Alberta s Carbon Levy the first 45 days

Transcription

1 Alberta s Carbon Levy the first 45 days Presented to PJVA, PASC and IIAA Speakers: Ken Ghag, Indirect Taxes Jill Johnston, Internal Audit David Van Den Beld, SRED & Incentives

2 Today s agenda Introductions: Ken Ghag, Jill Johnston and David Van Den Beld How the first 45 days went General comments Issues arising in the first 45 days Comparison with the BC Carbon Tax How Internal Audit can help Credits and incentives programs Questions and answers 2

3 Issues arising in the first 45 days Registration/Certificates Late registrations producers, oilfield service companies & direct remitters Obtaining & providing exemption certificates Possible voluntary disclosure Natural gas sales on pipelines Confusion on need for exemption certificates No tax unless gas delivered for taxable use If change in use, purchaser remit levy if taxable Alberta Tax and Revenue Administration ( TRA ) Role Numerous discussions/rulings/interpretations provided Any new issue should be brought to TRA s attention 3

4 Issues arising in the first 45 days Accounts payable groups Invoices with carbon levy charged Who should approve levy applicable? Tax/Finance/Regulatory Need to establish processes and controls Billing and marketing groups Some coordination problems on billing the levy Accounts Receivable; Marketing; Regulatory Need to establish processes and controls Provoking issues in other taxes Alberta Fuel Tax Tax Exempt Fuel Users ( TEFU ) If taxable use for carbon levy pay fuel tax 4

5 Issues arising in the first 45 days Reporting Capturing volumetric information for first return due on February 28 TRA workshops on doing returns The exemption for fuel used in upstream conventional oil and gas production processes ( the 2023 exemption ) Differing views between industry & TRA Possible industry submission 5

6 The 2023 exemption, what is integral? Production process means an activity integral to the drilling, completion, workover or abandonment of a gas or oil well. Activities integral to the operation of the drilling, completion, workover or abandonment of a gas or oil well are considered to be activities that result in the release of direct emissions from: use of fuel (other than clear gasoline or clear diesel) in non-vehicular machinery and equipment used on-site to drill, complete, rework or abandon a gas or oil well, use of fuel (other than clear gasoline or clear diesel) in an unlicensed vehicle or vehicular machinery and equipment used on-site to drill, complete, rework or abandon a gas or oil well, or flaring or venting of fuel at a gas or oil well during drilling, completion, workover or abandonment of the gas or oil well. 6

7 The 2023 exemption, what is integral? Production process also means an activity integral to the operation of: (1) gas or oil well, (2) gas battery, (3) gas gathering system, (4) compressor station or facility, (5) gas processing facility, (6) gas fractionation plant, (7) straddle plant, (8) oil battery, or (9) oil production site, other than an oil production site that includes one or more thermal oil wells. Activities integral to the above operations are considered to be activities that result in the release of direct emissions from: the use of fuel (other than clear gasoline or clear diesel) in non-vehicular machinery and equipment used to run mechanical or processing equipment on site or at the facility, the use of fuel (other than clear gasoline or clear diesel) in an unlicensed vehicle or vehicular machinery and equipment used for day to day operations or processes at or within the site or facility, or flaring or venting of fuel on-site or at the facility. 7

8 The 2023 exemption, what is integral? Examples of integral activities include: (a) provision of heat and electricity for processing equipment at facility, (b) operation of mechanical equipment, such as pumps and compressors, or unlicensed vehicles or vehicular equipment for moving products, inputs or wastes within the site or facility, (b) operation of processing equipment at facility, (c) provision of heat and electricity for buildings that house the equipment and instrumentation for the site or facility referred to in all of the above equipment/sites, or (d) processing of liquid outputs from a gas or oil well, an oil battery or an oil production site (other than one that includes one or more thermal oil wells) to extract a fuel or product that is not otherwise suitable for delivery to a refinery for export without further processing. See TRA Special Notice No. 5 for more details on the concept of integral and what is not covered. 8

9 The 2023 exemption, what is integral? Various activities are carved out of integral that arguably are essential to the production process such as: reclamation and remediation of well sites; preparing well site, clearing land, building roads into site, etc.; waste disposal on or off site or at/away from facility; and worker accommodation, transportation or protection from elements, among others listed in Special Notice #5. Special Notice #5 is seen as very restrictive and contains inconsistencies within it; Alberta courts have considered integral, but TRA position does not reflect the courts view. 9

10 Administrative traps to watch for Registrants must notify the TRA in the following scenarios: ceases to carry on business, or carry on that part of the registrant s business that the registrant was registered for; subject of proceedings relating to bankruptcy, insolvency or receivership; amalgamates with another corporation; wound up, liquidated or dissolved; or subject to any proceedings under CCAA legislation; a partnership where there is a change in partners of the partnership; or a joint venture where there is a change in the participants in the joint venture. Failure to notify Minister could result in sanctions from revoking license to refusal to provide exemption certificates. 10

11 Administrative traps to watch for An exemption certificate can be invalidated in the following ways on the earlier of: expiry date on the certificate (if shown); the date the certificate holder ceased to be entitled to purchase fuel exempt from the carbon levy; if the certificate holder is a corporation, the date the holder amalgamates with another corporation; is wound up, liquidated or dissolved; or is subject to any proceedings under the Companies Creditors Arrangement Act (Canada), if the certificate holder is a partnership, the date there is a change in the partners of the partnership; if the certificate holder is the operator of a joint venture, the date there is a change in the operator of a joint venture; and the date the certificate is cancelled by TRA. Set up process to monitor the above actions 11

12 Administrative traps to watch for TRA may refuse to issue, cancel or suspend a carbon levy exemption certificate where it: determines that the applicant is not exempt from paying the carbon levy on other fuel; determines that some or all of the information provided on the application is false or misleading; the applicant holds a valid carbon levy exemption certificate in respect of the same fuel; determines that the applicant has contravened the Act or the Regulation or any other enactment that provides for the imposition of a tax; or the applicant has an (any) overdue debt to the Crown. 12

13 Penalty and interest provisions Direct remitters, vendors or retail dealers first offence, up to $10,000 and/or imprisonment up to 6 months. subsequent offence, up to $25,000 and/or 1 year imprisonment. Consumers penalty for failure to pay the carbon levy first offence, up to $1,000. subsequent offence, up to $5,000 and/or imprisonment up to 6 months. Penalty for deceptive documents, document destruction and alteration, willful evasion (in addition to any other penalty) 300% penalty on the carbon levy due or 300% penalty and imprisonment up to 2 years. 13

14 Penalty and interest provisions Penalty for failure to file returns $50 for each day of default. Penalty for failure to maintain proper books and records $50 for each day of non-compliance. Contravention of provisions for which no other penalty provided first offence, up to $1,000 and/or imprisonment up to 1 month. subsequent offence, up to $5000 and/or imprisonment up to 6 months. Interest applies to the above penalty amounts at the current prescribed rate according to Regulation; per Corporate Tax Act. Directors liability extends to carbon levy, penalties and interest. 14

15 Comparison with the BC Carbon Tax Same in general concept and design final user bears the tax BC higher rate - $30/tonne vs $20/tonne No Specified Gas Emitter Regulation in BC No oil & gas production exemption BC has more restrictive export rules 15

16 Internal Audit: Carbon Tax Regime risks Significant risks to consider: Penalties/Imprisonment Inaccurate or deceptive information provided Not filing returns or late returns Failure to maintain proper books and records Reputational Risk Other risks to consider as developing compliance response: Paying tax on sources that are exempt for your organization Ownership and accountability across multiple departments Consistency of information with other reporting requirements 16

17 Internal Audit: Compliance to the new regime 17

18 Internal Audit: Are you ready? People Process Systems Have you assigned responsibility for carbon tax related procedures? Do you have effective and efficient processes in place to prepare and report your emissions inventory monthly? Do you have mechanisms in place to capture and track all relevant information? Are roles and responsibilities clearly defined between functional areas? And other 3 rd parties? Do you have internal controls in place to identify and help reduce inaccuracies that could damage the company s reputation? Are you confident your emissions inventory data is accurate and complete? 18

19 Internal Audit: How IA can help As you start reporting Ongoing reporting Audit compliance with Regulation Assess accuracy and completeness of information reported Assess process and controls Identify gaps and provide recommendations on process and controls Assess adequacy of books and records (documentation, support, approvals etc.) Provide routine compliance assessments Assess compliance against changing legislation or administrative policy change Provide recommendations on enhancing process and controls for collecting data (i.e. better use of technology; data analytics) Test controls and provide recommendations for improvement Share good practices and recommendations on overall compliance program. 19

20 Innovate-away some carbon levy burden with government incentives Overview Government incentives More common incentives for carbon related initiatives SR&ED Tax Credit Program Examples of eligible projects 20

21 Government incentives Federal and Provincial incentives related to: Job creation, Training Productivity, Environment, Energy R&D, Innovation Grants, Tax credits, Loans, Matched funding, Equity Investments Depends on type of business, location, size Programs come and go Funding released in tranches 21

22 More Common Incentives related to Carbon Credits IRAP Capital Investment Tax Credit - CITC Sustainable Development Technology Canada - SDTC Funding Canadian clean tech projects Alberta Innovates Renewables and Emerging Technologies Water and Environmental Management Energy Technologies Mitacs Natural Sciences & Engineering Research Council NSERC 22

23 More Common Incentives related to Carbon Credits Federal Energy Innovation Program ecoenergy Innovation Initiative Clean Energy Fund Innovative Energy Technologies Program (IETP) Town/City programs Energy Efficiency Alberta 23

24 SR&ED Tax Credit Program Tax incentive program to encourage innovation and jobs in Canada Government defined R&D in Canada, not just white lab coats $3.5B of ITC annually across 15,000-18,000 claimants Federal Investment Tax Credits (ITCs) 15% to 35% Provincial ITCs: Alberta (10%, refundable to maximum of $400k cash/yr) British Columbia (10% tax credit) Manitoba (20% tax credit) Saskatchewan (10% tax credit) 24

25 Eligible examples for incentives Leak detection technology, new or improved Vent flow and gas migration well heads Steam efficiency projects Zero water extraction process Sequestration projects Converting CO2 to products Alternative energy projects - wind, wave, solar Building energy reduction, thermal scans, geothermal, HVAC Fleet vehicle conversion and emission systems Modeling, IT simulations and EIAs 25

26 Questions, answers and solutions Feel free to contact us to discuss the Alberta carbon levy via: Ken Ghag David Crawford Jill Johnston David Van Den Beld