In court documents, the Government of Saskatchewan calls the collection of federal carbon fees ‘invalid or unlawful,’ per constitutional arguments made by the province
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Saskatchewan says the Federal Court has granted an injunction order to stop any collection action against the province on outstanding carbon tax levies while a decision on a longer-standing injunction is pending.
In a statement issued Monday, Attorney General Bronwyn Eyre said the emergency court order was sought on Friday — a day after Saskatchewan filed a challenge against the amount owed in federal court “due to the continued threat of garnishment of our bank account” by Canada Revenue Agency (CRA).
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“The court ruled in our favour, blocking the federal government from unconstitutionally garnishing money, pending the full hearing and determination of the continuation of the injunction by the Federal Court,” said Eyre.
The CRA is attempting to collect a portion of the outstanding fuel charges on natural gas that Saskatchewan has not paid since January, as assessed by the Minister of National Revenue under the Greenhouse Gas Pollution Pricing Act (GGPPA).
The province, meanwhile, is seeking a judicial review to toss out CRA’s requirement-to-pay notice, plus a request for a stay order by way of the aforementioned injunction on any collection by the federal agency while the case is pending.
According to a federal assessment, as outlined in court documents filed by Saskatchewan, the province owes a total of $42.4 million (including arrears interest) in unpaid carbon levy charges as of March — “the legality of which the Province denies and intends to dispute” in its court action.
Saskatchewan stopped remitting the carbon tax on natural gas used for home heating as of Jan. 1, 2024. That came following a federal three-year exemption on the levy for home heating oil, which is used primarily in Atlantic Canada.
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Of the $101.6 million total in fuel charges from January to March, Saskatchewan remitted $59.2 million as obligated, says the application. The difference is the sum of levies associated with home heating use.
CRA attempted to recover $28 million of those funds in June, though it remains unclear if that was successful. On Friday, a spokesperson from the agency declined to comment on the fees owed.
Not included in any figures to date are payments for April, which tallied $26 million owed but $12.2 million paid, or any future sums accrued as Saskatchewan continues to withhold remittances. The review application advises that the provincial government intends to dispute future charges as well.
The emergency injunction granted Monday will block any attempts by federal agencies to claw back the money until further decisions are made by the presiding judge.
Hearing dates have not yet been set for the matter.
The Leader-Post has obtained the notice for review and injunction request filed last week by legal counsel for the Government of Saskatchewan in a Vancouver-based Federal Court. Both name the Attorney General of Canada, Minister of National Revenue Marie-Claude Bibeau and the Royal Bank of Canada as respondents.
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Outlined is a two-fold argument from the province objecting to the imposition of the fees, asking the courts to declare the collection notice “to be invalid or unlawful” and that it be voided “on constitutional grounds.”
Saskatchewan argues that the federal government’s decision to exempt the carbon levy on heating oil, while still pursuing levies on other fuels used for home heating, invalidates the standing on which the Supreme Court ruled the legislation constitutional in 2021.
The province says the basis of that ruling — that carbon pricing is applied at a minimum national standard — has been “abandoned” by federal officials who are “deciding, for partisan political purposes” to “selectively apply” the charge.
“This amounts to the precise industry and regional targeting about which certain Justices of the SCC (Supreme Court of Canada) warned as amounting to potential unconstitutional regulatory overreach,” reads the document.
Saskatchewan is also arguing that provinces have “a constitutional right to be free of charges and levies imposed by the federal government” when it comes to general reserve fund monies, and “the exclusive right to determine how such revenues are spent,” per Section 126 of the Constitution Act.
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Court files say Bibeau did not answer a postponement request from the province in response to the attempt to recoup funds in June, or “consider, propose, or attempt any less intrusive collection measures.”
The judicial review application characterized the injunction as necessary because “the legal and constitutional issues raised in the notice of objection are significant” and “must be resolved before interim recovery is sought.”
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MLT Aikins has been retained by the Government of Saskatchewan as the primary firm on this matter, alongside in-house counsel. Calgary and Vancouver-based legal firm Osler, Hoskin and Harcourt are also acting as representative counsel, named in the court documents.
A spokesperson from the Ministry of Justice and Attorney General, in an email statement Monday, said the firm was selected from proposals by “various law firms.”
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“Osler is a leading national firm, with lawyers across the country, chosen to support the Saskatchewan team as a result of its specific and deep expertise in injunction, constitutional and energy law, as well as tax disputes,” said the email.
Former premier and Saskatchewan Party alumnus Brad Wall is listed as a special advisor to the firm’s Calgary office, where two of the four named Osler-based counsel also work.
Wall’s bio on the firm’s website says he serves to offer clients “strategic insight and guidance, particularly in relation to the energy and agri-food industries.”
Asked if Wall was involved in this litigation, the ministry affirmed it has “been advised that he has nothing to do with work on this matter.”
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