Order Fixing January 1, 2019 as the Day on which Sections 176 to 178 of that Act are Deemed to Have Come into Force: SI/2019-25

Canada Gazette, Part II, Volume 153, Number 10

Registration

SI/2019-25 May 15, 2019

BUDGET IMPLEMENTATION ACT, 2018, NO. 2

Order Fixing January 1, 2019 as the Day on which Sections 176 to 178 of that Act are Deemed to Have Come into Force

P.C. 2019-424 May 3, 2019

Her Excellency the Governor General in Council, on the recommendation of the Minister of Natural Resources, pursuant to section 181 of the Budget Implementation Act, 2018, No. 2, chapter 27 of the Statutes of Canada, 2018, fixes January 1, 2019 as the day on which sections 176 to 178 of that Act are deemed to have come into force.

EXPLANATORY NOTE

(This note is not part of the Order.)

Proposal

This Order in Council, made pursuant to section 181 of the Budget Implementation Act, 2018, No. 2 (the Act), which received royal assent on December 13, 2018, fixes retroactively January 1, 2019, as the day on which certain sections of the Act, come into force.

Objective

The objective of the Order in Council is to apply the carbon pricing system of Newfoundland and Labrador (NL) in the Canada–NL offshore area in a manner consistent with the co-management framework for offshore oil and gas resources, as set out in the Canada–Newfoundland and Labrador Atlantic Accord Implementation Act (Accord Act).

These amendments also align with the goal of the Pan-Canadian Framework on Clean Growth and Climate Change (Pan-Canadian Framework) of ensuring the application of a price on carbon pollution throughout Canada, either via the application of provincial or territorial carbon pricing systems that meet the federal benchmark, or via the application of the federal carbon pricing system in provinces or territories that request its application or that do not have a system that meets the federal benchmark.

Background

In December 2016, the Minister of Environment and Climate Change and the Minister of Finance sent a letter to their provincial and territorial counterparts to inform them that the federal government was targeting January 1, 2019, as the date for the implementation of the federal carbon pricing system. Since then, the federal government has publicly reiterated its intent regarding the target date of January 1, 2019, on multiple occasions. The Greenhouse Gas Pollution Pricing Act (GGPPA) provides the legal framework and enabling authorities for the federal carbon pricing system for the purpose of ensuring that the pricing of greenhouse gas (GHG) emissions (i.e. carbon pricing) is applied broadly in Canada at appropriate levels.

The GGPPA, which received royal assent on June 21, 2018, has two components: (1) a charge on fossil fuels (Part 1 of GGPPA); and (2) a charge on excess emissions of specific large industries under the output-based pricing system (Part 2 of GGPPA). It also contains a schedule that lists provinces, territories and areas where these two components apply: Part 1 of Schedule 1 lists provinces, territories and areas where the fuel charge applies, while Part 2 of this Schedule lists where the output-based pricing system applies.

On October 23, 2018, the Government of Canada announced to which provinces and territories its performance-based system for emissions-intensive and trade exposed facilities (the output-based pricing system) would apply starting on January 1, 2019. To that aim, the Governor in Council made an order in council to add these provinces and territories to Part 2 of Schedule 1 of the GGPPA.

The NL government elected to implement its own carbon pricing system by amending the province’s Management of Greenhouse Gas Act (MGGA) and making regulations under it. This system, which consists of an explicit price on carbon and a performance-based system, came into effect on January 1, 2019.

The governments of Canada and NL have jointly managed offshore oil and gas activities through an agreement, or “Accord” since the mid-1980s. This “Accord” is implemented through the Accord Act and its provincial equivalent. The Accord Act defines the Canada–NL offshore administrative area, provides for the imposition of royalties for the benefit of the province, describes the regulatory requirements, and establishes the Canada–Newfoundland and Labrador Offshore Petroleum Board (CNLOPB) to regulate offshore oil and gas activities. When making any amendments to the Accord Act, mirror changes are made to the provincial legislation.

Given that the Canada–NL offshore area is jointly managed by the federal and provincial governments through the Accord Act, a tailored approach to facilitate the application of carbon pricing in the Canada–NL offshore area was preferred. Since 2017, the governments of Canada and NL have worked together to ensure that a tailored approach to carbon pricing applicable to the Canada–NL offshore area and aligned with the objectives of the Pan-Canadian Framework and GGPPA is established in legislation.

The mirror Accord Act amendments in the NL legislature (Bill 41) and the Act to Amend the Management of Greenhouse Gas Act and the Revenue Administration Act (Bill 44) received royal assent on December 5, 2018.

Amendments

Section 176 of the Act amends the Accord Act to establish a cost recovery regime for carbon pricing in the Canada–NL offshore area. As laid out in the Accord Act, the federal and provincial governments provide equal shares of the CNLOPB’s budget, which are then fully cost recovered from industry and returned equally to both governments. Currently, there are no cost recovery requirements for carbon pricing; however, once section 176 comes into force, it will introduce a conditionality to the cost recovery scheme to specify that 100% of the costs associated with the CNLOPB administering the provincial carbon pricing system will be recovered from industry, and remitted in full to the province.

Section 177 of the Act amends the Accord Act to incorporate by reference NL’s provincial carbon pricing system under the MGGA. This section also identifies exemptions and limitations of the incorporation by reference, more specifically:

Section 178 of the Act also amends the GGPPA to ensure the non-application of NL’s carbon pricing system in the Canada–NL offshore area in the event the Canada–NL offshore area is added to Part 2 of Schedule 1 of the GGPPA.

Lastly, aligned with the objectives of GGPPA and the goal of ensuring that a national approach to pricing carbon pollution is in place in Canada as of 2019, section 181 of the Act provides the legal authority for these amendments to come into force retroactively, on a day that must not be before January 1, 2019.

Implications

The Order retroactively establishes the coming into force date of sections 176 to 178 of the Act as January 1, 2019, and contributes to the application of carbon pricing to a broad set of emission sources across Canada, a key part of the federal government’s Pan-Canadian Framework.

The Accord Act and the GGPPA amendments are a tangible demonstration of Canada’s commitment to responsible resource development, and enhancing environmental protection in the offshore area. It also demonstrates Canada’s commitment to the sound functioning of the joint management with its Accord partner and all parties’ willingness to work together for the safe and environmentally responsible development of Canada’s Atlantic offshore resources.

There will be no additional costs involved with bringing sections 176 to 178 of the Act into force.

Consultation

During the development of sections 176 to 178 of the Act, the Government of Canada collaborated with the Government of NL. Multiple departments from each level of government were involved. The implicated federal departments and agencies included Environment and Climate Change Canada, Justice Canada, the Offshore Petroleum Boards, and Natural Resources Canada. The offshore oil and gas industry and two Indigenous groups were also consulted prior to the legislative process.

In December 2018, the Government of NL advised offshore operators of their obligations for 2019 under the MGGA. An information session was held with operators on January 18, 2019, to go over their obligations. The NL government has worked with the CNLOPB to put in place the requisite administrative mechanisms for retroactive implementation for January 1, 2019.

Departmental contacts

For additional information, please contact

Natural Resources Canada
Timothy Gardiner
Acting Director General
Petroleum Resources Branch
580 Booth Street
Ottawa, Ontario
K1A 0E4
Telephone: 613‑992‑3794
Email: timothy.gardiner@canada.ca

Environment Canada and Climate Change
Stéphanie Johnson
Executive Director
Legislative Governance
Environmental Protection Branch
351 Saint-Joseph Blvd.
Gatineau, Quebec
K1A 0H3
Telephone: 819‑938‑5507
Email: stephanie.johnson@canada.ca