Executive Summary: Key Legal and Evidentiary Issues

• Saskatchewan refused to remit approximately $71 million in fuel charges on natural gas used for home heating, challenging the constitutionality of amended federal carbon tax regulations

• The Respondent's motion to strike was allowed, removing numerous paragraphs from the Notice of Appeal that raised constitutional arguments beyond the Tax Court's jurisdiction

• Constitutionality arguments were struck because the Amending Regulations affected light fuel oil, not natural gas, meaning their validity had no bearing on the assessments under appeal

• Interjurisdictional and Crown immunity arguments survived the motion as a novel issue, though background paragraphs about the Amending Regulations were removed

• Collection-related pleadings were struck as falling under Federal Court jurisdiction, with leave granted to add a simplified paragraph acknowledging asset seizure

• References to penalties were removed by consent, and a provision regarding interest waivers was struck as outside the Tax Court's authority

The carbon tax and Saskatchewan's challenge

The Greenhouse Gas Pollution Pricing Act (GGPPA) and the Fuel Charge Regulations came into force in 2018, imposing a fuel charge — colloquially known as a "carbon tax" — on sales of fuel in provinces that the Governor in Council determined did not have a sufficiently stringent greenhouse gas pricing mechanism. Saskatchewan was among those provinces. The Government of Saskatchewan, along with others, challenged the constitutionality of the Act, but the Supreme Court of Canada in References re Greenhouse Gas Pollution Pricing Act (2021 SCC 11) upheld it as constitutional on the basis that it sets minimum national standards of greenhouse gas price stringency to reduce greenhouse gas emissions.

The Atlantic Canada heating oil exemption

In late 2023, the federal government announced it would exempt light fuel oil used to heat homes from the application of the Act through the Regulations Amending the Fuel Charge Regulations, No. 2. Saskatchewan alleged that this exemption was motivated by purely political purposes — specifically to benefit constituents in Atlantic Canada where heating oil use is prevalent — rather than to further minimum national standards of greenhouse gas pricing. The Province contended that the exemption disproportionately favoured Atlantic Canada while continuing to impose charges on Saskatchewan's primary home heating fuel, natural gas.

Saskatchewan's refusal to remit and the resulting assessments

Taking the position that the Amending Regulations rendered the application of the Act to home heating fuel unconstitutional, Saskatchewan refused to remit fuel charges on natural gas used for residential heating starting in January 2024, while continuing to remit charges on other natural gas supplies. SaskEnergy Incorporated, a Crown corporation and agent of the Crown established under The SaskEnergy Act, served as the utility that provides natural gas to homes, businesses, and industry throughout Saskatchewan, while the Province itself was deemed the registered distributor of natural gas for the purposes of Part 1 of the GGPPA as a consequence of a Services Agreement entered into with SaskEnergy. The Minister of National Revenue assessed Saskatchewan for failing to collect and remit approximately $71,000,000 in fuel charges across seven monthly periods from January through July 2024. Saskatchewan appealed those assessments to the Tax Court of Canada.

The motion to strike

The Respondent, His Majesty the King, brought a motion to strike various paragraphs of Saskatchewan's Notice of Appeal under section 53(1) of the Tax Court of Canada Rules (General Procedure), arguing they disclosed no reasonable cause of appeal. The disputed paragraphs fell into three broad categories: the constitutionality of the fuel charge on natural gas for home heating, interjurisdictional and Crown immunity, and the Minister's attempts to collect the assessed fuel charges.

The court's analysis of the constitutionality arguments

Justice Graham considered whether the Tax Court had jurisdiction to hear the constitutional challenge. While acknowledging that it was not plain and obvious the Tax Court lacked jurisdiction over constitutional matters generally — citing section 19.2 of the Tax Court of Canada Act and Federal Court of Appeal decisions — Justice Graham ultimately struck the constitutional pleadings on other grounds. The critical finding was that the Amending Regulations affected the fuel charge on light fuel oil, not natural gas. Because the assessments related entirely to Saskatchewan's supplies of natural gas, any determination on the vires of the Amending Regulations would have no effect on the correctness of those assessments. The court characterized Saskatchewan's attempt to frame the argument as an attack on the Regulations "as amended" rather than on the Amending Regulations themselves as "a distinction without a difference." Even under a best-case scenario for Saskatchewan, a trial judge finding the Amending Regulations ultra vires would only declare those changes of no force and effect, which would not reduce Saskatchewan's natural gas fuel charges.

Interjurisdictional and Crown immunity preserved

The Notice of Appeal also raised the novel issue of whether interjurisdictional and Crown immunity prevent the federal government from assessing the Province. The Respondent did not seek to strike this argument. However, Justice Graham struck the background paragraphs (28 to 50) that detailed the history and alleged political motivations of the Amending Regulations, finding them irrelevant to the immunity question and potentially prejudicial. The court granted Saskatchewan leave to add a simplified paragraph explaining why it changed its position on compliance with the Act, without pleading the underlying facts that led to that conclusion.

Collection matters directed to Federal Court

Paragraphs alleging that the Minister improperly used a requirement to pay to seize funds from Saskatchewan's consolidated revenue fund were struck. The court agreed with the Respondent that the process by which the Minister enforces assessments is immaterial to their validity or correctness, and that jurisdiction over collection matters lies with the Federal Court. Saskatchewan was granted leave to add a single paragraph noting that the Minister attempted to collect fuel charges by seizing the Province's assets and that the Province did not consent, without further details about the manner of collection.

The ruling and outcome

On November 27, 2025, Justice David E. Graham of the Tax Court of Canada allowed the Respondent's motion to strike, removing the constitutional and collection-related paragraphs from Saskatchewan's Notice of Appeal. The Respondent — His Majesty the King — was the successful party on this motion, and costs were awarded in the Respondent's favour. Saskatchewan was permitted to file an Amended Notice of Appeal by January 9, 2026 to add the limited pleadings the court described and to remove the struck provisions. The Respondent was given until March 13, 2026 to file an Amended Reply. The appeal itself, centred on interjurisdictional and Crown immunity grounds, remains ongoing. No exact monetary award was determined at this stage, as the motion addressed only the scope of permissible pleadings rather than the merits of the approximately $71,000,000 assessment dispute.