The New Brunswick Energy and Utilities Board has rejected a privately-negotiated agreement between Irving Oil Ltd. and the public intervener on petroleum price increases.

"It is clear that there is a significant disagreement regarding the board’s authority to approve the proposed settlement agreement as well as the appropriateness of doing so," the regulatory body states in its seven-page decision, released on Monday.

The EUB also cites opposition by the Department of Energy and Mines.

A full public hearing will proceed on Dec. 17.

Public intervener Rene Basque says he'll be arguing for Irving Oil Ltd. to get smaller price increases than he had agreed to last week.

The details of the negotiated deal have not been released.

The EUB notes, however, there had been nothing wrong with Irving Oil Ltd. and Basque trying to settle the issue. The EUB would have ensured it was fair, the decision states.

Irving Oil Ltd. had applied to the EUB for a $20-million increase in gasoline, diesel, and heating oil price margins in June.

The company was seeking increases ranging between 22 per cent and 25 per cent in the wholesale margins it can charge retailers, which would have boosted pump prices by about 1.5 cents per litre.

A public hearing on the matter was to be held, but on Dec. 5, lawyers for the company asked the EUB to cancel the public hearing and accept the negotiated deal instead.

Irving Oil Ltd. had negotiated a deal on gas price increases with the public intervener. (CBC)

Irving lawyer Len Hoyt told the board that as far as he knew, the Deparment of Energy did not object to the deal.

"The province, as well, was aware of it, but you know as expected they are not signing on to the actual settlement agreement and Mr. [Sacha] Patino can speak for the province at that point, but my understanding is that they are fine with that," he had said.

When the chairman of the board asked Patino to clarify, Patino said: "No, we didn't participate in the discussions. We are just here as an observer. And yes, we stay neutral. We are not getting involved in the discussion."

On Dec. 7, Energy Minister Craig Leonard reiterated that his department was taking no position on the deal.

"The EUB is an independent body and the EUB will have the final say on any of that matter so basically I'd have to say I'd leave it at that." Leonard had said.

But about an hour later, department officials who had been attending the hearing sent a letter to the EUB objecting to some of the elements.

"In terms of the authority of the board to adopt the proposed model, we do not believe that the board has the discretionary power to do so, nor do we believe that the Act contemplates such a model," wrote Patrick Ervin, director of the hydrocarbon energy legislatives and regulatory affairs division of Energy and Mines.

Irving's lawyer sent an angry letter to the EUB about Ervin on Dec. 10, saying the department had "reversed its position."

The EUB concluded confusion over the department's position left it no choice but to reject the agreement.

"The Department of Energy and Mines, a registered intervener in this matter, took no position on the proposed settlement agreement at the hearing but now opposes it," the board states in its decision.

"While complete unanimity from all registered interveners may not be a prerequisite to the approval of all settlement agreements, the position of the department is not a frivolous one. In fact counsel for the applicant relied upon the lack of opposition from the department at the hearing as support for the position that the proposed settlement agreement was appropriate.

"Given the opposition of the Department of Energy and Mines; the board, in the exercise of its discretion, will not approve the proposed settlement agreement."