I first met Dalzell at a lonely Tim Hortons on the edge of Saint John, New Brunswick, with the only other denizens being some trucker types nursing their coffees. I’d just flown into New Brunswick’s largest city from Toronto and we agreed to chat before I headed to my hotel.

As head of the Citizens’ Coalition for Clean Air in Saint John, Gordon Dalzell has knocked up against the Irvings. This industrial port city of 70,000 is famous for is its foul-smelling air, largely caused by the Irving-owned oil refinery that stands on the edge of town – the largest refinery in Canada, processing up to 320,000 barrels a day. As well, there’s the Irving-owned pulp and paper mill parked in the heart of the city, spewing out a steady sulfur-laced plume.

The Irvings would disagree: Through one of their lawyers, J.D. Irving Ltd., says that their company “proudly contributes to the New Brunswick economy, has generated thousands of jobs in New Brunswick, directly and indirectly for decades and… is an important economic generator throughout Atlantic Canada and across the country.” Irving Oil Ltd. did not respond.

To outsiders, that might sound alarmist, and it’s a characterization the Irvings strongly reject, but New Brunswick is unlike anywhere else in Canada. Despite being viewed as a charming Maritime province tucked away on the east coast, renowned for its forests, lakes and the Bay of Fundy’s stunning coastline, in reality it’s a “company province” dominated by one very rich and powerful family. “You have a corporation that has completely captured the province… which is absolutely Third Worldish,” says Don Bowser, an internationally-renowned anti-corruption consultant who lives in Nova Scotia and worked in the former Soviet Union, hot spots like Iraq and Afghanistan and is currently advising the Ukrainian parliament. “This whole province-living-in-fear stuff is just absolutely crazy. Nobody can imagine in Canada that this sort of stuff goes on.”

In person, Dalzell is a friendly, rumpled 70-year-old who was working as a case manager at Veterans Affairs Canada before he retired in February. Wearing a brown leather jacket, polite and self-effacing, Danzell and I discuss why I was there: researching the Irvings, Canada’s fifth richest family, a clan Dalzell has crossed swords with for years. Which makes him rare, given the fear they inspire in this region. “You have to remember in Saint John nobody criticizes the Irvings,” he explains. “Not many people have the fortitude to do this kind of work. Because so many families, neighbors and cousins are intertwined with this organization and they don't want to be punished. Remember, we’re dealing with an oligarchy basically – like in Russia.”

The Irvings are also notorious for throwing their weight around. “The Irving company is an aggressive corporation,” explains Bill Parenteau, an historian at the University of New Brunswick in Fredericton, who says he has been a target of the Irvings over his academic work. “ A lot of things they do are kind of beyond of the pale."

JK and Arthur are perennials in the top ten of Canada’s richest people , worth (US) $7.4-billion and (US) $5.2-billion respectively, according to Forbes.

Overall, the group is split into three separate corporate entities – J.D. Irving, Ltd., which focuses on forestry and shipbuilding, the energy company Irving Oil Ltd., and a construction/real estate wing. It’s mostly controlled by two octogenarian brothers, James (JK) Irving, aged 88, and Arthur Irving, 85, along with their nephew, John Irving Jr.

The Irvings wield such power because they dominate the province’s economy: the Irving group is made up of between 174 and 250 companies, collectively valued at an estimated $10-billion. They’re responsible for one out of every 12 jobs, and more than half the province’s exports. (J.D. Irving, however, notes that compared to their competitors in the global arena, they are a small player. For example, in paper production, they can produce 420,000 tonnes annually – while the global leader, UPM, produces 11.5 million tonnes. This is also true in pulp, lumber, and container industries, says the company.)

In fact, in 2014, Dalzell was turfed off Irving Oil’s community liaison committee after he passed on information about problems at the company’s refinery to the Reuters news agency (Irving Oil did not respond to a query about this matter). The committee is designed to allow citizens, Irving staff and government officials to raise concerns about refinery projects. Dalzell says they claimed he broke confidentiality terms of being on the committee. “But there was no confidentiality agreement,” he says. “I'm a member of the public. I can speak to anyone I wish to... I don't think the Irvings ever minded me talking to the local press…But anyone who speaks to the media internationally they don't really appreciate that at all.”

Yet it’s difficult for Dalzell to get his message out about such hazards. After all, every one of the province’s English language daily newspapers are owned by the Irvings, including the Telegraph-Journal, Saint John’s local paper. Consequently, while Dalzell does approach the Irving-owned media, he also sends his findings about the Irvings to reporters in the US because he feels he will receive fairer media coverage.

Together, these and other Irving-owned facilities emit a mixture of carcinogens, including benzene and lead. In 2009, the Conservation Council of New Brunswick produced a study which found that rates of lung cancer were 40 to 50 percent higher in Saint John than in Fredericton and Moncton – New Brunswick’s other major cities. “It doesn't come as any surprise to people like me or even the common person on the street,” says Dalzell, “when you have all of these various pollutants in a concentrated area in this city.”

With other pipelines mired in controversy, Alberta’s oil patch is hoping Energy East will solve their problems of getting their bitumen to tidewater. “That refinery in Saint John is a really important piece of energy infrastructure in Canada,” says Tim Duboyce, a spokesperson for TransCanada Corp., which will build Energy East if it’s approved.

Now the Irvings are being pulled into the limelight more than ever. One reason is their central role in trying to get the $15.7-billion Energy East pipeline built. The longest pipeline in North America if it goes forward, it’s designed to carry 1.1 million barrels of oil 4,500 kilometres from Alberta to Saint John every day, where some of it will be refined at Irving Oil’s refinery before being loaded onto ships and exported to world markets.

J.D. Irving’s lawyers take exception to this, pointing out that New Brunswick has been home to the Irving family for over 130 years, that it “cares about the communities where it has operations” and “makes no apologies for caring about prosperity and working hard to sustain and grow jobs in New Brunswick through competitive operations.”

Map of the Energy East pipeline route from Alberta to New Brunswick

And then there is the $26-billion shipbuilding deal that J.D. Irving’s shipyard in Halifax was promised during the Harper years to build a new fleet of warships. That contract is being reviewed by the Trudeau government over concerns over how it was awarded (part of it was never tendered) and cost overruns – concerns stirred afresh after a CBC report in January said the Irving-built mid-shore patrol ships used by the Canadian Coast Guard had caused numerous complaints, including faulty wiring and pipes, premature corrosion and polluted water tanks (J.D. Irving defended the ships’ quality and said the CBC stories were “misleading”).

The Irvings’ influence in Ottawa is also a topic du jour. After last October’s election, J.D. Irving lobbied cabinet ministers in the Trudeau government to delay a controversial $700-million ship renovation contract awarded by the Harper government to a Lévis, Que.-based shipyard. The Liberals briefly froze the deal before deciding it could proceed.

Then it came into focus that Liberal house leader Dominic LeBlanc is a “friend” of Jim Irving’s – who is a son of JK and co-CEO of J.D. Irving Ltd. – as well as Jim’s son Jamie, who runs the family’s media holdings in New Brunswick. In February, opposition MPs were demanding what role, if any, LeBlanc played in arranging a meeting between Jim Irving and Navdeep Bains, the Innovation, Science and Economic Development Minister while they were both traveling through Moncton. This prompted federal ethics commissioner Mary Dawson to forbid LeBlanc - who recently took on additional responsibilities as the federal fisheries minister - from having any more dealings with the Irvings and their companies.

But then Tory MP Blaine Calkins pointed out that LeBlanc’s new senior adviser was Kevin Fram, who Calkins said had been personally lobbied by the Irvings soon after he took over his new post. It was noted that Fram was a guest at an Irving-owned fishing camp in New Brunswick years ago (in 2003 Fram told the media he has a close personal relationship with the Irvings). “The cozy ties between the government House leader and the Irving family run very deep,” said Calkins in the House of Commons in February. “When it comes to dealing with the Irving family, it is clear to everyone that the government House leader's so-called ethical screen is full of holes.”

However, J.D. Irving says the government confirmed the meeting between Jim Irving and Bains was not arranged by LeBlanc or his office, nor did the house leader attend it. “J.D. Irving Ltd. has always enjoyed a good working relationship with the federal government, no matter who is in government,” the company said in a statement. “Its business successes don’t depend on who it knows, but being successful at what it does.”

Federal Government House Leader and Fisheries Minister Dominic LeBlanc speaks at Liberal party convention in May 27, 2016 in Winnipeg. Photo by Bea Vongdouangchanh.

Back in New Brunswick, the Irvings are at centre of a host of scandals – including the firing of the province’s chief medical officer, potential shale gas development, tax concessions wrung from the city of Saint John and a controversial forestry strategy agreement. Rob Moir, an economist at the University of New Brunswick in Saint John, says some “talk about the Stockholm syndrome” when it comes to the relationship with the Irvings and the province. “Others even go farther and talk about the 'captured state'. I don't think you're far-off when you talk about a fiefdom… We are at the center of corporatism in Canada: We are corporatism run amok.”

(J.D. Irving disagrees with this view, pointing instead to their long history of creating “good paying jobs with wages that are substantially above the provincial average” and remain devoted to staying in New Brunswick despite other non-Irving business quitting the province.)

K.C. Irving builds a unique - and aggressive corporation

The Irving empire was founded by Kenneth Colin (KC) Irving, son of a sawmill owner in Bouctouche, NB, a small village on the east coast of the province. Born in 1899, KC’s family roots go back to Scotland and its severe Presbyterian ethic.

KC was a talented entrepreneur. Starting in the 1920s he began selling oil and cars to the locals. In time he developed a business model based on vertical integration, whereby he tried to control all aspects of a business supply chain. “So you start off with a gas station and you end up with the refinery,” says Moir, “and you end up with the all the heavy manufacturing that supplies the refinery.”

Photo of K.C. Irving from Irving Oil Commercial website.

From these humble origins, Irving built a unique conglomerate. Privately held, its internal financial situation is shrouded in mystery. And instead of focusing on one product, like the McCain family does with frozen foods, the Irvings grew their company organically in New Brunswick, eventually dominating all aspects of the economy, before expanding into neighboring provinces and northeastern United States. “They have this kind of oozing out into the nearby territories and controlling not only power in one economic area, like oil, but in several,” says Lance Tapley, a Maine-based journalist who’s investigated the Irvings. “It’s just a really different economic model.”

Today, the Irving companies cover an immense range of industries, with the mainstays being oil (where they own more than 900 service stations, the largest refinery in Canada and largest oil-by-rail terminal) and forestry, whereby they own or lease 5.7 million acres of land, along with trucking, bussing, railway, construction, real estate, food processing and even a security company. They once even owned a fleet of ships.

Irving gas station.

More troubling is their grip on New Brunswick’s media, owning its three English language daily newspapers, 18 of the province’s 25 English and French community weeklies, and three radio stations. A 2006 Senate report on the Canadian media concentration referred to this situation as an “industrial-media complex.”

The Irvings have expanded into the US, and are one of the five largest landowners in North America, provide 60 percent of the oil to the Boston area, supply almost one fifth of US oil product imports, and have so much power in Maine they’re able to influence its political system (they're the largest private landowner in that state). “It’s an industrial oligarchy in a way,” says Parenteau – a characterization the Irvings strongly reject, pointing out that they are a small global player in many of the industries they compete in.

But as his company grew, KC pressured municipal, provincial and even federal governments. During the 1960s, he went to war with Liberal premier Louis Robichaud, who was attempting to modernize New Brunswick's infrastructure and tax code and encourage more competition in the economy (decades later when Robichaud died, the Irvings admitted they were wrong in some their criticisms). KC used his newspapers to attack Robichaud, and backed his Tory rival in the 1970 election, helping oust Robichaud from power.

Since then, the province’s premiers have learned not to challenge the Irvings' power. Queries to discuss the Irvings with recent premiers, including David Alward, Shawn Graham, Camille Thériault, Frank McKenna, Bernard Lord, along with the current government of Brian Gallant, were either politely declined or never acknowledged. “What you have is a classic captured state situation, in which a corporation essentially takes over making policy for government,” says Bowser. “We saw this across Eastern Europe.”

Photo of J.D. Irving paper mill by Wikimedia Commons.

Internally, KC developed an almost cult-like corporate culture – employees are expected to be hard-working and clean-living and fiercely loyal. In his 2007 book “Twenty-First-Century Irvings”, author Harvey Sawler refers to the perfect Irving employee as being an “Irvingite”. He writes: “Those who are able to tough it out in the Irving culture (and it’s not for everyone) tend to morph into otherworldly beings…The bottom line is, either you fit within the Irving culture or you don’t. It’s really that simple, that black and white.”

Accused of muscling out competition

The Irvings’ focus on relentless expansionism has meant they’ve been effective at driving out competitors.

Ken Langdon saw these methods firsthand. He used to run a weekly newspaper in Woodstock, New Brunswick, for the Irvings back in the late ‘90s. There were two other papers in the area, but Langdon says the Irvings eventually drove them out of business, buying their assets and merging them into one paper. “Originally there were 44 people working in newspapers in Carleton County,” he says. “When I left there was 17 producing the same number of papers.”

Langdon left the Irvings' employ in 2007, and started his own newspaper, the Carleton Free Press. It lasted a year during which the Irvings brought an injunction against him which forced Langdon to open his home and files to Irvings' accountants, he says. Then they cut advertising rates dramatically in their own papers to undermine the Free Press. Finally, they took him to court (and lost). The injunction they sought was so severe it would have prevented Langdon from approaching any of the Irving papers’ advertisers to place ads in his paper, or use any of its suppliers. “They cut subscriptions prices by fifty percent,” says Langdon. “They offered free colour to their advertisers. A spot we were selling for $200 they were giving away for free… They got very aggressive.”

Brunswick News Inc. (BNI), which is owned by JK Irving and controls the Irving papers – and was Langdon’s former employer - says that they took these actions because “Mr. Langdon removed extensive confidential and proprietary documents owned by BNI, just prior to his resignation, and in breach of the BNI Code of Conduct. BNI was very disappointed that Mr. Langdon’s actions made its court action necessary but from BNI’s perspective he attempted to create an unfair advantage by using BNI’s confidential and proprietary information.” (Langdon responds that the so-called “confidential information” included a list of advertisers – which was no secret, given the advertisers were printed every week in the paper. And a judge dismissed BNI’s request he be prevented from approaching the Irving papers’ advertisers.)

In the late ‘90s, a company running gas stations in central Maine launched an anti-trust action against Irving Oil. The suit said Irving Oil was undercutting their competitors by providing oil to its Irving gas stations from Irving Oil's refinery at a below-market price – thereby giving them an unfair competitive advantage. The lawsuit claimed Irving Oil was breaching US competition law. (The lawsuit failed).

Andrew Clark, former president of the New Brunswick Federation of Woodlot Owners, also accuses JD Irving of undermining the wood marketing boards, which allow small private woodlot owners to sell to industries needing wood. “J.D. Irving has been particularly confrontational with woodlot owners and marketing boards,” he says, claiming the province refuses to step in and stop them.

A panoramic view of the Irving Oil refinery in Saint John, N.B. Photo by Bruce Livesey.

J.D. Irving responds by saying that “a comprehensive review of wood purchases by New Brunswick mills from private wood producers, which will show that, in recent years J.D. Irving Ltd. has posted the highest volumes of purchased wood in its history, buying from hundreds of private wood producers.”

Indeed, one reason the Irvings have become so dominant is because governments at all levels won’t challenge them. Their media holdings are a case in point: their monopoly in New Brunswick has been condemned or criticized by three federal government inquiries since the early 1970s. “The Irving firms’ media dominance is compounded by the family’s dominance on the industrial side of the province,” said the 2006 Senate report on the media. “Numerous witnesses expressed concerns about the implications of a dominant media force linked to a dominant industrial base.” Yet no legislative action has been taken to break up the monopoly.

(BNI says that their “newspapers have editorial independence and report objectively on Irving-owned enterprises. They also frequently publish commentary and letters both critical and supportive of them, reflecting the view in the community.” They say their editors and journalists are given free rein, and note numerous awards the newspapers have won this past year, including a Michener Award for meritorious public service and two National Newspaper Awards. They also point out that in 2012 they appointed an Ombudsperson who acts independently from management.)

There’s also been few governmental efforts to pressure the Irvings to pay more taxes. By 1972, KC Irving had moved the ownership of his companies to a Bermuda-based trust to take advantage of its status as an offshore tax haven. KC also moved his home there where he lived in a mansion called Skyline - and avoided paying millions in capital gains taxes. To this day, it’s believed the Irvings control their holdings through Bermuda – where they have 11 various trusts, holding and other companies currently listed there. “The Irvings were one of the first corporations who in the ‘70s began using tax havens to manage their assets in a way they would put as much profit as they could in offshore bank accounts,” says Alain Deneault, author of the recent book “Canada: A New Tax Haven”.

(J.D. Irving says it’s untrue that control of their company is held offshore, saying they are “owned and controlled from within Canada by Canadian citizens.” When asked about the 11 offshore holding companies, of which at least one is a J.D. Irving subsidiary, the company did not immediately respond.)

The federal government launched suits against the Irvings to make them pay more tax monies, but either lost them in the courts or didn’t pursue the rulings.

Consequently, the amount of money KC managed to keep offshore was staggering. After he passed away in 1992, KC’s will stipulated that the bulk of his assets be retained in the offshore trust, to be controlled by his widow and two lawyers – with his sons not able to control it unless they gave up their residency in Canada. Moreover, by having the Bermuda trust kept out of the control of his sons, it's believed KC ensured they avoided paying a great deal of tax. At the time of his death, estimates of the size of KC's net worth ranged from $7-billion to $16-billion. By about 2009, according to court documents, the Bermuda trust held $3-billion in assets (some of this money may have since been repatriated). “The old man was almost religious about tax havens,” says Dennis Howlett, executive director of Canadians For Tax Fairness, an Ottawa-based NGO that lobbies against tax avoidance. “And his kids couldn't get any of his money unless they took allegiance to tax havens.”

Tax concession blowback

Closer to home, Saint John has been gripped by a controversy over a tax break granted to Irving Oil in 2005.

At that time, Repsol, a Spanish energy company, wanted to build a $1.2-billion liquefied natural gas terminal in Saint John where they could offload natural gas before sending it to the US. To do so, they needed to lease land from Irving Oil – who entered into a joint venture with Repsol. The lease was for 25 years.

But then the CEO of Irving Oil at the time, Kenneth Irving (Arthur Irving’s oldest son), met with Norm McFarlane, the then mayor of Saint John, and asked for a significant concession on property taxes for the land. At the time, the property was assessed at $8-million in taxes per annum for the city. But Irving wanted to pay only $500,000. Kenneth claimed the terminal would not be built without the concession. “I asked him very clearly and looked into his eyes and said ‘Kenneth, look in my eyes and tell me if this does not happen will this facility not be here’ and he very clearly said ‘Yes, it is true’,” McFarlane later told the CBC.

Today, most believe the mayor was misled. After all, Repsol had never sought a tax concession – this was entirely the Irvings’ doing. Moreover, the terminal was going to be generating about (US) $20-million a year in profits for Irving Oil no matter how well the terminal performed.

Unaware of the details of Irving Oil’s deal with Repsol, McFarlane pressured the city council to approve the tax concession. The provincial government followed suit, passing a bill to cement it. By doing so, the city forsook $200-million in tax revenues over the next quarter century.

Last year, when the details of how much money Irving Oil was making from the Repsol joint venture emerged, the city council became so angry they demanded the provincial government scrap the tax concession (after much delay, the government agreed to do so only if the city took full financial responsibility for any fallout). Moreover, according to city councilor Gerry Lowe, the terminal created very few local jobs – the company says a total of 100. “There is no problem giving a tax break if people work there,” he says. “But not a 95 percent one for 25 years – that's totally scandalous.”

CBC still of Saint John city councilor Gerry Lowe

Irving Oil has defended the tax concession by saying: “On an overall basis we believe that the returns generated by this project for our company are appropriate given the scale and risk associated with the undertaking, of which the property tax arrangements are but one element.”

Meanwhile, Saint John is in dire financial straits, with a $76-million pension shortfall and Lowe saying they're unable to afford to replace retiring firemen and police officers. Lowe also notes the Irving Oil refinery pays only $5-million in taxes to the city and province, while refineries of similar capacity pay three times that sum. “We are looking for a fair deal because who's paying the taxes in the city – it's the residential people.” (Irving Oil states “As a New Brunswick company, we pay all applicable taxes on all aspects of our business.”)

In the forestry sector, the provincial government charges so little in stumpage fees to forest companies who lease Crown land for logging it’s losing money on its holdings (JD Irving controls 32 percent of leasable Crown land in New Brunswick – just over one million hectares). A 2010 CIBC World Markets report said that for that fiscal year, the provincial government lost $32-million in revenues after paying out for forest, wildlife and regional management.

Then last year, the provincial auditor calculated that while gross timber royalties for 2012-13 totaled approximately $65 million, the budget for the Department of Natural Resources was $75-million. Meanwhile, says David Coon, the sole Green Party MLA in the provincial legislature: “We have two and a half environmental enforcement officers for the entire province.”

Indeed, while the provincial government offers large concessions to the Irving companies, it’s in a deep fiscal hole. The government’s long-term debt stands at $13-billion and climbing, which means it pays $685-million in annual debt servicing costs, and is projecting a deficit of $347-million for this coming year (it’s run a deficit for 10 straight years). In the Gallant government’s most recent budget, it called for more layoffs of civil servants. Meanwhile, transfers from the federal government make up about 31 percent of the province’s budget – the second-highest percentage among all the provinces, behind only PEI.

UNB economist Rob Moir feels the Irvings bear some responsibility for this crisis. “There is a myriad of ways you can get the tax money out of (the Irvings) but they are sheltering what taxes they are paying, and not distributing its earnings," he says. “They are a private corporation and offshoring it.”

(J.D. Irving says that the company is held within Canada – although at least one, if not more, of its subsidiaries are listed in federal government documents as being registered in Bermuda.)

New Brunswickers faring poorly

While New Brunswick made the Irvings among the wealthiest people in the world, how have New Brunswickers fared? A common refrain heard in this province of 754,000 is “Thank God for the Irvings” - with the argument they’ve brought industry and jobs to this underdeveloped corner of Canada. It’s a notion echoed by the Irvings themselves, their political allies and some academics.

But have the Irvings actually brought prosperity to New Brunswick? Median income is the lowest among all provinces – $67,340 in 2013, compared to the national average of $76,550 (and $97,390 in Alberta), according to Statistics Canada. The unemployment rate is 9.3 percent, with only PEI and Newfoundland higher. In 2014, the Conference Board of Canada gave New Brunswick a “D” grade on economic performance – the lowest in Canada. And because of poor job growth, the out-migration from New Brunswick is the highest in Canada, losing 3,497 people between 2012 and last year (during a time when Canada’s population grew by one million) – and 21,000 since 2005. Meanwhile, Statistics Canada reports that 53 percent of New Brunswickers are functionally illiterate.

Poverty rates are among the highest in the country too. According to a 2015 Saint John Human Development Council study on poverty in New Brunswick’s largest city and heart of the Irving empire, 19.5 percent of its citizens, and 31 percent of its children, live in poverty. “Saint John has one of the highest child poverty rates in Canada,” said one of the council’s reports. “The city also has the highest percentage of children in low-income families, ranking last among 57 Cities Reducing Poverty communities.”

Driving around Saint John, a windswept city of colourful but modest homes, there is little visible sign of the Irvings' munificence. “The poverty rate in my ward, it’s fifty percent poverty for kids,” says city councilor Gerry Lowe. “That's one out of two kids who live in poverty – quite the number.”

Meanwhile, Dan Weston, coordinator of the Fredericton Anti-Poverty Organization, says “I think they bear a huge responsibility (for poverty) and it enables them to hire and fire workers at will and to pay them fairly low wages.”

When asked about this, after criticizing the question, J.D. Irving said that it is “proud of its record creating many thousands of jobs directly and indirectly for New Brunwickers, for families right across Canada and, indeed, for individuals and families across the country” noting that these jobs “generate hundreds of millions in employment income and our average wages are significantly above the average annual wage in New Brunswick” which in turn generates considerable consumer spending and taxes. They also note that have been a major support of education, anti-poverty and other social initiatives, including the Partners Assisting Local Schools (PALS) that helps students from low income families improve their academic chances.

Yet some despair of things changing in a region renowned for its complacency. “What’s shocking about this is that in a place that’s in such dire trouble like New Brunswick is there doesn’t seem to be any urgency… to actually change this,” says Bowser. “And on the (federal government) side – who’s going to help bail out New Brunswick when they go bankrupt? It’s never happened where a province has gone bankrupt. You know, there is a major Detroit-like situation where if New Brunswick goes bankrupt then what?”

Editor's note: In order to provide more context, we have updated this story from an original version that ran in March with additional comments that were provided by the Irving companies.

Coming next to National Observer: Irving Oil in Turmoil