Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
Excise and Specialty Tax Directorate
5th floor, Tower A, Place de Ville
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 9000297
Business Number: [Business number]
Attention: [Client]
June 11, 2024
Dear [Client]:
Subject: FUEL CHARGE INTERPRETATION - Hydrogenation Derived Renewable Diesel and Biodiesel
Thank you for the letter dated [mm/dd/yyyy] concerning Hydrogenation Derived Renewable Diesel (HDRD) and whether or not it meets the definition of biodiesel under the Greenhouse Gas Pollution Pricing Act.
From the information in your letter and our subsequent telephone calls, we understand the following:
Background:
We understand that in the biofuels industry there are various terms used to describe lines of products, such as bio and renewable, and these terms are often used interchangeably. You wish to seek clarification on the treatment of renewable diesel under the Act.
INTERPRETATION REQUESTED
Does HDRD meet the definition of biodiesel and qualify for a reduced quantity formula?
INTERPRETATION GIVEN
The Act only contains the term bio in reference to particular fuel types and thus this term will be used in this interpretation. It is important to note that the term bio could include renewable products under the Act as discussed further below.
To determine whether the formula found in subsection 8(6) applies to deem a quantity of light fuel oil to be a decreased quantity, the fuel has to have components meeting the definition of biodiesel in section 3 of the Act which is as follows:
biodiesel means
(a) a particular substance
(i) that is
(A) made up of mono-alkyl esters of long chain fatty acids derived entirely from biological matter available on a renewable or recurring basis, or
(B) made from plant or animal matter using a hydrogenation process,
(ii) that may contain other substances, materials or things, that are not described in subparagraph (i) if the combined proportion of those other substances, materials or things does not exceed 1.5% of the particular substance, and (iii) that is suitable for generating power by means of a diesel engine or for use in a furnace, boiler or open flame burner when used
(A) on its own,
(B) after being blended with light fuel oil, or
(C) after being blended with a light fuel oil-like blendstock to produce light fuel oil; or
(b) a prescribed substance, material or thing(Footnote 1)
The definition of biodiesel does not explicitly exclude HDRD. Each substance needs to be examined on a case by case basis to determine if it fits in the definition of biodiesel. All three subparagraphs under paragraph (a) must be reviewed to ensure that all three conditions are met.
It is important to note that under paragraph (a), we are looking at a particular substance which is the bio component separate from any light fuel oil or light fuel oil-like blendstock that it may be blended with.
For subparagraph (i), either one of the two conditions must be met. If a substance is produced from plant or animal matter using a hydrogenation process, it would meet the condition under clause B, thus fulfilling the condition under subparagraph (i).
The second condition is under subparagraph (ii) and restricts substances, materials or things other than those from subparagraph (i) to a combined proportion that does not exceed 1.5% of the bio component. In a circumstance where a substance met condition (B) in subparagraph (i), any substances, materials or things other than plant or animal matter cannot exceed 1.5% of the bio component produced.
The final condition under subparagraph (iii) is that the substance has to be suitable for generating power through a diesel engine or used in a furnace, boiler or open flame burner. The substance can be used on its own, blended with light fuel oil, or blended with a light fuel oil-like blendstock to produce light fuel oil.
If the bio component meets all three conditions of the definition of biodiesel, then it can be considered biodiesel for purposes of the Act, despite it being referred to as renewable in the market. If the biodiesel component then exceeds 5% of the final fuel product after blending with light fuel oil, light fuel oil-like blendstock, or the component on its own if it can be used as light fuel oil, then the quantity of light fuel oil is deemed to be the number of litres determined under the formula in subsection 8(6) of the Act.
The interpretations given in this letter, including any additional information, is not a ruling and does not bind the Canada Revenue Agency (CRA) with respect to a particular situation. Future changes to the Act, regulations, or the CRA’s interpretative policy could affect the interpretations or the additional information provided herein. For further information see the publication “Requesting an Excise and Specialty Tax Ruling or Interpretation”.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 647-355-9305.
Sincerely,
Janet Pelletier
Janet Pelletier
Senior Rulings Officer
Fuel Charge Unit
Excise Tax and Fuel Charge Division
Excise and Specialty Tax Directorate
FOOTNOTES
1 Nothing is currently prescribed for purposes of paragraph (b) of the definition of biodiesel
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