National Revenue Minister Marie-Claude Bibeau rises during Question Period, in Ottawa on May 24, 2024. THE CANADIAN PRESS/Adrian Wyld

REGINA - The federal government says it has reached an agreement with Saskatchewan over the province not paying carbon levy money to Ottawa, though the case may still end up in court.

National Revenue Minister Marie-Claude Bibeau said Tuesday the deal secures 50 per cent of what Saskatchewan owes until the dispute is resolved.

She said the agreement complies with the law and standard practices.

"Our government remains committed to upholding this significant legislation that propels us towards a more sustainable future and pledges to be fair to all Canadians by providing the full Canada Carbon Rebate where the federal backstop system applies," Bibeau said in a statement.

Saskatchewan Justice Minister Bronwyn Eyre said the province has offered to establish a letter of credit, a document that guarantees payment if conditions are met.

She said the dispute could yet go to the Tax Court of Canada.

Earlier this month, Saskatchewan filed for an injunction in Federal Court in Vancouver to stop the Canada Revenue Agency from collecting $28 million through a bank order – about half of the $56 million the agency says the province owes.

A judge had granted a temporary stay to prevent the money seizure until court arguments could be heard.

Eyre called the temporary stay a win.

"The province's bank account and general revenue fund are safe and sound, and all moneys remain there, thanks to the court's early intervention," she said in a statement.

"We stopped them."

Earlier this year, Premier Scott Moe's Saskatchewan Party government stopped paying the carbon levy on natural gas, after Prime Minister Justin Trudeau exempted home-heating oil users from paying.

Trudeau's move was largely seen as helping those in Atlantic Canada, where home-heating oil is commonly used and where polls suggest the federal Liberals need to bolster support.

Saskatchewan argues it's unfair for its residents to pay if those in other jurisdictions are getting a break. It also says it's unconstitutional for Ottawa to drain a provincial bank account.

Court documents filed by Ottawa say Saskatchewan's position carries no weight.

The documents say the carbon pricing law allows the revenue agency to collect 50 per cent of what's owed, if that figure is more than $1 million.

Ottawa also argues that permitting an injunction would undermine the carbon pricing system and signal to other provinces they can opt out.

Eyre said Saskatchewan will continue not collecting the levy from those who use natural gas to heat their homes.

"That exemption will remain in place until this federal government, or the next one, does the right thing and gets rid of the carbon tax on everyone and everything," she said.

This report by The Canadian Press was first published July 16, 2024.

News from © The Canadian Press, 2024