IRAC rules Irving Oil can pass cost of Ottawa's clean fuel standards onto consumers

The Island Regulatory and Appeals Commissionhas ruled that Irving Oil can continue to pass along costs related to the federal government's new clean fuel standard to P.E.I. consumers.

Those costs have been built into fuel prices since July. Ottawa's clean fuel standards are aimed at forcing oil refineries and fuel importers to lower the "carbon intensity"of the products they sell and the methods they use to refine them.

The policy sets targets for emissions and establishes financial rewardsfor oil companies to reach them, and penalties for companies that don't.

Earlier this month,IRAC issued a ruling making those costs part of the pricing model, but they are not visible in pricing breakdowns published on the commission's website. Instead, they're built into wholesale prices.

"The primary supplier's (Irving Oil) cost of complying with the [clean fuel regulations] is included in the rack price, to the extentthe market will allow," IRAC said in its decision.

"As a result, using the rack price as the benchmark price allows for the recovery of CFR compliance costs without the addition of a separate clean fuel cost adjuster. The amount of CFR related costs that may be recovered through the rack price will be limited by the competitive pressures of the market."

Irving is the exclusive supplier of petroleum products to Prince Edward Island.

What makes up fuel prices on P.E.I.? We use a pie to help explain.

1 year ago

Duration 3:06

Many on P.E.I. know that the Island Regulatory and Appeals Commission adjusts fuel prices each week. With the help of a pie, CBC's Kevin Yarr explains how much IRAC actually manages and who else gets a slice.

A consultant hired by the commission estimated the cost to be about 4 cents per litre.

Critics have said Irving calculated its costs based on the most expensive option to meet the new regulations, while the federal environment minister wrote to IRAC saying there should be no extra costs yetbecause the rules gave refineries a full year to come into compliance.

"Seeking immediate consumer price increases to account for estimated costs under a worst-case scenario projection could lead to a scenario where a company later chooses a lower-cost option, pockets the increased revenue from consumers, and adds it to already elevated refinery margins," said federal Environment MinisterSteven Guilbeault.

"The clean fuel regulations will not necessarily lead to significant cost increases to refiners, particularly in the short term, and certainly not as high as those claimed by Irving."