otherwise become payable under Part 1 of the Act in respect of combustible waste is not payable by a person prescribed by regulations, a person belonging to a class of persons prescribed by regulations or a person meeting conditions prescribed by regulations, or if circumstances prescribed by regulations exist or if conditions prescribed by regulations are met. New section 28 of the Regulations sets out circumstances under which a charge that would otherwise be payable is not payable.

New section 28 provides that no charge is payable under section 25 of the Act in respect of combustible waste that is burned in a listed province by a person if the person is a registered emitter and the combustible waste is burned at a covered facility.

This section applies in respect of combustible waste burned after August 9, 2022.