Proceedings of the Standing Senate Committee on
Transport and Communications
Issue 10 - Evidence, June 3, 2008
OTTAWA, Tuesday, June 3, 2008
The Standing Senate Committee on Transport and Communications, to which was referred Bill C-23, An Act to amend the Canada Marine Act, the Canada Transportation Act, the Pilotage Act and other acts in consequence, met this day at 3:45 p.m. to give consideration to the bill.
Senator Lise Bacon (Chair) in the chair.
[English]
The Chair: We are here today to study Bill C-23.
[Translation]
We are pleased to welcome the Honourable Lawrence Cannon, Minister of Transport, Infrastructure and Communities. We are very happy to have you here, Mr. Minister. We are very fond of your parliamentary secretary, but we like it when a minister comes to defend his bill.
Welcome to the committee. You have a presentation to make and then senators can ask their questions.
The Honourable Lawrence Cannon, P.C., M.P., Minister of Transport, Infrastructure and Communities: Thank you, Madam Chair. I am always pleased to appear before Senate committees. This is the first time I have an opportunity to appear before your committee and I am happy to be here to discuss Bill C-23.
Madam Chair, this is a bill that would make much needed and long overdue improvements to the Canada Marine Act.
It would introduce flexibilities and strengthen the operating framework for Canada Port Authorities. It is important not only to the Canadian marine industry but also pretty critical to the economy of this country.
[English]
Today I have with me, from the department, Janet Kavanagh, Director, Ports Policy; and Philippe de Grandpré, legal counsel.
Before I begin speaking about Bill C-23, I would like to like a few minutes to acknowledge the important work of this committee on a related marine initiative: the recent work on the potential future of containerized freight traffic in Canada.
I spoke to this committee back in October 2006 at the outset of this important project. Since then, you have covered a tremendous amount of ground, visited various ports, held in excess of 30 sessions, and heard from a diverse range of witnesses including officials from Canada Port Authorities. I would like to thank the committee for the work you have done on this increasingly important issue. I am certain that you are now very well informed on the importance of Canada's ports to the local communities, cities, provinces and, of course, the country.
[Translation]
I understand that at times during this process you heard testimony related to the proposed amendments to the Canada Marine Act, the precise reason for my being here today. For example, Mr. Dominic Taddeo, the past President and Chief Executive Officer, Port of Montreal, stated during his appearance before you, and I quote:
The Canada Marine Act limits us as to how we can invest the monies generated from our profits. It is safe and secure, but we are not taking full advantage of that commercial aspect.
This is a view that we have heard repeatedly over the years from many of the Port Authorities.
The Canada Marine Act as it stands today is not sufficiently flexible to allow these ports to maximize opportunities and undertake strategic investments in a timely manner.
[English]
Ms. Oldfield, Halifax Port Authority, has stated with respect to the Canada Marine Act that, ``As we all know, the act is currently undergoing some amendments. We view those to be very positive amendments.'' She stated further that Bill C-23 ``will be a very positive move forward for us and for all ports. From our perspective, we are in a position where we need to increase our borrowing limits.''
Bill C-23 has the undisputed support of the marine industry. The House of Commons Standing Committee on Transport, Infrastructure and Communities heard widespread industry backing from the membership of the Association of Canadian Port Authorities, the Shipping Federation of Canada and the Chamber of Maritime Commerce. Labour has also endorsed these amendments.
Bob Wilds, Managing Director, Greater Vancouver Gateway Council, highlighted the need for regulatory stability, stating:
Recommendations for amendments to the Canada Marine Act have been outstanding for extended periods of time, and the industry remains uncertain as to what, if any, amendments will be implemented. This uncertainty negatively impacts decisions about capital investments.
[Translation]
All that to say, you have heard repeatedly that Bill C-23 is needed and it is needed now. Canada Port Authorities have been waiting many years for these amendments and further delays will render further missed opportunities, not only for the marine industry but also for the Government of Canada.
We are all cognizant of the projected growth in trade with the Asia-Pacific region. Canada's two-way trade with China reached $42 billion in 2006, with imports increasing fivefold over the last decade at $34.5 billion in 2006, and exports to China at $7.7 billion in 2006.
We have seen the result of this significant increase in trade levels stretching and straining Canada's west coast infrastructure, and the implications are being felt across the country. It is not difficult to see that the passage of this bill is key to the success of the government's ongoing efforts to strengthen Canada's global competitiveness through the various corridor and gateway initiatives. Marine transportation, and more specifically the Canada Port Authorities themselves, are integral to each of Canada's three gateway strategies.
Let me list them: the Asia Pacific Gateway and Corridor Initiative, the Ontario-Quebec Continental Gateway and Trade Corridor, and the Atlantic Gateway Initiative. We need to provide the right framework for Canada's marine ports to be key players in a highly competitive industry.
[English]
The origin of Bill C-23 dates back to the results of a statutory review process undertaken in 2002 that subsequently led to the introduction of Bill C-61 in 2005 by my predecessor and the previous Liberal government. That bill died on the Order Paper with the dissolution of Parliament. Bill C-23 reflects not only those original and extensive consultations but also more recent stakeholder consultations. It also takes into consideration the changed global trade environment. In essence, Bill C-23 is the culmination of many years of consultation and much hard work by both Transport Canada officials and industry representatives.
I will now take a few minutes of senators' time to briefly articulate some of the key provisions contained in the bill. Bill C-23 would allow Canada Port Authorities to apply for three strategic categories of contribution funding: infrastructure, environmental sustainability and security measures. Today, unlike other transportation entities, Canada Port Authorities are prohibited from accessing these funds. This means neither the creation of a new funding program nor that Canada Port Authorities would automatically receive funding. Rather, it would allow Canada Port Authorities to be considered in the process along with other transportation bodies. They, like all other funding applicants, would need to meet the established criteria and conditions specific to each program.
[Translation]
I have already briefly touched upon the introduction of a commercial borrowing regime in the context of the comments of Mr. Dominic Taddeo, past President and Chief Executive Officer, Port of Montreal.
Bill C-23 would introduce a tiered approach that would permit larger Canada Port Authorities — those with $25 million in operating revenues for three consecutive years — to move to a commercially based borrowing regime. In this regime, there would be no fixed limit, rather these Canada Port Authorities would have their borrowing capacity determined by the private sector provided their borrowings are consistent with the new borrowing code established in their letters patent. It should be noted that this increased borrowing flexibility is also paired with enhanced accountability requirements.
[English]
The proposed legislation includes provisions that would allow a consistent approach to facilitate any potential future amalgamations of Canada Port Authorities. We learned lessons during the recent amalgamation of three port authorities in the Lower Mainland of British Columbia. For example, these amendments would create transitional measures with respect to fees, would facilitate name changes and changes to the make-up of the board of directors, and would add express regulation-making authority.
Bill C-23 includes some important governance-related amendments that would result in a more stable operating framework for Canada Port Authorities. These amendments, among other things, would increase the number of renewable terms for directors resulting in a total possible tenure of three terms of three years and also would allow incumbent directors to remain in office until renewed or a new appointment were made for a maximum tenure of nine years. These changes are particularly important for the smaller port authorities, given that remote areas have fewer candidates with the appropriate skills and qualifications to be considered for appointment as director.
The last amendment I will speak to is the introduction of a administrative monetary penalty regime that would make the enforcement of minor violations easier to manage by providing an alternative to court proceedings in the case of noncompliance with regulatory issues.
[Translation]
As I mentioned earlier, Canada Port Authorities have waited patiently for these improvements to be made to the legislative framework governing ports. I am proud of this bill and the support it has received. Thank you for your attention.
The Chair: Thank you, minister. I know that the legislative amendments contained in this bill have been awaited for a long time by members of Canada's marine industry and the question that comes to my mind is why did you wait so long before tabling them? I will not ask that question. However, if you want to answer me, you could do so.
Bill C-23 is in response to the recommendations of the 2003 report of the task force on the Canada Marine Act.
You certainly set aside recommendations that were contained in the report in Bill C-23. I will give you two examples: having the possibility of issuing tax-free bonds and paying an allowance established not on the basis of their gross income, but their net income.
Would there be another bill in the future that might contain the recommendations that were set aside?
Mr. Cannon: I will resist the temptation to answer your first question. Indeed, as you have noted, there have been a number of recommendations and observations formulated on the specific reasoning regarding the implementation of some recommendations. I will ask Ms. Kavanagh or Mr. de Grandpré to verify these things, but perhaps Ms. Kavanagh could provide you with the appropriate response.
[English]
Janet Kavanagh, Director Port Policy, Transport Canada: Yes, the Canada Marine Act review panel did make a series of recommendations, some of which are more closely reflected in the proposals before the committee. The tax exemption attempts to model the U.S. situation: American port authorities operate under quite a different governance structure than Canadian port authorities do and they have an ability to issue tax exempt bonds. There was not much support across a wide breadth of industry for that kind of significant change having to do with the governance structure. We have reports as opposed to the governance structure that the U.S. has for their ports. U.S. ports are often municipal entities as opposed to federal entities.
We worked closely with port authorities with respect to the net income to try to develop another regime. Currently, they pay a gross revenue charge based on their gross revenues as opposed to their net income. Following fairly extensive consultations one on one with individual port authorities and their CMA subcommittee, there was no easily recommended proposal that was as even-handed, easy to implement and relatively easy to audit and evaluate.
When you move into net income, there was a feeling there is more opportunity to reduce that number with respect to what that final number would be upon which we would base the stipend paid to government. We did do a fair amount of examination of that issue. We tried various models and consulted with the port authorities, but the port authorities were not able to come forward with a new regime they were all able to agree upon.
The Chair: You are not thinking of any other legislation at the present time?
Ms. Kavanagh: Not at this time, no.
[Translation]
The Chair: Bill C-23 also contains provisions that amend the minister's regulatory powers, including clauses 33, 34, 35, 37, 46, 49 and others. Many amendments involve the documents to be provided. Did the industry welcome these amendments or is the minister keeping some leeway with regard to the regulations?
Mr. Cannon: Generally speaking, I would say that the industry is satisfied with these aspects, but perhaps Mr. de Grandpré could tell you more about the details.
[English]
Ms. Kavanagh: On that one, the ports that are moving, for instance, to the commercial borrowing regime have more flexibility under that regime. As a result, the trade-off or check and balance is that they will be required to demonstrate a higher level of accountability, and there will be a more vigorous, robust reporting system with respect to borrowing limits in particular.
Again, we did work with the Association of Canadian Port Authorities. They have a subcommittee both on financial aspects and on the overall amendments to the Canada Marine Act. They are supportive of that regime, in general. Many of the requirements we are looking at were borrowed from the U.K. model. They have a prudential code that they have put in place for port authorities. We also worked with financial advisers. The financial advisers, Canada Port Authorities and the central agencies who have a role to play with respect to the risk that this might expose the government to and ourselves came to a general acceptance that this was a reasonable expectation by government regarding the greater financial ability that they will have as a result of Bill C-23.
[Translation]
The Chair: Do you anticipate further amendments to the Canada Marine Act soon, or has a task force been formed to do this? Should we expect a statutory review?
Mr. Cannon: I can tell you that we are not currently reviewing a new legislative provision. This is more or less the same answer that was given to you a few moments ago in response to the previous question. It is obvious that from a statutory standpoint, the date of review does not come to mind, but we generally attempt to review these organizations at least once every 10 years.
Why is that? Because there is an amendment, and not only an amendment to the environment in which people work, but also because of the fact that we are part of a competitive business environment.
We want to give our port authorities the tools that would allow them to compete properly with our neighbours. The idea behind all this is that if there is demand and need, I am not closing the door, but generally speaking this will be reviewed every 10 years.
The Chair: I would like to thank you for your support for the work we have done. We will be publishing the report soon and as you can see, this is a team that is very interested in what is going on in the field of transport.
Mr. Cannon: I have noted that there are even senators who are not members of the committee and who are joining in the proceedings because the subject is so riveting.
The Chair: That is correct. Thank you very much.
[English]
Senator Oliver: Welcome, minister. Thank you very much for coming. We appreciate your opening remarks. I was happy that you referred to the ongoing study of this committee on containerization. You are quite correct that as the committee went from British Columbia to Atlantic Canada, it heard from a number of interested persons about this bill, and a number of them indicated they would like to have it because it will help them do their business. Thank you for referring to that.
I was interested in the quotation you made from Ms. Oldfield from Halifax who also indicated that, from what she had seen, several things in that would help the Port of Halifax.
I am interested in infrastructure and the Building Canada Fund. In response to the first question from the chair, who was asking you about issuing tax-exempt bonds, there were other aspects that some people would like to have seen to give them more financial freedom to do their jobs and build their ports, such as sharing municipal taxes for infrastructure. Will infrastructure funding for ports reduce the amount available to municipalities for their infrastructure requirements? If so, what can ports, such as Prince Rupert, do to access money?
Mr. Cannon: Thank you, Senator Oliver, for your question. Two months ago I had the opportunity of meeting the people from Halifax Port Authority, and we discussed their particular preoccupations.
I want to reassure the committee, senator, that the Building Canada Fund we have put forward has a number of programs within it. The specific program that would be available to the port authorities from coast to coast is the one that deals with the gateways and borders corridor. That program totals $2.1 billion, which includes of course the Ontario-Quebec gateway, as well as the Atlantic Gateway. As you know, we have increased the $500 million that the previous government put in place for the Asia Pacific corridor to roughly $1 billion to handle those pertinent issues in the western part of our country.
That is a merit-based program. It is not allotted and attributed on a per capita basis, like the Building Canada Fund, which is done on a proportional basis or at least the ratio of population. For instance, the largest province will get the largest chunk out of it, but the gateways and borders program will indeed be the one that supplements the needs the ports might want to put.
The long and the short of it is that the municipalities will not be penalized. Provinces will not be penalized, because it is a merit-based approach.
To give you an example of that kind of project, we have identified the Windsor-Detroit crossing as being capital for the expansion and maintenance of our economy with the United States. We are going forward and have allotted a good chunk of that investment. We announced more recently an access road to the new crossing, which we will be announcing in a couple of weeks. We have committed 50 per cent with the Province of Ontario to building that access road.
We have also committed, for instance, in other areas of the country, sums of money that will go to help ports, such as Deltaport, where we have done grades crossings. We have worked with the private sector to invest our money and with the municipalities of course to be able to do grade separations along the specific areas that have been identified as areas of congestion.
The whole issue here is that we are not penalizing municipalities. We are working with the private sector, but we want to ensure that Canada remains competitive and that we do get our products and services to market faster than anybody else.
Senator Oliver: Thank you for that, minister. You indicated in your response that in the Building Canada Fund you have set aside $2.1 billion for gateways, et cetera. Could you give me some indication of how much of that $2.1 billion has already been allocated? You talked about money you will be announcing in a couple of weeks for access to roads to supplement the Ambassador Bridge in Windsor. How much of the $2.1 billion might be left now, that is not committed and not pledged?
Mr. Cannon: We have approached this based on our discussions with the private sector as well as with the provinces. Case in point: we have signed a memorandum of understanding with all the authorities in question. We signed a memorandum of understanding last year with the provinces of Ontario and Quebec. We have committed, in the first instance, to do a lot of data gathering. We want to be able to identify those areas of congestion, as I mentioned before, that are detrimental to maintaining our competitive advantage.
There is a lot of fact-finding in the first two years, or maybe less, and then we will be going forward to invest, as I said before, either with the private sector or by ourselves or with the provinces in specific areas. A series of projects has already been identified. I have mentioned the Detroit-Windsor crossing. That will commit close to $800 million of the amount that has already been identified.
As for the other projects, some of them are coming forward. Once again, there is no haste. We are working with the private sector. We have committed to a certain number of sub-tables, if I am allowed that expression, the sectoral approach, whether it be the trucking industry, the rail industry or the manufacturing sector, where provinces come together and we are able to identify that. As we invest, they also invest. It is a win-win situation not only for our Canadian companies but also of course for our Canadian competitiveness on the world markets.
There is no haste to spend all this money. We want to ensure we are doing the right investment at the right time. The Detroit-Windsor crossing had been identified years ago as needing to be increased because the volume was increasing. We also did this when we made the tunnels and bridges provision, in order to ensure that as the years progress we will have this infrastructure in place to continue being competitive.
[Translation]
Senator Dawson: I would like to join my voice to your own as well as that of Senator Oliver. In each of the public hearings we held, from Prince Rupert to Halifax via Montreal, we received pressing requests from people in the industry for us to speed passage of this bill. Moreover, we received correspondence from the Association of Canadian Port Authorities, the Shipping Federation of Canada and the Chamber of Marine Commerce, who were unanimous in asking us to help you, minister, adopt this bill as quickly as possible. As far as we are concerned, given the number of years this bill has been expected, we will be pleased to cooperate.
Having said that, and the perfect being the enemy of the good, there are nevertheless some things that are not in this bill that we will have an opportunity to include in our report. There will probably be demands that will go further than what your bill presents. Since you are already paying attention to our report and since you will have it in your hands in the coming weeks, I think that you will have an opportunity to respond to Madam Chair: ``Yes, there are amendments that I could put forward and we will not necessarily be forced to wait five or ten years.'' In other words, you can count on us.
However, there are still some minor problems. Here is one example. The facilities in Prince Rupert only bring in $25 million in profits over three years in their port operations. Why? Because they have just started up. There is no doubt that in the next 10 years, there will be 30, 40 or $50 million in profits every year since the future of containerization on the west coast will make it a major league partner. I hope that the money available in the Canada Fund will enable you to help them. Yes, they can achieve this themselves by self-financing, but if we want to be as quick as possible as our report will indicate to you, if we want to be able to give them the tools to be in the vanguard of the demand from Asia, we should ensure that your department will be likely to see that beyond the $25 million, there might be other exceptions that may require assistance.
Thank you, Madam Chair. I simply wanted to make a comment and support the bill.
Senator Fox: Madam Chair, I am no expert like you, Senator Dawson or other members of the committee who are here. However, what struck me in your opening statement are the consultations that you held. If all ministers consulted interested parties like you have done, it would certainly simplify the task for parliamentarians. Unfortunately, that is not always the case, which explains why in some cases we have to call several witnesses before the committee.
I understand that Senator Dawson is proposing amendments. I did not understand if it was for this bill, following the study on containerization, or if it is something different.
Senator Dawson: It is simply that the report will contain proposals that indicate that the industry has expressed demands to which the ministry has not yet responded.
The Chair: Thank you for that clarification.
Senator Fox: You say you have the unqualified support of the marine industry. Is it really without reservations? Nobody has any serious problems with this? I suppose that there are always minor points of disagreement, but no one objects substantively to any provision whatsoever in this bill?
Mr. Cannon: I would say that there is unprecedented consensus.
Senator Fox: All right, in which case I congratulate you. Senator Oliver talked about the issue of tax-free bonds. Is this a notion that your department has examined? Is this something that the Department of Finance would accept? I had an opportunity to visit facilities in Baltimore, especially the infrastructure of what could be called their ``old port,'' where they obtained the right to issue bonds and the bond holder did not have to pay income tax on the interest. That had allowed for very rapid development.
In the public sector, this would be an extraordinary incentive to raise funds, be it for port facilities or for old ports such as the one in Montreal, in which you are very interested. Is this something that could be considered as a method of financing?
Mr. Cannon: This would have to be examined on a case-by-case basis. You are absolutely right. What I take away from your proposal is that we have to be able to give our port authorities the tools they need so that they can be more competitive and gain access to funding. Regardless of the entrepreneur, if he decides to invest tomorrow morning, there are tax laws which in some cases allow this person to have a tax exemption, but also conserve the interest that has accumulated on these sums of money. The idea is to ensure that people can reinvest these amounts on the one hand, but also to facilitate investments, on the other hand.
I would ask Ms. Kavanagh whether or not we anticipate this kind of regime in other specific sectors?
[English]
Ms. Kavanagh: That question has come up periodically, long before these amendments, and even predates the original Canada Marine Act, the concept of interest-free bonds.
As we went through the exercise of looking at options related to borrowing, that was talked about somewhat. Many of the amendments today relate to bringing Canada Port Authorities to an even playing field with respect to section 25; unlike other transportation entities that could access contribution funding, Canada Port Authorities could not. Also, with the movement of the larger ports to a commercial-based borrowing limit, they received a much more flexible, responsive and timely tool with respect to partnering with industry.
Tax-free bonds are very much a Government of Canada fiscal issue. If you were looking at port authorities, you would in fact not just bring them to a level playing field; you would put them perhaps on another level altogether. Other transportation providers, such as railways and perhaps the air sector as well, would start to question us about that.
These amendments were meant to level the playing field with respect to port authorities and other transportation entities and to give them flexibility, with an appropriate level of checks and balances, because these still remain federal assets.
Senator Fox: That was my last question. I encourage the minister to become a champion of that idea within the Government of Canada. Obviously, if you have a bond that is issued with non-taxable interest, it also reduces the level of interest that is payable in a competitive market. If it is limited to public infrastructure, for instance, perhaps that could be considered. Thank you.
[Translation]
The Chair: The work has apparently been done. Minister, Ms. Kavanagh and Mr. de Granpré thank you very much for your presence here today.
This committee continued in camera.
[English]
The committee resumed in public.
The Chair: Is it agreed, senators, that the committee move to clause-by-clause consideration of Bill C-23, An Act to amend the Canada Marine Act, the Canada Transportation Act, the Pilotage Act and other Acts in consequence?
Hon. Senators: Agreed.
The Chair: Shall the title stand postponed?
Hon. Senators: Agreed.
The Chair: Carried. Shall clause 1 carry?
Hon. Senators: Agreed.
The Chair: Carried. Shall clause 2 carry?
Hon. Senators: Agreed.
The Chair: Carried. Shall clause 3 carry?
Hon. Senators: Agreed.
The Chair: Carried. Shall clause 4 carry?
Hon. Senators: Agreed.
The Chair: Carried. Shall clause 5 carry?
Hon. Senators: Agreed.
The Chair: Carried. Shall clause 6 carry?
Hon. Senators: Agreed.
The Chair: Shall clause 7 carry?
Hon. Senators: Agreed.
The Chair: Carried. Shall clause 8 carry?
Hon. Senators: Agreed.
The Chair: Carried. Shall clause 9 carry?
Hon. Senators: Agreed.
The Chair: Carried. Shall clause 10 carry?
Hon. Senators: Agreed.
The Chair: Carried. Shall clause 11 carry?
Hon. Senators: Agreed.
The Chair: Carried. Shall clause 12 carry?
Hon. Senators: Agreed.
The Chair: Shall clause 13 carry?
Hon. Senators: Agreed.
The Chair: Shall clause 14 carry?
Hon. Senators: Agreed.
The Chair: Shall clause 15 carry?
Hon. Senators: Agreed.
The Chair: Shall clause 16 carry?
Hon. Senators: Agreed.
The Chair: Let us group them. Shall clauses 16 to 60 carry?
Hon. Senators: Agreed.
The Chair: Shall clause 61 carry?
Hon. Senators: Agreed.
The Chair: Carried. Shall clause 62 carry?
Hon. Senators: Agreed.
The Chair: Carried. Shall clause 63 carry?
Hon. Senators: Agreed.
The Chair: Carried. Shall clauses 64 and 65 carry?
Hon. Senators: Agreed.
The Chair: Carried. Shall clause 66 carry?
Hon. Senators: Agreed.
The Chair: Carried. Shall the title carry?
Hon. Senators: Agreed.
The Chair: Carried. Is it agreed that this bill be adopted without amendment?
Hon. Senators: Agreed.
The Chair: Carried. Is it agreed that I report this bill at the next sitting of the Senate?
Hon. Senators: Agreed.
The Chair: Carried. No observations? I do not think there are any observations we should make. Everyone wanted the bill. We distributed to all of you a copy of the various letters we received.
Senator Tkachuk: Yes.
The Chair: They all wanted the bill, although they did not want to appear, so I do not think we need any observations.
Senator Tkachuk: No.
The Chair: We will table the bill tomorrow. Thank you.
The committee adjourned.