Judge says no to Nunavut mining company’s request for tax rebate

Agnico Eagle Mines Ltd., which owns the Meadowbank gold mine near Baker Lake, has lost another tax battle with the Nunavut government. (FILE PHOTO)

The courts have come down once again on the side of the Nunavut government in a tax dispute between Nunavut and the owners of one the territory’s two operating mines — Agnico Eagle Mines Ltd.

In a judicial review judgment delivered on April 28, Justice Bonnie Tulloch of the Nunavut Court of Justice said the Nunavut government’s finance department was correct in withholding a portion of a fuel tax rebate owed to Agnico Eagle because of a previous error in how the territory’s tax law was applied.

That’s strike two in two months.

In March, the Nunavut Court of Appeal overturned part of a lower court decision and denied the owners of the Kivalliq-based Meadowbank gold mine certain government fuel subsidies — but for different reasons.

The most recent decision, contained in a 19-page judgment, is dense, dealing with issues of tax law and also issues of whether a legal standard of “correct” or “reasonable” should be applied to the finance minister’s actions.

But in effect it comes down to this question: how much fuel did Agnico Eagle purchase in 2010 and 2013 and what did it use that fuel for?

That second part is important because under the territory’s Petroleum Products Tax Act, companies can be eligible for fuel tax rebates.

Fuel taxes and rebates vary considerably depending on how that fuel is used:

• one cent/litre on aviation fuel;

• 9.1 cents/litre on motive use (for things such as vehicles and equipment); and,

• 3.1 cents/litre on non-motive use (for things such as heating and machinery).

Those small numbers translate into big bucks when you’re talking hundreds of thousands of dollars in fuel costs.

According to a summary of events contained in the judgment, the GN completed an assessment of Agnico Eagle’s fuel tax rebate application for 2010 and 2013 and in June 2015, seized $2,503,215, in principle and interest, from the latest rebate owing to AEM.

Basically, the GN went back and looked closely at how AEM had used the fuel and decided that an across-the-board 3.1-cent tax and rebate rate, which the company was requesting, was not warranted.

But Agnico Eagle, which operates a gold mine 110 kilometres north of Baker Lake, said that’s what it had always done, and took issue with the sudden application of the rules.

“AEM submits that, since 2006, the use of the fuel was not a consideration in spite of the requirement under the [Petroleum Products Taxation Act],” the judgment said.

“The company was used to purchasing the fuel, paying the tax at a rate of 3.1 cents per litre, and then filing for a rebate at the same amount. Tax was never before decided on the ultimate use of the fuel.”

But the GN says on certain uses, the company was supposed to pay a tax of 9.1 cents per litre of fuel because of how it was used.

In fact, Tulloch points out evidence, put forward by the GN, that the mining company, for the years 2007-2008, 2008-2009 and 2009-2010 paid taxes at both the “motive” and “non-motive” rates.

“The GN argues that in the year 2010-2011, AEM provided a breakdown that indicated it was consuming fuel entirely for non-motive purposes. It was at this time that the relationship between the parties became strained.”

The case is further complicated because of the time lag between ordering, getting delivery of, and then using all the fuel purchased in a particular year.

Tulloch noted at the end of her judgment that “this case involved many volumes of material and hours of argument over a number of days in court.”

In the end, she decided that the finance minister’s decision in June 2015, “is justified, transparent and intelligible,” and she dismissed AEM’s judicial review without costs.

Then she offered a bit of advice.

“It is this court’s fervent view that the parties should now use their best efforts to avoid any further litigation in relation to the fuel tax rebate issue,” she said in the judgment.

“My hope is that the parties will move forward to repair their relationship quickly and fairly. The work being done in this territory by Agnico Eagle Mines Ltd. is very important to Nunavut’s future.”