Order P.920211-3 - Petroleum - Ben Livingston & Sons Ltd. - Application for Initial License (Feb. 11/92)

Order No. P.920211-3

IN THE MATTER of Section 38 of the Petroleum Products Act, Stats. P.E.I. 1990, c.43;

- and -

IN THE MATTER of application by Ben Livingston & Sons Ltd. for initial licensing under the Petroleum Products Act, supra;

Tuesday, the 11th day of February, A.D., 1992

BEFORE

Linda Webber, Chairman
Anna C. Carr, Commissioner (dissenting in part)
C.C. Hickey, Commissioner

Decision and Order

Table of Contents

Appearances and Witnesses

I. Introduction

II. Evidence

A. The Applicant
B. The Interveners

III. Decision

The Application
a) Record of Performance/Fitness
b) Location and Physical Accessibility
c) Competition/Existing Licensees/Demand
Conclusion

IV. Order

Dissenting Opinion (Carr)

Appearances and Witnesses

Participants in the hearing and the parties for whom they appeared were as follows:

Applicant
Ben Livingston & Sons Ltd.
Counsel:
    Mr. John R.A. Douglas
Witnesses:
    Mr. Paul Livingston
    Mr. Jack Liptrot
    Mr. Harry MacLauchlan
    Mr. James Darnbrough

Interveners
Mr. William E. Armstrong
P.E.I. Retail Gasoline Dealers Association

Witness:
    Mr. Dale H. Mader (PEIRGDA)

Commission Counsel:
    Mr. Douglas R. Drysdale
Staff:
    (Mrs.) H. Doris Pursey, Director - Petroleum Division
    Mr. Harry MacDonald, Assistant to Director - Petroleum Division
    (Mrs.) Faye Weeks, Recording Secretary

I. Introduction

On 28 March 1991, an application was filed by Ben Livingston & Sons Ltd., P.O. Box 444, Charlottetown, P.E.I. for initial licensing under the Petroleum Products Act for retail self-serve gasoline dispensing facilities associated with a convenience store proposed to be constructed at the intersection of Kensington Road and Exhibition Drive, Parkdale, P.E.I.

Notice of this application was then published in the local press and, in response, the Commission received two letters of intervention opposing the granting of the requested licensing. These letters were signed by Mr. William E. Armstrong, 55 Greenfield Avenue, Charlottetown, and by Mr. Dale H. Mader, Executive Director of the Prince Edward Island Retail Gasoline Dealers Association ("R.G.D.A.")

Subsequent to the receipt of these letters of intervention, the Commission caused to be published in the local press a Notice of Hearing which set forth the details with respect to the time, date and location of the public hearing into this matter.

The hearing commenced at 9 a.m. on 27 August 1991 and continued on 28 August 1991. Four witnesses gave evidence for the Applicant, and Mr. Mader gave evidence on behalf of the registered Intervener, the P.E.I. Retail Gasoline Dealers Association. Mr. Armstrong did not testify at the hearing in support of his intervention.

At the conclusion of the hearing, the Chairman directed that written summations be filed on a date to be agreed upon with Petroleum Division Staff, with exchanges of summations to take place and a further ten days permitted for the filing of rebuttal briefs.

A Post-Hearing Brief was filed on behalf of the Applicant by Mr. John R. A. Douglas on 30 September 1991, and a letter concerning this Brief was received on 15 October 1991 from Mr. Mader on behalf of the R.G.D.A.

II. Evidence

A. The Applicant

Mr. John R.A. Douglas, Counsel for the Applicant, presented four witnesses at the hearing on behalf of Ben Livingston & Sons Ltd., as follows: Mr. Paul Livingston, Vice-President of Ben Livingston & Sons Ltd., Mr. Jack Liptrot, Co-ordinator - Construction & Maintenance - Maritimes for Ultramar Canada Inc., Mr. Harry MacLauchlan, President of Island Petroleum Products Ltd., and Mr. James Darnbrough, Motorist Sales Representative for Ultramar Canada Inc. in Prince Edward Island.

Mr. Paul Livingston gave testimony with respect to the specific site involved as well as to the proposed construction and installation of underground storage and dispensing equipment thereon. Mr. Livingston gave evidence that considerable growth had been experienced in the area, as supported by information obtained from the Town of Parkdale. He also filed as Exhibit No. 22 in this hearing fifteen letters which had been obtained in support of the application--thirteen of which were from members of the surrounding business community. As well, Mr. Livingston gave testimony relating to Exhibits 33 to 37, which consisted of coloured photographs of the site in question.

The next witness, Jack Liptrot, testified as to the suitability of the location, the anticipated gasoline volume to be dispensed at the outlet, and other matters such as the placement of facilities at the site, entrances and exits.

Mr. Harry MacLauchlan is President of Island Petroleum Products Ltd., a licensed fuel oil distributor which also makes deliveries of product to certain Ultramar retail sites. Mr. MacLauchlan had filed a letter dated 28 March 1991 in support of the application of Ben Livingston & Sons Ltd. In his letter, Mr. MacLauchlan stated that the area around the property in question had developed significantly over the last five years; and with more traffic being diverted onto Riverside Drive and Kensington Road due to the enhancement of the Charlottetown Perimeter Road, he could see a definite need for the development of a project of this nature to adequately service the increased amount of traffic.

Mr. MacLauchlan was present at the hearing and gave evidence on behalf of the Applicant. Mr. MacLauchlan gave testimony in support of the statements made in his letter, and pointed out that when travelling from the Shaw Building to the Charlottetown Perimeter Road via Kent Street and Kensington Road, there is no gasoline outlet located directly on this route. He gave evidence with respect to the factors necessary to make an outlet viable, and expressed the view that several different services were necessary to make an outlet viable. He also noted that his tractor-trailer driver, Mr. John Kenny, had done tests of the accessibility of the site and had not experienced difficulties in maneuverability on the lot.

Mr. James Darnbrough was the next witness for the Applicant, and gave evidence relating to leasing arrangements between the Applicant and Ultramar, as well as with respect to the technological, investment and training programs which are in place in his Company to assist operators of motor fuel outlets. He noted that the trend in the petroleum industry is away from bay service and also responded to questions relating to minimum volumes for viability of outlets.

In addition, Mr. Darnbrough gave evidence relating to several exhibits dealing with items such as gasoline volumes of existing outlets, market shares and traffic statistics.

B. The Interveners

Mr. William E. Armstrong, by letter dated 21 May 1991, expressed to the Commission his concerns with respect to the licensing of further gasoline outlets in the Charlottetown area, and expressed the view that the area is already more than adequately served. He noted that it was his feeling that the addition of more outlets would increase the difficulty of existing stations to operate a viable business and that service would likely deteriorate as a result. He also expressed concern relative to "corner lot" locations for these types of outlets as a result of motorists "shortcutting" across lots of this nature, and added that he felt that this outlet would add to traffic problems already existing in the area. Mr. Armstrong, however, did not appear at the hearing in support of his written intervention.

Mr. Dale H. Mader, in his letter of 13 May 1991, noted that the Prince Edward Island Retail Gasoline Dealers Association feels that it would not be in the public interest to license further gasoline outlets in the Charlottetown area due to the detrimental effect that additional outlets would have on the ability of existing retailers to provide quality service to the motorist. He noted that the existing outlets are all under-utilized in terms of their capacity to handle additional sales, and that the introduction of additional outlets could only mean reduced sales for existing outlets and ultimately less service to the motorist.

Mr. Mader, in giving testimony, filed a written submission which was entered as Exhibit No. 39 in the hearing. In this document, the Association submitted that the license applied for cannot be justified when measured against the test of public interest, convenience and necessity as required by Section 20 of the Petroleum Products Act. Various examples were given, and Mr. Mader quoted from various sources in support of this contention. The documents from which Mr. Mader quoted were provided by him under covering letter dated 30 August 1991 to the Commission and Counsel for the Applicant.

III. Decision

The Application

The Application here is for a license to operate a self-serve gas bar and convenience store at the corner of Kensington Road and Exhibition Drive. The business would front on Exhibition Drive.

The Applicant is a private company which has operated a welding/machine shop business adjacent to the proposed site since 1960. The owners plan to enter into a cross-lease arrangement with Ultramar Canada Inc. whereby Ultramar would be the supplier of petroleum products to that outlet for 10 years. Although the convenience store would run independently, Ultramar does have some requirements in connection with it including the requirement to provide Atlas Auto Parts--e.g. windshield wipers and windshield washer fluid--at the store. There would be one public washroom. An air pump would be available for tires.

The Applicant's position is that the increasing traffic flow in the area has created a need for this combination of services. Motorists travelling the arterial road (Riverside Drive) would find this site easy to access, say proponents of the application, as would those using the road regularly. The hours of operation would be 9 a.m.-11 p.m.

In considering an application for an initial license, the legislative test to be applied is that set out in Section 20 of the Petroleum Products Act, R.S.P.E.I. 1990, Cap. 43, which reads as follows:

When issuing a license with respect to the operation of an outlet operated by a retailer, the Commission shall consider the public interest, convenience and necessity by applying such criteria as the Commission may from time to time consider advisable including but not restricted to the demand for the proposed service, the location of the outlet, traffic flows and the applicant's record of performance.

The legislation requires us to consider the above-noted issues, and they are dealt with herein. With regard to traffic flows, the evidence relating to this issue interconnects with the other factors considered, and although traffic flows are not dealt with under a separate subheading, they form part of the discussion hereunder. It should be noted that the subheadings are used only to assist the reader. The Commission views most of the issues as being interconnected when dealing with public interest, convenience and necessity.

a) Record of Performance/Fitness

Since the Applicant has no experience in the retail petroleum products industry, it must establish its qualifications for this license.

The Applicant does own the property and has obtained a building permit from the Town of Parkdale to build the proposed facility.

An Ultramar Canada Inc. representative testified that Ultramar was closely consulted in all phases of the design of the site and changes were made to plans where these were suggested. Ultramar has also indicated that it has a good training program for its operators and would in fact through its cross-lease keep as close a watch on this operation as on those it owns. The Commission accepts that Ultramar has the required experience to operate this type of outlet and is committed to see that the proposed one is properly operated.

In addition, evidence was given that the Applicant and Ultramar have worked closely together to establish the financial viability of the operation and Ultramar is loaning the Applicant some of the money to start up and expects to be repaid. The evidence of traffic counts in the area, as analyzed by the Applicant's witnesses, supports the evidence that there is potential for 1 million to 1.5 million litre sales annually. Ultramar and the Applicant indicated that the money generated from the convenience store service would also be necessary to make it viable.

Overall, the application appears well thought out with respect to these matters.

b) Location and Physical Accessibility

Clearly the main reason this site was chosen is because it is owned by the Applicant. In addition, James Darnbrough for Ultramar, Jack Liptrot of Ultramar and Paul Livingston all testified as to the appropriateness of the site both from the perspective of being off the main arterial roadway, yet easily accessible from it, and from the perspective of being on a road heavily travelled in its own right as it connects the center of Charlottetown with the arterial road.

Harry MacLauchlan of Island Petroleum Products Limited also testified in support of the application's location, calling it the number one site in Charlottetown for a new outlet. As with the other witnesses, Mr. MacLauchlan would benefit from approval of this application (he would deliver the bulk product to this site). However, Mr. MacLauchlan stated that he would endorse the application and express his belief in the need for an outlet in that area even if he were not to benefit from the development. He expressed strong feelings about the need motorists have for obtaining service where they actually drive rather than somewhere else not too far away. He also felt that a need for such an outlet at that site came from the many people regularly attending the Charlottetown Driving Park, the Exhibition grounds and the Civic Centre.

A review of Sub-Exhibit 3 of the Submission of the P.E.I. Retail Gasoline Dealers' Association in this matter is relevant here. That exhibit is a map showing the Greater Charlottetown area and the location of retail gasoline outlets. The spread of outlets, and the cluster in the centre of the City, show very clearly that these outlets developed where the traffic flow was greatest--from the Hillsborough Bridge up Grafton Street to University Ave. and then out on the Trans Canada Highway, or from University Ave. along Euston Street to St. Peters Road.

What we are now seeing is a shift from those locations, perhaps due to the development of an arterial road. Once again, the development of outlets is following the traffic flow. This seems reasonable and appropriate to meet the interest and convenience needs of the motoring public.

In support of a gas bar and convenience store at this site, the Applicant filed 15 letters of support (Exhibit 22) thirteen of which were obtained from businesses operating in the immediate vicinity. As well, Mr. Livingston testified that he spoke to customers and tenants of his and even the single residence owner nearest the proposed outlet and all expressed support for the proposal.

The Commission prefers to hear directly from individuals who wish to support or oppose an application. However, we realize that this is not always possible and will accept letters as some evidence of concern or support.

The weight to be given to letters will depend upon a variety of factors. Form letters must be viewed cautiously. In this case, numerous questions were asked about the circumstances under which these letters were distributed and signed. The Commission finds that the evidence indicates these letters were not signed without some thought being given to the issue. The evidence is that in most cases they were approved and signed by a person in authority for the business concerned. For this reason they are of some value to the Commission in assessing support for this application.

As for the layout and physical accessibility of the site itself, Jack Liptrot of Ultramar was the primary witness. He testified that there would be no likely congestion, there is a good wide entrance that should allow entry without creating a bottleneck, and that there is no traffic or visibility problem at the site. The pumps are a good distance from the sidewalk and the land is well compacted, which should lessen any environmental concerns.

Paul Livingston noted that some of the layout had been changed after Ultramar tested the site for truck turning ability. Mr. MacLauchlan said that one of his drivers had gone to the site with a truck for a similar purpose and had reported no problems.

c) Competition/Existing Licensees/Demand

Evidence was provided by the Applicant of population statistics for the surrounding area and building permit approvals. These added little to the Applicant's case because they show no significant growth or decline and no argument was made that there is more need than existing outlets are capable of supplying.

Traffic flow information and statistics supported the argument that this area of Kensington Road, Riverside Drive and the perimeter highway are getting more and more traffic and are being used regularly by the motoring public.

Information was also provided about Charlottetown area sales and market shares. With respect to sales, Exhibit 11 shows sales increasing by five million litres from 1985 to 1990, but we know from information on file with the Commission that sales in 1990 for Prince Edward Island as a whole were only returning to 1979 levels. This would suggest that if sales have gone up in the Charlottetown area then it would be at the expense of outlets elsewhere.

This is the point made strongly by Dale Mader in his intervention on behalf of the P.E.I. Retail Gasoline Dealers' Association. He states that sales have not been increasing and there are more than enough outlets to serve existing demand for gasoline.

However, the argument put forward by Mr. Mader in our view leads to two conclusions. Mr. Mader concludes that if there are more than enough outlets, there is no need for another. This is one possible conclusion, but our review of the law would qualify this statement by adding "unless the proposed outlet would add to the public interest, convenience and necessity of the motoring public being served in the area". The other possible conclusion we see is that, if there are too many outlets now, it is likely that some could close without the motoring public suffering any material detriment in terms of convenience and necessity. Viewed in this light, the argument being put forward by Mr. Mader does not rule out the possibility of a new outlet being justified as meeting the requirements of public interest, convenience and necessity.

Having reviewed numerous board decisions and court cases dealing with public interest, convenience and necessity, and with public convenience and necessity (including Re Allison MacLeod Ltd. (1958), 14 D.L.R. (2d) 500 (P.E.I.S.C.); Nova Enterprises Limited v. Nova Scotia (Attorney General), (unreported, N.S.S.C.A.D., October 23, 1987), Simeon Carlos (N.S.P.U.B., December 31, 1934); In re Irving Oil, [1986] 2 P.E.I.R. B-8 (A.D.); Canadian Tire Corporation Ltd., (N.S.P.U.B., October 3, 1990, including dissent by Harris), the Commission has determined that the issue to be considered when applying the public interest, convenience and necessity test is not whether existing outlets are capable of fulfilling existing requirements in the global sense, but rather whether there is a need or convenience requirement of the public that is not being served--either by location, service offerings, price or some other aspect of business. If so, it would be in the interests of the motoring public to be served in that area for the new outlet to be approved, unless such a new outlet would likely have an overall negative impact on this group.

If such a proposed operation would have such a negative effect upon existing retailers that there would be an overall decline of availability of service to the overall detriment of the motoring public in the area, then those negative effects would override the benefits.

While it is true that the sales of 1 to 1.5 million litres hoped for at this new outlet will no doubt come from other outlets in the area, there is no indication that this would have an overall negative effect on the services available to the motoring public in the area.

We also agree with the suggestion made by the Applicant's counsel in his post-hearing brief that where traffic patterns and consumer expectations change, the refusal to grant new licenses is unlikely to save outlets which are now located in the wrong place or which are uncompetitive. All the refusal would do would be to increase the volumes at the outlets most conveniently located and inconvenience the motoring public.

The one other factor of relevance in determining whether or not the motoring public's best interests are being served is whether or not competition will be lessened because of the dominance of one wholesaler in the marketplace. While this requires us to go behind the Applicant to its proposed supplier in this case, given the long-term nature of the proposed cross-lease with Ultramar, we think this is appropriate. The Applicant is in one sense not "independent" for the ten years of the lease and for any renewal term the supplier might have. This will influence the market share of Ultramar.

Exhibit 12 deals with the issue of market share in the Charlottetown area and indicates that Ultramar has had and continues to have a significant market share. However, the market share is not disproportionate and we do not believe the proposed outlet will have an impact that would cause us concern at this time.

Conclusion

The Applicant has produced sufficient evidence to indicate that on a consideration of public interest, convenience and necessity the application should be approved. Traffic patterns have changed, along with activities in the area of the proposed site, to an extent that gasoline dispensing facilities at a convenience store on that site would appear to be convenient and meet a public need in that area. The impact on competition in the area would not appear to be so great as to create any overall concern about the best interests of the motoring public in this area being served.

However, the Commission does have one area of concern. The outlet is proposed to be self-serve with only one employee full time. Additional help would be provided for the busy times. When asked about one employee being sufficient for an outlet of this type, Mr. Darnbrough's answer did not satisfy the Commission. Given the location, it is clear that at times such as when the Charlottetown Driving Park closes, when events end at the Civic Centre and Exhibition Grounds, and even as they begin, the Applicant can expect to be very busy. The console operator must be aware of what is happening at the pumps at all times for the safety of the operation. Being distracted by many people looking for store items or buying cigarettes in a rush to get to the next race is no excuse for laxness in this area.

We believe there is a need for at least two people at that outlet, especially when there are events at the Civic Centre or Exhibition Grounds. This license (as would any other) will be suspended if we find that the safety of the public is being jeopardized.

IV. Order

The Commission therefore Orders that:

1) The application of Ben Livingston & Sons Ltd. dated 28 March 1991 for initial licensing covering the installation and operation of retail self-serve gasoline dispensing facilities in conjunction with a proposed convenience store to be constructed at the intersection of Kensington Road and Exhibition Drive in Parkdale be and is hereby approved.

2) Final plans with respect to the above-noted outlet are to be submitted to the Commission for approval prior to construction.

3) A license under the Petroleum Products Act will be issued when construction is completed and final inspection has determined that all requirements have been met.

4) The outlet is to be operated in accordance with the filed application and testimony given by and on behalf of the Applicant at the hearing.

5) Having regard to the timing of this Decision, the approval contained in this Order is valid for a period of six months from the date of issuance thereof rather than the standard four months.

DATED at Charlottetown this 5th day of February, A.D., 1992.

BY THE COMMISSION:

Chairman

Commissioner

CARR, Commissioner (dissenting): I dissent from the findings in the majority's Decision and Order for reasons which follow.

Section 20 of the Petroleum Products Act, P.E.I. 1990, Cap. 43 directs the Commission to consider public interest, convenience and necessity by applying criteria such as the demand for the proposed service, location of the outlet, traffic flows and the applicant's record of performance.

In my opinion, the areas of demand and need for the proposed service have not been addressed in sufficient measure to meet the requirements of the legislation.

During the public hearing one individual, Mr. Harry MacLauchlan, did appear and give evidence in support of the application. Fifteen individuals representing both businesses and property owners from the surrounding area signed form letters of support. However, not one of the fifteen appeared in person to support the application by evidence during the public hearing. A letter of intervention from Mr. William E. Armstrong was received but the author did not attend the hearing to support his arguments. Other witnesses for the Applicant addressed the issues of location, traffic flows and the record of performance. However, in the area of demand, the Commission in this case is faced with the dilemma of weighing unsupported written evidence and the evidence from one who supports the application (Mr. MacLauchlan) against the evidence of one who appeared in opposition to the application on behalf of the R.G.D.A. (Mr. Dale Mader).

Exhibit 39 outlines the objections raised by the P.E.I.R.G.D.A. to this application. Some of these objections are summarized as follows:

- market demand for retail gasoline in Prince Edward Island is at same level as it was in 1979
- Charlottetown area outlets sold less gasoline in 1990 than in 1989
- Prince Edward Island has the highest density of retail gasoline outlets and the lowest average volume of gasoline sales of any province in Canada
- twenty-six outlets serve the Charlottetown area and offer a wide variety of services and hours of operation

Mr. MacLauchlan strongly believes that need for the outlet exists because from the Shaw Building on Kent Street to Riverside Drive via Kensington Road there is no retail gasoline facility and patrons of the Civic Centre and the Charlottetown Driving Park have the need "for service or a place to get gas anyway". He maintained it is not fair to the travelling public not to have an outlet on that main artery. Mr. MacLauchlan admitted to having more interest in this application because, if successful, his company could be the supplier of the petroleum products to be dispensed through the pumps.

Are the interests of the potential supplier of product to be equated to the needs of the motoring public or are the needs of the motoring public to be considered in a broader sense to include service availability beyond the supply of gasoline? In my opinion, if gasoline dispensing facilities are necessary, convenient and in the public interest for motorists travelling a "main arterial" like Kent Street-Kensington Road to the By-Pass Arterial simply because it is a main arterial, then similar arguments could be used for gasoline dispensing facilities on other main arterials such as the Brackley Point Road north of Belvedere Corner, and Mt. Edward Road (both of which will likewise connect with the By-Pass Arterial in 1992) and North River Road. It has been suggested that main arterials allow traffic to flow smoothly. Locating a gas bar on a main arterial at the proposed site could change traffic flows and result in hindrance to traffic flows. Consequently, an argument could be made that an outlet should not be located at such a site due to this factor.

Three outlets on St. Peters Road are conveniently located within a very short distance of the site in question. No motorist would be greatly inconvenienced if the site in question was not developed as a gas bar with convenience store. Put another way, public convenience and necessity do not require an outlet at this location.

Arguments put forth in support of the placement of gasoline dispensing facilities at the site in question were not, in my opinion, sufficient to warrant approval of the application before us.

Therefore, I do not concur with the decision of the majority in approving this application.

Commissioner