FCN10 Regulations Amending the Fuel Charge Regulations Made Under the Greenhouse Gas Pollution Pricing Act
July 2019
The purpose of this notice is to inform stakeholders of the Regulations Amending the Fuel Charge Regulations that were made on June 22, 2019.
These Regulations may affect certain businesses that are required to be registered, or that decide to voluntarily register, under the Greenhouse Gas Pollution Pricing Act, such as distributors, including cardlock operators, emitters, rail carriers and specified rail carriers, as well as non-registrants such as farmers, fishers, greenhouse operators and remote power plant operators.
Stakeholders should carefully review the information contained in this notice since a clear understanding of the legislative provisions is key to remaining compliant with the Act.
The information in this notice is for reference purposes only and does not replace the Greenhouse Gas Pollution Pricing Act or its regulations. The information described in this notice is also based on the Regulations Amending the Fuel Charge Regulations that were made on June 22, 2019. Unless otherwise stated, any reference to the Regulations in this notice is to the Regulations Amending the Fuel Charge Regulations.
Should there be any discrepancy between the information in this notice and the legislative provisions in the Act or its regulations, the legislative provisions apply. For more information about the Act and its regulations, including all related technical publications, go to Fuel charge technical information.
Table of Contents
Overview
On October 23, 2018, the Government of Canada released proposals for public comments that included additional partial relief from the fuel charge for qualifying greenhouse fuel (that is, marketable natural gas and propane) delivered to greenhouse operators and full relief from the fuel charge for light fuel oil (for example, diesel fuel) delivered to remote power plant operators.
In response to feedback from Canadians, the Government of Canada made the Regulations Amending the Fuel Charge Regulations to provide further refinements to the federal carbon pollution pricing system, which are explained below. The Regulations were made on June 22, 2019.
Rebate – fuel exported from a listed province by a non-registered non-resident
Effective April 1, 2019, when a registered distributor of a type of fuel delivers fuel of that type in a listed province at an earlier time to a non-resident that is not registered for purposes of Part 1 of the Act and that exports the fuel at a later time, the CRA is required to pay a rebate to the registered distributor in respect of the quantity of fuel, the listed province and the reporting period if the following conditions are met:
- a charge was payable by the registered distributor under section 17 in respect of the quantity of fuel and the listed province at the time the fuel was delivered and that charge was taken into account in determining the net charge for the reporting period of the registered distributor that includes the earlier time
- during the period that begins at the time of delivery and ends when the fuel is exported, the quantity of fuel is not further processed, transformed or altered in Canada except to the extent reasonably necessary or incidental to its transportation
- the non-registered non-resident provides evidence to the registered distributor that the quantity of fuel has been exported, and the registered distributor retains this evidence
Currently, Form B400-1, Fuel Charge Return Schedule – Registered Distributor, does not include a line for reporting and claiming a rebate for fuel delivered to and subsequently exported from a listed province by a non-registered non-resident. The CRA is working to have the form updated to include such a line, which should be ready in October, prior to the due date for the September reporting period. In the meantime, for the reporting periods prior to September 2019, registered distributors should subtract the fuel quantity of each fuel type that was delivered to the non-registered non-resident person and subsequently exported, respectively, from the total quantity of each fuel type delivered, and enter the result on the appropriate line. The total charge obtained for each listed province is the reduced amount of charge payable that must be reported on the registered distributors’ Form B400, Fuel Charge Return – Registrant.
When Form B400-1, Fuel Charge Return Schedule – Registered Distributor, is updated, registered distributors will include the quantity of fuel delivered under “Delivered to another person” (in the “Additions” section of part 2 of the return schedule), and claim a rebate for the quantity of fuel that was exported in the new rebate section of the updated return schedule.
In all cases, registered distributors must maintain appropriate documents supporting any rebates claimed.
Example – Export
On August 4, 2019, a registered distributor delivers 1,000 litres of diesel fuel in a listed province to a non-resident that is not registered under Part 1 of the Act and another 1,500 litres of diesel fuel in a listed province to a person that cannot benefit from an exemption. The non-resident intends to export the product to the United States.
The diesel fuel is not processed or transformed and is exported by the non-registered non-resident 10 days later, during the same reporting period. The non-registered non-resident also provides proof to the registered distributor that the product that was delivered for export was in fact exported. The registered distributor must maintain records of those transactions, along with proof that the product was exported. The registered distributor will enter a net quantity of 1,500 litres under “Delivered to another person” in the “Additions” section of part 2 of the return schedule for the August 2019 reporting period.
The registered distributor will report the total charge payable on its Form B400, Fuel Charge Return – Registrant. The registered distributor must maintain appropriate documents supporting any rebates claimed.
Fishers
The Act provides relief from the fuel charge for fishers for qualifying fishing fuel (that is, gasoline or light fuel oil, such as diesel fuel) if the fuel is delivered by a registered distributor and the fuel is for use exclusively in the operation of an eligible fishing vessel and all or substantially all of the fuel is for use in the course of eligible fishing activities.
A charge is not payable by a registered distributor for qualifying fishing fuel when it delivers fuel of that type to a fisher and the following conditions apply:
- an exemption certificate applies in respect of the delivery
- the fuel is delivered in a listed province that has been prescribed
The Regulations prescribe the following listed provinces for this purpose: Ontario, New Brunswick, Manitoba, Saskatchewan, effective April 1, 2019, and Nunavut and Yukon, effective July 1, 2019.
Greenhouse operators
Partial relief for greenhouse operators in a listed province
Effective April 1, 2019 in Manitoba, New Brunswick, Ontario and Saskatchewan and July 1, 2019 in Nunavut and Yukon, a greenhouse operator could be eligible for partial relief from the fuel charge when a registered distributor delivers qualifying greenhouse fuel (that is, marketable natural gas and propane) to a person and the following conditions apply:
- the person to which the fuel was delivered is a greenhouse operator at the time of delivery
- an exemption certificate applies in respect of the delivery
- that exemption certificate includes a declaration by the person to whom the fuel was delivered that the person is a greenhouse operator
In this case, the amount of the charge payable by the registered distributor for qualifying greenhouse fuel delivered under an exemption certificate is calculated as follows for each type of fuel and listed province:
| Where | |
| A | is the quantity of fuel in respect of which the charge becomes payable |
| B | is the rate for fuel of that type for the listed province at the time the charge becomes payable (as per Schedule 2 to the Act) |
Example – Registered distributor delivering fuel
A registered distributor delivers qualifying greenhouse fuel to a greenhouse operator in August 2019, in a listed province. The greenhouse operator provides an exemption certificate for that fuel to the registered distributor. The registered distributor delivers 2,000 litres of propane.
The registered distributor will calculate the amount to be reported and paid to the CRA by using the appropriate formula A × B × 0.2,
where
A is 2,000 litres
B is $0.0310 per litre (rate for propane in August 2019)
The amount of the charge to be reported and paid by the registered distributor in respect of this delivery and the listed province is $12.40 (2,000 × 0.0310 × 0.2).
Charge for fuel diverted by a greenhouse operator
A greenhouse operator that diverts qualifying greenhouse fuel received under an exemption certificate, to be used for purposes other than for eligible greenhouse activities, will need to report and pay the fuel charge calculated as follows for each type of fuel and listed province:
| Where | |
| A | is the quantity of fuel in respect of which the charge becomes payable |
| B | is the rate for fuel of that type for the listed province at the time the charge becomes payable (as per Schedule 2 to the Act) |
The greenhouse operator must use Form B401, Fuel Charge Return for Non-registrants, and related Form B401-1, Fuel Charge Return Schedule for Non-registrants, to report the fuel charge.
Example – Greenhouse operator diverting fuel
A greenhouse operator that received qualifying greenhouse fuel under an exemption certificate by a registered distributor, diverted this fuel for purposes other than for the operation of a greenhouse (used in heating the administrative building).
The greenhouse operator must report and pay a charge on the amount of qualifying fuel that was used for other purposes. In August 2019, the greenhouse operator diverted 5,000 cubic meters of marketable natural gas for non-eligible purposes. The greenhouse operator will calculate the charge to be reported and paid by using the formula A × B × 0.8,
where
A is 5,000 cubic meters of marketable natural gas
B is $0.0391 per cubic metre (rate for marketable natural gas)
The amount of the charge to be reported and paid by the greenhouse operator in respect of this fuel and the listed province is $156.40 (5,000 × 0.0391 × 0.8).
Fuel held on adjustment day
Effective April 1, 2019, greenhouse operators are subject to an annual charge on qualifying greenhouse fuel held on April 1, 2019, in Manitoba, New Brunswick, Ontario and Saskatchewan and on July 1, 2019, in Nunavut and Yukon, as well as on qualifying greenhouse fuel held in all listed provinces on April 1, 2020, April 1, 2021, and April 1, 2022. For more information on fuel held on adjustment day and the related obligations, see Fuel Charge Notice FCN3, Annual Charge on Fuel Held in a Listed Province on Adjustment Day.
As such, a greenhouse operator must calculate the charge on each type of qualifying greenhouse fuel held at the beginning of an adjustment day in each listed province, using the formula:
| Where | |
| A | is the quantity of fuel held at the beginning of the adjustment day in the listed province |
| B | is the quantity of that fuel delivered to the person by a registered distributor for that type of fuel and for which an exemption certificate applies |
| C | is the rate in respect of that fuel for the listed province applicable on the adjustment day |
| D | is equal to:
|
A greenhouse operator that holds qualifying greenhouse fuel on April 1, 2019 in Manitoba, New Brunswick, Ontario and Saskatchewan or on July 1, 2019 in Nunavut and Yukon, for use exclusively in eligible greenhouse activities, is responsible for reporting and paying the fuel charge on 20% of the quantity of fuel held at the beginning of April 1, 2019 or July 1, 2019, respectively.
Remote power plant operators
Relief for remote power plant operator in a listed province
Effective April 1, 2019 in Manitoba, New Brunswick, Ontario and Saskatchewan and July 1, 2019 in Nunavut and Yukon, a remote power plant operator is eligible for relief from the fuel charge for qualifying power plant fuel (that is, marketable natural gas and light fuel oil, which includes diesel fuel), delivered by a registered distributor, when the following conditions apply:
- the remote power plant operator will use the fuel exclusively to generate electricity for remote communities
- an exemption certificate applies in respect of the delivery
- that exemption certificate includes a declaration that the person is a remote power plant operator and the fuel is for use exclusively at the location of a remote power plant in the operation of the remote power plant
Charge for fuel diverted by a remote power plant operator
A remote power plant operator that diverts qualifying power plant fuel to use for purposes other than for generating electricity for remote communities will need to report and pay the fuel charge.
The remote power plant operator must use Form B401, Fuel Charge Return for Non-registrants, and related Form B401-1, Fuel Charge Return Schedule for Non-registrants, to report the fuel charge
Fuel held on adjustment day
A remote power plant operator that holds qualifying power plant fuel on April 1, 2019 in Manitoba, New Brunswick, Ontario and Saskatchewan or on July 1, 2019 in Nunavut and Yukon, for use exclusively for the generation of electricity for remote communities, is not responsible for reporting and paying the charge in respect of that fuel held at the beginning of an adjustment day.
However, a remote power plant operator is required to report and pay the charge in respect of each qualifying power plant fuel held for any other use at the beginning of an adjustment day in each listed province using the following formula:
| Where | |
| A | is the quantity of fuel held at the beginning of the adjustment day in the listed province |
| B | is the quantity of that fuel delivered to the person by a registered distributor for that type of fuel and for which an exemption certificate applies |
| C | is the rate in respect of that fuel for the listed province applicable on the adjustment day |
| D | is equal to:
|
Farmers
Travel between farms and cardlock facilities
Effective April 1, 2019, the definition of eligible farming activities is prescribed to include the operation of eligible farming machinery for the purposes of travelling between a farm and a cardlock facilityFootnote 3 to obtain qualifying farming fuel (that is gasoline or light fuel oil, such as diesel fuel).
Relief for farmers for delivery at cardlock facilities in a listed province
Effective April 1, 2019 in Manitoba, New Brunswick, Ontario and Saskatchewan and July 1, 2019 in Nunavut and Yukon, a farmer could be eligible for relief from the fuel charge for qualifying farming fuel when the following conditions apply:
- the location at which the fuel is delivered is a cardlock facility and the cardlock facility is registered as a distributor
- the fuel is for use exclusively in the operation of eligible farming machinery or of an auxiliary component of eligible farming machinery
- all or substantially all of the fuel is for use in the course of eligible farming activities
- the farmer provides an exemption certificate that includes a declaration in respect of the 3 circumstances described above
Annual net fuel adjustment calculation
Effective April 1, 2019, rail carriers and registered specified rail carriers must calculate their annual net fuel adjustment based on a specified year (April 1 to March 31) instead of a calendar year, and the net fuel adjustment, for purposes of section 35 of the Act, becomes payable on September 30 instead of June 30. The net fuel adjustment for the amount payable on September 30 will be reported on the October return of the person.
Emitters under the Saskatchewan output-based performance standard system
Effective January 1, 2019, persons that are regulated emitters in respect of a facility in Saskatchewan under Saskatchewan’s Management and Reduction of Greenhouse Gases (Standards and Compliance) Regulations could apply to the Minister of Environment and Climate Change Canada for a determination of whether the facility is subject to a provincial output-based performance standards system relating to a provincial pricing mechanism for greenhouse gas emissions as set out in paragraph 24(d) of the Regulations. In that case, they will receive a statement from the Minister of Environment and Climate Change Canada confirming this condition is met. A regulated emitter under the Saskatchewan regulations that received a statement must notify the Minister of Environment and Climate Change Canada, in writing, when the person ceases to be a person responsible for the facility or of any changes in respect of the facility.
Upon receipt of the statement from the Minister, the person could apply to the CRA to be registered as an emitter and must provide the statement number on their application. A registration as an emitter under Part 1 of the Act provides the registered emitter access to fuel for use on its facility without the application of the fuel charge. For details on registration, reporting requirements and obligations as an emitter, refer to Fuel Charge Notice FCN5, Emitters Under the Greenhouse Gas Pollution Pricing Act. To complete an exemption certificate, Form L401-1, Fuel Charge Exemption Certificate for Registered Emitters or Users of Fuel under section 36 of the Greenhouse Gas Pollution Pricing Act, and the Fuel Charge Regulations, should be used.
Further information
For all technical publications related to the Greenhouse Gas Pollution Pricing Act and its regulations, go to Fuel charge technical information.
To make a technical enquiry on the fuel charge or for additional information on the application of the fuel charge for each type of registrant, go to Contact Information – Excise Duties, Excise Taxes, Fuel Charge and Air Travellers Security Charge.
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