Tough times for the Irving clan

Jack's death was a blow, but the real issue is whether nephew Kenneth will return.

For a billionaire clan that values family and shuns publicity, it was a double blow. John E. (Jack) Irving, youngest son of legendary New Brunswick industrialist K. C. Irving, died July 21 at age 78. Hours earlier, news broke that his nephew Kenneth Irving, who runs the family’s energy interests, was sidelined with health concerns. The result was a fresh wave of speculation about the future of the privately held Irving empire, a major player in forestry, energy and other industries in Eastern Canada. The Irvings’ holdings earned them second place on last year’s Canadian Business Rich 100 list, worth an estimated $7.28 billion.

‘He was a gentleman,’ says Arthur Doyle, former publisher of the Irving-owned Telegraph-Journal newspaper, ‘polite, very modest, respectful of everybody he met.’ A smooth succession to the third generation is a given, since Jack’s son, John Jr., was already in charge of the construction side of the Irving ledger.

The bigger shock was Kenneth’s abrupt departure as CEO of Fort Reliance, the holding company for Irving Oil and new energy ventures. In a private note that was leaked to the press, he blamed a ‘health setback’ from which he expects to ‘fully recover.’ His father, Arthur Irving, 79, second of K.C.’s sons, will replace Kenneth on an interim basis and told employees his son’s leave was for ‘personal reasons.’ (Spokespersons for Fort Reliance and Irving Oil did not respond to requests for comment.)

Just 49, Kenneth has been the most high-profile Irving, using speeches and media interviews to promote Saint John as an energy hub. ‘He’s very motivated, interested, excited by the business,’ says Tom Adams, an energy consultant in Toronto who got to know him through a shared interest in predicting future transportation needs. Since taking the helm in 2000, Kenneth pioneered the production of low-sulphur gasoline and partnered with Spain’s Repsol YPF to build a $1-billion LNG terminal — Canada’s first — near Saint John. ‘For a young man,’ Adams told Canadian Business, ‘it’s a pretty remarkable record.’

But Kenneth’s vision of building a diversified energy producer for the 21st century has taken a beating. Last summer, after years of design work, Irving Oil and partner BP PLC scrapped plans for a second, $8-billion Saint John refinery, citing weakened demand for gasoline. In the first half of 2010, the company nixed a $30-million headquarters building slated for the Saint John waterfront, pulled out of a tidal power feasibility study, and withdrew an application to build a biodiesel plant.

There has been good news. The collapse in March of Hydro Quebec’s bid to take over NB Power brightened prospects for Fort Reliance’s ‘energy corridor’ through Maine to the lucrative New England market. The company is seeking partners to invest up to $2 billion to make the regional power grid more efficient. And despite low natural gas prices, a 25% stake in the Canaport LNG terminal appears to be paying off, and the facility hopes to double shipments to New England this winter.

Kenneth’s future role is uncertain. His father’s return is a temporary solution, and outside expertise is already on hand. Experienced executives, including Bank of Nova Scotia chairman John Mayberry, joined the Fort Reliance board in 2009. And Irving Oil is in the hands of Mike Ashar, a former Suncor Energy executive hired as president and CEO long before Kenneth’s announcement. ‘My sense of the guy,’ says Adams, ‘is that if he can come back, he will be back.’ In the meantime, Adams expects to hear less talk of energy diversification and megaprojects. ‘I see the company focusing on their core business, pursued with their historic assets.’