Saskatchewan to stop collecting carbon tax from natural gas and electrical heat

The Saskatchewan government says its natural gas utility is to stop collecting the carbon levy as of Monday from residential customers.

The move comes after Prime Minister Justin Trudeau exempted those who use home heating oil from paying the levy, mostly benefiting residents in Atlantic Canada.

Saskatchewan asked for the exemption to cover all other forms of heating, but Ottawa denied the request. In response, the province said it would stop collecting the charge at the start of 2024.

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Dustin Duncan, the minister responsible for SaskEnergy, said the due date to pay the levy to the federal government is the last day of February.

Should SaskEnergy not remit those dollars, it would be breaking federal law and executives could face fines or jail time.

Saskatchewan passed legislation that aims to shield executives from legal consequences, putting that burden on the province.

Duncan said in December that SaskEnergy asked the federal government to remove it as a registered distributor of natural gas.

He said the company wants Ottawa to instead list the province as the distributor.

"The sooner we get clarity from the federal government, whether or not they will essentially acknowledge what the bill says and accept that change in registration, I think that will dictate the next steps for us to make a decision in January [to not remit]," Duncan said.

The Canadian Press asked the Canada Revenue Agency if it has delisted SaskEnergy.

The agency said in a statement the Greenhouse Pollution Pricing Act prevents it from discussing details of specific cases.

SaskEnergy has declined interviews over the issue and directed media requests to the provincial government.

Trudeau has said he expects all provinces to follow the law and that heating oil is far more expensive than natural gas.

Ottawa has also said the carbon pricing system offers rebates, putting more money back into the pockets of most Canadians, and proceeds are returned to the provinces where the charges are collected.

Saskatchewan said the average resident can expect to save $400 next year by not paying the levy.

Also starting this month, Saskatchewan is no longer collecting the carbon levy from those who use electricity to heat their homes.

However, the province doesn't anticipate legal ramifications for that move, because it controls the carbon levy that applies to its electrical utility, SaskPower.

Duncan said SaskPower is to deposit what customers would have paid in those levies into an investment fund.

He said the move will cost SaskPower more than $3 million this year.

"Why we've decided to direct SaskPower to essentially keep those carbon tax payments whole is that we don't want to jeopardize the federal government coming in and saying, 'you're not compliant with our agreement and, therefore, take the entirety of those dollars back,"' Duncan said.

The Saskatchewan Party government said it plans to use money from the fund for emissions-free electricity projects, including a potential small modular nuclear reactor.

Carbon levies from other heavy emitters are to be deposited into a separate technology fund for projects that reduce, sequester and capture emissions.

Saskatchewan took Ottawa to court over the carbon levy in 2021, but lost its challenge when the Supreme Court ruled it was constitutional.

-- This report by The Canadian Press was first published Jan. 1, 2024.