Oil companies in N.B. being overcompensated for federal clean fuel costs, experts say
CBC
New Brunswick has been overestimating the cost of federal clean fuel regulations on oil companies and have allowed consumers to be overcharged by millions of dollars since last July as a result, two expert witnesses told an Energy and Utilities Board hearing this week.
Timothy Auger of the group Advanced BioFuels Canada and Vijay Muralidharan of Calgary-based R Cube Economic Consulting Inc. are each challenging a formula adopted last year by the EUB to calculate the cost of federal clean fuel rules on oil companies.
This week, that formula is allowing oil companies to add 5.22 cents per litre to the price of gasoline and 5.82 cents to the price of diesel in New Brunswick to pay for the cost of regulations that took effect nationally in July.
Every one cent added to petroleum prices in New Brunswick costs consumers about $1 million per month at the pumps.
In testimony Monday, Auger argued consumers in New Brunswick are compensating companies for costs that do not exist yet.
"The net effect is simply passing on additional profits to the primary supplier at the cost of consumers in the province," he told the board.
Federal clean fuel rules are separate from carbon charges and 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 rewards and penalties for oil companies to reach them.
The regulations do not apply to heating fuels or to petroleum products exported from Canada.
Refiners can comply with the new rules in different ways, including putting more ethanol in domestic gasoline, selling biodiesel products or finding ways to reduce their own refining emissions.
Companies that come in below the federal government's emissions intensity ceiling earn credits they can sell on a market being set up for that purpose. Other producers can buy those credits if their fuels fall short.
It's also possible to earn credits through investments in things unrelated to refining, such as electric vehicle charging stations.
The New Brunswick government passed legislation in 2022 to allow oil companies to pass clean fuel charges onto consumers and instructed the Energy and Utilities Board to determine what those costs might be.
The EUB is now reviewing the controversial formula it adopted for that purpose last year after agreeing to the recommendation of a single consulting firm, Grant Thornton.
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