Province's inquiry into high B.C. gas prices shouldn't suppress taxes
Credit to Author: Gord Kurenoff| Date: Fri, 30 Aug 2019 01:25:42 +0000
VICTORIA — When the New Democrats ordered the inquiry into high gasoline prices in B.C. earlier this year, they tried to head off any findings that would reflect badly on their own policies and taxes.
The May 21 cabinet order establishing the inquiry said the B.C. Utilities Commission “must inquire into the factors influencing gasoline and diesel prices since 2015 and the mechanisms the province could use to moderate price fluctuations and increases.”
The terms of reference gave the commission a free hand to investigate refiners, wholesalers, retailers and other industry players — indeed pretty much everyone involved in delivering gas at the pump but the attendants at your local filling station.
But the cabinet also set down what the inquiry was specifically forbidden from doing: “The commission may not inquire into the effects of provincial enactments or policy on gasoline and diesel prices in B.C.”
Despite that edict, many of the industry players the commission sought out in the course of its inquiry did address the very things the New Democrats did not want to talk about.
Some, like the final submission from Parkland Fuels, operator of the Burnaby refinery, did so at length.
“It would be misleading for the utilities commission to report the factors influencing prices in B.C. without acknowledging the substantial contribution of taxes,” wrote Parkland at the outset of a 100-plus page submission that was like a gauntlet thrown down in the path of the NDP’s cabinet order.
“Taxes are the single largest component of the retail price in British Columbia,” it continued, citing figures from the national energy board.
“Taxes represented approximately 36 per cent of the price of a litre of gasoline in Greater Vancouver in the first three months of 2019. In April 2019, the total tax portion of regular gasoline in Vancouver averaged 53.9 cents per litre.”
“To put this in perspective,” Parkland continued, “the cost of taxes in Greater Vancouver is more than the cumulative costs and profits of all of the participants in the multi-step supply chain.”
Here’s Suncor Energy on the same topic: “Taxes are much higher in B.C. and, in particular, in the Lower Mainland. There is an 11-cent difference between Vancouver and the rest of B.C., and a 21-cent difference between Vancouver and Alberta.”
Another provincially-induced factor blamed for pushing up prices now and in the future were regulations governing the content of the refined product itself.
Suncor: “Regulatory compliance costs in B.C. have increased since 2015 at a higher rate than the Canadian average as the requirement to use renewable fuels and initiatives to reduce carbon intensity have increased substantially.”
Parkland: “B.C. is the only province with a low carbon fuel standard. It requires refiners who produce fuel for the B.C. market to progressively lower the carbon intensity of fuels produced at the facility every year. There are limited pathways to comply with this legislation, all of which involve significant costs.
“B.C.’s cleaner gas regulations for gasoline are more stringent during certain times of the year than the other provinces or the U.S. Pacific Northwest. This discrepancy leads to higher manufacturing and blending costs for any refineries selling product for the B.C. market during those times.”
Also cited were other factors that are within the control of the provincial government, like higher minimum wages, labour costs and payroll taxes.
Imperial Oil: “B.C. (Vancouver in particular) is an exceptionally difficult area to serve. Logistics, land cost/availability and regulation all function as substantial barriers relative to many other areas where we operate.”
Not every factor cited in the submissions was within reach of the provincial government.
The cost of unrefined crude oil, which accounts for about one-third of the price of the finished product, was reported to have contributed an additional 17 cents per litre since 2015.
Several submissions cited the shortage of refined product arriving in B.C. through the existing Trans Mountain pipeline, as noted here Thursday.
Because of the tight three-month time frame imposed by cabinet, the commission was forced to concentrate its efforts on gleaning as much information as it could from industry players such as Parkland, Suncor and Imperial Oil.
While it is not surprising that the industry would try to put the onus back on the government over taxes and regulations, some of the outside experts retained by the commission did the same.
“B.C.’s Vancouver region has the highest taxation rates in the country on both clear gasoline and clear diesel,” wrote the Vancouver-based Deetken group of management consultants. It was one of two firms retained by the commission to get itself up to speed on in relatively short order.
At the outset of the inquiry, commission chair Dave Morton said he was comfortable with the cabinet order precluding him and his colleagues from examining the role of provincial taxes and regulations in pushing up gasoline prices.
“I’m not disappointed with the terms of reference,” he told Rob Shaw of The Vancouver Sun. “They are consistent with what we agreed to. I’m happy to proceed.”
But with the final report of the inquiry scheduled for release today, the commission is at the end of the process. And its website is top heavy with reports identifying provincial taxes and regulations as major contributors to the high price of gasoline.
In delivering the final report, Morton and his colleagues can’t fail to acknowledge those factors without making the whole exercise look ridiculous.
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