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NB Greenhouse Gas (GHG) Emissions Reduction Regulation: 5 Key Obligations

Published:

October 29, 2021

Author(s):

• Lucia Westin-Eastaugh

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The New Brunswick Reduction of Greenhouse Gas Emissions Regulation, effected under the N.B. Climate Change Act, establishes specific requirements for a carbon pricing system intended to reduce greenhouse gas emissions. Although the N.B. government only filed the Regulation on June 1, 2021, it’s deemed to have come into force on January 1, 2021. The Act and the Regulation are yet another example of the growing trend to mandated ESG (Environment, Social and Governance) requirements. Here’s a look at the facilities to which the Regulation applies, the standards under it, and the five key obligations it imposes.

 Application

The Regulation’s requirements apply to owners or “operators” (the person responsible for an industrial facility’s operations) of a “regulated facility”:

• Any industrial facility that produces emissions of 50,000 tonnes or more of greenhouse gas (GHG) on an annual basis.
• Facilities that “opt in” to the regime, an option for any facility emitting less than 50,000, but more than 10,000, tonnes of GHG.

Notably, the owner or operator of a facility that emits more than 10,000 tonnes of GHG that decides not to “opt-in” must still submit the Greenhouse Gas Emissions Report under the Regulation, although it isn’t subject to the other obligations.

Standards

A number of the obligations under the Act and Regulation require compliance with “standards”, which the Minister has the power to enact under s. 10(2) of the Act. The Minister hasn’t yet issued these standards, but has shared a proposed Standard for public review. We expect the proposed Standard to be issued before the end of 2021 and to include step-by-step instructions on how the program will roll out in New Brunswick. It will likely also include the dates on which the Regulation’s requirements take effect. This means that for the years 2021 to 2023, regulated facilities are wise to pay special attention to the timelines and requirements set out in the Standard. Once the program rollout has taken full effect (as set out in the Standard), the dates and requirements for compliance with the obligations the Regulation imposes will apply.

5 Key Obligations

The new Regulation imposes several obligations on the owner or operator of a regulated facility. Here’s a summary of five key obligations.

1. Registration

If the facility was already registered under subsection 171(2) of the Federal Greenhouse Gas Pollution Pricing Act in 2020, then it’s already deemed to be registered under the Regulation. If not, the owner or operator must apply to register the facility.

Application for Registrations. An owner or operator of a facility must apply for registration by June 1 of the calendar year following the first year they produce emissions of 50,000 tonnes of carbon dioxide or equivalent. Alternatively, the owner or operator of a facility that wishes to opt in must apply for designation as an opted-in facility by filing an application form on or before December 1 of the year preceding the year in which the designation is intended to be effective, along with any other required information (which is likely to be elaborated in the Standard). Once the facility has “opted-in”, the owner or operator must apply for registration within 15 days of being designated an opted-in facility.

Re-registration. If a regulated facility becomes deregistered for any reason, the owner or operator has an obligation to re-register the facility if it has a total quantity of emissions of 50,000 tonnes of GHG or more in any calendar year.

2. Reduction of Emissions Intensity

The heart of the Regulation is the requirement for registered facilities to reduce GHG emissions.

Emissions Limit. The owner or operator of a regulated facility has an obligation to reduce their emissions intensity. For this purpose, they must determine, for each compliance period, the emissions limit for their regulated facility. The emissions limit is determined according to the Standard and involves considering the performance standard reduction factor for a product. The applicable reduction factor is determined using Schedule A of the Regulation (Table 2 for facilities exclusively generating electricity and Table 1 for all other facilities). The owner or operator of the regulated facility must determine the applicable reduction periods in accordance with the Standard.

Regulated Emissions. The owner or operator of a regulated facility must also determine the total quantity of regulated emissions for every compliance period. For this purpose, a “regulated emission” is considered an emission from any source from which emissions may originate and that is established in the Standard.

Compliance Period. A “compliance period” is the calendar year in which a regulated facility is required to reduce emissions intensity pursuant to the Regulation. Generally, the first compliance period is the first calendar year in which the facility becomes subject to the Regulation. For a new facility, the first compliance period will be the third calendar year after the calendar year in which the new facility starts commercial production.

3. Compliance Obligations

If a regulated facility exceeds its emissions limit, it must fulfill a “compliance obligation”. These obligations allow the regulated facility to compensate for the exceedance by using fund credits, performance credits, or offset credits.

Fund Credits. Fund credits can be obtained by paying money into the Climate Change Fund, and expire if not used within one year.

Performance & Offset Credits. Neither the Act nor the Regulation set out the steps to obtain performance credits or offset credits. It appears the intention is that facilities can purchase performance credits from other facilities that have beaten their emissions reductions threshold. However, while the Act authorizes the Minister to make regulations for the purpose of defining a “performance credit”, the Regulation and proposed Standard don’t set the gas emissions reductions threshold that a regulated facility must reach to be awarded a performance credit. Therefore, it appears the government will implement performance credits at a later date. The mention of the “offset credits” also suggests an offset market could be established for New Brunswick where facilities will be able to purchase offset credits, although there’s no such market at this time.

Failure. If a facility fails to fulfill the compliance obligation, it must pay the dollar amount of the unfulfilled compliance obligation. The dollar amount is calculated at the rate of $40 per tonne of GHG for the 2021 compliance period, and $50 per tonne for the 2022 compliance period.

4. Reporting

The Regulation requires regulated facilities to submit three different sets of reports to the Minister. Anyone who submits a report must retain all documents or information that supports the report for seven years.

Baseline Emission Intensity Submission & Verification Report. This report must include the established baseline emissions level, baseline production level, and baseline emissions intensity for each product the facility produces. It must also include the baseline years for the regulated facility. The regulated facility must also submit a verification report from a third party with the baseline report to establish the accuracy of the information provided. The verification report must be prepared by a “qualified person”: a person who’s not an employee, agent or officer of the owner, operator, or their affiliates. If the verification report contains an assessment adverse to the regulated facility, the Minister may direct the owner or operator to take corrective actions. This set of reports is submitted only once.

Greenhouse Gas Emissions Report. This report includes information about whether the facility met, exceeded or fell below its emissions limit for the compliance period. Owners or operators of regulated facilities, as well as non-regulated facilities that emit more than 10,000 tonnes of GHG in a year, must submit this report. It must be submitted for each calendar year, or “compliance period”, for which a facility is registered. For regulated facilities, it must be verified by a qualified person and include a declaration signed by the owner or operator of the facility.

Compliance Report. This report is only required where a facility’s actual quantity of emissions exceeds the prescribed limit in a given compliance period. The compliance report must include confirmation that the regulated facility has met its compliance obligation.

5. Notification to the Minister of Specific Occurrences

The owner or operator of a regulated facility must notify the Minister within 30 days if any of these events occur:

• Commencement of commercial production of a new product.
• Cessation of commercial production of an existing product.
• Decreased commercial production (but not yet cessation) due to the decommissioning of the facility.
• Reduction in emissions intensity that is equal to or greater than 10% in a compliance period.
• Changes have been made to quantification methodologies that result in deviations from regulated emissions calculated.
• Changes have been made to operational boundaries, ownership or control of greenhouse gas sources or sinks.

If any of these changes apply, the owner or operative can apply for authorization to adjust a baseline emissions intensity for a given commercial product.

*Lauren Ogden, Summer Student, McInnes Cooper, contributed to this publication.

Please contact your McInnes Cooper lawyer or any member of our Energy & Natural Resources Team @ McInnes Cooper to discuss compliance with these new GHG emissions reduction regulatory obligations.

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