Irving Oil's tank farm and the tax break that keeps on giving
Some tax exemptions can live long after the problem they were designed to help goes away
New Brunswick Liberals could barely believe it.
After fighting throughout the 1970s with Irving Oil to force it to pay property taxes on its Canaport oil tank farm, Richard Hatfield's Progressive Conservative government was changing course.
In the summer of 1980, the government reversed its position and introduced legislation that proposed to grant the company the property tax exemption it wanted.
"They have been scrapping for some years now about their storage tanks and pipelines." then opposition Liberal MLA Doug Young observed in the legislature.
"Can the minister indicate if this is meant to relieve the taxation burden of the Irving interests?"
Irving became vulnerable
Special property tax breaks in New Brunswick have been set up to address many problems over the decades.
But when those problems changed — even disappeared — sometimes the tax breaks didn't.
That's true of the 1980 deal to lift property taxes on the crude oil tank farm, which has become one of the longest-running property tax deals in New Brunswick.
Crisis soon ended
The troubles faced by Irving Oil were serious but also short-lived. Still, decades later the tax deal is still in place.
A number of things were taken into consideration. One was the importance of the refinery to the province of New Brunswick.- Richard Hatfield, former premier
The history of the deal is well documented in old court decisions and New Brunswick legislature transcripts.
Irving Oil pushed hard to get a tax break at the tank farm for nearly a decade but the province held firm the company should pay full taxes — even taking Irving to the Supreme Court of Canada in 1975 over the issue and winning.
Irving had invested heavily in its refinery in the 1970s, twice undertaking expansions. The company also built the Canaport oil tank farm, all designed to serve U.S. markets.
Consumption down
But a worldwide oil crisis in 1979 put Irving Oil in a difficult spot. Soaring crude prices drove petroleum consumption in North America down heavily and Irving Oil appeared genuinely vulnerable.
"After the refinery was built the situation changed drastically with regard to the export of refined product to the United States," Hatfield told the legislature to explain his about-face.
"The government decided that … in view of the changing circumstances with regard to the export of refined product to the United States … that an amendment should be made to the Assessment Act.
"A number of things were taken into consideration. One was the importance of the refinery to the province of New Brunswick."
Troubles didn't last
Believing Irving Oil needed help, the government gave it a break on taxes valued at up to $500,000 per year.
The tax exemption on the oil tank farm, however, lived on.
Finance Minister Cathy Rogers acknowledges that may be a problem.
Considering side-effects
"Sometimes you make a tax exemption or a tax rebate or a tax credit for a particular purpose in time, and it's important to [ask], 'Is it still serving the same purpose?'"
The province won't say what the tank concession is worth today, only that it is "substantially more" than it was in 1980.
"This information is considered confidential and should be obtained directly from the property owner," said Service New Brunswick spokeswoman Nichole Bowman.
Irving Oil did not respond to a request to participate in this story.
Prefers evolving tax policy
"It's like policy," she said.
"It's living and we have to keep making sure that it's relevant."
But government has been slow to move on old tax deals.
Several New Brunswick governments have come and gone since 1980 and none have made any changes to the tank farm tax exemption.
Not part of cost-cutting exercise
And Rogers acknowledged that the Gallant government itself did not look seriously at the tax break during last year's comprehensive "strategic program review."
If you make one change it may have an unintended consequence on another.- Cathy Rogers, finance minister
This year the province also steered well clear of a second Irving Oil tax break embroiled in controversy — a little known provincial connection to the Canaport LNG properties
Last week the legislature gave third reading to a bill allowing Saint John to repeal its tax concession at the LNG site, after the city discovered Irving Oil had been collecting $12.25 million US in rent on the tax-reduced land for years.
Still a favoured place
The province granted the port of Saint John a tax exemption in 1997 to help it transition from a federally controlled to a locally controlled body.
But that exemption included non-port property owned by Irving Oil, some of which eventually became home to the LNG terminal.
That made what would have been $6.5 million in provincial property tax on the terminal uncollectable.
Provincial break lives on
Although helping Saint John repeal its tax concession, the province has not done the same.
Rogers said her department is looking at every tax deal at once and wants to wait before taking action on any.
"We have to look at the whole, not just fragmented pieces. If you make one change it may have an unintended consequence on another," she said.
But not making changes has had unintended consequences too, in one case creating a tax break that has managed to live decades longer than the problem it was meant to help solve.
Edited and packaged: Connie Camp
Video by Paul Hantiuk and Earl Cabuhat
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