This Hansard has not been finalized - this is the "Blues" in Parliamentary speak, or unedited transcript in regular speak.

This Hansard is the unedited transcript and will be replaced by the final copy soon (generally within 5 business days). In the meantime, direct quotes should not be used, when the final is published it will seamlessly replace this unedited copy and any existing links should still work.

This is from the 18th Assembly, 3rd Session. The original version can be accessed on the Legislative Assembly's website or by contacting the Legislative Assembly Library. The word of the day was public.

Topics

Committee Report 25-18(3): Standing Committee on Economic Development and Environment Report on the Review of Bill 36: An Act to Amend the Petroleum Resources Act and Bill 37: An Act to Amend the Oil and Gas Operations Act
Reports Of Standing And Special Committees

Cory Vanthuyne Yellowknife North

Thank you, Mr. Speaker.

Conclusion

The committee commends the Minister for his willingness to work with committee to further amend Bill 36 and Bill 37 in response to public interest and to work collaboratively with committee on the amendments.

The committee thanks all those who took the time to appear before committee to share their thoughts on this legislation.

Following the clause-by-clause review, motions were carried to report Bill 36, An Act to Amend the Petroleum Resources Act, and Bill 37, An Act to Amend the Oil and Gas Operations Act, as amended and reprinted, as ready for consideration in Committee of the Whole.

Rule 100(5) of the Rules of the Legislative Assembly of the Northwest Territories requires Cabinet, in response to a motion by committee, to table a comprehensive response that addresses the committee report and any related motions adopted by the House. As required by this rule, committee usually includes a recommendation in each report, which is moved as a motion in the House, requesting a response from government within 120 days. Given that the 18th Legislative Assembly will dissolve prior to the conclusion of the 120-day time period allowed by the rules, committee has opted to forego this recommendation. Committee nonetheless requests, to the extent that it is possible before the dissolution of the 18th Assembly and for the public record, that government provide a response to this recommendation, even of a preliminary nature, that committee may publicly disclose.

This concludes the standing committee's review of Bills 36 and 37. Thank you, Mr. Speaker.

Committee Report 25-18(3): Standing Committee on Economic Development and Environment Report on the Review of Bill 36: An Act to Amend the Petroleum Resources Act and Bill 37: An Act to Amend the Oil and Gas Operations Act
Reports Of Standing And Special Committees

The Speaker Jackson Lafferty

Masi. Reports of standing and special committees. Member for Yellowknife North.

Motion to Receive Committee Report 25-18(3) and Move into Committee of the Whole, Carried
Reports Of Standing And Special Committees

Cory Vanthuyne Yellowknife North

Thank you, Mr. Speaker. I seek unanimous consent to waive rule 100(4) and to have committee report 25-18(3), Standing Committee on Economic Development and Environment Report on the Review of Bill 36, An Act to Amend the Petroleum Resources Act, and Bill 37, An Act to Amend the Oil and Gas Operations Act, moved into Committee of the Whole for consideration later today. Thank you, Mr. Speaker.

Motion to Receive Committee Report 25-18(3) and Move into Committee of the Whole, Carried
Reports Of Standing And Special Committees

The Speaker Jackson Lafferty

Masi. The Member is seeking unanimous consent to waive rule 100(4) to have Committee Report 25-18(3) moved into Committee of the Whole for consideration later today.

---Unanimous consent granted

Bill 36, An Act to Amend the Petroleum Resources Act, and Bill 37, An Act to Amend the Oil and Gas Operations Act is now moved into Committee of the Whole for consideration later today. Reports of standing and special committees. Member for Kam Lake.

Committee Report 26-18(3): Report on the Review of the Carbon Tax Bills: Bill 42: An Act to Amend the Petroleum Products Tax Act and Bill 43: An Act to Amend the Income Tax Act
Reports Of Standing And Special Committees

August 13th, 2019

Kieron Testart Kam Lake

Thank you, Mr. Speaker. Your Standing Committee on Government Operations is pleased to present its Report on the Review of the Carbon Tax Bills, Bill 42, An Act to Amend the Petroleum Products Tax Act, and Bill 43, An Act to Amend the Income Tax Act, and commends it to the House.

INTRODUCTION

The Standing Committee on Government Operations ("the committee") is pleased to report on its review of Bill 42, An Act to Amend the Petroleum Products Tax Act, and Bill 43, An Act to Amend the Income Tax Act, collectively referred to as the carbon tax bills.

The carbon tax bills, sponsored by the Government of the Northwest Territories (GNWT) Department of Finance, were given second reading in the Legislative Assembly and referred to the Standing Committee on Government Operations for review on March 8, 2019. When passed, these bills will implement a carbon tax in the Northwest Territories.

Bill 42 proposes to amend the Petroleum Products Tax Act to:

  • Impose a carbon tax on petroleum products and natural gas;
  • Clarify that all existing provisions in the act related to the current fuel tax are noted as such;
  • Provide an exemption from the fuel tax for petroleum products delivered to or purchased by an Indian or Indian band on a reserve; or used by a designated municipal authority that is recognized by the Minister as representing a community;
  • Make the necessary amendments for collection and administration of this tax in the same manner as the current fuel tax, which requires purchasers to pay the tax, and vendors and collectors to remit the tax to the GNWT;
  • Allow the Minister to provide in regulations for rebates and grants;
  • Increase the maximum fines and penalties which may be imposed as administrative penalties or on summary conviction; and
  • Set out a process for the appeal of an assessment of tax, interest, or administrative penalties under the act.

Bill 43 proposes to amend the Income Tax Act to provide a cost-of-living offset as a mechanism for returning carbon tax revenues to Northwest Territories residents.

Bill 43 also proposes to amend the Income Tax Act to make changes in non-refundable tax credits claimed by multi-jurisdictional tax filers, including changes that restrict the Northwest Territories pension credit to NWT residents and changes that allow full pension and dividend credits to be claimed by NWT residents with business income earned outside the Northwest Territories.

This amendment, which is not related to the implementation of the carbon tax, arises out of discussions between the Department of Finance and the Canada Revenue Agency aimed at harmonizing the provincial-territorial tax treatment of pension and dividend tax credits for multi-jurisdictional tax filers. It will have the effect of denying NWT pension credits to non-residents with business income earned in the NWT and allowing full pension and dividend tax credits to NWT residents with business income earned outside the NWT.

BACKGROUND

As a signatory to the Pan-Canadian Framework on Clean Growth and Climate Change, the GNWT made a commitment to implement carbon pricing in the Northwest Territories. This tax on fuels that emit greenhouse gases (GHGs) is intended to encourage residents and businesses in the Northwest Territories to reduce fuel consumption. Along with the provinces and other territories, the GNWT was given the option by the federal government to implement its own approach to carbon pricing, provided that approach is consistent with the federal approach. For those jurisdictions choosing not to implement their own approach, Canada advised that it would impose its approach, often referred to as the "federal backstop." The GNWT opted to implement its own approach to carbon pricing, the details of which were publicly released in July 2018.

Lack of Meaningful Engagement with Committee

The GNWT communicated early and frequently with committee on this work as it progressed, including providing three presentations on the GNWT's proposed approach prior to its public release. The first of these took place in June 2017, prior to the public release of the GNWT's Discussion Paper on Implementing Pan-Canadian Carbon Pricing in the Northwest Territories. During this time period, committee wrote twice to the Finance Minister raising concerns that the GNWT's approach did not set out options for public debate; the proposed 75 percent direct rebate for large emitters was too high; there was no rebate or special measures for small businesses; and the policy objectives of the carbon tax were not clearly articulated.

According to the GNWT's plain-language summary of Bill 42, the "federal government reviewed and approved the planned approach in September 2018, and Bill 42 and Bill 43, which are needed to implement carbon pricing, were tabled in the NWT Legislative Assembly in March 2019." Committee was not advised that the federal government had "approved" the planned approach in September, which occurred while the committee was in the process of considering the legislative proposal for the carbon tax bills.

In November 2018, the committee again wrote to the government, advising that it does not support the proposal in its current form and reiterating its concerns that the 75-percent rebate for large emitters is too high and that there are no specific measures for small businesses. To this, committee added its concern that the rebates to individuals can only be claimed by filing taxes. Committee also expressed its concern that there was no indication from government as to whether or not the carbon tax legislation would mandate public reporting to enable transparency, increase public awareness of how the tax revenue is being used, and measure the impact of the carbon tax on emissions in the NWT.

While the GNWT was very forthcoming with respect to its discussions with the federal government on the GNWT's proposed approach, there was little actual engagement with committee to allow Regular Members to have input into the development of this approach. As noted, committee wrote several letters to the Minister raising committee's concerns with the proposed approach. In retrospect, committee does not feel that its input was given due consideration, nor was it made clear to committee that the information being shared was for information purposes only and that the input of Regular Members was not being sought.

Committee understands that the GNWT's proposed approach to carbon pricing in the Northwest Territories was negotiated with the federal government, leaving little room for input from Regular Members once that process had commenced. The lesson here, from the committee's perspective, is that earlier engagement of Regular Members, including engagement on the discussion of whether or not the GNWT should pursue its own approach, should have taken place.

This would have afforded Members the opportunity to debate issues such as the relative merits of differing policy approaches to reducing greenhouse gas emissions, such as a cap-and-trade system versus a carbon tax. It would have also allowed for dialogue about lessons learned from other jurisdictions such as British Columbia, which has had a carbon tax in place since 2008 and where the Minister is required to present annual plans to the provincial legislature setting out the amount of tax revenue anticipated.

Bills 42 and 43 were introduced in the Legislative Assembly, given first and second reading, and referred to committee for review on March 8, 2019.

Now, Mr. Speaker, I will turn the reading of this report over to the honourable Member for Sahtu.

Committee Report 26-18(3): Report on the Review of the Carbon Tax Bills: Bill 42: An Act to Amend the Petroleum Products Tax Act and Bill 43: An Act to Amend the Income Tax Act
Reports Of Standing And Special Committees

The Speaker Jackson Lafferty

Masi. Member for Sahtu.

Committee Report 26-18(3): Report on the Review of the Carbon Tax Bills: Bill 42: An Act to Amend the Petroleum Products Tax Act and Bill 43: An Act to Amend the Income Tax Act
Reports Of Standing And Special Committees

Daniel McNeely Sahtu

Thank you, Mr. Speaker.

The Public Review of Bills 42 and 43

Timing of Review

Rule 75(1) of the Rules of the Legislative Assembly provides that a bill referred to a standing committee "shall not be proceeded with until the Assembly receives the report of the committee or 120 calendar days pass from the day the bill was given second reading." Convention provides that, should the 120-day period expire while the House is not sitting, committee must report the bill on the first day of the next sitting of the Legislative Assembly.

On June 5, 2019, the Finance Minister made a statement in the Legislative Assembly advising that the GNWT now intended to implement a carbon tax in the Northwest Territories on September 1, 2019. This statement, which appeared to be directed at the federal government, suggested that there was a delay in the legislative process and that "this delay was unintended and in no way should be considered as a lowering of the government's commitment to implementing the NWT carbon tax."

Given that the 120-day period allowed for the review of Bills 42 and 43 expired well after the spring sitting of the Legislative Assembly, committee is of the view that it has been required, from the outset, to report the bills on August 12, 2019, the first day of the final sitting of the 18th Legislative Assembly, regardless of the GNWT's planned July 1, 2019 carbon tax implementation date. While it is perhaps moot at this point in the terms of the 18th Assembly, committee nonetheless encourages Cabinet Ministers to keep in mind the time allowed by the rules for standing committee review of bills when planning its legislative calendar.

Challenges in Comparing Options

Before commencing its review of Bills 42 and 43, committee undertook to analyze and compare the GNWT's approach with the federal backstop, which is based on Canada's output based pricing system. This system establishes emission intensity standards for various large industrial sectors based on average emissions per unit of output.

Committee found it challenging to assess the salient differences between the two approaches. While Finance provided ample material regarding the GNWT's proposed approach, the key features of the federal backstop were more difficult to ascertain. For example, Finance provided committee with a figure indicating the estimated "effective carbon tax" for small emitters under the GNWT's approach, which is the average carbon tax per tonne of emissions. Committee asked both Finance and Environment and Climate Change Canada for the corresponding figure under the federal backstop. Committee also requested information on the annual net carbon tax revenues deriving from small emitters under the federal output based pricing system.

The GNWT's response, while detailed, did not provide committee with the figures it sought. The response from the federal Minister of Environment and Climate Change Canada completely disregarded committee's inquiries, instead referring committee to public information on the Government of Canada's website about the output based pricing system that is technically detailed and not specific to the Northwest Territories. Similarly, a lack of detail about the federal government's approach to offsetting the carbon tax for small businesses and municipalities, made direct comparisons with the GNWT's proposal difficult.

Mr. Speaker, I pass the rest of the reading on to the Member from the Deh Cho. Thank you.

Committee Report 26-18(3): Report on the Review of the Carbon Tax Bills: Bill 42: An Act to Amend the Petroleum Products Tax Act and Bill 43: An Act to Amend the Income Tax Act
Reports Of Standing And Special Committees

The Speaker Jackson Lafferty

Masi. Member for Deh Cho.

Committee Report 26-18(3): Report on the Review of the Carbon Tax Bills: Bill 42: An Act to Amend the Petroleum Products Tax Act and Bill 43: An Act to Amend the Income Tax Act
Reports Of Standing And Special Committees

Michael Nadli Deh Cho

Mahsi, Mr. Speaker.

Confidential Information and Nature of the Bills Inhibited Public Consultation

Committee originally planned to hold public meetings in Fort Providence, Hay River, Inuvik, and Yellowknife. However, on May 8th of this year, two thirds of the way through the formal 120-day review period, committee was notified in writing by the Finance Minister that the GNWT had revised its carbon tax approach for large emitters, those emitting 50,000 tonnes or greater of annual greenhouse gas emissions. This was of concern to committee, which already felt that the GNWT's proposed approach to large emitters was too generous. Committee was advised that this adjustment was necessary to better align the GNWT's approach with the federal backstop, details of which were only released by Canada in December 2018.

Committee had hoped that additional information about this change in approach would be made public by the Minister during the May-June sitting, including details provided in confidence to committee. When this information was not shared with the public, committee subsequently issued a news release on June 7th advising of its decision to postpone the planned public consultations until more information was provided by the Department of Finance.

Committee asked that as much detail as possible related to the committee's specific questions be shared with the public. Unfortunately, as with much of the other information shared by Finance with committee, the responses to these questions were marked "Confidential - Not for Distribution." This is particularly vexing with respect to Bills 42 and 43, where the majority of the GNWT's proposal is not contained in the legislation itself but in regulations and other public policy instruments.

Committee is not at liberty to disclose information provided in confidence by Cabinet Ministers. Unfortunately, the large majority of the correspondence received by committee from the Finance Minister on this initiative, including responses to committee's questions, was marked confidential, thereby prohibiting committee from publicly disclosing its contents. This also inhibited committee's ability to engage in a meaningful consultation. For example, committee's inability to disclose the information contained in Finance's May 8 letter rendered committee unable to explain to the public, even with the writing of this report, how the GNWT's approach to large emitters has changed.

Plain-Language Summaries Provided

Committee wrote to the Minister requesting plain-language explanations of Bills 42 and 43 that could be shared with the public.

Committee wishes to take this opportunity to thank the Minister for responding positively to the committee's request by preparing plain-language summaries of both bills that could be shared with the public. It is committee's experience, based on consultations undertaken over the course of the 18th Assembly, that simple, straight-forward information for NWT residents outlining the purposes of changes to the law and the impact of those changes is vital to obtaining meaningful input from the public. Too often, committee finds itself having to explain government-sponsored bills, leading to confusion about the role of standing committees and the legislative process. Accordingly, committee makes the following recommendation.

Recommendation 1

The Standing Committee on Government Operations recommends that, for all bills proposing to establish, replace, or make significant changes to territorial legislation, a plain-language summary be prepared and made available to the appropriate standing committee at the time the bill is introduced in the Legislative Assembly.

Committee sent out a second news release on July 15th, indicating that it still lacked sufficient detail to enable committee to adequately answer questions from the public on these Finance-sponsored bills. This consideration, along with timing constraints, led committee to the decision to request written submissions from the public and hold a single public meeting in Yellowknife on August 1st.

Mr. Speaker, I now pass on the reading responsibilities to my honourable colleague, to my colleague for Hay River North.

Committee Report 26-18(3): Report on the Review of the Carbon Tax Bills: Bill 42: An Act to Amend the Petroleum Products Tax Act and Bill 43: An Act to Amend the Income Tax Act
Reports Of Standing And Special Committees

The Speaker Jackson Lafferty

Masi. Member for Hay River North.

Committee Report 26-18(3): Report on the Review of the Carbon Tax Bills: Bill 42: An Act to Amend the Petroleum Products Tax Act and Bill 43: An Act to Amend the Income Tax Act
Reports Of Standing And Special Committees

R.J. Simpson Hay River North

Thank you, Mr. Speaker.

PUBLIC INPUT AND COMMITTEE RECOMMENDATIONS

Committee received four submissions on Bills 42 and 43. These submissions from the NWT Association of Communities (NWTAC), the City of Yellowknife, Arctic Energy Alliance, and a joint submission from Ecology North and Alternatives North are appended to this report. A representative of the NWTAC also attended committee's public hearing to present the association's submission.

While the submission from the NWTAC indicates general support for the GNWT's approach over the federal backstop, it points out that, without a cost-of-living offset, the carbon tax will end up costing municipalities. This is occurring at a time when the GNWT has acknowledged a significant gap between municipal funding needs and funding support received from the territorial government. In fact, the NWTAC submission alleges that when this concern was raised with the Department of Finance, municipalities were advised that they would "just have to increase their property taxes." Committee is dismayed to hear such a report and feels that more should have been done in the GNWT's approach to mitigate the impacts of the carbon tax on underfunded local authorities. Accordingly, committee makes the following recommendation.

Recommendation 2

The Standing Committee on Government Operations recommends that the Government of the Northwest Territories, led by the Department of Municipal and Community Affairs, complete its work to assess the municipal funding gap on an urgent basis, taking into consideration the increased costs of the carbon tax to all local authorities, and that additional forced growth funding to compensate for these costs be included in the 2020-2021 budget.

The City of Yellowknife's submission also notes chronic underfunding by the GNWT and points out that, while the NWT houses 50 percent of the territories' population, none of the projects identified in the 2030 energy plan over the next five years are scheduled for Yellowknife. The city recommends making revenues available to community governments in order to support actions set out in their Community Energy Plans. Committee notes that the GNWT's Department of Infrastructure administers a GHG Grant Program for Government, which is designed to fill a gap in funding for larger GHG reduction initiatives. Under this program, in place until March 31, 2022, applicants may be eligible to receive up to 75 percent of eligible project costs.

The City of Yellowknife's submission points out that "if the proposed carbon pricing regime does not accomplish a reduction in GHG emissions it has merely created an unnecessary administrative burden and cost to residents and businesses," recommending that "the GNWT re-evaluate the program after implementation to ensure that it is making a difference."

This recommendation for program evaluation is also contained in the joint submission from Ecology North and Alternatives North, which recommends that there should be "an annual reporting mechanism that evaluates and measures the effectiveness of the tax in meeting its purpose."

Committee fully agrees that there should be both annual reporting on the carbon tax and program evaluation to determine the effectiveness of reducing GHG emissions in the Northwest Territories and to guide future policy decisions. Committee raised these issues during its in-camera discussions with and correspondence to the Department of Finance.

Committee also sought the advice of the law clerk regarding the potential to amend Bill 42 to include reporting requirements. Committee was advised that such an amendment would likely be ruled out of the scope of the bill given that there are no provisions currently contained in the Petroleum Products Tax Act mandating reporting and that the scope of the bill is narrowly defined to allow for the imposition of the tax and the provision of grants and rebates through regulation.

During the clause-by-clause review of Bills 42 and 43, the Minister indicated that he had made a commitment to committee that the department would undertake annual reporting on the carbon tax. While committee is pleased to hear this, a commitment made during an in-camera discussion did not carry the weight of a public commitment. Therefore, to provide for this public commitment, committee makes the following recommendation.

Recommendation 3

The Standing Committee on Government Operations recommends that the Department of Finance table an annual report in the Legislative Assembly on the carbon tax that provides details on total carbon taxes collected; carbon taxes collected from large emitters; total rebates provided; number and nature of grants provided; costs of administering the carbon tax; reinvestment of carbon tax revenues; projected tax revenues for coming year; and an annual plan for future year reinvestment of carbon tax revenues.

With respect to program evaluation, committee makes the following recommendation.

Recommendation 4

The Standing Committee on Government Operations recommends that the Department of Finance undertake an annual assessment of the impacts of the carbon tax on greenhouse gas emissions in the Northwest Territories to be reported in the annual report. This should be integrated with the reporting on GHG emissions under the Climate Change Strategic Framework and energy projects under the Energy Strategy. This will allow an evaluation of whether the carbon tax is effective in reducing GHG emissions.

Recommendation 5

The standing committee further recommends that the Department of Finance undertake a comprehensive review and evaluation of its carbon tax approach, including public consultation, to be completed after the program is fully implemented in 2022. The purpose of review is to determine the effectiveness of the program on reducing GHG emissions and to assess its impacts on the NWT economy in order to develop program improvements.

The submission received from the Arctic Energy Alliance asked committee to consider the inclusion of a provision in the Petroleum Products Tax Act to allow for the disclosure of fuel sales data at the community level to address significant gaps in the organization's knowledge of energy use in the Northwest Territories. The committee is sympathetic to this request and Members appreciate that good data is essential to well-informed, evidence-based decision making. Unfortunately, the same issues of scope that prevented committee from including annual reporting requirements in Bill 42 also prevent the inclusion of a clause mandating the release of this information as it is not related to the collection or expenditure of carbon tax revenues.

I will now pass the reading on to the Member for Kam Lake.

Committee Report 26-18(3): Report on the Review of the Carbon Tax Bills: Bill 42: An Act to Amend the Petroleum Products Tax Act and Bill 43: An Act to Amend the Income Tax Act
Reports Of Standing And Special Committees

The Speaker Jackson Lafferty

Masi. Member for Kam Lake.

Committee Report 26-18(3): Report on the Review of the Carbon Tax Bills: Bill 42: An Act to Amend the Petroleum Products Tax Act and Bill 43: An Act to Amend the Income Tax Act
Reports Of Standing And Special Committees

Kieron Testart Kam Lake

Thank you, Mr. Speaker. Thank you, colleagues.

CONCLUSION

The clause-by-clause review of the bill was held on August 7, 2019. Committee thanks the honourable Minister of Finance and his officials for their appearance before the committee. Committee did not move any motions to amend Bills 42 or 43.

Rule 100(5) of the Rules of the Legislative Assembly of the Northwest Territories requires Cabinet, in response to a motion by committee, to table a comprehensive response that addresses the committee report and any related motions adopted by the House. As required by this rule, committee usually includes a recommendation in each report, which is moved as a motion in the House, requesting a response from government within 120 days. Given that the 18th Legislative Assembly will dissolve prior to the conclusion of the 120-day time period allowed by the rules, committee has opted to forego this recommendation. Committee nonetheless requests, to the extent it is possible before the dissolution of the 18th Assembly and for the public record, that government provide a response to the recommendations contained in this report, even of a preliminary nature, that committee may publicly disclose.

This concludes the Standing Committee's review. Thank you, Mr. Speaker.

Committee Report 26-18(3): Report on the Review of the Carbon Tax Bills: Bill 42: An Act to Amend the Petroleum Products Tax Act and Bill 43: An Act to Amend the Income Tax Act
Reports Of Standing And Special Committees

The Speaker Jackson Lafferty

Masi. Reports of standing and special committees. Member for Kam Lake.

Motion to Receive Committee Report 26-18(3) and Move into Committee of the Whole, Carried
Reports Of Standing And Special Committees

Kieron Testart Kam Lake

Thank you, Mr. Speaker. I move, seconded by the honourable Member for Hay River North, that Committee Report 26-18(3): Standing Committee on Government Operations Report on the Review of the Carbon Tax Bills, Bill 42: An Act to Amend the Petroleum Products Tax Act and Bill 43: An Act to Amend the Income Tax Act be received by the Assembly and moved into Committee of the Whole for further consideration. Thank you, Mr. Speaker.