Minister's letter backing Irving Oil application 'inappropriate,' former EUB intervener says

A letter sent by Natural Resources and Energy Development Minister Mike Holland telling the New Brunswick Energy and Utilities Board how he thinks it should deal with an Irving Oil Ltd. application is drawing criticism, but the province is not apologizing for it.

Holland sent the letter to the board on Jan. 6, one day after Irving Oil made an application to increase the amount petroleum wholesalers in the province can charge.

If approved, it could cost consumers up to $60 million more per year.

In the letter, Holland told the Energy and Utilities Board that industry members had "expressed concerns to government about the sufficiency of the current wholesale margin," and said he wanted the board to know he felt it should act quickly on the issues Irving Oil was raising.

"It has been suggested that the current margin in New Brunswick is not enough to guarantee continuity of supply in the challenging COVID-19 global environment," Holland wrote.

"As a result I am supporting the application to review evidence in an expedited fashion and, if warranted, an interim order to increase the wholesale margin. If an interim order is warranted, I feel the severity of a possible supply issue means it should be issued at the earliest opportunity." 

Holland was not made available for an interview. But in an email Monday, Natural Resources Department spokesperson Nick Brown said the government approved of the letter's intent.

"Government felt that it was prudent to support an application by industry to ensure petroleum products remain available to New Brunswickers," Brown said in the email.

After CBC News reported on the letter, Green Party Leader David Coon called for Holland's resignation, saying the letter was an "egregious abuse" of power.

Letter could be a first

Hartland lawyer Peter Hyslop, a former Energy and Utilities Board public intervener, said he cannot recall a minister writing to the board directly in the past about a matter in front of it.

"Totally inappropriate," Hyslop said after reviewing the letter.

"I do see it as a serious abuse of the process."    

Hyslop was appointed to represent the public interest at numerous board hearings by the former government of Bernard Lord.

Provincial legislation gives the Natural Resources minister authority to "direct the Board to make an investigation," but Hyslop said an investigation into wholesale petroleum margins had already been triggered by Irving Oil's application on Jan. 5.

Holland's note only amplified the company's position and sought to tell the board how to proceed, he said.

"We have the board because they have the technical and industry expertise to hear and determine different matters that the Legislature authorizes them to decide," Hyslop said.

"If a matter was before a court, a minister would not write a letter to the judge."  

University of Ottawa law professor Paul Daly said Holland's letter is not illegal, but its appropriateness is up for debate.

"Even if the minister has done nothing illegal, it might be a breach of unwritten rules or conventions about the independence of the Board," Daly said in an email.

Irving cites pandemic pressures, years of no change

New Brunswick has regulated the maximum price consumers can be charged for petroleum products since 2006.   

Maximum prices are calculated weekly by the the Energy and Utilities Board according to a formula created by government that includes amounts for refiners, wholesalers and retailers, amounts for delivery costs to transport fuel to its final destination and other amounts for taxes.

Irving Oil has applied to have what it and other companies can charge for the wholesaling component increased by 4.13 cents per litre, including an "immediate" increase of 3.5 cents.  

• Irving refinery scored 'free' oil from historic price collapse, according to Higgs

According to the company, that's to make up for several years of no changes in the margin amount and other financial problems it says have been caused by the pandemic.

"COVID-19 has exacerbated and heightened this issue," Irving Oil's chief marketing officer Darren Gillis wrote in the company's application for the increases. "As a result, wholesale margin increases are now urgently needed to ensure that wholesalers can recover their costs and ensure security of supply."  

Failure to award the amount could result in product shortages, the company claimed. 

Application would raise wholesale margins by up to 75%

Current wholesale charges allowed in New Brunswick include 5.5 cents per litre for furnace oil and 6.51 cents for gasoline and diesel.  

If granted, the application would raise those by between 63 and 75 per cent, depending on which fuel is involved.

That in turn could mean an overall petroleum price increase for New Brunswick consumers in excess of $60 million annually, based on the more than1.5 billion litres of petroleum products used annually in the province.

Nova Scotia's regulator did allow for an interim increase in wholesale margins in that province as of Jan. 8, although at 2.5 cents it is a smaller increase than Irving Oil is seeking.  

They're looking for permanent relief, and in the total scheme of things, COVID is a short-term [issue].- Peter Hyslop, lawyer, former EUB public intervener

The Nova Scotia Utilities and Review Board said it was satisfied an "emergency situation may exist" because of the COVID-19 pandemic, a finding Holland also mentioned in his letter to the board.

Petroleum consumption has fallen dramatically across North America this year, with volumes in New Brunswick alone down 15 per cent in the six months between April and September.

Hyslop said that's another reason New Brunswick's regulator needs to be left alone to do its work.

It will need to sort through extensive amounts of evidence to discover which oil industry problems are temporary and which are not.

"The reason in the change for the margin appears to be related to COVID," Hyslop said. "They're looking for permanent relief, and in the total scheme of things, COVID is a short-term [issue].

"I think it should be careful to make sure we don't give them a permanent increase, because after COVID, wouldn't the margins go back? The board should proceed cautiously."