Saskatchewan threatens to withhold carbon fees on natural gas

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Saskatchewan Premier Scott Moe has threatened to stop collecting fees from the carbon price applied to natural gas, saying Ottawa’s exemption for heating oil has excluded his province and created “two classes of taxpayers.”

Mr. Moe’s threat Monday ratcheted up the pressure on Prime Minister Justin Trudeau to drop the carbon levy from all heating fuels. The federal government’s surprise rollback to its marquee climate policy last week has emboldened detractors of carbon pricing who argue that the partial reversal proves their years of criticism of the program.

Ottawa faced calls Monday for more concessions on home-heating fuels from other provincial premiers, as well as from other parties in the House of Commons.

What to know about Trudeau’s carbon pricing system and the Atlantic exemption

The political firestorm began Thursday when Mr. Trudeau exempted home heating oil from the carbon price. The new federal policy disproportionately benefits people in Atlantic Canada, where the fuel is more commonly used, leaving those in most other regions at a disadvantage.

The East Coast is the Liberals’ only rural stronghold on the federal electoral map.

“It’s the federal government that has created two classes of taxpayer by providing an exemption for heating oil, an exemption that really only applies in one part of the country and effectively excludes Saskatchewan,” Mr. Moe said.

More than 90 per cent of Saskatchewan households rely on natural gas to heat their homes, Mr. Moe noted on social media. He said it is “only fair” that all households in Canada have their heating fuel exempted from the carbon price.

Having SaskEnergy stop collecting and submitting the carbon price on natural gas would effectively give Saskatchewan residents “the very same exemption that the federal government is giving heating oil in Atlantic Canada,” Mr. Moe said.

He acknowledged that what he is proposing – to direct the provincial gas utility to stop collecting or submitting the levy to Ottawa – is likely illegal. Experts say such a move could open up the provincial utility’s officers and directors to jail time and further undermine the rules governing Ottawa and the premiers.

The federal government did not reply to a request from The Globe and Mail about Mr. Moe’s comments. Environment Minister Steven Guilbeault has also been unavailable for interviews since the government announced the carbon-pricing changes last week.

Ontario and Alberta have also called for the carbon levy to be exempted from natural gas.

Premier Danielle Smith said her province can’t as easily follow Saskatchewan’s plan because Alberta doesn’t have a provincial energy utility.

“I wouldn’t ask our private-sector operators to be in a position where I’m asking them to be out of compliance with the law,” Ms. Smith said at a press conference. “I would just prefer for the federal government to do the right thing and give a reprieve across the board in all provinces [for] all fuel types for the winter.”

She said she will also ask for legal advice on whether the province can once again challenge the federal carbon-pricing regime, now that Ms. Smith said Ottawa isn’t following its own law.

The Supreme Court has previously ruled the federal carbon pricing is constitutional, but Ms. Smith said Mr. Trudeau is now applying it unequally – which is contrary to the purpose of a broad-based, economywide price on carbon.

A spokesperson for Premier Doug Ford in Ontario said it was in a similar position to Alberta without a provincial utility. “Ontario would never ask private companies to violate federal law,” said Ivana Yelich in a statement to The Globe and Mail.

“The federal government should simply do the right, fair thing, and eliminate the carbon tax across the board.”

British Columbia Premier David Eby said Monday it’s unfair that Atlantic Canada is being targeted for federal relief on heating bills that won’t apply to B.C., which collects its own fuel levy. He told a news conference in Victoria that a proposed heat-pump rebate that is being piloted in Atlantic Canada should also be made available in B.C.

When Mr. Trudeau announced the carve-out for home heating oil last week, he also announced Ottawa will double the rural carbon tax rebate for households in provinces that are subject to the federal carbon price and launch a new pilot program on the East Coast to fully cover the costs of median- and low-income households to switch from oil to heat pumps.

The government framed the changes as an “energy affordability package,” and the Prime Minister said they were needed because of rising cost of living pressures.

University of Alberta law and economics professor Andrew Leach said with the exemption, the government has undercut its own carbon-pricing policy. He said the rationale for a carbon price is that more emissions-intensive fuels should face a higher carbon price. In this case, the government has lifted the extra charge on a more emissions-intensive fuel – oil – but left it on fuels that have lower-emissions intensity – such as natural gas.

“This is a big misstep,” said Prof. Leach, who researches climate and energy policy.

By linking the carbon price to affordability pressures, he said the government “undermined the rationale for the carbon price and the justifications and analysis of it.”

Under the federal carbon-pricing law, entities are required to collect the carbon price on eligible fuels and submit the fees to the federal government. Prof. Leach said that according to the law, officers and directors of a corporation that does not comply could face fines and up to six months of jail time.

Errol Mendes, a constitutional law professor at the University of Ottawa, said the threat from Saskatchewan should be taken seriously because it also undermines the rules governing the relationship between Ottawa and the provinces. He said the threat from Mr. Moe shows how fragile the system is. It’s the province “thumbing its nose at the accepted constitutional practice,” he said.

In the House of Commons, NDP Leader Jagmeet Singh, whose party supports the minority Liberals, repeated his calls for the government to remove the federal sales tax from all home heating.

In a letter to the Prime Minister, Conservative Leader Pierre Poilievre offered his party’s unanimous support to remove the carbon price from all home-heating fuels ahead of the winter.

Comments from Rural Economic Development Minister Gudie Hutchings over the weekend also fanned accusations of unfair treatment. In response to a question on CTV’s Question Period with Vassy Kapelos about whether the government would grant other heating fuel carve-outs to the carbon price, Ms. Hutchings replied in part “perhaps they need to elect more Liberals on the Prairies.”

Asked what message his colleague’s comments sends to Canadians, Labour Minister Seamus O’Regan said Canada sent a “very clear message” to Western Canada when it set up a $1.7-billion fund to clean up orphaned and abandoned oil wells during the COVID-19 pandemic.

“A clear case was made here with the intensity of home heating oil, with its volatility on global markets … and because of its saturation of the Atlantic Canadian market, we have to get people on heat pumps.”

With a report from Carrie Tait and The Canadian Press