COVER

A BURGEONING EMPIRE

THE IRVINGS BATTLE FOR MAINE

SHONA MCKAY February 6 1989
COVER

A BURGEONING EMPIRE

THE IRVINGS BATTLE FOR MAINE

SHONA MCKAY February 6 1989

Maritimers are accustomed to the pervasive presence of the Irving Industrial Group’s huge blue, red and white signs, spelling out the family name on gas stations, transport trucks and oil tankers. But any visitor who crosses from the Maritimes into New England realizes that he has not left Irving country behind. Indeed, to the growing consternation of many of Maine’s 1.1 million residents, the shadow of New Brunswick’s Irving family is stretching deeper and wider into the state. Led by Arthur Irving, president of Irving Oil Corp., Irving Oil Ltd.’s subsidiary in Maine, the Irvings have acquired large and often-dominant interests in a range of Maine industries, including forestry, retail gas outlets, convenience stores, asphalt manufacturing and trucking lines. Like some Maritimers, the citizens of Maine have expressed concern about the spreading Irving influence. Said Dean Brown, manager of a rival Exxon station in Calais: “He [Arthur] is going to take over the state of Maine. You cannot beat him. He’s got too much money.”

Stake: The Irvings’ already well-established stake in Maine allows the enormously wealthy Saint John family to take advantage of American business under the Free Trade Agreement. But even before free trade, the Irvings had been intensely active in Maine. Arthur Irving told Maclean’s that the family’s thrust into the state came about because Maine is a “natural trading partner.” The company’s first acquisition in Maine came in the early 1940s when it purchased a sawmill and 200,000 acres of woodland in the northwest corner of the state. But the family’s big push into Maine did not begin until the early 1980s. In the space of just three years, the Irvings have acquired an estimated 15 to 25 per cent of Maine’s $600-million gasoline industry and approximately 60 per cent of its industrial fuels market. Through the purchase of four small home-heating oil companies last year, they have obtained an important toehold in the regional home-heating market. And they now run Maine’s largest independent trucking firm, after incorporating the rival companies of Sunbury America Inc., Midland Transport and Road & Sea Transport in 1985. In the northern portion of the state, the Irvings control 75 per cent of the asphalt market through Irving Oil Corp. and are the second-largest owner of roadside convenience stores. And since the Irvings purchased another 220,000 acres of forest in the state in 1985, they are now ranked among the top dozen of the region’s largest timberland owners.

But many critics in the state have complained about the Irvings’ rapid takeover spree and aggressive business style. And as the Irving family grows larger in the state over the coming years, those voices will grow louder. Already, as more Irving gas station signs sprout along highways, the Irvings’ business practices have come under increasing fire from people who say that they could undermine the state’s economic structures and indigenous lifestyle. Of particular concern is the Irvings’ pattern of vertical integration, linking refineries, truck stops and gasoline stations. The links are sometimes undetectable because Irving operates more than 10 Irving corporations in Maine under non-Irving names, including Van Buren-Madawaska Corp., a forestry company, Penobscot Bay Terminal Corp., which runs oil terminals in Maine, and Sunbury America Inc., a trucking company. Recently, the weekly Maine Times declared, “Maine is becoming part of a foreign-owned empire.” Echoed a Portland Press headline: “Canadian family combine reaps Maine harvest.”

Worse: Part of the residents’ complaints stem from their inability to compete with the Irvings’ enormous purchasing power—the problem will grow worse as their U.S. empire expands. That was the case last fall when Texaco put 12 Maine service stations up for sale. Irving, which already owns about 150 stations in the state, offered to buy the outlets for as much as twice the appraised value. Said John Clifford, legal counsel for the Tri-State Gasoline and Automotive Dealers Association: “The purpose behind this is to thwart the attempts of the stations’ existing leaseholders, who have the right to match the amount offered by the highest bidder.” Frank Hinckley, a former Texaco leaseholder, succeeded in buying his gas stations in Brewer and Orono, but only after meeting the Irvings’ huge bids. Said Hinckley: “The outlets I wanted were appraised at $115,000 and $200,000 respectively. What Irving bid, and what I ended up paying, was $325,000 and $400,000.”

Issues: The Maine Times, which deals with social and environmental issues, published in the community of Topsham 40 km north of Portland, has been active in documenting cases of questionable business practices by the Irvings. In one investigative series in late 1987, it claimed that the Irvings had used predatory pricing in an effort to wipe out competition in the asphalt business by selling at or even below cost. According to the Times, the Irvings have also tried to enforce so-called tie-in sales, in which contracts go to companies that agree to purchase related Irving products. Some complaints have generated legal and legislative inquiries. In 1978, Maine’s attorney general’s office initiated an investigation to determine if the company was violating antitrust statutes, after receiving complaints from established asphalt manufacturers and home-heating oil suppliers that Irving was practising predatory pricing. The case is still pending. And the state’s current attorney general, James E. Tierney, is also looking at the Irvings’ involvement in the gasoline and service station sectors. Tierney was forced to take action when reports of the Irvings’ efforts to buy the Texaco stations prompted the Maine legislature to call for an official examination of the competitive status of the state’s motor fuel industry. A report is due later this year. At the same time, the gas and auto dealers’ organization has announced its intention of resubmitting a state bill, withdrawn last fall, which would prohibit oil refiners or producers such as Irving from operating retail outlets. If successful, the gas and auto dealers’ organization would be one of the few ever to weaken the Irving’s vertical integration style.

Pitted: And bitter battles have taken place in small communities where residents say that the Irving interests are a threat to their way of life. A case in point is the dispute in which Irving Oil is currently pitted against the residents of the border town of Presque Isle. After the Irvings bought a modest car-repair shop with one gasoline pump, a 27,240-litre gas tank and an adjacent residential property in 1987, the Irvings proposed expanding the facilities to include three pumps and a 145,280-litre tank to serve the busy cross-border traffic that results when Canadians cross the border into the United States to buy cheaper American gas. Local residents protested that the proposal could increase traffic and lower property values and safety in the town. Although Irving Oil later backed down on the extra pumps, it won the right to install larger tanks—a decision that the local homeowners have appealed. Said Presque Isle resident Dorothy Dingwell: “Irving arrogance led to their telling us that they were improving our neighborhood. There was no suggestion that the many longtime residents also have rights.”

Irving’s treatment of its timberland has also scarred its image among state residents. In 1986, the company stripped several hundred acres of woodland down to the roadside just outside the tiny northern Maine town of Westmanland. The townspeople quickly passed an ordinance forbidding such so-called clear-cutting within 100 feet of any roadside. As a result, Irving has begun to plant seedlings on the denuded site. But the bitterness remains. Despite the Irvings’ reputation for replanting the vast acreage of forest they control in New Brunswick, the people of Westmanland see it differently. Said Westmanland chief administrator Stephen Miller: “Everybody had felt that this land was considered a common [public property]. Now, no Westmanlander over the age of 30 will see a renewed forest in his lifetime. Even our children will never see the woods as we once did.”

Failing: The Irvings’ timber operations have also run afoul of government authorities in Bangor. The federal Occupational Safety and Health Administration has filed 13 charges against Van Buren-Madawaska Corp., an Irving forest-products subsidiary in northern Maine, for failing to provide drinking water, showers, toilets, first-aid facilities or hearing protection for its workers. Land-use regulators have also cited the subsidiary for illegally maintaining a polluting bark and sawdust pile at its sawmill outside Fort Kent and for violating timber harvesting standards. The Irvings’ only reaction was to issue a news release extolling the good working conditions that exist in their New Brunswick operations.

Despite such animosity, there are many Maine residents who argue that the Irvings are a beneficial influence in the economically depressed state. The company has a reputation for good management and quality products. The business writer for the daily Kennebec Journal in the state capital of Augusta praised the Irvings for erecting protective canopies over their gas pumps and for the cleanliness of their convenience stores and gas stations. And Paul Merrill, owner of Merrill Transport Inc., now the state’s second-largest trucking firm, declared: “Irving’s presence has stimulated a lot of activity in Maine. The company has brought the benefits of competition.”

The Irving family also has attempted to demonstrate its charitable side. Last year, Irving Oil was praised when it donated $100,000 to the construction of a YMCA facility in the coastal, diversified town of Ellsworth. Said Albert Small, chairman of the building campaign fund: “Without question, this gift is the gift that says this project is going to be built.”

Complex: Yet, whether they are welcomed or reviled, the Irvings have made it clear that they will not only stay in Maine but use it to reach a broader American market. They have tried, so far without success, to buy a Boston oil terminal. And, last fall, they bought a store-motel-service-station complex in Ossipee, N.H. Said Christopher Goumas, owner of the Ossipee country store, which sells Irving gas at the site: “The brothers were here and told us that they were going all the way down the coast to Florida.” These days, that is a boast that few Maine residents would bet against.