Proceedings of the Standing Senate Committee on
Fisheries and Oceans
Issue No. 8 - Evidence - November 1, 2016
OTTAWA, Tuesday, November 1, 2016
The Standing Senate Committee on Fisheries and Oceans met this day at 6:02 p.m. to continue its study on Maritime Search and Rescue activities, including current challenges and opportunities.
Senator Elizabeth Hubley (Deputy Chair) in the chair.
[English]
The Deputy Chair: My name is Elizabeth Hubley, a senator from Prince Edward Island, and I am pleased to chair this evening's meeting. Before I give the floor to the witnesses, I would like to invite the members of the committee to introduce themselves. I'll start on my left.
Senator McInnis: Senator Tom McInnis, Nova Scotia.
Senator Enverga: Tobias Enverga from Ontario.
Senator Raine: Senator Nancy Greene Raine from B.C.
Senator Poirier: Senator Rose-May Poirier from New Brunswick.
Senator Munson: Jim Munson, Ontario.
The Deputy Chair: Thank you.
The committee is continuing its study on Maritime Search and Rescue activities, including current challenges and opportunities. This evening, we are pleased to welcome representatives of the Shipping Federation of Canada. Would you like to introduce yourselves?
Michael Broad, President, Shipping Federation of Canada: Thank you, senator. My name is Michael Broad. I am President of the Shipping Federation of Canada. To my left is Chad Allen, who is our Director of Marine Operations and a former chief officer on board foreign flag ships, sailing between Europe, Asia and North America. On my right is Sonia Simard, who is our Director of Legislative and Environmental Affairs.
The Deputy Chair: On behalf of the members of committee, I thank you for being here today. I understand you have opening remarks. Therefore, in the interests of allowing as much discussion as possible in the time available to us, you are requested to please limit your opening statements to no more than 10 minutes. The floor is yours.
Mr. Broad: Thank you, senator, and thank you all for giving us this opportunity to participate in your study on maritime search and rescue activities.
Our organization, the Shipping Federation of Canada, represents the owners, operators and agents of the ships involved in Canada's world trade. Our contribution to the committee's study is to raise a red flag regarding the urgent need to provide funds for the replacement of the Canadian Coast Guard's icebreaking fleet as we noted that some of the members of the committee raised questions on the topic previously.
I'll try to keep my presentation short and focused on some key messages.
The Coast Guard's icebreaking fleet plays a fundamental role in keeping Canadian waters open to marine commerce. This is particularly true for trade routes such as the northeast coast of Newfoundland and the Gulf of St. Lawrence, the St. Lawrence River and the Great Lakes, and the Canadian Arctic, each of which relies on the Coast Guard's icebreaking services in order to remain open to navigation in the challenging ice conditions of winter.
Icebreaking and ice management services are pillars of the Coast Guard's mandate under the Oceans Act, and the fleet plays a fundamental role in the protection of the marine environment by escorting ships, including petroleum tankers and other vessels carrying dangerous goods, through icy waters.
Despite its importance, the Coast Guard's icebreaking fleet is in a precarious state and is not well-positioned to meet the needs of increased marine traffic throughout Canadian waters. The number of ice-capable vessels within the fleet has declined over the years, and several of the remaining icebreakers have exceeded their operational life expectancy, with an average vessel age of over 36 years.
Although the government has invested in vessel life-extensions for the fleet, these efforts do not result in increasing icebreaking capacity and, in fact, reduce the overall number of available units when vessels are tied up for this life-extension work.
Although the Coast Guard's icebreaking fleet is aging and limited in number and capacity, demand for icebreaking services remains strong, primarily due to industrial activities along Canadian waterways, ever-growing container traffic, increased ferry services in Eastern Canada and growing traffic in the Arctic, as well as the ongoing need for icebreakers to engage in flood control, search and rescue and other governmental priorities. Pressure on the fleet is expected to grow even further as the trade agreement between Canada and Europe is implemented.
The need for a comprehensive and realistic schedule to replace the icebreaking fleet has been publicly acknowledged by the Auditor General, the Standing Senate Committee on Fisheries and Oceans and the maritime industry. The Tanker Safety Expert Panel submitted a report in 2015 highlighting the need for additional ice-capable vessels to meet the government's commitments and to ensure safe navigation.
We also believe that the Coast Guard's effort to optimize deployment of its current icebreaking assets, although laudable, is only a Band-Aid solution. We believe the Coast Guard does very well with what they have, but what would happen in the event of an unexpected breakdown of one of the operating icebreakers when the fleet is already so thinly spread?
In illustration of our concerns, in 2013 and 2014, we saw vessels carrying just-in-time container goods and raw materials being delayed up to five days due to the severity of ice conditions and a lack of icebreaking assets on the St. Lawrence trade corridor. In 2015, the seaway experienced its latest opening date since 1997 due to the severity of ice and the resulting challenge that icebreakers faced in opening the trade corridors in the Great Lakes. Finally, during the 2015 Arctic shipping season, the Coast Guard was unable to adhere to its published levels of service and deployed fewer than the agreed number of icebreakers for commercial and resupply escorts, following a government directive to allocate Canada's two most capable icebreakers on a mission to the North Pole. This situation highlights the fact that the current icebreaking fleet is thinly spread and makes it difficult for the Coast Guard to meet its objectives when weather and/or traffic varies.
The committee should appreciate the essential role that the annual resupply missions play in ensuring the sustainability of Northern communities and the extent to which these missions are tied to the availability of reliable marine transportation. I don't have the number, but one could argue that the cost of operating and maintaining the Coast Guard's aged fleet, including the Vessel Life Extension Program, is much higher than it would be to operate and maintain a newer fleet. Ultimately, the lack of icebreaking capability undermines Canada's ability to build, support and maintain a robust supply chain, which is essential to supporting Canada's economy and ensuring the social and economic well-being of remote communities.
To conclude, to overcome these challenges, the Shipping Federation of Canada supports the development and implementation of a concrete and immediate plan for the effective renewal of the Coast Guard's icebreaking fleet. More specifically, we would invite the committee to consider the following recommendations:
First, we recommend the adoption of a concrete plan for renewing the Coast Guard's fleet of icebreakers, which includes securing funding and establishing realistic and verifiable timelines for the delivery of vessels in the medium term.
The second recommendation is to renew the medium-sized Type 1200 icebreakers on a priority basis, with precedence over the planned construction of the proposed $1.3 billion polar icebreaker.
The third recommendation is, in the short term, to explore all options to make additional units available in order to respect the Coast Guard's level of service commitments on icebreaking, including the possibility of purchasing or chartering existing foreign icebreakers and/or building such vessels abroad.
Madam Chair and distinguished members of the committee, thank you for your attention and we would be pleased to answer any questions you may have.
The Deputy Chair: Thank you very much for your presentation.
I would like to welcome now Senator Wallace to the committee, as well as Senator Eaton and Senator Sinclair.
Our first question goes to Senator McInnis, a member of our steering committee.
Senator McInnis: Welcome guests, and thank you for coming. I knew this would happen at some point in my career. I walked out of my office in a hurry and grabbed the wrong binder, but I have read all your materials.
Let me begin by saying that I sense from your remarks and what I read this afternoon that maybe "crisis'' is a too strong a word, but are we approaching that? As I understand it, we have something like 17 vessels ranging in size: two large ones and, of course, we have one on order, which is a major one that I think, as the schedule goes, is due for construction in 2018 and comes into service sometime later on, but those things tend to be pushed off.
Where are we? To me, it sounds very serious, just from listening to you, particularly when these vessels guide super tankers carrying dangerous goods and so on so there is a concern about the environment. Where are we with respect to that, and how serious is it?
Mr. Broad: Thank you. As I mentioned, the average age of these vessels is over 36 years old. In fact, the Louis St. Laurent is 50-some odd years old, or close to it. We have been talking about this issue for the last several years.
During tough ice seasons, we do see delays. We see ships delayed because there are not enough icebreakers around to get them out of the ice. We've seen, last year, the resupply program upset because of, again, the lack of icebreakers. Two of them were sent up on a mission to the North Pole.
To say it's a crisis, no, but it is time. It's time to renew the fleet. It's like any asset you have. These things are over 36 years old. We're going to see more delays as we go along. Every year there are more and more delays. I think it will continue, and it's bad for the economy and for trade.
Senator McInnis: Is there a delay with the Louis St. Laurent? Will it be kept in service longer now?
Mr. Broad: It will, and several of the other ships will be undergoing life extensions. The Louis St. Laurent has already had a life extension. But they only do the life extensions during the winter, when we need the icebreakers.
Senator McInnis: I'm thinking about short-term solutions. Are there available vessels that could be chartered?
Mr. Broad: I'm not an expert, but with the recent drop in the price of oil — and as we all know, oil projects have been put on the back burner — we know there are some foreign-flag icebreaker ships out there that we may be able to bring in on charter, but I don't know the cost of them. But we can't do it under Canada's laws right now. We have to have Canadian-flag ships, so to bring in foreign ships will take forever unless we change the law.
Senator McInnis: How are we viewed by the international shipping community?
Mr. Broad: They view us as getting long in the tooth on certain areas of trade in the St. Lawrence. The shipowners that we represent see the aging fleet. Mr. Allen has been up and down the St. Lawrence for a number of years on container vessels. We need good equipment there, and the delays are increasing every year.
Senator Eaton: I think your whole letter was very interesting and I'd love to go through it with you, but some of my other colleagues want to talk to you too. In one of your recommendations, I thought it was very interesting that you would take heavy and medium icebreakers on a priority basis and put them before the $1.3 billion polar icebreaker.
Aren't the polar waters very vulnerable now with increased traffic? Would you deploy these heavy and medium icebreakers up there if you had to? Why did you make that particular recommendation?
Mr. Broad: I don't know when they are going to start that ship, but I don't think delivery is until 2022, and it's $1.3 billion. This is a ship that, four years ago, was supposed to be built at $780 million, and now it's up to $1.3 billion, and it's supposed to be built in Canada. We don't think we have the wherewithal to build these here efficiently, but we are not commenting on government policy. We think that instead of building one for $1.3 billion, you could build a few for that amount.
Senator Eaton: Is the design up and ready to go with the polar icebreaker? It has not started to be constructed, but is it up and ready to go? Would you have to start from scratch with the medium and heavy ones?
Mr. Broad: No, I think that presently it's easier to get the medium and heavy ones going, in my understanding, anyway, than it is the polar ship. Although, to that point, I'm also told by the Coast Guard that if they want to build a new icebreaker these days in Canada, with all the work that's going on with the navy and in Canadian shipyards, it will take eight years. There is not a lot of good news out there with respect to icebreakers.
Senator Eaton: Well, this committee and others — I sit on the Finance Committee as well — it's very discouraging because we hear what the navy and the Coast Guard are saying, and you just wonder why things can't move faster.
Senator Poirier: Thank you, gentlemen and madam, for being here. I have a couple of questions on the same subject.
We've heard several witnesses talk about increased activity in the Arctic area since we began the study, whether it be recreational or commercial. Is it possible for you to provide us with the activity level for the last five years of the ice passage by the members you represent, where ice breaking is needed? Is that something that you could provide to the committee?
Mr. Broad: Not tonight, but yes, we could.
Senator Poirier: The second question would be whether you anticipate the trend of the increase to continue. Have any companies who use these ice passages ever voiced safety concerns due to the lack of icebreakers?
Mr. Broad: On your first question about the traffic levels and the trend, we saw this year the Crystal Serenity that travelled, the passenger ship, and there are more adventure tours going up there. Some of our members were involved in mining projects in Baffin Island, Baffinland. We understand there is a lot of cargo interest for a Northwest Passage going from Asia to Europe through the Arctic. Personally, I don't like that.
There is increased traffic, and it is at a point where Canada is now looking at a polar code and at ways of coming up with particular trade corridors to make sure that environmental concerns and rescue operations are addressed. You don't want ships going all over the Arctic, so the government wants to keep these ship corridors.
What was the other question?
Senator Poirier: Have any companies who use the ice passage ever voiced safety concerns because of the lack of icebreakers?
Mr. Broad: None to us.
Senator Poirier: You also mentioned in your opening remarks — and I also read it in your notes — the free trade agreement, CETA, which is going on right now. In your opinion, if the Coast Guard does not renew its icebreaker fleet in a timely fashion, could it hurt our export and import activities? If so, to what degree do you think it would hurt?
Mr. Broad: It's difficult to say. Obviously, if the icebreaker fleet is not renewed within the near future, it will make passage up and down the St. Lawrence much more difficult, and ports between Quebec City and Montreal will be at risk.
I guess you'd be looking at putting the cargo through other ports, which could increase costs substantially. All water is cheaper than rail and truck, and more environmentally friendly too, by the way.
Senator Munson: Thank you for being here. You alluded to the Arctic. Do we have the capacity and capability to do the job now? We've heard so much about this massive ship with tourists. Has it already gone through? Has it made it through the North?
Mr. Broad: Yes.
Senator Munson: But there will be more. I'm curious about the capacity and capability today, each and every time. This will build. Is there a likelihood of one of those ships getting stuck and not having the capability of freeing that ship?
Mr. Broad: If I could ask Ms. Simard to comment.
Sonia Simard, Director, Legislative and Environmental Affairs, Shipping Federation of Canada: In terms of the capacity in the North, looking at it from the commercial traffic angle, at this stage we're still in a situation where the level of traffic is mostly on the resupply for the communities and on the mining side. But even there, we see that sometimes, in terms of the ability to provide icebreaking services — for example, for the resupplying of the local communities — those vessels have to wait because the icebreaker has to suddenly quit escorting to go and rescue, for example, a National Geographic boat that's out there doing some filming. The commercial escort has to stop because there is a search and rescue need. It's happening now where there are priorities and the needs of all the users are not necessarily met. We have seen cases like this in recent winters.
With the increase in traffic, is it difficult to see a scenario where the needs could be challenged? It's not difficult to see a scenario where there may be difficulty in ensuring that there will be an escort for a boat to resupply communities, for commercial, for search and rescue, and for adventure tourism, and the requirement to help those.
If we're talking about the adventure side of it, those ships that come through the Northwest Passage on more of a sports and expedition type of excursion are maybe not as well prepared as one would expect. Right now we may not be monitoring that type of traffic, so it creates extra need at the last moment, whereas the commercial traffic is pretty much well settled and knows the needs in advance.
Yes, conflicts might increase. However, right now, when we look at the trend — you were talking about the increased traffic in the Northwest Passage. We are not thinking right now — and correct me if I'm wrong — that the Northwest Passage will become a highway in the next five years. It is a longer-term schedule. We are not here to tell you there is a need for more icebreakers because we think that tomorrow there will be a highway in the Northwest Passage. We are not saying that.
But right now, in terms of the need to support the resupply, the commercial, the mining projects and all of that, we sometimes see delays in icebreaking escorts because the icebreakers have to be diverted to search and rescue or other types of missions.
Senator Munson: With the exception of air-sea rescue, just for edification, what is the priority for an icebreaker, Coast Guard or otherwise? Is it to have ships come and resupply communities that need food and supplies for their daily living, or is it to cut out the ice for a tourist group with lots of money that wants to come and see our North? What would be the priority of an icebreaker?
Ms. Simard: Personally — and I don't know if my colleagues will be adding anything — in terms of priorities among the commercial activities, I'm not sure that there are fixed priorities. But definitely, if there is a search and rescue mission, the icebreakers will be diverted from the commercial escort to the search and rescue.
When you say "breaking out the ice'' for those excursion vessels, smaller vessels and port vessels going there, if they find themselves in trouble, yes, the commercial side will lose the escorts. It is our understanding that the Coast Guard will do the first mandate, which we understand is search and rescue, and we are not here to say it shouldn't take place. But it is a fact that if those ships are coming into Arctic waters and are not as equipped as they should be to face that type of climate, and the resupplying missions' ships there are well equipped but they still need icebreakers, we lose icebreaking escorts because they have to go and help small vessels in the Arctic. It's happening, and we believe the priority will be if there is an issue with concern for life.
Senator Poirier: How often does that happen?
Ms. Simard: I should qualify. As an association, we do not represent the resupply. Resupply missions to local communities are done by Canadian flag vessels. In Canada, in order to move cargo from point A to point B, you have to do that on Canadian flag vessels. The resupply commodities are done by Canadian domestic vessels. We represent the ocean-going vessels that are going, for example, to the mining projects and are taking the important exports out of south or north of 60.
Senator Poirier: I meant how often would an icebreaker be removed from the commercial to the search and rescue?
Ms. Simard: I was explaining that, because it has happened. I was saying that because, to our knowledge, it happened on the resupply vessels. We didn't experience that directly. It's our colleagues within the industry on the resupply side. We understand that this had happened at least once last year, where the resupply vessel was concerned about losing the escorts because of a need to assist. That's our understanding.
Mr. Broad: We're not experts in Arctic shipping. Most of our work is south of 60. Of our members, I would say 98 per cent of their business is south of 60.
Senator Munson: One other question for the captain, because you said that you have been on many ships around the world. Maybe you have the experience — or Mr. Broad — about comparing us to other countries.
You talked about the number. Are there 17 icebreakers that we have? Seventeen, and the one we have proposed for 2018 or six or seven years down the road.
How do we compare with, for example, Russia, Northern Norway, Sweden and what the United States is doing in Alaska? Are we lagging way behind these countries, or are we breaking ice properly?
Mr. Broad: Certainly Russia has something like 48 icebreakers, and they are building four new polar icebreakers. They are way ahead of the game as far as any other country that I know of.
The U.S. does not have a lot of icebreakers. How many do they have in the lakes?
Chad Allen, Director, Marine Operations, Shipping Federation of Canada: They just have a couple there.
Mr. Broad: They also have a polar icebreaker on top to be built. I think that's one of the reasons why Canada wants to have another polar icebreaker also.
Senator Munson: We talk about that route, that magnificent story of the ship that went from one part of Russia and then ended up in China, over the polar route, which was a great undertaking.
Mr. Broad: Yes.
Senator Munson: I don't think we could do that.
Mr. Broad: No. They took a different route. What do they call it, the eastern route?
Mr. Allen: There are two. There is the Northwest Passage and the Northern Sea Route. That is one is through Russia, the Northern Sea Route.
Senator Munson: We could learn from the Russians then. If they can afford it, why can't we afford it?
Mr. Broad: Yes.
Senator Enverga: Let's talk about the search and rescue capability of the Coast Guard. Last week, we were in Halifax and in Sydney, Nova Scotia, and we talked about the capability there.
Do you have any record of how many times you have assisted the Coast Guard, let's say, as a vessel of opportunity in search and rescue? Do you have any numbers there?
Mr. Allen: I'm personally not aware any statistics, but as you say, it's part of the search and rescue framework. If there's a vessel that can assist, then a vessel is required to assist under SOLAS.
Senator Enverga: Do you know of any instances when your group was able to assist the Coast Guard? How much dependence do they have on you as commercial vessels in rescuing people?
Mr. Allen: I think there is a reliance, certainly to utilize the resources that are at sea in terms of the Atlantic Ocean or crossing the Pacific Ocean. Those ships are probably closer in vicinity than official search and rescue facilities in Halifax or on the West Coast.
Senator Enverga: The last time we were there, we were asked a question of the head of the Coast Guard, and she told us that the Far North is changing. Climate change is supposed to be warming the Arctic, but there are times when there is more ice there than ever before. Can you say that's true, judging from the experience of your people?
Mr. Allen: I am not an environmentalist. As we say, we're not experts in the Arctic. It's really difficult to comment on that in terms of the changing conditions in the Arctic.
Ms. Simard: Not from personal experience, but when you read about the Arctic passage, both within the trade journals and within the scientific literature around climate change, what must be considered for navigation is that when we talk ice-free waters, we are not looking at ice-free waters yet. What has happened is that because of the melting of the ice, you now have more pieces of ice that are floating and are coming into the passages. What you see as diminution of ice in terms of the width is creating more pieces of ice that are floating and creating additional challenges from a navigation point of view.
On climate change, when we look at open-sea waters, I believe that the mariners would tell you that, in terms of the Arctic, it comes with a lot of additional and different challenges because of the free pieces of ice that are now floating but used to be attached to the bigger icebergs. That, in itself, is an additional challenge when you think of navigation in the Arctic in the current and future years.
Senator Enverga: Now I understand.
Senator Raine: It's nice to have you at our committee. One of you said something about vessel life extensions are only done in the winter. I don't understand why that would be. Could you explain that?
Mr. Allen: Well, basically the Coast Guard has a 10-year plan that they have listed on their website, which outlines when these vessels are going for life extension, when they are going to dry dock. They are quite aware of the requirements both in the Arctic and south of 60, in the Gulf. They try and work around those peak periods, but there is a very short window in which they do have to work. It's unavoidable that they are going to overlap.
Looking at next spring, in April, we see three of the medium-sized and one of the heavy icebreakers going in for refit. If we have a harsh winter, then we see an immediate problem in the spring. They try and do it in the spring, in April, but if we have ice, it could be a problem.
Senator Raine: When they're actually being refurbished, then, is that happening in the summer or the winter? In the winter, aren't they breaking ice?
Mr. Allen: Down here they are, in the south. That's the sort of maintenance period for the Arctic.
Senator Raine: The Arctic, they have given up.
Mr. Allen: Yes. They don't go up there in the winter. They are only up there in the summer months. The periods when they can actually take these ships out of service are rather limited in trying to meet the needs of industry, both in the Arctic and in the south.
Senator Raine: The logistics are very complicated. Did you have any understanding that they would divert two icebreakers to the North Pole before they actually did it last summer?
Mr. Broad: No. That was kind of a surprise.
Senator Raine: My final question is: If you've got a National Geographic film crew wanting to go to the Arctic and it's going to put strains on our limited supply of icebreakers, who says "yes'' or "no''?
Mr. Broad: Well, Sonia knows a bit more about this on the legal side than I do, but there is the ability to trade or go wherever you want, the right of passage of ships to transit in international waters. You can't put a stop on vessels going up there, and yes, it does create problems. I remember the previous commissioner of the Coast Guard telling me about some guy who wanted to ski up to the North Pole. He said, "We had to rescue him, and you wouldn't believe the amount of money we spent on saving him.''
It's a big place, and we have ships that are going up there, free passage, and they get stuck once in a while, so the Coast Guard has to get them out. I would say right now that's the exception. It's not the norm.
Senator Raine: It begs the question: If somebody is going to do something stupid, such as going where they shouldn't go and then getting stuck, who pays the cost? Surely there should be a way, as we have in our environmental protection, where if there's an environmental disaster, the industry pays for the cleanup. Why wouldn't we have the same kind of thing? It's beyond me when we're struggling to obtain new vessels and we incur costs that aren't recoverable. I guess you wouldn't have any comments on that?
Mr. Broad: It's a good point, a point well taken, but, again, I think that the example given was an exception to the norm.
Senator Raine: Yes.
Mr. Broad: With the size of the Arctic, you could have 15 or 20 icebreakers, and you still wouldn't cover the whole thing. But I think your point is well taken, that there are limited resources, so we have to find ways and means of using them as efficiently as we can.
Senator Raine: I know this is not your topic, but my understanding is that, with that tourist ship that went through, they did pay the icebreaking costs.
Mr. Broad: They did. They brought their own icebreaker. It was a British icebreaker.
Senator Raine: The other question I wanted to ask you is: You mentioned just-in-time shipping. In just-in-time shipping, obviously, they factor in the ice conditions before they guarantee delivery by a certain time of goods that are transiting, sort of opening up waters. But if there is a delay that they didn't expect, it's the businesses that have to cover the cost of that delay? There is no recourse for not being open?
Mr. Broad: No. There's no recourse. It's the businesses, yes, that have to cover the cost, and also there are additional costs. The ship that's carrying the cargo is delayed; they're not getting paid any more for the ship being delayed. So, if it's costing $20,000 a day to operate that ship, it's expensive. Ships, especially ones that are on regular ports of call or regular trade lanes, get slowed down. Then they get to Montreal, and they turn around and go back over to Europe. They have to speed up to make up time for their schedules, so they burn more fuel and it costs more money. So there are other costs aside from the cargo interest that the importer loses money, maybe a sale or whatever, but there's no way to recover that. There are a number of additional costs that add up to the ship owner, to the cargo interests.
Senator Raine: The thing is, though, that it's very important, if we're going to have good, viable trade, that we have all things working properly. As you say, when you are looking at 35-year-old ships, you are anticipating some problems down the line if we don't build more ships.
Mr. Allen: I would just like to add a quick comment on what Michael touched on there. When a ship is late, certainly on the container side and the intermodal side, there is a whole downstream effect. The whole railcar network and rail system is designed on these ships being on time. There's not a lot of buffer there. If a ship is late, it sort of sets an imbalance between the railcar supply and the labour supply, because the labour is also a critical component. So there are downstream effects to one ship or ships being late in terms of the whole supply chain. There's a ripple effect.
Senator Raine: It would probably be good if we had a little cushion built into the supply of icebreakers.
The Deputy Chair: Supplementary question, Senator Enverga.
Senator Enverga: With all of the problems you're getting with the shipping delays, do you have any estimate on the opportunity cost of this or the cost of all of the delays? Give me a rough estimate of how much the industry is losing because of the icebreakers being late or behind or not there. Can you give us a rough idea?
Mr. Broad: No, but maybe in a couple of months I can because the Coast Guard is trying to find out that same number. Our members don't get together as an industry to record all of that time lost or that opportunity cost, but we're working with the Coast Guard now to come up with some numbers.
Senator Enverga: You'll give us the report soon, when it's available?
Mr. Broad: It's a Coast Guard report. I don't know how soon it will be available, but I know that they're working now on that particular subject, yes.
Senator Sinclair: Thank you for being here. On the second page of your document, you referenced, in the middle paragraph, that accompanying icebreakers for commercial and supply escorts had to be withdrawn and that two of them had to be allocated to a mission to the North Pole. Was that a search and rescue mission, do you know?
Mr. Broad: No, it was a scientific mission, was it not, Sonia?
Ms. Simard: It was science, yes, mapping of the continental shelf.
Senator Sinclair: Okay. That was a Government of Canada decision to reallocate. So that had an impact upon the commercial shipping operations that they were escorting?
Mr. Broad: Actually, no, it had some effect on the resupply in the Arctic.
Senator Sinclair: Okay. I couldn't tell from the paragraph where it was. I wondered if you could tell me — and maybe you mentioned it and I missed it — do the commercial fishing operations that use Coast Guard escorts in order to keep the lanes clear pay a fee for that, or is that provided free of charge to the commercial shippers?
Mr. Broad: As far as I know, it's free of charge, yes.
Senator Sinclair: If that's not correct, you can advise us later.
Mr. Broad: I will.
Senator Sinclair: That means, then, that the search and rescue fleet is only available to you if they're not needed for search and rescue operations. Am I right?
Ms. Simard: If I may, we're speaking to you in terms of the icebreakers, so the icebreaker vessels, yes. Search and rescue south and even north doesn't happen that often. I could take two minutes to make it very simple, because it is my fault and I didn't want to put this committee in a wrong direction. The example we gave you about the potential to divert to go for search and rescue in the North is one example. Indeed, Mike mentioned that we don't see it happening every day. We gave you that as an example to show the potential conflict.
But in terms of our the need for icebreakers on commercial operations, every five years, the Coast Guard is working with the industry at assessing the needs of the industry versus how much service they can provide to us, and we have a five-year agreement. To give you an example, from 2011 to 2016, there was a gap between how much service the industry forecasted it needed versus how many hours the Coast Guard vessels for icebreaking are actually able to give. That gap — remind me, Chad — is how many hours?
Mr. Allen: I'll give it to you in a percentage. It's 22 per cent in terms of what we asked for, what industry outlined as requirements, versus what the Coast Guard could commit to in terms of capacity. At the time, in 2011, there was a 22 per cent gap in terms of the number of days that we needed icebreaking support.
We are currently undergoing the renewal of this agreement, but we're fearful that the gap is going to continue to increase because there's one less icebreaker, the Tracy. We have increased refits and dry docks, and we have increased ferry services as well. So this gap is certainly going to increase from 22 per cent. We don't know what it's going to be yet. We haven't seen what they have committed. We're still working on what our requirements are going to be. They haven't changed too much, but certainly the Coast Guard's capabilities to meet those requirements are, I think, going to be stretched further again.
Mr. Broad: If I can just add, we respect the committee's look at search and rescue, and we aren't here to talk about search and rescue. We just saw some of the questions that came out about the Coast Guard's fleet, and we wanted to come and answer that. Our knowledge of search and rescue is very limited, at best.
Senator Sinclair: Thank you for that clarification, and we'll certainly keep that in mind.
I did want to ask one further question, and that has to do with that agreement that you referenced. I gather it's up for renewal and being re-negotiated as we speak. Do you anticipate an increase in commercial shipping over the next five years as compared to the last five years? If so, what would that increase be?
Mr. Allen: Based on the discussions that we've had with stakeholders that are involved in this, we're not really anticipating a major increase in the requirements for icebreaking based on what we've outlined in previous years. The demand hasn't changed, but I think the Coast Guard's ability to meet those demands is going to continue to decrease.
Mr. Broad: If I may add, we don't know what the CETA, the trade agreement with Europe that was just signed, will bring. Previous estimates have said $5 billion worth a year of new cargo coming in, or business, so it could very well increase. If trade does indeed increase, the East Coast and Montreal and Quebec would certainly be beneficiaries of that increased trade. And, of course, we need to keep the St. Lawrence River open.
Senator Sinclair: Would that perhaps also be true of the Trans-Pacific Partnership, as far as you know?
Mr. Broad: No. I doubt it, because the Trans-Pacific Partnership will be more trade with Asia.
Senator Sinclair: What about exporting?
Mr. Broad: It would be exported through the West Coast ports. There wouldn't be too much export out of Eastern Canada to Asia. It would probably go by the West Coast.
Senator Wallace: Thank you for the presentation. Being from the Atlantic Provinces, I couldn't help but think of this gap that exists between the icebreaking requirement — in particular I'm thinking of the St. Lawrence when I hear mention of this — and the needs of shipping. Time is money, and if the icebreaking capability isn't up to scratch, shipping costs go up and so on.
You mentioned the ports of Montreal and Quebec City, but there are ports further east than that, on the Atlantic coast, not the least of which are Halifax and Saint John. If the Coast Guard is not going to keep up with the icebreaking capability and the requirements of the industry, it may be that that provides an opportunity to make the Atlantic coast ports viable for shipping purposes.
Mr. Broad: You're absolutely right, particularly for container cargo, but you do have bulk cargoes moving in large lots, and the railway would take a bite out of anybody's profits to ship that. It's not just containers. The ports of Halifax and St. John are certainly well-positioned to handle cargoes, but there are a lot of other cargoes besides containers that move up and down the river.
Senator Wallace: Indeed, and it's all bottom-line driven.
You had said that the Coast Guard has icebreaking capabilities in 17 vessels with an average age of 36 years. When was the last Coast Guard vessel built in Canada or when did it last purchase a new vessel? Just roughly.
Mr. Allen: I believe it was the early 1980s.
Senator Wallace: With the existing fleet of 17 vessels, would all of those be government- or Coast Guard-owned, or are any of them on long-term time charter from the private sector?
Mr. Broad: No. Those 17 vessels are not all icebreakers, are they, Chad?
Mr. Allen: No, I don't believe so.
Mr. Broad: When we talk icebreakers really breaking ice — not just buoy tenders or whatever — you're probably talking about nine ships, but they're all owned by the Government of Canada. None are time-chartered. Again, it has to be Canadian flag ships.
Senator Wallace: Obviously money, like most things in life, becomes the issue for government. The cost of upgrading and the $1.3 billion for the polar vessel is major money. But in Canada, is there a market or an availability of chartered icebreaking vessels? Does that exist in the commercial shipping business?
Mr. Broad: There are icebreakers that you can charter in, particularly now since some of the oil projects up in Alaska and elsewhere have been put on the back burner. But I don't know if there are any others. Nordic countries, like Finland, can build icebreaking vessels.
Senator Wallace: I guess what I'm thinking is that if there's an icebreaking gap in the country, as you refer to it, and getting new vessels built hasn't happened since the 1980s, it sounds like a long stretch. Are there other options to provide those icebreaking vessels through the private sector? Would the private sector build them and long-term charter them? Has that ever happened? Do you see that possibility existing? We have shipyards in the country that can build these, so perhaps the private sector may find that an opportunity to be profitable. Would that be an option for the government to look at? It would keep the capital cost off the government's books.
Mr. Broad: That's an excellent point, senator, but under existing laws, no, that wouldn't be possible.
Senator Wallace: Unless they were built in Canada.
Mr. Broad: Unless they were built in Canada.
However, we would urge the government to take a good look and maybe do a business case on this whole thing. It's not our place to comment on shipbuilding in Canada, far from it, but we have to remember that there's not a lot of skill built up yet, and it's a very good thing for the country that they are going to build that up in Halifax, Vancouver and, maybe, Quebec. But bottom line, is that the way to go?
Maybe there's a combination. The ships that are being built for the Navy, in Canada, for security reasons and all of that kind of thing, are going to take up time at the shipbuilding yards. Is there a case for maybe a combination of building some in Canada, chartering in tonnage to meet short-term needs and building offshore? There are several ways you can go about it, but I think the government would be well done by taking a good look at it, doing a business case and seeing what they could come up with.
Senator Wallace: In particular, if there is some capacity availability in the Canadian shipyards. At some, there wouldn't be right now, it seems, based on what's happening.
It just seems to me that there may be an opportunity there for private sector to build them and provide them on a long-term charter. It's a Coast Guard issue, I know, but just given your knowledge of shipping, I had wondered whether that made any sense at all. I think I have your answer to that.
Mr. Broad: When you say private sector, do you mean the Canadian shipyards or do you mean others?
Senator Wallace: I'm talking about investor conglomerates that could build a billion-dollar vessel, and they could do it in a Canadian yard on the strength that they'd have a long-term time charter pre-arranged with the federal government. They'd agree to take it for 20 years at a rate, and so it's an investment.
Mr. Broad: It's certainly a possibility, yes.
Senator Wallace: As opposed to where we're at now, where we're trying to get the federal government to come up with billions of dollars, on top of all the other shipping.
Ms. Simard: If I may, on that point: They could be built here, or I guess the business case could be done as well to look at building abroad. If you're thinking of private investment, they would look into the business case. Like you say, we haven't built since the 1980s, so it might be quite difficult for the Canadian shipyards to meet a short-term demand because they are pretty much occupied right now under the long-term procurement strategy.
Senator Wallace: I just have one other quick one, if I could, chair.
How realistic is it, with the age of the existing vessels, to look at getting into — and I know that every year money is being put into the maintenance of these vessels, I'm sure — but instead of replacing them, to get into a major upgrade, improvement in the reinforcing and icebreaking capability, increasing the capacity of the engines? So instead of buying new, take what you have now and spend money. Instead of spending $1.2 billion, maybe spend $300 million or $400 million and do the upgrade.
From what you know about the vessels, does that make sense when you look at the age of these vessels, or is it just to keep band-aiding them until the more permanent solution comes along?
Mr. Broad: In terms of the vessel life extension, I think previous administrations have looked at doing exactly what you're suggesting. I'm not an expert, but from my experience, that's a Band-Aid solution. We certainly need to continue the vessel life extensions now because it will take so long to build more of these icebreakers. For the time being, we have to somehow keep these things going. They are not going to last forever, and it's more of a Band-Aid solution than anything.
Mr. Allen: To touch on that, the Louis St-Laurent, which was built in 1969, went for a major refit a few years ago. Once they got in there, they found more and more problems, which ended up costing a lot more money.
Senator Raine: I don't quite understand the issue around flags of convenience. Is it a Canadian law that says the Canadian government cannot lease or charter a vessel with a different flag? Is it our law that is preventing us from doing that?
Ms. Simard: Under Canadian law, what we call the Coasting Trade Act, if you operate a ship between two points in Canada, a maritime operation in Canada, you will need to have a Canadian flag and a Canadian crew on-board those vessels.
Other countries have similar laws. The U.S. for cabotage is also reserving the Jones Act. Canada is not the only country with those types of rules.
In terms of building abroad, domestic owners are now sometimes building vessels abroad and importing them. They have reduced duties and they are importing those vessels, but then they have to flag the vessel with the Canadian flag and use a Canadian crew.
When we talk about icebreakers, you would need a Canadian flag and a Canadian crew. That's our understanding of Canadian law.
Senator Raine: But that's our law?
Ms. Simard: That's our law.
Senator Raine: So we would have the ability to change that law and allow us to then charter or lease or do something else, if we had to. If our law isn't working, we can change it.
Ms. Simard: You are quite right. Under the Coasting Trade Act, there is already a mechanism to allow a licence to use foreign-flag vessels if no domestic vessels are available. That's a short-term licence for a specific trade, and it comes with procedures. What you are talking about is not a concept that is unknown in Canada. The act is not framed this way at this moment, but having an exemption for certain types when you can't find the capacity in Canada, that concept exists under Canadian law right now.
Senator Raine: I do understand that if a ship has come from another country to Halifax or Vancouver, or directly to Montreal and not stopped anywhere in between, it can be foreign flagged. But if it's going to stop in Halifax, Quebec City, Montreal and so on, then it would have to be Canadian flagged?
Ms. Simard: The little difference is that the foreign-flag vessels could come and stop, for example, in Montreal, discharge part of the cargo, go into the Great Lakes and discharge more cargo — that is still an ocean-going vessel doing an ocean-going trip — and then load in Canada and go abroad. But you couldn't take the same cargo and move it from point A to point B within Canada. That would be the Coasting Trade Act and that would be reserved. It happens that ocean-going vessels do multiple trips but do not carry the same cargo between two points in Canada. They will continue their unloading or discharging of the exports or imports.
Senator Raine: In terms of the shortage of icebreakers, that's not implicated at all. If we got stuck for icebreakers — and you are forecasting that we are not going to be able to keep up with supplying the communities in the North, commercial operations in the North and keeping the St. Lawrence Seaway open — we would be able to then charter an icebreaker, if there was one available, to add to our capacity in an emergency situation.
Ms. Simard: My understanding is we would be able to charter. There are ways of re-registering that vessel in Canada while it's operating in Canada and put a Canadian crew on board that vessel under the current law. Not the scenario you discussed, but under the current law. You would have to do some modifications but, yes, you could go into a long-term charter, as long as you bring the ship under the Canadian flag and a Canadian crew.
Senator McInnis: While icebreaking capacity is certainly important for search and rescue, I just want to remind you that I think Minister Morneau will be commencing pre-budget consultations across the country, and I suggest that you should be at some of them. You make very good points, absolutely no question about that.
The previous government put in place a procurement program with respect to replacement of military and icebreaking vessels. A lot of effort went into it. It's strange. I drive by the Irving yard in Nova Scotia, and I have been through it, and it is a world-class shipbuilding facility, no question about it, and these icebreakers were to be built out in B.C. That was put in place, and I think that's where the lobby has to be; I really do. These things just continue.
I'm totally off point here, but I remember the Sea King helicopter. It was back in 1990 that they announced a new program, and it was cancelled. Governments do different things. They have different priorities when the governments change.
For me, what you say is extremely important. It's eye-opening for all of us, as representatives of the people of Canada. I think it would be important for you to continue this dialogue, but I would, if you will, bark up another tree.
Mr. Broad: Thank you, senator.
Senator Munson: So you're saying we don't have any influence? Is that what you're saying?
Senator McInnis: What I'm saying is that I have all kinds of ideas for Minister Morneau on what his budget should be for Atlantic Canada, Senator Wallace, but I'm not sure that's —
Senator Enverga: Most of the questions I have for second round have been answered; however, I just want to ask a quick question. I know you mentioned that CCG is not well positioned to meet the needs. How would you rate the services now, from 1 being not satisfied to 10 being very satisfied?
Mr. Broad: With respect to the overall service of the Canadian Coast Guard?
Senator Enverga: Yes.
Mr. Broad: Right up there, eight, because of the fact that they are doing so well with what they have. They have a terrific organization, and I think they just need more financial support. They serve industry and other government organizations and agencies, and there are many people asking them to do a lot of stuff. They do a terrific job on search and rescue. They are just fantastic. The people in the Coast Guard put their lives at risk every day, going out there and saving people — not every day, but many times they are out there. I give top marks to Coast Guard.
The Deputy Chair: Mr. Broad, Ms. Simard and Mr. Allen, thank you so much for being with us this evening. We certainly did appreciate your presentation and your answering of our questions. Thank you, senators. The meeting is adjourned.
(The committee adjourned.)