Proceedings of the Standing Senate Committee on
Transport and
Communications
Issue 18 - Evidence
OTTAWA, Tuesday, April 22, 1997
The Standing Senate Committee on Transport and Communications, to which was referred Bill C-44, for making the system of Canadian ports competitive, efficient and commercially oriented, providing for the establishing of port authorities and the divesting of certain harbours and ports, for the commercialization of the St. Lawrence Seaway and ferry services and other matters related to maritime trade and transport and amending the Pilotage Act and amending and repealing other Acts as a consequence, met this day at 3:39 p.m. to give consideration to the bill.
Senator Lise Bacon (Chair) in the Chair.
[English]
The Chair: We have before us on Bill C-44, the Canada Marine Act, officials from the Department of Transport.
[Translation]
Perhaps you could introduce yourself along with the colleagues accompanying you?
Mr. Louis Ranger, Assistant Deputy Minister, Policy, Transport Canada: Madam Chair. I am accompanied by Mr. Neil MacNeil, Executive Director of the Harbours and Ports Group, Mr. Barrie LePitre our legal advisor, Mr. Bruce Bowie, Director of Marine Policy and Mr. Gerard McDonald, Director of Maritime Pilotage.
The Chair: We have two hours, you have ample time in which to make your presentation. One hour for you and one hour for the Vancouver Port Authority. I think that one hour should be enough for your presentation and the senators' questions.
Mr. Ranger: Madam Chair, Bill C-44 fulfils the 1995 national marine policy to commercialize and strengthen Canada's marine sector.
The legislation makes it easier for ports to operate according to business principles. It enables the Minister of Transport to commercialize the operations of the seaway and ferry services. It improves the way pilotage authorities operate.
[English]
Part I of the bill establishes a new form of port corporation called a Canada port authority. A port must meet four criteria under proposed legislation to become a Canada port authority: First, it must be financially self-sufficient; second, it must have diversified traffic; third, it must be a port of strategic significance to Canada's trade; and fourth, it must be linked to a major railway line or highway.
The basic principles for a port authority's operations are that they will not have recourse to federal treasury for any purpose; they will be incorporated by letters patent under the proposed Canada Marine Act; they will be non-share capital corporations; they must recover costs from fees charged; and they must delay with the relevant provisions of the Canada Business Corporations Act.
In line with these principles, the powers of a port authority include commercial freedom to price its services; the power of a national person for the purpose of managing a port; authority to place liens on vessels; and authority to borrow on open markets. With regard to federal property, the port authority may only secure loans by pledging revenue streams and moveable fixtures, not federal land.
It is important to note that the Canada port authorities will be agents of the Crown. Agent status will allow ports to pay grants in lieu of taxes and reinforce the port's immunity from provincial taxation and regulation. This is necessary to allow our major ports to remain competitive in a global environment. However, ports will not be able to borrow as agents. They will have to convince commercial lenders of the merits of their proposed investments; the Crown will not back up port loans.
In summary, Bill C-44 provides a tailored approach which strikes a balance between establishing agent status for major reports on the one hand and limiting the Crown's exposure to their actions on the other hand. This legislation will give the ports the autonomy they need to operate on a commercial basis without unduly exposing the Crown to future liabilities.
Part II of the bill requires the repeal of the Public Harbours and Ports Facilities Act. It then provides the minister with various options for the administration of ports remaining in the federal system. It provides also for the transfer or disposal of the remaining port facilities. It sets up a new streamlined regulatory regime for these public ports similar to that for the new port authorities. Part II also requires that the minister report to Parliament each year for five years on the divestitures that took place during the year.
[Translation]
Part III of the Act sets a new framework for management of the Canadian portions of the St. Lawrence Seaway. The minister may use agreements to assign the management of part or all of the Seaway to a not-for-profit corporation or to any other person.
The existing Seaway authority may be dissolved by the Governor in Council at an appropriate date to allow such agreements to proceed.
The government will retain Seaway property and regulatory control over navigation in the Seaway.
Part VI in the bill provides that the minister may enter into agreements with third parties, including provinces to take over services provided by Marine Atlantic.
[English]
Part VII of the bill provides a more commercial environment for the operation of our pilotage authorities. It allows pilotage tariffs to take effect after expiry of a 30-day notice. If there are appeals, any review of tariff increases by the Canadian Transportation Agency must be done within 120 days or less. The borrowing limits for pilotage authorities are to be set by the Governor in Council. The bill also states that no appropriations can be made from the government to pilotage authorities except in respect of emergencies. The chairman of a pilotage authority will be part time or full time, appointed by Governor in Council in consultation with users and the authority.
The bill also requires that there be a ministerial review, in 1997, of various functions of pilotage authorities, in consultation with both the authorities and users.
Finally, I should mention that the entire bill will be subject to review after four years.
The Chair: To what extent does this bill satisfy the apparent requirement that ports be more autonomous while still retaining a link with the government as agents of the Crown?
[Translation]
Mr. Ranger: I'll attempt to answer the question and then ask Mr. MacNeil to complete my response.
[English]
First, the ports will not be subject to the Financial Administration Act, which requires Crown corporations or agents of the Crown to submit five-year plans for approval by the board. It will not require the ports to submit a borrowing plan and then require approvals of specific loans, and so on. In that respect, a port will have to file a business plan as any other enterprise does, but it will be for information purposes only. It will not be for approvals, per se, from central agencies.
Mr. Neil MacNeil, Executive Director, Harbours and Ports, Transport Canada: In clause 6 of the bill, most of the requirements for control are from the Crown. They are the letters patent provisions. The minister issues the letters patent after negotiations for the next six months with each port. The way the bill was drafted, we have a general framework and we will have flexibility in the implementation for each port. The port of Vancouver may have a borrowing authority of $50 million or more without Crown guarantee, but the port of Trois-Rivières may only have $10 million. It is for this kind of flexibility, based mostly on the past performance of the ports and their current borrowing requirements or their spending requirements.
We also have provisions in the bill on public accountability, which will be different from the Financial Administration Act. Similar to the local airport authorities that were being created, there will be a requirement for an annual public meeting wherein the port authority must table audited statements, summaries of corporate plans, compensation paid to directors and senior officers and a land use plan. We think we have a built-in balance of not only real commercial autonomy for the local port but also some accountability to its shareholder.
Senator Roberge: What is the difference between an airport authority and an agent of the Crown?
Mr. MacNeil: Airport authorities are not agents of the Crown. They do a land lease with the federal government. The federal government maintains the ownership of the property and the airport authority is established under the corporations act of each province as a not-for-profit, no-capital-share corporation.
In the Canadian port authorities, we have the desire to have some protection from the federal Crown and to have the delegated authority to manage the traffic in and out of a harbour for safety and security as well as environmental reasons. Therefore, we propose that they are an agent of the Crown but not a Crown corporation, and that they enjoy some of the protections provided by the Crown. They will avoid much taxation, they will have regulatory authority and they will perform a number of functions that airport authorities do not.
NAVCAN, for instance, performs the control of the airspace in airports, which is different from an airport authority. However, most of the real authority exercised by the Crown in a port will be done through the port authority, the new corporations we are setting up.
Senator Roberge: Have you looked at the possibility of using the same format as an airport?
Mr. MacNeil: Yes, we did. For the past three years, we reviewed it and came up with this model because this is the model that the ports really needed and wanted.
Senator Roberge: That is after discussion with the users?
Mr. MacNeil: Yes, discussion with the users since 1995.
Senator Roberge: Why did it take so long to come here?
Mr. MacNeil: There was a lot of brokering to get this far. Many ports wanted to be in this model and some ports did not meet the tests laid out in the criteria. It took a long time to get this far.
Senator Roberge: Are there any user groups whatsoever that are against the bill in its present form?
Mr. MacNeil: A few groups opposed it at the House of Commons hearings but I am not aware of any who oppose it now.
We tabled 127 amendments in the House of Commons committee. Approximately 50 were approved. This bill has been compromised on a lot. However, at this point, I would not say that there are major objections.
Senator Roberge: We will see. I hope that all of your amendments were not moved in the last half hour, as happened on Bill C-32.
The smaller ports are in a totally different situation than the CPAs you are proposing. What will happen if some smaller ports do not have the funds to operate the port? What will happen to them? Did they make representations to you or to the House of Commons committee?
Mr. MacNeil: To give you an overview, Canada has 572 public harbours and ports listed as commercial ports within the realm of Transport Canada and another 2,200 ports in the realm of the Department of Fisheries and Oceans. Of the 572, we identified 30 to 40 that have real commercial activity. There are another 500 that are not commercial and have very low traffic.
Senator Roberge: Are those pleasure ports, for example?
Mr. MacNeil: Yes. There is a difference between a public harbour and a port. Not every public harbour is a port. It can be just a plain body of water within a bay. When we began this process, our proposal was to create the commercial ports under Canada port authorities with a second tier of ports, known as public harbours, which have some traffic. The idea was to divert them to the local communities. We would deproclaim the third level of ports, which is public harbours without port facilities. We have done that. We have deproclaimed about 200 ports. We are in the process of divesting the other 200 public harbours.
We asked for and obtained permission from the government to be exempt from the federal real property surplus requirements. We try to negotiate with the community and the users to create their own port corporation to run it. We have a port divestiture fund of $125 million.
Before we transfer to a local community, we determine four basic elements for the transfer: clear land title, which is not often the case; the engineering status of the facilities; the environmental situation within each port; and a business case. We collect this background information, share it with the future owners, and then negotiate a transfer. That is what the port divestiture fund is for. If the port needs working capital to improve facilities, there is a draw on the port divestiture fund at the time of transfer to the community.
Senator Roberge: Have you started negotiations on that with most of these small ports?
Mr. MacNeil: Yes. We have done 10 transactions to date in which we have actually sold the port and transferred title. We have 92 letters of intent completed with communities and those negotiations are under way. We hope to close on about 30 of those this year.
The government has given us a six-year time frame to divest the 272 ports which are left.
Senator Roberge: I am concerned about the policing issue. I understand that the police forces in the ports are very specialized in port security and the security of people on small boats in those harbours. Can you tell me about how the decision on that was arrived at?
Mr. MacNeil: In 1983, when the government of the day converted the National Harbours Board into the Canada Ports Corporation Act, there was provision in that act to create a national police force. It was permissive; it said that they may establish a police force. There were six detachments created across Canada as the Canada Ports Police. They are in Vancouver, Montreal, Quebec City, Saint John, Halifax and St. John's. The total complement of that police force is 110 officers.
Since 1994, we have been reviewing the best way to deliver safety and security functions in those major ports. After much study by outside consultants and consultation with other police forces and port users, it was deemed that the best way to proceed was to separate the functions of policing from safety and security. We are asking the port authority to be responsible for safety and security; that is, who locks up, who keeps the gates, who put the lights on, who controls.
We believe that the policing function should rest with two legitimate policing authorities: First, the federal government through the RCMP, which handles the smuggling issues, et cetera; and, second, Customs and Excise and Citizenship and Immigration, which handles smuggling and the transfer of illegal immigrants. That federal function remains the same. Those police forces have been fulfilling those functions for the past 20 years and they will continue to do so.
With regard to criminal activity, we are asking that the municipal police forces provide that function, as they do now. To use a worst-case scenario, if we had a murder on the waterfront in Montreal, the port police would call in the municipal police to handle the investigation.
When we convert to Canadian port authority status, we will ask each of the ports to negotiate with the municipality to provide adequate services, for which we will provide adequate funding. There have been many stories in the press about the offloading of federal responsibility onto the poor taxpayers of the provinces or the municipalities. That is not happening.
Senator Roberge: Who will pay for the municipal police or the RCMP?
Mr. MacNeil: RCMP services are not charged to the ports at this point. That has always been a federal policing responsibility for which the general taxpayer pays.
Senator Roberge: What about the municipalities?
Mr. MacNeil: With respect to the municipal police forces in the future, we are asking that the ports make adequate compensation to the municipal police forces. We are starting that negotiation. Captain Stark, the next witness, can talk to you about the arrangements made with the City of Vancouver. We are now negotiating with each of the other five municipalities.
Senator Roberge: When I was in Halifax, I was led to understand that the users are paying right now for the cost of the security of the ports.
Mr. MacNeil: That is through the normal port charges. For safety and security in the future, they will continue to do this through their normal port charges. That is correct.
[Translation]
Senator Pépin: I think the Act specifies that ports must have connections to rail. Let me follow up on Senator Roberge's question. In the case of smaller ports, those that will be closed or handed over to municipalities, what will happen to the ports that are not connected to a railway line or a functioning port? What will happen in that case?
Mr. Ranger: Those ports not eligible to become a port authority may be transferred to others. If they do not have any links, then they will fall into the remote status. There are 60 ports in this category and they remain under the control of Transport Canada.
Senator Pépin: So you will continue to be in control, it will not be the municipalities?
Mr. Ranger: Isolated ports will remain under the umbrella of Transport Canada.
Senator Pépin: In the case of the St. Lawrence Seaway, are there already agreements or have you negotiated with private groups relating to the development of the Seaway? How do you intend to proceed?
Mr. Ranger: We are in an advanced stage of negotiations with a group of users representing 75 per cent of the tonnage now being shipped on the Seaway. A letter of understanding in principle was concluded last June. At the present time, we are waiting for the bill to be adopted to be able to continue these negotiations.
The basic principle is to have the users responsible for the daily management of the Seaway. The Seaway is a very important capital asset. Of course, the government will continue to provide funding for the maintenance of the Seaway. It is a capital expenditure amounting to several billion dollars. It is obvious that tolls alone will not suffice for the major upkeep of the Seaway. So groups of users would be responsible for the daily management of the Seaway but the federal government will continue to pump large sums of money every year to keep up the existing infrastructure.
Senator Pépin: I gather that the administration of the Seaway is now shared with the United States. What is their attitude to this approach?
Mr. Ranger: On the American side they are all reviewing the way the St. Lawrence Seaway Development Corporation operates and they are also making some changes. Starting next year they will be focusing much more on performance criteria. However, for the time being the Seaway is managed by two autonomous entities. For this system to work, on-going consultation is of course necessary. I chair a joint committee with my American counterpart and we have been trying to identify different ways of cutting back on costs, avoiding duplication and so forth. So regular discussions do take place on how our costs can be reduced and perhaps a way of sharing the management of the Seaway by sections. There are all sorts of problems relating to sovereignty and one of our long term objectives concerns the possible creation of a binational agency. However, we are far from that point at the present stage.
Our approach, and that taken by the Americans as well, is to determine what we can do to reduce expenditures in the short term. However, we are not giving up on the long term project of working as a binational agency. The idea is still around.
Senator Pépin: So we can consider that this is joint process with the U.S.
Mr. Ranger: Yes and as a matter of fact, some of the users we are now involved in discussion with are American.
Senator Pépin: What will happen to the Seaway employees? Do they have any chance of being taken over by the new owners or directors?
Mr. Ranger: What we want to do is change the way the Seaway operates. However, the great majority of employees will continue to do the same work they are doing today. The board of directors will be different and we hope that perhaps there will be more discipline on the business side of operations.
Senator Pépin: We are told that there will be a part-time or full-time chair as well as a representative of the federal, provincial and municipal governments, if I understand correctly. No, I think I am mixing two things up. I am not talking about the Seaway. I have concluded my questions on the Seaway and would like to come back to the matter of ports. Did I understand you correctly to say that there will be a federal government representative, a provincial one, as well as a representative of municipalities and users?
Mr. Ranger: Users will make suggestions and recommendations to the federal government but the appointment will be made by the Governor in Council.
Senator Pépin: But there will be a group representing them.
Mr. Ranger: That is correct.
Senator Pépin: Thank you.
The Chair: However, how can one make recommendations for the representation of users? How exactly will that be done?
Mr. Ranger: Through letters patents, for example, specifying mechanisms whereby users will make recommendations to the government. The appointment as such will be made by the federal government but on recommendation.
[English]
Senator Cochrane: Mr. MacNeil, you are talking about having the municipalities involved. Will this operation to be phased be similar to the privatization of airports?
Mr. MacNeil: It is not completely similar.
Senator Cochrane: Could you please explain?
Mr. Bruce Bowie, Director, Marine Policy, Transport Canada: My understanding of the composition of the boards of directors for the airports is that they are all established by the local community. The corporation established to operate the airport has a process, as part of their letters of incorporation, that determines who will be on the board. There is no federal role in determining the directors whereas, on the port side, with the exception of the provincial and the municipal representatives or board members, all the board members will be appointed by the Governor in Council -- most of them on the recommendation of the users of the port. There is quite a difference in the appointment process.
Senator Cochrane: What are the municipalities saying about this package which you are putting forth to them?
Mr. MacNeil: Most municipalities have never had an appointment to one of those port boards. They have had appointments in a few harbour commissions, but they never had appointments in the major ports. This is an up side for the municipalities.
The municipalities were concerned about losing tax revenue, municipal taxes. The compromise worked out over the last two years was that, although the port tenants pay a considerable amount of municipal taxes through a business occupancy tax, we struck an arrangement that as soon as the government agreed that it become an agent of the Crown, each of these Canadian port authorities will now be subject to grants in lieu of taxes. Of the 15 ports now listed on the schedule to be Canadian port authorities, eight of these municipalities now get new tax revenues. They have never had them before through grants in lieu of taxes.
If the Federation of Canadian Municipalities were here, they would tell you that they are in support of this bill now. This is a much better arrangement. It is much more stable in the sense that the municipality can depend on a particular flow of revenue for taxes and the ports now know how much they must pay annually.
Senator Cochrane: This does not apply to the small ports, does it?
Mr. MacNeil: No, we are just talking about the Canadian port authorities.
Senator Cochrane: How many are there?
Mr. MacNeil: At the moment, there are 15 listed in the schedule, but the bill provides that any port can apply at any time. If it meets the criteria and the tests, the minister may issue letters patent.
Senator Cochrane: One of the criterion is a certain volume of traffic, is it not?
Mr. MacNeil: There are four criteria: Financial self-sufficiency; diversified traffic, so you are not solely captive to one traffic; connections to rail --
Senator Cochrane: Perhaps, Madam Chair, we should hear from these people.
The Chair: We have already heard from them.
Senator Cochrane: I mean the people from the municipalities.
The Chair: I do not believe they have asked to be heard. If they do not want to appear, we cannot force them.
Senator Cochrane: I do not mean that, but perhaps we should ask them.
The Chair: We have asked some.
Mr. MacNeil: They appeared twice before the standing committee of the House.
The Chair: Representatives from Toronto will be appearing tomorrow.
Senator Cochrane: I do not have a list of witnesses.
The Chair: We just distributed the list now because we just got the bill out of the chamber.
Senator Cochrane: That is our problem.
Mr. MacNeil: The Standing Committee on Transport in the other place travelled across Canada twice and heard from a considerable number of municipalities, and on two occasions from the Federation of Municipalities. After the two years, most of them are now satisfied with the way the bill is structured, which is probably why they did not want to be heard here today.
Senator Cochrane: I doubt that. I am sure there are other reasons.
Mr. MacNeil: Do you want us to give you an undertaking to have the municipalities fax a note to you?
The Chair: You can ask your questions tomorrow of the representatives from Toronto.
Senator Cochrane: Yes.
The question first and foremost on my mind is: What happens to the smaller ports under this bill, those which do not have the local port corporation status?
Mr. MacNeil: Of those ports, approximately 60 will remain the responsibility of the Crown and the federal government.
Senator Cochrane: Could we have a list of those?
Mr. MacNeil: Absolutely. They are called remote status.
Senator Cochrane: How soon can you get that for us?
Mr. MacNeil: I will have them for you tomorrow morning.
The Chair: You could give it to the committee, and I will table it so that every member receives a copy.
Mr. MacNeil: I will table it with the clerk tomorrow.
The federal government, under Transport Canada, will be responsible for their annual maintenance, upkeep, and capital investment. They were designated remote because there are there to serve isolation relief. There was no other method of moving people or goods through that region. That is the main reason the federal government will maintain responsibility.
Senator Cochrane: Is there anything down the road whereby they might be thinking of looking at this next year?
Mr. MacNeil: I am in no position to comment on this in perpetuity. At this time, they remain with the Crown until you change this act again.
The 272 ports listed as regional local ports are the ports designated for divestiture. The federal Crown will sell the assets. The preference is to give them to a local community wherein we try to broker with the current users and tenants of the port and the community. In most cases, the 100 letters of intent fall into that category.
In Bayside, New Brunswick, a small port 30 miles down the coast from Saint John, the community came together with the users and formed a not-for-profit corporation under the New Brunswick Corporations Act. They have negotiated a letter of intent with us. We have conducted the four studies, and we are in the process of now negotiating a transfer to that authority to own and operate that port. They operate it as a not-for-profit corporation -- that is, we expect it to generate a profit or a surplus in operation, but the dividends are not distributed. They are maintained for reinvestment in the port or to lower the cost of moving the goods in and out of the port.
There are 100 of these negotiations under way at the moment, which leaves us with another 172 with which to talk about divestiture for another six years. In some cases, we may not be able to transfer to a local community. Some communities do not want to take the responsibility for some of these facilities.
Senator Cochrane: I am not sure I agree with you. I think they cannot afford to take the responsibility.
Mr. MacNeil: For whatever reasons, they decide not to take it. The government still owns and maintains them and will be required to make a decision at that time on whether to continue to own them or close them.
Senator Cochrane: My major concern is that, 10 years down the road, major repairs may have to be made to ports or harbours. Dredging is a major undertaking. If these agencies are in control and do not have the funding to do the dredging and all the necessary work to keep all these ports up to their safety standards, and we need those safety standards, what happens? Will we be required to revisit this issue again and start from scratch?
If we do that, it will probably cost the government just as much in costs to start the process all over again as it did over the 10-year period paying the ports people.
Mr. MacNeil: The same concern was raised in each community as we signed the letters of intent and talked about the future transfer.
When we transfer these ports, we are transferring them as operating, viable entities. We expect them to retain earnings and hold those in the harbour development fund to pay for future capital investment such as dredging or repairs of facilities. They will have a borrowing authority. They can borrow on their own, and they will charge the users increased fees to improve facilities. The idea is that it is the users who should be paying for these facilities, not the taxpayers. We proposed a transfer or divestiture fund of $125 million.
Senator Cochrane: However, that is just for start up or transition.
The Chair: Do you believe that the legislation gives ports sufficient scope to set up related businesses, or is the legislation too restrictive?
Mr. Ranger: The legislation provides for a structure where the port will be an agent for what we call core port -- that is, what you can visualize as being normal operations a port would carry out -- but it also allows it to have other ancillary activities. When they go into those activities, they would not be agents for the purpose of the legislation.
For example, more and more, equipment or spare parts come in two containers that may need to be assembled at the port before being shipped to its final destination in North America.
If a port came to us and said that it would like to enter into that kind of business, then they should be allowed to enter into it. However, they would be doing that on their own since it would be a commercial interest for them to do so. They would be doing it, just as any other enterprise would do it. Certainly, it would be allowed.
The legislation differentiates between core port activities and non-core activities, where both are permitted to take place on the same site.
Senator Landry: Most of the questions I wanted to ask have been answered. My concern is with small ports where there are 20, 30 or 40 fishermen. Will this bill address their concerns?
Mr. MacNeil: This bill does not address those ports. This bill does not address any of the 2,200 ports in the Department of Fisheries and Oceans under the Small Craft Harbours Program. That is a separate program.
Senator Roberge: I received a letter from Bruce Phillips, the Privacy Commissioner of Canada, in which he states:
...I was gratified to see that the ports and pilotage authorities affected by the bill are to be scheduled under the Privacy Act in terms.
He also mentions in his letter that the St. Lawrence Seaway Authority and its management, which represents about some 750 employees, is to be removed from the jurisdiction of the Privacy Act and go over to the non-profit organization. Why does it include one and not the other?
Mr. Bowie: With respect to the ports and the pilotage authorities, these entities are agents of the Crown. In essence, they remain within the federal family of providers of service. Essentially, we are making them more commercial, but we are keeping them as agents and federal entities.
With respect to the St. Lawrence Seaway Authority, we are transferring the management and operation of our facilities to a separate, private operator who will be operating those facilities on our behalf by virtue of a management agreement. It will be a separate, private organization which, in effect, will operate the seaway. Therefore, it is not in the same sense a part of the federal entities.
Senator Roberge: When we privatize NAV CANADA, the airports, or whatever, privacy protection is always included for former federal government employees. I do not follow you.
Mr. Bowie: I do not believe the Privacy Act applies to NAVCAN.
Senator Roberge: Mr. Phillips states in his letter:
...the Government of Canada has taken the position that when programs or services of the federal government are privatized or commercialized, continuing protection of personal information equivalent to that contained in the Privacy Act should be made part of the agreement between the government institution and the private sector entity taking over the responsibility.
It does come into effect. That is part of government regulations.
Mr. Bowie: You were referring to the legislation itself. This legislation would establish the Canada port authorities and the pilotage authorities. However, with regard to the seaway management agreement, there will be a separate corporation that is not established by this legislation which will operate the seaway.
Senator Roberge: Exactly.
Mr. Bowie: The place for agreements between the Crown and the operator of the seaway is not dealt with in this legislation. It is dealt with specifically in the management agreement. It is in the management agreement itself where we will specify certain requirements that they will have in terms of access to information, privacy, and satisfying federal regulations as a separate entity.
Senator Roberge: In past instances, that was part and parcel, not of the agreement, but of the bill. I understand that you want to do it through a management arrangement with the new non-profit corporation which will exist. I am saying that in the past it has been included in bills of the same nature as the one that is before us now.
Mr. Bowie: We are not aware that establishing the airport authorities, for example, that there is legislation that specifies the application of the Privacy Act. I think the letter to which you have referred says that it is not included in the legislation.
Senator Roberge: He says his preferred position is that it would be included in the legislation.
Mr. Ranger: Your point is that in similar circumstances it was covered and in this case it is not. That does not mean that we cannot accommodate the situation through a management agreement. I guess we had the option, but we chose the latter.
Senator Roberge: Are you not obliged by law to include it in the legislation?
Mr. Ranger: I do not think we are; that is correct.
Senator Roberge: That is what it says. Do you intend to include it in the management agreement?
Mr. Ranger: That is our intention.
Senator Cochrane: Can you bring us up to date on the privatization of ferry services in Atlantic Canada?
Mr. Ranger: Yes. The privatization or transfer of ferry services is proceeding much faster than we expected. There are two ferry services in the Bay of Fundy which have been transferred effective April 1 of this year. At the end of March, we also transferred to the province a major operation, namely, the service to Labrador.
There are ongoing discussions regarding other ferry services. Basically, those are the three that we have transferred in a fairly short period of time.
Senator Cochrane: Have you encountered any problems with the transfer in Labrador?
Mr. Ranger: The service in Labrador was part of a comprehensive agreement by which we transferred 17 wharves. We have transferred the service in perpetuity to the province on the understanding that we would provide the province with an amount of $340 million so that they can ensure service is provided in perpetuity.
Senator Cochrane: Will the federal government put in more money after the $340 million has been expended?
Mr. Ranger: No. This was our calculation of net present value. If you took that money and put it in the bank, that amount of money should yield revenues to allow us to cover those services in perpetuity. That was our calculation and it was agreed to by the province. We have also transferred the ships that went with that service.
Senator Cochrane: Will this marine pilotage aspect of the bill work?
Mr. Gerard McDonald, Director, Marine Pilotage, Transport Canada: Yes. We feel that many of the changes brought in by this legislation with respect to the marine pilotage regime are certainly important aspects and an improvement on the current Marine Pilotage Act. We understand that we still do not have the perfect piece of legislation. However, that is why we have included an item to further review those issues which we feel require more study. That review will be done by end of this year.
Senator Cochrane: What happens if the corporations run up some losses?
Mr. McDonald: At present, three of the four pilotage corporations are operating in the black.
Senator Cochrane: Do you mean right now?
Mr. McDonald: That is correct. The fourth is presently covering its losses through the use of commercial loans. In order to offset any losses, there are two issues one must tackle: either costs must be reduced or revenues must be increased. It will be up to the board of the authority, in consultation with the users of the service, to decide how best to address any losses with which they may be presented.
Senator Cochrane: I have also had serious questions from individuals about policing. Senator Roberge addressed those, but there are concerns about policing from various sectors of the country. It is an area we must address seriously before any legislation is passed. You are saying this will be done by the RCMP and by customs people.
Mr. MacNeil: There are three functions in the future: the safety and security function is provided by the port authority; the federal activity and policing is performed by the RCMP, Customs and Excise and Citizenship and Immigration, as it has been for the past number of years.
The third part is that, rather than have a dedicated ports bill within a small group, we will call on the Attorney General to make agreements with the municipalities and the port authorities on providing municipal policing.
We have given this long study and we believe this is the best model. All the police forces, except the one being disbanded, believe it is the right model.
Senator Cochrane: I do not have to tell you about the cutbacks in the RCMP. Will this have a bearing as a result of the added responsibility?
Mr. MacNeil: This is not an added burden. They perform the function now and to everyone's satisfaction. The RCMP will continue to do so.
Senator Cochrane: In my own region, customs offices have been closed down. When a ship comes into port and there is a concern that drugs may be onboard, we must call a customs officer from 75 miles away because this customs office has been closed down as a result of cut-backs.
Mr. MacNeil: Which region are you from?
Senator Cochrane: I am from the Stephenville area.
Mr. MacNeil: When a vessel is sailing into the Port of Halifax or the Port of St. John's, the harbour master knows when a vessel is due, where it is coming from and what services will be required. We can call on the RCMP to come out and meet that vessel.
Senator Cochrane: There are only a few customs people there. What happens if these customs people are out doing a job at another port? They cannot spread themselves too thinly.
Mr. MacNeil: Perhaps Captain Stark will answer how it works in his port. He has been harbour master in Saint John and Halifax and is now managing the Port of Vancouver. We have not had difficulties in the six ports where we now have police forces.
Senator Cochrane: You mean you have not had difficulties yet.
Mr. MacNeil: We are not creating a problem, we are solving a problem.
Madam Chair, you mentioned that you have representatives from the City of Toronto appearing tomorrow. I should like to table a Nesbitt Burns study done specifically on the Toronto Harbour Commission. Senators may want to read it before the Toronto representatives appear. It deals with whether or not Toronto meets the criteria to be on the list of the port authorities.
The Chair: I will distribute it to the members of the committee. Thank you for your presentation today.
Welcome, Captain Stark. Please proceed.
Captain Norman C. Stark, President and Chief Executive Officer, Vancouver Port Authority: Thank you very much for the opportunity to appear in front of you.
As Mr. MacNeil mentioned, I was at the Port of Saint John from 1979 to 1981 and the Port of Halifax from 1981 to 1985. I have been at the Port of Vancouver now since 1985 and I am the president and chief executive officer.
The Port of Vancouver is the most diversified port in North America. Last year, we handled 72 million tonnes of cargo, which is about 23 per cent of Canada's international maritime trade. We also handled 700,000 cruise ship passengers. We were the second largest port in North America last year.
Our diversification ranges from coal to canola, from chemicals to containers and from containers to cruise ships. Approximately 60 per cent of our exports come from the landlocked provinces of Alberta and Saskatchewan. We are just as much the port of Saskatoon as we are the port of Grand Prairie as we are the port of Vancouver.
Our board meeting next week is in Regina. Every year we go outside the port of Vancouver. Last year we were in Toronto. At the same time, we have a port users conference where we take longshoremen, grain handles, grain terminal elevator operators and all the service providers, including railroads, out to the customers to have a one-day meeting after our board meeting.
We are also the Western Canadian container port for the provinces of Ontario and Quebec. Much of our container cargo comes from the Toronto area and also from Quebec and even some from the maritimes. We get snow crab coming from the maritimes right through to Vancouver.
The fundamental issue for us in assessing this legislation is: What does it do for the port's competitiveness position vis-à-vis the challenges we face from subsidized ports in the United States, the Pacific Northwest, namely, Seattle, Tacoma, Portland, Longview, and so on?
Meeting that challenge from America's ports is a tough assignment but it is a challenge that must be met competitively, energetically and professionally. Port initiatives are certainly part of the answer. We also need an integrated policy regime which makes the competitive position of the national ports a federal priority so that our capacity to become economic generators is enhanced and not eroded.
The port of Vancouver creates approximately 10,800 direct jobs with over $1 million of payroll and also millions of dollars in taxes to all levels of government.
Bill C-44 has many merits. We particularly like the full divesting of the authority in the board of directors, the streamlining of decision-making, the elimination of special drawn downs and the abolition of the Canada Ports Corporation.
The new governance model also gives the users of our port who provide the cargo, the infrastructure and the services input into the board's selection.
It is crucial that the Canada Marine Act empowers national ports to compete effectively and innovatively with less bureaucracy and more autonomy vested locally. Bill C-44 achieves this.
National ports are part of Canada's infrastructure and are key to our international trade objectives. National ports should and will continue to be owned and regulated by the federal government. Under the Bill C-44, they will continue to be trustees for the federal government in administering federal port lands.
Our U.S. competitors have many benefits that we do not, such as tax-exempt bonds for capital projects and the ability to raise taxes from local property owners, which gives these U.S. ports a substantial advantage over us. For example, the port of Seattle last year raised over $35 million U.S. from taxing local residents. When you pay your house taxes in King's County, $300 goes to the port authority.
The few advantages we have in Canada, such as federal agent status, should and will be preserved in Bill C-44. Realistically, we do not expect the federal, provincial and municipal governments to provide us with the same advantages which favour our American counterparts and competitors, but it is crucial that Canadian port authorities do not lose the advantages they already have. Bill C-44 protects this.
It is understandable that the federal government wants to restrict port authorities from creating obligations and liabilities directly or indirectly on the federal treasury. We agree with this restriction and believe that the government is also protected in many other ways through such things as special examinations, annual general meetings of the port authorities and other accountability checks which are required under Bill C-44.
If Parliament wants major Canadian ports to be competitive and to have extensive delegated authority, then Parliament should give national ports the flexibility to be innovative and entrepreneurial. It should rely on the directors to act responsibly with their mandate and to be accountable for their actions. Bill C-44 achieves this.
We are not asking for carte blanche. In grey areas, Bill C-44 should and will allow the minister to amend each port's letters patent from time to time and grant additional powers where appropriate because of shifting, unforeseen and exceptional circumstances.
We believe that good legislation, like a good long-range plan, should be robust, responsive and not stiff and unyielding to change or unexpected circumstances. Again, we believe Bill C-44 does this.
It is not easy or quick in the normal course to amend legislation. Accordingly, it is important that the Canada Marine Act have plenty of scope for ministerial or cabinet discretion to allow ports to perform their mandates as economic generators in a responsible and progressive manner. We believe Bill C-44 does this.
We believe Bill C-44 is good legislation and will create a ports system that will help achieve our national trade objectives.
The Chair: Mr. Stark, are you satisfied with the provisions regarding the appointment of directors?
Mr. Stark: Yes, I think this is a very good system. It gives our port users the opportunity to make nominations to the board. This is something the port users have been concerned about for a long time. It allows them to nominate up to five individuals that the minister will appoint through the Governor in Council.
It also gives the municipalities an opportunity. We are surrounded by eight municipalities in the port of Vancouver. Having one municipal representative is a step in the right direction. We will also have one provincial representative from the province of B.C., one from the other western provinces, plus one federal representative. I think it is a very good combination for a board of directors. From my understanding, and the various briefs that have come from Vancouver, everyone is satisfied with that setup.
Senator Cochrane: You have a wide experience with ports and harbours. You have a great business in Vancouver. I heard that 700,000 passengers come though the port of Vancouver each year.
Mr. Stark: That is correct.
Senator Cochrane: That is fantastic.
Mr. Stark: That is actually over five months, from May to September.
Senator Johnson: It is the same as Port-aux-Basques.
Senator Cochrane: I wish that were the case.
How do you feel this bill will affect smaller ports across the country?
Mr. Stark: It is difficult for me to speak for other ports, but I think it is a bill that addresses, in many ways, everyone's needs. It is not easy to address everyone's needs. Coming from Vancouver, it is not easy when you have so many municipalities and interest groups.
Through its committees, I think the government has listened very well to people across the country. There are still concerns, such as those that you have raised, but I think they have addressed everyone's needs to the best of their ability. This new model is a big step in the right direction.
I came through the national harbours board system back in the seventies, the Ports Canada system, and I have seen things progress to point where I think this is a major step in the right direction.
Senator Cochrane: In the future, do you think this bill will be good for smaller ports?
Mr. Stark: I think it will be good for everyone in the long run.
Senator Johnson: In your brief, you mentioned every province except Manitoba in the west. We have not had much time to study this legislation, but perhaps I can ask you about Churchill. Do you have anything to do with Churchill?
Mr. Stark: Not really, no.
Senator Johnson: As you know, it has been controversial over the years.
Is there anything else you would like to have seen in this legislation? You seem to be very pleased with the bill.
Mr. Stark: Yes, we are.
Senator Johnson: Is there anything outstanding that might be considered at a future time, or are you happy with it totally?
Mr. Stark: I think there is always room for improvement in any legislation. As was mentioned, there will be a review in four years. You must give this bill an opportunity. Over the four years, no doubt, we will see some changes that we would like, but, given what we have today and the myriad of different pieces of legislation, I think this is a major step in the right direction and it will be a big benefit not only to the port system and the government but also to the shippers of cargo and the users of the ports. That is what we are in business for, namely, to make Canadian products more competitive in world markets. I think this bill will do that.
Senator Johnson: In the next four years before this bill is reviewed, what do you estimate your tonnage and passenger numbers will be in the port of Vancouver? You said 60 per cent of your exports come from Alberta and Saskatchewan. What are your estimates in the next few years?
Mr. Stark: We do not like to forecast very much.
Senator Johnson: I am curious to see how fast the west will take over the country.
Mr. Stark: By the year 2005, we expect to have over 1 million passengers.
Many of our products, of course, are dependant on world markets. Coal has been growing and doing very well. Our container business in the first three months of this year increased by 33 per cent. Last year, it increased by a total of 24 per cent. With respect to grain, obviously there are more and more markets opening up in the Pacific Rim. The port authority now has 14 offices in the Far East. We have offices in Beijing and many countries in the Far East.
Senator Johnson: Is that the fastest growing market?
Mr. Stark: The Far East?
Senator Johnson: Yes.
Mr. Stark: Definitely.
Senator Landry: Is the port of Vancouver three or four time times as big as the port of Halifax?
Mr. Stark: I think Halifax handled about 14 million tonnes, and we handled 72 million tonnes last year. The port of Montreal handled about 22 million tonnes, and the port of Saint John handled around 20 million tonnes.
Senator Landry: Is Saint John bigger than Halifax?
Mr. Stark: In terms of tonnage, they are very big in the oil business, with crude oil coming in for Irving Oil.
Mr. MacNeil: The difference is that Halifax has very little bulk commodity. It deals mostly with containers. Vancouver deals in major bulk such as coal and potash.
Senator Landry: I noticed some of our containers are going from Moncton to Vancouver by train. Halifax is not too pleased with that, but that is what is happening.
Mr. MacNeil: There is a land bridge now. It is easier to bring the commodity into the country in Vancouver and rail it across the country or export it through Vancouver.
Mr. Stark: With respect to Singapore, it is much more economical to bring cargo coming west through the Suez canal and into the port of Halifax. Once you go east of Singapore up towards Japan, Korea and Hong Kong, it is much more economical to bring it into the West Coast. That line is almost the same as the one you have in Canada.
Senator Landry: It must be a great adventure because transporting a container from Moncton to Vancouver is quite a trip.
Mr. Stark: It takes about four or four and one-half days.
Senator Landry: You mentioned snow crab a while ago.
Mr. Stark: That is right.
Senator Pépin: As one of the conditions, it is mentioned that you must protect the environment. Since you come from B.C., do you have any specific problems regarding the environment?
Mr. Stark: Yes. I have three environmental people on staff. I have a doctor of oceanography, a biologist and a chemist. We have an environmental department.
Everything we do is done with a great environmental sensitivity. Whenever we are building new facilities such as the new docks we build, we build refugia inside of them so that the small fish can go in and hide from the big ones. Whenever we do dredging, we do it in layers so that you get different growth and different refugia at different levels of the sea level. We do everything we can to protect the environment.
The Chair: A dividend will be paid to the federal government. Is the basis of this dividend considered fair to you?
Mr. Stark: If we get what I think we will get, then I think it is fair. The federal government does deserve a return, as do the shareholders. In the past, we have had special draw downs. Since 1985, the port of Vancouver has contributed $150 million back to the shareholder. We have had special draw downs. We pay dividends that go up and down, based on our net income. With the new system of paying a fixed number, namely, our percentage of gross revenue, it gives us more confidence concerning what we will have to pay. We can project much better than we can today.
Senator Roberge: Have you been in conversation with your five other partners who will eventually be CPAs? Do they have the same feeling that you do?
Mr. Stark: I believe so. We have port managers meetings. We also have discussions over the phone -- not on a daily basis but regularly, because we work together.
Senator Roberge: First, I wish to thank you for a very good presentation. It was very enlightening. You addressed many of the questions that I had.
I have one small question, which is a supplementary to the Chair's question. I notice that you and the port of Montreal will be over 5 per cent on the dividends to be paid versus approximately 3 per cent for the others. I think you feel that is fair.
Mr. Stark: I think that is too much.
Senator Roberge: I imagine that Mr. Tadeau also feels that it is fair.
Mr. Stark: I think so.
Senator Roberge: When I go back to Montreal, I will check that with Mr. Tadeau.
The Chair: Do you think the changes to pilotage will work?
Mr. Stark: On the West Coast, we are part of what is called the western marine community. We have been involved with things like the marine service fee, and so on. We spend quite a bit of time together with the pilotage authority and the pilots. The West Coast pilotage is a very complicated pilotage. There are lots of islands and many shallow areas. The system they have out there is a good system. They now have a committee working on operational improvements. I believe that is chaired by Marion Robson, who is with the CTR. Perhaps she is not doing that in her new position, but she had been chairing it. That committee has been working well. They have been looking at good operational improvements. Speaking about the West Coast, I think what they are looking at is a good system.
The Chair: How does your port relate to other B.C. ports such as the Fraser River? Do you compete with them or do you collaborate with them? How does this work?
Mr. Stark: With Prince Rupert, not so much in the north. There is certain cargo that moves to Prince Rupert, northeast coal and some pulp that moves from the northern regions. Some grain goes north as well. We do not compete with them a lot. In fact, we are trying to work together to promote the cruise ship business out of the Prince Rupert. With the Fraser River system, we compete with certain cargoes. Unfortunately, we are not competing on a level playing field there. As a harbour commission today, they have certain advantages that we do not but, again, we do collaborate on many areas such as the environment. We have the Greater Vancouver Gateway Council, which involves the airport authority, the sea ports, trucking rail, the longshoremen, the labour force, and all the entities that provide service. We work together with the Fraser port in those areas. Yes, we do compete for certain businesses. They handle approximately 20 million tonnes of cargo.
The Chair: Any other questions?
[Translation]
Senator Mercier: Do you transport aluminium?
[English]
The Chair: Do you transport aluminium?
Mr. Stark: Aluminium?
Senator Mercier: Yes.
Mr. Stark: No. Aluminium does not come into Vancouver but at Kitimat, which is in the north. The Alcan smelter is located there and they are moving some aluminium out of there.
The Chair: Will this bill help your competitive position with the harbour commission?
Mr. Stark: It makes it a more level playing field. My position on port authorities are that port authorities should be on a level playing field. It is the private sector that should be competing. If we have an unlevel playing field in port authorities where the port authorities are helping to put money into the pocket of the foreign ship owner, then it is the port authority and the government who lose. I believe that port authorities should be on a level playing field. Let the private sector quote competitive rates and compete against each other. We both report to the same minister so that you do not have two Crown corporations and harbour commissions which are federal entities that are competing on an unlevel playing field. It is better to let the private sector do that. This bill will create a more level playing field.
The Chair: If there are no further questions, thank you very much, Mr. Stark, for your presentation today.
The committee adjourned.