On November 3, 2016, the Alberta government publicly released the anticipated first regulation under the controversial Climate Leadership Implementation Act (the “Act”). The Act, which passed its third reading in the legislature this past June, allows for the implementation of a carbon levy on Alberta’s industry and citizens, as an integral part of the Alberta government’s announced plans to combat climate change. The carbon levy, which comes into effect on January 1, 2017, will be included in the price of all fuels that emit greenhouse gases when combusted.

The Climate Leadership Regulation (the “Regulation”) provides further detail related to the provisions of the Act, expanding on what kinds of activities and at what stages of the fuel supply chain a carbon levy is payable, as well as details of carbon levy exemptions. For example, the Regulation specifies the prescribed activities that require payment of a carbon levy on fuel, as well as the stages in the fuel supply process at which no carbon levy is payable. The Regulation also provides guidance on how a carbon levy is applicable in the event of a mixture or blend of fuels, and gives the Minister discretion to determine the method to determine the amount of fuel on which a carbon levy is payable.

Arguably the most noteworthy provisions in the Regulation deal with exemptions from the carbon levy. A consumer is exempt from paying a carbon levy on fuel used in the operation of a specified gas emitter (a facility to which the Specified Gas Emitters Regulation applies, being large industrial and other emitters of over 100,000 tonnes of greenhouse gases annually) if the emissions from the fuel are direct emissions and are marked as such. This means, for example, that a consumer identified as a large industrial emitter, such as a large oilsands facility or power plant, will not have to pay the levy on marked gasoline or diesel. A consumer is also exempt from paying the carbon levy on fuel that is used in a production process before 2023 if it is not flared or vented.

Other exemptions from the carbon levy include natural gas consumed on site, marked gasoline and diesel used by farmers for farming operations, aviation-use fuel for interjurisdictional flights, and fuel sold for export. The Minister also has discretion to grant or refuse an application from an Indian or Indian band for a carbon levy exemption certificate. However, the Regulation restricts purchases of carbon levy-exempt fuel.

For most applicants, in order to purchase fuel exempt from the carbon levy, an application must be made for a carbon levy exemption certificate in a form and manner specified by the Minister. If the application is approved, the Minister will issue an exemption certificate detailing the type of fuel on which the consumer is exempt from paying the carbon levy. Further, if a recipient ordinarily exports at least 80% of the gasoline or diesel they purchase in Alberta in a calendar year, they can be issued a license by the Minister, upon their application, for an exemption certificate to purchase carbon levy-exempt fuel.

The approval of the Regulation fleshes out the technical details of the Alberta government’s key piece of legislation driving their Climate Leadership Plan: the Climate Leadership Implementation Act. Albertans now have a more concrete idea of what the carbon levy means for them, though many issues such as how the levy funds will be reinvested into renewable energy and into Alberta’s economy remain to be addressed.