Vol. 144, No. 14 — July 7, 2010

Registration

SOR/2010-138 June 17, 2010

CANADIAN ENVIRONMENTAL PROTECTION ACT, 1999

Regulations Prescribing Circumstances for Granting Waivers Pursuant to Section 147 of the Act

P.C. 2010-763 June 17, 2010

Whereas, pursuant to subsection 332(1) (see footnote a) of the Canadian Environmental Protection Act, 1999 (see footnote b), the Minister of the Environment published in the Canada Gazette, Part I, on November 14, 2009, a copy of the proposed Regulations Prescribing Circumstances for Granting Waivers Pursuant to Section 147 of the Act, substantially in the annexed form, and persons were given an opportunity to file comments with respect to the proposed Regulations or to file a notice of objection requesting that a board of review be established and stating the reasons for the objection;

Therefore, Her Excellency the Governor General in Council, on the recommendation of the Minister of the Environment, pursuant to section 145 of the Canadian Environmental Protection Act, 1999 (see footnote c), hereby makes the annexed Regulations Prescribing Circumstances for Granting Waivers Pursuant to Section 147 of the Act.

REGULATIONS PRESCRIBING CIRCUMSTANCES FOR GRANTING
WAIVERS PURSUANT TO SECTION 147 OF THE ACT

PRESCRIBED CIRCUMSTANCES

1. The circumstances in which the Minister may, pursuant to section 147 of the Canadian Environmental Protection Act, 1999, grant the waiver provided for under that section are

(a) an actual or anticipated shortage of fuel exists and one of the following measures has been made or issued:

(i) a proclamation by the Governor in Council under subsection 6(1), 17(1), 28(1) or 38(1) of the Emergencies Act,

(ii) an order by the Governor in Council under subsection 15(1) of the Energy Supplies Emergency Act,

(iii) an order by the Lieutenant Governor in Council or the Premier, under section 7.0.1 of the Emergency Management and Civil Protection Act of Ontario, R.S.O. 1990, c. E-9, as amended from time to time,

(iv) a declaration by the Government or the Minister of Public Security, under section 88 or 89 of the Civil Protection Act of Quebec, R.S.Q., c. S-2.3, as amended from time to time,

(v) a declaration by the Minister of Emergency Management, under subsection 12(1) of the Emergency Management Act of Nova Scotia, S.N.S. 1990, c. 8, as amended from time to time,

(vi) a declaration by the Minister of Public Safety, under subsection 11(1) of the Emergency Measures Act of New Brunswick, S.N.B. 1978, c. E-7.1, as amended from time to time,

(vii) a declaration by the responsible Minister, under section 10 of the Emergency Measures Act of Manitoba, C.C.S.M. c. E80, as amended from time to time,

(viii) an order by the responsible Minister or the Lieutenant Governor in Council, under section 9 of the Emergency Program Act of British Columbia, R.S.B.C. 1996, c. 111, as amended from time to time,

(ix) a declaration by the responsible Minister, under subsection 9(1) of the Emergency Measures Act of Prince Edward Island, R.S.P.E.I. 1988, c. E-6.1, as amended from time to time,

(x) an order by the Lieutenant Governor in Council, under section 17 of the Emergency Planning Act of Saskatchewan, S.S. 1989-90, c. E-8.1, as amended from time to time,

(xi) an order by the Lieutenant Governor in Council, under section 18 of the Emergency Management Act of Alberta, R.S.A. 2000, c. E-6.8, as amended from time to time,

(xii) a declaration by the Lieutenant-Governor in Council, under subsection 11(1) of the Emergency Services Act of Newfoundland and Labrador, S.N.L. 2008, c. E-9.1, as amended from time to time,

(xiii) a declaration by the Commissioner in Executive Council, under section 6 of the Civil Emergency Measures Act of Yukon, R.S.Y. 2002, c. 34, as amended from time to time,

(xiv) an order by the responsible Minister, under section 11 of the Civil Emergency Measures Act of the Northwest Territories, R.S.N.W.T. 1988, c. C-9, as amended from time to time, or

(xv) a declaration by the responsible Minister, under section 11 of the Emergency Measures Act of Nunavut, S.Nu. 2007, c. 10, as amended from time to time; or

(b) an actual or anticipated shortage of fuel exists and the Minister of National Defence advised the Minister in writing that the actual or anticipated shortage of fuel affects or could affect the Government of Canada’s ability to protect national security, support humanitarian relief efforts, participate in multilateral military or peace-keeping activities under the auspices of international organizations or defend a member state of the North Atlantic Treaty Organization.

COMING INTO FORCE

2. These Regulations come into force on the day on which they are registered.

REGULATORY IMPACT
ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Issue and objectives

There are circumstances under which flexibility is needed regarding the requirements of fuels regulations in order to respond to emergency situations. The Canadian Environmental Protection Act, 1999 (CEPA 1999) provides authority to the Minister to grant temporary waivers to fuels regulations only where the circumstances are “prescribed.”

The objective of the Regulations Prescribing Circumstances for Granting Waivers Pursuant to Section 147 of the Act (hereinafter referred to as the Regulations) is to prescribe circumstances under which fuels regulations made under sections 140 or 145 of CEPA 1999 can be temporarily waived.

Section 147 of Part 7, Division 4, of CEPA 1999 states: “The Minister may, in prescribed circumstances, grant a temporary waiver from any of the requirements of a regulation made under section 140 or 145 on any conditions and for any period that may be determined by the Minister.” The Regulations allow the Minister of the Environment to grant temporary waivers under the authority of CEPA 1999 if there is an actual or anticipated fuel supply shortage during a declared emergency, and/or at the request of the Minister of National Defence if there is an actual or anticipated fuel shortage that could affect national defence operations.

Description and rationale

There are currently four regulations made under section 140 of CEPA 1999. These are the Gasoline Regulations (SOR/90-247), Sulphur in Gasoline Regulations (SOR/99-236), Sulphur in Diesel Fuel Regulations (SOR/2002-254) and Fuels Information Regulations No. 1 (SOR/C.R.C., c. 407) [hereinafter collectively referred to as the fuels regulations]. The fuels regulations, which address fuel quality for fuels produced and consumed in Canada and for fuels that are imported for consumption in Canada, were developed under Division 4 of Part 7 of CEPA 1999, and established concentration limits to lead, phosphorous and sulphur in gasoline, established concentration limits to sulphur in diesel fuel, and prescribed reporting requirements for sulphur levels and density in fuels and additives. The fuels regulations were passed in order to complement vehicle and engine emissions regulations made under CEPA 1999, which in tandem reduce emissions of harmful substances from vehicles and engines. (see footnote 1)

The Regulations prescribe circumstances under which the Minister of the Environment may grant waivers to the fuels regulations made under sections 140 or 145 of CEPA 1999. These regulations apply only to fuels used domestically in Canada. The prescribed circumstances are as follows:

• an actual or anticipated shortage of fuel exists and at the same time there has been a declaration of an emergency under federal, provincial or territorial emergency legislation, or
• an actual or anticipated shortage of fuels exists and the Minister of National Defence advised the Minister in writing that the actual or anticipated shortage of fuels affects or could affect the Government of Canada’s ability to protect national security, support humanitarian relief efforts, participate in multilateral military or peace-keeping activities under the auspices of international organizations or defend a member state of the North Atlantic Treaty Organization.

If the prescribed conditions of the Regulations are met, then the granting of a temporary waiver and conditions that apply will be made at the discretion of the Minister of the Environment based on the perceived duration, extent and necessity for a temporary waiver. If the Minister decides to grant a waiver, the Minister can temporarily waive any or all of the requirements of a regulation made under sections 140 or 145 of CEPA 1999.

Canada’s fuel quality regulations provide important environmental and health benefits, and it is recognized that the temporary waiving of such requirements could lessen these benefits. However, the granting of a waiver enabled by the Regulations would likely be of short duration, and the imposition of appropriate conditions would permit the minimization of any long-term damage to the environment or human health. At the same time, the granting of a waiver could help alleviate an emergency situation. For instance, both the United States Environmental Protection Agency (U.S. EPA) and the California Air Resources Board have provisions under which fuel standards can be waived in exceptional circumstances. The most notable use of these powers in the United States was in the aftermath of hurricanes Katrina and Rita in 2005. A large number of waivers were granted both generally and to specific companies in order to improve fuel supply and aid recovery from the 2005 disasters brought about by the hurricanes. A smaller number of waivers were also issued in 2008 to respond to hurricanes of that year.

Although declared emergencies in Canada are rare, the possibility of such occurrences exists. If, during an emergency, fuel is unavailable or in short supply, government action to address supply constraints by granting a temporary waiver from fuel quality requirements may be warranted.

Consultation

Environment Canada informed the governments of the provinces and territories through the CEPA National Advisory Committee (CEPA NAC) about the proposed Regulations via a letter dated March 11, 2008, in which an opportunity to consult was offered. No comments were received from CEPA NAC members during the 60-day offer period.

Environment Canada has also consulted and provided background material to interested federal government departments (Natural Resources Canada, Department of National Defence, Transport Canada, Health Canada and Public Safety Canada), industry stakeholders, environmental non-governmental organizations and the public regarding the development of the proposed Regulations.

A discussion document on the proposed Regulations entitled “Discussion Document: The Use of Temporary Waivers Under the Fuels Division of the Canadian Environmental Protection Act, 1999” was released to the public on April 1, 2008. The Department has compiled an extensive list of some 900 parties who, over the years, have expressed an interest in fuels-related regulatory issues. These parties were informed by email that the discussion document was available on the CEPA Environmental Registry. All interested parties were invited to comment on Environment Canada’s proposal by April 30, 2008. Eight interested parties responded, including the Department of National Defence, the Government of Ontario (Ministry of Energy), one environmental non-government organization and associations representing the petroleum products industry, the auto industry and transportation providers. There was widespread agreement among stakeholders that Environment Canada should proceed with the proposed Regulations.

The main concerns that were raised as well as Environment Canada’s responses to them are presented below.

• The Department of National Defence was of the view that a provision was warranted that would permit temporary waivers to address shortages of fuel that could affect defence-related situations.

Environment Canada acknowledges this concern and has included such a provision in the Regulations.

• One trucking association commented that making waivers contingent on a declaration of an emergency set too high a threshold and recommended that the proposal be amended to broaden the circumstances for a temporary waiver. The association also commented that a cost-benefit analysis should not necessarily be a part of the Minister’s decision-making process for granting individual waivers, and that all concerned federal departments should develop an action plan that would allow the on-road diesel sector to access U.S. and other fuel sources during shortages.

Environment Canada acknowledges that a less stringent threshold could allow for a greater range of criteria to be taken into account in granting a waiver; however, the proposed criteria are designed to achieve a balance between addressing fuels shortages and the human health and environmental protection that the fuels regulations provide.

In addition, Environment Canada clarifies that it is not the intent of the proposed Regulations that a formal cost-benefit analysis be done for the granting of an individual temporary waiver. Once an emergency is declared, if the Minister is able to conclude that there is an actual or anticipated shortage of fuels, the waiver may be granted.

Finally, the subject of a general action plan for fuel supply is beyond the scope of these Regulations. This is an area that is managed by Natural Resources Canada. Natural Resources Canada works closely with the oil industry and the provinces to enhance the growth, flexibility and diversity of the energy supply system, and engages collectively with other countries in emergency planning to reduce the risks and potential impacts of oil supply disruptions.

Under certain circumstances prescribed in the Energy Supplies Emergency Act and in the Emergencies Act, the Government of Canada has the authority to declare that an oil supply disruption constitutes a national emergency. Under a declared national emergency, the Government of Canada would have extraordinary powers to effect the allocation of available oil supplies. Canada also participates in the emergency oil-sharing arrangements of the International Energy Agency.

Under the provisions of the Energy Supplies Emergency Act, the Energy Supplies Allocation Board has the authority to control all aspects of crude oil and petroleum product movements. Natural Resources Canada is currently working with the provinces to evaluate Canada’s oil security of supply issues and determine whether further initiatives are warranted.

• One environmental non-governmental organization commented that potential waivers should only be available under the most severe and extreme circumstances. They also recommended that there be a provision in the Regulations for transparency and that they be subject to the public notification regime set out in section 13 of CEPA 1999 (Environmental Registry).

Environment Canada reiterates that the proposed criteria are stringent enough and that the proposed Regulations are designed to achieve a balance between addressing fuels shortages in emergency situations and the human health and environmental protection that the fuels regulations provide.

All waivers, including the conditions that would apply to the waivers (e.g. fixed dates, areas of applicability, meeting averaged annual limits for sulphur in gasoline, reporting requirements), except for those applying to the Department of National Defense (DND), (see footnote 2) would be published in the Canada Gazette as well as posted on the CEPA Environmental Registry.

• One petroleum industry association commented that it was important that the circumstances for which a waiver would be granted be well understood by the public, petroleum consumers and elected officials so that there is no misunderstanding as to the purpose of such an extraordinary exercise, and that transparency and accountability are important principles that should guide any deliberation on the part of the Minister in using his/her powers.

Environment Canada agrees and would further inform the public through compliance promotion and public outreach activities. It is also intended that all waivers that are granted, and all conditions that apply to those waivers, except those applying to DND, be published in the Canada Gazette and posted on the CEPA Environmental Registry.

• The representative for vehicle manufacturers expressed concern over the potential for specific fuel-vehicle interactions and stated that no increase from the specified lead levels should be considered in the waiver process. The association also commented that there should be a requirement for the reporting of temporary specifications for the amount/concentration of lead, phosphorous and sulphur in fuels produced under waivers for the duration of the waiver; that waivers should be granted for the shortest time possible; that applying a levy may be useful in order to ensure that no company makes extraordinary profits when a waiver is granted; and that a CEPA amendment to allow for a waiver to the Benzene in Gasoline Regulations could be considered as part of the proposal.

Although the possibility of granting a waiver for the restriction of lead in gasoline would exist under the proposed Regulations, it is difficult to envisage circumstances under which such a waiver would be granted because supplemental gasoline supplies in North America are lead-free and because of the potential harm that could be caused to vehicle emission control systems by granting such a waiver.

It is intended that all waivers that are granted, and all conditions that apply to those waivers, except those applying to DND, be published in the Canada Gazette and posted on the CEPA Environmental Registry. Given the stringency of the criteria under which a waiver could be granted, a levy applied to fuels supplied to address an emergency is deemed unnecessary, and the development and implementation of such a levy scheme would likely be complex and prohibitive. The Benzene in Gasoline Regulations were enacted under the toxic provisions of CEPA 1999 and therefore cannot be subject to the waiver provisions under section 147 of the Act. A CEPA 1999 amendment to allow such a waiver is not being proposed at this time.

• The representative for independent fuel marketers commented that the proposed Regulations should include economic harm in the conditions under which the Minister may temporarily waive fuel specifications. The association also commented that all aspects of Canadian and U.S. fuel specifications should be harmonized in order to ensure supply security for Canadians and an unencumbered flow of products between the two countries, and recommended that EC undertake this as a next step.

A less stringent threshold could allow for economic implications to be considered for granting a waiver; however, Environment Canada reiterates that the stringent criteria set out in the Regulations are consistent with the desire to avoid the health and environmental consequences brought about by air pollution that are the fundamental reasons for the fuels regulations. Notwithstanding the need for consistent and clear regulations to prevent air pollution, there could be circumstances where emergency situations warrant temporary waivers.

Fuel specifications are already harmonized between Canada and the United States. Similar averaging provisions in U.S. and in Canadian regulations provide flexibility for large suppliers at the cost of additional administration. Smaller companies tend to avoid the administrative costs that accompany the averaging provisions, which can inhibit access to some potential product imports. Harmonization and access to imported fuels is a subject always relevant in the context of consultations on specific regulations. Provisions for temporary waivers now exist in the United States. The proposed Regulations are a step towards alignment with the U.S. EPA program.

Comments received following publication of the proposed Regulations in the Canada Gazette, Part I, on November 14, 2009

The proposed Regulations were published in the Canada Gazette, Part I, on November 14, 2009, for a 60-day comment period. Feedback was received from a fuel producers’ association, an engine manufacturers’ association and a shipping association.

Comments received were generally supportive of the proposed Regulations, but a few concerns were raised. Below is a summary of comments received and Environment Canada’s responses to them.

• The fuel producers’ association raised concern with the fact that, given the highly integrated nature of the fuel supply system, a waiver granted in a specific area may have repercussions, in other jurisdictions and recommended the use of transitional measures to alleviate the impact on the supply infrastructure following the emergency as fuels subject to waived requirements may still be in the supply system.

Environment Canada expects that the processes leading to triggering a declaration of an emergency will depend on the specific circumstances at the time and the provisions in federal, provincial and territorial legislation. If an emergency is declared the Minister may be in a position to aid in relieving some of the associated consequences. Contingency plans are being developed to facilitate effective use of the regulations when it may be needed. These plans will address different aspects of the fuels Regulations and conditions that could help in the practical and effective application of a waiver.

• The engine manufacturers’ association raised concerns regarding the consequences of a fuel quality waiver in relation to specific control technology on vehicles and associated warranties. It was recommended that mechanisms be in place to notify all parties of the details of the waiver and that its effects be monitored and minimized.

Environment Canada clarified that at the time a waiver is to be considered, the duration of the waiver, the areas of its application and the particular aspects of the fuels regulations that will be waived will be determined. The Minister’s authority includes imposition of conditions on a waiver that will take account of the specifics of the situation. Because of the nature of the fuels regulations and the impact that fuel quality can have on immediate and longer-term emissions performance, care will be taken to minimize any negative consequences.

• A shipping association raised concern with respect to granting a waiver and its implication for an upcoming implementation of a marine emission control area and accompanying regulations on sulphur content of fuels. The commenters recommed that mechanisms be put in place so that all parties are informed of the emergency and use of waived fuels requirements during international shipping operations.

Environment Canada clarified that any regulation made under section 140 or 145 of CEPA 1999 can be subject to a waiver. However, in instances where a waiver is granted and for the purpose of marine operation, coordination with other relevant departments will be made so that all parties are informed.

Implementation, enforcement and service standards

The Regulations come into force on the day on which they are registered. The Regulations prescribe circumstances under which the Minister may grant temporary waivers to fuels requirements. An implementation plan has been developed and is available upon request. This implementation plan will assist the Department in reacting to circumstances where waivers may be necessary. Should the Minister grant a temporary waiver, Environment Canada currently has resources in place which include program, compliance promotion and enforcement staff presently managing the fuels Regulations that will manage the granting, implementation and enforcement of any conditions that apply to the waiver. In addition, it is proposed that all waivers, except those applying to the Department of National Defence, be published as soon as possible after being granted, on the CEPA Environmental Registry and in the Canada Gazette.

Contacts

Leif Stephanson
Oil, Gas and Alternative Energy Division
Environment Canada
351 St. Joseph Boulevard
Gatineau, Quebec
K1A 0H3
Telephone: 819-953-4673
Fax: 819-953-8903
Email: Leif.Stephanson@ec.gc.ca

Markes Cormier
Regulatory Analysis and
Instrument Choice Division
Environment Canada
10 Wellington Street
Gatineau, Quebec
K1A 0H3
Telephone: 819-953-5236
Fax: 819-997-2769
Email: Markes.Cormier@ec.gc.ca

Footnote a
S.C. 2004, c. 15, s. 31

Footnote b
S.C. 1999, c. 33

Footnote c
S.C. 1999, c. 33

Footnote 1
There are a number of regulations that were not enacted pursuant to Division 4 of Part 7 of CEPA 1999 and cannot be subject to waivers under section 147. These include the Benzene in Gasoline Regulations, the Contaminated Fuels Regulations and the Gasoline and Gasoline Blend Dispensing Flow Rate Regulations.

Footnote 2
It is not intended that the details of waivers applicable to DND be published because of the potential to compromise national security.

NOTICE:
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