New Brunswick

Court sides with First Nations in dispute with N.B. government over carbon-tax sharing

A judge has ruled that the New Brunswick government must share carbon tax revenue it generates from gasoline sold at First Nations businesses with those same communities.

Judge cites 2017 agreements in case that involves almost $5M in disputed revenue

The Grey Rock Power Centre in Madawaska is one of several First Nation truck stops in New Brunswick covered by tax sharing agreements with the province. (Julia Wright / CBC)

A decision by the New Brunswick government not to share millions of dollars in carbon tax revenues with First Nations that they collect at their own gasoline stations violates agreements signed in 2017, according to a new court ruling.

"I am of the opinion the applicants' [First Nations] position must prevail," wrote Justice Richard Petrie in a 63-page ruling released in the year-old dispute between the province and six Wolastoqey communities over the sharing of new provincial carbon taxes.

In a statement, Woodstock First Nation Chief Tim Paul applauded the decision, which involved almost $5 million in disputed revenue.

"This is a clear win and we hope this will now lead us down a new path of fairness when dealing with the Higgs government," read Paul's statement.

Jennifer Vienneau, director of communications for the Department of Finance, said the province is reviewing the decision and is not yet prepared to comment on it.

Province didn't want to share revenue

The court case was launched last year after New Brunswick Finance Minister Ernie Steeves wrote to all Wolastoqey and Mi'kmaw chiefs informing them the province would not be sharing revenue from carbon taxes with their communities on the same terms as agreements signed in 2017 require it to share gasoline and diesel taxes. 

"It is our government's position that the Tax Sharing Agreement is specific and applicable only to the Gasoline and Motive Fuel Tax, the Tobacco Tax and the provincial portion of the Harmonized sales tax," wrote Steeves in the letter.

But the agreements specifically mention they will apply to "any" tax collected by New Brunswick on gasoline or other motive fuel,  and in his decision Justice Petrie said carbon taxes levied at First Nation gasoline stations fall into that category.

"On its face the phrase 'any tax imposed by the province on the sale of gasoline and motive fuel …' appears rather straightforward," he wrote   

"It is not in doubt that the carbon tax is a tax applied to the sale of gasoline and motive fuel.'"

Ruling to help First Nation gas stations

The Madawaska Maliseet First Nation operates one of the largest truck stops in northwestern New Brunswick and Chief Patricia Bernard said the ruling will help stations like that one prosper.

"They are drivers of economic growth in local communities both on and off reserve," said Bernard in a statement.

"It is unfortunate that the minister forced us to bring this issue to court."

Madawaska First Nation Chief Patricia Bernard was a central figure behind the lawsuit and blamed the province for triggering the court case. "It is unfortunate that the minister forced us to bring this issue to court." (Julia Wright / CBC)

New Brunswick has revenue-sharing agreements with all provincial Wolastoqey and Mi'kmaq First Nations covering fuel and tobacco taxes and gaming and HST revenue that in the 2020 fiscal year generated $61.6 million for the 15 communities.

The agreements with the province's six Wolastoqey communities rebate 95 per cent of the first $8 million collected in provincial fuel, tobacco, and sales tax collected on business done inside each community and 70 per cent of amounts above that.

They have helped finance a number of significant aboriginal business initiatives, including the construction and operation of large-volume gasoline stations and truck stops in key locations that generate millions of dollars per year in rebated provincial fuel taxes.

But in April 2020 to meet the requirements of federal carbon pricing rules the province lowered provincial fuel taxes nearly 30 per cent to make room for replacement carbon taxes.

The overall amount being collected on fuel by the province between the two taxes went up slightly, but in a letter to First Nations chiefs sent two days before the changes took effect, Finance Minister Ernie Steeves told them to expect up to a $4.85 million reduction in shared revenue. 

Although carbon taxes largely replaced existing gasoline and diesel taxes the province viewed them as outside of tax sharing agreements.

Without agreeing to First Nations having a right to carbon tax revenues they collect, the Higgs government did propose to set aside equivalent amounts of money for economic development and climate change initiatives for First Nations communities. That idea has been rejected by chiefs, who claim it is an attempt to "circumvent" the tax-sharing agreements.

"Our agreements apply to any tax collected and stipulate the sharing," Kingsclear First Nation Chief Gabriel Atwin said in a statement Monday.

"The games around that remittance must end with this decisive court victory."