If Irving Oil leaves New Brunswick, then what??

Ron in Regina

"Voice of the West" Party
Apr 9, 2008
23,074
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Regina, Saskatchewan
“It’s just something they don’t do.”

That’s what New Brunswick’s former chief economist, David Campbell, said about Irving Oil’s public announcement of a strategic review, including a possible full or partial sale. The company is mulling existential questions.
1686317717006.jpeg

So why are the Irvings — notoriously quiet about business affairs — choosing to say this out loud?

Here’s why — at least, here’s my guess.

Irving Oil has been lobbying hard in Ottawa for months, surely focused on the Clean Fuel Standard, a regulatory regime that pushes petro producers and refineries to become less carbon-intensive in their production. It will cost real money to comply.

It’s a key piece of the climate change action plan devised by the federal Liberals, led by Environment Minister Steven Guilbeault.

Irving Oil and Guilbeault are not getting along.

The minister singled out Irving Oil in a letter urging energy regulators in Atlantic Canada not to let refiners get a price increase July 1, when Clean Fuel Standard rules start coming in. He suggested that refinery margins are fat and healthy, and the company should absorb the cost of compliance, rather than trying to pass it along to consumers.

The company disagrees, and is fighting back. The strategic review will surely propose at least a couple of options that represent a significant economic hit to Atlantic Canada, and New Brunswick in particular.

They could sell the refinery, or close it. They could pivot their business to something else, and move.

I don’t think it’s an idle threat.

On the face of it, you’d think that moving operations somewhere else would be impossible — and that we, the public, should call their bluff. What about the sunk cost of the refinery? Are you seriously going to leave?

But Canada is pushing more and more companies to answer that question “yes.”

Irving Oil has unique features that make its continued presence in New Brunswick a question. It has long imported its crude. (Opportunities to have Canadian crude piped to Saint John fell through when the proponent of the Energy East pipeline cancelled the project during the approval phase in 2017.)

If they do want to keep refining, they could go do it somewhere the regulatory regime isn’t actively trying to destroy them, and where access to crude is easier.

If they want to do something else — still energy, perhaps, but not refining petroleum — there might not be much reason to do it in New Brunswick. Making hydrogen for Europe, for example, makes way more sense to do in Europe than in Atlantic Canada. And Irving Oil already has a footprint there, in Ireland.

The risk is real. And thus the threat may be an effective strategy.

An employer and exporter like Irving Oil, if they scaled back or sold their Atlantic Canadian operations, can’t be replaced. New Brunswick would be devastated. Even if the refinery continued operating for a while under new ownership, head office jobs would likely move elsewhere, and the new owner would face the same compliance costs and may decide to scale back.

Publicly announcing the strategic review could be a way to push Guilbeault and the feds to take some responsibility for all this. The reality is that climate action does not mean loads of great new well-paid squeaky clean green jobs. That narrative has always been BS. The green jobs are subsidized.

Shutting down oil and gas production does need to happen at some point in the future, in the name of halting the worst effects of climate change — raging wildfires, anyone? — and in recognition of that, whatever we think about Peak Oil, it’s going to run out some day.

The problem is, there’s the future, and then there’s how to get there. We should be able to make this transition without killing off the economy of entire provinces.

Few countries are taking the “virtuous” industrial policy route like Justin Trudeau’s activist federal government. Canada is becoming a place where nobody invests anymore unless they get a major cash payment from the government.

For a business that can, moving elsewhere is becoming more attractive. The Liberals may not believe this exodus will happen in a big enough way to matter, but the chatter in the business community is worrisome. Suncor and TC Energy are cutting jobs. Lots of projects are falling through.

The solution isn’t necessarily to bow to business demands when they make threats. Instead, the solution is to make good policy.

A revenue-neutral carbon tax is, in my view, good policy to address climate change. I wish we had one, but we have tax-and-spend instead, with a bit of rebate thrown in to appease voters.

The Clean Fuel Standard, meanwhile, is not good policy — it’s a lot of pain for minimal gain. And we’re about to find out, on July 1, how much it’ll cost us.

If Irving Oil shuts off the lights, we are going to feel it. Get ready for a summer of high gas prices, and hard manoeuvring about who’s to blame for it.
 
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Serryah

Executive Branch Member
Dec 3, 2008
8,957
2,067
113
New Brunswick
“It’s just something they don’t do.”

That’s what New Brunswick’s former chief economist, David Campbell, said about Irving Oil’s public announcement of a strategic review, including a possible full or partial sale. The company is mulling existential questions.
View attachment 18425

So why are the Irvings — notoriously quiet about business affairs — choosing to say this out loud?

Here’s why — at least, here’s my guess.

Irving Oil has been lobbying hard in Ottawa for months, surely focused on the Clean Fuel Standard, a regulatory regime that pushes petro producers and refineries to become less carbon-intensive in their production. It will cost real money to comply.

It’s a key piece of the climate change action plan devised by the federal Liberals, led by Environment Minister Steven Guilbeault.

Irving Oil and Guilbeault are not getting along.

The minister singled out Irving Oil in a letter urging energy regulators in Atlantic Canada not to let refiners get a price increase July 1, when Clean Fuel Standard rules start coming in. He suggested that refinery margins are fat and healthy, and the company should absorb the cost of compliance, rather than trying to pass it along to consumers.

The company disagrees, and is fighting back. The strategic review will surely propose at least a couple of options that represent a significant economic hit to Atlantic Canada, and New Brunswick in particular.

They could sell the refinery, or close it. They could pivot their business to something else, and move.

I don’t think it’s an idle threat.

On the face of it, you’d think that moving operations somewhere else would be impossible — and that we, the public, should call their bluff. What about the sunk cost of the refinery? Are you seriously going to leave?

But Canada is pushing more and more companies to answer that question “yes.”

Irving Oil has unique features that make its continued presence in New Brunswick a question. It has long imported its crude. (Opportunities to have Canadian crude piped to Saint John fell through when the proponent of the Energy East pipeline cancelled the project during the approval phase in 2017.)

If they do want to keep refining, they could go do it somewhere the regulatory regime isn’t actively trying to destroy them, and where access to crude is easier.

If they want to do something else — still energy, perhaps, but not refining petroleum — there might not be much reason to do it in New Brunswick. Making hydrogen for Europe, for example, makes way more sense to do in Europe than in Atlantic Canada. And Irving Oil already has a footprint there, in Ireland.

The risk is real. And thus the threat may be an effective strategy.

An employer and exporter like Irving Oil, if they scaled back or sold their Atlantic Canadian operations, can’t be replaced. New Brunswick would be devastated. Even if the refinery continued operating for a while under new ownership, head office jobs would likely move elsewhere, and the new owner would face the same compliance costs and may decide to scale back.

Publicly announcing the strategic review could be a way to push Guilbeault and the feds to take some responsibility for all this. The reality is that climate action does not mean loads of great new well-paid squeaky clean green jobs. That narrative has always been BS. The green jobs are subsidized.

Shutting down oil and gas production does need to happen at some point in the future, in the name of halting the worst effects of climate change — raging wildfires, anyone? — and in recognition of that, whatever we think about Peak Oil, it’s going to run out some day.

The problem is, there’s the future, and then there’s how to get there. We should be able to make this transition without killing off the economy of entire provinces.

Few countries are taking the “virtuous” industrial policy route like Justin Trudeau’s activist federal government. Canada is becoming a place where nobody invests anymore unless they get a major cash payment from the government.

For a business that can, moving elsewhere is becoming more attractive. The Liberals may not believe this exodus will happen in a big enough way to matter, but the chatter in the business community is worrisome. Suncor and TC Energy are cutting jobs. Lots of projects are falling through.

The solution isn’t necessarily to bow to business demands when they make threats. Instead, the solution is to make good policy.

A revenue-neutral carbon tax is, in my view, good policy to address climate change. I wish we had one, but we have tax-and-spend instead, with a bit of rebate thrown in to appease voters.

The Clean Fuel Standard, meanwhile, is not good policy — it’s a lot of pain for minimal gain. And we’re about to find out, on July 1, how much it’ll cost us.

If Irving Oil shuts off the lights, we are going to feel it. Get ready for a summer of high gas prices, and hard manoeuvring about who’s to blame for it.

Depending on who you ask, Irving is doing this to throw their weight around and get what they want, which they tend to do, or it's a bluff.

Lots of people here in NB think they're full of shit, to be honest.

Considering the crap they do and get away with, and how brown our Premier's lips are...

They MIGHT have had more standing if they actually gave a shit about NB, but in the end, they don't. They know they have NB by the balls and this is just lip service to get away with whatever else they want.
 

petros

The Central Scrutinizer
Nov 21, 2008
109,232
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Low Earth Orbit
Irving Oil and Guilbeault are not getting along.
Best news I've heard so far this year.

The Irving refinery has a bigger problem than retooling to the fuel standard. They can only refine imported sweet crude or domestic kerogen (shale oil). If Mid East imports are kyboshed they are screwed.
 
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Ron in Regina

"Voice of the West" Party
Apr 9, 2008
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Regina, Saskatchewan
Depending on who you ask, Irving is doing this to throw their weight around and get what they want, which they tend to do, or it's a bluff.

Lots of people here in NB think they're full of shit, to be honest.

Considering the crap they do and get away with, and how brown our Premier's lips are...

They MIGHT have had more standing if they actually gave a shit about NB, but in the end, they don't. They know they have NB by the balls and this is just lip service to get away with whatever else they want.
Yeah but…what if? What does NB do?
 

Serryah

Executive Branch Member
Dec 3, 2008
8,957
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New Brunswick
Yeah but…what if? What does NB do?

Depends on who buys the company, whatever they sell.

If Irving was smart, they'd put money and R&D into switching to Hydrogen or something, or at least a profitable sector in energy. Or something at least. But they won't, cause they're like children right now who demand the cookie they want and they want it now.
 

Ron in Regina

"Voice of the West" Party
Apr 9, 2008
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Regina, Saskatchewan
Depends on who buys the company, whatever they sell.

If Irving was smart, they'd put money and R&D into switching to Hydrogen or something, or at least a profitable sector in energy. Or something at least. But they won't, cause they're like children right now who demand the cookie they want and they want it now.
Or they switch to Natural Gas production, where it’s wanted, in Europe. Anything can happen, and if they bail out who would want it as far as a “new owner” if the political climate and regulations made the previous want to leave?? The NB Government maybe?
 

Serryah

Executive Branch Member
Dec 3, 2008
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Or they switch to Natural Gas production, where it’s wanted, in Europe. Anything can happen, and if they bail out who would want it as far as a “new owner” if the political climate and regulations made the previous want to leave?? The NB Government maybe?

Nat Gas around here is questionable; I don't know the whole story with it.

True, anything can happen.

Considering the provincial government is so pro-Irving that, again, Higgs has permastained brown lips, it's not like they don't get what they want all the time. Federal is different, I realize, but provincially they bend over backwards.

I tend to agree that whoever the Irving's sell to - if they do - they will be someone Irving will approve highly of (and likely still have influence with). Personally I'm shocked at the idea Irving might sell to anyone outside the family but I guess we'll see.
 

Ron in Regina

"Voice of the West" Party
Apr 9, 2008
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If the Regulatory & Political climate in Canada has become inhospitable, and Natural Gas is “Green” in Europe…& they want it (!)….Irving could mothball production in Canada and set up shop elsewhere without selling the Canadian facilities to anyone.

I guess American refineries can feed Maritime Canada “if” they have a surplus ‘cuz it won’t get piped there from Western Canada anytime soon.
 

Serryah

Executive Branch Member
Dec 3, 2008
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New Brunswick
If the Regulatory & Political climate in Canada has become inhospitable, and Natural Gas is “Green” in Europe…& they want it (!)….Irving could mothball production in Canada and set up shop elsewhere without selling the Canadian facilities to anyone.

I guess American refineries can feed Maritime Canada “if” they have a surplus ‘cuz it won’t get piped there from Western Canada anytime soon.

They could, sure. Would they though? I dunno. Maybe.

You say American Refineries feeding us, as if the Irving's are doing so.

Ron; they aren't.

The only thing NB get's out of Irving overall is jobs (which are fickle AF with them but you also work damn hard for the company if you're in, from what I understand) and... that's it. They don't pay their share of taxes, they don't really invest more into the province, they don't do much of anything else really.
 

Ron in Regina

"Voice of the West" Party
Apr 9, 2008
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So if Irving Oil bugs out, there’s no contingency plan needed then? That’s the question I was unclearly asking.

I was under the impression they were a bigger player in your neighbourhood than they are. If they won’t be missed other than a few jobs then I guess it’s not a big issue.
 

Taxslave2

House Member
Aug 13, 2022
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Nat Gas around here is questionable; I don't know the whole story with it.

True, anything can happen.

Considering the provincial government is so pro-Irving that, again, Higgs has permastained brown lips, it's not like they don't get what they want all the time. Federal is different, I realize, but provincially they bend over backwards.

I tend to agree that whoever the Irving's sell to - if they do - they will be someone Irving will approve highly of (and likely still have influence with). Personally I'm shocked at the idea Irving might sell to anyone outside the family but I guess we'll see.
As I understand it, Quebec nixed a pipeline to get NG from the prairies to the East Coast. Not much chance of running a pipe through the US either. I also am not sure just where NG wells are in the development process. But Quebec did ban all drilling in that province.
 

Taxslave2

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Aug 13, 2022
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So if Irving Oil bugs out, there’s no contingency plan needed then? That’s the question I was unclearly asking.

I was under the impression they were a bigger player in your neighbourhood than they are. If they won’t be missed other than a few jobs then I guess it’s not a big issue.
That depends on who you ask. The left wants them gone, but also wants the tax revenue, both from the company and the employees.
 

Serryah

Executive Branch Member
Dec 3, 2008
8,957
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New Brunswick
So if Irving Oil bugs out, there’s no contingency plan needed then? That’s the question I was unclearly asking.

I was under the impression they were a bigger player in your neighbourhood than they are. If they won’t be missed other than a few jobs then I guess it’s not a big issue.

If they bug out, the hope is whoever they sell to is decent, or better.

They are a big player in the region. My point was that they are the biggest, or one of these biggest, employers in the region, and if they left all that could go down the shitter, turning NB into a worse province. Which is why the hope that this is either a scare tactic or whoever might buy them is a decent employer. Sorry I didn't make that clearer.


Beg for more equalization payments from the evil west.

A lot of people here go out west to work, then move back here after, or do a six months on/off schedule out there. If you asked the people here, we'd rather not have to resort to the damned payments.


That depends on who you ask. The left wants them gone, but also wants the tax revenue, both from the company and the employees.

Please; the left wants them gone? The Libs have been almost as hard core pro Irving as the Cons some years. As for tax revenue, WHAT tax revenue?


 

Taxslave2

House Member
Aug 13, 2022
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If they bug out, the hope is whoever they sell to is decent, or better.

They are a big player in the region. My point was that they are the biggest, or one of these biggest, employers in the region, and if they left all that could go down the shitter, turning NB into a worse province. Which is why the hope that this is either a scare tactic or whoever might buy them is a decent employer. Sorry I didn't make that clearer.




A lot of people here go out west to work, then move back here after, or do a six months on/off schedule out there. If you asked the people here, we'd rather not have to resort to the damned payments.




Please; the left wants them gone? The Libs have been almost as hard core pro Irving as the Cons some years. As for tax revenue, WHAT tax revenue?


Payroll taxes. Income taxes. Property taxes. Utilities taxes. Foreshore leases. Probably a dozen more.
 

pgs

Hall of Fame Member
Nov 29, 2008
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They could, sure. Would they though? I dunno. Maybe.

You say American Refineries feeding us, as if the Irving's are doing so.

Ron; they aren't.

The only thing NB get's out of Irving overall is jobs (which are fickle AF with them but you also work damn hard for the company if you're in, from what I understand) and... that's it. They don't pay their share of taxes, they don't really invest more into the province, they don't do much of anything else really.
You voted for it .