MASSE IN THE HOUSE: Speaking on Bill C-14, Fairness at the Gas Pumps

Wednesday, May 12, 2010
Fairness at the Pumps Act

Mr. Brian Masse (Windsor West, NDP):
Mr. Speaker, I am pleased to speak to Bill C-14, An Act to amend the Electricity and Gas Inspection Act and the Weights and Measures Act.
It has been termed the fairness at the pumps act but it is actually a series of different measurements for a series of different products. This is an attempt at a smokescreen by the government to try to appear tough on the oil and gas industry, in particular to the retailers in this instance, who are not the culprits at the end of the day in terms of high pricing. That comes from other parts of the industry.
It is important to note that we will not be supporting this to go to second reading because this is really about de-regulation, less accountability and would cause greater problems for the Canadian public as opposed to fixing the current system under Measurement Canada, and penalties that could be done as well.
My colleague who spoke before me was speaking out about the upcoming Memorial Cup. I can say that the Spitfires will be returning as champions. We will continue that debate another time. However, I wanted too ensure that he did not have the last word, as he thought. He was wrong on that and he is wrong on his predictions as well.
This particular bill comes about in a very interesting way. It was actually a number of years ago that there was a challenge to the industry through Measurement Canada. That information was gathered a number of years ago and did not go public. A freedom of information request by the press broke the information and the story opened. It then led to some interesting discussions.
I would remind the House that on May 12, 2008, my leader, the member for Toronto—Danforth, asked the then minister of industry at that time, who has since been punted to another department, about this issue and whether or not the government would do anything on it.
In the response to my leader, the minister at the time said:
Second, I have instructed regulatory changes to be prepared. These will increase the onus on gas retailers. Fines will be increased from $1,000 per occurrence to $10,000 per occurrence.
Meanwhile, it took approximately two years for this to happen, and it was under another minister.
The government was very clear about trying to distance itself from this issue by not acting on it. It is rather perplexing because what it has offered are some modest changes in terms of accountability. I do want to run through some aspects of this bill, which is very important, and some of the background to it. I will also tackle some of the deficiencies of the bill and why it is just a smokescreen for an attempt to appear accountable to Canadians about this industry when the government really is not.
As I mentioned, a media story appeared in the Ottawa Citizen after an investigation was done by Measurement Canada which found that 5% of the 200,000 fuel pumps that it investigated between 1999 and 2007 delivered less fuel than reported on the pump display. The government inspection data showed that about one-third of Canada's gas stations, about 14,000, had at least one faulty pump.
We had a chronic situation with regard to that and it was uniform. There was a big story in my paper in Windsor West because we had some of the worst pumps in my riding. What that means is that people are not only getting ripped off by what they are paying at that time to the company, but they are also paying tax on phantom gasoline.
Despite having put this bill forward and despite having that information over all that time, the government did not use any of the available tools to either do one of two things: to fine the companies for doing that, which it could have been doing; or attempting to restore, from its own coffers, the theft from Canadians when it actually took taxes on phantom gasoline.
That is important because it just shows the lack of respect in terms of fixing the problem. We do not have a study that goes for nearly a decade which finds a significant problem across the board and then wait for a couple of years to introduce legislation. Ironically, this legislation would lead to the industry self-policing itself. Basically, it would be a wink-wink, nod-nod approach to accountability that would allow the industry to actually grow itself.
I will get into it later, but the inspectors who would be part of this process would likely come from those very companies. They would be creatures of the companies. As the testing, the equipment, the measurement and all those things are very specialized, it would be very difficult for independent companies to get into the market.
Measurement Canada would end up going to the administration of fines and penalties as a sole responsibility. It will probably be a lot less busy because it will probably get a lot less evidence about the actual situation. I have no confidence whatsoever that consumers would benefit from the particular changes outlined in this bill.
I mentioned that the bill is about other issues and I want to read them off. This is about measuring devices for a series of things: retail petroleum, downstream or wholesale petroleum, dairy, retail food, fishing, logging, grain and field crops, and mining. We are going to have deregulation in all of those elements as well. We do not accept that as a process to move forward.
I would point out that this industry has already gotten off enough with lack of regulation by not having the significant strength of a competition bureau. It does has some tools to it. In fact, a find was levied on a company just a little while ago today. It can happen but they are still not sufficient in terms of having an ombudsman office or the accountability monitoring that has been recommended since 2003.
I know the member for Pickering—Scarborough East, who has done terrific work on this file, will remember the days of coming here in the summer to have hearings and have the industry basically rule the roost and once again put this issue on the back burner. Unfortunately, we still have not seen accountability, although that member has done terrific work on this file.
I want to follow up now with the issues related to this that would change. It is important to notice in legislation that we can refer this to committee, and that is sometimes a reasonable approach to take. For ourselves, however, we will not do that because we do not want to see the use of private sector authorized service providers being activated by this legislation at the end of the day. The risk is far too great.
We have habitually seen abuse from this industry upon nations and upon customers, which is one of the reasons that we have to get off our dependency on oil and find other alternatives. We just have to look at the Gulf of Mexico right now where once again the industry was able to get its way. For those who say that it did not, that it is nonsense, because we all saw the political campaigns of the United States that said, “Drill, baby, drill”.
That has all evaporated right now but what has not evaporated is the hundreds of thousands of gallons of crude that is threatening the ecosystems that affect not only the United States but also Canada. We have asked questions about that and the Conservative members have heckled us saying that we are in Canada and not in the United States. However, those ecosystems are shared by a number of different species that have a connection to Canada. We also know that some of that oil can eventually reach into some of the international streams and eventually, if it is not plugged, reach into our own system here
This is a very serious issue and deregulation and letting industry self-police has led to that problem over there. When the “drill, baby, drill” campaigns were going on during the presidential election, the end result was that even the Obama administration loosened up standards to allow for more offshore drilling. The Americans have now put a moratorium on that, but there was enough of a penetration to open that up.
On the Canadian side, we have seen a whole debate over a number of years about the taxation policy of this issue. The taxation policy of this issue in this chamber has happened for many years and that is because there is basically a breakdown of our taxes into three taxes: the crude oil cost in terms of the price at the pump; the gross profit margins for retailers and refiners, which is around 16% to 18% for marketing; and taxation at 38%. Canada's taxation on this comes from royalty taxes, excise taxes and sales taxes.
I do not want this debate to be forgotten in terms of what members have previously said here when they talked about the cost and the price at the pump. I think the minister pointed to the cameras and warned the retailers that they were coming after them for the amount of money that they might have been scamming from not having the proper pumps fixed right, either knowingly or unknowingly.
There have often been government and opposition members talking about the cost of this to Canadians, that it is really important for our lifestyle, important for our environment and important too for how we use our natural resources.
I want to read a quote from the House of Commons on May 12, 2004:
Mr. Speaker, the Prime Minister will know that across the country Canadians are struggling with record gas prices. Canadian businesses are being hurt. Canadian consumers are burdened with the difficulties this is causing, but the government itself is rolling in record gas tax revenue.
Will the Prime Minister finally do the right thing and agree to lower gas taxes for Canadians?
The member who said that was the current Prime Minister. It was the current Prime Minister who was advocating for the reduction of taxes on gasoline, something that the government really has not done.
When they tried to do that by removing the GST, there was no accountability in that for the system. What we have seen is the coffers of the nation suffer with the reduction of gasoline taxes at the pump from the GST without the savings being measured and paid back to consumers.
That is a real problem because the companies are getting record profits, record tax cuts and also extra revenue now from the taxation policies that were never followed up with proper accountability. That is because we do not have an ombudsman office. We do not have a system in place that ensures the policies are going to be fulfilled by the actual objectives and that was unacceptable.
I will read another quote:
...when all is said and done, the government seems content with high gas prices. The reason is the government does not want to reduce gas taxes, so it actually wants high gas prices....
Will the government admit that the real reason it does not want to do anything is that $1.40 is its actual target price for gasoline?
That was the current Prime Minister who was once again advocating for a policy that he has never put in place, and that is the policy of reducing gas prices for Canadians.
We never saw any of that with regard to this announcement. We did not hear the Minister of Industry say the government was going to ensure that any of these savings are going to be passed on. In fact, the creation of this system and this regime that is being proposed could actually increase the cost of gasoline for the retailers and subsequently for Canadians. There is going to be an increase in inspections, which I argue is good in a sense, but at the same time those costs are going to be borne by the retailer, and the retailer will pass those on. The margin of profit for the retailers is very small, especially for an independent operation. They do not have the same luxuries as some of the larger ones.
When we go to our gas station, it is almost like a drug store these days. They sell chocolate bars, pop, chips, coffee, and they partner with different organizations to run small businesses out of their stations. They have a whole series of different products and services, because gasoline has such a small margin of profit that they end up having to rely on other measures.
When this issue is going to be passed on to the inspectors, when they have to pay the fees for it, it will be interesting. They will be able to set their own prices for this. They will be able to keep a system in place that will be very difficult to challenge. As I mentioned earlier, the industry will have a key advantage. Who has the training, who has the equipment, who has the knowledge, who has the skill set to be able to do the type of testing that is necessary and make a business out of it?
They will have behind them a wealth of backing in terms of loans as well as operating costs that will give them a strategic advantage over any independent business or organization that may want to bring about accountability by being independent and doing that measuring outside the realm of the industry itself.
I suspect it will be a subsidiary, or it could be a spin-off, or it could end up being relied upon to get training, equipment and a series of things that will create a dependency model. We will not see the type of innovation that we will need on this issue.
We will see a continuation of deregulation. We will see the industry police itself and it is an industry, once again, that has shown no support whatsoever to being more competitive. That is critical. When we look at supply and demand we know that right now we have a record high supply of a number of different gasoline and fuel products, yet pricing still remains above a certain level. That is unacceptable.
We also do not necessarily have to have collusion in this industry, because there is a lack of competition with the vertical integration that has taken place. I would look to the issue, for example, of the Burlington refinery station that was shut down by Petro-Canada. Instead of investing in that facility and ensuring more competition for refining, it mothballed it and shut it down and then bought Esso gasoline to put in Ontario Petro-Canada sites. So there is no competition with regard to the product and the actual use of it on the open market. It is important because it does affect daily lives for a number of people.
We have everything from low income people who are very significantly affected by gasoline prices to truckers, in particular, who are dependent upon this. We have been talking about this issue since 2002-03 when it went to committee. Many truckers have moved into more independent operations and are getting squeezed right now. There is also the rural element where they have to traverse over a greater distance and have no choice but to use private transportation to ensure getting to a destination to be able to work or whatever it may be. They also have stronger winter conditions, using more fuel for a series of things.
When we look at this act being supposedly more accountability for consumers at the gas pump, in Ontario they will wake up on July 1. I do not know why the Prime Minister and Mr. McGuinty cannot leave Canada Day alone when bringing in a new tax. This is Mr. McGuinty's second taxation date on Canada Day. First it was for health care and now it is for this. Maybe we need an act of Parliament to stop taxation from starting on Canada Day. But when the HST comes into effect in Ontario, there is going to be a windfall for the McGuinty provincial government.
I had parliamentary research do some work for me. For those out there, parliamentary research is available for all members of the House. It is a very important part of our democracy. It allows economists, lawyers and other types of researchers to do independent work for members who may want to share it later on, but it is independent from an MP's office, other members and the government, and it is critical.
I asked for a breakdown on the HST in a responsible way. Researchers looked at 13 major cities across Ontario and the average price of gasoline over a number of years, I believe five years. Under the regime right now, they expect the provincial government to bring in an additional $1.2 billion in gasoline tax, and another $500 million is going to come in, so $1.7 billion in total, just for gasoline and diesel for the province of Ontario next year. That is if the price remains just under $1 a litre.
This windfall the provincial government is stepping into is available only because the Conservative government has agreed with the harmonized sales tax, and we can quote the finance minister talking about policies on this and wanting to bring it to other provinces. Ironically, we are borrowing $4 billion to bring this into Ontario. So we are borrowing money, we are going to pay interest on that money as we are in a deficit right now and we are then going to ask Ontarians to pay an additional $1.7 billion more in taxation at the pump this summer.
In conclusion, we need to have real accountability. We do not need deregulation in this industry. We need to make sure it is going to be held accountable. Every time anything is brought up, the government claims foul, that there are no issues, but I can say there is an issue and it is that Canadians have been getting hosed at the pumps not only by the retailers having poor equipment but also by the government's not living up to what it said when it was in opposition and introducing policies that increase taxation on people.

Mr. Brian Masse (Windsor West, NDP):
Mr. Speaker, my colleague is quite right to note that this is very much a minor fix, that it is actually a smokescreen, with the overall industry challenges related to accountability, pricing, and availability to source.
However, one of the things that has been unique is that this country has given up a lot of its sovereignty, with regard to NAFTA. We have included energy as part of that agreement. I would like to hear his comments about the vulnerability and the limitations that we have because of NAFTA.

Mr. Brian Masse:
Mr. Speaker, I would agree with my colleague that he has a bit of knowledge on this. My comments were inclusive and certainly in order about the overall industry. It is the prerogative of members to point out that, when a bill is introduced that is so scoped and does not have the proper strategy behind it, it leads to other consequences and they all match together. I do not apologize for that. It is critical to connect the dots on this.
In specific answer to his question, yes, the process might be really short but, once again, where is the competition for measurement of this process going to come from? People in that industry are going to demand a profit for service and delivery and they are going to have to do it over different geographies, and that cost will be borne by the consumer.

Mr. Brian Masse:
Mr. Speaker, my colleague is absolutely right. I left that part out of the debate and it is an important part.
At some of the hearings we heard that more paper barrels of oil change hands in some of the markets than are pulled out of the ground each day. With hedge funds, in particular, speculation affects the price and it is completely counter to a productive society that requires this fuel source to be part of its market-based system.
One of the things that needs to be examined again is the effect of the sale and trading of these products on our overall economy. It makes little sense for us to continue to fight over these tiny scraps like the 5% of pumps. It is a serious issue that people should get what they pay for and accountability should exist, but when the overall industry is at about a 30% price inflation right now, they are still going to get hammered far more significantly.

Mr. Brian Masse:
Mr. Speaker, it is an important point of fairness. From 1999 to 2007, citizens discovered this equation of gasoline not being provided to consumers. No attempt was made to measure that and either refund Canadians or, alternatively, create a petroleum monitoring agency or enhance the resources of the Competition Bureau.
The government could have done a series of things with the money it gained. It was an absolute theft. The government knows it has resources in its taxation policy to cover products not provided to the customer. There could have been a way to redirect some of those funds, either directly to the consumer or, if that was too costly, through competition issues to ensure there was more accountability.

Mr. Brian Masse:
Mr. Speaker, we have not been provided any evidence on the duration of the process for testing. I cannot imagine it being two minutes. I take the member at his word with regard to the process.
My colleague is correct. All kinds of equipment will be required as well as storage facilities and transportation to get to those locations. We will be dealing with hazardous materials so there will have to be some regularly requirements and training elements, which are critical. A whole series of infrastructure will be required.
I do not believe there will be competition in this business. I do not believe there will be three or four operators in the city of Windsor West who will do the testing. It will probably be done by one operator out of the general region who will have close connections and ties to the industry.
A number will be assigned to the retailer and the retailer will have to pay for it. What are they going to do? Are they going to then try to bring somebody from the Toronto area to come down and test, or some other area if the operator is in the North or in Quebec. There will be vast jurisdictions where one person will cover off a whole series of things, literally driving hundreds of kilometres to get to those sites. People charge a per diem do those types of things.
Moving it out of Measurement Canada is a mistake, in my opinion, because it will pass on to the consumer those extra costs. Also, it will be too close to the industry to bring it the accountability that is necessary, which the minister purports this will do.