Irving Oil supporters and skeptics lining up on opposite sides of company price hike request

An initial hearing into Irving Oil's request for increases in petroleum wholesale prices begins today in front of the New Brunswick Energy and Utilities Board with supporters raising the stark prospect of the company shutting down if it does not get what it is asking for and skeptics warning the board against being manipulated.

"We must be cautiously aware that no business is too big to fail," read one letter on the issue received and posted publicly last week by the EUB.

"They are playing the Board,"  read another about the company's application.

New Brunswick adopted petroleum price regulation in 2006 and put the Energy and Utilities Board in place to oversee it.  Currently wholesalers are allowed to add 6.51 cents per litre to the price of motor fuels they handle (gasoline and diesel) and 5.5 cents per litre to furnace oil. 

Irving Oil is applying for a 62.8 per cent (4.09 cent per litre) increase in the allowed wholesale margin for motor fuels and a 54.9 per cent (3.02 cent per litre) increase in the margin for furnace oil.

The increases are substantially more than the 11 per cent growth in inflation that has occurred since the margins last changed in March 2013, but the company says fundamental changes in the oil industry and a sudden collapse in demand for petroleum products caused by the COVID-19 pandemic have rendered those old amounts obsolete.

"Petroleum pricing regulations in New Brunswick were created 15 years ago," Darren Gillis, Irving Oil chief marketing officer, said in an affidavit supporting the application. "They did not contemplate the challenges of the last several years and were not designed to react to a global pandemic."

If granted in full, the increases would apply to all New Brunswick wholesalers and would cost consumers about $60 million per year in higher retail prices.

The Energy and Utilities Board has tentatively scheduled a full hearing into the matter for the end of March, but in its application Irving Oil said its situation is dire and it cannot wait that long for relief.  

Instead it is asking for 85 per cent of the requested increase on motor fuels (3.5 cents) and 99 per cent of the increase on furnace oil (3.0 cents) to be granted immediately pending the outcome of the full hearing next spring.

"The entire supply chain in under pressure and at risk," Gillis said in the application. "COVID-19 has exacerbated challenges for the industry and urgent action is required."

That tone has alarmed supporters of Irving Oil who fear the company is in trouble. Last week, the company  announced layoffs at its Saint John refinery and worried suppliers have been mobilizing to urge the EUB to grant its request in full.

Eric Lloyd is president of Sunny Corner Enterprises Inc., an industrial construction firm in Miramichi that does business with Irving Oil.  

Lloyd wrote to the EUB to say it "must take action to understand the economic forces that are stressing a very important contributor to our economy," and warned it is not "too big to fail" in asking its request be granted.

Another Irving supplier, Lorneville Mechanical Contractors Ltd. in Saint John, also sent a letter expressing concern about the company's financial health.  

"We understand that Irving Oil has identified New Brunswick's highly regulated fuel pricing system as a challenge to its ability to operate reliably and sustainably," wrote Lorneville's president Jim Brewer, in endorsing immediate increases.   

Local building trade unions warned the viability of the refinery itself could hinge on the EUB's decision.

"It would be devastating to lose this asset," wrote union president Jean-Marc Ringuette in his letter supporting Irving Oil's request.

But others are skeptical.

A number of anti-poverty, union and social justice organizations have signed up to oppose Irving Oil's application and a clutch of private citizens, like Saint John resident Mary Milander, also sent letters opposing  the increase.

"I believe that that the people of Saint John and the whole province have suffered financially much more than the oil industry during the pandemic," Milander wrote to the board.

Although yet to start, the hearing has already been highly controversial following news last week that New Brunswick Natural Resources Minister Mike Holland sent his own letter to the EUB expressing concerns about Irving Oil's ability to supply products at current prices.

That led to criticism from all three opposition parties and a call for Holland to resign from Green Party Leader David Coon. Premier Blaine Higgs defended Holland's intervention.

The EUB has granted interim relief to applicants in other cases before, but normally on the condition money collected from consumers be returned if the increases are later found to be unjustified.

A complicating factor in Irving Oil's application for immediate relief is that Gillis has acknowledged that other than home heating oil sales, returning money to customers will not be possible.

"In the unlikely case the permanent increase for motor fuels is lower than the interim increase, Irving Oil cannot effectively and fairly rebate the difference," he said.