BRIDGEWATER, THURSDAY, JULY 15, 2004
SELECT COMMITTEE ON PETROLEUM PRODUCT PRICING
7:00 P.M.
CHAIRMAN
Mr. William Dooks
MR. CHAIRMAN: Good evening, ladies and gentlemen. My name is Bill Dooks, and I'm the Chairman this evening. We would like to welcome you here tonight. On behalf of the committee, I would like to say that we're very pleased to be in this community this evening. We're here by order of Resolution No. 1676 by the House of Assembly. In a broad sense, we're basically a select committee travelling throughout Nova Scotia gathering your concerns and ideas about the fuel prices in Nova Scotia, whether that be gas or home heating fuel.
Tonight we've structured this committee to listen to you. We had a meeting in Yarmouth last night, and I think it was very successful. We certainly were informed of the issues in that part of the province. The rules are very simple here tonight, and I hate to use the word rules but we do have to have rules because of time restraints. I must advise you, clearly, that everything you say tonight will be recorded. If you have not scheduled presentation time, you can see Kim, down at the back of the room, and she will take your name and pass it on to the committee.
Those scheduled in, of course, will go first, and those who wish to speak later, may. You will have 15 minutes in turn, organizations and/or a person, to give your presentation, and at that time, if you wish, I will open up the committee to questioning. This is how we gather our facts. In saying that, I will ask the committee members, starting at my far right, to introduce themselves.
[The committee members introduced themselves.]
1
MR. CHAIRMAN: Folks, you see we're very happy to be here. In saying that, it's a very relaxed committee meeting tonight. To those who are not familiar with this process, I want to make it very clear that you can be very comfortable in giving your presentation tonight, don't feel one bit nervous. And to those who are professionals, do as you wish. Once again, Kim, could you just wave to everybody so that they'll recognize you. We have a lot of information outside that you've probably had an opportunity to look at as you travelled into the room.
At this time, I will call the first witness, Lawrence England. (Interruptions) Just come to the front, and give your name for the record. We have another member of the Liberal caucus, Diana Whalen. It's nice to have you with us tonight, as well. Sir, state your name, and the floor is yours.
MR. LAWRENCE ENGLAND: My name is Lawrence England, and I'm representing the Kings County branch of the Retail Gasoline Dealers Association. I'm branch president. Since they wouldn't have a meeting in my territory, I had to drive to Bridgewater. Anyway, I will keep my presentation fairly short. I'm going to mainly hit on the gas margin prices that I have to deal with and changes that come on a daily basis in running my business. For instance, in June, I have June 4th here, I was 3.47 on self-serve, full-serve was 5.4; on June 7th self-serve was 2.7, and full was 4.7; on June 9th self-serve was 2.5, full-serve was 4.5.
MR. CHAIRMAN: Sir, excuse me, could you haul your microphone a little closer to you.
MR. ENGLAND: On June 13th we were back down to 2.59 on self-serve, and full-serve was 4.59. Now that's the type of thing we have to deal with, day to day, in our daily operations in our area. One thing I find is it's a pretty hard job for you to set any kind of a price budget to work with when your margins of profit are going up and down, basically daily. One thing I will bring to your attention is that the oil companies, in our area they took about 13 days to bring the thing down, a 10 cent a litre drop. Tuesday it went back up 5 cents, just like that. We're dealing with prices. We have customers coming in wondering why there's such a drastic jump in our pricing. It also takes its time to come back down.
One thing that I would like to see, maybe, on the heating fuel, I don't have much to do with that, but I know we have to buy it and I would like to see the HST removed. A lot of our poor people who have to buy furnace oil are paying that extra HST. I find that we're one glorified tax collector for the government. If you buy $20 worth of gas, we're paying pretty near $9 and some cents worth of tax on it. What we're doing is we're collecting the tax and getting nothing out of it, really. Thank you.
MR. CHAIRMAN: Any questions? We have one question from Mr. Brooke Taylor.
MR. BROOKE TAYLOR: Mr. England, thanks for driving over from Kings County. Price discrimination, where different retailers are charged different prices by the same supplier, to your knowledge, is that prevalent in Nova Scotia?
MR. ENGLAND: I couldn't answer that, honestly. I don't see a price on my invoice. When my fuel is delivered to my door, there's no price on my invoice. The gas you buy at my station today, I pay tomorrow, the - whatever you call it - tank-wagon price, whatever that going price is on my schedule for that day, I pay that price, regardless of what my margin is and this type of thing. Right now it's 93.9 at the self-serve, and that's what I pay, less my margin of profit on that.
MR. TAYLOR: You must be with one of the - you're integrated with the wholesaler - what flag are you flying at your operation?
MR. ENGLAND: I'm flying an Ultramar flag, I own my business, I own my pumps, the whole nine yards. The only thing I don't own is the eagle by the road.
MR. TAYLOR: Do they dictate which wholesaler you purchase from?
MR. ENGLAND: Well, I have to buy from Ultramar.
MR. TAYLOR: You have to buy from Ultramar?
MR. ENGLAND: Yes, I have to buy from Ultramar. I can't go down the road and buy from PetroCan. If I do, then that can really screw up your book work. No, I can't buy from another supplier, if that answers that question.
MR. TAYLOR: Some of the independents have indicated that they buy, for example, from Wilson Fuel Company Limited. I have an invoice, actually, from one of the independents who was kind enough to provide me with it. Everything is priced, their regular unleaded - now this is an independent.
MR. ENGLAND: I'm an independent operator, but I have a cross-lease contract with the Ultramar people that I buy their product.
MR. TAYLOR: May I be so bold as to ask your terms of endearment, so to speak, as far as, are you cash, COD, or do you have 30 or 60 days, or do you sell the product first?
MR. ENGLAND: I have one day.
MR. TAYLOR: One day to pay for it?
MR. ENGLAND: I will tell you my whole story, if I have time.
MR. CHAIRMAN: We have the time.
MR. ENGLAND: Ultramar puts the gas in the ground, it doesn't cost me anything for that, in the ground, but I have a cash deposit with Ultramar for $9,000, that's in a deposit, they pay me interest on it, they do that. When I sell their gas, today's gas will be paid for tomorrow morning, and we do it on an Interac machine. When we do up our statements and our invoices for the credit cards, that all comes out of the Interac machine, and we have to make up a cash deposit, it goes to the bank, that's all deposited in the bank and then we just come back and run our Interac card through our Interac machine, Ultramar gets paid. That's how we pay for our gas, day to day.
MR. TAYLOR: Now, you class yourself as independent but you must buy from Ultramar.
MR. ENGLAND: That's right.
MR. TAYLOR: Mr. Chairman, I'm having a little difficulty here understanding the independency there when, in fact, I feel if you were (Interruption)
MR. ENGLAND: There is no way that I can see of anybody buying from somebody else when you're tied under their banner.
MR. TAYLOR: Exactly.
MR. ENGLAND: That's right.
MR. TAYLOR: So, I was just curious as to whether or not your margin is guaranteed by Ultramar, irrespective of what you're paying?
MR. ENGLAND: Yes, this margin is up and down. They dictate my margin. I can have five cents today and three cents tomorrow, just like that.
MR. TAYLOR: Exactly.
MR. ENGLAND: If you followed my thing on this piece of paper I have, on June 4th, self-serve was 3.4 cents; on June 7th, it's 2.71 cents; so that's the fluctuation. On June 9th, on self-serve, it was 2.5 cents and on full-serve it was 4.5 cents. So that's the way they fluctuate. If gas goes up, I get a little more money out of their margin, if it comes down, I take a loss too. They fluctuate my margin to compare with their gas prices. It's the way I understand it.
Every time I get an increase it will come up a little bit. If I get a decrease, my margin will decrease.
But getting back to this independent thing. I'm an independent, I own my pumps, I own my building, I own my land. But I do fly the flag and what we do is we have a cross-lease with the Ultramar people, they pay me 1.75 per cent over and above my margin for this, but other than that I maintain my pump service. I have to look after all my pumps, my tanks, everything, my insurance and all that. But I am bound to buy their product, by this cross-lease.
MR. TAYLOR: One of the concerns I have and obviously, Mr. Chairman, with only a limited knowledge on this issue is that before - what I am getting at, I guess it was Tuesday of this week, all over the radio stations, locally in the Truro area and in the newspaper, it was reported that the price had gone up 5 cents, just in one fell swoop and nobody could actually give justification for that and the consumer is very frustrated by that and, obviously, the retailers and it seems as if, before you can really provide some type of price justification to the consumer out there, you have to have a level playing field for the retailers in this province first.
Anyway, that's it for now, I don't want to hog all the time.
MR. ENGLAND: It's a pretty hard job, we just get a phone call from Ultramar telling us to put the gas up or put it down. One of the things, like you mentioned there, the consumer will complain because how come it took so long to put it down 10 cents when it goes up 5 cents within an hour, that type of thing. That's what they're complaining a lot to us, about the oil companies, what they're doing to us. But I've been in the business for about 32 years, I was a Texaco retailer to start with, and when you're tied to a cross-lease, you have to buy their product, regardless, you can't go down the road and buy somebody else's. I guess you could, but the trouble is, when you do that, with this gas in the ground, they audit, they come around and do an audit on me. So if I had somebody else's gas in the ground, well then it would show that I had too much gas and I hadn't bought it from them.
Are there any other questions?
MR. CHAIRMAN: Oh, yes, we have lots. You're not going yet. (Laughter) We have more questions. Do you have anything further?
MR. TAYLOR: No, I think in fairness we have to give other members equal time.
MR. CHAIRMAN: We have other questions for you.
MR. ENGLAND: I will try to answer them but I don't know if I can do it.
MR. CHAIRMAN: I think you're doing a great job. Howard Epstein, please.
MR. HOWARD EPSTEIN: Mr. England, you are selling gasoline but in addition to that, are you also in the home heating fuel business?
MR. ENGLAND: Not now. I used to be years ago, but I'm not anymore. I threw that in there because I have an apartment house and my tenants have to buy oil and a lot of them are on welfare. So why are we taking welfare money and making them pay for the HST and then turning around and giving it back to them on welfare? It's more arithmetic to me than good sense.
MR. EPSTEIN: It's a perfectly good point. I wasn't disagreeing. I just wanted to know your interest in it.
The other thing I wondered was your comment about the 10-day delay in drop in price but really an instant rise when it goes up. Is there anything in your contract that affects that at all?
MR. ENGLAND: No, there is nothing in my contract that has anything to do with pricing.
[7:15 p.m.]
MR. EPSTEIN: So you have to take the price that is offered by the wholesaler?
MR. ENGLAND: Yes, I work with the price that the wholesaler puts out. Actually, the wholesaler is Ultramar. I have no control over the pricing, what they do.
MR. EPSTEIN: Are you aware if any of your other members have anything in their contracts, that is, any of the other members of the Kings County association?
MR. ENGLAND: Not that I'm aware of. Some of the other people, they have to buy their product and when they buy it and put it in the ground and if they have an increase they make a little money but if they have a decrease and they're sitting there with a tank full of product, they lose money.
MR. EPSTEIN: I understand that. Can you tell me how long you've been in the business?
MR. ENGLAND: About 32 years.
MR. EPSTEIN: That was all in Kings County, was it?
MR. ENGLAND: All in one little spot in Kingston.
MR. EPSTEIN: What I was wondering was during that time, during those decades, can you tell us about consolidation. I assume that there has been a decrease in the number of retail outlets in Kings County, is that right?
MR. ENGLAND: Oh yes. We've dropped to almost zero, I don't know, overall the picture is about 500 retailers who are independent left in Nova Scotia, but in Kings County we lost a lot of these two-bay Irving stations. In fact, there is another in Kings County, just in Kentville, right on Main Street, that the pumps just went a couple of days ago.
MR. EPSTEIN: How large is your station, sir?
MR. ENGLAND: Well, I have, I guess you could call, it a six-bay garage.
MR. EPSTEIN: Can you tell me what your total literage would be in the course of a year?
MR. ENGLAND: I am doing in about 1.5 million.
MR. EPSTEIN: Is that typical now with the size of the station you have in Kings County?
MR. ENGLAND: For my station it would be, because I don't have a big frontage. There are three pumps with six nozzles on them, but it's very close, confined, so if you drive into my station, you will have to wait for service sometimes. But the pumps are probably doing about as much business as you can get out of them.
Now, the guy up the road has a bigger outlet, he's Imperial, he's probably doing about twice what I'm doing.
MR. EPSTEIN: The margins that you were talking to us about, per litre before, was that before or after an adjustment for discounts that you would have to pay for credit card companies?
MR. ENGLAND: No, margin is - how can I phrase this - I lose 2 per cent off every credit card I process.
MR. EPSTEIN: So that 2 per cent comes off your 3.47 or your 2.59 or whatever it might be?
MR. ENGLAND: No, whatever you want to take, it comes off that.
MR. EPSTEIN: So those numbers you gave us were before you paid the credit card company?
MR. ENGLAND: That's right.
MR. CHAIRMAN: Gerald Sampson.
MR. GERALD SAMPSON: Thank you, Mr. England for coming.
MR. ENGLAND: Is that it?
MR. GERALD SAMPSON: No, sir, I do . . .
MR. ENGLAND: I'm on the hot seat here. (Laughter) I thought we had 15 minutes.
MR. CHAIRMAN: When the questions are through I will thank you.
MR. GERALD SAMPSON: I would just like to have your reaction, Mr. England, to the 48-hour notice that was originally proposed. How would that have sat with yourself or the gas dealers in your area?
MR. ENGLAND: You mean 48-hours notice before the price went up?
MR. GERALD SAMPSON: Yes. Or down, either/or.
MR. ENGLAND: It really wouldn't have made that much difference. If people knew that they were going to have a gas increase, it would drive us crazy, we're driven enough as it is. I will tell you how this seems to work in our area. I live in Kingston and about five miles south of me is Greenwood. There is an Ultramar, there is an Irving and a PetroCan. Well, the Irving and PetroCan will usually go up first over there, so we will get a real drive with people coming to our station to get the product, to get gas. A lot of them will say to us, well, you're usually the last one that goes up. We normally are. I'll have a yard full of people and if we had a 48-hour notice, everybody would be the same way, I suppose. You'd have a lineup at the pumps, probably steady, so I don't think that giving people notice is as good a thing as you might think it would be.
In some situations, we would probably run out of gas. I know the big Ultramar station that Ultramar owns in Greenwood has done that, because we are the last people to go up and they have pumped themselves dry of regular gas and had to switch to giving - where they're a company-owned outfit they can switch and they'll give you the supreme at the regular price, and they've had to do that.
MR. GERALD SAMPSON: Thank you, Mr. England. In a conversation prior to coming here this evening, I had an opportunity - Mr. Chairman, I was just wondering if this would be possible, and we had discussed it last night, it was first on the topic here this evening, the extreme fluctuation in prices - in a conversation with one of the representatives from the gas company, I understand they're going to make a presentation at the Halifax meeting and when they do that, would it be possible if anybody would like their information, could we print it off and mail it to those who would leave their address with Kim at the back? Would that be possible? I'm not here to defend the gas companies whatsoever, but I did get the feeling that these fluctuations are almost like a stock market price. What is the stock trading at today? These fluctuations occur and as they change on the daily market, up and down, I just thought that might be information that the public could use to reason why the fluctuations take place.
MR. ENGLAND: I think you have a point there. I've watched the crude oil prices on TV and it'll fluctuate and in a few days somebody will get a raise somewhere. It may not occur all over Nova Scotia, sometimes they'll put it up in Halifax and in the Valley area we won't get a raise for probably a week, and then it will creep up in our area, but sometimes it doesn't happen all over, but it will happen, and in some places it happens sooner than in others.
MR. CHAIRMAN: Member, to answer your question, all presentations are recorded and anyone who would like a copy of anyone's presentation would leave their name with Kim and she would be able to forward that presentation to them - also, it would be on the Internet as well.
MR. GERALD SAMPSON: Thank you, Mr. Chairman.
MR. CHAIRMAN: Okay, carry on. Is that it?
MR. GERALD SAMPSON: Yes.
MR. CHAIRMAN: Charlie Parker.
MR. CHARLES PARKER: Thank you, Mr. Chairman, and thank you, Mr. England, for coming over from the Valley to see us tonight. You've been in business now for 32 years and you've seen a lot of changes during that period of time. About 13 years ago, regulation was taken off of gasoline in this province and, of course, things have changed considerably
since then and prices certainly are much higher, I'd like to get your thoughts on regulation - did it work then, or not, and what do you feel today?
MR. ENGLAND: Oh, yes, regulation worked. I'm not saying that we needed to be regulated quite as much as we were, but I liked it when they decided we could have self-serve. I'm in a transit area, by Greenwood Air Base, and we always had a lot of complaints - people coming in from Ontario asking why Nova Scotia doesn't have self-serve. I think one of the biggest mistakes was made - this is my thought, I could be out to lunch - when they deregulated and turned the pricing over to the oil companies, at that time the government controlled the oil prices through their board of utilities and it took awhile for that to go through the system. There were no big increases, fluctuations like today. We're getting a lot of fluctuation - it goes up 10 cents, 5 cents, but back then it used to move 2 or 3 cents or a penny.
The old story I always got when this was in power was that the oil companies would go for 5 cents and the board of utilities would probably give them 2.5 cents - that's the way it worked. That was the story I got through the board of utilities. Nobody seemed to really notice that much difference, but when it goes 10 cents, then they start complaining. It is a bit - in some ways - today a lot of people are driving two cars, so it takes quite a bite.
The regulations, as far as I'm concerned, weren't all that bad. We could have had them just relaxed and go into self-serve. The government kept control of the oil prices, I think it would have probably helped this crisis that we're into now of the big jumps, you know, somebody else controlling it. All the oil company has to do is just dial my number and say, Lawrence, put your price up to this much and that's what I have to do, and I have to do it when they tell me. Before, you knew it was going to come because you saw it through the paper. Does that answer your question?
MR. PARKER: Yes, that helps. So generally you felt there was some merit to it at that time and there could still be today.
MR. ENGLAND: Yes, it was. Well, I'll tell you, it took 20 years to get some of the rules put into place and some of them weren't all that bad. We could live with a lot.
MR. PARKER: I'm going to switch to another question. Last night we heard a lot from independent retailers in the Yarmouth area who were very concerned about the low margins and there seems to be a variety of ways that independent, or lessees, are affected by oil companies - especially on the payment. Some, like yourself, pay every day and some are paying COD, and some are paying two days later, and some on longer terms, but I guess the bottom line - I know you have your mechanical business and everything that goes with your gasoline - do you feel you're making money on gasoline sales?
MR. ENGLAND: Not really. Not really, by the time I pay help, my credit card charges and this type of thing, it's about a break even. I watched it one year and I think I made enough to pay the expenses and pay the man for pumping gas - that's not counting the light bill for the service station part of it.
No, the amount of gas I'm selling, the only way I could survive on it, I'd have to pump it for the 13 hours a day that I'm open, myself, basically. To pay somebody to do it, by the time you take your wages out of it, your Workers' Compensation, your benefits and this type of thing that we have to pay the help, there's just not a lot in it.
One other thing I might add, too, I think as an independent we're a dying breed. The oil companies could care less if we stay or go. I have a contract coming up this November - the same contract I've had the last 5 years. I talked to my sales rep the other day and I asked, is there any chance that we can get a little increase on the 1.75 cents that they pay me over and above the margin. No.
MR. CHAIRMAN: Okay. Thank you. Russell MacKinnon.
MR. RUSSELL MACKINNON: Mr. Chairman, on the issue of deregulation, back in 1991 when deregulation kicked in it was on the premise that we would be able to provide greater service and that the price of fuel would actually go down. At that time I believe it was 45.9 cents a litre and now it's 90.5 cents a litre, so I think the math is off just a bit.
Now, given the fact that the number of service stations have been reduced quite substantially in the province from that period of time, and given the fact that government is chronically addicted to tax revenue, what else is there, as a committee, what we can do to help the consumers of Nova Scotia against the increasing cost of fuel prices?
[7:30 p.m.]
MR. ENGLAND: If I had that answer, man, I would be God. I don't have that answer.
MR. MACKINNON: If you had that answer, it would make you Leader of the Liberal Party. (Laughter)
MR. ENGLAND: I don't know about that.
MR. MACKINNON: It's important to be an optimist, Mr. Chairman.
MR. ENGLAND: Anyway, I sat in front of Don Cameron and George Moody in a motel in Truro when they were talking deregulation. I said, you give this four years and it's going to backfire on you. It took four years for it to kick in and then the prices started
fluctuating - up, down, up, down - and now, look where they are. It's like you said, they were back to 40-some cents and they're paying 93.9 cents at my station for self-serve and you have to pump your own gas to get it.
MR. MACKINNON: Quickly, Mr. Chairman. If not total, but perhaps some partial regulation, would be the answer?
MR. ENGLAND: I would think if the government stepped in and could - this is my thought and only my thought - if the government had some control of the pricing, it would slow the oil companies down from making these mega-increases. The big jumps. That's the thing.
As this gentleman here mentioned, it is something like the stock market. When crude oil goes up, everybody has to pay more money for this type of stuff. It's one of those things, but if the government had some control of the pricing, I would think it would be better regulated than what it is right now. All the oil company does is just phone me and whatever they want, they tell me and that's what I put on my sign.
MR. MACKINNON: Thank you.
MR. CHAIRMAN: I'd like to recognize Jim DeWolfe. One more question, sir.
MR. JAMES DEWOLFE: Mr. Chairman, I don't want to hold you too long. Last night we had a presenter who indicated that 25 years ago he had better margins than he does today. You're in the business now for 35 years, what were your margins like back then?
MR. ENGLAND: Well, they were better, but what we could do in a contract, we could get better deals. I got mega-deals out of Texaco when I was a Texaco dealer. I got storage tanks put in the ground at no cost. Double wall piping, double wall tanks. I got $25,000 up front - money I didn't pay back. You don't get that today. Your margins, maybe they were all right, but you got extra money when your contract came up and if you were smart enough to go for a five-year contract, you could do that every five years.
MR. DEWOLFE: Pretty good incentives involved.
MR. ENGLAND: That's right. It would give you a bunch of money. I would imagine the two tanks they put in, plumbing and all the bells and whistles, it cost them pretty close to $100,000 at my station. That was extras. You can't get that today.
I put in a new pump island and a new diesel tank about five years ago and they advanced me $20,000 and I had to pay it back. When I got all done, it was actually $30,000 because I added a few more things to it which is why I'm self-serve today.
That's the things you used to be able to get. You're not getting that now. If you don't want to take what the oil companies will give you today, you can go out the door. Okay?
MR. DEWOLFE: Thank you, sir.
MR. ENGLAND: Am I done?
MR. CHAIRMAN: Just before you leave, I'd like to thank you. As I recall, when you first took your seat, you weren't going to be very long.
MR. ENGLAND: You kept me too long.
MR. CHAIRMAN: We did so, we asked the questions, but we do thank you for the history and good luck to you.
Before I call the next witness, I'd like to introduce Carolyn Bolivar-Getson, the MLA for the area. It's nice to have you with us this evening, a minister, as well. Thank you kindly for coming.
I'd like to call now Rodney Grace. Rodney, I don't know if you were here, but you have 15 minutes to do your presentation. Then it will be up to the committee to ask you questions if you so desire. It's the committee who gauges the time. We were only joking there with Lawrence. I'd also like to inform you that your presentation this evening is being recorded. If anyone else has entered the room, if you would like to make a presentation and you haven't scheduled, please contact Kim at the back of the room. Sir, carry on, introduce yourself for the record.
MR. RODNEY GRACE: My name is Rodney Grace. I'll throw a little bit of background in here and try to give you my complete package in a short time. Thank you for taking the time to come to Bridgewater and to meet with us and to listen to us.
My wife, Tina, and I are the owners of Bob's Shell here in Bridgewater. Our business was founded by my uncle, Bob Grace. It was a White Rose service station 49 years ago, 1955. He was there from about 1948 when he originally started the business.
In 1981, I began working with my uncle. When he retired in 1993, Tina and I purchased the business from him. One year later, in 1994, the Atlantic Superstore purchased all the land around our service station to build a new grocery store. At this time we worked in conjunction with the Town of Bridgewater and the Atlantic Superstore and we traded our existing service station property for a larger, adjacent lot. This allowed for the Town of Bridgewater to do a street relocation to handle the extra traffic generated by the new grocery store.
We also took advantage of the opportunity and added propane sales, self and full-serve gasoline and more modern service bays to our offering. We financed this project ourselves, on top of the outstanding debt from the business we had just purchased one year prior. The rewards were immediate in 1993; our gasoline volume was 2.1 million litres a year, by 1995 it had grown to 4.1 million litres. During this time, it was shortly after gasoline was deregulated and our profit margins were seldom less than 6 cents a litre. Over the next six years, until 2001, our volume grew to 5.4 million litres and even though margins had shrunk to approximately 5 cents a litre, we ran a profitable business and carried our debt load with no problems or regrets.
In 2001 we did it all over again, we were again approached by the Atlantic Superstore. This time they wanted to do a major expansion of their grocery store and offered to buy our property. We accepted their offer and purchased a vacant lot across the street to again rebuild our service station - that being our present location that we're in today. This time we did not keep our automotive service bays as part of the operation - instead, we added a touchless car wash, a convenience store, a larger canopy with more gasoline volume capabilities. This decision was based on advice from our oil company, we hired an independent consultant, our accountant and our own experience in the gasoline business between ourselves and my uncle, we had a pretty good background and thought we were doing the right thing. This new project in 2001 was again financed by ourselves and that was on top of the outstanding debt from the location we just sold.
Our new location is open 24 hours a day, we employ 22 people - we have 9 full-time people including Tina and myself and we have 13 part-time employees. Our gasoline volume for 2003 was 7.6 million litres. We take a lot of pride in our customer service and community involvement. In 2002, we were named Business of the Year by the Bridgewater and District Chamber of Commerce and in 2003 we were awarded by our oil company for outstanding site appearance, customer service and safety standards. I hope I'm not boring you yet.
MR. CHAIRMAN: Not at all.
MR. GRACE: Just to review, we're a long-time family business - almost 50 years. We have a new, state-of-the-art location, we employ 22 people, we're a great community supporter. I've always been willing to help anyone in distress. In 50 years we've never, as of today, had an outstanding bill or missed a payment and this year our gasoline volume is going to hit a little bit over 8 million litres.
So far, this sounds like a nice, neat, little success package. If you're thinking that, you're absolutely right except for one small problem - for over a year our business has not been able to generate a profit. At present, with gasoline pump prices over 90 cents a litre, our credit card fees of 1.75 per cent can be greater than the profit of a litre of gasoline on any given day. Even with all the other services we've put into place and the price spread from
self-serve to full-serve to generate revenue, on our current course, our business won't be able to survive at 8 million litres.
Our bookkeeping is in very good order. If you request, I could supply any amount of daily gasoline profit margins, retail prices, invoices - I didn't bring a lot of things with me tonight, but if any one of you wanted to contact me, I have an endless supply of background material, if anyone is interested in seeing it. Maybe with that you could do the math and realize that there is a real problem. If there's not a minimum profit margin of at least 5 cents, in my opinion, put in place to protect independent gasoline retailers, there will not be any independent gasoline retailers.
Something else I'm sure you're confused on - and this isn't in my notes - and I am, too, is who is independent and who isn't. There are all different versions of independent. I consider myself independent, because I own the property, I own the gas in the ground, the oil company doesn't have any control over my day-to-day business, other than what they charge me to buy gasoline from them.
I realize each independent retailer, big or small, has their own particular situation, but we also have a lot in common. We have to buy gasoline, we have to sell it and make a profit doing so. Smaller-volume sites sell less gasoline, they make less profit based on their volume, and have associated costs and overhead. Large-volume sites, such as ours, we sell a large amount of gasoline, we need to make a profit based on the volume, and we have extremely large overhead and associated costs. Our mortgage payment alone is based on $1.5 million. We did do our homework before we started, and, historically, we shouldn't be in this situation.
Looking at the way things went up to the point where they are this shouldn't be a problem today. Whatever has happened in the last years changed our business dramatically. I've used every possible avenue to explain the desperation of the situation to our oil company, only to hear that is how it is, you'll have to get used to it. That's what I'm doing. All the gasoline in our storage tanks is paid for when it's delivered or a day or two after, however long it takes the paperwork to go through the bank. They have automatic access to our bank accounts. If I get a delivery today, if not tomorrow then the next day they will make an automatic withdrawal from my account.
I cannot control my retail price or my profit margins. If I need to make more profit and decide to move my pump price up, two things will happen. Number one is, because my price is higher, nobody is going to buy it. If you're not the same or the cheapest, it doesn't take very long for the consumer to see you're high and they're not going to buy it. Number two, if I increase my pump price, the oil company will increase my cost. If I decide I'm going to put my pump price up because I need to make more profit margin, just wait a day or two and the invoices will sneak right up behind it. It just moves in parallel.
When I asked the oil company why this is, I'm told we have a formula in place. I've requested that this formula be explained or provided in writing, to no avail. At one point in time they told me it was based on 50 per cent of the prevailing full-serve pump price in the market area. So, 50 per cent of whose volume? Well, now, we can't tell you exactly whose volume. In your market area - well, what's my market area? Well, now, it changes. So there's just nothing there to weigh anything on.
Independent gasoline dealers' pump prices and retail margins are totally controlled by oil companies. If a company-owned site is told to move their price up or down, we independents have no choice but to follow. If we don't go up, our cost price is going to go up anyway. So if we see somebody next door go up, we might as well go as soon as we can, because that gives us a little bit of a gain, until they catch us and move our cost up. If the competition puts their prices down and I stay up, then, again, I'm the high-price person in town and nobody buys the gas.
Back in the year 2000, the margins were starting to shift a little bit, and I had some advice I thought was good at the time. I was told, hold out with your price, set your margin where you want it, and you know your service is good, you've been around a long time, you're going to be a little bit higher but people will buy the gas anyway and you will make your money. That was the first year in probably 15 years that we ever had a decrease in our sales. We lost 700,000 litres that year. To me, it wasn't worth it. Maybe we made a little more money and lost 700,000 litres, but the consumer was starting to get a picture in their mind, well, we're not even going to stop there because we know he's going to be the high-price guy. So that didn't work for us at all.
Along with the margins, other things that have disappeared in recent years would be oil company assistance with things like safety audits. They used to send a safety team around to check our site, make sure everything was up to spec, and if it wasn't, either tell us what had to be done or send a contractor down to do it. Regular visits, we had a territory rep. At one point in time his territory was the Valley-Yarmouth-South Shore. Every two weeks, he would be in and spend some time with us. Now the person who is doing that job looks after Nova Scotia-New Brunswick and if you see them once a year, that's it. They would supply paint, all kinds of things.
[7:45 p.m.]
We can live with the loss of all those things, but we do need to make a minimum retail margin of 5 cents a litre, and still be able to sell at a competitive price. Very few people realize the pressure that has been put on gasoline retailers and their staff, who are confronted by the motoring public on a daily basis. It's unbelievable what the staff go through with the unhappy motoring public, and who don't have any really good resource to be able to come back with a straight answer. What else can you imagine selling someone for upwards of $50 and not be able to justify or explain why the cost is what it is, or why yesterday they could
have bought it for $2 less and tomorrow, who knows what the cost is going to be? It's tough selling a product like that, especially when, in the back of your mind, you know you are doing it for free. Thank you for your time. If you have any questions, I will answer them the best I can.
MR. CHAIRMAN: Yes, we do have a couple of questions for you. Brooke Taylor, please.
MR. TAYLOR: Thanks for your presentation, Rodney, and congratulations on the awards that your company received.
MR. GRACE: Thanks.
MR. TAYLOR: I'm sure you and your family are good corporate citizens in this community. I've been reviewing some information I have; I have been told since that it has been updated somewhat. When we first went out on this mission, at least speaking for myself, I was very concerned about the motorists, truckers and consumers out there, but we're hearing that the independents are in dire straits as well. I trust that you have to buy from Shell, do you not? The wholesaler, you're integrated that much that you have to buy from Shell.
MR. GRACE: Yes, I do.
MR. TAYLOR: Do you get an invoice from Shell for regular unleaded for the products you buy?
MR. GRACE: Yes, it comes with the delivery truck. They leave me a copy . . .
MR. TAYLOR: Can I just ask you, if you don't mind, what you're paying for regular unleaded? That's with, I understand, your taxes included. I just wondered what the selling price to you is, with everything factored in, the total price per litre.
MR. GRACE: I'll just make sure I have the right note here. July 15, 2004, my invoice cost with HST today is 90.16, the pump price is 93.9, and it's a margin of 3.7 with HST; less HST it's 3.25 cents. That's today. That's not every day, that's today.
MR. TAYLOR: And that confirms my suspicion that there is definitely some price discrimination taking place in this province.
MR. GRACE: No question.
MR. TAYLOR: I have an invoice here, and it's a recent one, where the selling price of regular unleaded to this independent is 84.755 cents per litre.
MR. GRACE: They probably had to truck it further, too.
MR. TAYLOR: Unless I'm missing something here, it seems very obvious, Mr. Chairman, that the price that the different wholesalers are placing before their customers varies, and those who are integrated, meaning that you have to buy from Shell and Mr. England has to buy from Ultramar and so on, you really don't have the benefit of being independent.
MR. GRACE: I don't think independent in this business has anything to do with who you buy your fuel from. I think whatever flag is flying by your roadside is who your fuel has to come from, whether you be independent or any version thereof. Whatever sign you're flying, I don't think you would ever be able to buy fuel from, to my knowledge . . .
MR. TAYLOR: On P.E.I., for example, they regulate the wholesale price of petroleum products - well, they regulate the retail, too, and guarantee a margin, I understand. My friend there mentioned - and I mentioned it last night - do you see any value in partial regulation, where the wholesale price is regulated? It seems that where most of the product in Nova Scotia, if not all, is coming out of the Esso Refinery, whether it's Ultramar, Shell or any brand, that you should be paying a similar price for that product, save for some justified transportation costs. Do you think there's any value in that type of an approach?
MR. GRACE: Definitely. I don't think full regulation, at this point in time - to put the regulations we left off with in 1991 in place today, it wouldn't work. They would have to be totally revamped and things added, but minimum margins and as far as retail price, it's a terrible thing to say, but at this point in time it wouldn't matter to me if gasoline was $1.10 a litre to the motoring public - I would have to buy it, too, to drive my truck - as long as the retailer could make 5 cents selling it.
I don't think we ever want to control retail prices, and we never will. I don't think asking for a 5-cent a litre profit margin is out of line. We're not asking for 10 per cent, we're not asking for 10 cents, 5 cents seems to be a pretty fair number.
MR. CHAIRMAN: Mr. DeWolfe.
MR. DEWOLFE: It would appear, to the outside public, that someone with huge volumes of sales, like you have, would be sitting pretty today, so to speak, and should be, with the kind of investment and upgrading that you've done through the years. But this is the story that we're hearing more and more over the past two days. It appears that the minimum and maximum margin, like they have in P.E.I. may be a fix to this problem. You are, as my colleague said, in a very difficult situation right now, the independents are. Would you agree that that is where we have to concentrate to solve your problems, and your colleagues' problems? We keep hearing this 5 cents; would that be fairly generous, this 5 cent margin? In all fairness, everybody asks for more than maybe they need.
MR. GRACE: I think around 5 cents. When the margin was 8 cents, 9 cents, 7 cents, coming down, I don't think anybody heard anything from any of us until it hit the 5 cent mark. I'm sure, obviously, more would be better.
MR. DEWOLFE: Now we're hearing that there's a lot less than what you're even getting in places like Digby and so on.
MR. GRACE: And there are people who would possibly not get up to this 5 cents a litre, but it would keep me happy.
MR. DEWOLFE: I wish you luck. Hopefully this committee can make a difference. Thank you for your input.
MR. CHAIRMAN: Mr. Frank Corbett.
MR. FRANK CORBETT: Mr. Grace, your contract with Shell, how long is that for?
MR. GRACE: My present contract is a 15-year contract.
MR. CORBETT: And how far are you into it?
MR. GRACE: I am into it for three years.
MR. CORBETT: So there's 12 left. Is there an out option for you, or is it impossible?
MR. GRACE: Apparently, I've been told lots of times that you can't have - an oil company can't hold a retailer to a contract longer than five years in Nova Scotia, but it's one of those things that I don't think has ever been challenged. As far as I know, I'm under contact for 15 years, and I agreed to it on day one.
MR. CORBETT: You talked about when your uncle first opened, in the late 1950's, he was with White Rose. Has it been Shell since White Rose exclusively?
MR. GRACE: Exclusively.
MR. CORBETT: So you wouldn't feel it fair to comment then on what deals are like with Imperial or Ultramar?
MR. GRACE: I have no experience.
MR. CORBETT: I ask this because last night in Yarmouth a young couple who ran a Shell station there, their fear is that they're into a 10-year agreement, plus the Shell
company has the right for a fifth-year option, which in effect is 15 years. Is that how you're coming up with your 15 years?
MR. GRACE: No, mine was solely a 15-year deal, right from day one.
MR. CORBETT: There was no option to go five or lower?
MR. GRACE: No. It's a 15-year contract.
MR. CORBETT: Either that or they walk?
MR. GRACE: No, either that or I walk. If I tried to change oil companies, it just wouldn't be allowed, it would be a breach of my contract.
MR. CORBETT: When can you start negotiating with other companies? Are you bound?
MR. GRACE: November of the 14th year.
MR. CORBETT: Okay. Thank you.
MR. CHAIRMAN: Mr. Danny Graham.
MR. DANIEL GRAHAM: Thank you, Mr. Grace, and to your wife and the rest of your family for all their hard work in this community over many years. It's obvious that you've contributed a great deal, and you're precisely the story that we are looking to touch in on, when we travel around the province. We thank you for taking the effort to prepare your remarks, and to present them to us in a thoughtful manner. And best of luck.
The story that appears to be emerging is one of the oil companies - or at least it is one that the companies will be called upon to respond to. One would expect that there is an imbalance of bargaining strength when you have those big, thick agreements and a lot of corporate types in head office who created these thick, convoluted, and say that this is the standard and this is what we expect from people, and sign it here, we don't expect many changes, because your friend down the road didn't make any changes.
The one comment that you made that really turned my head, the term that is in your agreement - and it may not be in your agreement, it may just be a practice - is the one where you suggested that if you increase your price by a certain amount, the oil company will increase its price, thereby - I'm seeing some nodding heads at the back of the room - shrinking your margin. That strikes me as not just oppressive but offensive, that that would happen. I think there is an obligation on the part of the oil companies to answer for that. I
would, in this public forum, record that there is an onus on them, if this is an industry standard.
Your deal is with Shell. I know that you're not here to run down Shell or the brand name of Shell, because you fly under it. It's nice to see that there appears to be a balance of people coming from different companies. My question is whether or not this practice of increasing the wholesale price when you increase your margin is, to your knowledge, an industry standard? Is this something that happens throughout the industry?
MR. GRACE: I've always got my ears open, and I hear of it happening quite often, but I can only base it on my own personal bookkeeping. There's a trend to be followed.
MR. GRAHAM: Is it the result of something that exists in your contract, specifically? You spoke earlier, and you seemed to be fairly precise at the time that you said this, that you understood that it was 50 per cent of the prevailing full-service pump price in the market area. Is that something that you're told by the regional dealer for Shell, or do they ever provide much of an explanation for this?
MR. GRACE: I was given that explanation numerous times, from an oil company representative, that our cost price was based on 50 per cent of the prevailing full-serve retail price in the market area.
MR. GRAHAM: So they win no matter what.
MR. GRACE: With no market area defined and no direct competition, basing it on full-serve and probably 90 per cent of the volume is self-serve now, it doesn't hold water.
MR. GRAHAM: Their costs don't increase. You're trying to eke out a living, and they squeeze whatever remaining opportunity you have to eke out that living. That's the way it sounds.
MR. GRACE: I think you're on to something. (Laughter)
MR. CHAIRMAN: Mr. Howard Epstein.
MR. EPSTEIN: We heard from you, Mr. Grace, and from Mr. England before you, that it doesn't sound as if your supplier is actually providing you with a great deal. Can you just - as a matter of interpretation of the contract that you have with them, as a business proposition - tell me what exactly it is that your company does provide you with?
[8:00 p.m.]
MR. GRACE: My company, when we constructed our new site, put their fascia on the canopy. You have a canopy and it has - in my case - the red and yellow band. They supplied that. I'm in a cross-lease situation, much the same as Mr. England is, and there's a cent-per-litre basis over that 15 years. I don't want to disclose here in public what my cent-per-litre cross-lease is, but it definitely works against - it's a real estate issue, and obviously if I didn't have a cross-lease, I wouldn't have been able to finance the building that I'm in. Cross-leases are a real estate issue, they're not based on the profit you make to buy and sell something there. They're based on whether or not you're able to put the building up, pay your taxes, and be there for the duration of your contract, but most of them are directly tied to gasoline volumes.
MR. EPSTEIN: And of course they advertise as well, but in terms of other services or products or infrastructure for you, is there anything else?
MR. GRACE: There's national advertising, there are promotions that I'm sure are all included in the price we pay for our gasoline, and there are 1-800-numbers if you have an unhappy customer. There is definitely a banner package there, I mean they definitely support us. I'm not sure if I know what you're looking for.
MR. EPSTEIN: Well, for example Mr. England referred us to some of his experience with his company. At some point he said that when leases were up for renewal, then sometimes there would be certain kinds of beneficial arrangements entered into . . .
MR. GRACE: Yes.
MR. EPSTEIN: . . . or even when they weren't up for renewal, when it was time to improve the quality of the infrastructure at the service stations, sometimes infrastructure would be provided either for free or perhaps at a subsidized price, and I'm just wondering what your experience has been with any of that.
MR. GRACE: In the contracts of old, when my uncle was in business and when I first started with him, the way contracts were designed then and now is totally different. There were prepayments, it was a different structure.
MR. EPSTEIN: So they provide you with your product, they do the advertising, and they help you finance the building of your station?
MR. GRACE: By a cents-per-litre, based on volume over the term of the contract.
MR. EPSTEIN: Sure, I understand that.
MR. GRACE: Without that we wouldn't have done the project in the first place, but we were expecting to have that, plus a reasonable margin on gasoline. Based on cross-lease, nobody would ever be in the gasoline business, and your cross-lease is a real estate issue and then you expect to make a profit on what you buy and sell.
MR. EPSTEIN: Fine. Thank you very much.
MR. CHAIRMAN: Thank you, Howard. One quick comment, I believe, from Brooke.
MR. TAYLOR: I just have a question, Rodney. Do you sell diesel as well?
MR. GRACE: Yes, I do.
MR. TAYLOR: Do you know what you're paying for the diesel product - the selling price?
MR. GRACE: I have it at full-serve only. The pump price is 82.9 cents and the invoice, with HST - if I don't go to jail for saying this in public - 78.2 cents with HST.
MR. TAYLOR: That is 78.2 cents.
MR. GRACE: And my margin, less HST, on diesel is 4 cents.
MR. TAYLOR: This invoice I have, which is essentially the same distance from that same refinery, is for 73.1 cents, the selling price, and that includes the 15.5 cents provincial tax and the 10 cents, the flat taxes are in there, the provincial and federal tax plus exempts, the tax price. So you know there's a big difference in the price that our retailers, whether they're integrated with the wholesaler like you or the guy who isn't, and this particular individual claims he's an independent and it's really hard to compete when, in fact, the wholesalers have, in my opinion - I'm speaking for myself, not the committee - wholesalers are sticking it so to speak to you and somebody down the road in another community is buying that same product from the same refinery for that price - and this is dated too, I did find the date, the effective date is July 3rd.
MR. GRACE: That's the price as of today, is it?
MR. TAYLOR: Yes, and the trucking companies, whether it's Seaboard, Coastal or RST - I used to be in the trucking industry for quite some time - I can tell you and anybody in this room can tell you they're not getting rich. So essentially they pay those brokers the same price running up and down the roads.
MR. GRACE: Yes.
MR. TAYLOR: So thanks, Rodney.
MR. CHAIRMAN: Do you have a question, Russell?
MR. MACKINNON: Mr. Chairman, on a point of order. Would the honourable member for Colchester-Musquodoboit Valley please table that document?
MR. CHAIRMAN: Thank you and I would ask, yes, the point of order is taken and, member, if you would table that at your convenience, we would appreciate that.
MR. TAYLOR: Sure, I will make a photocopy for all members. If they want this, they're welcome to it. Rodney can have it as well.
MR. CHAIRMAN: Thank you for bringing that to my attention, Mr. MacKinnon. Sir, thank you for your presentation, an excellent job. It certainly brought some clarity to the issue and, once again, it's basically what we've been hearing as we travel from spot to spot.
At this time I would like to recognize Casey Publicover, please, and I ask Casey to come forward. I have to once again tell you that the presentation is being recorded this evening and that you have 15 minutes for your presentation and then we'll open up for questions. Thank you, sir, and state your name for the record.
MR. CASEY PUBLICOVER: My name is Casey Publicover. I'm currently running an Esso site in Wileville. We call it Casey's Car Care. It had its one-year birthday on Canada Day actually, so I've been in business in the community for one year. I've been in the gas business since I was 14 years old, so I had 16 years in, under my belt, when I decided to stop selling tires and go into the gas station business last year, I guess.
It's more of the same I have to say - Rodney put together an excellent presentation and it's exactly what we want to convey. I've just got a quick picture I want to paint. For May, my numbers for May - unfortunately, June is still at my accountant's office - between my mid-grade, premium, regular and diesel, full- and self-serve, I sold $83,513.04 worth of product. That equated into 102,358 litres which made an average selling price, and this is all the grades - full-serve, self-serve, it's everything together - 81.59 cents, what retailed at the pump. I generated from 102,358 litres that I sold that month, a gross profit of $2,422.78, so I made 2.36 cents across the board, on average, on everything that I sold.
I did $38,382.53 in credit card sales for that month, which cost me $703.54 just to do that. I do run two service bays and I can assure you that the bulk of that, I would say maybe 2 per cent of that might have come from paying for my service. So I can say at least $36,000 of that was from my fuel sales. That drops my profit margin for the month of May
to $1,719.24 a month. I have 465 man-hours out there that I have to have and it's mandated, I have to have at least one person monitoring the pumps at all times. If you're running full-serve, it's mandated that you have to have two, you have to have a full-serve attendant and a self-serve attendant, but for one person for me at the table all the time watching what's going on, at minimum wage - $6.50 an hour, it costs me $3,022.50 a month. There's a 12 per cent employer contribution which costs me another $362.70, and that brings the total of the cost for my employee, $3,385.20, that's for one attendant on for each shift day and night, bringing my gross profit margin to a whopping minus $1,665.96, that came out of my pocket to run my pumps.
That's before I put power to the pumps, turn the lights on at night, look after my environmental liabilities, my insurance liabilities, you know, slip and fall and personal, my insurances for that. This is a busy time of the year; this is when the tourists are coming through. Casey, this is when you're making your money. My power usage was $593 for the month, and I'm looking at a two-cent-a-litre take on that - and that's before I lose my 2 per cent on the credit cards.
I brought it to the table in its entirety to just say I've been in business for a year and I've yet to generate a profit. I'm eating a loss, I'm lagging, it's a fight, trying to put it together and make it happen and you know, my revenues just aren't there right now for me. In its conception it has to be stroking along from all aspects and I'm paying to drag my fuel pumps with me especially given the fact that there's, I think it's 15.5 cents provincial excise tax, 10 cents federal, and then another 15 cents HST on that. I can't get my hands on Rodney's magic number of 5 cents which I think we would all be content with. That would at least be enough to pay for what I've got going on out front which is all I'm asking for because that way anything that I'm doing in my confectionary sales or otherwise would be money that I could put towards retiring some day.
MR. CHAIRMAN: You've painted a very clear picture and we thank you for that, Casey. I would like to recognize Russell MacKinnon, please.
MR. MACKINNON: Mr. Chairman, obviously, when we came on this committee, my initial thought was how we were going to deal with the escalating price of gasoline and other fuels to the consumers in Nova Scotia and here is emerging a rather unique story - a pattern of the retailers being almost abused by the oil companies. Now, whether that's correct or incorrect, the evidence seems to point that way and it's something that I believe my colleague, the member for Halifax Citadel, has spoken to. However, there is something because I keep hoping that some consumers will come forward as well and make some presentations. We've only had one consumer representative I think so far.
MR. CHAIRMAN: Just one last evening.
MR. MACKINNON: One last evening out of, what, six or seven presentations.
MR. CHAIRMAN: And he wasn't really talking about the price of fuel, but an alternative to the usage of fuel.
MR. MACKINNON: Yes, and we haven't had any today so far. My question is, given the fact that we have three grades of gasoline, you have regular, you have premium and you have supreme?
MR. PUBLICOVER: That's correct.
MR. MACKINNON: You have two tanks in the ground, correct?
MR. PUBLICOVER: No, I have three.
MR. MACKINNON: You have three?
MR. PUBLICOVER: I have three.
MR. MACKINNON: Okay, because the question I asked last night was with regard to this. Many of the service station operators have just two tanks in the ground.
MR. PUBLICOVER: They have what they call a blended product.
MR. MACKINNON: Yes, and they had the regulator that will pump so much regular gas out of one tank and then so much supreme out of the other one?
MR. PUBLICOVER: That's right.
MR. MACKINNON: Well, you wouldn't have this problem obviously, but perhaps I can save it for others, but do you know if these service stations are inspected?
MR. PUBLICOVER: Yes, they are.
MR. MACKINNON: They are?
MR. PUBLICOVER: Yes.
MR. MACKINNON: Because last night we were given a slightly different indication that they weren't even regulated and he was representing the petroleum retailers.
MR. CHAIRMAN: He didn't know. (Interruption)
MR. PUBLICOVER: Actually I just went through it. We do line tests to make sure that we're environmentally sound and every time you pick up the pump and you're putting $20 in your car, you're not losing 50 cents of that in the ground or in transition. There are measurements in place and tests that we do on a regular basis as retailers, which comes out of our pockets to do, to ensure that the customer is getting their 20 litres of fuel that they're purchasing. I mean I can't tell you that you're going to get 20 litres of gas and dump a litre of it on the ground on its way to the pump.
MR. MACKINNON: Because a certain percentage is also . . .
MR. PUBLICOVER: That's right.
MR. MACKINNON: There's a calibration for the temperature?
MR. PUBLICOVER: Yes, that's correct. I run a service station monitor, it's a computer program, and on that service station monitor it runs a fluid reconciliation program and through my fluid reconciliation program it's down to the temperature, the physical inventory which is the dip . . .
[8:15 p.m.]
MR. MACKINNON: That's right.
MR. PUBLICOVER: . . . and that gets cross-balanced against my running totals or what I have pumped, my litres for the day for all volumes, all storage tanks, and it's all weighed against each other at the end of the day to make sure that my sales revenues and my balance in my inventory, you know, that nothing is missing.
MR. MACKINNON: And am I correct to suggest that there's a rebate program with regard to the temperature, the loss that you would incur if there's a certain amount of evaporation?
MR. PUBLICOVER: Not for myself, no.
MR. MACKINNON: No. How often do the inspectors inspect your service station?
MR. PUBLICOVER: It's not so much mandated, they wouldn't come in and say, now, Casey, you're due for your yearly inspection, I'm from the Department of Environment and Labour, I'm here to do it. It's left up to myself really to make sure that it's done.
MR. MACKINNON: When was the last time a provincial inspector came to your station?
MR. PUBLICOVER: When I opened last year on July 1st.
MR. MACKINNON: And that was it?
MR. PUBLICOVER: And all he did was walk the premises.
MR. MACKINNON: Thank you, Mr. Chairman.
MR. CHAIRMAN: Thank you very much, Casey, for your story this evening and we wish you well. I would like to call the next witness - Mike Power. Sir, you've been up front, you know the procedure tonight, and how are you doing?
MR. MIKE POWER: Just great.
MR. CHAIRMAN: It's nice to see you here with us tonight.
MR. POWER: Thank you. I'm not one of the motoring public except to the extent that I buy gas and I get gas now and then when I eat spicy foods. (Laughter)
Thank you, Mr. Chairman and members of the committee, for coming to Bridgewater here tonight. My attendance here tonight is as a lawyer. I'm counsel for the Retail Gasoline Dealers Association of Nova Scotia and I also have an ongoing relationship with a number of the members of that association so the result is that I get to meet some of these problems face to face on a daily basis. Some of the problems that you're hearing about tonight boiled down to a legal issue on occasion and I become engaged in advising people in that regard. We only act for the individuals. They may have a corporate entity that they act through, but we only act for individuals. We do not at any point act for the oil company and when we act for them in a cycle of advice, we end up usually dealing at some point with a contract renewal and that's part of the reason that I want to speak to you tonight and I will be brief.
The cycle of contracts that we've seen, all of our business for the Retail Gasoline Dealers Association and its members, has been in the last 10 years. That's since deregulation. So we have seen only those contracts that have existed since that time and the result in that particular deregulatory era, what we've noticed, of course, is that the oil companies have shifted their weight immeasurably and thrown it around with the result that the individuals that you're hearing from here tonight, I can anticipate, you'll hear a number of stories similar to what you've already been previewed in the first three witnesses because the oil companies, it will be obvious, have a huge influence and effect in the marketplace and the individual is totally at their mercy.
Now, they may have had a long-standing relationship with that particular oil company or its predecessor and the result, as you have indicated, or you've heard indicated, like Lawrence England, Rodney Grace, they have a long history. That history means nothing
when it comes to renegotiating your contract and what is the prevailing attitude of the oil company is what you will receive and so there's very little bargaining power. You're usually at the mercy of your contract which may be a lengthy document, but as regards the individual company or person's rights, it's a pretty basic document. You're at their particular mercy. You're out when they say you're out. You'll buy their product at their prices and if you don't like it, you're out of business. You don't get the next load of gas and if you can't sell gas, you're out of business.
It has been one of the proposals of the Retail Gasoline Dealers Association to introduce what we call fair petroleum leasing guidelines and those guidelines have been bandied about inside government and through a number of representatives of both the oil company and the association and we feel that this is one area that should be looked at in promoting equality in the marketplace. The companies dominate prices and margins. The cross-leases which used to provide a measure of comfort to a given retail operation, and I've heard the committee deal with an independent, only independent in the sense that you may own the land that you're sitting on, but everything else is controlled by that contract. Cross-leases used to provide a measure of, shall we say, cushion or a pillow to even out the fluctuations in the pricing at the pump. That no longer happens, or it very seldom happens. Companies are cutting back in almost everything that they supply to the individual retailer.
One of the things that we wanted to refer to or emphasize again, you've heard that the credit card charges eat a large part of the margin and that can't be emphasized enough, that 2 per cent in the thin margins that are taking place is the difference between being in the black and being in the red. That is one area which simply this committee will have the opportunity to address or hopefully will.
Contracts, as I indicated, are seldom negotiable in bulk. They control all of the terms, including the price at which you will sell. If you don't play ball, you're out of the game. The fair trade is a concept that a number of industries have implemented in their particular business and I think this committee has an opportunity to introduce fair trade or reintroduce fair trade in the petroleum leasing guidelines. I think the time is right now when the industry has an opportunity, or this committee has an opportunity, to influence industry and propose fair leasing guidelines. If there ever was an opportunity which presents itself, now is that time gentlemen.
That's basically my submission here tonight. I have copies of the fair leasing guidelines that have been proposed. I'm prepared to submit those to the committee. They will not address some of the matters that you're dealing with here, but they will even out the playing field, and I'm prepared to answer any questions.
MR. CHAIRMAN: Thank you, Mr. Power, and we do have a couple of questions for you. We will start tonight with Gerald Sampson.
MR. GERALD SAMPSON: Thank you, Mr. Power, for coming. You sound very efficient and very effective. I'm just wondering, it's the independent dealers that you represent is it?
MR. POWER: Yes.
MR. GERALD SAMPSON: I understand it's somewhere between 400 to 500, the number of those dealers.
MR. POWER: Yes.
MR. GERALD SAMPSON: I would understand that the gas companies probably have their expiry dates on those - we'll use 400 for the round figure - for the expiration of their contracts, their dates would be staggered for the convenience of the gas company?
MR. POWER: Certainly.
MR. GERALD SAMPSON: You, as their representative, if you spoke on behalf of all 400 at once, could you have any effect, or what effect could you have? What I'm thinking of is if 400 stations suddenly said, thank you, goodbye, or, give us the 5 cents we're looking for or you'll have 400 vacant stations tomorrow, would they be glad? Would it have any clout, or what would that result in?
MR. POWER: Well, I think it would have an effect. I don't know how, shall we say, practical it is to suggest that the dealers can pool their resources and come up with a common program. Some people can be influenced by getting a better contract. You've heard, I think Mr. Taylor's reference to some of the prices that he referred to. The oil companies will always have the ability to influence the marketplace by influencing what they're going to pay to certain people to keep them from banding together to come to a position where they can influence the oil companies. They'll always keep the individual off balance.
MR. GERALD SAMPSON: Having said that, then as I said, I'm referring to one of the presentations last night, which was very heart-wrenching to see somebody that's energetic and useful and wanting to contribute to society and take a plunge and go into business and then basically, for the want of a better term, be held up to sacrifice and expected to work for nothing. As bad as it is in Third World countries, they don't do that in a lot of areas.
What I'd like to mention is - we'll use the figure of 400 again - a recurring theme is the cost of credit cards. If those 400 independent dealers - and let's use VISA or whatever kind of credit card you want - said, okay, Mr. Credit Card Company, we would like a better deal, because I understand from presentations last night that the gas company, because of the credit card use, if they're charging 20 per cent to the dealer, the gas companies are getting
maybe a percentage of that back by steering the business to the credit card. So they're making a percentage off the credit card cost to the dealer along with making off of the gas that they're selling. It's the dealer, like I said, everything falls downhill and they're on the bottom. Is there any potential for the 400 to band together and approach the credit card companies and say, okay, Mr. Credit Card Company, give us 1 per cent costs, not 2 per cent. Is there a possibility to that?
MR. POWER: I think the concept of banding together or pooling the resources for purchasing purposes, in other words, a number of stations grouping their volumes together, a number of stations making a proposal to reduce those credit card costs, have been considered, and have been, shall we say, discussed in meetings. The problem with presenting a united front is that the predatory practice of the oil company is to go to perhaps the leader of that particular group and propose that if he or she will alter their position, then there could be a little extra margin on theirs. So that's what you're faced with, the fact that the oil company will always be in a driver's seat position.
MR. GERALD SAMPSON: Divide and conquer. Thank you.
MR. CHAIRMAN: Thank you, Gerald. Some good points there. Danny.
MR. GRAHAM: Thank you, Mr. Power, for your appearance today. It seems clear that you're right that there has been an increase in the oil companies throwing their weight around since deregulation. I have three questions, and perhaps I'll lump them together if you don't mind, just to make sure that we get them all in.
First is whether or not it would be relatively easy to prepare a chronology of just how they've gone about throwing their weight around during the period since deregulation. What would be involved in preparing that kind of chronology, and what's the impact of each of those decisions? I think there's an increasing tone of discussion around deregulation, at this level at least, and if that's going to turn into a serious discussion and we're looking to make our case, I think something that paints it as clearly as it seems you're convicted to it, would help us make that case at some later date. So our chronology, is it easy to make? What would it involve? What kind of a case would be made, is my first question? Second, you spoke about the fair leasing guidelines and you said that there are other documents that are floating around. I think it would be helpful for us to get a copy of your fair leasing guidelines if you could provide that to us.
MR. POWER: Yes, I do have a copy.
MR. GRAHAM: If you could reference any other documents. You suggested there may be others that we could find in government or otherwise, that would contribute to this discussion around fair petroleum pricing that may be historical. I think it would be helpful for the committee to at least know where those are and if we had a copy of them.
The third one touches on the line of questioning that my colleague, the member for Victoria-The Lakes, was just touching on. There is an irony in that as prices increase, profit margins decrease because of the way that credit card prices are calculated. If somebody's paying a dollar a litre, 2 per cent of that, it turns out to be 2 cents, but if they're paying 50 cents a litre, then it turns out to be 1 cent, which has a significant impact on the margin that somebody has. There may be a sliding scale. There may be something that can be proposed, and I'm wondering if you know of any jurisdiction that has negotiated, where the dealers have negotiated some kind of a sliding scale with the oil companies around this, because the challenges we're facing aren't unique to Nova Scotia, and credit cards are used at gas stations all across North America. It would seem that with these rise in prices perhaps other jurisdictions have tried something like that. That's not an onus that we should place on you but if you knew anything that would help us understand that part of the equation a little better, it would really be helpful.
[8:30 p.m.]
MR. POWER: Thank you, Mr. Graham. I can't provide a chronology of events vis-à-vis deregulation tonight. I can provide copies of the fair leasing guidelines which have been proposed and discussed between representatives of both the association and the petroleum industry.
The other documents, maybe that was a loose term. There is a regulation in Nova Scotia called Regulation 15 of the motor fuels regulations which deems that all gas promotional activities must be included in the cost. A few years ago, I think within the last six or seven, the oil companies - I think it was spearheaded by PetroCanada - took a run at getting that regulation bumped. That's what I was talking about, other documents. There were other initiatives, if you will. These would be part of the deregulatory process and would fall into the chronology that you're referring to.
A few years ago, much to the credit of the sitting government of the day, which was a minority government, they held ground and kept and maintained Regulation 15 and it exists today to protect retailers like you're hearing from tonight.
MR. CHAIRMAN: Thank you. Russell, please.
MR. MACKINNON: Thank you, Mr. Chairman. Through you to Mr. Power, am I understanding you to suggest that there's a need for some form of regulation - at least, to protect the retailers from the wholesalers, the oil companies?
MR. POWER: I think that's a fair assessment, yes.
MR. MACKINNON: That ties into the issue of limits on profit margins - the minimums and maximums that we had before. Is that correct?
MR. POWER: Yes.
MR. MACKINNON: And that's what you support?
MR. POWER: Well, as an association, as their legal counsel, I have a position.
MR. MACKINNON: Oh, I know, like most people, we all have our own philosophical position.
MR. POWER: I'm not here to speak in favour of regulation or deregulation. The market is what it is, but it's obvious to me there are problems in the marketplace today. Whether you can directly relate them to deregulation or a combination of that and the escalating world price, et cetera, that's beyond my ken.
MR. MACKINNON: Right, but the profile you provided centres around post-regulation, obviously there would be some connection.
I'm a little perplexed on this issue of the credit cards. The consumer will go in, they can use that, it's costing the retailers. The evidence has been put forth, but it's also costing the consumer as well because when they use their credit cards, some of these banks charge anywhere from 20 per cent to 30 per cent, if you read the fine print. I looked at one the other day that the credit card company tried to sell me and you get the first three months at 5 per cent and it looks pretty enticing, but then in the fine print - you need binoculars to find it - it was 20 per cent after that. So the consumer is getting dinged pretty heavily and I think that's an issue that somehow has to be rationalized in concert with the retailers.
Whether that be done in some type of a regulatory form or not, I don't know. Perhaps if you could offer some thought on that because ultimately, without the consumer, there would be no retailer, no other factors.
MR. POWER: There's mention of a sliding scale that if the margins are going to be at a certain level, that at that particular point, the credit card charges would be absorbed by the petroleum company. What's hurting now is that in an era of low margins, if you're only getting 2.5 per cent, it's easy to do the math, if you're only getting that low margin, then you're faced with that credit card cost. You really have no margin at all so there should be a floor, in my opinion. There should be a base at which that stops.
MR. MACKINNON: Obviously. One final point, Mr. Chairman. The picture you've painted is that it's almost beyond predatory, it's almost vulturous what's happening out there. I hate to be so blunt about it, but that seems to be the message that's coming across.
MR. POWER: It's a tough environment. From a legal point of view, you're dealing with a large company dealing with an individual. There's an imbalance in their bargaining
power and it just doesn't get any better. You're totally at their mercy, whether you're dealing with them on a day-to-day basis and then if there becomes a legal issue, then you're dealing with their corporate counsel versus your individual resources and there's another imbalance at that level. That's an issue for another day.
MR. MACKINNON: Thank you, Mr. Power.
MR. CHAIRMAN: Thank you, Russell. I recognize Jim DeWolfe, please.
MR. DEWOLFE: Thank you and hello again, Mr. Power. It's nice to have you back with us again. You suggested that perhaps we should introduce fair trade in the leasing agreements and indeed, we heard that last night that we have to put some fairness in this equation and it's becoming quite obvious there's no fairness here for the independents. I know you've looked at this fairly extensively and I'm wondering if you've looked at other models - for instance, across Canada, other provinces, and also, I'm interested in the U.S., what kind of margins do they have across our border? How is it handled there? Did you look at any of those scenarios?
MR. POWER: I don't have those, but I think in fairness, you will get them tomorrow when you move on to Halifax. I think the chief executive officer of the Retail Gasoline Dealers Association will have that information.
MR. DEWOLFE: There's definitely a problem with pricing and the wholesalers are controlling that, I guess, because the previous speaker, Casey, indicated that his buying price is more than I'm paying at the retail level in Pictou County for diesel. So there's something terribly wrong with that because the shipping is probably about the same distance either way. The discrepancy shouldn't have anything to do with shipping costs, I would think.
So I am paying too little for diesel or is he paying too much and I would suggest that he's paying far too much for it. Somebody's making a great deal of profit on this and it's not him.
Anyway, do you have any suggestions in closing for us? I'd like to find out clearly from you what direction you would like to see this committee take in resolving these problems.
MR. POWER: I think Russell MacKinnon proposed that to one of the previous witnesses - what would you do? I think it's a combination of three things. I think first of all - and you may not like the first one - taxes on gasoline throughout the country are a huge component of the cost. That's one of the things that has to be looked at.
Secondly, guaranteeing a reasonable rate of return to the individual retailer has to be considered. And, thirdly, the practices of the oil companies - the most obvious one we've
touched on about the credit cards. You've just raised another one - and Mr. Taylor has also raised it - that one guy's getting one price and the other guy's getting another price. What would account for that discrepancy?
I wait, like you do, with bated breath to find out and I only hope that somebody from the oil company, the petroleum industry, appears tomorrow or at some point in your presentation so that someone can ask him or her that very question. That is one of the burning questions, but it's going to be a multi-levelled or pronged approach that will attempt to remedy the hardship that's not only facing the consumer but also the retail gasoline dealers.
MR. DEWOLFE: Well, I too have a problem with the tax, even though we're in government, the tax on tax. I don't have a comfort zone with that at all, because where we're talking goods and services the tax portion of that component is neither goods nor a service, it's tax.
MR. POWER: Charity may begin at home.
MR. DEWOLFE: I think so. I do have a problem with tax on tax. Thank you very much.
MR. POWER: Thank you.
MR. CHAIRMAN: Thank you for that comment, Jim. Now I'd like to recognize Howard.
MR. EPSTEIN: Could you help me understand something, please, Mr. Power? The essence of the contract that your members would sign with the suppliers is that the suppliers are giving them a product and the price of that product . . .
MR. POWER: Will fluctuate.
MR. EPSTEIN: Well, not just that it fluctuates, it doesn't seem to have any reference point. That's really what I need to understand here. As I heard it described by the individual presenters we heard before, Mr. Grace, Mr. England, they left me with the impression that the price that they're being charged by their suppliers is a mystery to them; they have no idea where it comes from. So what I'd like to know from you is, is there actually anything in the contracts that they are working under that actually does control that price at all? Could you describe it for us?
MR. POWER: Yes. It's a collateral or separate document. You agree to pay the price that I send you on July 3rd or July 15th, or whenever that date occurs, there's no fixed price in that contract.
MR. EPSTEIN: Well, that's my point. Looking at this in any other context, I would say that's an unenforceable contract.
MR. POWER: I agree. I agree to do what you tell me to do.
MR. EPSTEIN: That's right, and you know basic contract law, this says this is silly. It's just so vague as to be unenforceable. But I'm not interested in that part of it, what I'm interested in is, as legislators, we would actually have the power, if we wanted to exercise it, to reach inside that contract and say, look, here's what that definition of a price has to look at. There have to be definite bounds that make it ascertainable and objective and fair. What would a clause like that look like? Does that exist at all? Are there models? Can you make a suggestion to us?
MR. POWER: I'm sure that there are models. I mean, I can't give it to you off the top of my head, but I'm sure if you will allow me a subsequent submission, I'll provide that with a draft clause of what I think it would look like.
MR. EPSTEIN: Okay, because we're under a tight timeline that we set for ourselves, which is try to report by the end of August, I'd be happy to hear from you on this point as soon as possible.
MR. POWER: I'd be delighted to attempt to supply a definition, which I think would fit in Clause 3.1.
MR. EPSTEIN: Terrific, thank you.
MR. CHAIRMAN: Thank you, Howard, and you would put that to the committee, sir, if you don't mind, that request.
I recognize Brooke.
MR.TAYLOR: Thank you, Mr. Chairman, and thank you, Mr. Power, for coming in. We all know that you're very knowledgeable regarding this situation. Not to put you on the spot, but it's very clear that the oil company's response - from the testimony we've received last night and tonight - to the dilemma that the retailers find themselves in is almost one of disdain and contempt. I'm convinced before we can have fairness at the pump, we have to have fairness at the retailer's storage tank, so to speak. Where these people who have to work with the oil companies on a daily basis are being treated so poorly, if we were to say as a committee, oh, oil companies be good little boys and girls now and provide these retailers with a fair price, that just won't work.
[8:45 p.m.]
So short of some form of price justification or using the R word, "regulation", and you talked about one element and the contract, sure, that seems to have merit, but short of guaranteeing a fair wholesale price to any retailer, be they independent or integrated or whatever, what other measure would you suggest to the committee for consideration when we're deliberating on advancing some recommendations to the Legislature?
MR. POWER: You know, you are putting me on the spot when you ask for a solution, shall we say in 25 words or less. I don't know if there is a solution of that nature, other than that word that you mentioned. It may not be - and I think Rodney Grace referred to it - total regulation, but there has to be some intervention or response to protect those who are vulnerable at this time.
MR. TAYLOR: By the way, Mr. Power, that individual who was kind enough to provide me with that invoice, he claims that he isn't making any money off of selling that product and yet he's receiving the same product for nearly 6 cents a litre cheaper at essentially the same distance away from that very one refinery in Eastern Passage. It's really mystifying, but I'm sure when we have an opportunity to speak with the oil companies tomorrow they will shed some light on what seems to be a very obvious . . .
MR. POWER: Did you ask what he or she was selling for?
MR. TAYLOR: Yes, actually they were selling for 91.9 or 93.9. So they had quite a margin, but it certainly confirms what we were being told, that those who must buy a particular product at a particular price, it confirms that they are really up against it.
MR. CHAIRMAN: Thank you, Mr. Power.
There has been a gentleman in the audience who would like to ask you a question. (Interruption) Oh, he did. Okay. I wasn't going to permit the question, so God love you. I didn't want you to go away mad. I was going to explain the reference of the committee.
Mr. Power, we thank you very much for your knowledge and your input this evening, and we would ask that you follow the findings of this committee along with us, and Mr. Epstein has asked you to forward some information and I would ask that you do send it in care of the chairman of the committee. Thank you for your time, sir.
MR. POWER: Thank you.
MR. CHAIRMAN: Ladies and gentlemen, I would just like to go through the roles of the committee. I would ask at this time for Sarah and Frank Allen to come forward. Anyone who has not scheduled a time and would like to present or tell their story, I would
ask that you contact Kim, at the rear of the committee, and she would give me your names. Folks, you have 15 minutes to do your presentation and at that time if you wish to open your presentation up to questions, we'll allow that. Okay, I would ask that you state your name, for the record and, sir, if you're going to speak as well, state your name. You have the floor, carry on.
MS. SARAH ALLEN: I'm Sarah Allen.
MR. FRANK ALLEN: I'm Frank Allen.
MS. SARAH ALLEN: I'll be presenting this evening on behalf of my parents, Frank and Vicki Allen.
My family business has been in the retail gasoline business at the same location for 36 years, 30 years of which my father has owned Frank's Shell in Lunenburg. Frank's Shell is one of the few stations left in Nova Scotia that is a totally full-service site. Therefore, our perspective this evening is based on examples and facts relating to full-service gas sales. Our business was purchased and built on a regulated gasoline industry in this province. At the time, a gasoline vendor licence was significant and had a resale value. The value of these licences, in turn, made the dealer and their site an asset to the oil companies. After deregulation, the licence was no longer a bargaining platform when dealers were negotiating contracts with the oil companies.
Our oil company has been asked on many occasions over the past several years to provide a methodology for their pricing structure. We have never received a clear answer other than there are many factors contributing to the price. They cannot provide a ratio between the price of crude oil and the litre cost of gasoline once delivered to the dealer's site. Regardless of crude oil price, market supply or demand, they are providing us with a set profit margin per litre. The gas prices have doubled, but margins have been cut by 50 per cent or more, and we are interested if this committee has been able to get a structure or a pricing structure from the oil companies, if you have been more successful than we have in determining how they are pricing the gasoline. The average profit per litre comes nowhere close to covering our operating costs of providing this service. It barely covers the credit card charges, POS and debit fees. This leaves the dealer with nothing to reinvest in the business or to make any kind of property improvements.
We've assembled a package of information for you, including photocopies of gasoline purchase invoices and our daily fluid statements as proof that we are operating on extremely low profit margins, and this information has been forwarded to Kim Sheppard for your committee to review at your convenience. We have talked to people in rural Canada who must drive up to 70 kilometres to purchase fuel. People driving long distances with cans of gas pose many safety and environmental threats. In this province there are some rural areas feeling the pressure of a declining retail gasoline industry - a situation that will only worsen
in time. As more privately owned stations close and competition is reduced, corporate-controlled pricing will flourish.
There is no doubt in our minds why the younger generation is not entering the service station industry. This is one area of small business and entrepreneurship that will likely not be available for young entrepreneurs in rural communities in the future. The small rural stations are closing their doors as large corporate-run stations consume the market. With slim profit margins and corporate gas bars popping up at grocery stores, there is no incentive to delve into this industry.
Over the years of talking with other service station owners, there has been a general consensus that gas margins improve when the government or other agencies are discussing the need to regulate the industry. Investigating oil company activity, their pricing, and holding public meetings such as this do have an impact on our margins. Perhaps we should have these more often and, please, keep the pricing of fuel under investigation at all times. As government representatives, you have to understand that every new fee or increased cost for licences, permits, et cetera, really does have an impact on our bottom line. As one example, in the past year the government doubled the price for purchasing motor vehicle inspection stickers, giving the garages absolutely no increase. The government letter stated that the increase in price was needed to manage the program. What about the dealers? We also have a business to manage.
The government, oil companies, banks and credit card companies, and everyone else in this industry works on a percentage basis, yet this is never passed on to the dealer. Maybe dealers' profit margins should be based on percentages and not cents per litre. We would like to see dealers' margins based on percentages. It's the only way to monitor or gauge our business. If not, we would like to see the people with the power to regulate or deregulate take cents per litre for themselves instead of percentages.
Considering the government receives so much from the sale of gasoline, we hope this committee can take an unbiased approach to the plight of gasoline and home fuel dealers. We feel we are very much in need of a regulated gasoline industry. Damage done to gasoline dealers in Nova Scotia is irreversible. However, through your commitments and efforts to prevent the oil companies from dominating the retail margins, we look forward to some relief in the months ahead. We offer a sincere thank you for holding these public meetings throughout the province. As one of the local businesses here this evening, we really appreciate the opportunity to be heard. Thank you.
MR. CHAIRMAN: Thank you very much, and I would like to recognize Russell MacKinnon with the first question.
MR. MACKINNON: Well, more of an observation, Mr. Chairman, because it has been brought up last evening and again this evening on a number of occasions with regard
to taxation and the HST and so on. I would like to put it out there for other members of the committee that perhaps we should invite representatives from the federal Tax Commission to speak to this issue of the taxation, because I hear a lot of observations from various members around the committee and in the House about all this money that's collected on taxes, but we don't see anything for it. I think we do have the mechanism to invite members of those various agencies if they're a little reluctant to come. So I think we should consider that in light of the point that has been made. But quickly, your local operator/dealer here in Bridgewater, how many stations are there in Bridgewater today as opposed to, let's say, 10 years or 20 years ago? Or Lunenburg, I'm sorry.
MR. FRANK ALLEN: We're in Lunenburg, and there are four left. Four for the population we have is a large number of stations. There are a few gone, probably three have closed down. So there would have been seven at one point in time, but it doesn't help. I guess if I closed down, it would help the other three and so on, but I'm hoping to stay there. My daughter was hoping to follow in my footsteps, but it's not going to happen; it's just not feasible.
MR. MACKINNON: That's largely a function of the fact that rural Nova Scotia is declining in population, do you find that?
MR. FRANK ALLEN: Yes, and you have better vehicles and better highways. So you have everyone in Lunenburg who goes to Halifax one time or another and you have the Canadian Tires, and grocery stores offering gas with all sorts of incentives. I thought the oil company was supposed to pay for these incentives, but now the grocery stores are passing them out, and Canadian Tire is passing out Canadian Tire dollars, and you know I'm all for the consumer getting a good deal, but we're letting the big corporations rob the little guy with nothing being done. I guess maybe it has always been that way.
MR. MACKINNON: Quickly a final question. You would support regulation of some varied form?
MR. FRANK ALLEN: It definitely should be regulated. You know, some people say it was okay for the first four years of regulation, but I didn't find it okay for the first four seconds of deregulation. The day they deregulated, my gasoline licence was worth nothing. I had just spent $150,000 putting in new storage tanks and so on. Lawrence England gave the oil company credit and a pat on the back for giving him that kind of money in a contract so that he would be the owner of the storage tanks. Indeed, the oil companies were just doing that to unload the liability of environment because the Environment people said whoever owns the storage tanks are going to be responsible for environment issues, so the oil companies quickly sold the storage tanks to the dealers for $1, or helped myself, Lawrence England and others get new ones so they would be the proud owners of these storage tanks. It was a way of trying to dump the liability factor. It was doing nothing for us.
MR. CHAIRMAN: Thank you. Jim DeWolfe.
MR. DEWOLFE: Thank you very much for your presentation. First of all, just so I get my head around a matter, it's sort of unrelated, but you did bring it up, so I would like to know what the actual increase was per sticker - you suggested that the sticker price for a motor vehicle inspection, what was the actual amount, dollar amount, per sticker?
MR. FRANK ALLEN: Well, this inspection thing really gets in my blood because government said that trailers had new regulations . . .
MR. DEWOLFE: I don't want to get into a whole lot of detail on this because it's unrelated.
MR. FRANK ALLEN: We'll rush it ahead. We called the Motor Vehicle people and said that we do not get enough for doing inspections, there was too much time consumed. We were assured by a real nice gentleman on the phone that there was going to be some price changes and that we would see that in the very near future. I hung up the phone feeling extremely happy, but then one day the price of stickers doubled - they doubled.
MR. DEWOLFE: Your costs . . .
MR. FRANK ALLEN: Doubled.
MR. DEWOLFE: From what to what?
MR. FRANK ALLEN: It was $1.50 before.
MR. DEWOLFE: It was $1.50, now it's what?
MR. FRANK ALLEN: It's $3 now. At $1.50 we were making $12.50 on a vehicle. Today we're still making $12.50. They said they had to have that doubled so that they could manage their program.
MR. DEWOLFE: Okay, I don't want to go too far with that because we're using valuable time that we should be dedicating to the topic at hand. You sort of zeroed in on two things in your summary. The tax component was one of them and the other one was some sort of regulation, and you suggested regulation, we have to go back to regulation, and I'm just wondering at what level would you like to see regulation go into place? You don't want to see it going back to the regulation that was there before I expect.
MR. FRANK ALLEN: I didn't see a whole lot wrong with that.
MR. DEWOLFE: It seemed to work for you?
MR. FRANK ALLEN: Really it did indeed, it did indeed, because if I was selling a product at a price, everyone was at the same price. That was across the province, it wasn't from town to town, and Rodney Grace said that if he puts his gas up a penny the oil company will follow suit, and that's each and every time. I can tell you way back when, when gas was sold in gallons and, you know - I could spend a life here and I won't do that - the price of premium and the price of regular gas, when it was at a gallon, the cents difference was maybe a dime, 8 cents or a dime. Now it can be that much per litre. We, myself, I would rob you if you came in, or whoever my customer was, to try to keep my operation going, I would put the price of "Gold" gas up a little bit more. There I would have a chance to make a penny. The oil company would see this and follow me up and they continued to do that until the margin between "Bronze" and "Gold", in Shell's case, was as much and more cents per litre as it was on a gallon at one point in time.
[9:00 p.m.]
MR. DEWOLFE: Thank you for that example.
MR. CHAIRMAN: I'm not seeing any other questioners. I thank you for your presentation, and good luck to you. It's nice having you with us tonight. Margo Hanley is the next witness. Good evening to you. You've heard all the rules and regulations and all our wishes. Please state your name for the record and continue.
MS. MARGO HANLEY: Good evening everyone. I would like to first introduce myself. My name is Margo Hanley, and my husband, Borden, and I have run a PetroCanada station since February 1989. I'm also a Past-President of the Retail Gasoline Dealers Association of Nova Scotia.
In 1989, when we took over the station, the volume was very low and under poor management. We worked very hard to turn things around. We turned the station around to be a very profitable, viable station, and the volume increased dramatically. We were successful in getting extremely productive employees, and through teamwork we were able to obtain several awards from the community of Liverpool, such as Best Customer Service, Most Improved Customer Service, and also one of our employees got Employee of the Year.
Because we were running at a profit, we were able to keep employees satisfactorily paid, which in turn kept these employees dedicated, willing to please, and excellent at customer service. Also, our business was important to the community, in that we were able to support the non-profit organizations. We supported the fire department, the hospital, the minor hockey, and so many other local events, because we could. Those were the good old days.
Then things changed. The oil companies began dictating how much margin a dealer could make on their product. The oil companies seemed to want it all. The oil companies reduced margins 3 cents to 4 cents per litre. We thought that was bad. After all, the cost of staying in business was increasing and our profit margin was being taken away. Within a short period of time, it was necessary to cut wages, and that hurt our dedicated employees badly. They had to start looking for other jobs in order to make their own ends meet. We in turn realized that we could only pay minimum wage, which I might add has increased several times since that happened. We were required to hire new staff, now mostly students who had their lives to live, including school, social life, et cetera. It became harder and harder to motivate people to work for minimum wage, especially with enthusiasm.
Now, with oil company leases, the profit margins are decreased again. In fact we don't even have a current lease, as it expired in February 2004, and they do not want to even talk to us. We are currently running on a month-to-month term, which means they can have us evicted at their whim. We have been informed that they are considering putting the property up for sale in 2005, and apparently this is the severance that we are going to be stuck with, lucky to make ends meet before the next who-knows-how-many months, let enough making even a nominal profit.
I personally had to take a 40-hour a week job outside of the community in order to make our own personal ends meet, so now I am committed to two jobs, and one, I might add, is not profitable at all. I know you are taking these facts into consideration as you meet with people in the different areas of the province, and I urge you that your decision cannot come any too quickly, as stations are going out of business on a constant basis because of the unfairness of the oil companies. I also know for a fact that they treat all of us differently, as there are currently stations all over the province with healthier margins than others, and this is definitely not fair.
I urge you to take these things into account when you make your decisions. If you have any questions, I would be more than glad to help in any way that I can. Thank you so much for looking into this matter and taking your time to listen to our concerns. Thank you.
MR. CHAIRMAN: Thank you, Margo. We do have a question from Howard.
MR. EPSTEIN: I think I must have missed something you said. Did you tell us that PetroCan is telling you that they're going to close your station in 2005?
MS. HANLEY: Yes, the property will be put up for sale in 2005.
MR. EPSTEIN: With an intention of relocating or just simply with an intention of closing this station down?
MS. HANLEY: Well, they want to sell it to somebody who's willing to stay there, sell their product. We don't own our property. We lease our property. We lease where we are.
MR. EPSTEIN: So their reason for closing, or saying they want to sell this property is what?
MS. HANLEY: They say it's not profitable, and I would really like them to prove that to me. I was told a few years ago, by one of the reps, who I might add has now been fired, that we had one of the most profitable stations in the province for PetroCan.
MR. EPSTEIN: So they don't want a lease arrangement, they want someone who owns the property.
MS. HANLEY: Right. They want to sell it to somebody. They want to get rid of all the environmental issues. Right now, where we pay rent, they are responsible for all the environmental issues.
MR. EPSTEIN: And I take it there's nothing in your contract, really, that protects you from this. This is at the expiry of your contract, is it? Is that what's going on?
MS. HANLEY: Well, our lease was complete in February 2004, and we wanted to renegotiate and they don't want to. They say, oh, you're okay, we'll just leave it the way it is, because you know if we come down and talk to you, you're not going to get as good a deal as you have now.
MR. EPSTEIN: How many stations are there in the Liverpool area now?
MS. HANLEY: Actually one closed today. We had an Ultramar station close in Liverpool today. Currently there's ourselves, there's an Irving Mainway station that is company owned and operated, there's a Shell station that's probably about two miles from us, and one other on the South Shore. We've dropped in numbers, drastically. Then going out towards the Digby area, there's I think maybe two.
MR. EPSTEIN: When you say the numbers have dropped drastically, you're talking about, say, since 1989 when you first became involved in the business?
MS. HANLEY: Yes.
MR. EPSTEIN: Do you remember how many stations there might have been in your area then?
MS. HANLEY: I think it was eight to 10 when we took over the station.
MR. EPSTEIN: Do they all offer the same range of services? For example, do you all do vehicle repairs?
MS. HANLEY: We have only full-serve, and we have a two-bay automotive garage. The Mainway has the convenience store type of thing. We've always prided ourselves on being the guys who could fix the tires on Saturday, put the headlight in for the guy on the road at night, because the other stations don't do that.
MR. EPSTEIN: You're the only station that does vehicle repairs in the area?
MS. HANLEY: Pretty well, yes. No, excuse me, the Shell station does.
MR. EPSTEIN: Thank you for that.
MR. CHAIRMAN: Brooke.
MR. TAYLOR: Just a question on the distinction between your wholesale price and your retail. What's the difference?
MS. HANLEY: What margin do we make?
MR. TAYLOR: Yes.
MS. HANLEY: We make 2 cents a litre on regular and diesel and 2.2 cents on supreme.
MR. TAYLOR: What's the selling price to you for regular unleaded, ballpark?
MS. HANLEY: I don't know what it is today, to be honest with you. We're selling it for 93.9, full-serve (Interruptions) No matter what it is.
MR. CHAIRMAN: Sir, you're going to have to come to the mic. Rules and policies of the committee.
MR. TAYLOR: I don't mean to cause any difficulty for the presenters. You were talking about PetroCan claiming that it wasn't profitable. If your margin is only 2 cents and you're not making any money at it, and other wholesalers are selling that same product out of that same refinery for - what was it? - 84 cents, then somebody, at the very least, is misleading somebody.
MS. HANLEY: Somebody is making a lot of money.
MR. TAYLOR: And it's not you. It certainly isn't.
MS. HANLEY: No. It certainly isn't. And I'm telling you that the stories you're hearing tonight are fact, they are so true. I've heard them all over the place. The oil companies control the wholesale price, they control the retail price, they control everything. The fact of being an independent, I don't know what that means. I don't mind working hard if I'm making money, but when I'm losing money, it's pretty hard to get enthusiasm, to get out there and be a nice girl and put the smile on your face and all that. I just want to go home. If I'm going to lose money, do I really want to stand here and be nice to you? I'm sorry.
MR. TAYLOR: I don't blame you.
MS. HANLEY: I'm just human.
MR. TAYLOR: If the independents, whether they're integrated or not, are getting that same product for 84 cents, if that's their selling price, you can bet your bottom dollar that the big refinery is certainly making a profit, and the wholesaler, which in many cases is one and the same. I think that's just poppycock for PetroCan to say they're not making a profit. It's absolute nonsense.
MS. HANLEY: It is. I agree. The way they manipulate us, I'm not just saying even in pricing. Just one little example, the way they manipulate us, I've been very strong in the Retail Gasoline Dealers Association and one time we were having a meeting - I don't even remember what the issue was at the time, to be honest - and PetroCan found out that I was president at the time and I was going to the meeting. They sent me a personal letter stating that I should not go and associate with people who might talk things that we shouldn't talk about.
MR. TAYLOR: Shame.
MS. HANLEY: I've kept that letter in my file. That's just one of the ways they manipulate you.
Another girl was reprimanded for having my telephone number on a sticky note.
MR. TAYLOR: Pardon me?
MS. HANLEY: She was reprimanded for having my telephone number on a sticky note. They asked why she had my number. They don't want us talking and this is why I know you're only hearing from dealers tonight; unfortunately, we're the ones hurting, so we
welcome the opportunity for somebody to finally listen. This is why you're hearing so much from us.
MR. CHAIRMAN: We appreciate that, very much so. I have a couple more questions. Thank you, Brooke. Gerald Sampson, please.
MR. GERALD SAMPSON: I don't know if you can answer this or not, but it's just a thought that's come to me that I'd like to put out to the general public and while Mr. Power is here - the lawyer, the legal mind for the business. It appears to me that it may be my small way of thinking that there seems to be some sort of collusion between the oil companies and that could be a possibility, but what has also jumped into the equation after what I've heard tonight and last night is that the automotive companies must have some say in this.
Why should I have you putting a tail light in for me or fixing my tire or putting a ball joint on for me and keeping me happy when, if you're out of business, then I have to go to the dealer and pay three, four times the price in labour? It seems that the automotive companies and the gas companies are kind of partnering together to see if we can eliminate this pesky bunch of independents and allow us to have our dealerships. There's nothing like having it in both hands, which the oil companies seem to be getting their profits plus a kickback - if that's what you want to call it, or a commission - on the use of credit cards. Therefore, if we sell you a car, thank you very much, you're gone for good - one time you were. Now, you're not gone for good, you must come back to our dealers so we get two kicks at the can all the time.
That's just an observation that I would like to share, maybe the general public can think on it and come up with a better idea. That's the way it's hitting me.
MR. CHAIRMAN: You're certainly entitled to your opinion, sir. I'd like to recognize Danny Graham.
MR. GRAHAM: Thank you, Ms. Hanley, for coming. I just want to touch on one point that you raised. You raised the spectre of intimidation on the part of the oil companies. I'm wondering if you could elaborate on that, if you have any sense of how widespread that kind of practice is and whether or not you have any sense - I'd like for it to be as factual and known as possible - with respect to these hearings; for example, whether directly or indirectly, people have expressed a reluctance to even appear and speak about these issues as a result of the control that the oil companies may have over their business.
MS. HANLEY: I don't like to put other people on the spot. I do have the letter that I received from them. The lady that I told you about that was more or less reprimanded for having my telephone number, she is now no longer in business. So, I guess, maybe that kind of tells you.
MR. ENGLAND: Excuse me, Mr. Chairman, I'd like to back Margo on that.
MR. CHAIRMAN: Excuse me, sir, you have to follow the policy. If you're going to do that you have to have . . .
MR. ENGLAND: I want to back her on that.
MR. CHAIRMAN: Okay, thank you. Carry on, Margo.
[9:15 p.m.]
MS. HANLEY: That was basically it. The one thing I think that people touched on tonight - I have a little bit of a discrepancy where the people tonight seem to be satisfied with 5 cents a litre. I'm not being greedy, but we were making 8 cents a litre 10 years ago. That's when we could have good staff and support the community and if Rodney's getting 5 cents a litre on 8 million litres, he's going to do a hell of a lot better than me at 1.5 million litres on 5 cents a litre. I'm not too sure of the 5 cents a litre, I guarantee the oil company would never be satisfied for their profit to be 5 cents a litre.
MR. GRAHAM: Thank you.
MR. CHAIRMAN: Thank you very much and thank you for your presentation.
MS. HANLEY: Thank you very much.
MR. CHAIRMAN: I would like to call on Peter Mader. Is Peter with us? Peter, you've been waiting a long time for your presentation so obviously you know . . .
MR. PETER MADER: It's all the same thing.
MR. CHAIRMAN: I will remind you that your comments are being recorded, sir. You have 15 minutes. State your name, please.
MR. MADER: I'm Peter Mader, I'm owner-operator of Maders Esso in Barss Corner, which is about a half hour out of Bridgewater. I'm going to state much the same thing that everyone else has said, but I spent time writing it, so I'm going to read it.
I would like this committee to consider the state of an essential service that is disappearing from our rural communities and that is the reasonable accessibility to gasoline and diesel fuel. Nova Scotia's rural gasoline outlets are endangered and require protection from our predators.
Over the past 10 years I can think of at least 10 gasoline stations that have closed in the New Germany area. The outlets have closed, in large part, due to a poor financial return in what has become an extremely risky type of business. Gasoline dealers daily face the possibility of polluting their sites and the high cost of insuring against it. The risk of being held up, vehicle drive-offs, employee theft and product shrinkage is ever present.
In return, we offer the public clean fuel, clean windshields, clean restrooms, free air for their tires from clean, tidy sites. In spite of these risks, we sell our products for pennies a litre, often splitting that with the banks for credit card charges. Above these risks there exists the added pressure of competing in an industry that is dominated by large companies, often our own suppliers that own every division from the oil field to the gas nozzle.
That the media makes headlines of every movement in gas pricing further adds to the importance every Nova Scotian places on the competitiveness in this business. Customers expect the cheapest prices, loyalty points, extended hours and added services. The cost of this service and the low margins experienced over the last few years have meant I have been selling fuel for less than it costs me to pump.
Gasoline has become a loss leader, discounting used by national chains to attract customers to their sites. Once the customer is in the national chain's site, customer purchases generate volume rebates, listing fees and advertising incentives that the independent cannot access.
I am assuming that you came to Bridgewater by way of Highway No. 103. I further assume you knew that when you got here there would be a major company waiting for your business at the exit. But would you assume that if you went home by a secondary road, across the province to Windsor or Middleton, that there would be a fuel outlet opened to you tonight? If there was tonight, do you assume there will be one there five years from now?
I am here to tell you of the frustration that rural Nova Scotians feel when they run out of gas mowing their lawns and it takes an hour out of their day off to go for more fuel. What I really want you to understand is how a volunteer in a fire department feels or a search and rescue volunteer when they have an emergency and it takes an hour's drive to refuel their equipment. Our forest industry, Christmas tree industry and agricultural industries are all located in rural settings. They depend on easy access to fuel to run efficient businesses.
We only need to look back a few months to Hurricane Juan or the big snowstorm this past winter to show the near panic that people of Nova Scotia felt at not being able to access essential services, fuel for generators, snowplows, power saws and vehicles was an immediate need. The price of gas was no longer a headline on the days that followed those events. The concern was did the site have power and was product readily available? In today's world, emergencies and extreme events are all too real and ignoring the need for basic infrastructures in rural communities is irresponsible.
The fact that the Nova Scotia Government was unwilling to cut its percentage in times of high gasoline prices and furnace fuel prices is a key indication that they understand the need for added revenue in today's business world. I too understand those costs after dealing with recent upgrades to my site. It is clear that at present levels of financial returns on fuel sales, my outlet will also be another one of those closed rural sites. Sometimes we do not recognize a bargain when we see one. Gasoline is still a bargain, especially when it is available close to home. Public transportation is not available to rural residents and this makes them very dependent on private vehicles.
This committee can help assure fuel is available in open outlets to those who live in the interior of our province. I urge you to legislate a fair minimum margin to fuel retailers. Do not allow an essential service to be controlled by multinationals - rural Nova Scotia will suffer. I ask for a fair, consistent return on the many thousands of dollars I have invested in my community, to be able to compete on a level playing field for an essential service. In return, my site will remain open to provide after-hours service to a fire department or rescue unit. I will continue to be a community supporter, and I will have gasoline for your outboard motor when you make a nearby cottage your retirement home.
Thank you for your consideration of my request.
MR. CHAIRMAN: Thank you, Peter. Will you take a couple of questions?
MR. MADER: Sure.
MR. CHAIRMAN: I'd like to recognize Jim DeWolfe first, please.
MR. DEWOLFE: Thank you, Mr. Mader, for making your presentation. It was interesting what you brought up about rural areas losing their service, and I can relate to one in my own constituency where the community's only provider had to shut down because the company, all of sudden, decided that the volumes weren't there so they weren't going to truck the fuel down to fill his tanks and it's very sad that sort of thing has happened. Consequently it's a one-hour return trip to go to fuel up. I don't know how widespread that is . . .
MR. MADER: It's becoming more and more.
MR. DEWOLFE: It's becoming more and more obviously. It's very interesting, something that the company should be made to provide service to all residents of Nova Scotia.
MR. MADER: I think if our margins were there, you wouldn't need to worry about it.
MR. DEWOLFE: You wouldn't give it a thought, no.
MR. MADER: We could support ourselves or whatever.
MR. DEWOLFE: Once the fuel wasn't there anymore, the community lost their little grocery store that was connected to it, because it all works together doesn't it? They have to drive for their milk as well, that's the problem that comes up. So I just wanted to make the point that that's a big concern to me as well. Thank you.
MR. CHAIRMAN: Thank you, Jim. Howard.
MR. EPSTEIN: You make great points, thank you very much. As it happens I know Barss Corner. You needn't have been quite so modest about your community, it's a wonderful community and we happen to know where it is. What I don't know is the situation about the other routes that are across the province, 10, 12 and 14. Are there other stations?
MR. MADER: No, I'm just giving examples. There are a few, from New Germany to Middleton, it's probably 40 kilometres and there are no stations that left. There were two in the past, probably 10 years, that have closed. There's one between here and New Germany. New Germany has one. They've lost maybe four in that community in the last 10 years, and around me there are maybe three in my community that have closed.
MR. EPSTEIN: Did I hear you say that you anticipated closing yourself?
MR. MADER: I'm in the same situation that Mr. Grace is in. I've gone through an upgrade and of course found contaminated soil, which added another dimension to it. I'm hanging in there, but I'm not making money on my gasoline. It's my grocery store that is supporting the business, not the gasoline.
MR. EPSTEIN: Okay, we're certainly alive to this problem, thank you.
MR. CHAIRMAN: Thank you. Charlie.
MR. PARKER: Just a couple of quick questions I guess, Mr. Mader. What is your margin right now? What are you actually making?
MR. MADER: I think today I'm at 4.5 - I'm just full-serve - and that includes tax.
MR. PARKER: So 4.5, and you don't have self-serve?
MR. MADER: I don't have self-serve.
MR. PARKER: Okay. Consistently we've heard from retail operators - in fact, all our presentations tonight have been on that. It was suggested that maybe 5 cents a litre minimum price would be beneficial. What do you think?
MR. MADER: It would be beneficial.
MR. PARKER: Would that be sufficient?
MR. MADER: I think it should be based on a percentage, myself. I don't care what this committee says they can do, we can't control the world price of fuel. It's impossible. What we can do is keep it available to everybody, and in my view it should be a similar price throughout the whole province. I don't think someone in Halifax should be entitled to a better price than the guy who lives in Yarmouth - other than the fact of transportation.
MR. PARKER: As a retailer what would you like to see, like 5 per cent or 5 cents a litre? What would you need to make a profit?
MR. MADER: Well, if I had money to invest and I was going to put in a mutual fund for a lifetime, they tell you that you should expect 8 per cent. If I'm in business and running the risk of pollution and all these other things, why wouldn't I expect an 8 per cent return on my money?
MR. PARKER: Secondly, regulation. Do you think that would be beneficial to you, as we had it before 1991?
MR. MADER: I think it was fair for all Nova Scotians, yes.
MR. PARKER: Okay, thank you.
MR. CHAIRMAN: Thank you, Charlie, Gerald.
MR. GERALD SAMPSON: Thank you, Mr. Mader, for coming. Just an observation. You said that you would be repetitive, but everybody has something unique to say and you put a light on in my mind very quickly when you alluded to the fact that a rural gas station is an essential service, because I've been 12 years as a councillor in a rural area fighting for rurals and it's something that I personally didn't concentrate on. But I've always maintained that if people locally just supported their own local, there would be enough for everybody to go around, rather than go to the big centres and do their shopping and then come back home and complain when you're not open when they want that.
MR. MADER: That's happening. I'm getting the guy who's filling his lawnmower tank, but when he fills his gas tank he probably goes to Bridgewater to save 2 cents. That's happening, and I'm not complaining about that, but my concern would be, like I said, you
have a big snowstorm and the roads aren't fit to travel. What are you going to do? Are you going to drive to Bridgewater for gas, or if your furnace runs out of fuel? At least I have diesel, if the truck can't get to you, a snowmobile can, and you can have heat.
MR. EPSTEIN: I just want to personally thank you for raising the issue of essential service because that's a tool that I'll put in my chest for fighting for the rural areas.
MR. MADER: Thank you.
MR. CHAIRMAN: I would like to recognize Brooke Taylor. You have a question?
MR. TAYLOR: Yes, I do. I certainly appreciate the presentation as well. Did you say you fly the Esso banner?
MR. MADER: I do.
MR. TAYLOR: Then you buy from Wilson's?
MR. MADER: I buy it through Wilson's, yes.
MR. TAYLOR: Had you been aware that Wilson's might charge a different wholesale price to you than they charge somebody else?
[9:30 p.m.]
MR. MADER: Yes, they have a lot of different pricing structures and there may be five different programs you can get with them. So yes, I knew that there were different prices for different people because of their relationship with them, but they should be relative. I mean it should be, you know, if they're providing your pumps for you, that's a cost to them. It's going to hurt your margin but, you know, they should have an equation.
MR. TAYLOR: I think there probably is a number of factors and, as a business person, I would be extremely upset that I'm buying from the same wholesaler, flying the same flag as a colleague in the same industry, and I'm paying more, if in fact we're seeing the whole picture, and I know there are a number of inputs that maybe I'm not looking at, but it does seem very, very unfair.
MR. MADER: Well, as an example, Rodney Grace said tonight that he was selling his diesel for 82 cents, whatever, and I'm selling mine for 79.9 cents and I'm making 5 cents a litre on diesel.
MR. TAYLOR: Yes, yes, different strokes for different people.
MR. MADER: Yes.
MR. TAYLOR: That's all.
MR. CHAIRMAN: Thank you, Brooke, and thank you, Peter, for your presentation. Ladies and gentlemen, that brings the committee to a conclusion tonight and I would, first of all, like to thank the committee members for their questioning. Each and every night we learn a little bit more, that's for sure, and we're learning it from you. So we thank the audience tonight for your patience, and good luck. I just want to let you know that this committee is working for you. Good night and thank you and I thank the support staff as well. (Applause)
[The committee adjourned at 9:32 p.m.]
