HANSARD

Printed and Published by Nova Scotia Hansard Reporting Services

ECONOMIC DEVELOPMENT COMMITTEE

Mr. Michel Samson (Chairman)

Mr. Brooke Taylor

Mr. William Dooks

Mr. Mark Parent

Mr. Howard Epstein

Mr. Charles Parker

Ms. Marilyn More

Mr. Wayne Gaudet

Mr. Harold Theriault

IN ATTENDANCE:

Mrs. Darlene Henry

Legislative Committee Clerk

OBSERVERS:

Mr. Mike Duda, Senior Policy Analyst

Service Nova Scotia & Municipal Relations

Mr. Dale Madill, Project Consultant

Service Nova Scotia & Municipal Relations

WITNESSES

Retail Gasoline Dealers Association of Nova Scotia

Mr. Graham Conrad

Executive Director

Mr. Roy Pettigrew

Executive Board Member

Independent Dealer

Mr. Neil Cruickshank

HALIFAX, TUESDAY, JUNE 9, 2005

STANDING COMMITTEE ON ECONOMIC DEVELOPMENT

9:00 A.M.

CHAIRMAN

Mr. Michel Samson

MR. CHAIRMAN: Good morning, committee members. I would like to call this meeting of the Standing Committee on Economic Development to order. This morning, as you know, we have as witnesses the Retail Gasoline Dealers Association of Nova Scotia. Mr. Graham Conrad, the Executive Director, who is familiar to all members of this committee, is here with us today and we also have an independent dealer, Mr. Neil Cruickshank who also is joining us. Mr. Conrad, is Mr. Pettigrew going to be joining us? He will be, okay. It is also my understanding that we do have observing here today some representatives from Service Nova Scotia and Municipal Relations and also another familiar face, Mr. Bill Simpkins, who is here today as well and I certainly want to welcome them to our committee meeting.

Prior to your presentation, Mr. Conrad, I'm going to ask members of the committee if they will introduce themselves, their name and their riding, so that you know exactly who we have here. Mr. Epstein, if you want to start.

[The committee members introduced themselves.]

MR. CHAIRMAN: With that, Mr. Conrad, I would invite you to make some opening remarks. Also, Mr. Cruickshank, if you wanted to explain to us your specific situation and following that, I'm sure, committee members will have some questions for both of you gentlemen. Mr. Conrad.

MR. GRAHAM CONRAD: Mr. Chairman, I will keep my opening comments as brief as I can for a couple of reasons. My throat may not hold out and secondly, I'm sure that there are more interesting questions and answers than any point of view that I'm going to expose here today.

First of all, what I would like to do, because I haven't had an opportunity to do so before, is to thank all of you. I've met some of you before but I would like to thank all of the members of the Legislature for the enormous support that was shown to the independent retail gasoline dealers on the last day of the Legislature when every Party put, in some cases, their personal beliefs aside and their partisan politics aside, and voted to support Bill No.79 on the basis of the recognition of what it meant and the impact it was having on the people who were not only present at the Legislature on that occasion but in the industry as well. So on behalf of the association and the independent retail gasoline dealers, thank you very much for that.

I have to confess, my gratitude is somewhat diminished this morning based on yesterday's announcement, but we'll see how that goes.

The focus of the meeting is to talk about an overview of the oil and gas industry, emphasis on price regulation, fixed costs, independent retailers and any other industry-related issues that you want to talk about. If I could make it as simple as possible, and it's the same message that we've been bearing all along, the issue within the industry is the volatile, the unpredictable, the very difficult pricing practices by the major oil companies, as well as the domination that they have at the retail level, that is making it absolutely impossible for independent retailers to generate a profit and stay in the business. That's the issue in a nutshell.

Much has been said in the media and through the select committee review and presentations during that process, but the issue that we want to make sure is clearly understood is that it is a very serious, critical issue for independent retailers in the industry and that if some remedial action is not taken or if a recommendation that has been put forward like the province moving toward adopting regulations similar to those that exist in Prince Edward Island, then regretfully, the industry is going to see a serious meltdown of independent retailers who participate in the industry in a very short period of time. We are here to try to make sure that you decision makers fully understand the implications of what is involved here. For that reason, we are here today, and glad to be here today and glad to do anything we can to help make sure everybody understands the issue fully. Roy.

MR. ROY PETTIGREW: Sorry for being late. There are a few things I was going to say but there are ladies present. I don't know where Graham started but I know that some of the argument is with the press release last night, that the City of Halifax would be subsidizing the rest of the province. Well, gentlemen, this morning in Halifax, gas is 96.9 cents per litre. In Amherst it is 94.9 cents per litre. In a city the size of Halifax, it doesn't take long at 2 cents a litre to find out who's subsidizing who now in a non-regulated market. In Sackville, New Brunswick, that same gas that comes from the Halifax plant today is 92.9 cents per litre. So the subsidizing of Halifax or the metro area is a farce.

I'm sorry to hear that it sounded as though the Premier got lobbied by major oil companies. Last night I felt kind of violated. I didn't sleep well and I'm just having a hard time coping here this morning. The time and effort that went into this, all of this work by a whole pile of people, and to have that announcement last night, and this meeting today. Anyway, having said that, I hope that the Premier can write a cheque to the Toronto-Dominion Bank. I don't know how much longer I'll be in business. I've said that and stated that and stated that and stated that since day one. This Summer this government is apparently willing to watch 100 more retailers go by if something isn't done.

What irritates me the most is two weeks ago or three weeks ago in the Legislature we sat in the Premier's Office with him and Mr. Barnet. We shook hands and we were told that something would be done ASAP. Mr. Premier turned to Mr. Barnet and stated, your group is ready? Yes was the answer. I've never had a man look me in the eye and shake hands before and then turn around three weeks later and do the exact opposite. I'm sorry that I had to come here this morning feeling this way. I didn't feel this way last night. My emotions are not in place and I shouldn't even be talking probably.

I have letters in here, several of them, from Mr. Barnet, stating the bill is being held up by the Opposition, the bill is being held up by the Opposition, the bill is being held up by the Opposition. Those letters state, have the Opposition move this bill forward and something will be done. It's not being done. I also have the last gasoline prices from Prince Edward Island that show that Nova Scotia and Prince Edward Island are running within one penny. We do the gas here. We refine it here, we truck it there and their dealers, in talking with several of them, are happy, making 5 cents and 6 cents a litre yet we're scared to death to regulate. Are we going to put it to a plebiscite?

I think, gentlemen, it's time that this government stood up and at least made a decision. I know that there are some Progressive Conservatives around this room who are backing us, who feel that this is the right thing and it's improper the way things are going. Will you please take the initiative to tell your Premier that it's time that this government made a decision. We can't wait for Sunday shopping and put it on a plebiscite in the next election. There will be 100 less dealers at that time, probably including myself. With that being said, I have to thank those who did support us and did bring this bill forward. I know there were people who meant what they felt was the right thing to do and hindsight being what it is, maybe we should have dug our heels in for what we wanted but we thought we could trust the people who we shook hands with. Unfortunately, that trust has fallen by the wayside.

[9:15 a.m.]

I just hope that somebody will pick up the ball and realize that this can't go on. This can't go on and on. I don't know where you're getting your pressure from and I don't know who's telling you that it's going to raise prices. It's obvious, we have the proof, we've shown

it to you, it doesn't raise prices. In a regulated market on Prince Edward Island the price has been very close to ours on a consistent basis.

I thank you for your time, and I'm sorry I'm emotional but I have put a lot of time and effort into this and I thought we had a deal. Thank you.

MR. CHAIRMAN: Thank you, Mr. Pettigrew. I believe, Mr. Cruickshank, you have been brought here as one of the independent dealers to explain a specific situation you have been faced with and I would invite you to indicate that to the committee now.

MR. NEIL CRUICKSHANK: I have a small rural gas station with about nine employees. I have been in the business for 27 years and I thought it was running pretty successfully. Petro-Canada, who supplies me with petroleum products and also owns the station, came in two months ago with a little note telling me that, as of the end of this year, they would no longer supply gasoline and I might be able to buy the station, with the stipulation that no other gas could be sold there. That's just about all I have to say.

MR. CHAIRMAN: Thank you for your presentations. The committee members will have some questions. First, Mr. Epstein.

MR. HOWARD EPSTEIN: First, Mr. Pettigrew, I want to just set the record straight for you, not that you said anything incorrect, about Bill No. 79 and how it went through the House. You will know that the intimation that the bill was improperly held up by the Opposition, our caucus, the NDP, is not exactly true. We had an alternative bill of our own that we had brought forward and the reason we were opposing Bill No. 79 originally was because it set a framework for regulation by Cabinet and didn't give any detail as to how that regulation was to take place.

Our alternative was to say look, let's let a body like the URB, which is in the regulatory business, have its jurisdiction added to, let them be the regulators of gasoline pricing and also we went on to set some parameters for it, that was our preferred option. The government wasn't prepared to go for that so in the end we gave them the chance to go ahead with their Bill No. 79 to see where it would lead. Now, we're beginning to see where it's leading and that's the problem you have identified for us.

I think we had good reason for not being keen on Bill No. 79 as it originally came forward, but what I'd like to hear from you is perhaps some detail of what it is that you think the government should do in the form of regulation. We know at the moment that they are thinking of commissioning a study and they want to think about it for awhile and so on, but you're the ones who operate the stations, you're the ones who have a lot of experience in having a look at this. I think this would be a chance for you to put on the record, as an organization, what it is that you think the government should do in the form of regulation, what should that regulation look like, what should the government be doing.

MR. CONRAD: We had recommended right from the outset a regulatory system that is modelled after the P.E.I. regulations, it's just that simple. That model that exists on Prince Edward Island, as a refiner rack price, a starting point, a wholesale price if you want to call it, from the refiner. There is only one refiner in Nova Scotia, it's a very simple thing to consider. From there, Nova Scotia would be divided into zones, there would be transportation differentials established reflecting the cost of delivering product to each of those zones. There would be a recognition that a retail margin exists. The retail margin should consist of a minimum and a maximum, to allow levels of competition to take place, and that would ultimately determine what the retail price is.

Just to echo Mr. Pettigrew's comment, the information that we have been providing all year long on the comparison between Prince Edward Island and metro, and bearing in mind that just the HRM alone is a bigger market than all of Prince Edward Island, there's no intelligent, economic reason why P.E.I. prices could ever equal the HRM, it doesn't make any economic sense. In spite of the fact that we refine it here and we ship it there, which should cost a penny or two to ship it there, year to date, the difference in prices is within a penny. That also suggests that in P.E.I. the motoring public, nor the retailers, have not had to put up with the annoying, constant, unpredictable changes of price that take place.

There have been four times as many changes in metro Halifax as there has been in Charlottetown so far this year. In addition to that, retailers on Prince Edward Island have a system where there's a minimum of 4 cents a litre and a maximum of 5.5 cents on self-serve, and that same minimum on full-serve with a maximum of 6.5 cents on full-serve. They can adjust their business, they can plan their business, they can develop business plans, forecast what their revenues are going to be based on margins. None of that can be done in Nova Scotia in the independent retail sector, because everything is totally unpredictable, it is always up in the air, and it's totally impossible to manage and that's the message that we have been telling government and the Opposition since May of last year. It just cannot work with the existing system.

In terms of doing another study, after all of the studies that have been done so far, and other studies that have been done in other provinces across the country, it's impossible in many cases to fully understand how the industry works. The people in the industry can't understand it. I guess all we're saying is by the time we get a study that will provide all of the information so that everybody understands how the industry works, you'll have nobody to help, the independent sector of the retail gasoline industry will be long since gone.

MR. EPSTEIN: Mr. Conrad, as I read Bill No. 79, which has now, of course, been passed and is part of the law of the province, in fact, the Cabinet does have the power now to do essentially what you've asked. Those items that you've listed seem to be powers that the Cabinet has through regulation. Is that your understanding, as well?

MR. CONRAD: Yes it is.

MR. EPSTEIN: So at the moment there's no legal barrier for the government going ahead with a regulatory scheme along the lines that you have outlined, is that correct?

MR. CONRAD: That's correct.

MR. EPSTEIN: Let's look, if we could, at a point you made, Mr. Pettigrew, you suggested there could be as many as 100 more retailers that might close over the Summer months in the province.

MR. PETTIGREW: I don't think that has been a secret, that has been in the press and in most of our letters, especially from Graham, that there could be as many as another 100 retailers close this Summer. While you have me talking - you shouldn't do that - when we sat in the Premier's office, there didn't need to be any more studies. He turned to Mr. Barnet - and you can get four more people in this room who sat in that room - and Barry Barnet said, we're ready to go. So why do we need another study?

MR. EPSTEIN: Is there something particular about the coming months that represents a break point for those 100?

MR. PETTIGREW: It's the Summer months and if we don't make it in the Summer, we don't make it. We have the peak tourist season coming and if retailers don't make it in the Summer, then it's a long, hard Winter. As you know, when we sat in Province House two weeks ago, that was part of the comments, that we needed this before Summer.

MR. EPSTEIN: Do you know the locale of those 100? That is, are they mostly rural, are they mostly urban, do you have a particular idea as to who they are?

MR. CONRAD: There's no question about it, they are primarily rural and that's because there are no independents left in urban. In all of metro Halifax there are three remaining, there were four but Yuille Auto Works closed earlier this year. So the concept of an independent in the metro area, that doesn't exist anymore. It should be remembered when margins are pressed the way they are now, when retailers are not making enough money to pay the credit card costs of transactions, let alone their staffing and overhead, it doesn't make any difference if it's Summer when the volume should be higher, or if it's Winter when the volume would ordinarily be lower. You can't make money on less than 2 cents a litre, you just can't.

MR. EPSTEIN: Mr. Pettigrew, you started your remarks about the position of consumers in metro and consumers outside metro already in Nova Scotia. Your point was that consumers in Metro are already paying too much for their gasoline anyway, is that what your point was?

MR. PETTIGREW: I came down last evening and I called back home today, and our gas in Amherst is 94.9 and here in metro it's 96.9. So according to the Premier's comments last night, the metro area should not subsidize the rest of the province. Well, right now, the metro area is subsidizing the rest of the province.

MR. EPSTEIN: I have to say that when the Select Committee of the Legislature on Petroleum Product Pricing, last Summer, met, my recollection was, when we had a look at the historical evidence about cost in different parts of the province, what seemed to appear to us was that it seemed to fluctuate a lot, that there didn't seem to be anything that was kind of a clear indicator as to whether it was higher in metro, Truro or Yarmouth, and on the whole, it kind of seemed to be a bit of a wash over the course of a year. Are you saying something different has occurred in the last year or is there something else we should think about?

MR. PETTIGREW: I totally agree with you. There are so many price zones in this province right now, seemingly, that I don't know how anybody knows what their cost is. I don't know how the oil companies know what the cost is. My cost can be different than somebody's in Halifax, or my cost can be a different - actually, today, my cost is higher than somebody in Sackville, New Brunswick, who they are hauling the fuel right past my door to. I don't understand - I don't think anybody understands the oil companies' policy on pricing.

I don't know how anybody can make a positive comment, and stand up and say that the price will go higher with regulation because that's been a proven fact, it doesn't. If I have a bag of potatoes and I've got the only bag of potatoes in the world, and you tell me I can sell those for a dollar but I can make a good profit at 50 cents, I would sell it for a dollar. Right now, there are two major oil companies in the Maritimes. They have the only product in the Maritimes and they can sell it for whatever they damn well please without anybody telling them what they have to sell it for.

How high would the price of our power be if we didn't regulate it? Two or three weeks ago I read where the telephone companies have come up with regulation. How high would the price of our telephone be if it wasn't regulated? We regulate milk but this is one of our biggest commodities, it's not regulated and they have full rein.

MR. EPSTEIN: Mr. Conrad, at different times, I've heard a suggestion that if Nova Scotia were to regulate gasoline prices, that the refineries or the companies that are the oil majors and that have full control of the raw and refined product, would be tempted to sell their product elsewhere rather than here if they were faced with a regulated market. What can you say to that?

MR. CONRAD: Personally, I think that's rubbish. I think that that explanation probably carries weight when you'd be talking to a province that does not have a refinery. But when an oil company has a refinery in a province - I can't speak for the oil industry but

common sense tells me that if they have a refinery in a province, they're more locked into making sure they've got product going into the refinery than they are taking the product away from another province that does not have a refinery.

MR. EPSTEIN: It's also the case that P.E.I. and Newfoundland have had regulated prices for some time and the oil companies don't seem to be boycotting them, isn't that right, and they're making money.

MR. CONRAD: I don't think the argument has ever come from Irving. (Laughter)

MR. EPSTEIN: Good point, okay, thanks very much.

MR. CHAIRMAN: Thank you, Mr. Epstein. Mr. Parent.

MR. MARK PARENT: Thank you, very much. Neil, as you know, I'm very sympathetic to the situation that Petro-Canada has put you in and very upset about it. I think it's comparable, in a negative way, reflecting on Petro-Canada to what happened when the Bank of Nova Scotia decided they didn't want to service Canning. They pulled out but they co-operated with the co-op movement that came in and put a bank there. Petro-Canada is not co-operating in any way. It has told you that you can buy the station but you can't pump gas out of that station for five years. How do they expect you to make a profit, simply on the mechanical end? Have they given you any reason why?

[9:30 a.m.]

MR. CRUICKSHANK: No reason at all. You can't get hold of anybody who has anything to say.

MR. PARENT: So you're getting the same thing that I'm getting when you talk to Petro-Canada, they just ignore you?

MR. CRUICKSHANK: They just ignore you. You talk to the rep but he knows very little.

MR. PARENT: How would the loss of a service station in Canning due to the fact that Petro-Canada is not willing to - fine, if they don't want to service Canning, fine, but there are others who would. How will that affect the area?

MR. CRUICKSHANK: In a big way according to the public who come in and have read what is happening. There's a petition going on in all the communities because there are quite a few communities beyond Canning that have to travel a long way. Nova Scotia has Blomidon Provincial Park, which is beyond where I am, busy in the Summer. They just bought Cape Split, which is beyond there, and there are new houses going up on all these

back roads, not a lot like a subdivision but quite a few houses. It is a growing community but these big companies don't want anything to do with the little people.

MR. PARENT: I just want to express my sympathy with you because I know that with the Bank of Nova Scotia, they were willing to co-operate and we have a bank now. If Petro-Canada doesn't want to service Canning, Scotts Bay, all of that market, fine, but they're standing in the way of someone else serving us and trying to undercut your business. I just find that unconscionable.

MR. CRUICKSHANK: I realize to put tanks and stuff in the ground with the environment costs a lot of money but the ones I have in the ground are good for another five years, so I just don't even understand the thought behind it all.

MR. PARENT: Thank you.

MR. CHAIRMAN: Mr. Taylor.

MR. BROOKE TAYLOR: Mr. Chairman, I'd like to thank our guests for coming in this morning. Roy, I certainly appreciate your frustration here this morning. I think for everybody concerned it has been a very difficult file and the issue isn't all that simple. Believe you me, I've followed this for a number of years now and unfortunately, the problem generators, so to speak, big oil, simply does not want to be part of the solution, from my perspective. We have many stakeholders that are involved and there's no denying that it is a complex issue but at the top of the pyramid you have big oil, wholesalers, retailers, and the consumer.

I think it's unfair that while certainly it's appreciated that a large percentage of the media feels that regulation for some reason will lead to higher prices, there's absolutely nothing factual to confirm that. To make unfair comparisons of grocery stores and service stations, with me, at least, it just doesn't wash because a grocery store has many suppliers, all kinds of different suppliers, where an oil company selling gas has one supplier here in Nova Scotia, essentially, and that's Imperial Oil.

At the Petroleum Product Pricing Committee level, we asked big oil to come to the table and help us, provide us with some solutions to the problem that the retailer is having. The problem they're having is that they can't sustain under the present business environment. Nobody has said that regulation, for example, would lead to lower prices, but businesses, truckers, consumers, simply can't plan - that's a problem - they can't budget because of the price spikes that are impacting their businesses, besides the retailers which probably have the biggest investment in the whole scenario.

I guess from your perspective I think I know the answer, but for the record, is it fact or fiction that when oil is in a storage tank, say you took delivery today and you're selling it at 90.9 cents per litre, if you will, that you could get a call by noon telling you to bump up the price of that product that's in the tank to 96.9 cents, for example?

MR. CRUICKSHANK: Is it possible? Yes. It's put in a way that you control it yourself. In my case, as an independent, Petro-Canada doesn't even set my price.

MR. TAYLOR: Well, as a consumer that seems on the surface like price gouging when you suggest that, it's to the disdain of big oil, but what else does it look like? If you're purchasing a product and you're putting it in an underground storage, or on-ground storage, whatever the case is, you're purchasing it for X number of cents per litre and you're selling it to the consumer at the pump in the morning for 90.9 cents a litre and by noon, or sooner, you're asked to sell it for 6 cents more a litre. What the heck's going on? What other reason or what other thought would you have about the price variance?

I think what big oil should do is recognize that there is a problem, instead of shifting blame to everybody and sundry - they're the problem, big oil, and I think they should be part of the solution. It is difficult for Cabinet and government. I believe, as a very interested spectator, that it's not as easy as simply snapping your fingers and coming up with a solution. But there just doesn't seem to be any other answer to this problem than regulation.

I know, Graham, you fellows have suggested and made various submissions relative to the P.E.I. model; however, that has to be clearly thought through. I think that is what's actually happening now. I don't think there has been complete backtracking, Roy, but I do appreciate your frustration.

I came in this morning, for example, I live in the so-called "super city". The price in Middle Musquodoboit was 98.9 cents a litre, this was for regular. The price in Meaghers Grant was 99.9 cents. The price in Dartmouth, Roy, as you said, was 96.9 and apparently in Amherst it's 94.9. That's a real dog's breakfast all across Nova Scotia and by suppertime it could all change again. It may not but it has in the past, so what the heck's going on? No wonder people are frustrated, there's a real problem there. I certainly support the independents and will continue to.

MR. CONRAD: Could I make a comment on that too, Mr. Chairman?

MR. CHAIRMAN: Mr. Conrad.

MR. CONRAD: Just for the record, in case everybody doesn't understand it, this is really a Nova Scotia-unique situation we're dealing with here. The reason why I say that is because Nova Scotia is one of the last provinces, if not the last province in Canada, that still has such a high proportion of independent retailers who are servicing the industry. This

situation doesn't exist at all in some provinces because there is virtually no representation of independent retailers in some of the major cities in the country. Vancouver went through this in the 1980s and 1990s. Back in those days they had a very strong Retail Gasoline Dealers Association, now it doesn't exist.

So what's going on in Nova Scotia is sort of the last bastion of independent retailers, 60 per cent of all the businesses in terms of numbers, 60 per cent of all the businesses in the industry are independent retailers, and this is not a normal economic decline we're talking about. This is what has been referred to as a "meltdown". That's the reason why, as far as we're concerned, reference to another study might be helpful and there could be some new information that comes out of that, but by the time the study is finished, it could be too late.

MR. CHAIRMAN: Mr. Dooks.

MR. WILLIAM DOOKS: Good morning, folks. Thank you for the opportunity to be here today and voicing your concerns. I know the emotion of the day is running high.

I just had an opportunity to read the article in the newspaper that you referred to, Mr. Pettigrew, this morning. I can't really make comment on that because I haven't had a chance to caucus with the Premier or the minister on the report in the paper, so I'm going to go away from that a little bit.

As you know, I was part of the select committee that travelled the province. The committee worked hard listening to retailers, listening to big oil, listening to consumers. The committee, as committee members can remember, made some pretty aggressive and pretty strong recommendations. In saying that, it brings me to this point.

I supported Bill No. 79 in the House, quietly I might add, because I know that the small retailer, the rural garage stations, need help, I think we all know that. I think we have to look at it as more than just pumping gas or an economic generator for the rural communities. We also have to look at it as, I'll say, a safe haven for the communities to buy fuel for their emergency vehicles, to do all of that, that takes place.

When I talk about regulation, I'm not a firm believer that regulation will fix your problem. I believe, clearly, an extra 2 cents or 3 cents per litre will help the rural station in the short term. I have to go back once again, Mr. Chairman, to the problem. The problem clearly is the relationship between big oil and the retailer. If we regulate gas today and if big oil did not want a particular station to stay in business, I'm sure they'll find through contractual agreements another avenue to close out that small business.

In saying this, I'm a bit frustrated to think the year has passed and the committee members, the retailers and the people of Nova Scotia have worked hard to do something. I'm receiving letters in my office from people in support of the local garage stations. They have

not said to me, I do not want to pay that extra cent or two if regulation did cause that to happen, which we're not sure of and we've heard that here today. Stability is what they're looking for in the community - and I will use the words "the safe haven in the community" - and they're looking for the rural garage stations to stay in business.

Rural Nova Scotia is dying. The banks are moving, the garage stations are on their way out, the small stores and coffee shops are closing down because everyone is focusing to the city centres, because availability of services is quicker and faster, the population is greater, there seems to be more profit. But we do have a responsibility as legislators to make sure that the rural communities in Nova Scotia live and become strong, and enjoy the traditional relationships that we have with business.

So, yes, I supported Bill No. 79, yes, I would surely hope - and we'll be speaking to the Premier and to the minister today - that we quickly resolve this issue and will be making comment on this article in the paper. Truly, I will say to you, Mr. Chairman, and I will say it to people in the retail business, regulation is only a short-term fix which will only bring you a couple of cents per litre on your gas and will only continue the pain to last a little longer.

Government must step in and make sure that the relationship between big oil and the retailers is a good and fair relationship.

We've heard about 25 or 50 different stories about different relationships that retailers have with the big companies. Why do they want to close out these small stations? You know, when you think about it, I can't even come up with a reason why. The amount of litres that they would pump in the small stations really shouldn't be significant volume for the big companies.

Being a rural person, I want the rural areas to grow and to remain strong. I'm just saying today that I am in support of the Retail Gasoline Dealers Association of Nova Scotia and clearly want you to know that. I'm in support of our garage stations remaining open in the rural areas. When I go back and caucus with our members, I will speak clearly and repeat what I've said here today. We have a responsibility.

I don't want the antics or the play on words or the emotion of this to turn from a select committee going out last year, now bringing it back and blaming it on the government. The government has to work with the retailers, the government has to work with the big oil, the government has to work with Nova Scotians to come up with a solution to this problem, and I suggest we should do it quickly. Thank you, Mr. Chairman.

MR. CHAIRMAN: Mr. Conrad.

MR. CONRAD: Can I comment on that point?

MR. CHAIRMAN: You sure can.

[9:45 a.m.]

MR. CONRAD: Thank you, Bill. Just to echo your reference to the relationship between oil companies and retailers, I just want to make sure that everybody understands, there is another category of retailers other than the small retailers that you refer to. I'm also concerned about the retailers who have, in good faith, entered into agreements with oil companies, have invested $500,000: in Cheticamp, $500,000 invested in a Petro-Canada site; $1 million invested, Amherst; Digby, a young couple invested $450,000 in a Shell station; $700,000 invested in a Shell station in Bridgewater; $1 million invested in Lower South River; Pugwash, $500,000 invested in a state-of-the-art retail outlet. Some have bays, some don't have bays.

We're not talking about the old, small, really rural retail sites. We're talking Trans-Canada Highway sites. We're talking the most visible, the most attractive site in Cheticamp, in Digby, in Bridgewater. And high volume sites. These are the people who are being hurt. These are the people who have been hurt just as much as the small retailers.

MR. DOOKS: Where do they want to sell their gas?

MR. PETTIGREW: If I can comment on that, in 1991 - one thing I do have is a memory - when deregulation went into effect, the question was put to Guy Brown, Liberal MLA at the time, and he questioned whether there would be gas stations in River Hebert, Maccan and Joggins, three areas in his constituency. The answer was, there's a possibility there won't be. Well, today, there isn't. He still voted for deregulation, by the way, and I remind him of that on a daily basis.

But why not? Why wouldn't an oil company want to take a great big tanker to Truro and Halifax, maybe not even Amherst, Moncton, and dump it once a day? Why would they want to go all around the county? They don't have to because you're going to have to travel for gas. People are travelling for gas now. People are travelling 20, 30 kilometres for gas. I've got people coming from River Hebert, Joggins, buying gas, putting it in jerry cans, and taking it back to River Hebert and Joggins and storing it in their garages because they have no other alternative.

If the oil companies are allowed to run these little people out of business, then eventually - and this seemed far-fetched back in 1991 that there wouldn't be a gas station in any rural areas. But today it's true. Give another 10 years and there may not be any in Amherst - you know, you could have two or three big stations in Halifax, maybe. Put one in Bedford, one in Dartmouth and one in Halifax. It doesn't sound . . .

MR. DOOKS: It doesn't work. It can't.

MR. PETTIGREW: It's slowly working - we're working in that way. We're working towards that. Every station that closes up in the rural areas, that person has to travel that X number of distance to get fuel. It may not be one but why not dump one great big tankerful into an area?

MR. DOOKS: Sorry for speaking out of turn but, Mr. Chairman . . .

MR. PETTIGREW: No, go ahead, sir.

MR. DOOKS: I suggest there is a problem with the storing of gasoline on your property, storing it up so that - you know, taking your half-ton truck, getting 45-gallon cans, filling them with gas, taking them home and putting them in your basement or in your garage. That will create another problem as well for us.

MR. PETTIGREW: Yes, but it's happening.

MR. DOOKS: Unfortunately.

MR. PETTIGREW: Yes. So we agree - I'm not disagreeing with you but what I'm saying is that's why the oil companies - why send a tanker out into . . .

MR. DOOKS: Well, this is why I get back to the relationship issues. It has to be worked out, the relationship between the retailers and the big oil companies has to be worked out and it has to be fixed, as well as regulation to help you in the short term. But I think it's even bigger than just encouraging a few extra cents. Do you understand what I'm saying? It's a serious situation we're facing. Nova Scotia is facing a serious situation. Not just the people in this room today, but it's going to affect all of us.

MR. CONRAD: It's pretty clear that major oil companies have established new partners in terms of the way they want to go to market in the future. That's pretty clear. The big-box stores, Canadian Tire, Sobeys, Wal-Mart and more to come, are examples of that. I guess that's fine, that's evolution, bearing in mind that the industry in Nova Scotia - actually the industry in Canada, but specifically in Nova Scotia - was built on the backs of independent retailers, let there be no doubt about that. When the industry grew in Nova Scotia, it was independent retailers who brought the industry to the point where it is here today, and that's fine. But when you project where this is heading, there are some pretty easy precedents to take a look at to gain an understanding as to where this is all heading. Go to the City of Vancouver.

If you look at the City of Vancouver, the size of the market compared to ours - and they're next door to Alberta where they get a lot of their product, and they get some product from the United States - they have no representation of independents at all and Vancouver is consistently among the highest in Canada, excluding taxes for comparison's sake. There's

only one explanation for that, and it's going to happen in Nova Scotia, the more you reduce the competition, the fewer businesses out there to compete, it only stands to reason that those that remain have the opportunity to raise prices.

MR. CHAIRMAN: Thank you, Mr. Dooks.

Mr. Parker.

MR. CHARLES PARKER: Good morning, gentlemen. I, too, share your sense of frustration and certainly your sense of disappointment that at this point in time we have not resolved this issue. It has been 13 months since Bill No. 79 was introduced in the Legislature and longer than that that we talked about it. But it has been studied to death, it really has, I believe. We have had the select committee, we've had debate in the House, we've had all kinds of discussions and talks over the months and it's time that it happens. This is just dragging out the real difficulty for our retailers and for many of our communities, our rural communities are going to be hurting.

I certainly agree with almost everything that has been said here today so far. I think we all share the sense of disappointment and frustration that is there. Really, this is all about big oil trying to have more control over the marketplace, is what it comes down to. I guess we, as legislators, our job is to protect the people we represent, the consumers who live in our constituencies, it's about protecting small-business people such as yourselves, and it's really about protecting our communities, as a previous member had indicated. Communities hurt when they lose an essential service like a service station.

I know in the community I come from, in Pictou County, there's only one gas station left in River John, for example, there's only one gas station left in Scotsburn, there's only one in Union Centre. They're all hurting, they're all being squeezed on their margin. I was talking to one of them yesterday and he was telling me he is making 0.25 cents as his margin. He was selling at the highest price in the county, at 98.9 and out of that 0.25 cents he has to pay 2 cents for his credit card, he has to pay his electricity costs, and he has to pay his wages. So he's not only not breaking even, he's losing money and trying to survive. But he's told what he has to sell it at and at 0.25 cents, he's just not going to make a go of it.

We've been saying all along and I guess the select committee recommended, and the New Democratic Party certainly supported the idea that looking at regulation, it would be under the URB, not under the direct authority of Cabinet. Maybe that is part of the difficulty why we're having a holdup, why we're not proceeding with this. It seemed to make sense that an independent body would look at all the factors and then if they wanted to look at the Newfoundland and Labrador or P.E.I models and make the best recommendations on what they know. I guess I wanted to ask what your thoughts are, Graham. Would you prefer to see the URB rather than Cabinet make the decisions?

[9:54 a.m. Mr. Brooke Taylor took the Chair.]

MR. CONRAD: There's no question about it. That was our first choice and again, I go back to our recommendations all along that a quick fix, as far as we're concerned, that will also suffice in the long term, is to adopt the P.E.I. model. The P.E.I. model will work in the short term, as well as the long term. The P.E.I. model will not prevent retail outlets from going out of business, everybody understands that. But the P.E.I. model also lets the retailer leave the business when the retailer wants to leave the business, and still have a business that could be sold. We have a huge percentage of retailers in Nova Scotia who are still in the business because they can't get out.

Anyway, to go back to your point, you are absolutely right. You think that the purpose of a study that would be done by Cabinet for Cabinet - and Cabinets can change -then you ask yourself, what's the value of that study four years from now as compared to having a non-biased, independent board, that would have the information - much of that would probably still be on file in Nova Scotia because there must still be records of what the industry was like within government when it was regulated.

MR. PARKER: Cabinets come and go, governments come and go, but the URB is a permanent body that is here that would get down to it and do it right and not have undue influence from whatever interest was pushing them. I don't know, under the bill, I guess that's the way it was written, I don't know if it is too late for Cabinet to make the decision. Maybe we made a mistake here, maybe we could go to the URB, I'm not sure what the answer is to that, but it still makes sense that would be the way to go.

I want to ask another question around transportation costs. I think if I remember correctly, somebody from the select committee told us that the transportation costs to take the product from Dartmouth to anywhere in the province was somewhere around a cent per litre, or a maximum to go to Sydney, to Yarmouth, or anywhere else that would be about the cost, so there's not a lot of difference, and to go to P.E.I. it's about the same amount. On P.E.I. they have one zone for all the province on regulated prices.

I know you and others have talked about maybe five zones here in this province. Would there be some merit in having the same price right across the board, right across the whole province?

MR. CONRAD: We're not opposed to that, the only reason why there was a suggestion of five zones put on the table is because Nova Scotia is essentially divided into five economic zones right now and it just seemed to fit. Whether it was one price for all of Nova Scotia, we're not opposed to that.

MR. PARKER: I think our select committee actually had recommended that there just be the one zone in the whole province. It seems in some ways to make sense because if you're just on the edge of a zone, if it's cheaper there, people are going to go outside their community, maybe, if they thought they were saving a penny-a-litre or whatever. There's certainly some merit in one zone across the province.

Earlier, it had been mentioned about the metro market subsidizing the rest of the province and Roy, you had mentioned that it's higher here and it's lower there and then it's the other way around. Is that really just a red herring? Is there any merit in the argument that metro would be subsidizing the rest of the province or is it just something that was put out there as an argument against regulation?

MR. CONRAD: It's definitely an argument, just a red herring, as you said. Right now, there are probably 10 if not more, different prices in Nova Scotia as we speak, and Halifax is one of the highest. So who's to say that in any one of those 10 price zones, as they exist right now, that somebody is not paying more than they would if we had divided the province into the five zones that we had talked about or if we went with a uniform price right across the province. It only stands to reason that there are communities in Nova Scotia right now that are paying unexplainably higher prices and communities in Nova Scotia right now that are paying unexplainably lower prices. Why? How does that fit? To say that it's market conditions, well, years ago the market used to be the province and then the market used to be the zones that existed when the province was regulated.

Now the markets, according to the oil companies, are community by community. We'll soon be down to street by street and that's just an opportunity to speculate, manipulate, set prices whichever way they have to, in order to accomplish whatever the goals are that they have.

MR. PARKER: I know I bought gasoline last night in one of my local stations, it was 94.9 and as I mentioned, one of my other retailers just three miles away was 98.9, within five minutes of each other there is a four cent difference per litre. It has been that up and down market all over for years, as far as I can see. I have travelled back and forth from the city to my community and sometimes it is cheaper here in the city and sometimes it is more expensive. Last week, we had gas at 90.9 in the New Glasgow area. It's all over the map. So, basically, you're saying then it is a red herring, that the market price in the metro area would not be subsidized in other parts of the province?

[10:00 a.m.]

MR. CONRAD: No. That's not a given.

MR. PARKER: Okay, thank you. I've got one final question, Mr. Chairman. I just want to ask about margins, again. I talked about some of the costs of credit cards, power, wages and so on. Can you give us an idea right now what retailers are actually receiving? I know it's widely variable but what is the margin that retailers are getting? How does it fluctuate?

MR. PETTIGREW: I can tell you what my margin is today. Zero; 94.9 and I'm pumping it at zero.

MR. CONRAD: I have an e-mail from an independent on Main Street in Dartmouth. He's making 1 cent per litre and that's been for the last three days. I had a phone call from Petro-Canada in Glace Bay and he's making nothing; the question was, when do we regulate? Like, I can't hold on much longer. This is a big outlet.

MR. PARKER: The retailer is getting nothing, obviously the wholesaler must be getting something and the refiner must be making a profit, but they're expecting the retailer to do it for nothing. That's about the bottom line, I guess, isn't it?

MR. CONRAD: We're certainly not opposed to oil companies making profits but it's a matter of record what the financial statements last year and year-to-date indicate for the major oil companies. Record-breaking profits, yes, in the downstream at that, which is the end of the industry that affects us.

MR. PARKER: Okay, thank you very much.

MR. CHAIRMAN: Thank you, Mr. Parker. Mr. Samson.

MR. MICHEL SAMSON: Thank you, Mr. Chairman. I know Mr. Epstein talked a bit about the history of the bill and I wanted to raise a few points as well. When the bill came in last year, the bill, in itself, gave Cabinet quite a bit of authority to come up with some sort of solution. Unfortunately, as legislators, it didn't really tell us what that solution would be, how it was going to work or how it would be implemented. It was basically asking us to show a bit of blind faith in the government.

Now, that works fairly easily when you have a majority government. It doesn't work so well when you have a minority government. It was our position back then that this was not a real solution and our fear was, if we passed a bill without knowing there would be a solution within it, the government would use that as a means of saying, well, we did do, at least, something by passing that bill. It was our position at the time that the bill should not be passed because of it.

Now, as you will know well, this Spring, your association and independents throughout the province started to lobby all members of the Legislature. I know, certainly, I heard from Richard Britten in Martinique, from Bonin's Service Station in Petit-de-Grat and the message was, we need to have this bill passed.

As, Mr. Pettigrew pointed out, the Minister of Service Nova Scotia and Municipal Relations, Barry Barnet, continued to send correspondence saying, we have a solution, the Opposition is preventing us from being able to put that solution in place. I received correspondence from him along the same lines.

Once we got to the House of Assembly - and I remember the day that your association was present there, and I remember Minister Barnet getting up in the House, and his arms flailing and continuing to say, we have a plan, we have a solution, the Opposition won't allow us to put it in. Your association met with our caucus, you met with the NDP caucus, and following that, there was a commitment from us to say, we are prepared to allow this bill to go through if you are convinced that there actually is a solution in place, because we, at that point, were still not convinced.

Mr. Pettigrew, you have indicated you had meetings with the Premier, you had meetings with Mr. Barnet. They told you what they said in the House. We have a plan, we have a solution, we have correspondence from February which indicates that the Government of Nova Scotia is constantly monitoring development in international and local energy markets to determine whether action is required to address market and balances. It has also conducted several studies into how best to regulate energy markets should such action become necessary. So they have done their studies, they said they had a solution and that's what you came to us with, asking for our support, and you got it.

You said you have been blindsided by the Premier's announcement yesterday, and I think it's quite clear, that even the Progressive Conservative members on this committee have been blindsided as well by what the Premier said. We're left here with two options. Either we were all lied to by this government, the Premier and the minister, or somebody got to them and changed their minds. My question to you is, which one is it?

MR. CONRAD: Well, perhaps we should do a study on why the change in attitude. (Laughter) I don't know. I agree with everything you've said. That's pretty well the way the scenario evolved. It took us a while during the course of time to figure out what was going on here. Then, in our meetings with your Party and the NDP, we realized that it's just not the way it's being stated.

Let me state again how pleased we were with the support that we got from the Opposition in both Parties and how overwhelmed we were at how quickly that bill went through the Legislature with unanimous agreement. There was no doubt in our minds - and, I gather, no doubt in the minds of the MLAs - what we were trying to do. The intent was to

recognize the issue that was out there. We urged and pleaded for support from both Opposition Parties to get Bill No. 79 through because at least it's something that we can move on right away and it's consistent with the recommendation from the all-Party Select Committee recommendations in August of last year. We thought if we could get that through, then we would be on second base anyway.

MR. MICHEL SAMSON: See, our biggest fear, as I mentioned earlier, with the bill was that passage of the bill was just a means for the government to say, well, we did something, but to do nothing.

MR. CONRAD: Yes.

MR. MICHEL SAMSON: Now, for them to turn around and say we need to do another study brings into reality our fear from the start with this bill, was that, in essence, it wasn't going to do anything. For them to turn around, when you've got correspondence from February 14^th of this year saying they have already done the studies, they've got the solution, they've got the plan, they convinced you that the Opposition was what was to blame here, we were holding it up and that they could put it in place. Well, we agreed, once you were convinced that there was a solution, that bill went through the House, second, third reading, faster than many other bills ever see the light of day. We felt there was no need to delay if they've got this plan, which we were still suspicious, I have to tell you, but they had certainly convinced your organization and the independents throughout this province that they were sincere.

I am left here to wonder, was this all a ruse on their part and were we all taken for a ride by the government based on their actions on this to date?

MR. PETTIGREW: I would like to comment on that, if I could. My wife called me at 6:00 last night and told me what was on the news and she was in tears. I just said, you have to have it wrong, there's something missing. So I listened to the 11:00 p.m. news and then I picked up the ChronicleHerald this morning and the only thing that irritates me is that there was no press in the room with the Premier and Mr. Barnet. When we left that room that afternoon, we met with your caucus and then we met with the NDP, and we convinced you that this was going to get done.

As I said earlier, the hands were shaken. We looked each other in the eye and Mr. Barnet assured us that his plan was in place. There was no more studying to be done. His plan was in place. He had assured us, he assured the Premier that he had travelled halfway across this country studying regulation. Last night was just total shock. I feel somebody got to him and that's my personal opinion.

I know the phone calls that I have gotten in the last few days and I know how I'm being treated right now by my oil company. I think they're trying to get to me. That's a personal feeling. I can't understand how, overnight, or in two weeks that all the study that was done and the regulation that he had in place, or he said he had in place, is all of a sudden no good. I don't understand that.

MR. MICHEL SAMSON: I'm just curious, Mr. Pettigrew, if you could tell us exactly who was at that meeting with the Premier and the minister; and secondly, were you ever given a piece of paper from the minister that said, here is what our plan is, here is what it looks like, look at it and here's what we will bring forward?

MR. PETTIGREW: I can tell you who was at the meeting. There was the Premier, Mr. Barnet, Graham, myself, Rodney Grace, Ricky and Hilda Cormier and John Siteman. No, we were not given a piece of paper.

MR. MICHEL SAMSON: So, basically, you were asked to take the Premier at his word and take the minister at his word?

MR. PETTIGREW: At that time, yes.

MR. MICHEL SAMSON: I guess we all know what has happened as a result. Was there ever talk with you that there may be need for further study or that this plan was going to require a length of time before it could be implemented, six months, a year or more? Was that ever indicated to you?

MR. PETTIGREW: If there had been we wouldn't have been meeting with you fellows half an hour later. The reason for pushing that through the House three weeks ago or two weeks ago was because we thought, after that meeting, we had a plan in place.

MR. MICHEL SAMSON: And that that plan could be implemented as quickly as the Opposition would allow that bill to go through the House?

MR. PETTIGREW: Yes.

MR. MICHEL SAMSON: Which, in this case, took a day or two. Thank you.

MR. CHAIRMAN: Mr. Samson, thank you. Mr. Theriault.

MR. HAROLD THERIAULT: Thank you, Mr. Chairman. Thank you for your presentation. I know where you're coming from as small, independent businesspeople. I've been an independent businessperson all my life in the fishery. It's been a struggle there also.

We know that 90 per cent of small businesses keep this province and country going and I'm all for small business.

Mr. Conrad, you mentioned a meltdown, two, three, four times you've mentioned it. Can you explain or can you give us a vision of what this meltdown will look like in this province? I don't think the people of this province understand it. I know I don't, not clearly. You touch on it a little but what's your vision of this meltdown in this province?

MR. CONRAD: Well, let me begin by saying that there are about 430 - in total - outlets in Nova Scotia and about 260 are independently owned outlets. In total, so far this year, there have been 48 closures since May of last year or thereabouts. So we have 48, over 10 per cent of the industry has closed since May of last year. We have one outlet in Arichat, we have one outlet in Baddeck, we have one outlet in Canso, we have one outlet in Parrsboro, and in your riding, I believe, now there is no outlet in the entire Digby Neck. (Interruptions) One now, that one is either closing or on the verge of closing. So you could end up with not a retail outlet on the Digby Neck.

[10:10 a.m. Mr. Michel Samson resumed the Chair.]

If you want to go around the Cabot Trail, in Pleasant Bay, for example, I think it's 80 kilometres from Cheticamp, the fire department and schoolbus drive to Cheticamp to get their product. If Middle River closes, and they said they are going to, that would mean that the motoring public in Middle River would have to drive to Boisdale somewhere outside of North Sydney. When you get to New Ross, there's one outlet now and all the way down to the Forties and past that way there's about 40 kilometres in every direction. To me, the meltdown is going to be when you're down to perhaps even less than one outlet in a geographic area. If that outlet in Canso closes - and he has indicated that he's going to close - then you're getting into driving distances of 50 and 60 kilometres or more to get your fuel.

In terms of emergency situations that could crop up, there would be nobody there to help out. In terms of the impact on tourism, how would tourists know where to go to fuel up? It wasn't that long ago there was media coverage related to a member of an American motorcycle association who came to Nova Scotia and publicly complained about the lack of service stations, you can't find a service station in rural Nova Scotia. Now, I don't know what kind of impact the motorcycling industry has on our tourism industry, but it still speaks to the point that you won't know.

You can go to a Web site right now to try to find out where retail outlets are around the province, and if that's up to date it will indicate quite clearly that you had better do your planning very well, much better than we have planned in the past, before you head out of urban areas. That is my vision of a meltdown. Neils Harbour, that's beyond, I was talking to them last week, they're saying what's going on? When do we get our regulations? If Neils Harbour closes, my goodness, you'd have to pick up a jerry can at the causeway to take it around the Cabot Trail with you.

[10:15 a.m.]

MR. THERIAULT: Many times in the fishery we have had problems with big business, the control of price in the fishery. I have seen many times in the 35 years I was at it that we had to tie the fleet up, tie them to the wharf. I saw it go on for a week or two in the best of fishing.

With your 200 independent businesses, would they agree to shut down for a week or two or three just to give the people a feel for what may be taking place or may happen if this all goes ahead?

MR. CONRAD: That's an interesting thought. I don't think we've reached that point yet, but . . .

MR. PETTIGREW: We can't afford to.

MR. THERIAULT: If you're sitting there doing zero, you won't be going much lower.

MR. CONRAD: Your point is well made.

MR. CHAIRMAN: Mr. Gaudet.

MR. WAYNE GAUDET: I, too, want to thank our special guests for having come in this morning and sharing some of their concerns. I'm not going to repeat everything that has been said. Gas dealers in Clare, especially in the western part of Nova Scotia, are feeling the same as anyone throughout the province.

I want to talk a little bit about gas prices first and then I want to talk about what happened, the fact that there are no independent gas dealers left in B.C. My first question is, do all independent gas dealers pay the same rack price at the refinery, regardless of what brand you sell under?

MR. CRUICKSHANK: No.

MR. GAUDET: So there are different rack prices. Who has the cheaper rack prices? If I was in business I would certainly be choosing to sell for someone who would be selling gas at a cheaper rate than the others, wouldn't you?

MR. CRUICKSHANK: How do you find out that information?

MR. CONRAD: Not if you're signed up to a contract you can't. If you sign up to a sales agreement, you're locked in, they supply you.

MR. GAUDET: So if you were an independent gas dealer, I'm sure having been in the business for many years, you know what company offers the best type of contracts, don't you?

MR. CRUICKSHANK: No, because they keep it all quiet. They don't want anybody to know what the other one is doing, even in the same brands.

MR. CONRAD: But you're making a good point. I can tell you to the best of my knowledge I have never heard of an independent retailer buying directly from the refinery, that never happens. The independent retailer is always supplied by the oil company, they never have the option to buy directly from the refinery. When they sign those sales agreements, that's it, it's carved in stone, you are a recipient product from your supplier at whatever the negotiated prices happen to be.

I think recently, with the advent of big-box stores, that's now changing. It is my understanding that the big-box stores can now buy directly from the refinery, which puts them into a position of a competitive advantage over the independent retailer, and in many cases, I might add, independent retailers who sell far more than the box store. Not all box stores or Canadian Tires have big volumes.

MR. GAUDET: So again, looking at these contracts, gas dealers are told by oil companies how much they should be selling gas for. What happens if you don't? I'm hearing this morning there are people in the industry selling at zero per cent profit or practically very little profit. What happens if someone out there decides to jack up the price?

MR. PETTIGREW: Well, I can answer that. I do that on occasion, to try to survive. In fact, today, as I said, I'm making zero. What happens is your volume dries up. If you are 2 cents or 3 cents more than the guy down the street, keeping in mind that we have price signs in front of our building, if we are 1 cent or 2 cents higher, if you are 1 cent higher, you might get away with it but if you are 2 cents or 3 cents higher than the guy down the street, your volume is going to go and then once your volume goes, the oil company comes back and says you are not selling the volume you are supposed to sell. It's a non-win situation.

When we sign these contracts, in my case, I went from 30 years with Shell Canada to Petro-Canada because it was the best contract on the board at the time and the offers that were made and the promises that were made were great. They were that way for six months and then it slowly got worse and worse and worse until now, as I say, we are making nothing. As Graham alluded to earlier, my station is not an old, run-down station. It's a new station that we built right on the Trans-Canada Highway. It's the first one you see when you come into Nova Scotia. I spoke to Bill Casey a while ago and I told him it's going to look bad with plywood on it but that's the reality if things don't change.

MR. GAUDET: So if you decide to jack up prices, is there some kind of discipline that follows?

MR. PETTIGREW: Sometimes when we put our price up, not so much with Petro-Canada, in my case anyway, as with some others. When I was with Shell, every time I put my price up, the next load would go up as well. I know that it's in the select committee report, when Rodney gave his report, that's the way he gets treated by Shell. When he puts his price up then the next day he gets his load it's up. So it could continuously escalate until you are out of the market. In our case, I don't usually get slapped on the wrist for my price being up except for the fact that I get a phone call saying that your price is high and you are losing volume.

Sometimes we look at it and say well, maybe we can live for two or three days with the price up and try to get through the week with a profit. It's not a fun game, especially when oil company-run stations are around you and they can set the price at whatever they want. They make it at both ends.

MR. GAUDET: I've been asked many times, how do you explain lower prices in different parts of the province. For example, lower prices outside of metro.

MR. PETTIGREW: I can't explain it.

MR. CONRAD: There is no explanation for that.

MR. PETTIGREW: As I said, when I opened, how can you explain that in New Brunswick, 10 minutes from my station, gas is 92 cents per litre today and it comes from the same refinery. The same truck that dumps my fuel in my ground, leaves my station and goes 10 minutes down the road and dumps it 2 cents cheaper. How do you justify that? It's all coming out of the same plant.

MR. GAUDET: Graham, you made reference that there used to be independent gas retailers in B.C. I'm just curious. Is the market regulated, not regulated? Were the independent gas retailers forced out of business as is happening here in Nova Scotia? I'm just curious, what happened in B.C.?

MR. CONRAD: Well, talking to my counterpart in British Columbia on many occasions but in particular this past week, his recollection was that this pricing activity that, as I describe it to him, that's taking place here in Nova Scotia, that combined with other marketing practises just made running retail outlets absolutely impossible in British Columbia. At that point in time, the numbers that he recalled, there were a couple of hundred retailers in their association out there and the combination of not being able to make a profit and other marketing practises by the big oil companies, independents left the market all together although in some cases they sold their businesses, which is a positive thing, but the

long and short of it is, it just wasn't attractive for an independent businessman in Vancouver to get into or stay in the retail gasoline industry.

That's the situation we have here now. It's not a fun place to work, you lose money, you can't explain much of your activities during the run of a day, you can't explain why prices are up, you can't explain why everything costs so much, you don't have a good, positive working relationship with your oil company and then you can't sell it because who would want to buy a business that doesn't make money? Then you have environmental considerations, too; underground storage tanks were, over the last number of years, a big issue in terms of pollution and environmental cleanup. It placed a huge amount of responsibility on independent retailers and rightfully so but at the same time, who in their right mind would buy a retail outlet in today's environment?

MR. GAUDET: Mr. Chairman, one last question to Mr. Pettigrew. You indicated you had a meeting with the Premier and Minister Barnet. I'm just curious, what exactly was promised to your group? Was there a plan revealed, were there any details?

MR. PETTIGREW: No, I pretty much stated before what happened. We had a nice chit chat in his office. It was the day before the vote and he poured his heart out to us. He felt sorry for us, he knew it was happening and was going to do something about it. He turned to Mr. Barnet, as I said, and Mr. Barnet said, my people are in place, that was the answer and we all shook hands with a very gentleman's agreement that something was going to get done and something was going to get done very quickly. After that meeting we met with Mr. Gaudet and Mr. Dexter and their caucuses and because we were assured that something was going to get done, convinced them to let the vote go through uncontested, as they did. I can't tell you anything else. I mean when a man shakes my hand and looks me in the eye and says he's going to do something, I assume he's going to do it.

MR. GAUDET: I was curious of the fact that they promised they were going to do something, if anything was revealed, any details?

MR. PETTIGREW: No, nothing.

MR. GAUDET: Thank you, Mr. Chairman.

MR. CHAIRMAN: Ms. More.

MS. MARILYN MORE: I'm not sure I have any new insights to bring to this issue but I have to say I probably am in a unique position in this room as the only MLA representing a constituency that has both a refinery and independent gas outlets closing. So I have been following this issue very closely and I recognize that it is a complex issue. On the one side I have refinery officials telling me that they are one of the smaller operations within their international corporation and if they don't have a reasonable profit margin, they

may have to move out of the province. I appreciate the severity of that threat, in a way, because the refinery is a huge economic stimulant in my area and for all of Nova Scotia, generally, and yet I patronize businesses like Yuille's and the loss of that independent gas outlet is a big loss for that neighbourhood and the whole community of Dartmouth.

What puzzles me is that this issue is not a new one. Before I was elected, I worked with rural communities and travelled extensively throughout the year in all kinds of weather, all over this province, and as each year went by it was obvious, from discussions and from my own personal experience that decisions were going to have to be made around this issue. I just find the fact that the government hasn't had a plan and hasn't shown the leadership and has allowed it to get this point unbelievable and the fact that we are now continuing the level of inaction is just almost irresponsible. So I echo everyone's feelings around the table. We empathize, we've thrown our support in every way that we can as a caucus and it's so puzzling, I just can't think of a rational explanation for why something isn't being done. So good luck.

MR. CHAIRMAN: Mr. Taylor.

MR. TAYLOR: Mr. Chairman, I think we have come a long way, quite frankly and again I want to state that I appreciate Roy's frustration especially because I know that he's worked long and hard on this file. We have had many conversations about the problems that the retailers face but one of the concerns I have, as government wrestles with this difficult file, how do you actually justify or reconcile the price that is being paid at the pumps today as a starting point. As I said, in Middle Musquodoboit, for example, we're paying 98.9, in Meaghers Grant 99.9, in Dartmouth 96.9, and in Amherst 94.9. The government just can't pull a price out of the trees and say, look, this is justified. It's difficult, I really believe, to establish that base price. I just wonder what your thoughts are on that Graham or Roy?

[10:30 a.m.]

MR. CONRAD: I guess that speaks to the issue, the confusion. Why do prices vary? Why are they so volatile? Why is it so difficult to get explanations that we can understand? We know now, of course, that crude is traded on the international market, it's just a commodity like many other commodities traded on the international market. I guess the economy in China, the war in Iraq, inventory levels in the U.S., weather and whatever reasons, impact upon the cost of crude, I understand that. Like we've said over and over again, there are other products that we deal with on a daily basis that are in the exact same trading environment.

Coffee is no different than crude, but every morning when you go to Tim Hortons your price is the same. Granted, it goes up over time, but it doesn't go up one day, down the next, and up a little more and down even less. Gold trades every day. When you go to buy jewellery the price doesn't change from one day to the next.

The P.E.I. model has put some understanding into how the industry can function with a single price system. Maybe Nova Scotia doesn't have to go with the single price system, but it's not hard to understand how it can all take place. You have one refinery, the refinery has to make a profit. What's the number at the refinery level in order for the refiner to make a profit? The marketer needs to make a profit. What kind of a range to allow competition has to be there for a marketer to be interested as an incentive to get into the game? How much does it cost to transport product throughout Nova Scotia? Someone said one cent a litre from either extremity. You have to recognize the fact that somebody at the retail end needs a profit.

What kind of profit is required on a minimum or a maximum basis? Those who want to go for volume and want to cut their prices, they would probably hover around the minimum level, and all of that would generate a retail price that is explainable, and understandable, and everybody at every site along the way makes a profit. When we compare the P.E.I. model - and I have the most recent charts if anybody wants them - that all happens very nicely, thank you very much, and prices are as low or lower than they are in Nova Scotia.

MR. TAYLOR: The only conclusion one can come to, or most likely would come to is that, in fact, we're being gouged here in Nova Scotia when we have this dog's breakfast approach to pricing at the retail level. You haven't said this morning, what margin do the independent retailers need? How many cents per litre? We've heard Roy, for example, was operating at zero, somebody in Dartmouth at a quarter per cent, somebody in Pictou at 1 cent. If you are going to go to a regulated model, obviously, you have to be consistent.

MR. CONRAD: Again, the P.E.I. model covers that off very nicely. The P.E.I. model has a minimum of 4 cents for self-serve, a maximum of 5.5. It has a minimum of 4 cents for full-serve and a maximum of 6.5. In 1991 in Nova Scotia, the last year of regulation, the maximum retail margins were 5.1 cents a litre, what had to be proven and demonstrated to the Utility and Review Board was required for a retail operation then to be in business, it wasn't just a number that they pulled out of the air. There were financial statements and accountants, consultants were hired and they had to convince the Utility and Review Board that retailers need a margin of whatever it was at the time. The last margin in place was 5.1 cents a litre.

MR. TAYLOR: It seems that big oil, with all respect, is being ruthless in their approach to this. They're the problem and they can be part of the solution. I don't know what other alternative government has but we have, as legislators, I don't think anywhere along the line you have been promised - I certainly haven't been - that the government would adopt carte blanche the P.E.I. model. Roy, you may have drawn that from your conversation but we have enabling legislation, that's what we passed, as legislators around this table, enabling legislation. Cabinet now has the ability, the framework is there. I do think we have come a long way, I know it has been a long battle but we've had deregulation for 14 years and a lot

of independents have fallen by the wayside, unfortunately. If something isn't done, there's no doubt about it, Mr. Chairman, there will be more casualties and we all lose, and more especially in rural Nova Scotia. Thank you.

MR. CHAIRMAN: Mr. Epstein.

MR. EPSTEIN: Mr. Conrad, every once in a while you send out to the caucuses a list of recent closures of retail outlets around the province. The latest one I have is dated yesterday. I'm wondering if maybe you could go through it with me and we can just check to see the numbers and which are the stations that are closed. This is the one that lists 48 closures but it's not clear to me - and I think I heard you mention the number 48 somewhere else in your comments but I can't remember - what time period are we talking about for 48 closures?

MR. CONRAD: The list that you're reading from is a list that we've prepared. When we found out that there is no adequate tracking system in place within the government to keep track of what service stations close. (Interruptions) The tracking system as it exists, is when they send out an application for renewal, if you don't respond they'll send out another, if you don't respond they may determine at some point in the future that you're closed. That could take a year. Anyway, we have done some research to try to find out faster which outlets are closed and what you have in front of you is the work that we've done. So 90 per cent of these businesses closed since May of last year, since the select committee, the select committee was June.

MR. EPSTEIN: Over the last year?

MR. CONRAD: Over the last year, yes.

MR. EPSTEIN: So, basically the 48 in about a one year period. In the list, some of them are in bold and some are not. How recent are those listed in bold in terms of their closure?

MR. CONRAD: The ones listed in bold are the outlets that we have been able to identify within the last two weeks.

MR. EPSTEIN: The question is, how many closures have there been of retail outlets in Nova Scotia since we passed this bill? If that's the list in bold then we're looking at a serious list here, is that right?

MR. CONRAD: That's right, we're working with Service Nova Scotia to consolidate or at least compare our databases to make sure that were talking . . .

MR. EPSTEIN: If that's the case, I want to read this into the record. In Annapolis County, the Granville Service Centre and Hannam's Custom Exhaust; in Antigonish County, Levangie and Sons, and Havre Boucher Service Centre; in Digby County, Comeau Fuels and Little River Trading Company; in Pictou County, Arbuckle Service Centre; in Cape Breton County we have Cogan's Service Station; in Colchester County we have the Willow Street Service Station; in Kings, we have Paul Tidman, we have the Canning Main Street, J. & W. Service Centre and Long's Convenience; in Yarmouth County we have the Kemptville Corner Store and Craig Crocker. That's since the legislation?

MR. CONRAD: I apologize, I may have misled you. We are reconciling our data- bases and I sent the information in . . .

MR. EPSTEIN: Okay, if the number is different, this is your chance. Make it clear.

MR. CONRAD: This was the information we sent in based on the information we gathered over the last two weeks.

MR. EPSTEIN: Some of these may have closed early.

MR. CONRAD: That's correct.

MR. EPSTEIN: How many closed since we passed the bill? Do you know this? If you don't, that's fine, but I would like to know.

MR. CONRAD: I couldn't say with accuracy. I could tell you that I know personally there are probably six that I know of that have closed within the last two weeks.

MR. EPSTEIN: The other thing is, you said you had the table comparing the retail price with x tax price in Charlottetown and Halifax. I think you should hand that out but I'm just going to summarize that table here. What this is, this is a table comparing the 22 weeks since the beginning of 2005. Is that right?

MR. CONRAD: Yes.

MR. EPSTEIN: You've done weekly sampling and this is all based on Mr. Irving. Oh, I have it here, thanks very much.

MR. CONRAD: We've got copies for everybody.

MR. EPSTEIN: Oh sure. I'll pass them along. So when you leave the taxes aside, which is the only fair basis for comparison, the average price over the last 22 weeks of 2005 in Halifax has been 54.3 cents a litre and it's been 55.2 cents in Charlottetown. So fairly close in terms of price but there have been 13 of the 22 weeks in which the price has been

lower in Halifax than it was in Charlottetown. It's also the case that there have been 33 price changes, though, in Halifax compared with 11 in Charlottetown. So now tell us what the conclusions are that we should take from this table.

MR. CONRAD: That table speaks to three main points; people who are proponents of the theory that regulation automatically means higher prices, that chart speaks to three points. First of all, it's the first time that that information has ever been provided in that format, that we know about. That's first. In previous years there has been reference to numbers from the oil companies that prices are, the number 1.8 cents a litre stands out in my mind, more expensive in P.E.I. than in Nova Scotia and that's because of regulation but it was never put in a format like that where we look at it on a weekly basis and cumulatively, what, in fact, is the effect because in Nova Scotia every day 3 million litres of gasoline are purchased.

So if you purchase product in the morning at one price and the price changes in the afternoon, it never gets reflected with the way information was previously reported because previously reported, and it still exists today, is every Tuesday a survey is done of prices but it doesn't capture anything that has happened during the week. So that chart says okay, not a point in time, not a day or a week, year to date, what has been the impact of all the pricing changes in Halifax versus Charlottetown and what it says is that essentially they are both the same.

MR. EPSTEIN: If, in fact, it's about a penny a litre for transportation between Halifax and Charlottetown, they are exactly the same.

MR. CONRAD: Correct.

MR. EPSTEIN: All right. So this shows less volatility in the regulated market and the price is the same.

MR. CONRAD: And the retail margin, look at the retail margin at the bottom of the chart. The retail margin, we estimate that number. Roy just finished indicating his retail margin is zero. For comparison sake, we said if it's an average between 2.5 and 3.5, if that's what it is, then compare that with what takes place in Charlottetown which is fixed.

MR. EPSTEIN: And from the retailers' perspective, there's a better margin in P.E.I.

MR. CONRAD: Absolutely and not only that, it's fixed. You know exactly what your business plan is going to be like because all you have to do is work on volume. You do all the things you have to do to increase your volume and if your margin is fixed, you know how much money you have to work with.

MR. EPSTEIN: Good, thank you.

MR. CHAIRMAN: Mr. Parent.

MR. PARENT: I was going to ask the first question on the price you are quoting so thank you very much, if it's excluding or including taxes, so thank you for the chart. I want to pick up on what my colleague said, and he was on the select committee, I wasn't. In his opinion, regulation will be a short-term fix, that there are other endemic problems and one of them comes back to the situation that my retailer is facing, Mr. Cruickshank, and that is the fact that whether there are regulated prices or not, it wouldn't help him because Petro-Canada is really being anti-competitive, refusing to service this market, which is their choice, but then making sure that no one else can service it as well. So what other, beyond regulation, which has been the main topic, what other things need to be in place so that the large oil companies are responsive to the retailers and to the population? I don't know if that's a fair question.

[10:45 a.m.]

MR. CONRAD: That's an excellent question because we talked about this on many occasions. I don't know if legal proceedings took place against Petro-Canada to ask them to forgive that clause in the agreement, I don't know whether or not that could be successfully challenged but it should be because there is really no reason for Petro-Canada or any other oil company to say if we don't have it, nobody gets it. That doesn't make sense.

MR. PARENT: Unjust.

MR. CONRAD: Unjust as well as anti-competitive. Then the other issue that could be looked at is related to the possibility or the attractiveness or the opportunity for independent oil companies to come into Nova Scotia. There are a couple of barriers that prevent other oil companies from coming into Nova Scotia and they are very simple barriers, storage tank capacity. If those barriers could be addressed and if Petro-Canada, if that is a typical example, if that scenario could be addressed, you could end up making the industry a lot more competitive by encouraging more independent oil companies to come in and having more sites available that the major oil companies are not interested in for them to pick up. Really, it could continue to keep up the levels of service and levels of competition.

MR. CHAIRMAN: I want to thank our presenters for appearing here today. I certainly invite you now, all three of you, if you have any closing comments, I want to give you the opportunity to do so now.

MR. PETTIGREW: I just have a couple and I will try to keep it brief. I know that Brooke and Mr. Dooks and the other members of the select committee have worked with us very closely on the government side of things. As I said when I came in here, this announcement last night really shook me up. I dug out a few things here, one from Mr. Barnet who says he supports regulation. This was in the press, in the ChronicleHerald, and

the fact that if the government cuts taxes on gasoline, it's gobbled up by the major oil companies and doesn't go to the retailers and he's quoted in here as saying these things so he knows the position.

I know that you gentlemen said we can't lay blame but the bottom line, gentlemen, is we thought we had a deal and whether we did or we didn't, we were led to that assumption, very heavily, so heavily that we, as I said, talked to the two Opposition Parties and assured them that we had a deal and that this was going to be put together. Now, I think Mr. Barnet in his conversations, we talked about having to get something done before Summer and that if there was tinkering to do, anything could be refined later. If we wait until Fall and we do another study, as has been said here today, there will be 100 less of us left and Heaven knows what happens after that study. We just can't sit on this any longer. I've repeated this several times. We had a meeting with some people a while ago at the Liberal caucus meeting and I told them then, at that time, if we sit around any longer, the problem will go away. It's slowly going away because there is less and less and less of us and then when the last one goes, the problem will be gone.

So I urge you, I just hope that you can go back to your respective caucuses and do what it takes to get this thing done, at least get a start on it, get it going before we have more casualties. We've gone to war and we are losing big time. I don't know what happened this week. I do feel that there was heavy lobbying by the oil companies. We anticipated that. We figured that would happen but we didn't figure the outcome would be what took place last night.

With that in mind, as I say, we have to get this done. We can't sit on it any longer or the problem will go away and the economy of Nova Scotia and all of us who put this thing together and worked so hard over the years, all of this will be for naught. I thank you for your time today and hope to work with you later. Thank you.

MR. CONRAD: I would just like to thank everybody for their questions and express our appreciation for having the opportunity to once again put the issue forward and improve understanding about what the real critical issues are and who is affected and how much they are affected. I think everybody by now certainly understands the issue well enough to say there is nothing new that can be added to what has already been said. I guess from where we are coming from, it's a question of priorities. It's a question of government priorities and it's just that simple. I hope it's not the toss of a coin but it is a question of government priorities. Thank you.

MR. CHAIRMAN: Thank you, Mr. Conrad.

MR. CRUICKSHANK: I think a committee like this or the government as a whole should - I don't know how you would put pressure on the oil companies - come down and talk to them. I'm not talking about local reps but somebody from there who has a little bit of authority so at least we know what is coming down from these oil companies.

MR. CHAIRMAN: Thank you, Mr. Cruickshank and certainly Mr. Conrad and Mr. Pettigrew. We certainly appreciate you taking time out of your busy schedule to come before this committee. I think you have certainly seen a sympathy here toward the retailers from all committee members and hopefully we will be able to work together toward a solution in the very near future.

Committee members, with your agreement, I would move that we adjourn and meet again at the call of the chairman.

SOME HON. MEMBERS: It is agreed.

MR. CHAIRMAN: The meeting is adjourned.

[The committee adjourned at 10:55 a.m.]