Irving Oil considers sale of company as part of strategic review
'Timing is suspect,' says Conservation Council's Louise Comeau
Irving Oil says it has launched a strategic review that will consider, among other things, "a full or partial sale" of the company, one of the largest in New Brunswick.
"A strategic review of the company is underway, and a series of options are being evaluated related to the company's future," the Saint John-based company said in a statement.
"No decisions have been made about where this strategic review may lead. Considerations will be given to a new ownership structure, a full or partial sale, or a change in the portfolio of our assets and how we operate them."
The statement was signed by Arthur Irving, chair of the Irving board, Ian Whitcomb, the president, and Sarah Irving, the executive vice-president.
'Timing is suspect'
Louise Comeau, of the Conservation Council of New Brunswick, said until she hears otherwise from the company, she's going to "assume" the review is a normal part of doing business.
But she fears that's not the case.
"It's very difficult as always with this company and this family to understand the motivation because they don't tell us much," said Comeau.
She said she hopes "this is not a ploy as part of their campaign to undermine climate action" by connecting the review to economic constraints posed by climate regulations.
But she's suspicious of the timing.
"Yep, the timing is suspect. There's no doubt about it," said Comeau.
"One would hope that they wouldn't do that, A, to their workers, B, to the community and C, in terms of their own reputation for being a responsible employer in terms of its environmental performance."
Louise Comeau of the Conservation Council says she's suspicious about the timing of Irving Oil's announcement. (Jacques Poitras/CBC)
She worries the announcement will be used as "political game for others who are trying to undermine climate action federally and provincially, and I think that would be the most irresponsible outcome of all."
"My biggest concern is that politicians will take this on as an example of the negative impact of climate regulation, and that is completely irresponsible in my view," said Comeau.
Saint John Mayor Donna Reardon said she got a "heads-up" from Irving Oil's president, Ian Whitcomb, to tell her about the news release.
She said didn't get a sense from that conversation whether selling is a first choice or a last resort.
Reardon said she's not worried about a potential sale.
"I just feel a company like Irving Oil would be very particular who they would — if they are going to sell — who they would choose to sell that business to."
Reardon believes the Irving family would want to ensure the business goes into "the right hands" with a company that would "look after it and foster it and sort of keep it the way it is."
Largest refinery
Founded in 1924 by Arthur's father, K.C. Irving, Irving Oil operates Canada's largest refinery, which processes 320,000 barrels a day and is New Brunswick's largest greenhouse gas emitter.
According to the company's website, it has "more than 900 fuelling locations and a network of distribution terminals spanning Eastern Canada and New England."
With 4,000 employees, the company is one of the most powerful in the province.
In 2021, Irving Oil announced a partnership with Calgary-based TC Energy aimed at "significantly reducing emissions through the production and use of low-carbon power generation."
The company said at the time it was looking at adopting new technologies to "aid in decarbonizing local industry," but it has turned down interview requests about its long-term future as a refinery of crude oil.
Irving Oil spokesperson Katherine d'Entremont did not immediately respond to a request for an interview.
Why is it that I am not surprised?
Now there is a telling thing
Reply to Ron Baxter
CBC News · Posted: Mar 09, 2023
Arthur Irving was the 51-year-old head of Irving Oil when the company won a property tax exemption on its crude-oil tank farm in 1981 to help with a temporary crisis. He'll be 93 this year and the exemption is still on the province's books. (CBC)
Province retracts $580K property-tax levy on Irving crude-oil tank farm...Error cited in loss of 42-year-old tax-exemption status last March
CBC News · Posted: Jun 07, 2023
CBC News November 14, 2022
Irving Oil raked in a quarter of a billion dollars in profits in the same year it persuaded Saint John city council and the New Brunswick government to hand it a 25-year tax break, leaked documents show.
The company made $250.7 million in 2005, a year in which Saint John capped Canaport LNG's property tax bill at $500,000.
The cost to the city was estimated at $112 million over a quarter-century.
The tax break required special provincial legislation, which Bernard Lord's Progressive Conservative government passed later in 2005.
Company says millions of dollars in power costs assigned to industry need shifting to residential customers
Robert Jones · CBC News · Posted: Apr 21, 2023 6:00 AM ADT
Energy and Utilities Board adjourns to allow groups opposing price increase to argue for access to evidence
Robert Jones · CBC News · Posted: Jan 25, 2021 5:58 PM AST
Mike Holland draws criticism after urging EUB to act quickly on application for petroleum charge increase
Robert Jones · CBC News · Posted: Jan 19, 2021 5:00 AM AST
Reply to Robert Joyce
Talk about a reverse of the loaves and fishes parable
Province retracts $580K property-tax levy on Irving crude-oil tank farm
Error cited in loss of 42-year-old tax-exemption status last March
Provincial property taxes of nearly $600,000, levied on Irving Oil's deep-water crude-oil tank farm back in March, was an error that did not signal an end to a four-decade-old tax exemption on the site, according to the New Brunswick government.
Instead, the exemption has been reactivated and the tax bill retracted.
In a series of emails explaining why provincial property-tax amounts charged to the tank farm appeared in March, but have since disappeared, the director of communications for Service New Brunswick said the property briefly lost its tax exemption classification in an inadvertent internal computer incident.
"There was an activity to the property account that reset the classification," wrote Jennifer Vienneau.
"It has been manually reset to the original classification."
Service
New Brunswick operates the province's property registry and says an
error caused Irving Oil's Canaport oil terminal switch from 'provincial
rate excluded' to 'fully taxable' in its system in March. (Karissa Donkin/CBC)
In March, the province issued property tax bills to all landowners in New Brunswick and for the first time in 42 years, it charged Irving Oil for provincial property taxes on a number of parcels that make up its Canaport crude-oil terminal.
All commercial and industrial properties in New Brunswick, from corner stores to nuclear plants, pay two property taxes, local and provincial, unless specifically exempted by legislation.
The tank farm pays full municipal property taxes to Saint John, but in 1981 it was awarded an exemption from paying provincial property tax by the former government of Richard Hatfield.
The facility sits on Mispec Point, next to Repsol's LNG terminal at the edge of the Bay of Fundy.
It has a storage capacity of six-million barrels and receives shipments from ocean-going tankers that arrive from around the world multiple times each month. The tank farm feeds the crude to Irving Oil's Saint John refinery, about eight kilometres away by pipeline.
The property-tax exemption was meant to help Irving Oil weather a significant drop in North American petroleum consumption, caused by the 1979 oil crisis. Those troubles resolved themselves long ago, but the tax exemption has persisted.
In
March, Service New Brunswick posted a combined provincial and municipal
tax levy of $357,070 on one Irving Oil property containing four
crude-oil tanks at its Canaport terminal. Provincial taxes have since
been removed, and the tax bill has dropped to $213,915. Other properties
at the site have undergone similar reductions. (Service New Brunswick)
In its most recent 2021 accounting of the cost of exempting Irving Oil's crude-oil tank farm properties from provincial property taxes, the New Brunswick Department of Finance valued it to be worth $674,929 to the company.
However, since 2021, provincial tax rates on business properties in New Brunswick have been reduced, and the value of the exemption in 2023 is closer to $580,000.
According to the finance department, the exemption's purpose remains to "support the competitiveness of infrastructure that is important for economic development."
Richard
Hatfield was on record opposing special tax treatment for Irving Oil's
Canaport oil terminal, but the former premier's government granted it a
property-tax exemption in 1981, as sluggish petroleum markets in the
U.S. caused the company financial trouble. (CBC NEWS)
There have been calls for the exemption on the tank farm to be terminated in the past, but action has yet to be taken.
In 2016, then opposition leader Blaine Higgs said the exemption should be reviewed and potentially cancelled, since the crisis it was created to help Irving Oil survive resolved itself in the 1980s.
"A lot of policies in government start for a good reason, but they never end," said Higgs.
"There's no exit clause, so it just doesn't hit the radar again."
In 2018, the New Brunswick Green Party put the cancellation of the property-tax exemption on crude-oil storage tanks into its election platform, but has been unable to effect that change in the legislature.
In March, Green Party Leader David Coon applauded what appeared to be the end of the exemption, when Service New Brunswick began showing full taxes being charged at the site. He said he is disappointed to hear that has been undone.
"It's surprising," said Coon in an interview this week.
"It seems unlikely they made a mistake, but maybe it was. It's time for Irving Oil to pay their fair share on all of their properties."
In
this December 2016 interview with the CBC's Harry Forestell, then
opposition leader Blaine Higgs said he would support ending a provincial
property-tax exemption on Irving Oil's Canaport oil terminal, if a
review showed it was no longer needed. (CBC)
Irving Oil did not respond to a request for comment about the tax change and whether a property tax exemption at the tank farm is still required by the company.
Irving Oil does not publicly report its financial results, but in 2022 oil companies across North America posted record financial returns.
Refiners like Valero Energy Corporation, which operates refineries in both the U.S. and Canada, and PBF Energy Inc., which refines and sells petroleum into eastern U.S. markets, each reported pre-tax profits in 2022 close to $3,000 US per barrel of their refining capacities.
Results like that, if duplicated by Irving Oil, would have produced more than $1 billion in pre-tax 2022 earnings.
ABOUT THE AUTHOR
Reply to Ben Haroldson
The president and CEO of NB Power is once again the highest-paid civil servant in New Brunswick. (Not true check one of his VPs)
Keith Cronkhite earned between $400,000 and $424,999 in 2020, according to the unaudited list of employee salaries recently released by the province. (Keyword "unaudited")
Making between $325,000 and $349,000 was NB Power vice-president Darren Murphy and former Vitalité Health president and CEO Gilles Lanteigne.
Four other NB Power employees earned between $300,000 and $324,999: Lori Clark, Mark Power, Robert Stears, and James Christopher Wilson.
Also in that salary bracket is Dr. Jennifer Russell, the province’s chief medical officer of health, current Vitalité president and CEO France Desrosiers, and former Horizon Health president and CEO Karen McGrath.
Patrick Parent, the former president and CEO of NB Liquor, is one of 11 employees who earned between $275,000 and $299,999. Also in that salary bracket is Judge Jolène Richard, the former chief judge of the provincial court.
A total of 30 current and former provincial court judges earned between $250,000 and $274,999, along with former NB Power president and CEO Gaëtan Thomas, who retired in May 2020.
Among those who earned between $200,000 and $224,999 were former deputy minister Cheryl Hansen — who is now the province’s top civil servant — and former deputy minister Kelly Cain.
More than 3,300 employees earned more than $100,000 in 2020, including nearly 150 who received more than $200,000
PC minority government to table budget Tuesday, Liberals have vowed to try to defeat government
Jacques Poitras · CBC News · Posted: Mar 09, 2020 3:36 PM ADT
Welcome to Doug James for Saint John Lancaster.
Doug James is a former local, national and international journalist, best known for his work as a foreign correspondent for CNN, where he covered the first Gulf War, the Palestinian Intifada and the fall of the Berlin Wall.
Reply to Rob Bourque
Reply to danny rugg
Reply to danny rugg
Succession or hard times? Motive behind possible sale of Irving Oil stumps industry watchers
As a privately held company, Irving Oil historically reveals little about its operations
On Wednesday, the Saint John-based company announced a strategic review that would contemplate a "full or partial sale."
Campbell said the announcement was "kind of strange."
He said privately held companies such as Irving Oil have to conduct strategic reviews "on a regular basis, so to announce it sounded a little out of the ordinary."
With such a tight-lipped privately held company, Campbell said he has "no idea what the motivation would be" to raise the spectre of a sale, but he has a hunch.
"We do know that over the next 20 or 30 years, there's going to be less oil refined, and so they need to figure out strategically what their role is."
David
Campbell, an economic development consultant and a former chief
economist for the New Brunswick government, said a sale would have a
ripple effect on the economy. (Submitted by David Campbell)
With all the uncertainty around refining, perhaps they want to get out while the going's good, said Campbell.
And they may want to use the capital built up in the company for another venture.
"One of the options that many of us were hoping they would do is deploy that capital in other energy-related sectors like hydrogen … [or] other new energy-related opportunities, and maybe they still would do that."
Because of the size of Irving Oil and the hefty price tag that it will command, Campbell said potential buyers are likely not going to be Canadian-based.
Irving Oil has about 4,000 employees and operates Canada's largest refinery, which processes 320,000 barrels a day.
Such a sale, he said, would have ripple effects throughout New Brunswick's economy. First of all, any outside buyer would likely move the head office, which means a loss of all of those jobs.
Could be like NBTel
"So you remember what happened to NBTel in Saint John? That's exactly what's going to happen with Irving Oil — that all of the head office jobs, back office jobs, the support jobs, the supply chain, almost all of that disappears."
Founded in 1888, the New Brunswick Telephone Company was based in Saint John until it merged with other communications companies in Atlantic Canada in 1999. It's now known as Bell Aliant and is headquartered in Halifax.
Obviously, said Campbell, Irving Oil's refinery would have to remain where it is, so those jobs would be safe.
Campbell said it's also difficult to estimate the value of a privately held company. Normally one would estimate the value of the assets, but those aren't known with Irving Oil.
"I think the price will be set based on the discounted value of future profits."
Arthur Irving, seen in this undated file photo, is now 93 and remains chair of the board at Irving Oil. (CBC )
The company imports roughly $8 billion of raw crude each year and exports $10 billion worth of product, he said.
"So they're not worth $10 billion to the economy, but they're worth $2 billion to the economy," explained Campbell.
"I think the public needs to understand the economic contribution of a large company like that, but they also need to understand that businesses are trying to make a return on the capital they invest."
But, he added, "it is a shame when a locally owned business sells to a foreign or externally owned business because the decisions now are made outside the region, the profits tend to go outside the region."
A succession issue?
Contemplating a sale might also be a succession issue, said Tom Cooper, a business professor at Memorial University in St. John's.
After all, Arthur Irving, the head of Irving Oil, is 93.
"At some point, somebody has to decide who's going to take over," said Cooper.
Memorial University business professor Tom Cooper says now might be a good time to get out of the oil business. (Katie Breen/CBC)
Arthur's daughter Sarah Irving, who's in her late 30s, is currently executive vice-president of Irving Oil.
"And maybe the other children want their inheritance and they're thinking about selling it," said Cooper.
"When you're a billionaire like Arthur Irving and his brother, you're not just giving money to your children, you're giving money to your great grandchildren, if it's handled well. So a really good question is when do you exit? And this may be one of the strategic decisions that they're making."
With more restrictions on emissions, a shift away from fossil fuels to electric vehicles and other greener technology, said Cooper, "this may be a good time to get out."
He said there are some long-term trends that "are not favourable to companies that are involved in the oil and gas industry.
Insurance companies, for example, aren't looking favourably on the sector.
"Allianz, which is the big European German insurer, has said that as of 2035, they will no longer insure companies involved in fossil fuels. So that's one big trend and there's other big trends around regulation, both nationally and internationally, which may make this a good time to sell."
ABOUT THE AUTHOR
With files from CBC Radio's On the Go
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