Key Fuel Programs – Natural Gas Program

The Natural Gas Tax Program provides for an exemption of tax or lower tax rates on natural gas used for certain purposes by the oil and gas industry.

Natural Gas is tax-exempt when you use it, or purchase it for use, in compressors that are:

	used to transmit waste gas (composed primarily of hydrogen sulphide and carbon dioxide) within the gas processing plant and from the plant to a well, or
	located at the well head and used to inject waste gas into a depleted well for permanent disposal, or
	located at the well head, along the pipeline between the well head and the processing plant, or within the natural gas processing plant, and are used to compress gas that is not marketable gas. Marketable gas means naturally occurring or processed natural gas available for sale for direct consumption: as a domestic, commercial or industrial fuel as an industrial raw material, or when it is delivered to a storage facility

You pay tax on natural gas when you use it, or purchase it for use, in a stationary engines, such as generators, that compresses natural gas or pump oil. You use the Natural Gas Consumed by Internal Combustion Engines form (FIN 451) to send in the tax owing. Please see How to File for more information on filing your return.

The tax rate depends on what the compressor or pump is used for and where it is located.

The rate is 1.1 cents per 810.32 litres for:

	compressors located within a natural gas processing plant used to compress marketable gas, or
	pumps located at a well head or within an oil processing plant
	natural gas that is self-produced and used in a stationary engine

The rate is 1.9 cents per 810.32 litres for:

	compressors located outside a natural gas processing plant used to move marketable gas in or out of storage facilities, or from the plant to market
	pumps located along pipelines that move oil from a well head to the oil processing plant and from the plant to market, or in or out of storage facilities

The tax rate is 7% for natural gas purchased for use in stationary internal combustion engines other than as described above.

Please see Bulletin MFT 007, Fuel Used by the Oil and Gas Industry for more information about using natural gas and other fuels in the industry. Also, please see Bulletin MFT 005, Tax Rates on Motor Fuels.

Please contact us with any questions or for more information about the Natural Gas Program.