Oil refiners want cost of reducing their carbon footprint rolled into N.S. pump price

Public hearings set for Monday in Halifax will determine how much Nova Scotia consumers pay for new carbon reduction requirements imposed on oil refineries.

The reductions will start to phase in July 1, but are separate from the new federal carbon tax going into effect on the same day.

New federal clean fuel regulations require fuel producers to make gasoline and diesel cleaner by reducing their carbon footprint 15 per cent by 2030.

The industry wants the cost rolled into their regulated wholesale prices — the subject of hearings starting Monday at the Nova Scotia Utility and Review Board.

"The federal Clean Fuel Regulations (CFR) is arguably the most complex and costly federal regulation our industry has experienced and is expected to increase the price of transportation fuels significantly over the compliance period," said Carol Montreuil, vice-president for Eastern Canada with the Canadian Fuels Association, in an opening statement posted by the regulator.

"It is critical that the wholesale margin approved by the Nova Scotia Utility and Review Board fully integrates the CFR cost impacts."

Nova Scotia calls it second carbon tax

Environment and Climate Change Canada estimated compliance will add between six and 13 cents to a litre of gasoline by 2030.

The regulations allow suppliers to earn credits for reducing the "carbon intensity" of their operations through actions like carbon capture and storage, on-site renewable electricity, producing low-carbon ethanol and biodiesel or supplying fuel or energy to advanced vehicle technology.

On Friday, Nova Scotia's Progressive Conservative government amended the petroleum products pricing regulations to allow the Nova Scotia Utility and Review Board to determine how much of the cost of compliance can be passed along to consumers.

It referred to the clean fuel regulation as a "fuel producer carbon tax," reflecting its objection to carbon pricing mechanisms imposed by the Liberal government in Ottawa.

The provincial changes allow the board to set the price for gasoline blended with renewables like ethanol. The board will also have to account for the carbon credit trading system available to refiners.

Federal government intervention

Late last month, federal Environment Minister Stephen Guilbeault wrote the Nova Scotia Utility and Review Board saying the cost of meeting the new regulations should not automatically be passed on to consumers because soaring oil industry profits are enough to absorb the cost of lowering its carbon footprint.

In addition to Guilbeault's May 25 letter, his deputy minister, Chris Forbes, submitted a detailed technical analysis one day later claiming that the cost of compliance was significantly overestimated in studies presented to New Brunswick regulators.

The board says it will accept Guilbeault's letter as comment but it excluded Forbes technical analysis because Environment and Climate Change Canada is not a formal party in the proceeding.

"The board considers it would be inappropriate to include your correspondence as such because your communication was received only a few days before the start of the hearing and contains a level of technical analysis that one would have normally expected to have been presented as formal evidence by a party in a proceeding before the board," the UARB responded to Forbes on June 1.

"In considering whether to give that letter any weight in its consideration of the matter, the board must consider the fact that it was provided in a way that did not provide participants in this proceeding with an opportunity to test the assertions in it through cross-examination or other means."