New Brunswick

Saint John prepares for critics as it sets 2021 industrial water rates

Saint John is close to finalizing rates that three large industrial customers will pay for water in 2021 and although the city is satisfied the amounts are fair, six decades of controversy around the issue has it bracing for critics to attack anyway.

Controversy over price of industrial water poses a 'communications challenge' for city

Irving Pulp and Paper in Saint John is expected to consume 38.8 billion litres of city water next year and pay $2.8 million for it. It's equivalent to the amount of water that flows over Niagara Falls every three hours. (Robert Jones/CBC)

Saint John is close to finalizing rates that three large industrial customers will pay for water in 2021 and although the city is satisfied the amounts are fair, six decades of controversy around the issue has it bracing for critics to attack anyway.

"This is a communications challenge," said Saint John Mayor Don Darling last week about what Irving Oil Ltd., JD Irving Ltd, and  NB Power will pay for city water service next year at four large industrial plants.  

"People either don't understand or they do understand and are trying to kick the hornet's nest," Darling said of previous controversies that have erupted around the same issue.

At a Saint John finance committee meeting last week, deputy commissioner of Saint John water Kendall Mason explained the city needs to recover nearly $6 million next year from Irving Oil's refinery, NB Power's Coleson Cove generating station and two J.D. Irving Ltd. paper mills to maintain, operate and finance the city infrastructure that supplies the group with raw, untreated water.

The plan is to charge $2.8 million to the west side Irving pulp and paper mill at the edge of the Reversing Falls and $2.7 million to the Irving Oil refinery. Lesser amounts are to be billed to Irving Paper ($246,000) and NB Power ($195,000).  

Overall it's about a $400,000 increase over what the group was budgeted to be charged this year. 

The communications challenge arises because the group is expected to consume 52 billion litres of city water, and the $6 million in charges works out to an average of 11.6 cents per 1,000 litres.  That is a small fraction of what other city water users pay.

Kendall Mason, the deputy commissioner of Saint John Water, told the city finance committee that three industrial customers need to pay $6 million in 2021 to cover the cost of the system supplying their four plants with raw, untreated water. (City of Saint John/YouTube)

"We've seen articles written whereby if by just the swipe of a pen we just charged some of the industrial folks 40, 50, 60 cents (per 1,000 litres) all of our problems would go away, and that's misleading to the public," Darling said about criticisms made following last year's rate setting despite rules limiting what can be charged.

"We can't do it."

Industrial water rates have been the source of political controversy in Saint John since at least 1958 when it signed a 25-year agreement with industrialist K.C. Irving to supply Irving Pulp and Paper up to 159 million litres per day for less than $120,000 per year. 

The city regretted the arrangement almost immediately and in 1959 attempted to impose rates five times higher, but Irving refused to pay.

Industrialist K.C. Irving negotiated a 25-year water deal for Irving Pulp and Paper in 1958 that paid less than $120,000 per year — so little the city tried to cancel it in 1959. The case eventually went to Canada's Supreme Court, which sided with Irving. (CBC Archives)

A lawsuit launched by Saint John to enforce the higher rates failed at trial, failed on appeal and finally in 1963 failed at the Supreme Court of Canada. 

The city was forced to live with the 1958 contract until the early 1980s, but even after its replacement other water controversies followed.   

In the early 2000s both Irving Oil and J.D. Irving paid amounts for water of their own choosing for several years after contracts with the city expired, and the sides could not agree on new rates.

Those issues were largely resolved beginning in 2014, but the controversial history of industrial water rates in Saint John still poses political dangers, despite reforms.  

Saint John's industrial water system is now completely separate from the public drinking water system, and by legislation the city charges industrial users for the full cost of operating it.  

The Irving Oil refinery consumes 9.4 billion litres of city water a year and faces a bill of $2.7 million in 2021. The company disputed part of its water bill for 14 years and paid only what it felt it owed. The dispute was settled in 2014. (Roger Cosman, CBC)

Although industry uses substantially more water than the public, the infrastructure required to deliver it to just four customers is much less, and there is no requirement for expensive water treatment. That makes the cost of the industrial system less than one-quarter of the cost of the public drinking water system, and according to the city, the rates reflect that.

"Raw water and potable [drinkable] water are quite different in quality and in complexity of infrastructure and servicing requirements needed to provide the different services," Mason said in his written report to council.

"This results in vast differences in costs."  

Coun. David Merrithew, who chairs the finance committee, has been openly critical that some of the same industries pay property taxes that are too low, but he told the meeting there is nothing to complain about in the water rates.

Water for industry is taken from the Loch Lomond watershed in east Saint John and Spruce Lake in the west. About 140 million litres per day is delivered untreated to four large industrial plants. (Nature Conservancy of Canada/Submitted)

"We are passing on the true cost to the appropriate water users," Merrithew said. "This is a user pay system. This is exactly what the report is telling us we're doing."

Still Darling asked that a document be prepared to clearly explain industrial water rates for 2021 to blunt criticism the city is charging too little or that it has any option under legislation to bill more for water than it does.

"I think anything we can do to explain," said Darling. "Not messing with people, not lying to them, not suggesting we can just swipe a pen and charge one ratepayer over another some exorbitant new amount of money when we can't."

The proposed rates were approved by the finance committee and have been forwarded to city council for final consideration. 

ABOUT THE AUTHOR

Robert Jones

Reporter

Robert Jones has been a reporter and producer with CBC New Brunswick since 1990. His investigative reports on petroleum pricing in New Brunswick won several regional and national awards and led to the adoption of price regulation in 2006.

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