Click here for a PDF version of this Order.

Docket PD911
Order PC18-003

IN THE MATTER  of the application by Parkland Fuel Corporation pursuant to section 20 of the Petroleum Products Act, R.S.P.E.I., c. P-5.1, for a retail petroleum outlet license to operate a retail gasoline and diesel outlet.

BEFORE THE COMMISSION ON Wednesday, June 27, 2018

J. Scott MacKenzie, Q.C., Chair
M. Douglas Clow, Vice-Chair
John Broderick, Commissioner
Terry McKenna, Commissioner

Order

Contents

Appearances & Witnesses

Reasons for Order

Decision

Overview

Statutory Mandate

Issue

Analysis

Evidentiary Questions

Public Interest, Convenience, and Necessity

Other Issues Raised by the Intervenors

Conclusion

Order

Appearances & Witnesses

1.  For the Appellant, Parkland Fuel Corporation

Counsel: Ryan P. MacDonald

Witnesses: Steve Beatty, Bill McQuillan, and Vera Gaudet

2.  For the Intervenor, Cape d'Or Holdings Limited:

Counsel: Tom B. Keeler

Witness: Doug MacDonald 

3.  For the Intervenor, Mel's Enterprises Inc.:

Representative: Dan MacIsaac

4. For the Intervenor, Ferne MacPhail

Representative: Colin MacPhail

5. For the Intervenor, PEI Retail Gasoline Dealers Association:

Representative: Jeff Doucette

Witness: Norman Glow

6. For the Island Regulatory and Appeals Commission:

Counsel: Jonathan M. Coady

Reasons for Order

Decision

[1]  The Island Regulatory Appeals Commission (the "Commission") approves the application of Parkland Fuel Corporation ("Parkland") for a retail petroleum license pursuant to section 20 of the Petroleum Products Act1.

Overview

[2]  On September 8, 2017, Parkland made an application to the Commission for a license to operate a new retail petroleum outlet at the intersection of Capital Drive and Maypoint Road in Charlottetown, Prince Edward Island.  The property is located beside a new roundabout at this intersection.

[3]  The proposed outlet will have eight fuel pumps, provide both gasoline and diesel, include a convenience store and car wash facility, and be open 24 hours a day.  The outlet will be operated under the Ultramar brand.  A quick-service restaurant is also planned for the property.  The property will be owned by Cordova Realty Ltd. ("Cordova") and leased to Parkland.  

[4]  On February 26, 2018 the Commission ordered a public hearing in relation to the application.   

[5]  Four parties applied for and were granted status as an intervenor in the public hearing: 

  1. Mel's Enterprises Inc. ("Mel's"), which operates a newly renovated retail petroleum outlet on Highway 1 under the Shell brand; 

  2. Ferne MacPhail ("MacPhail"), who owns a property on Highway 1 that is leased for the operation of a longstanding retail petroleum outlet under the Petro Canada brand; 

  3. Cape d'Or Holdings Limited ("Cape d'Or"), which operates a successful retail petroleum outlet at the intersection of Capital Drive and North River Road under the Esso brand; and 

  4. the PEI Retail Gasoline Dealers Association ("Association"), which is a voluntary association of a small number of the retail petroleum dealers in Prince Edward Island.  

[6]  The four intervenors oppose approval of the application by Parkland. 

[7]  The Commission did not receive any comments or objections from the other retail petroleum dealers in Prince Edward Island.  In response to the public notice of the application and hearing the Commission received an objection from only one member of the public who operates a nearby stand alone car wash.The Commission does not regulate car washes. 

[8]  All parties were invited to present evidence and provide written and oral submissions to the Commission. A public hearing was held on May 30 and May 31. All parties participated at the hearing.

Statutory Mandate

[9]  The Legislature has vested the Commission with the authority to supervise the licensing of retail petroleum outlets in Prince Edward Island2.   The Petroleum Products Act requires that every retailer obtain a license from the Commission for any petroleum outlet3.   However, no license confers any perpetual or exclusive right by virtue of section 18 of the Petroleum Products Act.4

[10]  In order to decide whether to approve the application by Parkland, the Commission is required to consider the public interest, convenience and necessity.5 More specifically, section 20 of the Petroleum Products Act requires the Commission to consider the demand for the proposed service, the location of the outlet, traffic flows and the applicant's record of performance:

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.6  

[11]  Additional relevant factors are set out in the application form.  The form states that the Commission may consider the following: 

  1. the services presently available to the motoring public in the area; 

  2. trends in gasoline sales; 

  3. population and traffic trends in the area; 

  4. the demand for service; and 

  5. whether the application would promote competition. 

[12]  The Commission has previously found that section 20 of the Petroleum Products Act permits flexibility and the particular circumstances surrounding each application must be considered.  There is no single checklist of factors that must be satisfied in every application.  The determination of an application by the Commission is to be made in the context of the relevant facts of that application.7   The goal of the Petroleum Products Act is to ensure that there is a reasonable network of retail outlets.8   Public convenience and necessity are assessed under the Petroleum Products Act from the perspective of the motoring public and not the public in general.9  

[13]  Consistent with the earlier direction of the Commission in Order PC10-01,10 it was generally agreed amongst the parties that the following factors were relevant to the application made by Parkland in this case: 

  1. the promotion of competition; 

  2. traffic volumes and trends in the general area of the proposed outlet; 

  3. population size and trends in the general area of the proposed outlet; 

  4. trends in gasoline sales, especially, but not exclusively, among outlets in the general vicinity of the proposed location; and 

  5. services presently available to the motoring public in the general area of the proposed location.

[14]  The exercise is a contextual one.  The presence or absence of any one factor is not necessarily fatal.  The whole of the application must be considered against the statutory standard fixed by the Legislature in section 20 of the Petroleum Products Act: public interest, convenience and necessity. 

Issue

[15]  The only issue is whether public interest, convenience and necessity would be satisfied by approving or denying a retail petroleum license for Parkland at the proposed location.

Analysis 

Evidentiary Questions 

[16]  Two evidentiary questions arose during the hearing of the application.  First, there were questions raised as to the admissibility of, and weight to be given to, a report prepared by the MRSB Group and filed by Parkland as part of its application (the "MRSB Report").  Second, there were questions raised as to the burden of proof in an application of this type.

(1) Admissibility and/or Weight of the MSRB Report               

[17]  As part of its application, Parkland appended the MRSB Report, which had been prepared for Cordova.  The report provided a number of opinions on each of the factors outlined above in relation to public interest, convenience and necessity.  In order to form these opinions, the report relied on a number of sources of information, including a telephone survey conducted by Vision Research Inc. ("VRI") and statistics published by Statistics Canada ("StatsCan"), the Department of Transportation, Infrastructure and Energy (the "Department"), and Tourism PEI.   

[18]  Several intervenors argued that the Commission cannot give any weight to the MSRB Report.   They argued that the author of the report was not available as a result of a conflict of interest with one of the intervenors and therefore could not be examined at the hearing.  It was also argued that, without the whole VRI survey and its underlying data, the reliability of the survey could not be tested in any meaningful way.  Both Cape d'Or and Mel's noted that Parkland was relying on statistics arising from the VRI survey, but the Commission was not provided the actual supporting data for those statistics or any data that was potentially to the contrary. 

[19]  For its part, Parkland submitted that the MRSB Report, including the VRI survey, was admissible and deserving of weight from the Commission.  While Parkland acknowledged that it was unfortunate that the author of the MSRB Report was not present at the hearing, Parkland submitted that this was not fatal and beyond its control.  Parkland also argued that the reliability of the MRSB Report was not really an issue because many of its findings were not disputed by the parties and based on credible, objective sources.  As for the VRI survey, Parkland submitted that any issues as to its reliability went only to weight and not admissibility. 

[20]  The Commission agrees with the interveners and finds that there are concerns surrounding the MRSB Report and, in particular, the VRI survey.  Given that the author of the MRSB Report was not available for cross-examination at the hearing, the intervenors did not have meaningful opportunities to test the opinions contained in the report.  While the MRSB Report is relevant to the application by Parkland, the absence of its author at the hearing raises concerns as to both fairness and reliability.  The Commission therefore places no weight on the subjective opinions contained in the MRSB Report. 

[21]  The Commission is similarly concerned with the VRI survey.  The Commission agrees with the intervenors that the VRI survey ought to have been tabled in its entirety.  Without knowing the questions, responses and underlying data, it is difficult to assess the reliability of the statistics generated by the VRI survey.  Without the underlying data, a statistic generated from that data is of little assistance to the Commission.  For these reasons, the Commission places no weight on the statistics generated by the VRI survey.   

[22]  The subjective opinions in the MRSB Report, including the VRI survey, are contrasted with other credible and objective data that is contained in the report.  That data was capable of being tested and verified if the intervenors had chosen to do so.  Statistics from governmental sources, such as StatsCan, the Department, and Tourism PEI are credible and independent.  Reliability is therefore inherent within these types of information.  None of the parties challenged the reliability of this objective data.  In addition, no party presented data that contradicted these governmental sources.  The Commission therefore finds that it is entitled to admit and weigh the objective data contained in the MRSB Report and, in particular, the information from StatsCan, the Department, and Tourism PEI.

(2)  Burden of Proof

[23]  At the hearing, there was some disagreement between the parties as to the "burden of proof" for the application.  Parkland argued that it was only required to substantiate its case.  According to Parkland, it is open to the Commission to draw inferences from historical data and from the record generally.  For its part, Cape d'Or argued that the intervenors were not under any obligation to provide evidence and that the burden of proof rested solely on Parkland.  In other words, as the applicant, Parkland had to prove its case for public interest, convenience and necessity. 

[24]  An applicant seeking approval from the Commission bears the legal and evidentiary burden of substantiating its application.  However, the Commission agrees with Parkland that it is only required to substantiate its case and that inferences can be drawn from historical data.  In fact, the Commission has previously held that "certain assumptions based on historical data must obviously form part of the decision-making process in the case of non-established situations."11 Care must be taken not to import a strict judicial understanding of burden of proof into this type of regulatory hearing.  An applicant must substantiate their application; however, an applicant cannot be expected to assume the burden of proving exactly what will happen at some future point in time. 

[25]  Finally, while the Commission agrees with the intervenors that they were under no legal burden to prove anything, evidence may nonetheless be expected from intervenors when they wish to rebut historical data or the inferences to be drawn from that data.   For example, in the face of evidence that the consumption of gasoline and diesel is increasing in a particular area, intervenors cannot simply speculate that consumption will eventually decrease to defeat an application.  Ordinarily, evidence that is both reliable and specific to the local market will be required in order to rebut these types of inferences.  That evidence may be in the form of data to the contrary, evidence from within the industry or local market, or an expert.

Public Interest, Convenience, and Necessity 

[26]  The following factors, specific to the Parkland application were considered by the Commission in coming to its finding that Parkland substantiated its application and demonstrated that the granting of a license would satisfy the public interest, convenience and necessity test set forth in section 20 of the Petroleum Products Act. 

(1)  Record of Performance

[27]  The Commission finds that Parkland has a demonstrable record of performance in the operation of retail petroleum outlets and in the petroleum industry in general.  Parkland currently operates 1,850 retail petroleum outlets across the country.  Parkland also has a record of environmental compliance.  There was uncontested evidence before the Commission that Parkland conducts regular environmental audits.   

[28]  The public interest is advanced by retailers with demonstrable experience and expertise in the industry.

(2)  Trends in Petroleum Sales

[29]  The Commission is satisfied that the sales of gasoline and diesel in the local area have gradually increased over the last five years.  For example, Exhibit C-11 demonstrates that gasoline and diesel volumes increased between 2013 and 2017 for the five retailers that are closest to the proposed location.  It is reasonable for the Commission to infer that this increase in volume over the last five years is a signal of demand from the motoring public. 

[30]  Some of the intervenors submitted that the Commission cannot draw inferences from this data.  For example, Mel's argued that traffic volumes and petroleum demand will decline as a result of the introduction of a price on carbon and increased motor vehicle efficiency.  Cape d'Or also produced two reports from the United States that stated petroleum demand would decline over the next decade.  The reports cited the rising price of oil, fuel efficiency improvements, and alternative fuel vehicles as factors that will lead to a reduction in demand. 

[31]  These objections can be addressed summarily.  First, Cape d'Or acknowledged that the reports did not consider local issues or the particular market in Prince Edward Island.  The Commission is therefore unable to assume that the conclusions found in these reports are transferrable to the local market.  Second, the Commission did not have any evidence regarding the impact of a carbon price and vehicle efficiency on demand for gasoline and diesel in Prince Edward Island.  In the absence of evidence as to transferability and causation in our local market, the Commission simply cannot speculate that these factors will reduce demand for petroleum in this area going forward.  That evidence may someday be available, but it was not presented to the Commission in this application. 

[32]  The Commission has not been provided with any cogent evidence that would displace the logical inference from the historical data.  There is a general upward trend in the volume of gasoline and diesel sold in this local area.  This is a sign of continuing demand from the motoring public.

(3)  Trends in Traffic and Population

[33]  The application by Parkland is supported by expected changes in traffic patterns around the proposed location and population growth in the general area.  

[34]  The redevelopment of Highway 1 is expected to have a significant impact on local traffic trends: 

  1. First, a median has been constructed to divide the lanes of travel on Highway 1, which prevents access to existing retail outlets by left-turning vehicles.  Choice by the motoring public will therefore be restricted.   

  2. Second, the routing of Highway 1 will be modified by the construction of a bypass around the Town of Cornwall.  The MRSB Report states that, according to estimates from the Department, 8,000 vehicles or 53% of traffic will be re-directed to the new bypass.  A large segment of the motoring public will therefore be routed around an existing retail outlet in Cornwall. 

[35]  Several interveners submitted that the median would not affect the behaviour of the motoring public in a material way.  For example, MacPhail provided relevant and practical evidence that motorists were already generally reluctant to turn left across two lanes of oncoming traffic on Highway 1.  In other words, the median would just make impossible what had otherwise been impractical.  This is true.  However, it also cannot be denied that the addition of the median has the physical effect of restricting choice for the motoring public.  The proposed location which is immediately adjacent to the roundabout is accessible to the motoring public travelling inbound from Cornwall and outbound from Charlottetown.  In addition, for those vehicles expected to bypass the Town of Cornwall, Parkland would be a new option for retail petroleum service. 

[36]  The Commission also finds that the evidence demonstrated a general increase in the volume of motor vehicles in Prince Edward Island.  The MRSB Report stated that, according to the Department, the number of vehicle registrations and the number of new vehicles sold in the province has increased from 2011 to 2016.  Tourism PEI has also noted an increase in traffic on the Confederation Bridge from 2014 to 2016.  While these types of general patterns are relevant, the Commission also observes that they are not determinative.  Objective data that is related to the area in the immediate vicinity of the proposed location is more valuable to the Commission. 

[37]  There was evidence before the Commission that the population of the surrounding area is trending upwards.  The data from StatsCan shows that the population of Charlottetown and Cornwall has increased from 2011 to 2016 (4.4% and 3.6%, respectively).  For its part, Cape d'Or argued that this increase was a result of urbanization and therefore not sustainable.  However, no evidence was presented to the Commission in support of those assertions.  The Commission did, however, hear evidence that the area surrounding the proposed location was undergoing a substantial amount of commercial development.  To cite one example, there was evidence that a six-storey hotel was being constructed on the lot adjacent the proposed outlet.  When taken together, it is reasonable to infer that this population growth and development will contribute to demand from the motoring public. 

[38]  In summary, the redevelopment of Highway 1 will have the effect of reducing the number of retail petroleum outlets available to a large segment of the motoring public.  When this is combined with the increasing population, increasing traffic, and increasing commercial development in the immediate area, there is a strong evidentiary basis to infer that demand from the motoring public will also increase.  The interest, convenience, and need of the motoring public would be served by an additional retail outlet. 

(4)  Promotion of Competition and Services Presently Available

[39]  The Commission is satisfied that the introduction of a retail petroleum outlet under the Ultramar brand will increase choice for the motoring public and foster marketplace competition in the immediate area. 

[40]  Parkland will introduce a new brand - Ultramar - to the local area.  While there are Ultramar outlets located in Charlottetown at University Avenue and St. Peter's Road, none are located within the area that is reasonably expected to be served by the proposed location.  Accordingly, there is no concern of the market being dominated by a single brand or retailer.  Adding another national brand to the local area will increase choice for the motoring public.   

[41]  The proposed outlet will also provide some new services and programs that will further enhance consumer choice.  For example, the outlet will provide an onsite carwash service, offer a discount program at the pump, and be open for 24 hours a day.  A convenience store will also be operated; however, such a service is already found onsite at each of the existing retail outlets in the local area.   

[42]  By granting the application, competition will be encouraged in the local area to the benefit of the motoring public.  Consumers will have additional choices and the benefit of a broader network of outlets that provide a suite of services and programs.

(5)  Accessibility and Safety of the Proposed Location

[43]  The Commission is satisfied that the proposed outlet will be safe and accessible for the motoring public.  The evidence before the Commission demonstrated that the City of Charlottetown confirmed that the three points of access to the proposed location were reviewed by an expert and determined to be safe.   The City further confirmed that it was confident that its traffic impact study addressed all of the traffic engineering concerns related to the proposed location.  The Commission has not been provided any objective, expert, or professional evidence to the contrary.  The safety and accessibility of the proposed outlet has therefore been assured by the City. 

(6)  Totality of the Record

[44]  After considering the record as a whole, the Commission is satisfied that section 20 of the Petroleum Products Act has been satisfied.

Other Issues Raised by the Intervenors 

[45]  Several intervenors submitted that the application ought to be rejected because: 

  1. first, statistics suggest that existing retailers are operating below capacity and therefore have the ability to meet the future needs of the motoring public; and 

  2. second, Parkland would not be offering any new service to the local area. 

The Commission does not accept these submissions for the reasons that follow.

(1)  Capacity of Existing Outlets

[46]  Cape d'Or, Mel's, and the Association placed much emphasis on the fact that retailers in the local area are operating below their capacity.  The intervenors argued that an additional outlet was not necessary, and that the presence of an additional outlet could negatively impact the other existing outlets.  However, there was no evidence before the Commission that an existing outlet would close as a result of a new outlet being approved. 

[47]  Similar arguments have previously been made to the Commission.  While the Commission has recognized that negative impacts on existing retailers are relevant to its analysis, the Commission has also concluded that section 20 of the Petroleum Products Act focuses on the needs of the motoring public and not the needs of existing retailers.  In order to prevent approval of a new retail outlet, the evidence must demonstrate that service to the motoring public will be diminished: 

While concerned about the viability of each and every existing retail outlet, the Commission's statutory mandate relates primarily to the motoring public at large and as such their interest, convenience and necessity. As per previous Commission Order P.920211-2 (February, 1992 Irving Oil Limited), the Commission is of the opinion that it is only when the evidence clearly indicates that a new license will result in the closure of an existing outlet, which in turn will result in diminished service to the motoring public at large, that this detrimental effect takes a greater significance.  In this case the evidence given relating to any anticipated detrimental effect to existing outlets was insufficient to warrant declining the applications on that basis alone.12

[48]  In this case, none of the intervenors stated that they would be required to close in the event that the application by Parkland was approved.  The Commission also received no evidence of any projected future losses for existing retailers.  In the absence of such evidence, the Commission is unable to place significant weight on the current capacities of, and future potential losses to, existing retailers.   

[49]  Finally, the Commission observes that competition is intended to be fostered by the Petroleum Products Act.  As recognized by section 18 of the Petroleum Products Act, no license confers any perpetual or exclusive right upon a retailer.13   In other words, the Petroleum Products Act does not require an applicant wait until other existing retailers are operating at (or exceeding) their capacity before it can apply to enter the market.  Rather, an applicant must demonstrate that a new outlet is in the public interest and serves the convenience and needs of the motoring public.

(2)  Duplication of Services

[50]  Many of the intervenors submitted that Parkland will duplicate services that are already provided by existing retailers in the area.  For example, Mel's argued that its outlet includes both diesel and gasoline, offers a convenience store, includes quick service restaurant, provides a number of loyalty programs, and provides a cross-promotion for car wash services.  It was therefore submitted that the motoring public is already being served by existing retailers.  Parkland, for its part, countered that it is not required under the Petroleum Products Act to offer new or different services.

[51]  The Commission does not agree that Parkland will simply replicate the services being provided by other retailers in the area.  For example, the proposed outlet will provide an onsite car wash, offer a new national brand, and be open to the public for 24 hours a day.  The end result will be increased choice in the area for members of the motoring public. 

[52]  An application under the Petroleum Products Act cannot be defeated solely because an applicant will offer services similar to those already available to the motoring public.  While the addition of new or different services will generally be in the interest of the motoring public, it does not follow that the provision of the same or similar services will generally not be in the interest of the motoring public.  After all, each retailer - existing and proposed - is operating the same type of business in the same regulated market.  Each application must therefore be assessed in its entirety and on its own merits. 

[53]  The Commission finds that the introduction of an additional retail outlet - even one that offers services and programs that are substantially similar to those offered by existing outlets - will benefit the motoring public in a local area that is directly affected by highway redevelopment, population growth, and new commercial development. 

Conclusion 

[54]  In conclusion, the Commission finds that Parkland has substantiated its application.  The Commission is also satisfied that the proposed outlet will serve the interests, needs, and convenience of the motoring public in this area.  Redevelopment of Highway 1, changing traffic patterns, growing population, increasing vehicular traffic, and new commercial development in the immediate area are all reasonably expected to increase demand for petroleum in this area.  The motoring public will therefore benefit from the addition of a modern, 24-hour retail outlet that offers a new brand, is located at a safe and convenient site, and is operated by an experienced retailer. 

1 R.S.P.E.I. 1988, c. P-5.1.
2 R.S.P.E.I. 1988, c. P-5.1,s.9.
3 Ibid., s. 11.
4 Ibid., s. 18.
 5 Ibid., s. 20.
 6 Ibid.
 7 Order PC10-01 at para. 53.
 8 Ibid. at para. 54.
9 Ibid. at para. 55.
10 Ibid.
11 Order P. 990707.
12 Order No. PC10-01 at para. 66.
 13 R.S.P.E.I. 1988, c. P-5.1, s. 18.

Order

Upon reading and considering the application, the submissions by the parties, and all of the evidence at the hearing herein;

NOW THEREFORE for the reasons given in the annexed Reasons for Order;

IT IS ORDERED THAT

The license for the proposed retail petroleum outlet located at the intersection of Capital Drive and Maypoint Road in Charlottetown, Prince Edward Island, being tentatively identified as 400 Capital Drive, and operating in the name of Parkland Fuel Corporation, as an Ultramar retail outlet with four pump islands consisting of a total of eight nozzles serving gasoline and diesel and operating on a twenty-four hour per day basis is hereby approved subject to the condition that the following information be provided to the Commission within 180 days of the date of this Order:

  1. applicable filing fee;

  2. a copy of preliminary approval from the Department of Communities, Land and Environment relating to the installation of petroleum storage facilities;

  3. a copy of the building permit or approval in principle for the retail petroleum outlet from the City of Charlottetown; and

  4. proof of ownership of the lands by Cordova Realty Ltd. and a copy of the lease agreement between Cordova Realty Ltd. and Parkland Fuel Corporation. 

DATED at Charlottetown, Prince Edward Island, Wednesday, June 27, 2018

BY THE COMMISSION:

J. Scott MacKenzie, Q.C. Chair

M. Douglas Clow, Vice-Chair

John Broderick, Commissioner

Terry McKenna, Commissioner

NOTICE

Section 12 of the Island Regulatory and Appeals Commission Act reads as follows:

12.  The Commission may, in its absolute discretion, review, rescind or vary any order or decision made by it or rehear any application before deciding it.

Parties to this proceeding seeking a review of the Commission's decision or order in this matter may do so by filing with the Commission, at the earliest date, a written Request for Review, which clearly states the reasons for the review and the nature of the relief sought.

Sections 13(1) and 13(2) of the Act provide as follows:

13.(1)  An appeal lies from a decision or order of the Commission to the Court of Appeal upon a question of law or jurisdiction.

(2)   The appeal shall be made by filing a notice of appeal in the Court of Appeal within twenty days after the decision or order appealed from and the rules of court respecting appeals apply with the necessary changes.

NOTICE: IRAC File Retention

In accordance with the Commission's Records Retention and Disposition Schedule, the material contained in the official file regarding this matter will be retained by the Commission for a period of 2 years.