Title: Order P.000526 - Petroleum - Licensing - New London Service Station (May 26, 2000)

Order No. P.000526

IN THE MATTER of the Petroleum Products Act, R.S.P.E.I. 1988, Cap P-5.1

- and -

IN THE MATTER of an application made by Irving Oil Limited for a change of class of license issued with respect to the motor fuels outlet known as New London Service Station now or formerly leased to and operated by Vernon and Virginia O’Connor.

Friday, the 26th day of May, A.D., 2000

BEFORE

Wayne D. Cheverie, Q.C., Chair
Norman Gallant, Commissioner
James Carragher, Commissioner

Decision and Order

TABLE OF CONTENTS

TITLE PAGE

TABLE OF CONTENTS

APPEARANCES AND WITNESSES

DECISION

I.     INTRODUCTION
II.    REVIEW OF EVIDENCE IN SUPPORT
III.   REVIEW OF EVIDENCE IN OPPOSITION
IV.   REASONS FOR DECISION

ORDER

APPEARANCES AND WITNESSES

Participants in the hearing and the parties for whom they appeared were as follows:

FOR APPLICANT: IRVING OIL LIMITED

Counsel:
Eugene P. Rossiter, Q.C.
Stewart McKelvey Stirling Scales

Witness:
Kevin Bouchey, Distribution Manager
Irving Oil Limited

INTERVENERS IN OPPOSITION: JOLLIMORE’S GROCERY & DELANEY’S GROCERY

Witnesses:
Lauretta Jollimore
Jeanette F. Delaney

INTERVENERS IN SUPPORT: CANADRAULICS CO. (ARTHUR R. SAMPSON)

Witness:
N/A

PUBLIC INTERVENTIONS:

Witness:
Virginia O’Connor, Operator
New London Service Station

Vernon O’Connor, Former Lessee
New London Service Station

Honourable Kenneth C. Mackay, Q.C.,
Resident - New London

OBSERVERS:
Wayne Wilsack, Irving Oil Limited
Donald Jollimore, Jollimore's Grocery
Charles Gallant, Employee - New London Service Station
Spencer Waite, Resident - New London
FOR THE COMMISSION:

H. Doris Pursey,
Director - Petroleum Division

RECORDING SECRETARY

Faye Weeks,
Secretary - Petroleum Division

DECISION

I. INTRODUCTION

After due public and individual notice, a public hearing commenced at 9:30 a.m. on Tuesday, 25 April 2000 to hear evidence with respect to an application by Irving Oil Limited, P. O. Box 366, Charlottetown, Prince Edward Island for a change of class of license issued under the Petroleum Products Act in respect of the motor fuels outlet known as the New London Service Station from “service station” to “general merchant”. This application requests approval to board up the bay doors at this existing full-serve motor fuels outlet and use the entire space as a convenience store with full-serve motor fuels dispensing. Presently, this motor fuels outlet is operating as a “service station” under Petroleum Products License No. D00109-0 issued by the Commission on 16 March 2000.

Notice of this application dated 27 January 2000 appeared in the public press, with interventions either in support of or in opposition to the granting of this license to be filed by 22 February 2000.

As a result of this Notice, the following written interventions in opposition of this application were received:

Jeanette F. Delaney, Owner/Manager – Delaney’s Store, Stanley Bridge
Cheryl and Lauretta Jollimore, Owners/Operators – Jollimore’s Grocery, French River

One intervention in support was filed by Arthur R. Sampson of Canadraulics Co., Kensington.

After consideration, the Commission fixed this date and time for the commencement of this hearing, and Notice of Hearing dated 3 April 2000 was published in the Guardian and Journal-Pioneer newspapers.

Twenty-one documents were entered by the Commission as exhibits in this matter. No other exhibits were entered by the participants in the hearing.

Mr. Eugene P. Rossiter, Q.C., Counsel for the Applicant in this matter, called Mr. Kevin Bouchey, Distribution Manager for Irving Oil Limited in support of the application. No other witnesses were called by the Applicant. However, Virginia and Vernon O’Connor and Honourable Kenneth C. Mackay requested permission to give evidence with respect to the application. Lauretta Jollimore and Jeanette F. Delaney gave evidence in support of their filed interventions, and Mr. Rossiter and both Mrs. Jollimore and Mrs. Delaney offered short oral summations following the completion of the evidence. At the adjournment of the hearing at approximately 11:35 a.m., the Chair indicated that the Commission would take the matter under advisement, and the parties would be notified of its Decision in due course.

A listing of those appearing can be found on pages 3 of this Decision entitled "Appearances and Witnesses".

II. REVIEW OF EVIDENCE IN SUPPORT

The only direct witness for Irving Oil Limited, hereinafter referred to as “the Applicant”, was its Distribution Manager, Mr. Kevin Bouchey. Mr. Bouchey noted that for nine and one-half years, he was Retail Supervisor for the Company, and has recently been appointed Distribution Manager.

Exhibit 2 indicates that the New London Service Station was constructed by the Applicant in 1963, and has been operated by various lessees and company employees as a “service station” class of motor fuels outlet since that time. The letter (Exhibit 7) filed by Eugene P. Rossiter, Q.C. in support of the application of Mr. Bouchey (Exhibit 6) indicated that the outlet sells in the vicinity of 600,000 litres of gasoline annually, and that the bay operation associated with the service station generated only $20,000.00 gross sales in 1999, while the operator paid a licensed mechanic $30.000.00 during this same period. It was also implied in this letter that for this reason, it was difficult to retain lessees at this outlet.

Mr. Bouchey testified that the trend today in the retail segment of this industry is to have fewer outlets, with the majority of them being convenience stores. When asked the reason why this would be so, he made the following statement:

“Consumers are going away from the auto service sites for a couple of reasons—improved warranties on cars, they’re going back to the dealerships and specialty shops, increased number of vehicles that are leased, they go back to the dealership for repairs.

He further stated that the consumer now wishes to have their “convenience items” at one stop.

“It’s more convenient for the motoring public to get these items when you buy your gasoline.”

He further testified that he has observed the New London outlet for seven years, and noted that it has not been especially successful as a “service station”. He went on to state:

“It’s not a profitable venture right now for us or for the dealer. Like I said earlier, more and more consumers are going to dealerships and specialty shops to have their cars repaired. The gas volume isn’t enough to sustain the operation, so you need something else to make it work and the auto service site is not making it work right now, and hasn’t in the past ten years.”

Mr. Bouchey testified that he was prompted to make this application based on his desire to provide one-stop shopping in the area, and also on the basis that the automotive bay service was not self-supporting. He stated that unless the application is approved, the outlet will not continue to operate. Mr. Bouchey noted that the Applicant proposes to have the bay doors boarded up and the space gained utilized as storage and a small convenience store with full-serve dispensing of regular and premium unleaded gasoline, but that a major upgrade is not anticipated, and no alteration to the dispensing equipment is proposed.

Mr. Bouchey stated under cross-examination relating to the proposed viability of the outlet that it was his opinion that the changes proposed would be supported by the area residents and also by the many tourists travelling in the vicinity. He went on to say:

“We would like to stay in the community and we think our reputation of our convenience stores throughout Atlantic Canada and United States will draw customers in. We’ve had customers convey to us that they would like a store in that location.”

One resident of the area (Honourable Kenneth C. Mackay, Q.C.) was present in support of the application. The only other customer support for the application was indicated in the letter of Mr. Arthur R. Sampson (Exhibit No. 12), who was not in attendance at the hearing.

Mr. Bouchey gave evidence to the effect that the present operator is Virginia O’Connor. It is noted from the file that the three-year lease arrangement between Irving and Virginia and Vernon O’Connor expired on 27 January 2000, and that the outlet is presently operated on a month-to-month basis. Mr. Bouchey noted that Irving Oil Limited has taken some short-term financial steps to insure that the operation is somewhat viable for the dealer. He stated there had been four different lessees at the outlet in the past ten years, and that there was a qualified mechanic operating two service bays on the site for most of this time. He stated that the bay service brought in only about $20,000 to $24,000 annually (total labour and parts), and that it costs approximately $28,000 for the mechanic’s wages without considering other costs.

Ms. Virginia O’Connor, the present operator, requested permission to give evidence in this matter. She indicated that currently she offers convenience items such as pop, chips, cigarettes, sandwiches, coffee, etc., in addition to selling gasoline and offering bay services. She noted that her automotive bay services represent only ten per cent of her gross sales, and with the cost of heat, lights, tools, etc., that the viability of the site as a service station has become progressively worse. She attributed the remainder of her sales to 50% petroleum and 40% convenience items. Upon cross-examination, she clarified that the $30,000 salary paid her mechanic required that he also act as pump island attendant a good deal of the time, especially during the winter months. Ms. O’Connor indicated as well that she wished to continue to be the operator of the site in conjunction with the operation of a small C-store rather than automotive service bays, but that that remained to be seen. She testified that the outlet is located at a major intersection (Routes 6 and 20), and as well serves traffic on Route 8 coming off the highway from the bridge. She said she felt that she had great support from the community with regard to this proposal to revamp the outlet to a convenience store. The application signed by Mr. Bouchey indicates that the hours the proposed new services would be offered would be extended by opening at 6:00 a.m. from Monday to Saturday rather than at 6:30 a.m. as at present, and 7 a.m. on Sundays, with closing hours for all days being 7 p.m. The application indicates that on Holidays, the outlet would close at 9 p.m., although no opening hour was stated.

Hon. Justice Mackay noted that the location is very convenient to him in that he resides in close proximity, and finds it inconvenient to drive 3 1/2 miles to French River or 3 miles to Stanley Bridge. He noted as well that there is a large, large summer population, and that while Delaney’s store is “delightful”, it is not always open. He further noted that Jollimore’s is up for sale, and that Mr. MacEwen had had a general store in New London which had closed some time ago. He noted that he has implored the Irving’s to improve the ambiance of its outlet at New London, and to restrict the traffic on and off the lot. He felt that this was an opportunity to see positive changes at this location. Although Hon. Mackay indicated somewhat facetiously that there had been approximately fifty different operators of this site since its inception (and he has observed this site for a period of 32 years)—a review of the file reveals that in fact there have been twenty-one different lessees and company employees who have operated this site for various periods over the thirty-seven years since it was constructed.

Mr. Vernon O’Connor, who together with Virginia O’Connor, leased and operated this site for a period of approximately three years, agreed that Alan Douglas, who operates the R. & A. Service Station at Stanley Bridge supplied by Shell Canada Products Limited, operates very busy bays. He noted that this outlet services recreational vehicles, potato trucks, etc. in addition to the usual motor vehicles. He testified that with respect to Mr. Bill MacEwen’s outlet, he noted that he was a personal friend, and that Mr. MacEwen advised him that he had closed his general merchant outlet for several reasons, one of which was related to his health, and secondly, due to the various regulations relating to the sale of meat, milk and eggs in conjunction with gas sales. Mr. O’Connor noted that Mr. MacEwen had advised him a year ago that he could not compete with the Save-Easy in Kensington. Mr. O’Connor noted that if the traffic at the intersection (Routes 6 and 20) where this outlet is located (with traffic also coming off of Route 8) increases, something would have to be done to improve the safety at the corner. He also stated that Mr. Douglas has one less employee in the winter.

Mr. Rossiter, Counsel for the Applicant, indicated in his summation that the Commission has the authority relative to licensing under the Petroleum Products Act. He noted that traffic concerns, if any, would be considered by the Department of Transportation of Public Works in dealing with the issuance of the necessary building permit. He further indicated that the ingress and egress at this site would be addressed by the Applicant at the time of preparing plans relating to alterations to the site. He indicated that fifty per cent of vehicles are now leased, and that this is one reason why all major oil companies are getting out of the operation of service bays. He reiterated that the motoring public now demands a wider variety of services in terms of petroleum products outlets, and that competition drives he marketplace. He confirmed that the outlet at New London is not viable, and that unless the application to close the bays at New London is approved, the outlet will close, with even less service being available to the motoring public.

III. REVIEW OF EVIDENCE IN OPPOSITION

The two parties who intervened in opposition to the application, being Jollimore’s Grocery at French River (a licensed motor fuels outlet operated in conjunction with a general merchant facility and located approximately three miles from the New London Service Station), and Delaney’s Grocery (a general merchant outlet located in Stanley Bridge) had witnesses present in support of their opposition.   Mrs. Jeanette F. Delaney was sworn and testified in support of her letter of intervention which was entered into the record as Exhibit No. 13. She testified that her outlet is located approximately four kilometers from the New London site, and that she has operated only in the summer, but this and one other winter stayed open with reduced hours. She gave evidence to the effect that in her opinion, the proposed changes to the outlet would not be supported by the residents of the community, and would therefore not be viable. In addition, she referred to traffic safety concerns at this busy intersection, and noted that it appears necessary to improve the safety at this intersection. She noted that ingress and egress to the lot would in her opinion require further control than presently exists. She further stated that while this Applicant cited a lack of requirement for automotive bay service in the area, a competing outlet at Stanley Bridge is so busy that there is often a considerable wait in having your car serviced. She also referred to “unfair competition” in the c-store business due to Irving’s buying power.

Mrs. Lauretta Jollimore appeared in support of the written intervention signed by both her and her daughter, Cheryl Jollimore, which document was entered as Exhibit No. 14. Mrs. Jollimore echoed much of Mrs. Delaney’s testimony, and stated that the outlet she and her daughter Cheryl operate at French River would not be viable if not family-operated.   She noted that any further loss of business at her general merchant outlet would be serious due to the fact that residents often utilize their services during periods of bad weather, but when the weather permits, do most of their shopping in Charlottetown or Summerside. She noted that hers is a low-volume outlet, both with regard to groceries and gas sales, although she offers groceries and both regular and premium gasolines on a year-round basis. She expressed concern that with the gift shop and Lucy Maude home place in the same vicinity as the New London Service Station, that cars often park on the roadsides, and she feels that any additional traffic which might result from the revised outlet would add to an already dangerous situation.

Mrs. Delaney and Mrs. Jollimore gave short verbal summations of their evidence at the close of the hearing. Mrs. Delaney noted that it was very easy for residents to “go to town” for their supplies, and that she felt the two stores located in Stanley Bridge and French River were adequate to meet the needs of the residents of these communities. She stated that she felt the population is insufficient to support another c-store.  Mrs. Jollimore agreed that there is insufficient business for three stores in the area.

No direct testimony was given by members of the public concerning the loss of the automotive service bays in the area.

IV. REASONS FOR DECISION

Section 1 of the Petroleum Products Act, R.S.P.E.I. 1988, Cap. P-5.1; sets out the definition for “facilities” as follows:

s.1. (d) “facilities” means all parts of and services provided at an outlet, including the grounds, washrooms, sales areas and service bays;

Section 2 of the Act sets out the purpose of the Act, which is as follows:

s.2. The purpose of this Act is to regulate the distribution and sale of petroleum products within the Province of Prince Edward Island for use within the province, and the type, location, and operation of facilities and equipment associated therewith, and to ensure at all times a just and reasonable price for heating fuel and motor fuel to consumers and licensees within the province.

Petroleum Products Act Regulation 23(1) reads as follows:

No change in use of any portion of any outlet shall be made by a licensee without the prior approval of the Commission.

Persons requesting application forms for this purpose are also provided with a copy of a Commission document entitled “Requirements re Conversions” [Form No. IRAC509 (04/96)], which generally outlines the requirements with regard to completing such an application. This document formed part of both Exhibit No. 4 and Exhibit No. 5.

Petroleum Products Act Regulation 23(2) states:

The Commission may require such information and make such conditions for its approval under this section as the Commission considers necessary.

The primary statutory provision guiding the Commission in these matters is s.20 of the Petroleum Products Act, R.S.P.E.I. 1988, Cap. P-5.1:

s.20. When issuing a license with respect to the operation of an outlet operated by a retailer, the Commission shall consider the public interest, convenience and necessity by applying such criteria as the Commission may from time to time consider advisable including but not restricted to the demand for the proposed service, the location of the outlet, traffic flows and the applicant's record of performance.

The Commission also gives consideration to the factors contained in Section 24(2) of the Act relating to renewals, which reads as follows:

s.24(2). The Commission shall, before granting a renewal of any license with respect to the operation of any outlet, give due consideration to the quantity of petroleum product sold in the previous year from the outlet and to the quality of service which the outlet renders to the community which it serves and the Commission may refuse to renew any license if, in the opinion of the Commission, the quantity of product sold or the quality of service rendered is inadequate.

From a reading of Sections 1(d), 2 and 19 of the Act, together with Regs. 23(1) and 26, it is clear that the legislation intends that the Commission regulate services ancillary to the actual dispensing of petroleum products. Further, Reg. 23(1) specifically empowers the Commission to grant approval to a change in “any portion of any outlet” prior to such change being made. In addition, s. 20 of the Act refers to certain minimum criteria which the Commission must consider when issuing a license under the Act. It does not refer specifically to an initial license. In the present case, if the Applicant is successful, a new license, although amended, would be issued. Therefore, s. 20 is applicable to an applicant for a change of class of license although it may not be quite as difficult to meet the test as if it were an initial application. This, then, is the legal framework with which the Commission must dispose of the present legislation. The Commission is also of the view that each application for licensing must be decided on its own particular facts, and while there are general principles to which it must adhere in arriving at these conclusions, consideration must be given to the unique factors relating to the issues of public interest, convenience and necessity in order to arrive at an appropriate decision in each case.

Currently licensed outlets that may be meeting the current needs of a community, if altered, may no longer meet the tests of public interest, convenience and necessity, and this is something which the Commission takes seriously in attempting to ensure that outlets meet the needs of the motoring public. If in a certain area, approval of a change in class results in the loss of automotive bay or other services, and indeed might also result in the non-viability of another existing outlet or outlets, customers would then find themselves with reduced or no service. In such a case, an application to change the existing use may be denied. Thus, the factors considered are carefully weighed in relation to each specific application.

The Commission understands that each application is made for reasons particular to the applicant, the location and the community. It is felt that any proposal made with respect to changes in service offerings must be reviewed in an effort to determine whether the grounds on which the initial license was issued would still be met with regard to an altered site at the same location.

In addition, the Commission is always mindful that Section 18 of the Act states: “No license shall confer any perpetual or exclusive right.”—thus, changes which affect the essential nature of an outlet must be appropriately assessed.

The Act does not require a hearing before a license may be granted. In many similar applications, the documents filed have been sufficient to convince the Commission that the public interest, convenience and necessity test has been met. The public interest expressed as a result of the advertising of the application in the press and on the internet, however, has resulted in the holding of a public hearing in this case.

The market area of this outlet clearly includes the residents of the community as well as traffic on Routes 8 and 20, but primarily the tourist traffic which is especially prevalent on Route 6. However, no interventions either in support of or in opposition to the specific desire to retain the automotive bay services at this site were filed with the Commission. Several varying reasons were given for this, both by witnesses for the Applicant and for the Interveners. The closest existing motor fuels outlet with automotive service bays is approximately seven kilometres distant. In Kensington, which is approximately ten kilometres from the New London site, there are two outlets providing automotive bay services. Jollimore’s Grocery at French River sells motor fuels in conjunction with groceries. Delaney’s Store sells groceries on a seasonal basis but is not licensed under the Petroleum Products Act.

It is therefore apparent that the most significant benefit to the potentially patronizing public in the establishment of the proposed newly rebuilt outlet would be that additional convenience items would be available. It is doubtful whether or not any additional volume would result from the proposed minor changes to the image of this site—however, if so, it would be gleaned from several and not one particular outlet in the area. The costs of operation of this site, however, might decrease somewhat in that the salaries of pump island attendants would not equate with those of a licensed mechanic.

The Applicant has indicated that this outlet would operate every day but Sunday from 6 a.m. to 7 p.m. and on Sunday from 7 a.m. to 7 p.m.—thus providing services beyond the hours now applicable at this site, i.e. 6:30 a.m. to 7 p.m. on all days including Sundays. It is unclear from the application as to the opening hour of operation on holidays, although closing time is cited as being 9 p.m.   The immediate area is comprised of residential properties and some establishments of a commercial nature. Obviously, then, this revamped outlet, while reducing its services by closing the automotive service bays, would provide a wider selection of convenience items to the motoring public.

The next issue to be considered is whether or not granting an amended license in this case would likely result in a loss of services in the area that would be an overall detriment to the motoring public. Little evidence was forthcoming that this would be the case. All existing nearby outlets have competed with the outlet in question for many years, and each has been successful in establishing its own customer base. In addition, the evidence given relating to existing traffic counts would indicate sufficient vehicular traffic to support the newly revamped outlet with its proposed service offerings.

There was little evidence given by the Applicant with respect to definitive plans and specifications of the proposed revamping of this outlet. The Commission has concluded that while preliminary authorization should be given this proposal, it should only be granted on the basis of the fact that specific plans be filed which indicate that the outlet will present a satisfactory image, a pedestrian safe parking plan, and the establishment of a separate interior area or alternately, an exterior kiosk, with respect to the dispensing of full-serve motor fuels. In addition, a site plan relating to the entrance/exit locations are to be reviewed by the Commission prior to any construction being carried out with respect to the alterations proposed. All outlets, of course, must be in compliance with all municipal and provincial requirements including those of the Fire Prevention Act and the Petroleum Products Act.

It is acknowledged that the gasoline volumes sold at this site are approximately half the average volume of outlets operating in Prince Edward Island. However, the need would appear to continue to exist with respect to the provision of motor fuels at this location, especially in the summer months, in that there are no other opportunities to purchase petroleum products other than as set out above. In addition, it is the Commission’s conclusion that the convenience offerings which will replace the automotive bay services presently offered overrides any detrimental effect that such an approval might have on the motoring public, even though existing automotive bay service clients will have to look elsewhere for these services. It is noted that the outlet will continue to provide full-serve gasoline dispensing.

The concerns raised relating to traffic safety have obviously been noted by the Applicant, and it is the understanding of the Commission that consultations will be undertaken with the Department of Transportation and Public Works relative to any changes necessary to increase traffic safety at this busy intersection, and that any reasonable concerns will be addressed.

As Irving's Counsel noted during his closing arguments, there are numerous factors that the Commission considers at these hearings and the weight given to each varies depending upon the circumstances of the case. As previously stated, each license is applied for out of reasons particular to that applicant, location and community. In this case, the Commission reviewed the evidence with respect to the requirements of the statute, and is satisfied that the requirements have been met in this case.
The application is therefore approved in principle in accordance with the Order appended hereto.

ORDER

THE COMMISSION HEREBY ORDERS:

1)   THAT the application of Irving Oil Limited dated the 10th day of January, 2000 for an amendment to Petroleum Products License No. D-00109-0 with respect to full-serve motor fuels dispensing in conjunction with the sale of convenience store items (with no automotive bay service to be offered) at the outlet presently known as the New London Service Station be approved in principle. This authorization is valid for a period of four months from the date of this Order, and is conditional on the outlet being altered and operated in accordance with the application and verbal evidence given at the public hearing, and conditional on all operating requirements being met prior to the issuance of an amendment to the above-noted license.

2)   THAT plans be filed with the Commission for approval prior to any alterations being undertaken with respect to the proposed revised outlet as specified on page 17 of this Decision. These plans are to relate to the traffic safety concerns raised relating to ingress and egress, safe access for pedestrians in relation to the traffic flows, (including parking layouts for vehicles) on the lot, and as well, separate provision for full-serve pump island attendants.

3) THAT amendment fees be paid prior to the suspension of the existing license and issuance of an amended license regarding this location.

4) THAT the outlet operate on the basis of the hours indicated on the application form unless otherwise ordered or authorized by the Commission.

DATED at CHARLOTTETOWN this 26th day of MAY, A. D., 2000.

BY THE COMMISSION:

Chair

Commissioner

Commissioner

NOTICE

Section 58 of the Petroleum Products Act reads as follows:

58. Where any person has the status of a party or is an intervenor in any hearing before the Commission, he is entitled

           (a) to appeal the decision of the Commission to the Appeal Division; and
           (b) to participate as a party in the hearing of an appeal

and an appeal shall be on a question of law or jurisdiction only and be governed by section 13 of the Island Regulatory and Appeals Commission Act.

Sections 13.(1) and (2) of the Island Regulatory and Appeals Commission Act provide as follows:

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

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