Irving Oil's request for immediate price increases hits wall of opposition at EUB
Public intervener Heather Black joins community and union groups calling for application to be denied
Irving Oil's effort to win an immediate increase in petroleum wholesale margins hit a wall of opposition in front of the Energy and Utilities Board Friday, with public intervener Heather Black joining a collection of community and union groups in opposing the application.
"In my view, the applicant's motion should be denied," Black said in a point-by-point dismantling of the company's request for "interim" price increases.
"The applicant bears the burden of proof here and the applicant has not satisfied this burden."
Irving Oil's marketing and commercial divisions have applied for an increase of 62.8 per cent (4.09 cents per litre) in the allowed wholesale margin for motor fuels, including diesel and gasoline, and a 54.9 per cent (3.02 cents per litre) increase in the margin for furnace oil.
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On Friday it was also asking that prior to a full hearing on that request scheduled for April, 85 per cent of the increase on motor fuels (3.5 cents) and 99 per cent of the increase on furnace oil (3.0 cents) be granted immediately.
The immediate increase is necessary, it said, because of financial pressures that have arisen in the industry during the COVID-19 pandemic.
Company under financial pressure, exec says
Darren Gillis, the head of Irving Oil's marketing and commercial fuels divisions, said the company is under intense financial pressure that could interrupt its ability to supply petroleum to New Brunswick customers.
"Every day matters. Every day is important," said Gillis.
If granted in full, the requested interim increase would allow all New Brunswick wholesalers to charge about $1 million per week extra for petroleum products.
Under questioning from Hafsah Mohammad of the Moncton social justice and climate action group Grassroots NB, Gillis told the hearing the combination of no increases in wholesale margins since 2013 and a pandemic-driven drop in demand for petroleum products is causing the company significant trouble.
"We can no longer continue to absorb those costs, especially so in a worldwide pandemic," he said.
Acting EUB chair François Beaulieu asked why, if an emergency has developed inside the oil industry in New Brunswick, none of the three dozen other wholesalers in the province are publicly expressing support for Irving's call for increases.
"What puzzles me is we haven't received one letter of comment from a wholesaler that supports your application," Beaulieu said.
"Why should the board grant an increase if there is nobody else in this province, no other wholesalers, that support your request?"
Company lawyer Len Hoyt dismissed that concern, saying letters of support are of no evidentiary value.
He said that if other oil companies had written to the board, Irving Oil would be accused of orchestrating the effort.
"I really don't think you can take from the fact that there are no letters of comment filed by wholesalers that no wholesaler supports the application," Hoyt said.
No evidence offered of threat to supply, Black says
In her argument, Black listed a number of reasons to reject the application for immediate price hikes.
She said that although a threat to the supply of petroleum products in New Brunswick would qualify for interim increases, the company failed to offer direct evidence to support that such a threat exists, other than its own statements.
"I submit that the applicant in this case has not established whether or to what extent the current margin is squeezing wholesalers so much that it jeopardizes supply," Black said.
In addition, she said confidential cost information submitted by the company is not sufficiently detailed to separate out increases that apply to wholesalers from increases that might apply to the refinery, which is not covered by regulation.
She also noted that the company supplied no sales data to show how its business volumes have changed during the pandemic to support its claim of harm.
"Generally the evidence is composed of broad statements about the petroleum industry as a whole, the effects of regulation in general and the effects of the pandemic on the larger Irving Oil entity," said Black.
"There's nothing specific in the narrative about wholesalers."
In addition to those shortcomings, Black said the company's admission that it has no way to rebate motorists who are charged an interim increase if the increase is later found to be unjustified in a full hearing is a fatal flaw in the application.
"In my view, without the ability to rebate any over-collection, the board cannot grant the increase," she said.
Also opposing the application for interim increases were the community groups Grassroots NB, The Common Front for Social Justice, Leap4wards and Fredericton Solidarity, as well as the Canadian Union of Public Employees.
The EUB reserved decision in the matter.