FCN11 Marketable Natural Gas and Non-Marketable Natural Gas Distributed Through Pipelines

November 2019

In this publication, all legislative references to the Act are to the Greenhouse Gas Pollution Pricing Act, unless otherwise specified, and marketable natural gas and non-marketable natural gas are referred to collectively as natural gas.

---

Generally, a fuel charge applies to fuel that is delivered by a registered distributor in a listed province to a person that does not provide an exemption certificate in accordance with the Act.

Section 3 of the Act defines the term delivery as “in respect of fuel or in respect of a substance, material or thing […], making the fuel, substance, material or thing available.” Notwithstanding the definition under section 3, for purposes of the Act, the Canada Revenue Agency (CRA) will administratively consider “delivery” of natural gas distributed through a pipeline to only include the physical delivery of natural gas through a pipeline. When a physical delivery is made by a registered distributor through a pipeline to the final customer, the fuel charge will apply where an exemption certificate is not provided.

Natural gas producers, pipeline operators or owners that physically deliver natural gas through a pipeline and/or, in accordance with section 14 of the Act, meter the final customer for purposes of billing, will be the persons responsible for registering as distributors, as well as reporting and paying the fuel charge, when required, under the Act. Pipeline operators or owners may include operators or owners of distribution systems, transmission systems or gathering systems. The fuel charge generally applies in circumstances where natural gas is physically delivered to a final customer or where natural gas is removed from the pipeline, taken for use, or burned or flared.

A number of transactions for natural gas occur in a natural gas trading hub, a central location where natural gas is bought and sold, or is traded. The traders or marketers transacting at a natural gas hub generally do not take physical possession of the natural gas or do not physically deliver it to another person or to a final customer.

The following persons are not considered to physically deliver the natural gas and will generally not be required to register as distributors, even if they purchase and/or sell natural gas:

• persons who do not physically deliver natural gas, such as traders or marketers;
• persons who never take physical possession of the natural gas for use and/or never remove it from a pipeline; or
• natural gas users who purchase natural gas and contract separately for the physical delivery of the fuel to their own facilities.

The administrative position adopted by the CRA does not remove any obligations the persons may have under the Act for fuel-related business activities other than those related to natural gas distributed through a pipeline, in a listed province, as described in this publication.

For more information on registration, go to Fuel Charge Notice FCN1, Registration Under the Greenhouse Gas Pollution Pricing Act. For information on general obligations for distributors, go to Fuel Charge Notice FCN2, Distributors Under the Greenhouse Gas Pollution Pricing Act.

The following scenarios provide information on registration and the obligation to report and pay the fuel charge to the CRA, when necessary, for the physical delivery of the natural gas delivered through a pipeline. Conditions for the use of exemption certificates continue to apply. As such, a physical delivery that is made where an exemption certificate is not provided will be subject to the fuel charge.

If, as a result of this administrative position, a registered person believes it is no longer required to be registered, that person may request that the CRA cancel its registration. The registered person must notify the CRA in writing when this occurs, noting the reason for requesting the cancellation and the effective date. The CRA will cancel the registration if satisfied that the registration is not required.

Requesting cancellation of a registration may be done electronically using the “Submit documents” function in My Business Account or by mail to the Sudbury Tax Centre at the address provided below. Filing and reporting requirements remain in effect until the effective date of cancellation.

Sudbury Tax Centre
Fuel Charge Program
Post Office Box 20000, Station A
Sudbury ON P3A 5C1

As mentioned above, this notice explains the CRA’s administrative position regarding the delivery of natural gas distributed through a pipeline in a listed province for purposes of the Act. The information provided does not remove any other obligations a person may have under the Act.

Further information