Proceedings of the Standing Senate Committee on Transport and
Issue 12 - Evidence for the evening session
The Chairman: From the Fraser River Harbour Commission, we have Mr. Michael
Jones, Chairman, and Mr. Rick Pearce, Port Manager and Chief Executive Officer.
Mr. Michael Jones, Chairman, Fraser River Harbour Commission: The issue for
Fraser Port is: Do we or do we not support Bill C-9? To determine that, we
asked ourselves if Bill C-9 achieved the goals espoused when government
commenced its review of Canada's ports legislation. There were multiple goals,
but one important one was to improve the ability of Canada's sea ports to
compete in international markets, particularly with northern ports in the
United States of America.
I will speak to that again in a moment, but for now let us recognize that
considerable time, energy and cost have been sunk into the production of Bill
C-9; the time, energy and cost to Industry Canada and to Canada's ports,
including the Fraser River Harbour Commission.
I will repeat to you what we said to Minister Collenette when he met recently
with the proposed Canada port authorities. We believe that it is now time to
quickly conclude the consultation process on the proposed legislation. It is
time to move on to implementation and action.
The bill contains benefits requested by local port corporations which will
enable them to be more effective in competing with the ports of other
countries. It also contains some lesser benefits for our harbour commission
Therefore, it does achieve the goal. It also contains disappointments, however,
because in our view more could have been done toward achieving the goal of
improving the ability of ports to compete internationally.
I wish to make it clear that I do not speak against Bill C-9. It is good enough
to gain our support. However, I speak up because this bill concerns the ability
of Fraser Port to fulfil its mandate, which is to facilitate national and
regional trade and economic activity which, of course, translates into growth
in jobs and prosperity. That is an important purpose. It is an important reason
to exist and so deserves to be taken very seriously.
Fraser Port's position is that American ports have certain competitive
advantages because of U.S. legislation. We had hoped to see provisions in Bill
C-9 to offset those legislative advantages.
The record will show that, throughout the three-year review process, Fraser Port
has supported its positions with facts and has also offered constructive
suggestions for improvement. Today, we will continue in that vein.
We will first give examples of the U.S. ports' legislated advantages. Second, we
will give our proposals for improvements to Bill C-9.
I will cite only three legislative advantages, the first being local taxation.
The American ports of the Pacific Northwest may tax property in their county.
For example, the Port of Seattle collected $35 million U.S. in 1996 through
property taxation. Five other ports; Longview, Bellingham, Portland,
Vancouver-Washington and Tacoma, each collected between $2.4 million U.S. and
$5.9 million U.S.
On the other hand, with Bill C-9, Fraser Port faces a local government annual
tax liability of over $2 million phased in over four years. We are pleased
about the phasing in but, nevertheless, we must note our relative fiscal
disadvantage. We do not seek to be awarded the same advantage as the Americans,
and we do not seek to avoid this property tax liability. Rather, we seek to
secure offsetting considerations.
The second advantage of U.S. ports is that, among other things, U.S. ports may
issue revenue bonds, the interest on which is tax-exempt in the hands of the
bond holder, and that ability is a useful tool for attracting private
investment for building port facilities.
The third advantage is federal assistance. The U.S. Army Corps of Engineers
funds marine channel dredging, thereby reducing a U.S. port's operating
expenses. By contrast, Canadian ports are to start paying the cost of dredging,
as a result of federal downloading of those costs. This item is outside of Bill
C-9, but the cumulative effects of all federal actions must be considered.
That is our competitive situation. Having given examples of advantages which the
States enjoy, I will move on to suggest three changes to Bill C-9 which we
believe would help us to compete with the U.S. ports. These three changes are
founded on the premise that Canada should embrace an inspiring, challenging and
achievable vision to be the seaport gateway for goods moving into and out of a
large part of North America. We should not be content with maintaining our
current share of the market.
In our view, therefore, the new legislation should enable Canadian ports to
maximize their chances for growth in the face of U.S. competition. We have
three proposals for improvement.
The first is with regard to the charge on gross revenues. It is normal for
corporations to pay taxes or charges on their income net of operating
expenditures. However, under clause 8(2)(h) of Bill C-9, the Port Authority
will pay an annual charge or tax on its gross revenue. This proposed charge,
taken on gross revenue rather than net revenue, will be a deterrent to the
raising of private financing. A charge on gross revenues will create a senior
lien on the income of a port authority, and it must be paid prior to any other
obligation such as servicing debt. This will result in a less favourable
interest rate from lending institutions, because they will have a subordinated
call on the income of the port authority. That is counterproductive.
Therefore, we recommend that the charge be based on net income rather than on
gross income. In the event that this recommendation is not acceptable to
Parliament, we recommend that the net charge be based on income after the cost
of debt servicing.
The second improvement concerns capacity and powers. Since port authorities will
be in the business of facilitating national and regional trade, and will be
financially self-sufficient, they should be empowered rather than hampered in
their endeavours. In this respect, clause 28 is a crucial part of Bill C-9. It
provides for the core activities of each individual port to be defined in the
letters patent. It is essential that they be written in an empowering way,
because core activities will carry federal agency status, and the associated
immunities from corporate taxation and various local and provincial laws and
statutes. Those immunities will speed up decision making and lower cost, all to
the benefit of our clients.
An inappropriately narrow description of core business could seriously hinder a
port authority's ability to conduct its business efficiently and effectively.
We propose a Bill C-9 provision to ensure flexibility.
We recommend that clause 28(2)(a) be amended. It currently begins by stating
that a port authority is empowered to engage in:
(a) port activities related to shipping, navigation, transportation of
passengers and goods, handling of goods and storage of goods...
We would seek to add, "related commercial and industrial activities which
would generate funds needed for future infrastructure development."
Madam Chairman, my colleague, Rick Pearce, CEO and port manager of the Fraser
River Harbour Commission, will continue with this presentation and speak to the
third recommended change in Bill C-9 and also summarize the submission from
Fraser Port to you.
Mr. Rick Pearce, Port Manager and Chief Executive Officer, Fraser River Harbour
Commission: I will speak about regulation. In Bill C-9 there appears to be a
duality of responsibilities for regulatory activities. Such matters as by-laws
fall under the jurisdiction of ports, while other regulatory functions are
under the Government of Canada. At best, this could cause jurisdictional
confusion. There has been very little consultation to date from the drafters of
the legislation with respect to regulations. At the writing of this paper, we
have only just received a preliminary draft of proposed regulations. We have
been led to believe that ports would be able to develop regulations specific to
their operational area. This does not appear to be the case. We must stress that
in the operation of a port, one size does not fit all. I am living proof of
We believe it is better to get the regulations right prior to the legislation
coming into force, rather than work with our existing regulations, some of
which are long overdue to be changed. In our opinion, it would be better to
take the extra time now. While the legislation provides for that extension, all
the efforts are directed to the commencement of the new Canada port authorities
on January 1 of next year. We fear that we will either rush the regulatory
reform process or continue to work with old and possibly conflicting
regulations well into the next five years. Neither of those options will benefit
the port authorities. We believe that now is the time to make the amendments,
prior to the legislation coming into force.
Therefore, we suggest that the Senate recommend to Parliament that the
regulations tailored to Bill C-9 that are required to run the new port
authorities be in place prior to the commencement date, even if that date would
move beyond the January 1, 1999, target.
In summary, in today's global competitive arena we are constantly faced with
challenges to reduce costs, to become more efficient and to provide
infrastructure that, by its very nature, is expensive and produces returns that
are considered low by regular business standards. This is compensated by the
fact that Canada's ports serve not just the local area but the entire nation.
This is why they remain under the auspices of the federal government. It is
essential that ports be supported and encouraged to meet the competitive
challenges which come from the United States.
As transportation was not included in the North American Free Trade Agreement,
we have not been able to challenge the subsidies that the United States has
bestowed on its transportation system and, in particular, its ports. Cheap
capital, low operating costs and the collection of taxes has created a
challenge that must be met. We contend that increasing our costs does not let us
meet the challenge.
Canada must provide the right environment for its national ports to compete with
its major competitor, the United States. Unduly restricting the actions of the
port to compete, so as to address a perceived fear of doing something out of
the ordinary, only serves to restrict the creative abilities of our port
management. The provision of agent status serves to provide some of the needed
assistance. The secret will be in how much goes into the mix. Our American
competitors do not have restrictions on what business activities they may
become involved in, yet we will.
We contend that if the business activity of a port authority provides needed
funds to build the costly but required infrastructure to move Canadian product
to market, then it should be within the core power of the port authority and
given special status. If the government wishes to restrict certain activities,
then they should specify them now and leave the rest up to the ports.
In addition, government must not impose contraints on its ports that cause us to
be non-competitive. This includes the downloading of costs, whose cumulative
amounts may make us too costly. As well, the government needs to examine ways
in which innovative financing can take place through the provision of bonds and
interest vehicles that are also competitive to the U.S. practices. Ports must be
respected as generators of economic growth and employment. If they are
restricted in that role, then we could face the elimination of thousands of
jobs and the re-routing of Canadian product through U.S. ports, all totally in
contravention to the spirit of Bill C-9.
Therefore, we have recommended that the proposed stipend be based on net income
rather than gross, that the Senate recommend to Parliament that regulations
tailored to Bill C-9 that are required to run the new port authorities be in
place prior to the commencement date, even if that goes beyond January 1, 1999,
and thirdly, and probably most importantly, that clause 28(2)(a) be amended to
read that a port authority is empowered to engage in "activities related
to shipping, navigation, transportation of passengers and goods, handling of
goods and storage of goods, related commercial and industrial activities."
We could further add, that do not include the operation of hotels, restaurants,
casinos or condominium developments unless approved by the minister. That would
generate funds needed for future infrastructure development.
We have appended two papers that support the points that we have made in our
presentation. While both make reference to Bill C-44, an earlier legislative
attempt, their comments remain germane to the contents of Bill C-9. We urge you
to read them as well.
The time, Madam Chairman and senators, has come to proceed to the next steps.
However, it is essential that these critical issues be given attention and that
changes be made to the legislation. Then and only then will we have a workable
piece of legislation that will not require immediate attention after passage.
We urge the Senate to make these recommendations to the House of Commons.
Senator Forrestall: First, let me ask you, is the Fraser River Commission
financially quite healthy?
Mr. Pearce: We are alive.
Senator Forrestall: Do not understate it because you are quite healthy, relative
to other ports in Canada. You have had some blessings over the last 25 or 30
years that many other ports would like to have had. These have made you
somewhat well off.
Mr. Pearce: We have operated under the harbour commission system, which has been
Senator Forrestall: You created the harbour commission system, you did not
operate under it.
Having said that, it perhaps is less surprising that you would choose these two
areas to deal with, both of which I agree with. I wish to ask you specifically
about the regulations. You mentioned that you had seen or received a draft of
them. Were they for discussion purposes?
Mr. Pearce: Yes, they were for discussion purposes. Our concern is that we are
only getting them now.
Senator Forrestall: When the bill is virtually through.
Mr. Pearce: Yes, and we are getting close to the end of the year.
Senator Forrestall: Are they massive in size? How many pages are they?
Mr. Pearce: No, they were not massive in size. I have not had a chance to read
Senator Forrestall: Would you review them among yourselves and with your
Mr. Pearce: Yes. Our harbour master is reviewing them right now as far as the
operational ones, and our secretary of the board is reviewing the
administrative ones. I have not yet received their reports. We are due to meet
next Tuesday here in Ottawa with all the CEOs of the 18 port authorities, and
that is one of the topics we will review.
Senator Forrestall: The government rarely refers regulations to committees. I
wonder if there is any harm in asking the clerk if this committee might not
The Chairman: Can the clerk answer that?
Michel Patrice, Clerk of the Committee: I do not have a copy of the draft
regulations, but I could inquire.
Senator Forrestall: I always love to see regulations before I read the act. With
Mr. Martin, you have to be careful. Could you explain how the tax liability
that you will be facing as a result of Bill C-9 comes about and how you intend
to deal with it?
Mr. Jones: Yes. When we lease property, the lessee pays full taxes to the
municipality. This only concerns property that we have in our own name and have
not leased out. Years ago two of our large docks entered into long-term,
management contracts that specified that they would not pay property taxes. Now
they will become liable, and we will either have to pay the taxes or
re-negotiate those contracts with the docks.
We have 600 acres of federal land that we might have to pay tax on if we cannot
get it under development. This business of property tax ties back into our core
activity idea because we have an opportunity to develop that land and get it
into productive use and have someone else operate businesses on them and pay
the taxes. If we fail in that, we will pay the taxes.
The act was amended, and I think we suggested, or certainly the harbour
commission did, that if property taxes or grants in lieu actually had to be
paid, that they be phased in so that we would not be suddenly hit with a big
bill in one year. Bill C-9 provides for that. The local port corporations have
always paid grants in lieu; harbour commissions did not. Once we are
amalgamated, you cannot take away from the cities what the local port
corporations were paying, so we will have to be included in that group as well.
Senator Forrestall: This does not apply to you, but you are aware that some of
us are concerned about what impact removing income and not replacing it will
have on the municipal infrastructure, particularly its financial
Mr. Jones: You cannot remove the income from the cities. We accept that. Local
port corporations would not want to stop paying, I am sure. It would not make
I might also say, senator, that we are the only harbour commission in Canada
that negotiated a fee for service with some of our larger municipalities, where
our bigger facilities are. They will get more from us now than we have been
paying, but at least we recognized the right to pay for a service we got, and
we did that.
Senator Forrestall: How expensive is annual or regular dredging? Is that a major
Mr. Pearce: Yes, it is. Dredging each year will run around $2 million plus. We
have just concluded discussions and negotiations with the Canadian Coast Guard
where we have taken over the dredging of the river.
Senator Forrestall: How far up?
Mr. Pearce: The dredging will take place, if you are familiar with the river,
from the bridge, which is about halfway in our jurisdiction, to the mouth, and
that will be, on average, 1.5 million cubic metres annually.
Senator Forrestall: Do you use that for land reclamation?
Mr. Pearce: Some of it gets dumped at sea because it is not worth anything. Some
of it is used for land reclamation. We can recover some of the costs, and we do
so, but we still have a net cost.
Mr. Jones: In fairness, we should also say we negotiated an agreement with
Oceans and Fisheries now when the Coast Guard went, and they have given us a
lump sum payment that will pay the cost of our dredging for seven years and
then scale it down over another three years. Seventeen or 18 years ago we were
positioned to be able to do that. Sooner or later we will carry those costs.
Senator Forrestall: Finally, I am a bit unclear about gross and net income.
Gross is your total revenues. Does net represent profit?
Mr. Pearce: Yes. For us, net is profit.
Senator Forrestall: Or is it a specified list of expenses that cannot be
Mr. Pearce: No, we have said it was profit. We operate like any other business.
We figure we have a shareholder, which is the Government of Canada, and we had
better produce a profit. We are saying that it is unfair to the ports to have
the charge levied on the gross income when there may be other things that we
have to do, such as dredging. We are in this thing together as far as providing
benefit to the people of Canada, including those from British Columbia, so it
makes sense to us.
Senator Forrestall: You can charge back to the Coast Guard for dredging that may
be a benefit to them.
Mr. Pearce: We are not trying to charge them back; we are just trying to keep
much of the cash so that we can do the things we have to do.
Senator Forrestall: However, you will dredge to the benefit of some private
Mr. Pearce: We will dredge to move vessels in and out of our terminals, and that
is the main thrust.
Mr. Jones: We have always paid dredging on what you might call side channels
into marinas and the like, and the Coast Guard paid for the main channel. Now
we pay all of it, although we have a substantial sum coming to us.
Mr. Pearce: That is one of the reasons we feel we need to be in the bigger box,
to have the flexibility to do some of the businesses, because we will not be
able to increase our fees or our charges to those that come into the port
simply because of the competition we have from the United States. We need to
have flexibility and to have as much of what we want to do classified as core.
Senator Forrestall: You are not suggesting going to the point of levying
Mr. Pearce: Absolutely not.
Senator Whelan: Madam Chair, I should make it clear to you that this man from
Vancouver by the name of Michael Jones one time lived in my area, so he knows
the Windsor harbour, he knows the Detroit River, and he knows Canada. Let us
put it that way. I just want to make that clear.
The first time I visited your harbour, I was chairman of the Agriculture
committee in 1966. We were studying transportation and grain handling
facilities and potash facilities. That was a sideline in Vancouver at that
One thing that has aggravated me when we talk about NAFTA and free trade and
globalization is that there is nothing fair at all about, for instance,
municipal bonds in the United States. If you invest in them, you do not pay
income tax. They have a tremendous advantage. The people get a lower rate of
interest, but they do not pay any income tax.
Between the bonds and the U.S. corps of engineers, have you ever figured out the
economic advantage they have in Seattle or Portland?
Mr. Jones: We did that on an approximate basis, yes, in the standing committee
of House of Commons, and we listed them all.
We listed dredging; we listed property taxes. I do not recall the figures, but
we had a table in which we set it all out.
Senator Whelan: Can you make those available?
Mr. Jones: Yes, I can.
Mr. Pearce: We will submit them to the committee.
Senator Whelan: Those of us who are familiar with drafting legislation and who
have been around Parliament a long time know that regulations can sometimes
make legislation look like a stranger. Is this your interest in wanting to see
Mr. Pearce: Absolutely, I have been there before.
Senator Whelan: I liked what you said in your summation. You said that this is
compensated by the fact that Canada's ports serve not just the local area but
the entire nation. It is refreshing to hear someone from the far west say that.
You also said that transportation was not included in the North American Free
Trade Agreement. I must say that I agree with you. What a shame when you see
the advantages and disadvantages that are there.
You quote a speech by Mr. C.C. Tung. I do not know if you had a chance to read
any minutes from the Standing Senate Committee on Foreign Affairs and its study
of APEC. The committee has had witnesses explain why they were so wrong about
APEC, the great economic monster, and why it has been such a disappointment.
That must have affected your harbour somewhat, given the cutbacks and the
shipping of commodities such as lumber, coal and potash.
Mr. Jones: The interesting thing is that forest products are down. Our forest
products are not down as much as they are in the Port of Vancouver and other
B.C. ports, but they are down. Offsetting that is the importation of cars,
which come through our port, and steel. They are both up because APEC countries
need to export, and the price of their goods is lower. Our port is still doing
all right, but we are now dealing with imports rather than exports.
Senator Whelan: Their money is so devalued that their products are cheaper.
Mr. Pearce: As a Canadian, I would prefer that we had 100 per cent exports.
Senator Whelan: You talked about dredging. I was on the Fraser River about two
or three years ago, and huge cliffs were falling into the river due to erosion.
Were you involved in any discussions with your colleagues in the areas of
conservation, agriculture and forestry?
Mr. Pearce: Yes, on an almost daily basis. The area you are referring to, I
believe, was upriver in the Chilliwack area where they had substantial damage.
Over the last two or three years they have had some significant washouts.
In the area of our harbour, all of our dredging is subject to environmental
approval prior to it being undertaken. That includes a review by the inspector
of dikes. That includes a review by Fisheries and Oceans, Environment Canada,
and the Province of British Columbia with respect to the environment. We get a
permit to dredge each year.
We do not dredge the river beyond its designated depth. If we were to do that
then we would create the same problem that happened in Chilliwack. We could
make it too deep, and it would start pulling the sides in. Then we would have a
Mr. Jones: That is outside our jurisdiction.
Mr. Pearce: We respect the environment. It is internalized in everything that we
do, but we do continue to dredge.
One of the advantages is that the material being dredged is not toxic. There is
no chemical in it, so we are quite safe.
Senator Whelan: When you talk about dikes, the reason there is not a tremendous
flooding in the Fraser area is because the federal government built those huge
dikes under our leadership.
Mr. Pearce: That is part of it. The other part is that dredging has lowered the
level of the river by a metre over the last 25 or 30 years. Again, that is a
federal government operation.
Senator Fitzpatrick: I take it from your comments that the thrust of your
presentation has to do with developing a bigger and better port operation by
being more competitive and more flexible. Of course, Vancouver is already a
major port area. This could make a major contribution or a significant
contribution to the British Columbian economy.
Perhaps you can give the committee an idea of the magnitude you are talking
about or, conversely, the problems it would cause in the development of the
port. I may be wrong, but it seems to me that some years ago Vancouver was a
little behind Seattle in developing the container port operation. Hopefully we
have caught up now. That had nothing to do with this situation. However,
Vancouver was not competitive early enough in the container business.
I would like your comments with respect to the magnitude of the advantages you
see here, the benefits that we would receive, or, conversely, how we could be
harmed by the ports of Seattle, Portland or San Francisco.
Mr. Pearce: Our costs in Canada right now are lower on a dollar-for-dollar basis
as far as labour is concerned. In other words, if you convert our operation to
U.S. dollars and convert their operation to Canadian, we are cheaper. That is
one of our advantages.
The other advantage we have right now of course is the Canadian dollar, but one
cannot expect that to continue forever.
There are added costs to the port for the dredging, disregarding the fact that
we have made a settlement. That will run out sometime. It will be $2 million
plus each year. As well, there is the fact that we will be paying grants in
lieu of taxes of $2 million plus a year. There is also the fact that we will be
paying a stipend to the federal government, hopefully on net as opposed to
gross. As well, the federal department is downloading other costs or
cost-recovery programs. For example, there is Environment Canada and its ocean
disposal monitoring fee, as well as the Coast Guard and its marine services
fee. All of these have a cumulative effect on the port. In the United States,
they do not have any of this.
If we raise our costs, we would have three choices. We could go out of business,
which we do not think is the right thing to do. The second option is to
increase our fees. If we do that, the cargo will move south of the line because
it does not care where it goes. The third option is to find other sources of
revenue that will help us to stay competitive and move Canada's goods to market.
That is the choice we want to make, which is why we are asking for changes to
Mr. Jones: To give you an order of magnitude, our profits in a year are right
now approximately $1.5 million to $2 million. As a harbour commission, we remit
that to the minister every year. We can request that he return it to us, and he
always has. That is how we financed our facilities.
As the CEO explained, these costs exceed our profits in a year. If they all came
upon us at once, we would have to raise our charges, which would put us out of
business because people with ships can readily move to another port. We need
the ability to generate other sources of income. We are not here complaining.
We do urge the passage of the bill, however we do say if we are to seriously
compete, we need help with some of these things.
Mr. Pearce: What we are asking for will benefit all Canadian ports, it is not
just something for ourselves. We have tried to take that high road in the whole
Senator Fitzpatrick: It seems to me you are asking for the opportunity to
develop trade, which is a major thrust of the government.
I wanted to comment on the levy on gross revenues as opposed to net revenues. I
have a background in the mining industry and what we dislike in the mining
industry is having to pay royalties because it comes right off the top, rather
than pay our taxes based upon the net revenue or our profits. The charge on
gross revenues can be counter-productive in the development of a new business or
a business plan. That is something that should be taken into serious
consideration because whether the competition is in airports or ports, it is
very tough competition.
Mr. Jones: Senator, there is an another way of approaching it and that is to
look at what per cent of your gross revenues have historically been part of
your operating expenses. Assuming 80 per cent, then say it is based on gross,
but there is no charge on the first 80 per cent of your gross, then it begins.
You do not have to fiddle too much with the legislation if you will write that
in the letters patent. What we have been given is a sliding scale, it begins at
2 per cent and immediately grows to 3, 4, 5 and so on. There are different ways
to accomplish the same thing. It is an important point.
Senator Fitzpatrick: You are not suggesting less revenue, you just want a fairer
way of having it generated.
Mr. Jones: Yes.
Senator Milne: What area is encompassed by the Fraser port?
Mr. Pearce: Our jurisdiction starts at the mouth of the Fraser River and goes
upriver about 50 miles to Kanaka Creek and then further up to a tributary of
the Fraser, the Pitt River and up to the entrance of Pitt Lake. We cover 227
kilometres of shoreline. We are a fairly large area through nine municipalities
or cities. We have 600 water lot leases, two major terminals, several smaller
ones and we have a gross annual income to the terminals, because we take a
percentage of what goes through the till at the terminal, of between $10
million and $12 million a year and our net income is around $2 million, as the
chairman was saying.
Mr. Jones: It is a pretty good return, but we need it for reinvestment.
Senator Milne: Are you saying that your increased costs now under this bill will
more than make up the difference of that $2 million?
Mr. Pearce: Absolutely, yes.
Senator Milne: Do you include any of the parts to the north of you, any part of
Vancouver or North Vancouver?
Mr. Pearce: No, we do not. There is another harbour commission on the Fraser
River between ourselves and Vancouver and it is called the North Fraser Harbour
Senator Milne: Are you recommending that you become land developers on your 600
Mr. Jones: Yes, we are recommending that we become industrial land developers.
The front 200 acres would be purely for port activities, the land behind would
be for industrial development, not necessarily related to the port. This is
federal land and we do not want it to lie fallow. We do not want to return it
to the federal government to be used for something else. The local
municipalities run out of industrial land, they want it developed, it is the
biggest piece of industrial zoned land in the Lower Mainland of B.C. It is a
very important piece of property. We are asking for permission to develop that
and use the proceeds to develop the front 200 acres for the port facility.
Senator Milne: Is this 600 acres towards the mouth of the river?
Mr. Pearce: It is in Richmond; it is a large block.
Mr. Jones: We filled it with sand over the years so it was marshy land. You
could not do that now, but that is where dredged sand was once put. It is
Mr. Pearce: It used to be operated as a landfill.
Senator Forrestall: What is its value?
Mr. Pearce: It is probably not very much because it is old landfill. My estimate
would be $50,000 an acre. As a matter of fact, we just had it appraised to
determine its value for some business relationships that we have been working
on. That would make a total of $30 million.
The Chairman: Thank you very much.
Captain Maury R. Sjoquist, National President, Canadian Merchant Service Guild:
Honourable senators, the Canadian Merchant Service Guild is here to support
Bill C-9. We have been involved in consultations for a few years now and have
had meetings with the House of Commons committee and participated in lobbying.
We do support the efforts of this minister and the minister before him to make
compromises and put together some common sense legislation that we think is good
for our industry.
Appearing with me today is Lawrence Dempsey. He is the secretary-treasurer of
the Canadian Merchant Service Guild and the Canadian Marine Pilots Association.
The Canadian Marine Pilots Association is an integral part of my organization,
the Canadian Merchant Service Guild. They operate within our structure and we
represent all pilots in Canada.
I will begin our presentation with brief comments on the general nature of Bill
C-9 and the process undertaken to reach where we are now and I will offer
comments on some specific parts of the bill.
The Canadian Merchant Service Guild represents approximately 5,000 masters,
mates, deck officers and marine pilots in Canada, all of whom have a direct and
personal interest in the health and growth of Canada's marine economy. Over the
last four years, I have taken a strong interest in the evolution of the
legislation that the committee is now considering because all members of the
Canadian Merchant Service Guild are on the front lines of the marine industry
and will be directly affected by this proposed legislation.
We have been intensely involved in consultations nation-wide, as well as making
two appearances before parliamentary committees. In general, we are all pleased
with the process so far and would like to see it come to a successful
conclusion. Bill C-9 represents a strong effort at reforms that will ensure
that an already-competitive marine transportation system is improved even
As the Minister of Transport himself noted, although it is not a perfect piece
of legislation it represents compromise between various stakeholders and the
government, the result of which is a good balance of interests.
As you are no doubt aware, the marine sector in Canada has a great many
participants, all with varying points of view and often diverging interests.
Hammering out legislation that could gain the support of many of these groups
was not an easy task, and the government should be commended for its efforts.
Bearing in mind that the bill covers a variety of issues, not all of which are
directly relevant to our members, both the Canadian Merchant Service Guild and
the Canadian Marine Pilots Association support the passage of this bill without
modification or delay. For us, the legislation represents a positive step
forward. We believe that further delay or uncertainty around the legislation is
not good for anyone, least of all our members.
Bill C-9 principally addresses three issues: the St. Lawrence Seaway, the
reorganization of Canada's port system, and pilotage. The first two issues have
been and will be addressed by many other participants in these hearings, so my
comments will be limited.
The St. Lawrence Seaway is an essential component of Canada's marine
transportation system, which must be maintained. Insofar as Bill C-9 allows for
future investment and more efficient operation of the seaway, we believe that
the changes will be positive. We, along with virtually all shipping companies
and shippers using the seaway, support these changes. The reorganization of
Canada's port system has generated considerable controversy since the review of
marine policy first began. At the same time, however, the economic viability of
the whole marine system depends on efficient ports that serve the needs of its
customers. For our members, a strong port system is therefore a key issue.
While we recognize the extreme difficulty of the task, we also believe that the
government is making valuable progress in recognizing Canada's system of ports.
The issue that is of most relevance to our members, however, is pilotage. The
Canadian Merchant Service Guild, through the Canadian Marine Pilots
Association, represents all marine pilots in Canada. Marine pilots are
essential to the safe and efficient operation of ships in Canada's rivers and
Bill C-9 includes changes to the marine pilotage system that improve its
performance and efficiency, while it purposely does not address other aspects
of the system. I would like to comment on three issues in particular: regional
governance, efficiency and cost effectiveness, and safety standards and
The Pilotage Act was introduced in 1971, following the most extensive review of
pilotage in history, the nine-year Bernier Commission. A regional pilotage
system was created by the act. In so doing, most of the management of pilotage
was delegated to four regional pilotage authorities: the Pacific, Great Lakes,
Laurentian, and Atlantic. The reasoning behind this structure is simple.
Pilotage is essentially a regional service dependent on expert knowledge of
local waters, weather patterns, geography and traffic. Also, in Canada, a
country with two official languages, the implementation of a regional system
allows for the use of the appropriate language in each region.
In the Laurentian Pilotage Authority, the working language of marine
communication is French. The Laurentian Pilotage Authority naturally ensures
that proficiency in French as well as English is a mandatory part of the
licensing and certification process.
The regional nature of the pilotage system means that adjustments in service can
be made by the people who know the local conditions best. "Regional
decentralization", "stakeholder participation" and "decision-making"
may be the buzz words of today, but the Pilotage Act incorporated these
concepts 25 years ago. Wisely, Bill C-9 does not seek to make changes to this
regional structure. The government, after undertaking extensive consultations
on pilotage issues, has clearly understood the importance of maintaining the
In a global economy, efficiency and cost effectiveness take on important
meanings. International trade has become an even more important part of
Canada's growth and economic success. Marine transportation is a key part of
trade. Although pilotage services represent no more than 1 per cent of the
total cost of marine transportation, the system, nevertheless, has to be as
efficient as possible. Already, pilotage services in Canada are more
competitive than services available in the United States, and we continue to
Bill C-9 includes two important steps to increase the efficiency of the system.
First, it streamlines the financial operation of pilotage authorities by
improving the tariff collection process, thereby freeing the authorities to be
self-sufficient and to completely manage their financial affairs without
involvement by the federal government.
Second, it requires that labour disputes between pilots and pilotage authorities
be settled through final offer arbitration if they cannot be settled through
negotiation or mediation. In effect, this is a no-strike, no lock-out provision
that will prevent any disruption to pilotage services, notwithstanding the fact
that pilotage work stoppages in Canada have been extremely rare.
This is an historic change to the system; it has the full and unequivocal
support of the Canadian Marine Pilots Association. Pilots have recognized that
they play an integral part in the Canadian marine transport system and are
committed to ensuring that the system is run fairly and according to preset
Given the modern practice of just-in-time delivery of goods, the absence of work
disruptions is critically important. The Canadian Marine Pilots Association has
worked hard and in good faith to ensure that all pilots accept the new system.
Finally, I turn to the issues of safety and professional standards. I purposely
join these two issues because safety cannot be ensured without the highest
professional standards and constant vigilance that they be maintained.
Marine safety is not only an issue of the economics of shipping companies or
shippers, nor of those that may want to calculate the risk of accident costs,
but also an issue of paramount concern for the public. The consequences of
marine safety are such that it must never be compromised. A single accident
involving an oil or chemical tanker could have disastrous results on human
health as well as causing irreparable damage to the environment. Moreover, the
committee should not overlook the fact that even less serious accidents can
still involve significant danger to the life and wellbeing of seafarers.
Safety is and should be the concern for pilots, pilotage authorities and the
government. Safety can only be ensured if pilot licences and pilot certificates
are granted only to those apprentices and pilots who have successfully passed
written and oral examinations, demonstrating themselves capable of navigating
Canada's waterways. These examinations are and should be open to public record,
thus ensuring that there can be no compromise or favouritism in the process.
Bill C-9 does not directly address the examination and certification issue.
Instead, it calls for a review of this and other specified matters, to be
completed within one year of the passage of the bill.
The minister, in consultation with pilotage authorities and interested parties,
will be responsible for it. Pilots are currently working through the regional
pilotage authorities to address safety and professionalism issues, and are
confident that the minister will determine to his satisfaction that the system
is working well.
Moreover, any required changes could be achieved at the level of pilotage
authorities, in keeping with the regional nature of the pilotage system,
bearing in mind that the present system has an unparalleled safety record,
which is the envy of the international maritime world.
In closing, I would like to reiterate to this committee that this bill has
undergone extensive consultations and is the result of enormous work and
compromise. We urge the committee to pass the legislation so that it can be
promulgated and implemented as soon as possible.
Honourable senators, on behalf of the Canadian Merchant Service Guild and the
Canadian Marine Pilots Association, I would like to thank you once again for
this opportunity to speak to this committee today. We would be happy to answer
The Chairman: When you testified in October 1996 in front of the House of
Commons Standing Committee on Transport, you expressed your satisfaction with
the mechanism for the resolution of disputes in the contract renewal process.
Can you tell us how disputes are resolved under the present system?
Mr. Sjoquist: With regard to pilotage?
The Chairman: Yes.
Mr. Sjoquist: Under the present system, what has been adopted for the
entrepreneur pilots is a system of final-offer arbitration. When there is a
dispute, a period of conciliation follows; but if an agreement cannot be
reached, each side puts together its final position and the arbitrator has the
final say. The arbitrator cannot compromise; he must take one side or the
other. Obviously, the theory behind that is that it will force both sides not
to be outlandish or too far apart in their final positions.
The Chairman: You mentioned in your presentation the pilotage study that is
referred to in Part 7 of the bill. Can you tell us more about it? Are your
Mr. Sjoquist: Within a year of promulgation of the bill, there must be a review
of specified parts of the Pilotage Act. One of the more contentious aspects is
the certification process. The report must be back to the minister within a
year. This review is currently not under way. It will not commence until the
act is promulgated. My impression is that it will specify who will be involved;
in fact, it refers to any other interested parties, and most certainly, we are
directly involved. I have heard lately that the manner in which the government
wants to do the review has not been settled. However, in whatever manner it is
done, we will certainly be a part of it, and the industry and every other party
connected with pilotage will be consulted once again. We look forward to it.
Review of pilotage has been an ongoing thing.
As I say, we look forward to participating in the review.
Senator Milne: Gentlemen, earlier this afternoon, Mr. Morrison, the president of
the Canadian Shipowners Association, talked about a competitive vision for the
Great Lakes and St. Lawrence waterways. He spoke about their green light system
of navigation, with the digital global positioning system. Further, he said
that that system makes the requirement of compulsory pilotage services
everywhere on the lower waterway unnecessary.
Do you think that this bill addresses your concerns about this type of
advancement in technology? How is your association affected by this? What do
Mr. Sjoquist: Our association is drastically affected by that. I am familiar
with Mr. Morrison's statement. We do not agree with it.
As far as this legislation is concerned, I commend the way it is worded. It is
worded to address the problem. The legislation is not worded in such a manner
that it presupposes anything. It is legislation that puts into being a review
process, and I would certainly think that during that review process, this will
be one of the prime subjects to be examined. There will be an opportunity for
everyone involved, including myself, Mr. Morrison and his colleagues, to put
forward a point of view. If their point of view is accepted, then I take it
that the regulations and the structure of pilotage will change. I am here to
say that we certainly do not agree with Mr. Morrison.
Senator Whelan: You may have heard me say that I live on the banks of the
Detroit River. In front of my house there is a lighthouse, with a Livingstone
channel device. A cousin of mine was captain on a Great Lakes freighter. He
told me once, in response to me asking him why that thing goes off every 30
seconds during a fog, that he did not know because the double thermal panes in
the pilot house would prevent them from hearing it, even if it were right
outside the window. Their radar shows where the channel is when they go up and
down the river.
The Fraser River Harbour Commission suggested three amendments. It sounds as
though you do not want any amendments; that you want to get this bill through
and get it out of the way.
Mr. Sjoquist: Not to take away from the Fraser River commission's presentation,
but their interests lie elsewhere. In the interests of our members, most
certainly, senator, it is our hope that the proposed legislation comes into
effect. However, we do not want to denigrate this process. If there are changes
that this committee feels need to be made, then it is up to you to make them. In
terms of our interests, the bill is as close as they are going to get. As I
say, I do not want to indicate that this was easy, either on our part or the
part of any other participants; the development of this bill has been a rough
Senator Whelan: I am thinking of the two major coastal disasters, one off Cape
Breton, and one off the West Coast, involving the Exxon Valdez. Can you tell me
whether there was a pilot on either one of those oil tankers?
Mr. Sjoquist: There was a pilot on one of them.
Senator Whelan: Which one?
Mr. Sjoquist: Are you referring to the Exxon Valdez?
Senator Whelan: That was on the West Coast. It did not have a pilot?
Mr. Sjoquist: No, it did not have a pilot on it, but I will make a point about
this since you brought it up. They just changed the regulations in Alaska at
that particular time; therefore, the ship did not require a pilot any more. It
was, in fact, an inexperienced third mate. There were allegations regarding the
sobriety of the master; those allegations were later proven wrong, but no one
wishes to recognize that any more. The fact is that the master went below and
an inexperienced third mate, with no pilotage qualifications, ran the ship
In the case of the other vessel in Cape Breton Island, they do have Atlantic
pilots in Cape Breton Island.
We do not claim or guarantee that there will never be an accident if one of our
members is on board, but the training and the local expertise of the pilots
will certainly minimize the damage.
Senator Forrestall: What is the status of the Canadian Merchant Service Guild
these days? You mentioned that there were 5,000 members. How many of them are
employed, aside from pilotage?
Mr. Sjoquist: I believe we are at a little over 4,000. Unfortunately, at the
moment there is a considerable downturn, and that is partly because of the
situation in B.C. The marine economy in B.C. is very bad. While that has not
had a substantial effect on pilotage, despite the fact that foreign shipping
has slowed down and the volume of exports has decreased, it has affected the
other members of the guild, in that our major employers on the West Coast --
the various tow boat companies like Seaspan -- are very much tied to the forest
industry, which is now in a recession. When all the rest of us were undergoing
recession they were not, but now things are much better in the Great Lakes, in
the Atlantic, in the offshore, and on the ferry systems, but they are not very
good in B.C. or in any marine transportation related to the forest industry. As
a consequence, we have a few hundred unemployed right at the moment.
Senator Forrestall: The so-called "green light" is somewhat like AWOS;
it is a great system, but it needs many changes. It has many imperfections.
That system can tell us many things, but not whether to go ahead. However, we
have made great progress. I used to shudder every time I thought of a ferry
going over to Port aux Basques, crossing that lane using two different radio
channels. The east-westbound could not talk to the north-southbound because
they were on two different radio channels.
Senator Adams: Are all the pilots across Canada in the same union or do they
have different unions in different ports?
Mr. Sjoquist: They are all in my union entirely. We have two branches; a western
branch and an eastern branch. There are pilots in the river that NTCL use up
north, but they are not the licensed marine pilots to which I refer. I believe
they are represented by the SIU. We represent all the deck officers on all the
tugs on NTCL in the north.
Senator Adams: Earlier we heard from the St. Lawrence Seaway Union.
Mr. Sjoquist: Yes.
Senator Adams: They are concerned about salaries and benefits and items like
that. The pilots have nothing to do with that, considering Bill C-9?
Mr. Sjoquist: No, that would not affect them as far as Bill C-9 goes. There are
two kinds of pilots. There are entrepreneur pilots who carry their own pension
plans, and there are employee pilots who work directly for the authorities and
are covered by the Public Service Superannuation Plan, but there is nothing in
Bill C-9 that will affect them. I understand that the CAW's concern, as the
representative of the Seaway Water Workers, has to do with succession, when they
form their new not-for-profit corporation. I would certainly sympathize if they
have concerns or at least fears. I know very little about it since it is not in
my realm, but I understand that the act takes care of that concern of theirs.
That is another issue, however, that is not my concern.
Senator Adams: Does your salary come right from the ship owners and not from the
Mr. Sjoquist: If you are talking about ships officers, it comes directly from
the shipping companies. If you are speaking of marine pilots, it comes from the
Crown corporations, four of them, that have been formed. They collect the
revenue from the shipping companies or their representatives, and either they
pay the pilots directly, if they are employee pilots, or they have a contract
with groups of pilots and work out the remuneration in that manner.
Senator Adams: Do you have an age limit for retirement and benefits?
Mr. Sjoquist: The age limitations in the Pilotage Act were removed because of
human rights concerns some ten years ago. Literally, a marine pilot can keep on
working so long as he can pass a medical; that medical examination is very
strict and at age 50 and over it must be taken every year. You might be
interested to know there are some Japanese pilots who are in their 80s, but we
are not recommending that for Canada.
Senator Whelan: When I was young, I met a man who had been a Great Lakes sailor
in 1908. Were there pilots at that time?
Mr. Sjoquist: Yes, there were pilots then, but they were not in the same place
or in the same structure. As a matter of fact, pilotage in the Laurentian
region, which is the most historic pilotage in Canada, predates that. It goes
back into the 1800s.
Senator Whelan: This man was a wheelman on a boat. The wheelman stood out in the
open in those days, and the captain stood with him. One time, when they were on
the St. Lawrence River on their way to Montreal, the current was very strong
and there was a lighthouse in the middle of the river. He went to the wheel and
the pilot ordered him not touch it, but to steer right on that lighthouse. The
current swung the boat around to the lighthouse. He always remembered the skill
of that pilot, because if he had his way he would have wrecked the ship.
Mr. Sjoquist: That is an example of local knowledge that we speak about.
The Chairman: That was not a question. That was just information.
Mr. Sjoquist: It was interesting.
Senator Whelan: We cannot forget our history.
The Chairman: The next witness will be Mr. Jack Frye, a member of the board of
the Windsor Port Users Group.
Mr. Jack Frye, President, South Western Sales; Member of the Board, Windsor Port
Users Group: My name is Jack Frye and I am the president of Southwestern Sales
Corporation and a board member of the Windsor Port Users Association. I wish to
take the opportunity to raise a few issues as they pertain to the Canada Marine
Act, Bill C-9, and its predecessor, Bill C-44.
On my way over here tonight, I was reminded of the man who was driving along the
road and was approached by a police officer from the rear. As the police
officer approached him, the man sped up. As he sped up, the police officer put
on his red light, and he sped up again. The police officer put on his siren,
and he sped up again. He finally got the son of a gun to pull over. He went up
and said, "Young man, didn't you see me in your rear view mirror?"
The man said, "Yes, I saw you." The police officer asked if he had
seen the flashing light. "Yes, I saw that, too." The police officer
said, "And you sped up, again." "Yes." The police officer
said, "Did you hear the siren?" The man replied, "Yes, I heard
the siren too." The police officer asked, "Can you tell me why you
wanted to speed up?" The man said, "Well, a couple of weeks ago, my
girlfriend ran off with an OPP officer, and I thought he was trying to bring
Consequently, I would like to go back to the focus of Bill C-44 in its original
content, the way it was presented to us. The main issue of that was user
This piece of legislation, in our opinion, is long overdue and, therefore,
vitally important to the commercial users of the port of Windsor.
More than 5.6 million tonnes of cargo crossed the docks of the port of Windsor
last year, an increase of nearly 14 per cent over 1996. Much of the cargo was
in bulk form, in most part aggregates and salt. I have the honour of
representing many of the shippers, marine service providers, and other
commercial ventures that make their living in around the port of Windsor. This
group of companies employs hundreds of people within the Windsor community and
has invested millions of dollars in facilities around the port.
Four years ago, when the federal government first started to consider changing
the way the marine industry in Canada is governed, we in Windsor, like many
that rely on a competitive marine industry, embraced the government's direction
towards a reform system of federally regulated, controlled, and operated marine
services and infrastructure. That was Bill C-44. We were supportive of the
government's intent to implement a user pay/user say philosophy into the
management of the marine infrastructure under the control of the government.
Let me comment on the issue of user pay/user say. It is a great idea, fully
supported by those who actually pay the millions of dollars per year in federal
user fees. Our complaint is that we only really see one side of the equation,
the pay part.
Users believe that it is beneficial for both parties, government and industry
alike, to have an open and ongoing opportunity to discuss how services supplied
by the government can be better delivered. As customers of many of these
services, we think we have much to say on when, if, and how these services are
dispensed, managed, and invested in. With user pay/user say, the payers demand
that the users' say is heard by the government and acted upon accordingly.
Under the present proposed legislation, we are supportive of particular parts of
the bill and not of others. Overall, we applaud the government's efforts to
bring a more commercial environment to the St. Lawrence Seaway authority
through the direct management of its users. I wish to emphasize that the St.
Lawrence Seaway users are direct participants on the board and also make up the
majority of the board.
Today, though, I wish to discuss two issues that the port users would consider
great shortcomings in this legislation. Both concerns deal with the proposed
governance of a future Windsor Port authority found in clauses 8, 14, and 16 of
the bill. Our apprehensions pertain to the position port users will hold in the
decision-making process within a future port of Windsor.
I will first discuss the difficulty we have with clause 16(e) of the bill. This
section lists persons who are restricted from sitting on the board of directors
on Canada port authorities. Subclause (e) states that an individual who is a
director, officer or employee of a person who is a user of the port cannot
serve as a director of that port. The Windsor Port Users strongly disagree with
the government's exclusion of the port users who have invested millions of
dollars into the port community and possess the day-to-day commercial expertise
in a very competitive and complicated industry from serving on the board of
As I stated earlier, the vast majority of cargos that pass through the port are
low-value, bulk materials. In fact, in the case of aggregates that my company
moves, the cost of transportation can sometimes exceed the value of the cargo.
In the salt trade, one that sells in large part to municipal, provincial, and
state governments and moves more than 1.7 million tonnes through the port of
Windsor, a one or two cent difference in the landed price of the product can
make or break a deal.
Senators, these are the hard, real-life economics of a tough and
ever-competitive business. In Windsor, as with other ports, we must watch the
pennies or they just will never grow into dollars. With direct port users on
the board, we feel our everyday understanding of the marine business and the
fundamental need to keep costs down can only help in ensuring a well-run port
into the future.
The government has stated that exclusion of port users was due to the potential
for a conflict of interest on the part of a direct user while sitting on the
board. It has always been the law that governs politicians, ministers, and
government appointees that when there is a conflict of interest, or an apparent
conflict of interest, the individual of the conflict must declare the conflict,
remove himself from any debate on the issue, and would be ineligible to vote on
the issue. The government's rationale is that the Crown assets can only be
protected if the port users are excluded from serving directly on the CPA
The Windsor Port Users Group debates the validity of this argument, and we
merely need refer to the legislation to prove our point. Within Bill C-9 are
many provisions for an open, exclusive, and transparent governing environment.
Annual public meetings, open and audited books, a letters patent that can be
amended by the minister, and a clear statement of legal and fiduciary
obligations of directors are just a few of the provisions found in the bill,
and that should supply ample protection for the Crown, protection that we feel
should allow for direct users to bring their expertise to our ports board.
As well, within the CPAs letter patents, extensive conflict of interest
guidelines are to be drafted to compliment a full set of legislative,
The second concern with the bill, if the port users cannot serve directly on the
CPA board, can be found in clauses 8 and 14. These sections refer to the
appointment of directors to the CPA's board and the allotment of those
directors in the representation of various interests that include all three
levels of government and representatives of the board users.
More specifically, we find great difficulty with the clause that prescribes a
process in which the users representatives are appointed to the board. Within
the provision, the Governor in Council is given the power to appoint
individuals nominated by the minister in consultation with the users. Both board
positions representing municipal and provincial interests are not required to
go through this ministerial vetting and approval process. We find this
unacceptable. We believe that, if the port users are being specifically
excluded from the board, then the consultative process discussed in clauses 8
and 14 must be more flexible in their accommodation of the wishes of the port
users' community. We strongly urge rewording of the clause to allow for the
users to have sole discretion in the selection of the list of candidates
submitted to the minister, and that the minister select from this list the port
users' representatives he approves for inclusion on the board.
We understand that there are criteria specifically relating to the
qualifications of prospective board members. We have every intention of putting
forth qualified, high-calibre individuals to represent us on these boards. Our
great concern is that the list of candidates forwarded by the port users to the
minister must be approved and vetted through a political filtering process.
We strongly suggest that, if there is allocation for four port user
representatives on the CPA board of directors, we be allowed to submit the
names of eight qualified individuals. If the minister for some reason cannot
find four qualified people on this list of eight, we wish to have an opportunity
to resubmit names until the users do have their full complement of
representatives appointed to the CPA board of directors from their selection
I thank you for your time today and welcome your questions.
Senator Bryden: You have founded a good part of your presentation on an issue I
discussed with an earlier witnesses relating to the people who make up the
seaway authority, in one instance, and those who make up the board of the
Canada Ports Authority. I did not get a very clear answer, not because they
were being evasive, but because they simply did not know. I believe you said
that the seaway authority can include a director or even an officer of a user
of the seaway; is that correct?
Mr. Frye: They are not prohibited from serving on the board of the seaway.
Senator Bryden: Whereas, under the Canada Ports Authority Act, they are
prohibited in the act from serving on the authority?
Mr. Frye: That is correct.
Senator Bryden: Do you have an explanation for the difference?
Mr. Frye: I do not have an explanation, but I do feel that it is unfair to allow
it on the one board. We are not even allowed to select the people we would like
to see on the board who are not members of our corporations. We merely submit
the names, as I understand the legislation to read now. At that point, the
minister may or may not select people from our list. He may select some from
that list and some from any other area he wishes. I think that is a long way
from user pay/user say. I believe wholeheartedly that we are discriminated
against in that fashion.
Senator Whelan: The Standing Senate Committee on Agriculture and Forestry
recently held hearings out west for two weeks. During the course of those
meetings there was a lot of discussion about the selection of board members of
the Canadian Wheat Board. The board will be organized into a private system.
The government will appoint five directors, and the farmers will elect 10. They
put a great deal of emphasis on elections. You are telling us that you have no
Mr. Frye: No, sir, we do not. We can merely submit names to the minister, who
may or may not select those people on the list.
Senator Whelan: Does your company do business in aggregates, mainly?
Mr. Frye: Yes.
Senator Whelan: In how many ports are you involved?
Mr. Frye: We are involved in the Port of Sarnia and in Sombra. We have two docks
in Windsor and in the Port of Kingsville.
Senator Whelan: There are five.
Mr. Frye: Yes.
Senator Whelan: You will have no say, even though you are a user of the port
facility, because there may be a conflict of interest.
Mr. Frye: Yes, sir. Apparently the only people who can correct that are the
people sitting in this room.
Senator Whelan: You heard what the pilots association just said. They do not
want us to make any changes. They want us to pass this bill as is.
Mr. Frye: We are only asking to be treated fairly. I do not think any one of you
would want to trade places with the port users and have someone arbitrarily
select names. If I gave you eight names, you could pick four of those names. If
you were obligated to have that process and an auxiliary process, the port
users would feel very comfortable.
Senator Whelan: I know quite a few of those harbours well. Kingsville is on Lake
Erie. We used to have to dredge it quite often. As a user under this new
system, will you have to pay extra fees for dredging?
Mr. Frye: It is interesting that you raise that issue. The Department of
Transport is divesting itself of that port.
Yes, dredging has to go on every two to three years in that port. That was an
ongoing cost the government absorbed. The port was marginally unprofitable.
We believe, as port users within that port system, that we will be able to make
that port financially sound. We believe that we will be able to put into a
contingency fund enough funding to take care of any needs within the port. When
that fund is in place, we believe that we will be able to drop some rates in
the port. That is because we are port users.
Senator Whelan: But you will have no say in that.
Mr. Frye: The port users in the town of Kingsville will be joint owners of the
port. The Kingsville Port Users Association will be a part owner and will make
the adjustments in that port.
Senator Whelan: The corporation of the town of Kingsville?
Mr. Frye: Yes, and the port users.
Senator Whelan: Are you satisfied with that proposal?
Mr. Frye: I think so. It tells a tale that the port users are a vital instrument
for the government to use. If I were sitting on a port board, I would have the
best interests of that port at heart. If I made a decision, I would have to
stand in front of the people for whom I made that decision and tell them why I
made that decision, much like you folks must do.
Senator Whelan: For the interest of senators, the port in Kingsville is a
fishing port with facilities for fishing boats. It also serves a ferry service
for the big ferry that travels to Pelee Island. At one time, it was a
commercial port for coal and gravel.
Mr. Frye: Yes, sir.
Senator Forrestall: You mentioned three or four ports. Let me start with
Kingsville; is that a single commodity port?
Mr. Frye: No, it is a general cargo port. It can supply coal or aggregates into
that area. As Senator Whelan indicated, there is a vital fishing interest in
the port. Also, the port services the ferry to Pelee Island and back. There are
three main entities.
Senator Forrestall: Could you describe the activities of the other three ports?
Mr. Frye: Windsor is our biggest port. There is very little dredging in Windsor;
it is really a river port. It is not really a port in the true sense.
The Windsor Harbour Commission has been in existence for many years. We have
been at the Port of Windsor for over 22 years. We have contributed to the
Windsor Harbour Commission Fund in every one of those years. We have not had
one dollar spent on anything that our company might require in that port. We
have continued to pay, but we have not had very much say in the distribution of
Senator Forrestall: Presumably there is a story about the other two ports.
Sarnia is basically an oil port, is it not?
Mr. Frye: Sarnia is an oil port. However, there are two major aggregate docks
and a grain facility there. Sarnia and Windsor are vital ports. We have grain,
salt and fuel at Windsor. The major lake freighters are fuelled in the Port of
Windsor. Sand comes into Windsor for the Ford casting. We also supply material
into Windsor for the chemical plant in Amherstburg where they manufacture liquid
Senator Forrestall: Is there any suggestion of divestiture on the part of the
Mr. Frye: I do not think so, and I do not think there should be. Sarnia and
Windsor both come under the criteria that the Canada port authority (CPA)
should be established there. We would like to sit on the board, as you can
Senator Forrestall: You have drawn the line that Kingsville is a candidate for
divestiture, but the others are not.
Mr. Frye: Yes.
Senator Whelan: I should like the senators to know that the Morton terminal is
huge, and they do ship repairs there.
Mr. Frye: That is correct. They do ship repairs in the Port of Windsor.
Senator Whelan: You also have your other facility at Riverside.
Mr. Frye: That is an aggregate dock, as well. You are right, senator. A large
amount of steel flows into the Morton terminal and is shipped by truck or
train. I was also remiss in not mentioning wood. A large contingent of lumber
passes through the port. It is brought in by rail and trans-shipped to ship,
truck or vessel and then trans-shipped.
There are many things in the port which are vital and I can tell you that the
Windsor port users have supported on a large scale -- in our vote it was
something like seven to two -- for the federal initiative on the CPA status. If
we must pay, we would just like to be able to participate.
Mr. Brennan, Special Advisor to the Committee: In reference to Senator Whelan's
inquiries, clause 8 reads:
(1) The Minister may issue...if the Minister is satisfied that the port
(a) is, and is likely to remain financially self-sufficient; (b) is of strategic
significance to Canada's trade; (c) is linked to a major rail line or a major
highway infrastructure; and (d) has diversified traffic.
Senator Forrestall: Is there sort of a ribbon development along that stretch of
the river in terms of ports?
Mr. Frye: In the Port of Windsor, it is mainly self-cleansing and the vessels
can get almost alongside any of the docks there. Our material is delivered by
self-unloading vessels which stick the boom more than 250 feet over on to the
dockage property and discharge in a cylindrical pile. It is an amazing feat.
Senator Forrestall: How far is Point Pelee from your most eastern port?
Mr. Frye: From Point Pelee, we are 10 miles to Kingsville. It is our most
easterly port. Then we go to the west or northwest, up through Lake Erie, into
the Detroit River which is where Windsor is situated, then up through Lake St.
Clair, into the St. Clair River. At the head of the St. Clair, before you go
into Lake Huron is our Sarnia dock.
Senator Forrestall: That would be how far from one end to the other?
Mr. Frye: It is probably in the neighbourhood of about 100 miles.
Senator Forrestall: That is quite a piece of territory. You will be like
Mr. Frye: In our business, we have dock managers. Each of the dock managers
phone into the main office every day and from the central office, any
particular problems filter back out to the ports.
Senator Forrestall: If you have divestiture of one, that will not disrupt your
day-to-day operation, but what if two to three of them were to be divested?
Mr. Frye: I believe that only the port of Kingsville comes under the divestiture
criteria. Sarnia and Windsor are clearly well qualified for CPA status. We will
be part owners, through the Kingsville Port Users Association, of the
The Chairman: Thank you for your presentation.
Our next witnesses are from the Oshawa Harbour Commission; Ms Donna Taylor,
Chief Executive Officer, and Mr. Donald Walmsley, Chairman.
Mr. Donald Walmsley, Chairman, Oshawa Harbour Commission: Thank you for allowing
us to present this evening.
Oshawa is one of nine harbour commissions in this country. The port is located
35 kilometres east of Toronto and is capable of handling full Seaway-size
vessels. The Port of Oshawa is and has been an economically viable port
providing multiple users engaged in international and inter-provincial trade
with a competitive advantage. Companies located on port lands provide the local
municipality and region with jobs, opportunities and taxable assessments.
The cargoes in our port are diversified and include import and export steel,
liquid calcium chloride, asphalt, potash and various projects such as
filtration tanks for Taiwan. This year and last year we were shipping tanks to
From reviewing the transcript of the evidence presented to members of this
standing committee on April 2, 1998, it is evident to me that you were provided
with incorrect and misleading information about the Port of Oshawa which I
would like to correct for the record. It is important that the Port of Oshawa
is put in the proper perspective in order for our presentation to have any
credence, because you will, on Thursday of this week, be hearing from the City
Senator Bryden asked a question:
There are no ports along the seaway system that are not CPAs, or are there some?
In response, Mr. Lewis Ranger, Assistant Deputy Minister of Policy, Transport
There is one harbour, Oshawa, which does not meet the requirements and will be
We take exception to that because clause 6(2) of Bill C-9 allows the minister to
amend the schedule by adding the names of new port authorities. We have been
given a preliminary cursory examination by Nesbitt Burns, who based their
findings on 1994 financial figures. Based on those figures, they concluded
In the case of Oshawa, the ability of the port to use port property is in
significant doubt given the hearing underway before the Ontario Municipal
Board. This has significantly impacted the port's ability to generate new
business and there is currently little traffic at the port. Further, the port
has a significant upcoming dredging expenditure which would more than eliminate
This statement is outdated and based on old information. We intend to apply for
a re-evaluation based on the following facts: The November 1996 Ontario
Municipal Board hearing concluded in favour of the port. We now have the
appropriate zoning to allow for significant future development of our port.
This was a big impediment at the time of the Nesbitt Burns study because it was
Second, we have assessed, with our port engineers, the long-term dredging
requirements of the port and have developed a financially manageable plan for
future disposal of the "dredgeate." Third, port tonnages have
increased from the valuation year of 1994 by 73 per cent and will increase even
further in 1998.
Due process provides an opportunity for the Port of Oshawa to become a port
authority. I wish to reiterate that no decision has been made on the Port of
Oshawa. We are not at this time being offered for disposal. We do intend to
apply for port authority status under clause 6(2) and we expect an unbiased
evaluation at that time.
For this reason, the contents of Bill C-9 are of great interest and concern to
the Oshawa Harbour Commission. We would like to address certain sections of the
bill which we believe are not consistent with the intent of the legislation to
make the system of Canadian ports competitive, efficient, and commercially
For example, clause 8(2)(h) provides for a charge on the gross revenues of the
port authority. If this seems like dèjà vu, as if you have heard
someone talk about gross revenues before, it is because you have. We anticipate
that you will hear from many ports on this specific issue and we are not unique
in saying that if the port is to operate in a commercial manner, then we
propose that normal business practices be adopted, which would be to pay
dividends on net income or out of retained earnings after all standard
operating expenditures have been allowed.
We are asking you to recommend that clause 8(2)(h) be amended to reflect a
charge against the net revenues of the port rather than the gross revenues.
Further, under new government initiatives, the Port of Oshawa has had services
previously provided by the federal government -- such as dredging -- downloaded
on to the expense of the port. In addition, as noted in clause 182.1, the port
will presumably be subjected to grants in lieu of taxes which, as a harbour
commission, were not previously experienced.
It is important that the cumulative effect of the increased costs to individual
ports be considered when developing the letters patent and determining the
charge on net revenues.
We therefore recommend that provisions be made in the letters patent under
clause 8(2) for a phasing in of the charge on net revenues and grants in lieu
of taxes to be determined on an individual port basis after evaluation of the
impact of all relevant new costs being assessed against the port.
Clause 28 of the bill sets out the activities appropriate for a port authority.
This clause is also very important to us. We are concerned that this
legislation limits our activities and totally ignores the fact that our port
currently owns land that can be developed for viable industrial and commercial
The decision of the Ontario Municipal Board, as I mentioned previously, clearly
identifies prestige industrial zoning on our lands immediately to the east of
the operating port. Approved uses include light manufacturing, commercial uses
and warehousing. Revenues generated from this property will be used by the
commission for port development.
As currently structured, clause 28 would negate the OMB's decision and eliminate
this potential revenue source for the port. We feel that is important. We went
out and purchased land with the intent of creating an industrial park to
generate revenue for the port.
The commission also owns and operates a marina and administers some 50 acres on
the west wharf which is earmarked for future commercial and recreational
development. The anticipated revenues from these properties would also be lost
to the commission. Our port has traditionally operated as a landlord port,
providing land and infrastructure for private-sector use and development. The
future development possibilities as a result of the favourable Ontario
Municipal Board decision are numerous and not completely identified at this
Consequently, we concur with the recommendation you heard earlier today from our
colleagues at Fraser port, and wish to reiterate the following requested
amendment to clause 28(2), that a port authority be empowered to engage in
activities related to shipping, navigation, transportation of passengers and
goods, handling of goods and storage of goods, related to commercial and
industrial activities, that do not include the operation of hotels,
restaurants, casinos, or condominiums, unless approved by the minister, and
that would generate needed funds for future infrastructure development, and
other activities that are deemed in the letters patent to be necessary for port
The Port of Oshawa has served its users for over 30 years by providing a
competitive alternative to other ports and transportation modes. The marina and
public launch ramp have served the needs of the local community for 20 years.
The port's comprehensive land use reflects the future development of port lands
in accordance with the Ontario Municipal Board decision, the City of Oshawa's
vision, and the Regional Municipality of Durham's future needs.
We believe the port can continue to respond to local, regional and national
social and economic objectives under an amended Bill C-9 as we have just
We thank you for the opportunity to appear before you this evening, and we would
be pleased to answer any questions about the Port of Oshawa.
Senator Bryden: I appreciate you addressing the comments by the assistant deputy
minister, but you pre-empted my most telling question. It was just left hanging
there that there is one port that will be treated differently. I understand
what you are saying.
Were you here when the Fraser River Harbour Commission made their presentation?
Mr. Walmsley: I was.
Senator Bryden: They are getting a seven-year holiday in dredging fees. The
chairman only lets me ask one question or two, so I did not get a chance to
pursue that issue. Have you attempted to get any sort of holiday?
Mr. Walmsley: Most definitely, senator, we have, and we have not been
successful. Our dredging cost is approximately $700,000 per year, depending on
how much is dredged. We were not given any gift. We were not given any easing
into it. When we were informed that we had to look after our own dredging, the
best we could do would be to negotiate a 50/50 split in the dredging costs that
year, because the responsibility just came to us suddenly.
For subsequent dredgings, we have had to pay 100 per cent of the cost of the
dredging. Depending upon the cost of the dredgeate that has to be removed, it
runs between $450,000 and $700,000. We cannot take our dredgeate out into Lake
Ontario and dump it like they can from the Fraser River into the Pacific Ocean.
The reason for that is because there is pollution flowing from the Oshawa Creek
into the port basin. As a result of that pollution, we must build a dredge soil
containment facility in order to put the dredgeate in there until it can be
treated. We cannot take it and ship it out. It is an added expense to us. I
wish it was nice and clean so that we could just take it and dump it in landfill
or move it or sidecast it. It would be nice to be able to drag, in essence, a
snowplough down the channel and cast the dredgeate aside, but we are not
allowed to do that, so it costs us a little bit more. We have not been able to
get any relief in that area.
Senator Bryden: Have you had any discussions with the Department of Transport
officials about being classified as a CPA since this decision by the Ontario
Mr. Walmsley: Not yet, but we will be applying within the next 15 days to be a
CPA. We had to get our ducks in line, so to speak. We want to get the OMB
decision behind us. We wanted to be able to go out to port users and say, "Yes,
we do have a viable port. You do not have to worry about it being turned into
parkland or green space or bike trails. This is a viable, important port."
As a result of our going out to the shipping community, we had a large increase
in shipments last year. They are coming back to Oshawa, and it has enhanced the
port. That is why this year will be such a good year again.
We are handling steel from overseas. We are importing and exporting steel. We
are exporting manufactured goods from Canada.
Port Oshawa, as I mentioned, is 35 kilometres east of Toronto. The importance of
Port Oshawa to Canada and to Ontario is that it is handling general cargo,
manufactured goods. You cannot drag oversized tanks down Yonge Street. You
cannot get to Port Toronto. Therefore manufacturing companies in Toronto, and
north and east of Toronto, are taking their produce and bringing it down to
Port Oshawa for trans-shipment. We are very keen on Port Oshawa because we
believe that Ontario will get bigger. We believe that there will be more
industry in Ontario in the future and not less. The whole waterfront in Toronto
is growing. You have all seen those highrises. Oshawa is becoming more and more
important to Ontario and to this nation, now that we have our authority in place
and the port ruling as to what our lands have to be, and now that we are
bringing in people. We had people from Texas up talking to us about
establishing a new industry on our port lands. They want to bring industry in.
They are looking for an industrial park with water usage. We now have looked at
the dredgeate. We looked at the dredge spoil containment areas.
We have gone through the costing of this and how it can be handled, and so on.
Our engineers have gone through it. We can present a better financial picture
to anybody who will look at our port. Environment Canada is studying the creeks
north and west of our port, to test the level of pollution that is coming down
from the city of Oshawa. It is coming together really well and I am happy about
Senator Forrestall: What accounts for the 79 per cent increase?
Mr. Walmsley: Basically, we were able to go out to the port users.
Senator Forrestall: Have you been active in generating business?
Mr. Walmsley: Absolutely; that and the fact that we have good handling
facilities. We have access to major highways and routes and it is a good
Senator Forrestall: Your spill-over is sent east. This has come up a couple of
times. I am wondering whether it was a matter of the Ontario government related
Commercial-Industrial Act, which states:
...do not include the operation of hotels, restaurants, casinos, or condominium
developments unless approved by the minister.
Who enforces that on you?
Mr. Walmsley: In the City of Oshawa, and in the Durham region, they held a
referendum and they voted against casinos. Casinos are not a port-related
activity but there are some people who want the port lands for casino
operations. There was a big push by some elected city officials to establish a
casino in the area, so we thought that if this could be included it would be a
Senator Forrestall: You have a marina.
Mr. Walmsley: We have a marina, yes, sir.
Senator Forrestall: In that event that the marina expanded and the general
operator wanted to include a motel, would that be the exception that you would
take back to the minister?
Mr. Walmsley: We would take it to the minister, yes.
Senator Forrestall: Condominium developments add nothing at all to the port.
Mr. Walmsley: They add nothing to the port.
The provincial government is downloading a great deal of expenses to the cities.
They have downloaded GO Transit, highway repairs, ambulance services. You have
all read about it. It is no surprise to you. When the City of Oshawa looks at
the Toronto waterfront, they see high-rise hotels, they see waterfront
development and they see taxes and taxable income -- big tax income. Then they
look at our land and they are interested in high-rises, hotels and condominiums.
Senator Forrestall: I commend you for the growth of the port. If you can do 79
per cent once every five years, you will soon surpass Toronto .
Mr. Walmsley: We are doing very well.
Senator Forrestall: Why do you not just offer to take over Toronto?
Mr. Walmsley: Toronto deals in a different product. Our tonnages are much lower
than Windsor or Toronto. We deal in manufactured cargo and in general cargos,
whereas bulk cargo comes into Toronto -- for example, salt for the streets. Red
Path Sugar is located in downtown Toronto and they bring in millions of tonnes
of raw sugar. On the subject of manufactured goods, the tanks that are 29 feet,
6 inches wide cannot get into the Port of Toronto so they come to the Port of
Oshawa. An average lane of traffic is 11 feet wide, so it takes three lanes of
traffic to move these tanks.
There are good access roads at Oshawa; also, the railway is right there. It will
be good for the province and the nation.
Senator Forrestall: I wish you well and I commend you for your work.
Senator Milne: I will not commend you for your excellence of your operation
until I know how far east your lands go. Some time ago there was a great deal
of controversy about the keyhole marsh just to the east, between the city of
Oshawa and what used to be a lovely farm and is now an office building for a
major car company.
Mr. Walmsley: To answer your question, the harbour commission took that land and
we sold it to the city for $1. We sold 211 acres of marshland to the city and
it is being administered by the Friends of the Second Marsh. That is what the
area is called, Second Marsh.
Senator Milne: That is one of the few remaining keyhole marshes along the north
shore of Lake Ontario.
Mr. Walmsley: That is correct. We took a look at it and decided that it would be
better served for the people of the area as a natural marsh. We returned the
land to them.
Senator Milne: You have already divested yourself of responsibility for that. It
is now green land.
Mr. Walmsley: We turned over 200 acres of green space.
Senator Milne: How many acres are you now responsible for?
Ms Donna P. Taylor, Chief Executive Officer, Oshawa Harbour Commission: We have
60 acres left on the Gifford Farm, on the west side of the marsh. We had the
Beaton Farm on the east side of the marsh. We gave back the marsh but we
voluntarily cut a strip down off eastern boundary of the Gifford Farm, a
120-metre-wide buffer zone. We have voluntarily drawn that line, so we have lost
several acres because it is a long piece of property. The Ontario Municipal
Board approved that decision.
General Motors has a buffer of 60 metres on the other side, and we doubled that.
New legislation was coming down the pipe, but we voluntarily did that. The
parcel of land has been set aside as a pristine barrier between the development
of our 60 acres. We had originally anticipated that all of that land would be
for heavy use industrial, manufacturing, et cetera. Again, we voluntarily
offered to down zone that to prestige industrial, which is warehousing and
commercial interests, so it would have less of an impact on the marsh. We now
have the marsh, the buffer zone, prestige, and then we have our port
industrial. That was the plan that the OMB approved.
Senator Milne: Then I do congratulate you. That is good news for people who are
interested in the marshes along there.
The Fraser River port people, as you heard, expressed an interest in real estate
development, and this is what you are hoping to be able to do on your remaining
Mr. Walmsley: On the remaining land, because we have had the rezoning approved.
We intend to pursue light industries to do that, to generate a revenue base for
the port, yes.
For your information, we have restricted the heights of our buildings so that
from the marsh line you will not see the port. With the way the hill rises, and
because we have restricted the height of our buildings, you will feel like you
are in the middle of the wilderness. You will not even know there is a port
Senator Whelan: Does General Motors use your harbour at all?
Mr. Walmsley: General Motors uses our harbour when they import major presses for
the stamping of cars. They buy the presses overseas and they bring them in on
an intermittent basis. A number of years will go by, and then there will be a
Right now, General Motors is selling portions of a plant to a Far East country
-- I would rather not say where, but somewhere over in the Far East -- and we
are talking with them about it. They will take the plant apart and ship major
portions of it over there through the port.
Senator Whelan: They will dismantle the plant?
Mr. Walmsley: Yes.
Senator Milne: Will they dismantle the jobs, too?
Mr. Walmsley: I do not know if the plant is presently operating. I do not get
involved. If they say they want to ship a plant, I say, "Fine, thank you.
Senator Whelan: Did you receive any aid for your marina under the old federal
government marina policy?
Mr. Walmsley: No. The federal government would dredge the channel and the port
and put in the channel buoys. They maintained the foghorn.
Senator Whelan: We had a federal program for marinas where we developed
everything, the dredging, the docks, the wharves.
Ms Taylor: At one point in the early 1970s, we got some limited assistance to
dig what we now know as the north basin, which was the last area of expansion.
It was a one-shot thing of about $100,000.
Senator Whelan: Do you have tanks for the calcium chloride?
Mr. Walmsley: Yes, we have huge tanks for calcium chloride. It comes from
General Chemical. They bring it in, and it is used for fertilizer.
Senator Whelan: General Chemical is one mile from where I live, and I worked
there as a young man. How many people do you employ in the harbour?
Ms Taylor: We have office staff and the marina. We do not employ the stevedores.
We have very few direct employees. We are down to six people: myself and an
assistant and four people at the marina. That is because we are a landlord
port. We hire the stevedore company, which hires the other people. In the last
study that we did, the spin-off effect was up to 700 local jobs.
Senator Whelan: You said the City of Oshawa will be coming to Ottawa this week?
What will they say?
Mr. Walmsley: Yes, they will be here on Thursday. They will say, "Give me
the port for $1."
Senator Whelan: How much do you charge at the marina? It is a revenue source for
your harbour, is it not?
Mr. Walmsley: It is a revenue source, but we have been pouring the money back
into the marina by redoing the docks. For the last four years, any revenue
earned at the marina went back into the marina. They upgraded the docks from A
to I, and this year we redid the exterior of the yacht club. We recladded it in
a vinyl siding.
That is a revenue source, but basically we have been using it for the marina.
Ms Taylor: We tried to ensure that it remained self-sufficient.