Proceedings of the Standing Senate Committee on
Transport and
Communications
Issue 12 - Evidence for the afternoon session
OTTAWA, Monday, April 27, 1998
The Standing Senate Committee on Transport and Communications, to which was referred Bill C-9, 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 1:05 p.m. to give consideration to the bill.
Senator Lise Bacon (Chairman) in the Chair.
[English]
Senator Bacon: Good afternoon, senators. Our first witnesses today are the Toronto Harbour Commissioners. Please proceed.
Senator Forrestall: Madam Chair, in going over the list of witnesses it occurs to me that it might be to our advantage to ask any questions of an urgent nature as they arise but generally to wait to hear all the witnesses before we ask questions. At some appropriate time, perhaps four o'clock, we could call back the spokespersons and have a general round of questioning. I put that forward as a suggestion.
The Chairman: Some of the witnesses may have to leave for home, so we will try to keep that in mind as well. Your suggestion is well received. We will try to be as flexible as possible within our time limits.
Mr. Harold Peerenboom, Chairman, Toronto Harbour Commission: Honourable senators, thank you for this opportunity to speak to you about the Canada Marine Act. I was elected chairman of the Toronto Harbour Commission by my fellow commissioners. I am here today to separate fact from fiction as it relates to the Toronto waterfront. My three topics will be the history of the Toronto Harbour Commission, opportunities for economic growth, and why your support is needed.
The Government of Canada has had a very positive presence on the Toronto waterfront for most of this century. I will give you a pictorial tour of some of the accomplishments delivered by the Government of Canada through the Toronto Harbour Commission.
In 1911, an act of Parliament set up the Toronto Harbour Commission to manage the port, which was intended to be an economic generator to Toronto. Within months, a waterfront master plan was formulated. The Toronto Harbour Commission dredged the shallow harbour to a depth of 27 feet and used the dredged materials to fill water laths, reclaiming more than 2,000 acres of land. This map shows all the land reclaimed by the Toronto Harbour Commission, financed by the Government of Canada for the City of Toronto, creating the current harbour profile. They enlarged the Toronto islands. As well, miles of beaches were created. In the 1920s and 1930s, the Toronto Harbour Commission ran the Sunnyside Amusement Park, which was called the "poor man's riviera." This area is highlighted on the right-hand side of this diagram in blue; the beaches, which are on the left-hand side, are also in blue.
The Toronto Harbour Commission also built the Leslie Street spit, which is now treasured by the wildlife enthusiasts. The entire stretch of the western beaches, from the Humber River to the harbour, were deeded to the City of Toronto by the Toronto Harbour Commission. All the land that comprises the harbour front was created by the Toronto Harbour Commission through its benefactor, the Government of Canada.
The Toronto Harbour Commission built two airports, the Island Airport, which the Toronto Harbour Commission still runs, and Malton, now Pearson International.
The Toronto Harbour Commission created hundreds of acres of urban waterfront land, including some of the most prized real estate in downtown Toronto. Fifteen thousand people live on these lands and thousands more work there in hundreds of offices and small businesses which are the engines of the Toronto economy.
These lands house shipping-dependent industries such as Redpath Sugar, hotels, high-rise buildings, as well as the Toronto Fire Academy. The Toronto Star building is located on land created by the Toronto Harbour Commission, as is Ontario Place. Home plate at the Skydome also sits on land created by the Toronto Harbour Commission.
The City of Toronto annually collects tens of millions of dollars in property taxes from the occupants of the Toronto Harbour Commission lands. We tried to get the official figure, but were unsuccessful. We did approximately one-eighth of the land assessments and came up with just under $10 million.
Over the decades, the Toronto Harbour Commission created lands that have put hundreds of millions of dollars into the City of Toronto's treasury. Over the years, I have had two appraisals made of the lands and infrastructure created by the Toronto Harbour Commission. This is the first official appraisal which has ever been done in Toronto. The low point is $1.25 billion rising to $1.45 billion.
Senator Forrestall: Did you pay for it?
Mr. Peerenboom: In today's dollars, it would cost approximately $1 billion for the Government of Canada to create these lands.
Senator Forrestall: Are you referring to the acquisition of the land?
Mr. Peerenboom: To do the dredging and build the dock walls, yes.
Senator Forrestall: Did that money come back?
Mr. Peerenboom: The money stayed with the harbour commission, that is correct.
These appraisals, which I will leave with you today, exclude the beaches, the green parks, the lands on the island, the airport, the outer marina, the water lots, the Toronto City Centre Airport, Exhibition Place and the residential lots on Toronto Island as well as other parts that were deeded to the City of Toronto or the Government of Ontario. The figure of $1.2 billion as a value represents the absolute minimum of the land that was created by the Government of Canada.
The beaches, the airports and the port are located on land which generates millions of dollars each year. All of these were envisaged with the leadership of the Government of Canada.
Starting in 1991, the city council of Toronto began to rape and pillage the Toronto Harbour Commission assets and treasury. The Toronto Harbour Commission board has five members, three appointed by the City of Toronto, a fourth appointed on the recommendation of members of the board of trade, and a fifth by order in council.
The city abused its majority on the Toronto Harbour Commission board to strip the board of key assets. Over the objections of federal appointees, hundreds of acres of land created by the Toronto Harbour Commission were taken away.
I will cite five examples of miscarriages of justice on the Toronto waterfront which led to the inclusion of Toronto in the Canada Marine Act.
The first miscarriage is the following: The city, through its majority on the board, took 29 acres of railway and hydro lands which they valued at $20 million. They made an offer of $20 million. There were no appraisals and no arbitration took place. The city put down $225,000 for this land. Later, instead of paying the $19.8 million balance to the Toronto Harbour Commission, the city turned over the Spadina Marina -- worth $4.5 million -- to the Toronto Harbour Commission. This resulted in a slippage of over $15 million. They then reneged on transferring the marina. Hence, the government received, in total, $225,000 for the said lands.
Senator Forrestall: Whose fault was that?
Mr. Peerenboom: Senator, it is yours. You have three people on the Harbour Commission who control the two federal votes. I will address that issue as I proceed.
Miscarriage number two: This committee should know that the previous Toronto city council required its Toronto Harbour Commission appointees to sign undated resignations upon appointments, to keep them on a short leash. This creates a conflict of interest because all commissioners must also sign an oath of office and take on fiduciary responsibilities of the Toronto Harbour Commission. So when the city instructed its three sitting members to transfer 318 acres of land from the Toronto Harbour Commission to the city, the three members were prepared to do so, but they wanted the Toronto Harbour Commission to get fair compensation for the land.
The city agreed to hire the consulting firm Booz Allen Hamilton to calculate a fair annual rent for the port land acreage. The consulting firm recommended a $6 million transfer payment, in lieu of rents the lands generated. However, after receiving the report, the city did not want to pay the $6 million and forced the issue into arbitration. The arbitration panel comprised three appointees: one appointed by the City of Toronto; one by TEDCO, the Toronto Economic Development Corporation; and one by the Toronto Harbour Commission. The city controls two of the three votes. Unfortunately for the city, the arbitration panel agreed unanimously to support the $6 million payment.
The city reneged on the consultants' agreement and the arbitration agreement and decided to pay only $1.5 million a year to the Toronto Harbour Commission.
The city appointees honoured their fiduciary responsibilities and refused to reduce the city's obligation from $6 million to $1.5 million. These councillors were summarily sacked by the City of Toronto and replaced by compliant municipal bureaucrats who did transfer the land for $1.5 million in lieu of the rent they were collecting. The city also paid the princely sum of $10 for this acreage. We are now up to 347 acres, and counting, of grabbed land.
With me today are several past commissioners who experienced those times. Former harbour commissioner Howard Joy is here. Mr. Joy is a also the past vice-chairman of the Toronto Harbour Commission. As well, former councillor Steve Ellis is here. Mr. Ellis is one of the three people who were bounced off the commission.
These two gentlemen were put in the untenable position of being between the oath of office of the Toronto Harbour Commission and the direction they received from the City of Toronto. They should be admired for the way they stood with us during this travesty, ignoring pressures from city council and staring down their letters of resignation. Mr. Joy was not fired, and Mr. Ellis was.
Charles Parmelee and Gary Reid were also there at the time. These gentlemen sat around the table and can tell you what happened. I am documenting history.
Miscarriage number 3 reminds me of a saying I used to hear: "What the eyes cannot see, the heart does not yearn for." In other words, "Power corrupts and absolute power corrupts absolutely."
In any event, these three bureaucrats are at the harbour commission; they have the control of the harbour commission. They looked at the maps and identified another 294 acres of land. They grabbed it. This is indicated by the green areas on the diagram.
They had the votes and they took the land. Without a formal agreement, without any appraisals or arbitration, they decided to pay $10 for the land, and to make an annual payment of $1.3 million in lieu of rents. In this case, the city never even paid the $10 for the 294 acres of prime waterfront land which it took from the Toronto Harbour Commission. We are now up to 641 acres of prime downtown real estate. Tom Jacabek is here today. As the budget chief for the old City of Toronto, as well as of the new City of Toronto, he was responsible for the dastardly deeds. He is also a current member of the board of the Toronto Harbour Commission. In the city council he said:
We ended up with two administrations...one is being cash starved and the other one has had to subsidize it. It doesn't make any sense.
The statement is in reference to TEDCO, and the Toronto Harbour Commission.
Mr. Jacabek is here today, and you can talk to him as well.
Justice is a funny thing; sometimes it lies in subclauses of agreements and legal documents. I would like to read for you a clause from the agreement which transferred the Toronto Harbour Commission lands to the city:
Provided that the city ensure(s) that the THC continue(s) to receive an annual subsidy sufficient to support the restructured Toronto Harbour Commission operations.
This statement is in the document, and Mr. Jacabek can tell you how it got in there. The city essentially signed a blank cheque to cover the THC costs for the land forever; in excess of $6 million per year in excess cash flow. An agreement was written, of course, but the city thought it would always control the Toronto Harbour Commission board. The Canada Marine Act replaces city control of the port with citizen control, and the old city is being replaced by the new city. It is my intention to work out a fair, equitable agreement that will end the city's open-ended financial obligations.
I was informed before I came in here that Mr. Jack Layton is coming this week. On two occasions, most recently at my home on Monday, he told me that he would not be appearing here. Jack is not great with numbers, so I want to give you some numbers for your meeting with him.
The land was making in excess of $6 million in revenue, and they gave us $1.5 million. They have, therefore, kept in excess of $4.5 million in their hands. They then transferred another parcel of land over, giving us approximately $1.3 million to $1.5 million. They are now bringing in between $8.5 million and $10 million on that land, as well as in excess of $6 million per year in rent revenues from tenants the THC had created. They have collected $30 million or $40 million since this happened.
In addition, the THC took one of the leases which we had with Imperial Oil and allowed it to move off its site. The THC had built into its contract a provision that, when Imperial Oil vacated the lease, it had to remedial work, repairs and restoration, for the economic damage it had done with spills. TEDCO took a cheque and released Imperial Oil from that obligation.
Now I should like to discuss miscarriage number four. If the city comes here asking for reductions, it has lots of cash from your lands. In 1995, a plan was created and the commission downsized itself by 30 per cent -- $1.5 million in annual cost savings. It developed an airport improvement program to replace the money-losing ferry with a fixed link. It also allowed a different kind of equipment: planes. This was designed to turn a loss into an annual profit of $5 million per year. The city fought us at every turn. To date it has cost the Toronto Harbour Commission $10 million in lost profits to date, and counting. As a connection to the airport, the ferry continues to lose in excess of $500,000 per year.
Doug Young, who was Minister of Transport at the time, came to Ottawa to break the deadlock. He came to an agreement with the mayor to implement the airport improvement program, but it took someone from Ottawa to come down to the City of Toronto. I was at the table with the province and the city to hammer out this agreement, in order to allow the THC to stop losing money.
Miscarriage number five is probably the reason that we are here today. In 1996, the board of the THC recommended a second comprehensive proposal for waterfront reforms. I personally met with Mayor Hall, and she agreed to return certain lands needed for the port operations, as well as to seek amendments to the Toronto Harbour Commission Act to cut back on city representation on the THC board. She did not follow through, however, and three months later nothing had happened. I next met her at the CN Tower with then Minister of Transport David Collenette. The mayor told the two of us that she would move the plan forward in four weeks, but she did not do it. I later learned that she had come to Ottawa to seek assurances from Mr. Anderson, the Minister of Transport, that Toronto would not be included in the Toronto Marine Act. This was our back-up plan to bring sensibility back to the port.
I approached members of Parliament, Dennis Mills and Tony Ianno, and I met with the Toronto caucus at the CN Tower. They demonstrated their leadership, and had the gumption to have Toronto designated a port authority, thereby reaffirming the Government of Canada's commitment to the renewal of the Toronto economy. That is how it got in.
This is not the first time that the City of Toronto and the harbour commission have had problems. Their dispute in 1920 resulted in a celebrated royal commission. Judge Denton, who headed the commission, reported as follows in 1926:
Each member of the Harbour Board should be free and independent to exercise his own judgment uninfluenced by any outside powers that may seek to direct or control him.
The judge also said that the inquiry had clearly shown that no member of the city council should be a member of the harbour board. In the Canada Marine Act, we finally have an effective remedy, 72 years later. The Canada Marine Act protects the independence and integrity of the Toronto Port Authority board members, and makes sure that private citizens, not politicians or bureaucrats beholden to other bodies, run the port. It puts the Port of Toronto on a solid business footing. Those are the facts.
One result of the city's outrageous power grab and asset stripping, however, is the endless retelling of fairy tales by certain city councillors. Last year we all heard so many stories, and I would like to respond to some of them.
One councillor said that every square foot of land taken from the THC by the city is now under development, leased and tenanted, and that businesses are bringing back jobs in downtown Toronto. The claim that the city has rented out all of the port lands is just fiction. Much of the land is vacant, as these photographs demonstrate.
Former councillor Leckie also spoke you to last spring. He called the Toronto Port Authority "an agency that is not involved with our city governments and our communities." The reality is that the community will have a majority -- four members. Do we not need a fifth from the city? All of the members, including the provincial and federal members, will be involved in the city as well as in the community, so the control is basically back to the community. The members will not, however, be directly beholden to tiny interest groups. I remind you of Judge Denton's warning against allowing council to control the THC. This inquiry has clearly shown that no member of the city council should be a member of the harbour authority.
When Mr. Leckie appeared before you last year, he compared the Port of Toronto unfavourably with the Port of Hamilton. I want to look at some facts in more depth, although I do not want to put Hamilton down in any way. It is a great port. I do want to show how wrong the detractors are when they use selective statistics to minimize the size, and to attempt to explain why the Port of Toronto should not come under the Canada Marine Act.
I have a chart for you. Hamilton has tonnage of 12 million tonnes; Toronto has 1.3 million tonnes. However, revenue tells a different story. The revenue operation in Hamilton is 3.1 compared to Toronto's 2.1. I am using 1995 statistics.
In the last two years we have increased our revenues and profits substantially but I do not have the Port of Hamilton numbers for 1996 and 1997.
The revenue dollar difference between 3.1 and 2.1 is primarily due to the general marine cargo trade. General marine cargo and generally upgraded container warehousing earn revenues of $2.4 million. Hamilton's steel business of 11 million tonnes brings in about $700,000. That accounts for the difference.
Is Hamilton a bigger port than Toronto because Hamilton has nine times as much tonnage or is Toronto a bigger port than Hamilton because we have 48 per cent more revenue? I would say that the dollar value handled by the Port of Toronto is a telling fact.
Some people argue that the Port of Hamilton's total revenue is greater than that of the Port of Toronto. However, Hamilton made more than five times as much money renting land as it did handling cargo -- $7.4 million in rent, which is 70 per cent of the port's total revenues. The people who use these rent-inflated statistics to belittle the Port of Toronto are the same people who conspire to strangle the Toronto Harbour Commission by taking away the land rentals.
If we just use the $6 million -- forget the $10 million -- awarded on the first parcel, here is an apples-to-apples comparison. The revenues of the Toronto Harbour Commission are $14 million and those of the Hamilton Harbour Commission are $9.7 million. So much for the fiction. Those are the facts, and those facts are contained in documents published each year by both commissions.
In 1911, when legislators in Ottawa created the Toronto Harbour Commission, the city had a population of 375,000 people. Now the port is the heart of an urbanized, industrialized area of 4.5 million people.
The Senate has an opportunity to end the gridlock on the Toronto waterfront. The Senate can give the Toronto Port Authority the opportunity to develop into an intermodal cargo distribution centre and economic focal point where containerized cargo comes in by ship, truck and rail, all of which we have in Toronto.
The containers we are talking about are stacked, opened, sorted, restuffed, stored and forwarded. For this reason the distribution plan is a very important modernization initiative, but one which is going absolutely nowhere right now because of the uncertainty and the political mismanagement the Canada Marine Act is designed to end.
The situation I have outlined, where fiction forms the base of destructive actions, where local politics and special interest groups overwhelm the general good, cannot be allowed to continue. The Canada Marine Act puts an end to this destructive era of petty politics. It restores sanity and good management to the Toronto waterfront and frees the Port of Toronto to generate economic benefits for and southern Ontario.
The Canada Marine Act is important for the unique business infrastructure called the Port of Toronto. It allows us to be competitive, efficient and commercially oriented, which we cannot be right now.
This bill was given close scrutiny by two committees in 1997. On April 16 the Canada Marine Act was passed. It died on the Order Paper at one point and was reinstated. There are the votes.
As well as those votes the Canada Marine Act was put directly to the voters of Toronto in the last civic election, not by the federal governmen, but by two local councillors, Councillor Layton and Councillor Chow. They campaigned on this issue. Dennis Mills and Tony Anno ran against them in support of the Canada Marine Act.
The people spoke on June 2. Mr. Mills and Mr. Anno both won re-election, and the two councillors, Mr. Layton and his wife, Mrs. Chow, both lost. That is where the people in Toronto really stand on the Canada Marine Act.
We have made some progress in the last three years. With the participation of Mr. Joy and Mr. Charles Parmelee, long-standing Conservatives who join me, a Liberal nominee, in a coalition to set things straight, over the past three years the Toronto Harbour Commission has focused its limited capital and marketing efforts in expanding the value business and it is paying off. Total tonnage is up 33 per cent in the last two years. High value general marine cargo, container traffic and warehousing are up 34 per cent in the last two years. Revenue is up 32 per cent in the last two years. At the same time we reduced costs by more than $1.5 million.
However, the Port of Toronto has much more potential than this. If it is free of gridlock the port can develop into a valuable business infrastructure supporting economic growth, not only in Toronto and the GTA but all over southern Ontario. This is the role that the government of Canada anticipated the original Harbour Commission Act of 1911 would play on the waterfront.
In conclusion, I have spoken about the history of the Toronto Harbour Commission and its productivity, which built the waterfront. You can see on the yellow map how Toronto has benefited from your involvement.
I have talked about the recent troubles, how the narrow interests of local politics have hobbled the Toronto Harbour Commission and how the Canada Marine Act sets these things straight.
I have spoken about the opportunity for economic growth, which a properly managed port authority can help come to fruition and how the Canada Marine Act opens the door to this.
I each of you to support the Canada Marine Act and to ensure that there will not be any more skulduggery on the waterfront, no more picking of the federal pocket, no more improprieties. Once and far all I want to close the window and door of opportunity. The key to that door is the Canada Marine Act. I implore you to use it.
I have witnesses with me today who sat in the room when this land was taken -- the current general manager, the current vice-chairman, the past chairman, the budget chief from the City of Toronto and the past budget chief -- who may be able to explain to you why these things happened. I implore you to ask them questions directly.
Senator Roberge: Do you have a written economic impact statement concerning the Port of Toronto for the next five years, based on this actual bill?
Mr. Peerenboom: Where we are going or where we are right now?
Senator Roberge: Where you are going.
Mr. Peerenboom: We will be making between $5 million and $8 million dollars a year.
Senator Roberge: Over the next five years.
Mr. Peerenboom: Yes. The airport improvement program alone will deliver a $5 million profit instead of a loss. That is based on 600,000 passengers.
Mr. Tom Jakobek, Councillor, Toronto City Council, Ward 26, East Toronto: Even though the Harbour Commission is operating in a very businesslike manner and has a five-year plan, as well as a capital and operating budget for five years, how can you plan a budget when you do not know when someone -- in this case, the City of Toronto -- may pull the rug out from underneath you at any time by taking more land or by placing more bills on your lap by not meeting its commitments for dock-wall repair when you are running a deficit?
How can you create a five-year budgetary plan when the moment you decide to market the prime land you still have it is taken or encumbrances are put on it which restrict you at every turn because one side has three of five votes? That is what it comes down to.
Senator Roberge: I am sure that in the past it must have been difficult to make proper budgets, forecasts and projections. However, we have received indications from the chairman that you have done some projections for the next five years on increased tonnage as well as increased revenue. That is what I was trying to get at. If you can give us anything in writing on that we would appreciate it.
Mr. Jakobek: The commission is operating at a deficit this year of approximately $2.5 million. It is doing so because of the past actions of the city. The commission has taken dramatic actions under the leadership of Mr. Peerenboom which will eliminate that deficit. However, the divorce between the harbour commission and the city is not complete. The city has adopted the position of the budget committee, which I represented, to complete the divorce and hand some of the land back in order to end the city's future financial obligations. That remains to be done. We think that is attainable. We think that will allow the harbour commission to achieve its objectives years ahead of time when we are back on solid footing.
The harbour commission has a specific financial plan which can be made available to you. However, until this bill is passed the plan cannot be definite because we do not know what the other partner will do.
I sit on the commission. This is one of my favourite appointments. When this legislation is passed I will no longer be a member of the commission, yet I think it is important that the legislation be passed.
Mr. Steve Ellis, Commissioner, The Toronto Harbour Commissioners: I am a former chairman of the land use committee of the City of Toronto and a former vice-chairman of harbour commission. I was unceremoniously fired from the commission because I stood up for the federal presence in Toronto. I believe it is very important that the government of Canada remain involved. There are many things the government of Canada can do in the port area and on the lands of the City of Toronto.
With respect to the budget question, much of it is contingent on the real estate. When all the lands which generated rental revenue through industries were stripped away from the harbour commission money was taken directly out of the harbour commission's cash flow. I was involved in retaining Booz-Allen, who are American consultants from Maryland. Booz-Allen Consultants are the world recognized leaders in operating ports. They did an exhaustive study and determined a figure which should be paid by the City of Toronto in the name of fairness and equity. The City of Toronto chose to ignore that report. That was wrong at that time and it is still wrong now.
Without the revenue-producing lands it is hard to forecast the future.
The Booz-Allen report also said that most of the world's ports cannot generate a positive cash balance if their lands are taken away so that they do not earn rents. The report said that on shipping cargo alone most ports, especially those on the Great Lakes because of the nature of the seaway, cannot generate a positive cash flow, that they must have the land around them to subsidize the rest of the operations. They need the airport and the rentals coming in.
That is why it is so important that this bill be passed to allow the harbour commission to do what it does best; that is, create jobs and economic activity on the waterfront.
The Chairman: Your port will have to pay grants in lieu of taxes and a dividend to the federal government. Does this cause you, as a CPA, any problems?
Mr. Peerenboom: The situation now is that I do not want the land back if I have to pay taxes on it.
We went to the OMB last month and had our taxes on 57 acres of land reduced by in excess of 95 per cent. Instead of $1.3 million the assessment is down to $57,000 per acre. We are working these things out.
Is it a problem? We can handle it. There is $6 million of excess cash from the land revenues alone. We estimate the tax to be $4 million. We will work this out satisfactorily.
Mr. Jakobek: A change occurred in 1991. We separated the harbour commission, as we know it today, into two bodies: the harbour commission, stripped of all valuable lands, and the Toronto Economic Development Corporation, which took the prime lands. We had a harbour commission which operated at a profit and had done much for the port area. Today, only seven years later, we have a harbour commission that is having difficulties and a Toronto Economic Development Corporation which, although it has done some good things, has, speaking generally, not yielded results which would justify the $10 million of capital put into it at the start.
The reality is that when the divorce takes place, which will be enabled by passage of this legislation, the harbour commission will be able to do more than simply absorb the additional taxes and bring more money to the city. It will not be supporting two marketing companies for two adjacent properties and two managers for those same properties, et cetera. An immense saving will result and immense opportunities for profit-making, all to the public's benefit. The municipalities will benefit as well and municipalities are always looking for more tax revenue.
Senator Forrestall: Who pays your current deficit?
Mr. Peerenboom: We have a deficit in excess of $2.7 million which is paid for by Toronto from the $8 to $10 million it is taking in rent revenue. However, it has a commitment to pay the entire deficit, even if it were to be $20 million a year, and that is the problem.
If we received all the rental revenue we would have a $5.7 million profit this year.
Senator Forrestall: Unrelated to port activity but primarily related to rentals and profitable use of otherwise owned land?
Mr. Jakobek: We have the City of Toronto and we have the harbour commission and between those two entities is the Toronto Economic Development Corporation which holds the lands that were taken from the harbour commission. That entity actually generates a small profit and it, in turn, is responsible for paying the deficit that has been created at the harbour commission. The city's development corporation, of which the city is the sole shareholder, pays the harbour commission deficit which resulted from the harbour commission losing its lands.
Senator Forrestall: Is that equitable?
Mr. Jakobek: No, absolutely not. The Toronto Economic Development Office continues to operate with a larger margin than it gives back to the harbour commission. It also left a number of the costly expenditures, including dock wall repairs. If you know anything about it, you will be aware that it is very expensive to maintain dock walls. It left those costs with the harbour commission.
Mr. Peerenboom: As well as the dredging.
Senator Forrestall: The dredging?
Mr. Peerenboom: The dredging. For example, one year the City of Toronto asked the Toronto Harbour Commission not to dredge the bottom of the Keating Channel, and basically it all flooded. Approximately one tonne of silt comes out daily. That is done by the Toronto Harbour Commission, as well as repair to the dock walls.
Senator Forrestall: They pay for it out of rental revenues basically.
Mr. Peerenboom: We pay for it out of what we have, yes.
Mr. Ellis: In essence, senator, what happened was that the City of Toronto -- I was once a member of the executive there -- cherry-picked all the revenue-generating land and left all the liabilities.
Senator Forrestall: I do not understand all the complaining because you are not in a bad position if you can sort out your problems.
Mr. Peerenboom: We are in good position now, senator.
Senator Forrestall: What does the Marine Act do? How, specifically, does that end your problem?
Mr. Peerenboom: First of all, the city no longer has control of the board. That is the biggest problem we have.
Senator Forrestall: Does the act specifically do that?
Mr. Peerenboom: Very specifically. Not even one city member can sit on the board, but they can appoint one member; one out of seven.
Senator Forrestall: And you are in agreement with that?
Mr. Peerenboom: Oh, yes. For a long time, two years now.
Senator Forrestall: That is not a long time.
That is interesting. I am quite shocked to tell you the truth. I had no idea that the numbers were as large as they are and, perhaps more specifically, that you have not been able to get a handle on it, that you have not been able to resolve the basic budget.
We sit in isolation in rural eastern Canada. You do not. Whatever you do is looked at and commented on, and, frequently, very negatively. What we are dealing with here is enormous. Would the Miramichi not love to have your problem? What do you think? Pugwash? Sydney? Should I go on? The only people who would not want your problem is the Fraser River Commission in British Columbia.
Mr. Peerenboom: We did have it resolved with Mayor Hall but it never happened.
Senator Forrestall: You touched on that, but you did not elaborate.
Mr. Peerenboom: She had agreed to reduce the city's control on the board from three to two. I asked for one. She had agreed to give back a substantial amount of land identified by us, which would allow us the revenue to do repairs.
Senator Forrestall: Which lands did you identify? Can you tell us about the revenues that would have come from those lands? That is important.
Mr. Peerenboom: We will identify the lands with the approximate revenues.
Mr. Bill Jackman, Corporate Secretary, Toronto Harbour Commission: The dock properties, 318 acres of land, was the first land to go. We were generating in the neighbourhood of $6.5 million in rents from those lands, coupled with the green lands here, another approximately $2 million on top of that.
Mr. Peerenboom: Years ago.
Mr. Jackman: That is correct.
Senator Forrestall: If I wanted to buy an acre of land there today, what would it cost me?
Mr. Peerenboom: It would cost you about $1.3 million for an acre. That information will be on the appraisal that I will submit to you.
Senator Roberge: Do you have that acreage to rent?
Mr. Peerenboom: We have approximately 500 acres left. The city has the rest of it. That is the problem.
Senator Forrestall: Five hundred acres is half the size of the Port of Halifax.
Mr. Peerenboom: Keep in mind that much of that is the Toronto Island Airport. It is not just the port land on the land side.
Mr. Jackman: The airport is here.
Mr. Peerenboom: Show them the marina. It is not really port land.
Senator Forrestall: Let me come back to where I really wanted to get to when I started out on this. You are not receiving any federal grants. You do not want any federal money. My concern is with the withdrawal of federal funding for other than significant ports. In your case it is not founded at all; it is not applicable.
Mr. Peerenboom: No.
Senator Forrestall: You just got a tiger by the tail.
Mr. Peerenboom: We will wrestle that down, senator.
Senator Forrestall: I have not been able to do it for 30 years.
Mr. Peerenboom: We will do it in the next 30 months.
Senator Forrestall: I wish you well.
Senator Bryden: Is my understanding correct that, if there is a Toronto port authority, the port authority will replace both the functions of the harbour commission and the Toronto Economic Development Office?
Mr. Peerenboom: I will leave that for the city to answer. We will take over the running of the port with the kind of financial capacity to do our job properly. For example, many of the dock walls are not owned by us right now and we cannot even repair them.
Senator Bryden: When you say that, who is "we"?
Mr. Peerenboom: The Toronto Harbour Commission. The harbour commission does not own some of the dock walls.
Senator Bryden: You will not exist any more, right?
Mr. Peerenboom: Everything goes to the port authority, sir. Whatever we have goes to the port authority; everything.
Senator Bryden: You would not necessarily go with it?
Mr. Peerenboom: Would I go with it? No one has offered me the job, senator.
Senator Bryden: What I am really trying to get at is that the intention is to replace the Toronto Economic Development Office. Does it deal only with the lands down around the port?
Mr. Jakobek: Senator, what we are dealing with today is one piece of a puzzle. What we are talking about today is the independence of the commission, or port authority, from the city. The next step, which we are currently negotiating, is a sort of final divorce proceeding between the harbour commission and the Toronto Economic Development Corporation, which is owned by the city. What I can tell you, as a member of the newly amalgamated City of Toronto council and as their budget chair, is that we, like any other government, are attempting to amalgamate our operations. We are attempting to get ourselves out of those things that we are not needed to do, like running businesses or holding commercial land when we have no use for the land. Therefore, it is fair to say that we are not planning to expand on Toronto Economic Development Corporation; we are looking at how we get out of it and get our money back out of it so that we can concentrate on running municipal services, which is what we should be doing.
Senator Bryden: Are you saying you would transfer back the 641 acres that has already gone to them?
Mr. Jakobek: I could not say that we would transfer back the entire 641 acres, nor do I think the port authority wants the entire 641 acres. What we have agreed to do is sit down to try to work out an agreement whereby the port authority has dock wall space and operates a port and the city takes the remaining lands for other purposes, gets rid of them or works something out with the port authority. In this scenario, the city would not be financially responsible for the port authority's activities and the port authority would be paying municipal taxes.
Senator Bryden: Can you give an estimate of how many acres, then, would be under the control of the Toronto Port Authority?
Mr. Peerenboom: The Chairperson, Senator Bacon, put it the best: I do not want the land back with the taxes. I will take the land back with an arrangement. We need enough capital to do our job. We need approximately $4 million to $5 million in revenue which would, therefore -- using the equation, you have 600-plus acres, you are talking a city of 400 to 500 acres.
At the request of the budget chief, we are doing a study right now to tell him what land we need, why we need it, and how it relates to the port. We must justify why we need it and why want it. In return, we will allow him off the hook on this clause regarding unlimited guarantees of our cash flows. I do not know why that clause was put in there in the first place.
Senator Bryden: I do not know whether the new Toronto Port Authority will be considered a successor to the obligations.
Mr. Peerenboom: Yes, it is.
Senator Bryden: You are saying you have 500 acres now. You would like to get 400 back?
Mr. Jakobek: Senator, we know that what happened in 1991 did not work. Through negotiation, a lot of good faith and a lot of progress, we are attempting to resolve it. Land will come back to the Harbour Commission or the Port Authority. How much, we do not know. The Port Authority is not attempting to get its entire 600 acres back. It is simply attempting to get back sufficient lands to operate like a normal business, and to run a port which allows the city to be more diverse, rather than simply facing financial issues.
Senator Bryden: In your opinion, how much would it cost, on average, to rent an acre of land in that area?
Mr. Jakobek: The answer depends on the specific land. Some land is very valuable, yielding from $500,000 to $1.3 million per acre. On other land, you would have to pay someone to stay there because of environmental problems, et cetera.
It is important that the Port Authority have jurisdiction and responsibility for the dock wall space and for the lands that abut the dock wall. When someone needs a container port or an expanded container port or rail access to the port, then the Port Authority can ensure that it is there.
Senator Bryden: Your presentation says that the taxpayers of Canada have paid over $1 billion to develop these 2,000 acres of land. If this bill passes, the taxpayers of Canada will lease the land to the Toronto Port Authority. How much is the Toronto Port Authority prepared to pay to the Government of Canada and, therefore, to the taxpayers?
Mr. Peerenboom: I will answer this way. Our profit will be between $5 million and $10 million when we execute these plans. Do I want to give you the entire profit? No, sir. Am I prepared to give you a few million dollars? Yes. There is money there to pay our obligations to the Government of Canada.
Senator Bryden: The Booz-Allen report said that a fair amount for 347 acres was $6 million in rent per year.
Mr. Peerenboom: That is correct.
Senator Bryden: I assume that some of this land will be worth at least that much. The Booz-Allen report also said 294 acres is worth $6 million dollars per year. So we are up to $12 million on 600 acres.
Mr. Peerenboom: Do you want to keep it all?
Senator Bryden: We are starting out with the asset.
Mr. Peerenboom: Let us look at it the other way around. We lost $2.7 million last year in running our port. If we had the revenues from all the land rentals, which is closer to $10 million than $12 million, we are talking about $7 million in excess profit. That is the amount of money we would have from capital investment as well as for taxes for the City of Toronto, and for payment to the federal government. That is the number that we have.
Senator Bryden: The Greater Toronto Airport Authority has negotiated a "rent" for the airport over a 60-year lease. Presumably that is the same limit that will apply to these ports. Canadian taxpayers have paid $1.5 billion for this asset, and I am trying to determine a fair price for it.
Mr. Peerenboom: I do not have the answer for you.
Mr. Jakobek: As we speak, the federal government is not entitled to anything because it does not have control. Further, that over which it would have control is losing money.
If you pass this legislation, the federal government will have control. Owing to the divorce proceeding which is somewhat tied into that, a revenue will be generated. At that point, you can start calculating the sorts of monies that could or should come back or be reinvested.
Mr. Peerenboom: The bill calls for 2 to 4 per cent of the sales of the Port Authority to be turned over to the federal government each year. As it grows, the number goes up.
Senator Forrestall: That is after other considerations.
Mr. Peerenboom: You are going to give us further considerations?
Senator Forrestall: Are you familiar with the bill?
Mr. Peerenboom: I have read it, yes.
Senator Bryden: How does the federal government maintain control? You said the federal government does not have control now. What if we pass this act and the Toronto Port Authority is formed?
Mr. Peerenboom: You review it every five or seven years, sir.
Senator Bryden: It is my understanding that the Toronto Port Authority will be in control.
Mr. Peerenboom: Four appointments are made. There are recommendations from the community, but there could be 300 recommendations. The order in council makes the final four selections. Ottawa will make those decisions. The province has one selection. The city has one selection. This is a very good deal for us.
Senator Forrestall: From what you have said, I gather that there is no accumulated deficit.
Mr. Peerenboom: No. We are sitting with approximately $20 million in the kitty. Under the current legislation, that must be used for future capital expenditures.
Senator Forrestall: What happens when that grows to $40 million? There is nothing in the act other than the figure of 2 per cent. I believe that 2 per cent is not a reasonable rent. In recent years, the federal government has been insisting on a 10 to 20 per cent return on investments of this nature.
Do you have any great public work undertakings in view?
Mr. Peerenboom: Yes. First is the dock wall and dredging.
Senator Forrestall: Are you spending money to spend money? Do you have the necessary facilities in place?
Mr. Jakobek: As budget chair for the city, I just reviewed the THC's budget, and I will present it to city council tomorrow. The budget is $5.9 billion; larger than the budgets of six Canadian provinces.
The THC has the required substantial capital investments. One capital investment is for shoreline protection, which benefits all citizenry. As you know, with the high lake level this year, a substantial amount of shoreline protection is required. The THC has substantial dredging costs, which again protect the interests of the city's citizens with respect to flooding.
In addition, dock wall repair, which is substantial, is all laid on the harbour commission. Dock wall repair is a large repair bill.
The $20 million capital surplus will literally be given to you. It will be broken down and laid out over the next five years, as it was presented to us, to show this committee the prudent, financial plan for that reserve. It is not money being held in a kitty to keep it away from anyone else. That money has been prudently put aside for the capital repairs and works which are necessary for the vital maintenance of the port area.
Senator Forrestall: Can you tell me about one of the principal capital projects?
Mr. Jakobek: Mr. Reid can give you the exact projects and some of the numbers. We can make an actual five year plan available.
Mr. Gary F. Reid, General Manager, Toronto Harbour Commission: We have a number of repairs, such as roof repairs, to be made on some of our terminals. For the first time in a long time we will also have to do navigational dredging.
Senator Forrestall: Whose responsibility is that?
Mr. Reid: It used to be the responsibility of the Coast Guard, but as they have withdrawn from it, we will have to do it ourselves. In our harbour, we have to do navigational dredging maybe once every 10 years, but this is the tenth year.
We operate a ferry service, and every five years the ferries come up for inspection. We just had an inspection that fortunately did not require a lot of repairs, but we have another one coming up. The last time, we had to spend $500,000 to bring the ferries up to Coast Guard standards. We are planning on replacing the ferry service with a bridge, which will cost us $16 million.
We have other improvements to do at our airport that will require money as well. Over the next five to 10 years, we have probably $30 million to $40 million worth of capital expenditures on the airport alone.
Senator Forrestall: You will have a great start if you have half that amount already in your kitty.
Mr. Peerenboom: We would be happy to give you our budget.
Mr. Jakobek: The sum of $20 million is not sufficient for the capital projects this commission needs to do in the next five years.
Senator Forrestall: With all due respect, I could spend $50 million in the Port of Halifax by sundown tomorrow. That is not what I am talking about. Toronto will continue to exist, and you will continue to do business and flourish. Even if you do not get the $20 million, you will continue to bring a lot into the port, and nothing will happen to the City of Toronto or its environs that has not already happened. I hope you do get it. I just want you to be aware that some people would like to know the ins and outs.
Mr. Jakobek: There is one point missing. Since 1991, when this land was taken from the THC, putting it into a deficit position, it has been able to do less capital improvement and maintenance work than it normally has done.
In the last four months, I have dealt with 64 different budgets in the city's municipal budget. Yes, a bureaucrat will find a way to spend any amount of money given to him or her, but I tell you that, even with a $20 million reserve, this capital budget is actually under-funded. If it were not, I would be the first one to try to grab it because I have other problems and pressures elsewhere, but I can tell you that they are under-financed.
Senator Forrestall: How much would you sweeten the pot by annually?
Mr. Jakobek: The capital reserve has been decreasing substantially over the last five or seven years.
Senator Forrestall: You have been using it?
Mr. Jakobek: We have been using it. We can show you how we will use it over the next five years, and how it will be decreasing even further.
Senator Forrestall: Has any of that money gone back to the federal government?
Mr. Jakobek: No.
Mr. Reid: Under the current Toronto Harbour Commission Act, any surpluses go to the city.
Senator Milne: Mr. Jakobek, you were talking about the $20 million in reserve. You were saying that $15 million is set aside for a bridge to the Toronto Island airport. Is this a project that has been okayed by the new greater Toronto city council?
Mr. Peerenboom: It was okayed by the former City of Toronto.
Senator Milne: So is it in abeyance until the new city agrees?
Mr. Peerenboom: We have spent approximately $2 million on environmental studies. We expect to have those finished by August or September of this year, and hope to build by November. We are ready to go.
Senator Milne: Is the city ready to go?
Mr. Jakobek: I suspect the city council, which I sit on, will approve the bridge. Having said that, I will say that the full cost of the bridge will not be a drain on the capital budget, for the simple reason that the bridge will end up being self-financing. The cost of maintaining and operating the ferry service is so prohibitive that the elimination of the cost of running the ferry, and of its deficit, will finance the bridge.
At the end of the day, what I need to give you -- you have asked for it and you should get it -- is our five year capital plan, which will show you exactly how the money is being spent, and which will give you the historical trends. That will prove the point.
The fund has a capital plan which shows the $20 million being exhausted in the near future, unless something is done. When this bill is passed and the divorce from the city is complete, the THC will be in a profit-generating mode, largely because of the actions of this commission to clean it up. It will be able to contribute more monies towards the capital program, which in turn should yield more profits again.
The Chairman: Are there any further questions, senators? Thank you very much for the interesting presentation.
Our next group of witnesses is from CAW, the Canada Seaway Workers. Welcome, and please proceed.
Mr. Gary Fane, National Director of Transportation of the CAW Canada Seaway Workers: My name is Gary Fane. I am accompanied today by Vince Hearn and Joel Fournier, both of whom work for the St. Lawrence Seaway Authority. Also in the room we have a number of other union representatives.
Our union represents about 215,000 members across the country in most major industries, including transportation. We have members in auto assembly, auto parts, aerospace, electronics, airlines, railways, trucking, fisheries, marine, mining, hospitality and anything else that our union can get its fingers into. We represent about 20,000 people in transportation, including 641 members working for the St. Lawrence Seaway Authority.
There are two bargaining groups at the St. Lawrence Seaway Authority. One is a supervisory group, and the second is a group of workers who basically run the St. Lawrence Seaway and make sure that vessels come up and down the St. Lawrence safely.
Quite candidly, with respect to our position on the Canada Marine Act and the privatization or commercialization of the St. Lawrence Seaway, we have always been opposed to this idea. We think it is a mistake to be doing this. We have a wonderful transportation system that works very well. It is owned by 30 million Canadians. In reality, this commercialization will be put in the hands of nine or ten shipping companies on the board.
We are not naive, though. This bill has already been through the House of Commons. We expect it will pass, so we are trying to live with that situation as it is and as it will be. We have tried to make suggestions that will allow us to live with this bill, suggestions that would be good for the customer, good for the country, and good for our employees who work there.
The majority of our employees have over 10 years of service. They like working for the St. Lawrence Seaway Authority. They consider it a career. Once employed there, people do not come and go, leave easily or leave quickly. They think it is a good place to work, and they think they are doing a meaningful job.
In the past, we have had job reductions, and we have some concern that commercialization will mean more job reductions. There comes a time when you reduce enough jobs that the system itself and the safety of the system are put into question, and we think we are there now. More job reductions will mean that safety aspects will be jeopardized.
In the last year, a new president and a new administration have come into existence. From our perspective, we have a good working relationship with Mr. Fournier, the new president, and with his new team. Labour relations matters are being handled in a fairly good, expeditious fashion, and problems are being resolved.
The company's new administration is looking for a partnership with the workers and with the union, a partnership that could improve the quality of service to customers, that could reduce costs and that could ensure that we continue to have a good transportation system. We share all of these ideas with the president; we oppose none of them.
We have concerns over the question of commercialization and whether it is premature. We know that in the United States a lot of discussion is taking place about a binational corporation running the St. Lawrence Seaway, that we will get together with the Americans and put together a group of people to run it. If this happens, we wonder why we would go through this process twice. Why commercialize it, put together a new board of people, and a year or two later start over? It does not make a lot of sense.
Criticisms are always levied at the government. In this scenario, we think the government would be wiser not to dash off with commercialization until they know exactly what they will do with the Americans.
In the United States, a debate is taking place in the House of Representatives about whether this proposal will go through and whether it is a good thing or a bad thing.
It is not surprising that we have some strong self-interest for the members we represent. All of our members have more than 10 years of service. In the past, they have been in the public service superannuation pension plan. If there is any opportunity for your committee, Madam Chair, to do something constructive to help the employees who work there and to help the shippers, we think this would be the place.
Some of you may know that the public service superannuation pension plan is a good plan and a healthy plan. We do not enter into negotiations on the pension plan in each trip to the bargaining table because the terms are already set, such as how much the employees pay, how much the employer pays and how much the government is putting in. The amount of money that people get out of the pension plan is already set.
In the last round of negotiations, when we knew commercialization was coming, the company wanted us to sign a one-year collective agreement so that the new owners -- if I can use that term -- would have a fair say as how the world will change. They wanted some control, and they wanted to be in a flexible position.
The number one concern for our members is what will happen to the pension plan. We ended up signing a letter of understanding that said that people could transfer from the superannuation pension plan into the next plan. The letter of understanding also stipulated that in the event of a dispute over the quality of the plan, a third party -- an arbitrator -- could be brought in to oversee the process. This is how we have attempted to resolve the problem.
Things get a little frantic when it comes to collective bargaining. The bargaining process was in its 14th month and the company wanted us to sign a one-year agreement. We took the position that that would not be very wise. We said that we would ratify a collective agreement and on the same day take a strike vote. Now that gives two different messages to the customers, to the shippers and to the government, which did not make a lot of sense. Under the guidance of the new president, we ended up signing a new collective agreement for two years, which will end at the end of this year.
We have been debating the issue of the pension plan. Quite candidly, the pension plan debate to transfer one to the other will not finish this year, so we will end up opening the bargaining with exactly the same question in front of us.
If you are the user group sitting on the board and you take a good look at cost, one of the things you will want to do is curtail the cost of the pension plan. Right now, employees put in about 5 per cent. The St. Lawrence Seaway Authority puts in about 5 per cent. The government, given the way the plan is structured, ends up putting in the equivalent of 6 per cent or 7 per cent.
For our members who pay into this plan, this is their security and their long-term lifeline. This is their RRSP plan, to put it bluntly. This is the plan that will properly take care of their spouse, should they pass away.
The company only wants to set up the new pension plan when it transfers $160 million or $170 million from the present public service pension plan to the new plan. It cannot work unless you do that.
Our members, of course, would rather stay exactly where they are, and that is not impossible to do. An order in council could enable it. Proper guidance from this committee could enable it.
We are worried that, as soon as the commercialization takes place, there will be a national strike by our membership because people are worried about their pension plan.
We are not sure whether commercialization will stay as it is, or whether a binational committee will manage the seaway. Therefore, we will end up doing this more than once, which does not make any sense. I do not think that we are being demanding. We are not asking for an additional contribution by the employers. We are simply trying to protect what our members presently have.
We nearly had a strike last November. That would have created difficulties on the St. Lawrence Seaway because ships are trying to leave it at that time. No one wants to have that type of dispute. Imagine having a dispute over something you already have.
With regard to the idea of moving into a new plan, the federal government will have to move over at least $170 million. We will then have a debate. The employer will want to have a less rich plan, and we will not want that to happen. With this union, that will not happen. Therefore, we will have a conflict while we are trying to establish a new, quality relationship with the new administration.
As I said before, we know we cannot stop commercialization from happening. We are trying to live with it.
We fine it quite interesting that the user group will be put on the new board to run the facility. No one consulted the representatives of the workers who will have to live with the decisions made by the new board. The new non-profit board will be out to cut costs. There will be a debate on how the seaway will run, and that will affect our members and our customers. The union has been excluded from the board, however, and is not present even in an advisory capacity.
We know that the world is changing. We know that things cannot stay the way they are. We also know that the seaway made money last year. Our members are happy to be working there, and we think that we are doing a good job of adding to the economy of the entire country. We do not wish to stand in the way of that growth, but we do have some concerns.
We would be pleased to have you focus on the issue of the pension plan. That would give our members some relief, which would add to a climate of positive labour relations in the seaway in the years to come.
The Chairman: To what extent did you participate in discussions with the government and the user groups proposed to take over the operation and control of the seaway?
Mr. Fane: We were not invited to participate in the original discussions. That information which we did receive usually came to us second-hand, from the former president. The new president is communicating with us effectively, but throughout the entire process we have had little input.
The Chairman: Do you believe the new group proposed to run the seaway will be any more effective than the existing set-up? Where do you think new efficiencies can be found?
Mr. Fane: No, we do not think the new group will run the seaway any better. We think that the present administration, which is also making money, is doing a fairly good job.
I hope that you will not find this rude, but we sometimes think that it is like putting the fox in charge of the chicken coop. The shipping magnates are being told that, although many people use the facility, nine of them will be allowed to control it, because they have a vested interest. I would not expect our union to be allowed to control it, because we have a vested interest. The costs may go up and employees' benefits may go up higher.
We believe that the government rushed somewhat to change transportation policy. This looks a little like the airports. They gave away the good airports, but they cannot give away the ones that are not money makers. We believe that this is premature.
The Chairman: Are you aware of the terms under which airport employees were transferred to airport authorities? Did those employees keep their pension plans?
Mr. Fane: One large group in particular did not keep its pension plan. It was transferred to NAV CANADA. To be candid, the transfer was done properly.
There are three differences in this situation. First, the government still owns the facility. Second, the lease arrangements are for five to ten years. Third, they are already talking about doing something different with the facility, such as getting into a new relationship with the Americans. There are some similarities, but there are some differences as well.
The Chairman: Have all your concerns about the continuity of employment benefits been accommodated? You mentioned pension plans, but what about other benefits?
Mr. Fane: If you are referring to wages and the collective agreement, we feel confident that we can do business with the new president, Mr. Fournier. The pension plan seems to be somewhat out of his control, however.
If the pension plan is transferred and the employees elect not to transfer their invested money, which they can quite legally do, there will be a brand new pension plan. The owner will not want to contribute that much. Since the asset was not transferred, they cannot even make money on the asset transfer.
That is where we are heading. The new management group is expecting that the employees will transfer their $160 million or $170 million, that they will invest it wisely, and that will take care of future increases they may have to pay. Invested properly, that would have a very good effect.
Our members will not be transferring, however, and we cannot give them one good reason why they should transfer their past service. We have no choice on future service. If you have 28 years of service, there is no good reason to transfer your pension to a group of owners unknown to you.
We think we can work out issues such as salary and other benefits, even if it requires having a fight. The pension issue is a no-win situation for everyone, however.
Senator Forrestall: I understand your concern about transfer of pension arrangements. I was surprised to learn that you pay five per cent, the seaway pays five per cent and the governments six per cent?
Mr. Vince Hearn, Chairman, CAW Canada Seaway Workers: The government pays seven per cent, I believe.
Senator Forrestall: Seven per cent and the seaway pays five per cent?
Mr. Hearn: There is 15 per cent in total.
Senator Forrestall: Between the seaway and the government?
Mr. Fane: Yes.
Senator Forrestall: They pay that indexing over and above your cost?
Mr. Fane: It is the same pension plan and same payment plan, I believe, for every employee of the federal government.
Senator Forrestall: It sounded a little sweeter coming from you.
Mr. Fane: I tried to make it sound positive, yes.
Senator Forrestall: I can understand that. The challenge that is presented to the workers, the employees, the users and the provincial governments of Quebec and Ontario, because they are equally involved with the movement in the United States for a binational seaway, has some mid-to-long-term implications which must be considered. Have you sought to have the question deferred until such time as this question has been resolved?
Mr. Hearn: The pension?
Senator Forrestall: Yes, the pension deferred.
Mr. Hearn: We wrote to the Treasury Board and asked them to defer it. They wrote back and told us that they can only defer it for a short period of time and that the only way we could stay under the Superannuation Act would be by way of an order in council.
Senator Forrestall: They did not tell you why they could only defer it for a short period of time?
Mr. Hearn: They said that there was no legislation saying that we must stay in the superannuation or must leave but normally they do not allow a commercialized business to stay under the Superannuation Act. The only way that we would be allowed to stay in would be for the government to have an order in ccouncil.
The Chairman: Could you send us a copy of that letter?
Mr. Hearn: Yes. I went through the Speaker of the House and he forwarded my request on to the Treasury Board and they sent me a reply.
Senator Forrestall: That is rather interesting. What does your counsel say about it?
Mr. Fane: Basically, our counsel has advised us that only the cabinet could pass an order in council to make this types of arrangement. We attacked it a different way and said instead of leaving people there permanently could they leave them in temporarily for five to ten years depending on the lease arrangement and we were given basically the same answer.
When we dealt with the past president of the company he said bluntly that it was impossible. Later we found out from one of the users that they were thinking about taking over the pension plan. They would get $170 million put into an account and they would be able to manage it themselves. We were going from negative to negative.
Senator Forrestall: You would not know what to do with that $170 million if it was given to you, would you?
Mr. Fane: We would simply want to ensure that it was taken care of safely.
Senator Forrestall: It surprises me. That is a great deal of money to be given to you. Depending on how they gave it to you you would need to get it working immediately at the best possible returns and you are not in the business of doing that. You are not in the business of managing money.
Mr. Fane: We definitely have no interest in managing the pension funds. That would not be a priority of ours, to be honest.
Mr. Hearn: We view staying under the Superannuation Act as five-to-ten-year lease of which either side can say, "We tried it, we do not like it. Whether we get a reciprocal agreement under the Superannuation Act or not it is further disruption and we are changing back to a different pension plan." They are proposing that there be a two-tier pension plan. If we go into this binational commission when it forms a binational corporation will there be a new pension plan for the corporation and will our lives then be disrupted again?
Senator Forrestall: You said that your leadership would be prepared to take the question of a strike on this matter to your membership. Would you care to elaborate on that?
Mr. Fane: If bargaining in a reasonable way is not possible, quite candidly we still have the right to peacefully withdraw our services. This issue is so explosive for our members that in our union we have a philosophy: If the members are going one way, if you are in charge you had better make sure you are leading them because that is the only way you will remain in charge. There could be more than one major disruption over this issue. It is not a matter of something we wish to change. We had what we considered a very good plan and members paid their share. There was a comfort level. However, there is no doubt in my mind that, in either this round of negotiations or the next one, if this issue cannot be resolved the St. Lawrence Seaway will be closed by our members and I do not take great pride in that. There are times that I do take great pride in having a dispute over something important. This is one for which I think we should be able to find a resolution.
Senator Forrestall: Have you taken any preliminary steps leading to approval from your rank and file of a vote?
Mr. Fane: Last November, after 14 months of bargaining and the employer telling the past president that he could only sign a one-year collective agreement, we had a vote to have an illegal strike. That came in at 92 per cent. The date was picked and off we went. The new president intervened and we ended up trying to sidestep the pension argument because it was a year or two in the future. We put together a letter of understanding that said that if they were planning to transfer the new pension plan should mirror the former one. It is never a problem having a fight. Finding a solution is more of a problem.
Senator Forrestall: Sometimes in the heat of the battle you get a solution you do not really want.
Mr. Fane: This is true.
Senator Forrestall: I commend you for your early negotiations and I have complete empathy with your concerns and particularly your concern about the unknown. There is nothing proven out there, least of all your capacity to properly handle the transfer of that fund immediately. I think they would need to retain control. If they retain control there should be a realization that perhaps they should spread it out over a longer period of time and await the outcome of the binational commission.
Mr. Fane: That would make so much more sense in our view.
Senator Forrestall: It is a quiet issue, it is not a burning issue in Canada. I doubt we will hear about it from anyone else who comes in front of us and to that extent I agree with you.
Senator Roberge: Do you think that grand-fathering in would solve the problem?
Mr. Fane: Yes, that would solve the problem.
Senator Forrestall: Not necessarily ad infinitum.
Mr. Fane: Sooner or later, the government will decide on a policy.
Senator Milne: You have spoken mainly about pension concerns, but your brief says more about job reduction. Would you like to expand on that?
Mr. Fane: We have about 600 members left at the seaway, which runs with approximately 700 members. We believe that the corporation has cut all of the fat and bureaucracy out of the corporation that it can find, including jobs in management. We have no pride in people losing their jobs, regardless of whether the job is a union job or not. We do not like to see people lose their jobs.
We already are very efficient. If the new group wants to be more efficient, meaning further cost cuts, we are worried that more reductions will affect both the safety and the quality of our work, and the president of the corporation certainly has agreed with us. At one stage, they were going to cut more than they already have, but we find that we cannot cut any more. It is not a matter of efficiency now; if further cuts are made, we will not be efficient.
If you are on the board and trying to lower costs for your own vessels, who will pay the price? The answer is the St. Lawrence Seaway, the government, the safety aspect, and our members. We do not think we can cut much more.
Senator Milne: You think of the 641 employees you represent as being rock bottom.
Mr. Fane: That is rock bottom. If 10 or 20 of them retire tomorrow, they will need to be replaced, or else the system will not run efficiently.
The Chairman: Thank you, Mr. Fane, for your presentation.
We will now hear from representatives from the Chamber of Maritime Commerce and the Canadian Shipowners Association.
[Translation]
Mr. Donald N. Morrison, President, Canadian Shipowners Association: My name is Donald Morrison and I am the President of the Canadian Shipowners Association. With me is Douglas Smith, President of the Chamber of Maritime Commerce. We are pleased to be here this afternoon to discuss Bill C-9, the Canada Marine Act. After our presentation, we will be happy to take your questions.
[English]
Mr. Douglas Smith, President, Chamber of Maritime Commerce: I would like to give you some background on the Chamber of Maritime Commerce, and tell you what we represent.
We are an industry association which brings together many sectors of the economy which depend on, or are affected by, a viable marine transportation system. Our organization is binational in scope -- in other words, we have both American and Canadian members -- and it is very broad-based. We represent commercial interests including Alberta grain producers, Saskatchewan potash producers, Manitoba commodity traders, the Ontario steel industry, salt producers, cement producers, the aggregate industry, power generation interests, Canadian and U.S. ports, Atlantic shippers, and Canadian and foreign flag vessel companies. What brings them all together is an interest in competitive marine transportation.
Our function as a chamber is to promote the use of this cost-effective and efficient mode of transportation, to promote the benefits it brings to Canada's economy, and to ensure that the overall importance of this environmentally friendly means of transporting materials is understood.
The Chamber of Maritime Commerce and its members support Bill C-9, and we applaud the Government of Canada's efforts to make Canada's ports as well as the Great Lakes-St. Lawrence waterway more competitive, efficient, and commercially oriented. The chamber and its members have been actively involved for the last four years in the review and consultation process leading to this bill. In fact, we are so committed to the direction of this bill and the need for competitive transportation that our organization, in conjunction with the Canadian Shipowners Association, has developed a vision document for the Great Lakes-St. Lawrence waterway. We have that document with us today, and we will leave it with you. This document builds on the directions and initiatives in Bill C-9, but goes further.
I should like to take a few moments to highlight for the members of the committee the uniqueness and the economic significance of the Great Lakes-St. Lawrence waterway, and its implications for Canada's marine policy. The region is home to one quarter of North America's population -- more than 90 million people. It accounts for 40 per cent of U.S. manufacturing, and two-thirds of Canada's industrial production. The Great Lakes region accounts for 70 per cent of all U.S., and 67 per cent of all Canadian steel production. Nearly half of the Fortune 500 industrial companies are headquartered in the U.S. portion of the Great Lakes region. The vast majority of Canadian corporate head offices are in cities along the waterway.
Ports of the Great Lakes-St. Lawrence waterway are closer to the European markets than competing North American ports, and they give us access to Europe and other destinations that we would not otherwise have without an effective waterway. The Great Lakes-Saint Lawrence waterway lies at the heart of Canada's intermodal transportation network, linking rail, trucks, pipeline, and marine shipping. More than 40 provincial and interstate highways and nearly 30 railway companies connect the Great Lakes ports with key cities throughout the United States and Canada.
The waterway is not only a marine super-highway, but also an important element of eastern and central North American tourism, as well as a source of recreational opportunities for our citizens. It is important to all of us that both the commercial and other users and participants in that system continue to cooperate to maximize its benefit for all.
According to the House of Commons Standing Committee on Transport, the waterway adds an estimated $3 billion Canadian annually, as well as 17,000 jobs, to the Canadian economy and $2 billion U.S. and 49,000 jobs to the U.S. economy.
Trade is a leading priority for the Canadian government. The importance of the Great Lakes-St. Lawrence waterway to Canada's trade competitiveness makes it central to government trade strategy, and makes partnership with government a key focus for the marine transportation sector. It is an aggressively competitive marketplace, and we need to compete.
Over the years, the existence of the waterway has led many of our industries to make long-term investments in plants and machinery that are dependent on competitive marine transportation services.
These industrial producers and their employees are fully committed to a competitive transportation route for their products. They are investing daily in improving the system.
Efficient bulk transportation is strategically important for a trading nation like Canada, both for domestic industry and for export sales. Marine transportation on the Great Lakes-St. Lawrence waterway provides significant advantages over other modes of transportation, especially for bulk commodities. Marine transportation is safer by a wide margin than other transportation modes. It is significantly more environmentally friendly than competitive transportation options. For many industrial sectors, it is the only viable transportation option. It is fundamental to Canada's prosperity.
Commercial carriers are able to co-exist successfully with other users of the waterway. We have done this for years. It is a remarkable achievement, and we hope that it will continue in the new environment.
In the 40 years since the building of the St. Lawrence Seaway, considerable innovation has taken place in marine transportation and in the industry that uses it. However, in the view of our industry, the waterway has not achieved its potential. The policy, legislative and regulatory environments for the Great Lakes urgently need improvement.
We support Bill C-9 because it makes a start on these necessary improvements, and we urge its passage. We are committed to the use of Bill C-9 as a stepping stone to achieving our vision for the waterway. We have outlined this plan, and Mr. Morrison will speak on this in more detail. We have met with the government and spoken about this. A critical part of achieving our vision is doing things such as commercializing the seaway, undertaking pilotage review, and getting the ports on a competitive standing.
Mr. Morrison: Senators, I should indicate that we are taking the time to describe our association and our members in order to emphasize the importance of our industry. The Canadian Shipowners Association represents the shipowners whose Canadian flag vessels sail the Great Lakes-St. Lawrence waterway, the Canadian and U.S. east coasts, and the Arctic waters. Our association's goals include creating an economical and competitive marine industry, and making the Great Lakes-St. Lawrence waterway the most competitive, technologically advanced, environmentally responsible, water management system in the world.
Currently, we represent 11 companies, which account for more than 95 per cent of the Canadian flag commercial tonnage. Members of the association provide for Canada's prosperity by supplying Canada's industries and communities with the commodities and goods they require. As an example, in 1996 we carried 67 million tonnes of cargo, mostly bulk goods, but also general cargo in containers. That figure is not far behind the railways, especially when you consider the limited length of the seaway navigation system.
The CSA sees the commercialization of the port system and the seaway as an important step in this direction. We believe that the measures proposed by the Government of Canada in Bill C-9 will contribute to the vitality and competitiveness of the seaway and Canadian ports. We also believe that it is important to go further than this legislation goes.
Shippers and carriers have conducted a thorough review of the waterway, preparing the "Competitive Vision" document which we have just given to you. We have reached a consensus on the actions required to preserve and enhance the vitality of the system, the most important of which is creating a partnership for change within the marine industry. Governments and other stakeholders will manage the waterway as a unique integrated geographic and economic system, not a fragmented one.This is a new approach which embraces change and defines the needs of the waterway in terms of its economic and strategic role in the North American economy.
In our view, managing the waterway as a discreet, strategic economic system requires change in a number of areas. These include the fact that we need Canadian and U.S. marine legislation and policies designed to facilitate North American trade, rather than encumber and disadvantage the movement of goods, as sometimes happens today. We need greater private-sector management. We need a more open and competitive industry, and a regulatory regime that has more standards and is performance-based, rather than the historical regime we have today.
We are continuing to work to advance this agenda with Canadian governments. We are cheered by some of the initiatives already undertaken, including Bill C-9. The measures included in Bill C-9 to effect commercialization of the waterway are entirely consistent with our recommended strategic approach, and are a key reason for our support for this legislation. You will note that we have addressed this issue in our vision paper.
[Translation]
I would like to discuss another feature of Bill C-9, namely the amendments to the Pilotage Act and specifically clause 157 which calls for a review of the pilotage system in Canada and the tabling of a report to Parliament one year after the legislation comes into force. We support this provision.
[English]
The Canadian Shipowners Association has longstanding concerns about pilotage. The House of Commons Transport Committee heard this in the initial discussions on the previous bill. Pilotage is a prime example of how regulations are constraining our productivity growth. Ship operators have invested in new electronic-based navigation systems which provide unparalleled precision in navigating the waterway. Under current rules and practises, the advantages of this technology are not put to use, and the savings which could result from optimizing the technology for electronic pilotage or application are lost.
Considerable savings can be delivered through reform of the process without compromising safety in any way. While there will always be costs associated with waterway transit, there is no doubt that considerable savings can be achieved through legislative and regulatory modernization of pilotage services.
We have called on the Government of Canada to make legislative and regulatory changes that will bring about the implementation of a self-pilotage system that will allow shipowners to begin to benefit from their investment in technology and training. The mandated review by the minister, working with the users of the waterway, is a sound and necessary step towards such a system and another major aspect of our support for Bill C-9. We look forward to participating in a review.
Planning and implementation of a renewed pilotage system and issues regarding certification and training, financial self-sufficiency and cost reduction are all areas in which our members will be pleased to work with the pilots, government and other stakeholders to help find effective solutions.
In regards to major ports, we welcome increased commercialization. As the president of the shipping federation mentioned in his previous visit here, we might also have preferred more direct carrier participation, but we can live with the approach being taken in Bill C-9.
To recap, we support the passage of Bill C-9 in order to improve the commercialization of the seaway, provide increased user input to port management, and to review the pilotage system.
[Translation]
This concludes our presentation. Thank you, Madame Chair, honourable senators. We will now be happy to answer your questions.
[English]
The Chairman: The Vice-President of the Chamber of Maritime Commerce, Mr. Campbell, seemed to think that some provisions of Bill C-44 could affect the competitiveness of Canadian harbours when he testified in front of the House of Commons transportation committee in October of 1996. Do you think that the provisions in Bill C-9 will affect the competitiveness of Canadian harbours?
Mr. Smith: When Mr. Campbell was testifying here, he was referring to the disposition of some of the harbour commissions, which was intended at the time. Those issues have been resolved, and they are quite comfortable with the approach of the Canada port authorities. They believe that they will be competitive.
The Chairman: It seems that your message this afternoon is clear. It says to go ahead and pass the bill. What risks are involved with further delay? Are there real difficulties if we take our time in trying to perfect the bill?
Mr. Smith: I think you should take your time to do so. Mr. Morrison may wish to comment as well. We have been working with this for four years. We are eager to improve the competitiveness of transportation.
Many of the other competing modes, or modes that we work with, have already been deregulated and changed, so we are anxious to get on with it. While we are facing government policies that raise our costs, we have not yet had the benefit of things which may lower our costs. I am referring to things such as coast guard fees and other initiatives. We would like to get on with the implementation of a completely competitive environment. Obviously, things take time, but we are anxious to get on with it. As we said in our vision paper, we see the bill as a first step towards achieving some of these things. If the bill is delayed, then we will be delayed as well.
Mr. Morrison: As ship owners, we would underline what Mr. Smith has said. In the past two or three years, we have faced four or five new cost-recovery initiatives by the government. We have not yet been able to look at any efficiencies to be able to reduce the costs as we transit the Great Lakes-St. Lawrence waterway, and we really feel that it is time to do that.
Again, this bill has been discussed, and many people and groups in Canada have been consulted on it. We do understand that it is not perfect. We have even alluded in our paper to some of the things that we would like to have seen in the bill. We did not get them. However, in terms of the overall commercialization of the marine transportation system, we feel that it is a good step and we are willing to support the bill for that reason.
The Chairman: Are you satisfied with the present provisions in Bill C-9 with regard to the composition of the boards?
Mr. Smith: There are boards for the seaway and boards for the ports. Are you referring to the ports?
The Chairman: Yes.
Mr. Smith: The easy answer is that we can live with the provisions that are there. We feel they will work.
In our testimony before the transport committee in the other place, we testified to the fact that direct user representation on the ports would be the appropriate approach. We were concerned with the minister appointing user representatives rather than direct users, and with the minister perhaps not selecting port representatives that the users would like to see on the boards. However, we are satisfied with the intent of the legislation. We believe that, overall, our members are satisfied with it and we believe they can make that work.
Mr. Morrison: The CSA would have preferred direct carrier representation but, again, in the spirit of compromise, we did not get that. What we will do with the process as set out in the bill is pay much attention to it and ensure that we stay on top of the selection and nominating process to get the representation that we require. We believe that can be done with the present bill.
Senator Forrestall: I should like to return to some of the comments made by representatives of the CAW. Would you have any trouble with grandfathering those parts of the enabling legislation or regulations that would enable the transfer of, as they suggest, about $170 million in funds to the new corporation with respect to the pension, until such time as the binational discussion has finished? Would either of you comment on that?
Mr. Smith: I may answer your question by raising more questions. However, first, I do not know any details of the specific discussions about what the user group is negotiating or is not negotiating with the government. I do not know the details of that arrangement. I do not know their views with respect to the pension plan.
On a general basis, I would say they are taking over the whole thing with a view to making it more economical and efficient, so why encumber them in any way in that attempt?
The comment that was made here was about taking a strike to fight for their rights, and whether that would make the system effective. The users group will be negotiating many different things with the unions in operating the system. They do not wish to have the system shut down any more than the workers wish to have it shut down. There has been much talk about how the users will run the system for their own benefit and will compromise safety, and so on. However, those users have a huge investment in the ships that they carry on the system, and they certainly cannot afford to have the coal and iron ore used to produce steel, or the grain going to market, interrupted through loss of service. They will not be running the system to extract every last penny from its operation to the detriment of its safety or its performance in any way at all.
With respect to the binational agreement, we fully support the idea of having a binational operation of the seaway. We even support expanding that to other things than just seaway lock operations. However, that discussion has been going on for a long time and I believe it will go on for a long time yet. We do not think we should wait. It could be five years or more before that might happen, and to put everything off waiting for that discussion or agreement to take place would delay many opportunities to make the Canadian system, which, in fact, contains the majority of the locks and the operations, as efficient as we possibly can make it.
We fully support the binational project, and we will get behind it as soon as the discussions become serious, but they will take a long time. There are many difficult issues to deal with to make that happen.
Senator Forrestall: The seaway has been around for a long time. The pension fund is growing, it is stable, it is settled. It provides a degree of comfort to workers at the seaway, and that is very beneficial to the users of the seaway.
My question has nothing to do with any of those things. It has to do, rather, with whether you would have any objections to excluding from proclamation those clauses of the bill that deal with the transfer of the pension, or the completion of the settlement of the pension program, until such time as some of these other questions are debated and argued. I always had the impression that we could not do what we are doing today because it represented quite a leap from the original protocols and agreement establishing the seaway in the 1950s. In the back of my mind, I cannot imagine doing this, leaving in place the present public service pension arrangements until such time as they could be transferred without any fear on the part of the users or the beneficiaries of that pension scheme.
Mr. Morrison: I am sure we would both love to answer the question. I would be reluctant to do so until I have seen whatever documentation the government has, and what the plans are. As Mr. Smith said, we have not been privy to all of the negotiations between the users and the government. I would say that the relationships between the industry and the unions that represent the people who work for the Canadian Shipowners Association are very good, and I would hate to make any comment that would affect them one way or the other. We really could not reply without examining the whole question.
Senator Bryden: The St. Lawrence Seaway is described by the department as basically a water highway. They describe it in the same way as the Trans-Canada Highway, a vital part of the water transportation system of Canada.
However, there are concerns by some people about the continued viability of the St. Lawrence Seaway. You may be aware that not too long ago there was a reprint in The Globe and Mail of an article from the Wall Street Journal. The article states:
The St. Lawrence Seaway, long hailed as an engineering marvel, has turned into a surprising disappointment...
Opened nearly 40 years ago, the seaway brought open shipping to the North American heartland by allowing traffic to move from the Atlantic to the Great Lakes. The waterway, which is twice as long as the Panama Canal, thrived for years. But in the past two decades traffic has plunged by 45 per cent.
Do you agree or disagree with that statement?
Mr. Morand: We would not disagree with the numbers that are put forward. The article seemed to suggest that it was the fault of the waterway that the waterway was not doing well. Perhaps the numbers have changed over the years because of changing markets. That is not to say that some of those markets will not return. That is not to say that if we can get our act together in Canada that we could not again begin to compete with the Mississippi and the southern rail routes.
Remembering the article, I found it interesting that Mr. Smith and I had only a few days before that been interviewed by The Globe and Mail. The impression we had hoped to leave with them was not as pessimistic as the one they copied from the Wall Street Journal.
Senator Bryden: The article also went on to state:
Seaway officials estimate that it would take $4 billion (U.S.) to $5 billion to expand the system to accommodate the new generation of cargo boats now plying the oceans. But pessimists note that neither the United States nor Canada seemed eager to come up with the cash to expand the waterway's locks and canals.
Do you have any comment on that?
Mr. Morand: At this time that is probably a correct statement. One of the reasons we would like to see Bill C-9 pass is that we would like the opportunity to put this waterway system into the best shape it can be as it is. Before anyone starts to plan new capital expenditures we would want to have it in the best shape it can be to handle coal, grain, iron ore and the aggregates. We want to see what we can do with an efficient system.
We have heard today that the system presently is not that inefficient. We agree with that but we still think that there is the commercial hurdle of making it more like the private sector. We believe this will help the system.
Senator Bryden: Are you referring to the ability to accommodate larger ships?
Mr. Morand: No.
Senator Bryden: Where would the $4 billion to $5 billion U.S. come from?
Mr. Smith: We do not know.
Senator Bryden: My principal concern is that under Bill C-9 the ports, the port authorities, the smaller commercial ports as well as the larger ports, have no call whatsoever on Canada's Consolidated Revenue Fund. The only exception in the bill is that the seaway does. With numbers like this that is a pretty big call.
Mr. Smith: Again, we do not know the details of what is being negotiated with the users' group and the government but I do not believe they would be negotiating for or have the right to call on $5 billion in investment capital uncontested or in other forums. They are talking about a commercial arrangement to run the seaway so that it is self-sufficient on a day-to-day basis. The reason the government wishes to make the change to the seaway, recognizing that it serves huge populations and huge industry bases, is that up until about two years ago it was not self-sufficient, even on a day-to-day basis. Today it is. Some of the improvements that the previous presenters talked about have begun to lead to the seaway being self-sufficient on a day-to-day basis. The arrangement that the government and the users are talking about is to make that better and more viable. There is not the expectation that it is to underwrite the operation of the seaway.
Senator Bryden: It is absolutely, explicitly, clear in relation to every other part of our national water transportation system that once it is divested and becomes privatized or a not-for-profit organization the government cannot and will not guarantee loans. They will not support bond issues and they will certainly not provide additional funds. My concern, which I raised with the minister and which I now raise with you as spokespersons for the industry, is an issue of fairness. In the seaway section of the bill, it says exactly the opposite -- that is, that the government of Canada will pick up shortfalls for capital maintenance and that type of thing. That includes guarantees to be paid, funds and grants. The word "grants" is used. These come out of the Consolidated Revenue Fund.
Some of us -- me in particular, because I come from Atlantic Canada -- are very concerned about whether that is fair. The ports in Atlantic Canada and the ports on the West Coast are part of the national marine transportation system. It can be argued that the more funds are expended on the St. Lawrence Seaway by the federal government the larger the disadvantage to ports such as Halifax and Saint John and so on.
Do you see the seaway or ports along the seaway as competing with Halifax, for example, and Saint John?
Mr. Smith: First, I wish to make it clear that the legislation with respect to the seaway is with respect to the locks on the seaway. It has nothing to do with the ports that are part of the seaway system, part of the St. Lawrence River, or in Atlantic Canada or Western Canada. Part of the legislation deals with ports but the seaway part of it deals strictly with the locks and the operation of the seaway.
Second, the government has obviously looked at all the ports and talked about what would make them most effective. Being most effective would be in relationship to the users having direct involvement in the operation through representatives on the board and local interests whose economies would be affected by the operation of the ports.
The seaway supports many users and the transportation for those users. It affects two countries. It affects four or five provinces. It affects eight or ten states in the United States. It would not be appropriate to totally disregard those other interests.
However, having said that, the government has every intention, I believe, through the legislation to make the seaway more self-sufficient, not less self-sufficient.
Mr. Morrison: In terms of equity, the timing may not be good because most of the major ports are commercially independent now. However, if we look at the immediate past there have been instances of debt-to-equity changes. However, I think it puts those ports in a competitive position.
I suspect that, for the reasons Mr. Smith enunciated, the government must be concerned that a waterway or a highway remain competitive for the Canadian customers who are using it, whether it is grain from Alberta, grain from Saskatchewan, iron ore from Quebec, coal from the States coming in to help Ontario Hydro. When all things are considered, it does not look inequitable if we include a little bit of history.
Senator Bryden: The department said, and you have reiterated, that the commitment of the Government of Canada is to the locks, the infrastructure and so on. However, there has been a tremendous change of emphasis over the last ten years by governments. For example, if you use the ice breakers then the who benefit from the use of the ice breakers pay for it.
Why would that same principle not apply to those people who use the seaway?
Mr. Smith: They do pay for them today. They pay for them every day. They pay $70 million a year to use the seaway facilities.
Senator Bryden: If that is what is occurring, then it should not be necessary to have a call on the consolidated revenue fund to support the seaway.
Mr. Smith: First, I do not know the extent to which they do have a call on the consolidated revenue fund. The government and the users are in fact negotiating or have negotiated an arrangement for the users to take over day-to-day operation of the seaway. The seaway serves many regions of both countries. Its volumes in total very much depend on swings in the world trade picture. Grain shipments vary according to what is happening in the world, as do iron ore shipments. The concern on an annual basis is that a big disruption in traffic in any given year, if the seaway had to be totally self-sufficient, would cause the seaway corporation to raise tolls which, in fact, would have the effect of driving more business away rather than solving the problem. The idea would be to recognize that it needs to be spaced out and there must be some continuity in the process. I believe those are the kinds of discussions which are occurring. The government, having been responsible for the total cost of running the seaway at all times, is now entering into arrangements such that the seaway would be self-sufficient within reasonable bounds of predictability and will be under an obligation to meet performance targets and things like that, which the existing arrangement does not cover.
Senator Bryden: We could have an interesting debate about whether much of what you just said applies to a large commercial port, the swings in what happens in world trade and so on.
Is it your understanding that the users of the seaway can be on the seaway authority? I ask that, and I will put it in context, because it seems clear that the users of the ports cannot be on the port authority, and if I am right why the difference, if you know?
Mr. Smith: They are taking on responsibility for the day-to-day operation of the seaway. The users of the ports have not taken on responsibility for the day-to-day operation of the ports. That is the difference.
Mr. Morrison: This question also addresses users in two different contexts. The users, in effect, will be the managers. The port management group is already there. Their boards will be comprised of people nominated by the industry and, in effect, in the seaway -- if you could maybe just give us the source of that.
Senator Bryden: I will just read you what the Assistant Deputy Minister, Mr. Ranger, said.
The not-for-profit corporation that will manage the seaway will have on its board some people who have a very genuine interest in the viability of ports. We are talking about the big users. We are talking about large ship-owners and large shippers such as Stelco and Dofasco, large carriers like FedNav and Upper Lakes. Those people have a genuine interest to ensure the ports are viable.
I take it from that that the people who use the seaway, for example, the president of Stelco, could be on that seaway authority. Is that your understanding, if you know?
Mr. Smith: I do not know whether, in fact, the agreement between the users group and the government restricts that or not at this point.
Senator Bryden: Certainly the legislation does not.
Mr. Smith: The legislation does not. The distinction that Mr. Morrison made is that in the case of ports the users are not responsible. They are not operating the port. In the case of the seaway, they are attempting to negotiate the day-to-day responsibility for running the seaway. If they have that responsibility they must have representation on the board is the way I would put it if I were them.
I would just point out that the seaway board will comprise nine members, five of whom will be representative of users, three of whom will be government representatives and a chairman who will be appointed by the other board members. Each of the users represents many users, not one user.
The previous presenters spoke about four or five or nine large users representing everyone. As I understand it, there would be a representative on the board who would be a representative of domestic carriers. There is more than one domestic carrier.
Mr. Morrison, how many are there?
Mr. Morrison: Eleven.
Mr. Smith: There would be one board member representing those eleven carriers. Similarly, there will be one board member representing foreign-flag carriers. There will be a board member representing grain interests. There will be a board member representing steel and iron ore interests. There will be a board member representing the other smaller shippers on the system. In fact, those five members will represent to a large extent all the users of the system. Additionally, there will be three government appointments and then there will be a chairman.
Senator Adams: My concern relates to cargo and in dealing with NAVCAN two or three years ago when it was privatized by Transport Canada. Since NAVCAN took over, I think our rates for some of the freight and passengers went up about 30 per cent for those who are living in the Arctic. My concern is that you people -- the shippers and owners -- guarantee in the future that your rates will not go up in the future if Bill C-9 passes?
Mr. Morrison: We obviously cannot guarantee that our rates, in effect the carriers' rates, will not go up. What we can guarantee is that the carriers will be doing everything in their power to ensure that the rates in the seaway do not go up inordinately. That waterway system is so fragile right now, in terms of competition with our own two railroads, the American railroads and the Mississippi, that it cannot afford to have costs spiral out of control. We will have new fees. The market will look after that.
Senator Adams: Do you charge any fees at the docks for ships waiting to load? How does the system work? I am concerned because, when you want to ship anything north, the shipowners say you have 30 days before the ship leaves. Do you charge any fee for waiting in the docks?
Mr. Morrison: The ships would have to pay for the use of the dock, yes.
Senator Adams: If you have someone waiting at your dock for 30 days, you want to get paid for those 30 days. How does that work?
Mr. Smith: Our ships pay cargo fees. They pay dock fees, wharf fees, port charges, every time they go in. Are you asking what happens if they do not pick up a cargo and leave it on the dock?
Senator Adams: No. Suppose you own a ship and are shipping stuff to the Arctic, and your cargo will be there for 30 days. Are you charged for those 30 days or just for having the load delivered to your ship?
Mr. Morrison: Certain fees would be paid for the ship at the dock. It would be either a docking or a harbour fee, or some form of fee for the use of that dock. We would need to look at specific instances before we could apply it specifically.
Senator Adams: It seems like an owner can charge so much a day, and I wonder what would happen if the dock were privatized. You pay a landing fee to the dock, not by the day. If I am shipping something in 30 days and the ship is waiting to be loaded, I am concerned about how much you are charged by the dock owner. How much does he charge you for the tonnage?
Mr. Smith: I do not know. It is whatever the fees are today, and it varies for every port at which a ship docks. It would depend on the cost of that particular harbour commission or organization. I have no idea what the individual fees would be.
Senator Milne: Mr. Morrison, you spoke about the savings which could result from optimizing the technology for electronic pilotage. I assume you are again referring to the green light system.
Mr. Morrison: That is part of it, yes.
Senator Milne: What sort of implications would optimizing the technology have on employment in the system? I am thinking of the CAW representatives. Do you see that as reducing the number of employees needed along the seaway? As I live near Toronto, I am particularly interested in the seaway.
Mr. Morrison: I cannot answer that question, as we have not looked at what will happen to the seaway employees. We were looking in terms of how to better control the vessels using modern technology; using satellite technology to know where vessels are at all times, in order to make efficient use of the locks and docks, and to avoid queues. I would not necessarily say that this would increase responsibility for seaway employees, but it certainly would allow us to make more efficient use of the docks, and perhaps more vessels could pass through.
Senator Milne: You are using the time and employees more efficiently.
Mr. Morrison: Yes.
Senator Milne: The CAW suggested that there could be a strike if this were to go through, and that would have an enormous impact on you. It might also have an impact on Halifax. It might be of some benefit to Senator Forrestall if there is a strike on the seaway, because more ships would use Halifax. I also understand, however, that many of the deck crews on many of the ships going up and down the seaway belong to CAW. What sort of impact would a strike hazard have, in your opinion?
Mr. Morrison: I would rather not comment on that. As I mentioned earlier, our relationship with the sailors and the other people employed on vessels is excellent. Today was the first time that I had heard said with some strength that there could be a strike over this issue. Mr. Smith does not know the background to it; nor do I. I did find it to be strong wording. It would be akin to someone else involved in the seaway saying that he was going to close the seaway because he could not get what he wanted. I would just as soon not reply to the question.
Senator Forrestall: The ships, by the way, are manned by Canadian merchant seamen.
Mr. Morrison: There are two other unions involved.
Senator Forrestall: I do not know of any CAW members on-board ships.
Senator Milne: I have some fairly accurate information from someone who should know that some crews are in the same union as the CAW.
Mr. Morrison: One of our major companies, Timber Lakes, has CAW.
Senator Johnstone: There might be some advantage if the volume of traffic moving through the seaway could be increased. Are the present facilities, the docks and infrastructure, capable of handling larger ships?
Mr. Morrison: Not larger than the largest ones using it now.
Senator Johnstone: Are ships in general becoming larger, or are they staying about the same size?
Mr. Morrison: It is certainly true that the size of ocean-going vessels carrying containers and liquid cargos is increasing.
Senator Johnstone: Is this likely to impact negatively on the seaway?
Mr. Morrison: It certainly impacts on the size of the foreign vessels that can use the seaway.
Senator Whelan: I live right on the Detroit River, the busiest waterway in the world. It carries the largest tonnage and has the most pleasure craft.
Another committee spent two weeks hearing testimony in Western Canada on the Canadian Wheat Board. We heard over 100 individuals and 38 organizations. They cited the CNR financial report, and their biggest source of revenue. The highest increase in rates after the Crow's Nest Pass rates were removed was not on potash or coal, but on grain. I am concerned that this new system will be non-regulated and unfair.
Mr. Morrison: We have recently done much work on the same issue in terms of appearing with Mr. Justice Estey on grain transportation. We are looking for increased competition, not decreased competition, and more real competition. Normally, when that happens, you will see prices go down rather than up or at least stay stable.
If we were to increase the prices that we charge now for carriage of grain we would not even have the grain that we will get this year, which is not very much. We would not affect the market that way. We want to carry more grain, not less grain. If we increase our rates we will not be able to compete.
Senator Whelan: That sounds like good news. On page 7 of your presentation you refer to Action 7, an equitable trading environment. You say that the government of Canada, in discussions with the United States, has addressed the issue of the current subsidization of the Mississippi River and the competitive threat posed to the Great Lakes-St. Lawrence waterway users.
This has been constantly brought to our attention. The U.S. Corps of Engineers spent millions of dollars not only on the Mississippi but also on its tributaries, the Ohio and Missouri and others. As well, a big part of their grain is shipped on the Columbia River. A huge amount of grain is shipped by barge to the West Coast ports. They have a tremendous advantage.
I am concerned about NAFTA when we see how hard the loss of the Crowsnest Pass rates has been. Then we see U.S. grain-growers getting a $67-per-tonne subsidy which the Canadian grower gets no longer. They receive this tremendous subsidy while 50 per cent of their grain is shipped by water. That is a horrendous subsidy. Have you ever worked out the real cost of this subsidy on the Mississippi River and the other rivers?
Mr. Morrison: We have not worked it up explicitly but the numbers that we have heard at times would approximate 50 cents a tonne. Whether that can be used economically I am not sure, but it is a significant number. They are not carrying as much as they could on the Mississippi if they had barges and vessels available. They take off their crop about the same time as we do. Otherwise, perhaps even more grain would go that way.
Senator Whelan: I realize the importance of the St. Lawrence waterway and the many positive things it brings but we have also imported some bad things by that Seaway. We have the zebra mussels and another foreign species of fish which eats all the eggs of the perch in the Lake Erie region. Have you ever measured the cost of that?
Mr. Morrison: I represent the domestic shipowners. I would let someone else answer that question.
The Chairman: Thank you. Our next witness is ready to proceed.
Mr. John Whalley, Manager of Economic Development of Cape Breton Regional Municipality: Honourable senators, I do not wish to misrepresent myself. I will not pretend to be an expert on this legislation but it does have implications for our economic development.
When I attended Dalhousie University in Halifax, a professor of political science, James Ayers, wrote an important work entitled Views from a Fireproof House in which he discussed Canada's foreign policy between the two World Wars. My presentation could probably be called, "Views from a House of Flames" or, n keeping with the waterway context, "Views from a House Submerged."
Our region is includes approximately 117,000 people on the easternmost tip of Nova Scotia. During the past 15 years the population of the region has declined by some seven per cent. Within the last five years every community in the region has suffered a drop in population. The gross domestic product of the region is approximately $1.7 billion, which has been basically consistent through the past ten years, even with the decline of population. During the past three years the annual rate of unemployment in the region has been in excess of 20 per cent. Based upon most recent monthly estimate for March 1998 unemployment in the region exceeds 18 per cent.
The history of the island is basically a marine history. It was one of the first regions of Canada to be settled. The marine environment provides work for many of our people directly through the fishing industry. Many people import and export goods and services using marine transportation. With our numerous harbours and the Bras D'Or Lakes much of our recreational activity is marine-related.
Until very recently most people in the region would have taken public ownership of many of our marine assets for granted. We view public ownership as essential for ensuring joint consumption and non-exclude-ability as a public good. As well, public ownership was considered essential because the federal government's marine assets in our region, which included public wharves as well as the Sydport Industrial Park, were considered to be fundamental to our future economic development and growth.
In 1995 the Cape Breton Regional Municipality was formed by amalgamating eight municipal units. The rationale was to reduce the inefficiencies and redundancy of services associated with operating eight small municipal units. Indeed, during the discussion related to the amalgamation it was suggested that an amalgamated municipal unit would promote a more effective, planned approach to economic development.
In much the same way, the Canada Marine Act is essentially about improving efficiency and effectiveness associated with Canada's maritime operations. Our concern, however, is that the legislation in conjunction with other recent changes in Canada's transportation policy and economic development policy are rendering regions such as my own uncompetitive.
There are essentially four modes of transportation for goods and people: rail, air, road, and water. To put the Marine Act in context, I will provide some background on what seems to be happening with respect to these modes of transportation.
Recently, the Atlantic Provinces Transportation Commission conducted a study of airfares. The airfare between Halifax, which is the provincial capital, and Sydney has increased by approximately 49 per cent between 1995 and 1997. The current airfare between Sydney and the provincial capital is in excess of $600 per person, a fare which I contend is prohibitive for most people in the region and, therefore, a fare which is acting, I would suggest, as an impediment to economic growth.
Railways have had a long history in Cape Breton and in Nova Scotia. However, currently there is no passenger rail service east of Truro, Nova Scotia, and certainly no passenger service into Cape Breton. The freight service provided by the Cape Breton and Central Nova Scotia Railway has been successful and made, I believe, a small profit. However, the fate of this service is very much contingent upon the success of the Sydney steel plant and the operations of the Cape Breton Development Corporation.
Highway development is essentially a provincial responsibility. However, without exception, many of the major roads in our area are in a state of disrepair. Obviously, the roads and highways are essential for efficient transportation of goods and residents. They are also essential if we are to maintain and encourage tourism, which is a very important industry in our region. At some point, the level of disrepair of our highways and roads becomes a deterrent to tourist traffic.
Therefore, taking the other principal modes of transportation, there has not been a tangible improvement in the transportation network within our region in recent years. I suggest that in fact there has been a very palpable decline in the level of service and in the efficiency of the service. This is the environment into which the Canada Marine Act is being introduced.
The importance of this legislation represents a further withdrawal of the federal government from our economy. As a consequence of this withdrawal a void is being created, and there appears to be no plan, no commitment of resources and no discussion with other levels of government regarding the structure of elements that are required for economic rejuvenation in the region.
I do not think the municipal government was included as a significant partner in the discussions with regard to Bill C-9. If they were, I am not aware of such discussions. If we had been asked for suggestions, I believe we would have suggested that the municipal governments in all regions of Canada, particularly our own regional government, be given the right of first refusal on all significant federal assets in the region. If we had been asked, we would have clearly indicated that any divestiture fund that had been established would have been exhausted very quickly. Within our region, there is an expectation that we will be held responsible to contribute resources to these assets over the years, a contribution which I suggest we will have a great deal of difficulty meeting.
If we had been asked to contribute, we would have suggested that, consistent with the newly established regional municipality under which assets of the former municipal governments came under the responsibility of the regional government, we would have taken responsibility for the assets the federal government wanted to dispose of in return for an annual operating grant. That would have ensured a rational, efficient and effective marine operation within our region. As it is, individual community groups are gaining access to these assets, and I think it is inconsistent with the approach we had taken with respect to amalgamation.
Most important, though, if we had been asked about the Canada Marine Act and its implications, we would have suggested that the federal government is seen to be withdrawing from the region at a most difficult time.
Clearly, our experience with federal and provincial policy has not been satisfactory recently. We believe we have, consistent with other small communities throughout the country, different interests than some of the larger regions. Even within our own province, we have different interests, as has been highlighted by the recent Sable Offshore Energy Project negotiations. It is also the case in the current disposition to private interests of the Sydport Industrial Park, which is a fundamental asset in our region. It is currently owned and operated by Enterprise Cape Breton Corporation.
We feel excluded from some of these major policy decisions, and these decisions will have a major impact on our economy and our society for many years to come. Assets seemingly are being sold to disparate groups without a strategy, and when we agree to participate in a process and the process is circumvented, we tend to be described as the architects of missed opportunity.
In this light, we have reservations about the Canada Marine Act, and the reservations are quite serious. However, our concerns are really that much is being done without a reflection upon the total impact, and that is simply one more step in that process.
We are a municipal government. Without the proper tools and without cooperation, we can recognize the problem, but there is little we can do to change it or affect it. This is why we come here today, to raise awareness, to make our observations, and to communicate our interest and our willingness to work with other levels of government to secure a better future.
The Chairman: This bill has been under discussion for several years. How would you like to see it changed? Are you suggesting that the whole bill not go forward?
Mr. Whalley: No, I would never suggest that. My understanding is that the municipal government has been overwhelmed with its own internal problems, probably during the entire period because amalgamation occurred in 1995. For the past two years, they have been pretty much dedicated to their own internal reorganization.
My concern is that a number of harbours within our region may go to small, individual community groups to manage. We have already seen at least one harbour authority making application to us and to Enterprise Cape Breton Corporation for funding improvements. We expect this will happen over and over again and that the ports will not be managed in a coherent way consistent with an economic development strategy that we would develop.
We recognize that it is too late to change the elements of this particular legislation, but we certainly want to start to signal our recognition that things are not good. Things are declining, and there must some discussion about how to effect a change.
Senator Forrestall: You touched upon a sensitive area, one that is critical to any conclusions I draw with respect to this bill. Do you know how much money is transferred from marine-related activity to the regional municipal council as either grants, direct taxes or payments in lieu of taxes?
Mr. Whalley: I do not know if our situation would be much different from the situation that the representatives from Toronto discussed today. I would believe that our ports, by and large, cannot pay for themselves. Much of the land that would be in the vicinity of our harbours has enormous potential. This potential may well be realized over the next few years, if the development of the offshore oil and gas industry comes a little closer to our region. We are not receiving a great deal of revenue from the land.
Senator Forrestall: If the federal government were to withdraw its grant program, to what degree would that impact on your general spending in the regional municipality?
Mr. Whalley: Without knowing the actual numbers, I would suggest that there are many more important grants and subsidies that are being withdrawn. I do not think that the revenue perspective is the most important point. I look at it from managing the assets in a consistent manner, coherent with an aggressive economic development strategy. That will not be done under this particular legislation.
Senator Forrestall: Does the regional municipality know what it costs to operate the ports?
Mr. Whalley: I am sure that they do, although I do not. I learned that I was making this presentation late Thursday evening, and I have not had the time to compile all the data.
Senator Forrestall: My concern is that there is a potential for being very disruptive. If you know where your income is and then you are fighting to stay within your budget limits and someone claims 2 per cent of that revenue, it must be terribly disruptive to planning. When this happens in Halifax, we have one comment where I come from, "Give me Dartmouth any day." It is a lot cheaper.
Mr. Whalley: The mayor is not here today because we have to cut $4 million to $5 million out of our total operating of approximately $85 million. Any revenue that is taken out of that amount is significant.
The federal government recently invested $15 million to build a new government wharf in Sydney, for example. There is no way the municipal government would ever make that type of investment. It could never afford it, and it would have difficulty maintaining the facility.
Senator Forrestall: If the difficulties with the two remaining mines and the reserves that are available to us loom larger, it will not be 26, 27 years any more, but 10 or 11. That is very critical to your planning.
Mr. Whalley: Yes.
Senator Bryden: One of the statements in your brief eloquently describes the concerns of people in rural Atlantic Canada. I am reading from page 6:
...our concerns are really that much is being done without a reflection on the total impact.
I understand from you that Cape Breton will be dramatically impacted by the divestiture of the various ports from government to either private sector or not-for-profit groups; is that correct?
Mr. Whalley: Yes.
Senator Bryden: I do not think you said in the brief that it is the municipalities' anticipation that these ports will not be viable on their own, and will be coming to your corporation for financial assistance.
Mr. Whalley: They already have.
Senator Bryden: Some already have?
Mr. Whalley: Yes.
Senator Bryden: I have already put on the record the fact that, if the fees that must be charged to Port Hawkesbury are charged, the aggregate company has said that it will have to leave, and that is 265 jobs. Are you aware of the problem?
Mr. Whalley: I was not aware of that, although it may well be the case.
Senator Bryden: I question your statement that it is perhaps too late to affect the impact of this bill on regions such as yours. That is why we are here; it is not too late.
Senator Forrestall: I agree with the senator.
Senator Whelan: I agree with Senator Bryden.
Senator Milne: Mr. Whalley, I wish to thank you for coming here and making this presentation. I may come from Toronto, but I do understand what an 18 per cent unemployment rate means. That is a devastating thing.
Does the Cape Breton Regional Municipality take in all of Cape Breton?
Mr. Whalley: No, it does not. It is essentially the area formerly known as Cape Breton County, one of four counties in Cape Breton, and one of 18 in Nova Scotia. It is essentially industrial, what was called industrial Cape Breton, which is now an oxymoron.
Senator Milne: Does that encompass the Sydney area?
Mr. Whalley: Yes, industrial Cape Breton is the eastern part of Cape Breton.
Senator Milne: How many ports are there now in this expanded community?
Mr. Whalley: There are Sydney, North Sydney, Glace Bay and Louisbourg, which would be the major one. There are four major ones.
Senator Milne: How many have already come to you for money?
Mr. Whalley: One to date.
Senator Johnstone: I was interested to read in your brief that to fly from Sidney to Halifax return costs $600. To fly from Charlottetown to Halifax costs approximately $450. You can fly from Halifax to Heathrow return for less than that. That reflects something of the problems we have, probably all across Canada but certainly in the Atlantic region. It is certainly disproportionate that we should have to pay almost $450 for 22 minutes in the air.
Senator Forrestall: I wish to clarify one or two things. Only one of the component parts of the regional municipality of Cape Breton has come forward looking for money because they are only in their first full fiscal year and the impact of federal reductions in support funds has not yet been felt. We are not so concerned about the present as we are about what will happen next year when they realize that they are $3 million short. They are trying to cut $5 million from an $80 million budget. They can always cut, but can they find? This is our concern. There are probably a dozen or so ports in Canada such as Sydney that will feel the impact on their ability to present a balanced budget while continuing to provide services.
Is that not the case?
Mr. Whalley: Yes, it is.
Senator Forrestall: Thank you.
The Chairman: Our next witnesses are from the Labrador Metis Association.
Mr. Todd Russell, President, Labrador Metis Association: I am the President of the Labrador Metis Association. I have with me Robert Rose who advises us on a number of matters of concern to our people and our communities.
For those not familiar with Labrador and the Labrador Metis Association, it may be appropriate to give you a little background before getting into the meat of our presentation regarding the parts of this bill which focus on remote ports.
Labrador is currently an area of much concern for a number of different interests, particularly with regard to Voisey Bay, Lower Churchill, forestry, transportation, et cetera. It is an Arctic environment and very remote.
Our provincial government has a history of denial of Aboriginal people and Aboriginal rights. Some of its ideas with regard to self-government are very archaic.
In Labrador we are experiencing a resource boom similar to that experienced in the Yukon during the gold rush.
The Labrador Metis Association represents a unique adaptation of Aboriginal society. We are descendants of the Inuit people of south and central Labrador, referred to by early explorers as the Arbuchtoke, or Arqviqmuit, the People of the Whale. Our society has incorporated and blended with European newcomers as well as with Innu and other Indian people such as Mi'kmaq and Cree.
The LMA has a membership of about 5,000 people. The term "Metis" has become the favourite term of self-identification of our people over the past two decades, although earlier references to our communities and people used such term as "Eskimo half-breeds," "native," "mixed-bloods," "part-Eskimo," "liveyeres," "planters," "settlers," "Labradorian" and "Kablunangajuit." We have been called everything just about everything under the sun and sometimes much worse things than those euphemistic terms.
We are predominantly descended from the Inuit and non-Aboriginal settlers, with some Indian descent as well. In this sense, we are unique in Canada as Inuit-Metis, similar to the people in the Western Arctic who are distinct as Sahtu Metis or Gwich'in Metis.
Our communities, with the exception of those surrounding Happy Valley and Goose Bay, are completely isolated. There are no roads. All we have are ports for boat traffic in the summer, groomed trails for ski-doo traffic in the winter and air fields put in place a decade ago by the federal government. As a result, all the ports between Red Bay and Cartwright in Labrador have been designated as remote ports; that is, ports which it is essential to maintain because of the otherwise isolated nature of the communities involved. That is why we are particularly concerned about this bill.
Our presentation today deals to a large extent with what has happened already in terms of the implementation of this bill and our grievances with that. We are hopeful that that will shed some light on the way we see things proceeding with this bill.
I have three primary objectives today. The first is to expose the political reality surrounding Labrador remote ports, politics that has resulted in a loss of local control over essential transport systems, and the effect of privatization of the infrastructure into the hands of dominant commercial interests.
Second, I want to call your attention to the totally inadequate reflection in the bill of the supposed commitment of the marine policy to avoid breaching the federal government's fiduciary obligations to aboriginal peoples in relation to port divestiture. As I will demonstrate, over the past year aboriginal interests have been circumvented. The due process measures that were intended to protect aboriginal interests have failed and nothing in this bill promises to prevent such breaches in the future.
Finally, I want to expose the back-room deal in Labrador that has traded off our federal ferry system and ports infrastructure for a potential highway system. I call it a back-room deal because the Department of Transport and its minister have sought to work out a "roads for ports" swap that not only end-runs local community control but is now also effectively circumventing the capacity for any legitimate environmental review of a new highway system in Labrador; one that involves roads and bridges over 60 waterways in our territory through the last pristine Atlantic salmon spawning grounds in North America.
In terms of the new national marine policy, in late 1995 the federal cabinet met to develop a new policy on marine services in Canada. I will not go into the details of that policy except to highlight several elements.
First, the policy was to encourage local control over ports and other facilities.
Second, remote ports -- that is, ports in areas lacking alternative transportation -- were to be maintained as a priority focus and responsibility by Transport Canada and were not to be targeted for divestiture.
Third, the policy, backed by cabinet memorandum and Treasury Board requirements as well as by recommendations from the Department of Indian Affairs, required that aboriginal peoples were to be consulted about any divestiture plans in our communities.
It is important to note that, as indicated in correspondence between Transport Canada and Indian Affairs in late 1995, Transport Canada took the position that remote ports would be maintained but eventual transfer to provincial governments would be pursued. Transport also stated that some may be taken over by native groups.Transport asked DIAND for information on which ports were subject to native land claims, and it was indicated that both government departments would work closely to identify situations where aboriginal people might wish to acquire ports for economic activities.
In April 1996, I met with the executive director responsible for Canada Ports within Transport Canada. As a result of that meeting, I initiated a request to examine the feasibility of assuming local control over most of the remote ports along our coast. I was concerned, frankly, that if we did not act what had happened on the island of Newfoundland would soon happen to us. The Newfoundland government has, over the past few years, had an annual practice of negotiating the take-over of ferry services to obtain short-term infusions of cash at budget time. We had been informed by people on the island that the result was generally bad. While the ferry services were sent into general revenues, the ferry services and facilities quickly declined. We were also concerned to avoid the major shippers taking effective control over our primary transportation infrastructure, which would, we feared, result in our small, isolated and poor aboriginal communities having to shoulder the complete burden of all transportation costs. We were afraid that the effective subsidy provided by Parliament to our communities, amounting to perhaps hundreds of thousands of dollars, would end up being a subsidy to island-based infrastructure with the real cost of keeping our ports open downloaded on those least able to pay.
We initiated the formal request to examine a transfer of control to our communities. We were fairly confident of success. After all, we had been informed that Transport Canada policy was to avoid divestiture or down-loading for remote ports and was committed to ensuring that aboriginal interests were fully consulted. We had no reason to be concerned, did we?
This brings me to my first concern: provincial politics. In effect, someone saw to it that our legitimate request for local, effective control was bypassed, stonewalled, and was then a complete end-run. The sequence of events is somewhat important and so I want to spend a little time on it. We first wrote to Transport Canada on the issue in mid-May 1996. In late May, the minister wrote the premier to state:
We agreed that a broad provincial strategy for Labrador highway and ferry services was desirable. In this regard, our officials will cooperate in developing proposals that will permit early, mutually beneficial progress on the Trans-Labrador Highway, the Labrador Coastal Ferry Service and its associated ports.
Apparently, on the strength of these talks, our request to take over the ports was shared with the province. We did not know of the province's request until late last year, when we acquired information under the federal Access to Information Act. We have that information with us and will share it with the committee.
The LMA formalized a letter of intent to effect the transfer of our remote ports to community control in August of 1996. In September 1996, the Minister of Transport acknowledged that the province has still not put forward any formal proposal to take over either the ferry services or the associated ports. At the same time, Transport Canada officials began asking DIAND about whether there were any aboriginal interests associated with Labrador ports. For some reason, DIAND responded in October to say that while Davis Inlet and other north coast port facilities were subject to comprehensive claims, the ports along our coasts were not within the claim area as far as they were aware. This is very surprising since our land claim had been filed in 1991 and a detailed supplementary package of information had been filed earlier in 1996. Indeed, DIAND had already completed its review of our claim by October 1996 and had sought a legal opinion in mid-September, a legal opinion that is still bogged down in the Department of Justice.
What makes this even stranger is that in early October, when we asked when the normal contracts would be let to examine the feasibility and cost of a transfer to LMA, we were suddenly told that someone in the minister's office had instructed Transport Canada officials to not meet with us. We were being frozen out, black-balled and side-tracked. We must ask why.
I wrote to the Minister of Transport, Mr. Anderson, on November 1 to raise what I regarded as a serious issue of ethics and possible breach of fiduciary obligation. I received no response to that letter until January 1997. It is now apparent that something else was up. In a secret memo from the Privy Council, dated November 7, 1996, it was stated:
Initial discussions have occurred on the transfer of federal responsibility for ferry service in Labrador to the province. That is, the federal government would be relieved of its ferry service obligation in exchange for...
That is all the ATIP release we received says. We ask the question: In exchange for what?
We did not have long to wait to find out. By March 1997, rumours were rampant that a big deal was in the works for yet another transfer of ferry subsidies to the province, this time for Labrador. Moreover, we heard that the deal would involve a federal grant or subsidy for the building of a new Trans-Labrador Highway. I wrote, in late March, to Minister Anderson to again protest what tome was shoddy mistreatment of our people by his department; about the lack of consultation and about the breaches the department had committed under the national marine policy. I have yet to receive a response to that letter.
I did hear, however, that the LMA was the subject of some urgent discussions in March between senior provincial ministers, senior Transport Canada officials and possibly someone from the Department of Justice. I do not know what was discussed at that meeting, but it was likely to do with the fact that nobody bothered consulting with us on the ports transfer even though we were first in the formal line-up seeking a transfer. We are still trying to find out what happened because we feel that we have been wronged and we want to know who wronged us so that we can take appropriate action.
On April 3, 1997, both governments announced a deal: a $365 million transfer of funds and equipment to the province for taking over both ferries and ports in Labrador. What is important to note for this committee is that the Trans-Labrador Highway was announced at the same time. The province insisted that the funds from the federal government would enable it to build two-thirds of the highway, including resurfacing the Goose Bay-Churchill Falls Road and building a new road from Red Bay to Cartwright, a road that involves some 60 river and stream crossings.
At the end of the day, the national marine policy has permitted remote ports to be transferred to the province, in exchange for a commitment to use at least some of the money to build a road. This deal did not involve any consultations with people concerned, despite there having been requested community control over the ports concerned. We were blocked again, black-balled and side-tracked. The question to ask is: Did we get anything worthwhile out of it?
The unmaking of the deal. You might think that we did get something out of the deal. We got a road. Did we? Well, not according to the current Minister of Fisheries and Oceans, David Anderson, the same minister who negotiated the deal when he was in Transport Canada. If in fact the federal government did provide funds for the Trans-Labrador Highway, then of course the proposed highway would be automatically covered by the Canadian Environmental Assessment Act. Any federal or joint federal and provincial review of the proposal would now be under way, but it is not. In fact, despite all the stream and river crossings involved along our coast, and despite all the sensitive salmon habitat involved, as well as Metis trap lines and use and occupancy areas, the province insists on controlling the whole environmental review process with no funded interventions or community involvement.
As for the DFO, they are saying that all they need is a screening process; no review at all for each stream or river crossing. No doubt this reflects DFO's legendary capacity to anticipate environmental impacts on our fishery resources. DFO does not even admit the existence of a road connecting all those bridges and culverts. The federal government, or at least DFO, appears to be doing everything it can to avoid a federal assessment.
The obligation to build a road is disappearing in the fog. We have no guarantee that the province will actually proceed with a road along our coast and we have no control over the direction or nature of that road by having an environmental assessment to review the provincial proposals. We have the worst of both worlds -- no obligation and no control.
What of the ports themselves? All we can say is that within a year of transfer, the operation of the ferries, and of at least some of the ports, has been privatized by contract. To whom? The answer is to the major shippers to those ports, of course. A consortium of the Crosbie, Woodward and Puttister shipping companies has now received a $20 million contract over two years to operate the service.
The transfer to the province, in addition to end-running the federal policy on aboriginal interest in ports, has also end-run the policy preference for local control, and non-profit operation -- again transferring the service into the hands of shippers.
What of the commitment in the national marine policy to consult on impacts with aboriginal peoples? All we know at this point is that either Transport Canada officials or DIAND officials, or both, went through a meaningless and shoddy investigation of aboriginal interests. Even where those interests were accurately identified, nothing happened as a result. In short, the policy was totally ineffective.
Finally, I wish to take a quick look at Bill C-9. If the last 18 months are any indication, this bill will be totally ineffective in preventing political favouritism from overriding the so-called policy in place that attempts to protect local, and especially aboriginal, interests. Consider clause 3 of the bill as a case in point. As far as I can tell, it is meaningless. It simply says that the legislation will not be unconstitutional. What it should state clearly is that, where aboriginal peoples have a claim against any property involved, such as in a comprehensive land claim, there should be mandatory consultations, and the aboriginal groups should be given first right of refusal in assuming control over the port or facility involved.
As our experience also attests, it is even more important that the responsibility for carrying out consultations, and their scope, be very clearly set out in the legislation. Our experience shows that, under a little political pressure, bureaucrats such as those in Transport Canada will end-run even an explicitly stated cabinet policy. They will do so because the fine print of such policies is often secret. Parliament can and should do better in discharging its obligations to aboriginal peoples.
Similarly, clause 4(e) of the bill is misleading. How can a national marine policy objective provide a high degree of autonomy for local management of ports, or be responsive to local needs and priorities, when the ports are unilaterally transferred to provinces, and then privatized into the control of major shippers? If Parliament is serious about reaching the stated objectives of the national marine policy, then it should be more specific about favouring local control, preferably in the hands of non-profit corporations. This should be doubly clear in the case of ports in communities where the majority of people are aboriginal and have outstanding land claims.
I wish to close with a suggestion and recommendation to this committee about the mistreatment that we have been subjected to mistreatment in our dealings with Transport Canada's national marine policy. I would ask that Parliament, or the Senate, or this committee investigate the roads for ports and ferries, a deal that was done in Labrador last year. Why was our formal letter of intent to seek a transfer to community control disregarded? Why were no aboriginal people consulted; on whose authority, and in exchange for what undertakings? Moreover, if in fact federal support or funding for the Trans-Labrador highway was part of the deal, why is there no federal environmental assessment under way? If no road was part of the deal, how do you justify the total absence of consultation? We were not consulted, nor were the Innu or the Labrador Inuit Association, although our ports, which are our main economic transport connection to the rest of Canada, were effectively de-listed.
I would also recommend that the Senate recommend specific detailed amendments to Bill C-9 to shore up the responsibility of the federal government to properly discharge its fiduciary obligations to aboriginal peoples. Never again should any other aboriginal group be required to suffer the treatment that we received under this policy.We would call upon this committee to recommend that all departments and regulatory agencies in Ottawa sit down to negotiate protective regimes for our interests, instead of moving so quickly to accommodate provincial and industry interests without our involvement even being considered, let alone invited.
It is quite clear from our own experience that, unless and until Parliament lives up to its obligations by being concrete, specific, and demanding, it will fail to meet its obligations to aboriginal peoples, as well as to all those small communities which rely so heavily on the federal transportation infrastructure for their very survival.
The Chairman: This committee had a long session with the Minister of Transport, Mr. Collenette. He did his best to assure us that the small and remote ports would be protected if this bill is passed. Did you get a chance to see a copy of the minister's statement to this committee? If so, did you find it reassuring?
Mr. Russell: To your first question, no, I did not see a copy of the minister's statements. When did he make that particular presentation?
The Chairman: It was April 2. We can send a copy to you.
Mr. Russell: Certainly his comments come after the deal concerning our particular ports was struck in Labrador. At best it would be some measure of comfort for other remote ports in Canada, but it certainly does not remedy our particular situation, nor does it change how we feel about the way that this policy was implemented.
Senator Forrestall: There is no way that a road can be built up there with just one environmental assessment. I would think that there would be three years of work just to determine what it is safe to move. If you start building highways on those narrow ridges, you will break down a whole flowing system that is twice the size of Nova Scotia and Prince Edward Island. It will not happen that quickly. I understand your fear with respect to it.
Would it help if this committee were to ask the government not to proclaim certain sections of the bill which deal with remote ports, until such time as the proper consultation and time assessments could be done? There is no great rush about this, is there?
Mr. Russell: On some fronts, there is a rush for us in Labrador. You mentioned the environmental assessment process. The provincial government is quite intent on proceeding with only one assessment -- its own. It wants to do it as quickly as possible. With that particular assessment, there is very little, if any, consultation with our communities. Although they call it consultation, it is not consultation when someone comes into a community with 24 hours notice, allowing our people no preparation time.
There is a need to resolve this before things get too advanced. There is talk of hauling out the bulldozers within months, not years. At the same time, we are seeing the privatization of our marine services and ports. There is an urgency in Labrador, in the sense that we already see some of the impact of this particular policy, and what it is doing to small communities.
Senator Forrestall: I was suggesting we freeze that, and that it not have the authority of the proposed legislation behind it. We would simply ask that the government consider deferring proclamation of those sections.
Robert Rose, Advisor, Labrador Metis Association: The transfer took place last year. Whether it can be made retroactive is a good question. The nature of the agreement between the province and the federal government would be the determining factor there.
It would be useful if the committee were to say that it is unhappy with the protection of remote ports and aboriginal communities' ports, in particular remote aboriginal communities' ports. They were certainly not protected under the national marine policy which is supposed to be reflected in this bill. If this bill is a reflection of what the policy has done to date, it is not good enough. There is nothing specific in the proposed legislation that would prevent this from happening again, and it does not matter what the minister said. All it takes is a provincial premier who can twist enough arms to get a subsidy transfer along with the ports and the ferries, and it is done.
There is nothing to prevent it in this bill because there is nothing specific to protect remote ports as Transport Canada priorities or to protect aboriginal communities other than this throw-away line that the bill is not unconstitutional. Clause 3 is an oxymoron. You could make that clause very specific by requiring mandatory consultations. That in itself would slow down the pace of deal-making and expose it to the light of day, which did not happen in the case of the Labrador ports, not with the Innu, not with the LIA, nor the LMA, not even those ports for which Aboriginal land claims had been lodged and about which Transport Canada was specifically and accurately advised.
The Department of Indian Affairs fell off on its side with regard to the LMA communities but it did not do so with regard to the Innu community of Davis Inlet nor the five Labrador Inuit Association communities. They did nothing about that. There was no consultation. Nothing was done. They had a policy but they were not prepared to implement it.
That is why we recommend that if you put a freeze or any other action on remote ports that you should link it to the fact that there are no procedures or regulations or practices in place to effect the cabinet policy which has been in place since November 1995. The policy is that there shall be consultation and there shall be first rights of interest and there will be no impairment of aboriginal interests in those community infrastructures.
Senator Forrestall: It seems the attitude is do it and as long as nobody complains everything will just simply proceed. That is a little difficult to accept. Has there been any suggestion of similar policies with respect to the Northern Peninsula ports all the way down to Port aux Basques and across the south shore of the island itself? Was there a similar transfer to private sector in Stephenville, Corner Brook and other ports?
Mr. Russell: Not that time I am aware of. They have not privatized.
Senator Forrestall: There is no talk of that?
Mr. Russell: There is none of which I am aware.
Senator Adams: Other than this Senate committee, have you heard anything from anybody in Ottawa, such as the House of Commons, regarding the forced privatization of ports?
Mr. Russell: The Commons committee, as far as I am aware, did not travel to seek input from the communities. We did ask to appear before the Commons committee but we were not invited.
Senator Adams: You have heard nothing from any MHAs or from the transportation minister or anyone in the Newfoundland government?
Mr. Russell: Interestingly, when I spoke to the Labrador Innu Association, the Innu Nation, about this particular policy and the fact that they should have been consulted, they were not aware of it. They were not aware of any marine policy. They are now investigating what happened. In the northern part of Labrador there is no intent to take any of that money or subsidy to build roads or to upgrade the infrastructure.
They say that perhaps farther south they will get some kind of road. We call it a wood path at this particular point. But up north they have taken over their ports and the ferry service and they are not sure what the quality of service will be.
Senator Adams: Regarding the existing ports in Labrador area where you come from -- I do not know about Newfoundland island ports -- what is the arrangement to pay for maintenance? Are the governments paying for it in certain percentages? Does the Newfoundland government pay 50 per cent? How does the system work right now in the Labrador area?
Mr. Rose: Until the transfer last year the remote ports were maintained as federal ports so it was 100 per cent federal expenditure. With an amortization of transfer costs of subsidy at $365 million the annual expenditure for the Labrador service is around $22 million per year. That is obviously well over 10 years amortized as a lump sum payment up front. It is more than you would probably expect to see in transfers elsewhere under regional ports. Remote ports do not make money in most cases. They do not have sufficient commercial potential. Perhaps Voisey's Bay will make money but the mining company is planning to build its own wharf.
In most cases you are talking about communities of 300 to 800 people. They are fishing ports. All the transportation of goods is done by port because air is too expensive and you cannot transit very far by skidoo.
So far there has been a federal subsidy and federal support. In fact the national marine policy indicated, as did the cabinet documents and the cabinet materials we received under Access to Information, that this was to be a prime focus of Transport Canada's future obligations.
Then, bang, it is immediately gone in Labrador and in all these remote ports. All designated remote ports ceased to be eligible for shelter. There are no guarantees. There are no undertakings. All the province has said in public is that, as alternative transportation systems, like a highway or a road or a wood path, are in place, the need for the service will decline. Yet these are still fishing ports. That is all the people do, largely -- inshore fishing.
There is a big concern that there has been no cost-sharing formula in place. It has been a 100 per cent federally maintained service, particularly because there is no road system. Now there is no guarantee of a road. There is a transfer to the province. We wait to see whether the province will, on its own hook, maintain the service at quality levels.
Indication from the Island is that the service declined over the last three or four years with regard to the ferry or port transfers on those parts of the Island.
Senator Adams: You mentioned $365 million would be transferred to the new government. Is that in part for the ports or is it only for the highways?
Mr. Rose: It is difficult to say.
Mr. Russell: There was a marine services deal with the federal government. The federal government said if you take over control of the Labrador ferries and ports we will transfer $365 million to you. Of course, the province had a big announcement a few weeks later that $130 million would be spent on the section of road from Red Bay to Cartwright. That is the area now covered by remote ports. Another portion of that money will go into resurfacing a road between Goose Bay and Churchill Falls.
If we ask the Department of Transport about the roads deal they will deny it and say the money was only transferred for ferries and ports and for divestiture of those responsibilities. They will not say that there was a roads deal.
We are concerned about the transportation needs of our communities, particularly our ports where our economic activity is centred. We have an interest here. We wanted to have some say when we read about this policy but when we expressed an interest that interest was thwarted and ignored.
Why were we not involved in terms of negotiations if, in fact, they were going to transfer our ferries and our ports over to the province for roads? We could have contributed to that. We could have been a positive influence in terms of sensitizing the provincial and federal governments to our particular needs. That was not done. Instead we were told that they could not meet with us. They never acknowledged having other interests until the deal was cut. Then we found out that our harbours and ports and ferry services had been divested to the province.
Senator Adams: Did you get a chance to look at the $20 million contract for two years? Were you interested in that?
Mr. Russell: In the fall of last year, 1997, they supposedly held a consultation process on what to do with the marine services now that they had responsibility for them. They contracted out to a private firm called the SGE Group.
After they "consulted" for five days in five communities people still did not know what was going on. The SGE would not release its report and cabinet has kept it secret.
A matter of weeks after that we found out there had been a call for proposals for the privatization of the marine services in Labrador, which included some of the ports as well. That is about the only consultation or input we had into developing the terms of reference for these contracts, the involvement of aboriginal people in terms of delivering those services and the use of the ports. Again, it was a very quick process.
Senator Adams: We have 45 small docks in the Northwest Territories. They are not private and they are not local but now they will be turned over to Fisheries and Oceans instead of to Transport Canada. Now you say that Labrador is being funded 100 per cent by the federal government. I cannot see anything wrong. Is the Department of Fisheries and Oceans present in some of the Labrador communities?
Mr. Russell: Yes, we do have Fisheries and Oceans.
Senator Adams: I cannot see anything wrong there. You will have a difficult problem, however, in Nain and Goose Bay, for example. People are concerned that they will pay more taxes if they are privatized. They cannot afford that. I think this committee should look at why community docks in Nunavut will be turned over to Fisheries and Oceans. The small communities cannot afford it.
Mr. Russell: Some of these facilities are fairly new. A fair amount of money has been invested into the remote ports of Labrador by the federal government. As well, some of these facilities are quite good. However, we are concerned that this deal will mean that we will end up basically with a cow path or an ATV trail through our land. We are concerned that our ferries and ports will become run down. We will not have any maintenance for our ferries or ports so the infrastructure that exists now will be gone. Again, we will be left with only an ATV track through the country. We call it the Glorified Woods Road for a cost of $130 million.
Senator Forrestall: Let me intervene. Do not worry about it remaining a woods trail. What you want to be afraid of is what the government did to us in Nova Scotia. It is the same game. You allocate funds for a very worthwhile project. In Nova Scotia it was to get rid of Death Valley on the Trans-Canada Highway from Halifax to Amherst. The funds were re-routed to build a highway called the Fleur-de-lis route in Cape Breton. We ended up with tolls on a highway where the trucks have to stop every time the wind blows more than 30 kilometres an hour or they will be blown off the road.
We have to be very careful about people moving the shell around. Here is a clear case of $300 million plus dollars to sustain your ports. It is not a bad deal at first glance. However, is it a good deal in exchange for roads that you will have to build yourself or farm out to build with the payment coming from tolls?
Mr. Russell: I hate to think what a toll would cost in Labrador, probably half a family's income. The traffic is not that high right now.
Senator Whelan: The Liberal government of which I was a part built more roads in five years than the Conservative government did in 35 years.
Senator Forrestall: That is not so.
Senator Whelan: We had to build a lot of bridges. There was a plan that if you built a permanent bridge over a span of 100 feet you received a grant of 80 per cent. You say in your brief that you have some 60 river and stream crossings. How big are they? That could be horrendous.
Mr. Russell: We have six or seven major rivers. The span will be dictated by where you cross those particular rivers and for what purpose.
Senator Whelan: How many feet?
Mr. Russell: Some can be a quarter of a mile wide, depending on where you cross, to a matter of couple hundred feet.
Senator Adams: Fish are spawning there, too.
Mr. Russell: In Labrador we have spawning rivers for the Atlantic salmon. Our commercial salmon fishery has been under attack by various groups such as the Atlantic Salmon Federation for years and years. They say, "You guys are killing the Atlantic salmon." Given that, DFO still does not want to undertake a federal assessment of 60 streams or river crossings.
Senator Whelan: That would be a horrendous cost.
Mr. Rose: The general assessment is $130 million for a 225-kilometre road involving five main-span bridges, plus all the rest of the culverts and bog crossings. We are talking about tundra and tiaga. It does not seem to match reality.
I was noticing that it will cost $400 million to build 16 kilometres of Highway 416 in this region. If you broke it into very small ATV tracks in our area you might be able to do it and maybe bungee cord bridges but there are many questions about whether that is realistic. You are talking about a low-grade country road, at most a truck road intended for logging purposes, not really for the transport of goods to replace a ferry and port system. However, on the face of it that is the proposal, however crazy it sounds.
Senator Whelan: I know what a bridge costs in southern Ontario. You are talking about building over muskeg. The soil conditions are such that driving piles is difficult.
In southern Ontario, for example, Essex County was a lake thousands of years ago. You will find quicksand and everything you can think of but there is no tundra because is it a semi-tropical area.
Senator Milne: I need a bit of help with the economics of this issue. It looks as though the deal is done. The province has taken over both ferries and ports in Labrador and in return they received a $365 million transfer of funds. Now they have given a contract to Crosbie, Woodward, and Puddister shipping companies for $20 million to operate some of these ports. Why would any company want to take over a port if it is a money-losing port? Will this $20 million counteract the amount of money they could lose on the operation of the port? How and why does this compare with $365 million? The economics of this escape me completely.
Mr. Russell: We have not had a significant amount of detail to assess what types of impacts there will be with this new contract. We do not know what the details are in terms of their responsibilities, what types of level of services they are supposed to provide and those types of things. At the same time, the $365 million did involve the transfer of ships, which factored into the total worth of the transfer.
Of course, besides roads that affect our ports, there is the northern portion of Labrador where they will have to provide marine services in the $365 million package. What the provincial government is getting for $20 million, I do not know. What the contractor's vision of services is to our particular communities, I do not know. We have not seen the call for proposals.
Senator Milne: You have no idea at all whether the level of service will be decreasing in these ports. When is this service provided by this consortium supposed to start?
Mr. Russell: This spring.
Senator Milne: Right away. You still have no idea what sort of services you will be receiving.
Mr. Russell: That is right.
Mr. Rose: Last year the government said that there would be no change in service for 1997. That is the only commitment they made. After 1997, it is likely that costs for local users will increase. In remote ports of Labrador there will be a toll system, which is 180 degrees off national marine policy but it is going ahead.
Senator Bryden: In fairness to the department, the Government of Canada's undertaking in relation to remote ports in their marine policy is not that they would maintain the ports and continue to operate them but that they would ensure that designated remote community ports facilities are maintained. Presumably, an agreement could have been entered into agreement with the Province of Newfoundland and Labrador which specified what they are required to do to maintain the remote ports that you are talking about. Is it the case that you have not seen this agreement, or do you not know what is in it?
Mr. Russell: We have not seen the agreement that was signed between the federal and provincial governments concerning the transferability of the ports and the ferry services. We do not know the details. Why were we not consulted in terms of the transfer of responsibilities when the national marine policy says that we should have been consulted where aboriginal communities are involved?
Senator Bryden: Transport Canada has transferred 59 sites to DFO; 47 of them are remote ports. The second point though is that other ports may be transferred to other federal departments if it is determined that they are required in support of departmental objectives. Do you agree that marine policy dictates that remote ports may be transferred to other departments?
Mr. Rose: From reading the materials that we received, through the Access to Information Act, over the last year from Transport Canada, not including the agreement with the province, my sense is that you are right. The obligation of the policy is pretty much restricted to a federal one. It is not enforceable outside a contractual agreement with the provinces, which we have not seen. We do not know if there is a contractual agreement to maintain remoteness. The definition of "remoteness" is very vague. It is an internal Transport policy to define remoteness on a consultative basis, based on the presence of alternative transport systems.
All of the northern Labrador communities are isolated, as are most of the NWT ports. Once sheltered under a provincial transfer, it is difficult to say to what happen. The agreement was not made public. All we know is that after much internal discussion about how to deal with aboriginal communities, the two departments, Indian Affairs and Transport Canada, came up with an indemnification clause. That is the best they could do. Within this clause, they held each other harmless from all other claims and damages, et cetera, against either of them in the case of transfer of the ports and related obligations to aboriginal peoples or anyone else. That is the best they could came up with, after more than a year, even though policy itself is explicit.
The wording of the cabinet document indicates specifically that First Nations were to be consulted with regard to any disposal of lands, consistent with the Canadian fiduciary obligations and divestiture of ports which were subject to claims.
There was a checkmate and they did absolutely nothing about it. The bill is totally deficient on its face since there is nothing in it requiring consultation. At least for the future you can remedy that by ensuring that the bill reflects policy.
As for the Labrador situation, there is not much you can do other than to conduct an inquiry into why it happened and what is going to happen in the future about these remote ports that were built by federal investment over the last 50 years. Now that they are in provincial hands, how was the policy averted while the legislation was pending? Now that the legislation has come into effect, it does not reflect the policy as it is written. It may reflects the policy as it is happened.
Senator Whelan: With the huge mineral developments about to take place, would there not be tremendous royalties or compensation coming to you and your people that would provide the best ferry service, harbour service and roads?
Mr. Russell: If you ask me, maybe we should be. However, if you ask the company, I am sure they will have a different perspective on that. As I am sure Senator Adams knows, it is very difficult for companies to try to achieve a royalty regime or a revenue-sharing regime, or what have you. They try to stick as much in the pockets of the shareholders as they can.
I would not necessarily count on great royalty-sharing regimes with companies to make sure we can have class A1 ports, ferry services, roads and the like. We still have a rough road to go down yet.
Mr. Rose: The provinces will often step in. The Province of Newfoundland has stepped in to prevent the company from doing just such a deal with the aboriginal interests.
Senator Whelan: That is just like Alberta.
Mr. Rose: Churchill Falls is another example. Churchill Falls was the largest hydro electric development at the time in the world. Not a kilowatt of power went to the coast of Labrador. They are all still running on diesel.
Mr. Rose: Just for the record, senator, before you close, we do have a copy of the documents referred to in the brief.
The Chairman: Thank you. We will have a 15-minute recess.
The committee recessed.