Saskatchewan, federal government negotiating resolution to carbon tax collection court challenge

Saskatchewan and the government of Canada arenegotiating a potential resolution to their dispute over the federal carbon tax.

A federal court in Vancouver was scheduled to hear the arguments on an injunction being sought by Saskatchewan onFriday morning, but the hearing was abruptly cancelled just moments before it was scheduled to begin.

An update on the court record indicatesthe two sides are "currently negotiating terms which could resolve the current dispute."

A statement issued by the government of Saskatchewan failed to mention the ongoing negotiations, only saying that the hearing on the injunction was adjournedso lawyers for the two sides "could avoid the need for a further injunction hearing."

The province said it wasdecliningfurther comment in order to respect that process.

In its own statement on Friday, the Canada Revenue Agency confirmed negotiations are ongoing.

If the two sides are unable to reach a solution by Monday, the hearing could be rescheduled for next week.

Saskatchewan is arguing it isunconstitutional for the Canada Revenue Agency to garnish$28 millionit believes the province owes for failing to collect andremit part of the carbon tax and that it's unfair for the province to be expectedto pay.

The request for an injunction and judicial review was made in a federal court in Vancouver inan attempt to get a hearing as soon as possible, according to Saskatchewan Justice Minister Bronwyn Eyre.

Court documents show that despite the order from the revenue agency for Saskatchewan to pay $28 million, the bill has grown to at least $56 million as of the end of April.

As more time passes, that figure will continue to grow.

The court put in place a temporary injunction on the CRA seizing the money until a more fulsome hearing could be heard on the merits.

The province said on Fridaythat its position remains that any attempt to garnishfunds by the revenue agency from the province's account is unconstitutional. The$28 million remains in its bank account as of Friday.

An argument about fairness

This is just the latest in an ongoing dispute between the two levels of government overthe Greenhouse Gas Pollution Pricing Act, a federal law that requires provinces to collect the federal carbon tax.

At the startof this year, Saskatchewan stopped collecting and remitting the tax on natural gas for home heating. Premier Scott Moe said it was in response to the federal government's decisiontoexempt home heating oilfor three years.

Moe said it was unfair for a home heating resource primarily used in Atlantic Canadato be exempted from the levy while the primary resource used in Saskatchewan was not.

WATCH | Sask. faces uphill battle in Carbon tax court case, according to legal experts:

Legal experts says Sask. faces uphill battle in carbon tax lawsuit with CRA

2 months ago

Duration 2:09

Last week, the government of Saskatchewan filed a lawsuit in federal court, attempting to stop the Canada Revenue Agency (CRA) from garnishing $28 million that the CRA says the province owes for failing to collect and remit part of the carbon tax.

According to the province,approximately370,000residential SaskEnergy customers use natural gas to heat their homes. That's 85 per cent of homes in Saskatchewan.

The province later said SaskPower would do the same forelectricity usedto heat homes. According to the province, that accounts for 13per cent of households in Saskatchewan. About 2.6 per cent of Saskatchewan homes use home heating oil, according to the federal government.

Federal Minister of National Revenue Marie-Claude Bibeauhas said Ottawa will not back down.

In a statement issued last week,Bibeau said Saskatchewan is the registered distributor of natural gas and is "obligated to adhere to the law" andremit the carbon tax charges.

Currently,the province is not complying with the pollution pricing legislation, she said.

"The CRA is on the case,and has pursued collections as required by law," Bibeau said.

Experts have saidthe province faces an uphill battle in its lawsuit.

"If you're betting, you'd always bet on the status quo that Saskatchewan here is going to lose," said Rory Gillis, a law professor at Western University.

Other experts stressed that the lawsuit does have legal merit, even if it is seemingly motivated by politics.

"I think it's a case that's being put forward with genuine constitutional arguments," said Eric Adams, a law professor at the University of Alberta.

"But having a genuine constitutional argument doesn't mean winning."