Proceedings of the Standing Senate Committee on
Transport and Communications

Issue 5 - Evidence - February 9, 2008


HALIFAX, Saturday, February 9, 2008

The Standing Senate Committee on Transport and Communications met this day at 9 a.m. to examine and report upon current and potential future containerized freight traffic handled at, and major inbound and outbound markets served by, Canada's Pacific Gateway container ports, East Coast container ports and central container ports and current and appropriate future policies relating thereto.

Senator Lise Bacon (Chair) in the chair.

[English]

The Chair: Welcome to the Senate Standing Committee on Transport and Communications. We are here to examine current and potential future containerized freight traffic and all that and major inbound and outbound markets served by Canada's specific gateways, container ports, East Coast container ports and central container ports and current and appropriate future policies relating thereto.

We have this morning representatives of the Atlantic Institute for Market Studies. Charles Cirtwill, Acting President, and Barrie Hebb, Research Economist.

Charles Cirtwill, Acting President, Atlantic Institute for Market Studies: Thank you for the invitation and welcome to Halifax. As I was just mentioning to someone sitting in the audience, this really is going to be a contextual presentation. I have been following the committee's hearings over the last considerable number of months and you have heard from quite a lot of people who know far more about this than I do. In fact, some of them actually taught me what I know about this so I will not try and engage in their conversation.

Let us start with a little bit about AIMS just to supply a quick context. AIMS, of course, is a think tank. Some people will tend to have a hard time getting their heads around that but for those who might know a little bit about politics and nobody fits that description at this table, I am sure. However, for those of you who might know a little bit about politics, remember that Winston Churchill once described politics as the ``art of the possible.'' Our role in the public policy debate is to redefine the word ``possible.'' So we do social and economic policy across the full gamut, healthcare, education, immigration, all those things. And quite honestly we do it very well and that is not just our matter of opinion. We have won five major international awards in the 12 years we have been in existence.

Now when we talk about containerized trade or trade of any type, we tend to put it into the focus of one of our major projects which is the Atlantic or the international Northeast. I am going to show you two slides to illustrate the exact location of the international Northeast.

This map shows you the rough outlines of ``Atlantica,'' which consists of the four Atlantic provinces, the South Shore of the St. Lawrence River, and the Northeastern United States of New Hampshire, Vermont, Maine, of course, upstate New York.

A quick and dirty summary of what exactly Atlantica is is it is a response to our mutual isolation. If you look at this map, you can quickly see that the U.S. Northeast cuts off Atlantic Canada from the rest of our country. You can also see that our country cuts off the American Northeast from the rest of theirs. The concept around Atlantica is that by working together we can overcome the challenges that this geography represents.

The fascinating thing, and this is how we tie this conversation back into what you folks are looking at, is there seems to be a debate about Atlantica being a fairly new concept. In fact, it is not new at all. Robin Neil, an economist at UPEI, just wrote and article looking at historical Atlantica. In the article, Mr. Neil discusses the golden age of the Maritimes as being a golden age of commerce, not of general economic development, but of commerce and trade. He emphasizes the fact that the U.S. Northeast and Atlantic Canada saw some of its greatest prosperity at a time when we looked outward rather than inward.

In this slide, you see the section entitled ``Now'' and this indicates the period of time since the signing of the North American Free Trade Agreement. You can see the Gross Regional Product of the Maritimes leaped from $35 billion in 1992 to roughly $50 billion in 2001. Certainly, there could have been other drivers above and beyond NAFTA but I, for one, do not think it is coincidental that we saw this kind of exponential growth after we stopped looking inwards towards the center of the continent and started looking again outwards to the sea. I am sure that this committee has seen or heard of these slides during its hearings in the last 12-18 months.

Why the buzz on the East Coast about container traffic and trade? Well, NAFTA and EU trade is about 40 per cent of international trade and that continues to be a staple on the East Coast. The big thing for Atlantic Canada in particular is that thick blue line that runs through the Suez Express, which carries 7 per cent of world seaborne trade right now and that number continues to grow. Now why is that important for us? Well it is important for us because distance is, quite frankly, not an issue. If you look at Hong Kong west, we are a competitive distance time and cost- wise on that seaborne leg and in fact, if you go Southeast Asia into India, we have a significant competitive advantage. Therefore, the larger those economies grow in that region, the more opportunities there are for us. I will discuss just a little bit later on why that makes us a little bit different than the conversations you have had on the West Coast.

This is a slide on world containerization of the general cargo trades which I am absolutely certain you have seen a dozen or more times. So you see that total general cargo basically since the 1980s and going forward has continued on an upward slide and that containerization of that traffic has actually increased at an even faster rate to the point where we are probably somewhere between 85 per cent and 90 per cent of overall cargo is now containerized.

The reason I put this slide in is not to highlight those trends although those trends are important for your conversation and for public policy in this area but to highlight the fact that this slide goes from the period 1980 to 2010 and you can actually extend those lines on the same graph, into 2020 and beyond. That period covers several perhaps not necessarily recessions but downturns, adjustments, hiccups in the global economy. So, when you have conversations around what the impact of what is happening in the U.S. is going to be on these trends, I think we can be reasonably sure that, regardless of what happens in the U.S., this trend will continue upward. You can see from the graph that it has covered some periods that looked remarkably like what is happening in the U.S. now and so we can be reasonably confident that even if it levels off, it will likely continue to go upward in the near term.

Let us talk about the Atlantic Gateway. There is a lot of conversations about what gateway are you talking about? These are three potential definitions that we talk about when we look at the Atlantic Gateway. The first is a gateway to North America. Basically you get into the concept of the rise of India together with congestion — Halifax actually requires extra terminals here on the East Coast. Another opportunity is the trans-shipment to North America. One of my former colleagues described this as taking a lasso, throwing it around Gioia Tauro and dragging it across the North Atlantic. The idea is that the longer that you keep container and cargo on big ships, the cheaper it is and the less environmental imprint you make so the more we can keep it water-borne, the better off we all are. The third one I put there not because I am expecting this to happen any time soon, not even in my lifetime or it might be my children's or my grandchildren's lifetime. It would significantly change the structure of trade in North America; that is the Jones Act changes. We have similar kinds of restrictions here that mess up the flow of trade on short-sea shipping opportunities between our ports, between American ports and between point-to-points in the U.S. There is lots of space for ongoing conversations with the United States around incremental changes perhaps not necessarily leading to a fundamental repeal of the Jones Act but at least tinkering around the edges and getting rid some of the restrictions.

Before I leave that slide, I think it is important to emphasize that each one of these approaches plays to a competitive strength of one or more ports in the region and none of these three are mutually exclusive. It is entirely possible, for example, for the folks in Sydney to pursue a trans-shipment opportunity and the folks at Halifax to pursue a gateway opportunity and actually become complimentary to each other without necessarily competing. That is in an ideal world; I think the reality is perhaps a little different right now.

The next three slides illustrate what the public sector should or should not do to pursue or encourage this opportunity and I suspect that this is probably the area where this committee may have the most interest.

I will start with the gateway fund. In my opinion, the worst possible thing that the federal government could have done was set up a fund to support this exercise because it is the same old, same old. It has led to the exact same conversations, ``I want my fair share.'' ``They are getting a handout. I am not.'' ``It is us against them.'' And it has pushed to, once again, an internal focus as opposed to the external focus that I think is critical and that has been demonstrated to be the way to achieve success in this file.

The simple reality of the situation is that of that $2.1-billion fund, when it is approved and it starts to spend, the vast majority was going to go to the Great Lakes and Quebec anyway. You can either argue that is going to be on the basis of political reality or you can argue it is going to be on the basis of simple need. The infrastructure requirements in the Great Lakes Region and in Quebec are greater than they are here on the East Coast. The Pacific Gateway had real constrictions and real infrastructure needs. We do not have those same gaps, we have some, but not on the same scale.

The good news about the Gateway fund and for this I have to give kudos to Transport Canada, is that they are being very firm. They are calling on business cases. They are requiring hard numbers. They are asking people to speak with one voice and forcing a level of cooperation that has not really been the traditional case here in Atlantic Canada in particular. Therefore, from that perspective I think we have seen some very positive results coming out of this Gateway fund initiative.

On the regional plan side, we get into another key difference between the East and the West Coast and the question of a regional plan. We are asking who is going to develop it and what will be the objective. Right now, a federal/ provincial committee made up of senior bureaucrats from the provinces and the federal government is driving this exercise. Yes, they are engaging with the private sector but we need to contrast the engagement exercise with the formal involvement and actual authority and roles and direction that is happening on the West Coast around the Pacific Northwest Economic Region, around WESTAC and around the Halifax Gateway Council. We need to answer the question how does the private sector become engaged in a leadership role on this file. Is the answer the Atlantica Council, which is a new entity that the regional Chamber of Commerce started or is it something else? I think the private sector has an obligation to answer that question and answer it quickly.

What else should the public sector do? Well, I think there are some things that you could do in terms of focusing on people and connections. We need to continue to focus on immigration. We need to continue to drive up the number of people coming to this country, but we need to recognize that the more people we bring the better supports they will need. You wonder why I am talking about immigration in a conversation about containerization. Well that brings us to the second bullet on this slide. Immigration and trade are intrinsically linked. We need to recognize this fact and start to understand that where we are targeting immigration, we also need to recognize that there are trade opportunities related to that. It is far easier to do export and import business with people you know or are related to and that is why we need to start engaging in merging those two entities offshore. We need to take a serious look at our label of mobility and recognize qualifications from other provinces and countries. We need to take a look at our training and focus that on education areas where there are labour shortages. We need to reorient our labour policy around labour shortages rather than our traditional focus around jobs, numbers and make-work projects. And getting back to that regional plan quickly, the priority in that regional plan must be growing the entire market. We cannot spend a lot of time developing a regional plan that says this is Saint John's niche; this is Charlottetown's niche; this is Halifax's niche. We need to spend our effort on growing the entire pie and then letting the business communities put their work together to get a portion of it, as it is appropriate.

What else should the public sector do? It needs to promote public policy change for a better business climate. This is something you have never heard before, I am sure. In all seriousness, we still have a long way to go in terms of harmonizing our trucking and business regulations. I need to emphasize this does not mean watering down our regulations. This means putting in place consistent regulations that protect the public interest, that protect the environment and that are predictable and stable. Businesses cannot be in a situation where the rules are different every time they cross a provincial or provincial-state boundary, nor can they be in a position where the rules are changing every six to ten months. We need to be in a situation where it is predictable, where they can build it into their cost structure, and where they can move forward.

This bullet point is one of my favourites. I have been talking about it for 15 years. We need to continue to make changes to the Canada Transportation Act and the Canada Marine Act. Yes, the legislation is on the table yet again and quite honestly, I failed to check whether it had passed this time around. This is the third or fourth time we have tried to change it and the simple fact that it is taken us a long time to do it and, quite honestly, the fact that we had to start making changes almost immediately after passing the legislation, tells you that we made some mistakes in the first time around. It also indicates the level of priority that this file has with the federal government.

The other thing we need to talk about is we have to let the proponents pay their bills and sell their products. I cannot remember if Melford is coming today or tomorrow but hopefully you will hear from them that they do not want to see any direct investment in specific projects and I could not agree more. They should not be getting money any more than the Port of Halifax should be getting specific money. You should be looking for opportunities that encourage all of us to grow quicker.

Here are some things that I suspect Mary Brooks mentioned to you when she came and visited. We need better data. The data is atrocious and the government could certainly do a great deal on this side in terms of collection, collation and provision of better data. We need more research. We need to set a sound foundation and to again throw some kudos to people who are not used to getting them from me, ACOA is actually doing some interesting work in this field around encouraging some sound research on the gateway.

We also have to keep a focus on U.S. policy. I understand that for the most part we like to talk about Canadian policy because it is easier for us to change but the Harbour Maintenance Tax and what is going on at the border is going to be critical to the growth of containerized trade in Canada. One of the things that I like to say is if we took that $2.1 billion Gateway fund and spent it entirely on interacting with the United States around streamlining border security issues responding to their needs and ours, we would be a lot better off going forward.

There are three things to remember when you are talking about the Atlantic side in your final report on containerization and one is that the East Coast is not the West Coast. They are fundamentally different. We do not have major capacity constraints. We need minimal infrastructure investment. We are dealing with, and this is something that I find fascinating that many people are not talking about publicly or not expressing fully: we are dealing with emerging markets. We are not dealing with mature markets. We are talking about India, Southeast Asia, and Vietnam. We are talking about the new Russia and helping them grow helps us to grow.

To go to my second point, a gateway goes from somewhere to somewhere. This is an issue around who the Halifax Gateway Council is talking to and who the port authorities and others are talking to. We need to engage, for example, in the U.S. Northeast CanAm Connections Study. It is not enough for a provincial government to say it has someone at that table. The province needs to be at that table with money, time, research resources and a mandate. Why is the province there and what is it trying to achieve? It is frustrating for us. We spent almost a year and a half trying to get the federal government's attention to the fact that this study was even going to happen and to our understanding, the federal government is still not at the table in any meaningful way. That is a problem because that means that the U.S. is setting policy that is going to directly impact containerization growth here and we are setting policy on this side that is going to directly affect their economic growth there and there is no real blending of the two.

The last point I have to make, not that I enjoy disagreeing with ministers but when ACOA announced the Gateway fund the minister of the day said, ``If we build it, they will come.'' Unfortunately that is not true. If you build it, they might not come at all. We need to be talking to the people who own the goods. Ultimately, no matter how good we are, no matter how cost-efficient we are, they are the ones making the decisions about where their goods go. Next to them come the people who carry the goods. CN Rail is a critical partner in this exercise. It does not matter how efficient Melford is, how much Sydney thinks it can undercut Halifax's cost. The terminal operators are a miniscule part of the overall cost structure of this thing and if CN cannot find a way to service the East Coast effectively and cheaply, and maybe there is not one, because CN has certainly been trying. CN takes a lot of grief on this coast about the level of service and that kind of thing but they have made major investments. They have made major changes but the ultimate reality is that our inland haul is the key to making this work on the East Coast. On that point, I will give it over to questions and thank you again for your time.

The Chair: Thank you very much for your presentation.

In a report called Governance and Leadership: A Tale of Two Ports, the author, Michael Tharamangalam, compares the Port of Halifax to the Port of Lazaro Cardenas in Mexico. He concludes that Halifax can improve its performance at different levels and one of the recommendations is building strong relationships among port and administration, shippers, shipping lines and railway.

What do you think the port authority has to do to build a better relationship with its important partners?

Mr. Cirtwill: Mr. Tharamangalam was working a couple of years ago and I would think that many of his recommendations surround the structural problems and the complexity of the relationships. We have many organizations from the Halifax Regional Council to the Halifax Gateway Council to the International Longshoremen's Association, ILA You get the idea, and that is only on the private and the union side. Do not get me started on listing the number of provincial and federal organizations with a piece of this pie; from that perspective, this is a huge challenge.

I think the fact that Halifax itself has stagnated in its growth has crystallized a lot of people's thinking. I think you are now seeing public comments that are reasonably consistent from all of those groups. The ILA has said that they are ready to address aggressively the competitive challenges. CN is talking about the need to get urgent. You see the Canadian Retail Shippers' Association and the port authority doing the same thing. There is an appetite to make things better and there is a higher degree of collaboration. Whether we are all the way there yet, I tend to say no, we are not. There is a lot of ground to cover and each incremental improvement is welcome.

Senator Oliver: Mr. Cirtwill, we thank you for your comprehensive presentation. There was an awful lot there. We need a day, I think, to engage you on it.

You referred to the MOU between the four Atlantic provinces and the federal government for an Atlantic Gateway strategy. You discussed the agreement and the objectives. The vice-chair of the committee from ACOA discussed it yesterday. One concern that we both expressed is that it is without a business component and is more government. Unfortunately, many decisions are business decisions and I am just wondering what, if anything, you think a committee like ours could do to try to persuade that group to open it up to business.

The Greater Halifax Partnership appeared yesterday and I asked them if they were engaged in the committee and they responded that they are not. In my opinion, a group like that should be in the forefront along with other major business groups. You have to have the private sector involved with their dollars, their skills and their vision.

Mr. Cirtwill: Senator Oliver, I appreciate the question. About seven months ago, just after the announcement of the MOU, I wrote a column in the local paper saying exactly what they should do. In the article, I said that the federal government should re-think the entire exercise. That committee has to be expanded, its mandate has to be changed and its chairmanship has to be adjusted. If this committee were to recommend that the structure be changed into a co-chair situation with one chair from the private sector and one is from government, I think that would be a significant step forward. I advocate that all shares should be private sector but I recognize that there has to be a balance. I suggested that there are key players from this region who could and should provide leadership on that review. These players should provide ongoing leadership. They should attend all of the meetings to avoid other players from being suspicious. We do not want others suggesting a conspiracy. You giggle at that and yes, it is funny, but I was at the stakeholders' session. The labour groups were at that stakeholder session and they were very clear. ``We do not trust you.'' ``We know these conversations are happening behind closed doors and we want to know what you are saying.'' I think from that perspective, the fact that the committee is being led by public sector individuals, not questioning their competence, not questioning their desire to get this done, but it leaves the government open to being the scapegoat if this goes astray. I think that by changing that structure to a co-chaired exercise where the private sector has equal say and that we have labour and private sector on the committee itself deciding the direction, deciding how the conversations and the stakeholders go, I think that would be the best change that could happen.

Senator Oliver: Again, I had not seen your article but if you have a copy, maybe you could send it to the committee so we could read it. That would be useful.

You began with Atlantica and the Atlantica Council and so on and you showed us a map of your Atlantica. What kind of infrastructure investments are required if we wanted to move more goods? What do we have to do to the highways in your Atlantica? What do we have to do to ports and inland ports? What is required by way of infrastructure spending today for your Atlantica in order to move goods?

Mr. Cirtwill: At that stakeholders' session, I was sitting beside the head of the Saint John Board of Trade. I was flabbergasted to discover that 50 kilometres of highway between our trans-Canada network and the U.S. border is not twinned. If you do anything, I would suggest you tell the federal government to cut a cheque today to twin that highway.

Senator Oliver: To which piece of roadway are your referring?

Mr. Cirtwill: My understanding is it is between Saint John and the border. We have twinned everything else all the way through to Quebec so our connectivity into Central Canada on the road structure is perfect. It is that last piece between us and the U.S. connectivity that is an infrastructure piece and the beautiful piece about that expenditure from the federal government's side and the New Brunswick government's side is that it helps everybody. It helps Saint John, Halifax, Sydney and Melford. Incremental differences, of course, Sydney and Melford are going to be almost 90 per cent rail ports; Halifax is 80 per cent. However, that connectivity offers opportunities for road trains, long accommodation vehicles, it offers opportunities for more access to that northeast U.S. market that we do not have now and it is an easy sell. It is something that has been on everybody's priority list for a long time and it is easy to do.

There are some changes to the Truro interchange that probably need to be made to make long accommodation vehicles safe for other fellow travelers and just to improve the flow of that interchange. Here in Nova Scotia we could use some incremental adjustments in the connectivity into the Burnside Industrial Park. We could use some investment on the road around Rivière du Loup in terms of improving it for safety and capacity.

On our port side, there is really is not any investment that is critical right now. We have a lot of excess capacity. We have two major, private organizations talking about building more capacity so from the port side, I think we are pretty well handled. On the rail side, CN is running essentially at 30 per cent capacity. They have lots of room to spare. Their driving force, as they readily tell the public is the more volume the better they can price and they have lots of space to do that. In terms of our Class 1 rail, there are not many issues.

Now on the short lines the connectivity network that gives us another alternative to CN, which runs south and then west, there may be some opportunities to invest. I was in Montreal a few months ago with the Northeast CanAm Connection Study where I heard about a Quebec program that sees investments in short lines cost-shared three ways between the federal, provincial and private partners. Perhaps that conversation should happen around that structure here.

Senator Zimmer: I found your presentation inspiring in your candour, and boldness, which was noble and refreshing. This is the first time that I have heard some of these statements against the tide of opinion and I do not mean to intend to pun.

On one of the slides in your presentation, you show that 7 per cent of the ships come through the Suez Canal, the Suez Express. You noted the importance of that canal and said if I recall correctly, that it takes 24 days for the ships to get to North America. However, if a ship comes the other way, across the Pacific the time is almost the same; it is 23 days. How do the shippers decide which way to come to North America? Is the decision based on where the ship has to stop to pick up or drop off goods? How do they decide to go through the Suez Canal or come around the Pacific to get to North America?

Mr. Cirtwill: It is all about how much it will cost. Certain perishable goods travel by plane. Atlantic Canada's traditional opportunity is in medium-cost, high-value goods. The difference in a couple of days of shipping is important to these medium-cost goods. It involves how much it will cost the buyer to put a bike on the sales rack in Wichita.

Senator Zimmer: You said that gateway funds should not have been done, but the good news was Transport Canada requires and holds them to hard numbers. You indicated most of the money would go to the Great Lakes Region or to Quebec. Has Atlantica received any funding out of that Gateway fund?

Mr. Cirtwill: My understanding is the gateway fund has not been approved by Treasury Board yet so no one has received money out of that $2.1 billion fund. My understanding is while the $2.1 billion fund over seven years was in the budget, it has not yet received Treasury Board approval so they are not cutting cheques out of that account right now.

Senator Zimmer: You talked about niches and that we have to all work together. How important would it be for Canada to form part of an integrated North American container transportation system from the perspective of the rest of the world, not just across Canada but also North America?

Mr. Cirtwill: I think that is absolutely central. In fact, I was just shown a draft of a piece being done by some transportation experts in the U.S. that talk about the fact that there are currently in North America three major national strategies for transportation. All three were developed in isolation so they are not complimentary. They do not blend and they will not respond to the challenges that we have. In terms of the federal government and its responsibility for foreign relations and integrating with the United States in particular, the solutions to many of the U.S. transportation problems lie on this side of the border so I think it is actually critical to have a North American approach to this issue.

Senator Zimmer: Thank you for your candour.

Senator Mercer: Mr. Cirtwill, you began by telling us you did not think the government should be involved in anything in the Atlantic Gateway money or the gateway fund should not be spent but then proceeded to talk about 50 km of road in New Brunswick. You talked about an interchange in Truro and improving the highway from Edmundston to Rivière du Loup. By the way, you failed to mention the highway from New Glasgow to the Strait of Canso. That stretch of highway has not been twinned. Also, if Melford is going to go ahead that is obviously an issue but you told us you did not want the gateway fund to do anything but then proceeded to itemize places where the federal government should be spending money. I just find that a bit of a contradiction. Philosophically you are against government involvement but, ``By the way, here is a list of things you should be doing.''

Mr. Cirtwill: I miss you, Senator Mercer. First let us clarify the same thing we clarified last time you and I had a conversation. I am not philosophically opposed to government involvement in the economy, investment and infrastructure. What I said was the $2.1-billion gateway fund was a bad idea because it has done exactly what I said it was going to do. It has pitted us against each other.

Senator Mercer: You said it has not done anything though.

Mr. Cirtwill: Just a second now. It has pitted us against each other. Instead of spending our time and energy trying to attract international markets, we are spending a lot of time and energy, ``Oh well, you know if there is $700 million to spend on Atlantic Canada, how much can I get for the Port of Halifax to fill in those two berths? Well that would cost me $25 million so let us put a business case together.'' Instead of doing what they should be doing, they are trying to figure out how to get more money from Ottawa, which is not a good thing.

On the infrastructure side, let us recognize that the $2.1-billion fund is just one piece of a huge pie. There is $33 billion in that Building Canada Fund. There are many places where that money can come from for infrastructure investments. Just for the record, both the twinned highway in New Brunswick and the highway between New Glasgow and the strait are on the list of projects seeking approval under the normal funding arrangements between the federal and provincial governments. It is not that those two pieces of highway are being ignored or that they are not important. In terms of the Melford proposal that twinned highway is meaningless from a business case perspective of Port Melford. They do not need that highway. They are going to be 95 per cent 97 per cent rail-based so the key thing for them is the rail spur onto the CN line and they have already said that they want to pay for it themselves.

Senator Mercer: I will believe all of that when I see it.

Mr. Cirtwill: When they ask for that, you say no.

Senator Mercer: Let us go beyond to something that you and I may agree on because you and I have had discussions in the past.

We have heard from everybody, you have talked about the need to talk to the customer, and there are different definitions of who the customer is, whether it is the shipping line, whether it is the Wal-Marts of the world or whoever. You know, it appears to me that one of the real problems here is that we do not have enough boots on the ground where they should be to talk to the customers. All of the major players should be doing this talking: the gateway, the Province of Nova Scotia, the City of Halifax and the Port of Halifax. The Port of Halifax has one office in India. It has an agent in New Jersey, I believe.

It seems to me that while those of us who want to spend government funds on other things are arguing about that, perhaps somebody should be paying attention to actually talking to the customers and talking about getting shipping lines coming here and about moving their capacity use from 40 per cent to closer to 80 per cent.

I mean I do agree I do not think we should be worried about building new terminals or filling in new berths when we are still at 40 per cent capacity. When you are getting past 60 per cent capacity and you can see 100 per cent down the road, let us sit down and talk.

I get nervous about Melford because it is only going to create more capacity and I have not seen a contract that will fill it.

Mr. Cirtwill: Were you at my meeting with Melford because that is exactly what I asked them. That is what I asked the folks in Sydney. That is what I asked the folks in Halifax, too. I could not agree more, if we are committed to spending some government resources on engaging this exercise and seeing it grow.

On my concluding slide you will see the title ``Three Key Things to Remember.'' The second bullet point reminds us that ``A gateway goes from somewhere to somewhere.'' In the third bullet, we are reminded that we have to make ``more permanent links in India and Southeast Asia.''

I think that if the federal government wants to value add to this exercise, it should be opening offices and promoting the Atlantic Gateway. The government should say to prospective customers that Atlantic Canada has many opportunities including our existing capacity; we can take your ship tomorrow. We have Green field sites if you are more interested in taking a serious look at your entire international network and you want to build or you want to make a long-term exclusive lease. We have rail, road capacity and air linkages. All of those opportunities are pieces that market the entire region and certainly I have no objection to the idea that the federal government would take some of those resources that we have made available to exercise and open a series of offices.

Senator Mercer: So now, we are spending the Atlantic Gateway money that we should not have allocated.

Mr. Cirtwill: Well absolutely. It is there now. You have to do something with it.

Senator Mercer: Exactly. I do want you to clarify something. You referred to congestion in Halifax; I have not seen any congestion in Halifax Harbour for a long, long time.

Mr. Cirtwill: That is the theoretical case. Yes, there is no line-up sitting outside Chebucto Head.

Senator Mercer: What is your opinion on Melford?

Mr. Cirtwill: As long as they spend their own money, I do not care. Let them do it. What is wrong with that? If they can make a business case and they can convince investors to cough up $350 million to $500 million, why should we stand in the way?

I agree with you, senator, that if the day comes, and I hope it never does, they come and they say that they have spent $375 million and need another $125 million to finish or they will shut down, I think the answer should be no. I think the federal and provincial government should be clear with them from the start that the answer will be no.

Senator Tkachuk: We had representatives from the Port of Halifax and Melford International Terminal Inc. here. Melford made a presentation on the increased number of containers and the increased number of container traffic. Part of their business case showed 1.2 million containers coming through their port. Halifax says they have room to go from 500,000 that they handle now to 2.4 million.

I am looking at the container statistics and thinking that none of this seems to make any sense. Even though there was something in the paper about the big drop in the number of containers Halifax Harbour, which should have set a whole bunch of alarm bells, those numbers have been consistent since 2000, give or take a few percentage points. While this huge increase has been going on for the last seven years, we have not been capitalizing on it on the East Coast. Is there something wrong at the Port of Halifax? It does not seem to be in anyone's interest to continue in this way.

This is not very good and the Melford group thinks they can bring in 1.2 million more. Maybe we should sell the Port of Halifax to Melford and just save a lot of time.

Could you comment on what you think the problem is and why we are not getting our share of the increased container traffic throughout the world?

Mr. Cirtwill: I hate to sound like a broken record, senator, but in 2001, I co-authored a paper called Port-Ability: A Private Sector Strategy for the Port of Halifax. In that paper I say essentially what you just said, sell the Port of Halifax to a private interest and let them grow it.

Senator Tkachuk: That is your answer to the whole question.

Mr. Cirtwill: That is my answer to the whole question.

Senator Mercer: I told you that you would like it.

Senator Tkachuk: I do like it. You know, Don Cayo was one of the originators. I knew Don at college, he was a Saskatchewan boy who moved here and left Socialism to practise preaching free enterprise in the Maritimes.

Mr. Cirtwill: What the Port of Halifax will agree that they are concerned about the fact that their levels have been essentially the same for many years.

Senator Oliver: They are dropping.

Mr. Cirtwill: I am going to be cautious on saying dropping or going up; we have been sitting at the same point going up or down for about 10 years. The numbers have dropped over the last year. What they will tell you is the mix is different, that the traditional cargo load coming out of Europe has gone down but their cargo load coming out of those emerging markets that we were talking about, has gone up and that is where you will get some enthusiasm from them. Based on that rise they will have some expectation that they are going to grow. They are enthusiastic about Vietnam and Russia and really believe that as India comes fully on-stream, and as Southeast Asia, starts to expand their business will grow. The trends indicate that those are the points where they should be focusing and again, not to make their case for them, but they have been doing the kind of things that we are talking about that they should be doing. They have been talking to the U. S. market. They have an agent in the U.S. looking at connecting with people who are actually selling the goods. They have an agent on the other end of the supply chain. Whether they are doing enough, that is up to, well I usually use the word ``investors'' but since they belong to the federal government, I guess it is up to the federal government to decide whether or not they are doing enough.

Senator Adams: Your presentation is the first of its kind that has shown the possible route through the Northwest Passage in the Arctic. If this passage does open up in the future, how long will it take goods to come to Canada from the Far East? What would be the difference from a ship using the Panama Canal?

Considering the effects of climate change on the Arctic, this passage could be opened sooner rather than later. We know that the ice is moving further from the shore by so many kilometres per year.

Can you tell the committee the difference in the time it would take to use the Northwest Passage compared to the Panama Canal? I think it takes between 15 and 21 days to come from the Panama Canal to Halifax.

Mr. Cirtwill: Interestingly enough the Northwest Passage concept came to us through a Chinese immigrant entrepreneur that joined AIMS 18 months ago. Apparently, the Chinese and the Russians have been talking a lot about rail linkage over Eurasia and the potential for the Northwest Passage. As you say Senator Adams, not everything related to global climate change is negative and certainly from a distance perspective and for access to currently basically uneconomical commodity reserves, if that occurs to the point where it becomes possible, there is a great deal of potential there.

I do not think it is a realistic opportunity today or tomorrow but certainly from a time and distance perspective it is interesting and could be lucrative. We actually have a study that we are looking at and hope to release it within the next six to eight months. We will have more details at that time.

Senator Adams: Can you tell this committee how much the Panama Canal Authority charges for ships to use the canal? I ask because if the Northwest Passage opens up Canada will be able to charge a fee for ships to use it. We will likely have to share that fee with the Americans, the Russians and the Danes.

Mr. Cirtwill: The Panama Canal Authority makes out quite nicely on the fees it charges and considering the congestion, it charges a premium. We do the same thing in Canada; we have marine service fees that we charge ships traveling through our waters. If in fact that body of water becomes feasible, as a major flow through of global trade, the question of Arctic sovereignty will be critical because of course it will represent a significant competitive advantage for our country. It will present us with a significant opportunity to draw revenues that will allow us to do things in the North that we have been unable to do.

Senator Zimmer: Coming from Manitoba and being a senator and almost always supporting my neighbour here in Saskatchewan, I want to remind everybody when you think of ports you think of East or West but you sometimes forget about the Port of Churchill.

You are correct that global changes are opening up the passage and soon the icebreakers will be able to get right in there. Mr. Cirtwill, what are your thoughts of a polar route from the Port of Churchill right over into Russia? I ask that question in the context of the future.

Mr. Cirtwill: I think the people who are trying to combat global warming and are hoping that the planet will start to cool would say probably you and I would be a little premature in having this conversation. However, if warming trends continue we will start to see, and in fact we are already seeing, increased traffic in the Port of Churchill. They are doing short sea shipping servicing into other parts of Canada and I think from that perspective it is likely that it is a growth opportunity they can realize today and in the ensuing near term. In terms of accessing the Russian North through direct service, absolutely. However, it depends on what level of change happens up there, what happens to the ice, what happens to ships and the technology. There are many interesting questions on which to speculate.

Senator Adams: We have developed quite a bit, especially mining on Baffin Island. We have European businesses that are interested in the ore and they will be operating in five or six years' time.

I do not know about the ice thickness up there. The permanent ice is between seven and eight feet thick; it might be more. In Hudson Bay, the ice must be between four to six feet thick. I do not know if you can put those huge Panamax ships through that kind of ice. Do you think we will need huge icebreakers?

Mr. Cirtwill: We have not done any work on the incremental cost of ice breaking in the North but I will tell you this. You are unlikely to find anybody in Atlantic Canada who is enthusiastic about talking about ice breaking. How should we put this? Ice breaking fees have been an irritant when you discuss the growth trends of the Port of Montreal and the Port of Halifax.

There is a strong school of thought in Atlantic Canada that the sharing of the ice breaking fees has been an unrecognized subsidy to the Port of Montreal to the competitive disadvantage of ports in this region. If we get into the exercise of launching a lot of spending on expanded ice breaking services to have 12 month a year service to the North, I suspect that the Port of Montreal would be just as annoyed as the Port of Halifax is now.

Senator Cowan: Setting aside the philosophical differences that you and I might have about the legitimacy or illegitimacy of government involvement in these things, I think we probably share a frustration that as Atlantic Canadians we sometimes spend more time competing amongst ourselves than we do looking at the big picture. I agree with much of what you say about the necessity to do that if we are to grow.

Senator Tkachuk talked about either the steadily declining level of container traffic in Halifax or at least the not increasing levels. Let us just sort of step back for a moment and allow you to be in charge of this project. How would you as an individual or as an organization, recommend that we of get our act together in Atlantic Canada and move forward to take advantage of these opportunities which everybody seems to suggest are there but do not seem to be able to capitalize upon under the current structures? That is a big question. Can you give us a bit of an outline about what you would do if you were given that responsibility, that opportunity?

Mr. Cirtwill: Not only that, I can send you a copy. I apologize for not bringing them today, but I can send you a copy of the piece I co-authored in 2001 actually doing just that, laying out the strategy. Part of the reason I do not have copies of it here, by the way, is it is our most popular paper and we cannot keep it in print. It is the most downloaded piece from our website so clearly somebody is reading it. If you look at the strategy that the Halifax Port Authority has pursued over the last three years or so, many of the things they are doing are the things that we suggested. I am not going to take any credit for it because they certainly do not call me on a regular basis. The Halifax Port Authority is expanding their efforts in the new markets and in the end target environment. The authority is becoming far more aggressive at streamlining and cleansing the messaging that goes out from the port. It is spending much more time getting everybody on the same page about what our opportunities really are and focusing on those kinds of things. The people at the Halifax Port Authority are getting private sector investment; the fact that they were able to sell Halterm to Macquarie at a premium was certainly, for those of us watching the port, a sign of hope. Now that has not panned out and that is a little frustrating but I think from that perspective it makes the case. The folks in the strait did not like some of the things I was saying about Melford and called me down to basically throw sticks at me but one of the things I chatted with them about was that from a purely market philosophical perspective, maybe the best possible thing for Halifax is to have a terminal in Melford. I suggested that a terminal in Melford would foster strong competition and force them not only to pursue the strategy that they are pursuing but force them to do quickly and in a far more aggressive manner.

Senator Oliver: The Honourable Peter MacKay is leading a delegation from here to India in less than two weeks' time and as I understand it, Melford and the Port of Halifax officials will probably be going along. They are going to India to one of the new emerging markets so there will be some pulling together as a number of people have recommended.

In your presentation, you said that the government should reduce taxes to improve the business climate to make the port more functional and viable.

In the last budget, Canada's new government announced some of the biggest tax cuts that we have seen. What additional cuts would you like to see to help make the business climate here even better? I mean do you have some specific tax cuts in mind?

Senator Cowan: A couple of GST points.

Mr. Cirtwill: No, no, no, the GST was a bad idea. In fact on that front I have to agree with Frank McKenna. It would be far better for the provinces to take that GST point back and then translate it into a fund to cut personal income taxes.

We are actually working on a piece that looks at the global trends around business taxation. What we are seeing is business tax moving almost to zero so there is still space for us to take competitive advantages. In fact, from the Atlantic provinces perspective, we are about to make the case that it would be a significant competitive advantage for us to be the first to get to zero on a business tax basis, recognizing of course that businesses do not pay tax, people pay taxes. The people who buy the goods from the businesses pay those business taxes. The people who work for those businesses pay those business taxes so we need to recognize those things.

The other thing is not necessarily a tax, although Puritans will tell you that any user fee is still a tax, the rents that we charge our port authorities and our airport authorities creates a significant competitive disadvantage. U.S. ports and airports generally get lots of subsidies, direct and indirect from state, local and federal governments.

Senator Oliver: Are you talking about things like landing fees?

Mr. Cirtwill: I am talking about the actual rents, for example, that the airport authority has to pay on the land. Some of the limitations that we place on our port authorities around the use of their property in terms of securing it against debt and being allowed to translate it into cash flow, many of those things are hidden costs that the federal government is actually charging these organizations money as opposed to, at the very least, leaving that money in their hands for reinvestment. Many of the fees that are targeted at airport authorities and port authorities would help the overall objective and goals. Mary Brooks, Mike Ircha and others would be more than capable of itemizing those items for you.

Senator Oliver: Do you have a comment on capital gains taxes?

Mr. Cirtwill: I think we are going in the right direction concerning the capital gains taxes. We recognize that in fact they are a tax on reinvestment and in an environment where we have a high dollar and an opportunity to use that high dollar to our advantage to buy technology elsewhere and reinvest in our industries at a reduced cost, we should be continue along the road we are on.

The Chair: Thank you very much for your presence here this morning and we would appreciate any documents you can forward to us.

Senator Mercer: Madam Chair, if I could take a moment to introduce someone who has just joined us in the audience. Sheila Fougere is a City Councillor from the City of Halifax, has expressed some interest in our proceedings, and has just stopped by to say hello. Sheila, thanks and welcome.

The Chair: We appreciate your presence here. Thank you.

David Cranston, President/Business Agent, ILA Local 269, International Longshoremen's Association Council of Unions: Good morning, Madam Chair and members of the committee. I have distributed an outline of my presentation but you will see it is the low-tech version of presentation, so as I read along please do not be too dismayed if I do not follow the script. We appreciate very much this kind invitation that has been offered to us to speak here this morning. As you can appreciate, we are not used to meeting with such distinguished individuals. We are used to running ganshi grains and fixing tires and stuff, so if we are nervous, do not —

Senator Mercer: I would be nervous doing your job.

Mr. Cranston: The ILA Council of Unions represents about 400 members in the Port of Halifax and consists of three locals, Local 269, Local 1341 Checkers and Local 1825, the gear maintenance. We also represent approximately 100 non-union casual workers.

Today we hope to address you on two things, competitiveness and productivity enhancement. For some background, we have no regular work hours here in Halifax. There is no guaranteed wages like some employees and other longshoremen and we are practically on-call or we are on-call 24 hours a day, 365 days a year to respond to the shippers' and vessels needs. Most of the members work at either container terminal, Halterm or Ceres. The container work now occupies 95 per cent of the work of the ILA in the Port of Halifax.

Our members' wages generate approximately $35 million into the economy of Nova Scotia so we are significant in that respect. Our livelihood and security of our families is virtually wholly dependent upon containerization. As you probably know, over the past 40 years containers have become the principal means of transportation of shipping goods on the East Coast and throughout the world.

In terms of capacity, our terminals have plenty of excess capacity. We have never had a time when both piers were filled to capacity, as a matter of fact. In the last two years container traffic has declined and in 2008 the best expectations we have is to remain just where we are and keep what we have. This extra capacity is a matter of concern.

Yesterday, you heard of the proposal to build a new terminal in Melford. Despite assurances from the Melford proponents, you know, they say they are only after incremental new traffic, we just feel inevitably the terminal will attempt to lower work from the Port of Halifax. It is important that we are not perceived as people who are begrudging other Nova Scotians an opportunity for good jobs but it is important that the jobs that are created are new jobs and not jobs that are at the expense of the Port of Halifax. It would be hard to put into perspective what the cost would be to lose a customer to Halifax, one of our big customers such as ZIM, ACL or Hapag-Lloyd. I mean it is having a devastating impact right now and we certainly hope that policies that are developed at the provincial or federal level will take that into consideration and that any new developments would not be at the expense of the Port of Halifax.

As you have seen, there have been some substantial capital investments in Halifax. Macquarie Group has purchased Halterm for $175 million. There have been many millions poured into the Ceres terminal as far as increasing the rail capacity, building a new truck facility and the new Post-Panamax cranes are state-of-the art equipment. We are hoping that these investments are not left underutilized. We hope this committee will analyze that impact.

The loss of work also has an impact of losing the skilled workers. There is a shortage of skilled workers both in Nova Scotia and generally in Canada so it is important not to lose the skilled people to loss of work.

In addition, we are concerned about keeping ourselves internationally competitive. We compete against New York, Charleston, Savannah and Miami. It is a daily struggle. We recognize the work that the Halifax Port Authority and the terminal operators are doing. They are working diligently to promote the port around the world. They travel around the world. We have just heard of a trip in two weeks to the Indian subcontinent. I mean they are working hard. It is just unfortunate that the success has not been overwhelming as yet, you know, with these declines but we do, however, applaud their efforts. We will do what we can.

We have made a standing offer to assist the Port Authority in the solicitation. We are willing to help in any way we can. Our track record for providing stable labour relations is second to none. We have been strike-free for over 30 years. We think one of the best ways to ensure our port is competitive is through a more productive and efficient workforce. We have long suggested that our port in cooperation with the ILA should develop more sophisticated and advanced training programs. Some of these programs would include a simulated crane operation. It would be a dedicated training facility, not just about crane operators, but also about electricians and checkers. It is about everybody having a facility.

Right now what we are training people on-site and it is taking place right as we are working so you have the people who are in the system. There is going to be some sort of safety factor and plus it is the productivity. You are losing productivity in those respects. So far, it has been talk but we have yet to get any meat out of it, so to speak. We have the skilled workers. We have been in the container business since 1969. We have the people in place but we need to be more skilled to be productive. I mean with the new innovations, the new cranes, the new equipment, we need to be continually updated and retrained. Speed and safety are key factors. The Port of Halifax, like all the other ports, is measured and compared on the number of containers we move per hour. That is the first priority.

The terminal needs the best-skilled operators to assist in providing the service that they are trying to give the shippers so, as you can see from the ILA's perspective, our members and our industry, we feel it is at a crossroads. Our work is jeopardized through not only our traditional competitors but by potential new, significant competitors in a very small marketplace. Our member skills need to be improved so that we can be more productive and operate more safely.

If this committee were interested in improving container traffic in Canada and in the Port of Halifax in particular, we would hope that you would recognize that that ILA is a major player, an important cog in the wheel of success of the Port of Halifax. No development or change can occur here that does not take into account our members who actually make the port work. We are the rubber that meets the road. We care desperately about the Port of Halifax and its future. We ask that in your deliberations you do not forget the many men and women who actually do all the work and move all the boxes from rails to ships, ships to rails.

Thank you for allowing us this opportunity and we will be pleased to answer any questions.

The Chair: Do you have regular meetings with the Halifax Port Authority?

Mr. Cranston: No, not really. It is more of a cordial relationship. If the Port of Halifax is at this tier, we are pretty well on the periphery. I think the Port of Halifax made an analogy that we are invited into their tent. Well we are invited into the tent but we do not help put the tent up or anything like that. We have a cordial relationship; there is no animosity.

The Chair: Have you told the port authority what you have told us today?

Mr. Cranston: We have mentioned it. We have written a letter. We have indicated that we are willing to do what we can. Perhaps, what we bring they do not feel helps with their mandate. Like I say, it is not confrontational; we talk and we meet.

The Chair: But there are no results?

Mr. Cranston: We are not part of the upper level. We do not have representation on the board; we are on the periphery.

The Chair: The Melford people told us yesterday that with a new port they would use state-of-the-art equipment and so on. Are you afraid that this would mean your people would have to work 24-7, what people call ``new reality''?

Mr. Cranston: Well, we work 24-7 now. We have been doing that since the container ships started coming so it would be no different for us. We are there.

The Chair: And you are afraid there will be a shortage of people to work at a new port if one day there is one?

Mr. Cranston: We are more concerned that any more loss of traffic would cause us to lose some of our skilled workers. People have opportunities; they can move on and once people leave, it is difficult to bring them back.

The Chair: When you contract with the employer are there any terms that will be a priority for you to amend.

Mr. Cranston: I cannot think of anything that is specific.

The Chair: That is what you just told us. Would the improvements that you mentioned in your presentation be part of the terms of discussion?

Mr. Cranston: Oh, as far as in our collective bargaining?

The Chair: Yes.

Mr. Cranston: Yes, for sure. We are committed. To have the reputation of being strike-free for so long indicates that we have worked with the employers. Halifax has always been a port of convenience even before containerization. As soon as the St. Lawrence River froze, work came and as soon as it thawed, it went up the river so we have learned over the years that we have to work with people to keep it viable.

The Chair: You have not mentioned anything about the ship emissions and the health of your workers. I read something about the Port of Oakland testing a cold ironing system. Have you ever talked about that at your own union?

Mr. Cranston: Although it is not in the presentation, it is a concern. We have had crane operators take themselves off the cranes because of this emissions. At Fairview Cove, they have installed some sort of air purification system and it seems to be working.

I am a crane operator and I can relate to the experience with the emissions. They can be quite harmful depending on the direction of the wind.

Senator Oliver: I am interested in hearing more about training to become more productive and efficient. You referred to a simulator and I have had the opportunity to sit in the cockpit of a simulator. It looks just like the cockpit of a plane and the student can learn how to fly and deal with the many problems that may arise while in the air. Please tell the committee about the type of simulator that you would like to have.

Mr. Cranston: That is exactly what we are talking about. In the Port of Montreal and in New York they have these simulators. An operator can sit inside one of these simulators and simulate all different situations including wind and rain.

Senator Oliver: Is it a miniature?

Mr. Cranston: It is a mock-up of the cab with all the controls.

Senator Oliver: Oh, now I see.

Mr. Cranston: I do not know if you got up into the cranes during your tour. A crane simulator is essentially the same as the plane simulator. With both simulators, certain variables can be put into the computer and used to train the students.

Senator Oliver: Do you have any idea how much a simulator would cost?

Mr. Cranston: Not really, no. I would expect it would not come cheap.

Senator Oliver: You say you have seen them in Montreal or New York.

Mr. Cranston: I personally have not seen them but the international vice president of the ILA has seen them. He has operated one of them and relayed that information to us.

Senator Oliver: As an educational tool, they can make it move as though there is a heavy wind. The simulator can teach the student how to work under those conditions.

Mr. Cranston: Yes, exactly. Other variables sometimes do not come into play when it comes to unloading container ships. You see container ships that have mounds of containers on them. In Halifax, you do not take them all off and you do not put them all back on. We have to pick out certain section, so, you are picking out little sections and you are working up over and working down into blind spots so those are the type of things that you could simulate, too, instead of just doing it and learning on the fly. It would be nice to be able to have the ability to do stuff like that.

Senator Oliver: Here you are removing a container and putting it on a train or a track and you are not really stacking them. In Hong Kong and Shanghai we are told that they can stack one, two, three, four, five, six, seven and right up to ten high sometimes which means there would be more stresses and strains on your crane and there would be more skills required to stack them like that.

Mr. Cranston: We do stack them now.

Senator Oliver: How high?

Mr. Cranston: We stack them four and five high. The trains coming in have both import cargo going out and export cargo that we are receiving, so it is a flow. Trains push in trains full of containers and we discharge those containers and put them in sections. They wait for a ship that will take them overseas. When those cars are empty and then when those cars are empty, we will take containers that have been taken off another vessel, load them on those cars and shipping them back out full. The ideal is in full and out full as far as the rail is concerned. We do staking at the terminals.

Senator Oliver: That takes special skills as well.

Mr. Cranston: Yes. I mean working in between the containers

Senator Oliver: And that would be part of the training in the simulator?

Mr. Cranston: Hopefully, yes.

Senator Mercer: I have met with members of the ILA before and this issue of simulator has come up at that time. It seems to be that as we prepare for maximizing the capacity of Halifax and if Melford comes on it would be wise for governments to plan for that. It is probably the right time to get into the simulator business, to have a simulator somewhere in Atlantic Canada and the Port of Halifax obviously makes logical sense.

Have you ever approached the provincial government through its job training programs to suggest providing a simulator, which would not only increase the capacity of your current workforce but also prepare other workers?

Now if I understand correctly, your workforce is like many other workforces across the country; it is aging so you will have some people who will be retiring soon. You would want to bring in new people that have good training. Have you spoken to the provincial government about this?

Mr. Cranston: Not to my knowledge. My tenure as the president has not been that long but in my knowledge we have not yet. Most of the conversations have been to the Halifax Port Authority.

As far as the aging, we are actually not experiencing that problem. A blip occurred in 1965 when union people were taken in and then it was all the way to 1980. Our average age is between 55 years and 57 years.

Senator Mercer: The presentation we heard from you is radically different from the presentation we heard from your brothers on the West Coast. You are supportive and are part of the team of fixing any problems here in Halifax. The people on the West Coast had a much more adversarial thing going on. I want to capitalize on that. You say you made a standing offer to assist the Halifax Port Authority in finding the solution and in the solicitation of new business. Have they not involved you in that? Have senior union people not been taken on some of their excursions to Asia and India?

Mr. Cranston: No, we are not in the first tier.

Senator Mercer: I have lived here most of my life and I do not remember too many labour disruptions on the waterfront but being strike-free for over 30 years is a good marketing tool.

I think the Port of Halifax is missing a great opportunity to take representatives of the ILA along to show that it has a great, well-trained workforce that is anxious for new business. Other ports cannot say that. We can talk about the nice cranes we have and all the space and the deep water and others can try to compete with that but it is very difficult to compete with a well-trained and reliable workforce so I think you should continue to push that and I think we should continue to push also.

John W. Campbell, President, I.L.A. Local 1825, International Longshoremen's Association Council of Unions: I had an opportunity a couple years ago to go to Vancouver to see TSI's operation. TSI does an excellent job of marketing and training and everything that the port and myself wish we had in the Port of Halifax. We have all kinds of new equipment coming online, computerized and their training is next to nil. You learn on the job. You learn as things break, you know. You learn how to fix them on the job and that is not really the way to do it. TSI's model of how they market and how they train is second to none.

Senator Mercer: We were at the Ceres terminal yesterday and had a look at the new cranes, which are sophisticated pieces of equipment.

Mr. Campbell: Yes, our industrial electricians get a couple of day's new training when a new piece of equipment comes in. That is not adequate but you have to learn as you go, which is not good for productivity.

Senator Mercer: Absolutely and I think that identifies a problem that is not apparent on the surface. Safety is always a factor and the chair brought up the environmental aspect but it seems to me that the safety record of the workforce in Halifax has been very good. Am I right in saying that?

Mr. Cranston: Yes, it has been; we follow the regulations set out in the Canada Labour Code. We do the best we can. Everybody works safely. It is a fact, yes.

Senator Mercer: My last question is related to the Melford terminal. Are you concerned that if Melford proceeds that a number of your Halifax employees will move to that location to be closer to their ancestral homes? I do not want to discuss the competition that this terminal might bring but wonder about the movement of employees to family homes in the Cape Breton, Northern Nova Scotia, New Glasgow, Antigonish areas.

Mr. Cranston: It could be a possibility.

Senator Mercer: Have you had discussions with Melford? Have they bothered to talk to you about your ability to provide a trained workforce for them?

Mr. Cranston: With the locals in Halifax, no to my knowledge. I mean the international is down there. There is an ILA local down there in Mulgrave so working with them. There has been dialog between the Melford people and the ILA but to my knowledge not with our locals.

Mr. Campbell: The council met with their consultant and he tried to assure us that they were not after the Halifax cargo. We did meet with them.

Senator Adams: You say you have 400 union members work here in Halifax and 100 casual non-union employees.

Mr. Cranston: That is correct.

Senator Adams: Anyway, how does this work? Does the union employee go to a different job each time? Does the Halifax Authority hire them if they need them?

Mr. Cranston: No, they workers do the same jobs. They are not advanced up to the skill level as the regular union men. All the work that the employers have developed they are like a back-up pool so if there are shortages there will be skilled, or oriented people at least, that can step in and do some of the jobs. You notice them driving the yard tractors around, the shuttle, up to that level of job so we do have people in our local that have the ability to do that when there are shortages. John I do not think has any casual workers but the checkers have a preferred list that they draw upon when there are availability problems.

Senator Adams: Is it common for a union employee when he or she retires, to be replaced by a casual non-union employee? In the end, the non-union employee does not finish with retirement income. Does that bother you or do they work it out?

Mr. Cranston: Longshoremen are not people that come in and then suddenly say, ``Well this is not for me.'' Most guys and girls start working as a casual, non-union employees and work their way up. Although there is not a system that says one union employee goes, a non-union goes in, as the needs arise more union members are taken in from these back-up lists.

Senator Adams: Your friend mentioned electricians. I used to be an electrician. I am familiar with the trade and I worry that you said that the electrician only takes training of a few minutes. I am also aware of the voltage differences between Europe and North American. How does the union control the purchases of the equipment that the employees use?

Whey you buy that equipment are you buying it from Europe. One time we had a cannery in Rock Isle and we bought a smoke machine for the char. The machine was made in London England and shipped to Montreal. We had to have an electrician come to Montreal to hook it up. When we bought one in Rankin Inlet the man at the fish plant said, ``Willie are you able to hook-up that thing?'' ``Oh, yeah, I've got no problem to hook that up,'' and as you know, different voltage and stuff like that.

Mr. Campbell: Our local consists of all the requirements of being hired, as you must be a tradesperson. We have industrial electricians and heavy-duty mechanics, industrial mechanics and welders and I mean they come very highly qualified to the jobsite. But, when you throw in things changing so fast today and everything is computerized and very, very technical, we are just not getting the training that I feel is needed to keep productivity up and everything else. It is a complicated world out there when it comes to that kind of stuff.

Senator Adams: Well we have been up in the Arctic in the community, the Caterpillar people there and looking at power plants through the satellite. You can tell the guy in Rankin and say, ``Look it is time to change the oil'' you know?

Mr. Campbell: Even our yard tractors now are all computerized and you hook a laptop up to them and we learn it ourselves with very little training.

Senator Oliver: Do you have any difficulty in recruiting new skilled employees?

Mr. Cranston: No, most people come in at an entry level and then are trained up to this yard tractor. I do not know if you are familiar with the machine I am talking about. It is like a tractor with a trailer on it. That is the entry-level training for each employee and then the rest of it flows through so the training goes from one piece of equipment to another piece of equipment and the qualifications from that equipment move you onto the next piece. A progression takes place.

Senator Oliver: And in terms of your hiring, do you keep in mind the four government target groups of hiring Aboriginal people, hiring people who are disabled, hiring women and hiring visible minorities? Is that part of your employment scheme?

Mr. Cranston: Yes, it is. We are in compliance.

Mr. Campbell: And in the maintenance end of it, as far as getting skilled people it is not very difficult because in this area the container terminals are the top of the weigh scale for tradesmen so they do not have a problem filing those positions. As far as employment equity goes, there are not any women with the needed skills that we can hire.

Senator Oliver: There are no women available to hire?

Mr. Campbell: Not as heavy-duty mechanics and occupations like that. They are just not there. We have the studies done and we have the paperwork.

Senator Tkachuk: They are all in medical and law schools.

Mr. Campbell: I support employment equity. Sometimes I do not think there is enough advertising done by the employer but I do not know what I can do about that.

The Chair: Thank you very much for your presentation and the answers you have given to our questions. I do not think that this presentation replaces a good meeting with the Halifax Port Authority but I hope they will read whatever they get from our committee and call you for a meeting.

James Frost, Executive Director, Halifax Gateway Council: Thank you very much for inviting us and I have invited one of our directors, Mr. Hamblin, to sit with me. We will do our best to answer any questions that you have at the end of our presentation. It is just a short presentation. I could do the long one if you want but this is the short version. I am going to talk about the Halifax Gateway Council and some of the things we have been doing over the last three years.

Yesterday, I think you heard a little bit about the Halifax Gateway Council from Stephen Dempsey. It is a public- private initiative to develop the transportation sector in the Halifax Region. We have two kinds of members, voting members and resource members. We have five voting members who include the Halifax Port Authority, the Halifax International Airport Authority, CN Rail, Armour Transportation and Clarke IT Solutions.

We are developing a membership strategy to try to attract more private sector members and I could talk about that a little bit later. The support members or resource members are a who's who of federal, provincial and municipal economic development agencies.

The voting members provide the Halifax Gateway Council with the operating budget and the support members provide support but also contribute to some of the studies that we have been doing. Typically, the voting members will provide about half the funds for a study and the support members will provide the other half in large chunks, small chunks, whatever it takes to get it done. We have so many people around the table discussing important matters and this is one of the greatest singular achievements since the inception of the Halifax Gateway Council in 2004. One of the interesting things is everybody wants to participate in the same studies. They want to be on steering committees. We have achieved a lot of, I guess, community involvement in this whole initiative.

The historian in me cannot resist mentioning an old concept that has gained new primacy in the last number of years. It actually goes back to none other than Joe Howe in the 1850s. At that time, he envisioned a North American gateway at Halifax that would connect with Saint John, New Brunswick, Portland, Maine, Boston and New York. It would join the two closest points in Europe and North America with a fast line of steamships. At various times Halifax has marketed itself as the ``open gateway'' or the ``Atlantic gateway'' so it is not a completely new concept. What is new is the number and variety of people who are involved in the initiative. In terms of the historical background, Halifax has been a global container gateway since 1969.

I think you toured one or both container facilities yesterday so you know a little bit about Halterm. The port now handles about 15 per cent of Canada's containers of which about 75 per cent go to inland markets in Ontario, Quebec and the U.S. It is a true gateway. The market here is so small that it would not survive as a container port unless it was a gateway.

The Halifax Gateway Council is a multi-modal initiative and the airport is a big player. I do not know if you are aware but the airport is the eighth biggest airport in the thirteenth largest metropolitan area. It is also an award- winning airport, one of the best of its size in the world. The Halifax Gateway Council initiative started in late 2004 so it is almost three years old now and I was brought on board in March of 2005.

There has been a lot of private sector investment in this gateway. I think you maybe heard a little bit about this yesterday but the Macquarie purchase of Halterm last year; the Ceres purchase of two Post-Panamax cranes this year; the opening of a Consolidated Fastfrate transload facility in September; and Armour Transportation Systems is doing something next door to this Fastfrate facility.

You heard about the deepening projects at both terminals, the new truck gates at and the lengthening of the rail tracks at Ceres. These are all very healthy developments.

In terms of the airport, the Halifax Stanfield International Airport has built a new U.S. pre-clearance facility, a new parking garage, and has issued tenders for a hotel development. The construction of the U.S. pre-clearance facility a year or so ago gives us four or five new direct services to markets in the United States. It is a real achievement and I think it has probably exceeded expectations but we can now fly direct to three airports in New York. We can fly to Chicago, Detroit, Atlanta, Washington as well as other Southern destinations. This is a major, major achievement in terms of regional connectivity and being able to do business with, to and from this region. The total private sector investment is about $475 million in the last five years.

When the Halifax Gateway Council was established it set about to do two major projects. One was a strategic plan and the other was to assess the economic impact of the gateway. This Halifax Gateway Council was modeled after the Greater Vancouver Gateway Council, we had the same consultants do the studies and they have been advising us; we have a similar methodology.

The Halifax Gateway Council generates close to 12,000 direct jobs with direct wages of close to $500 million. Why do we want to invest? Why are we interested in this sector? The average wages are 32 per cent higher than the Nova Scotia average. These are very good jobs. These are not bottom-of-the-barrel jobs and there are management jobs. There are blue-collar jobs but they are very good jobs so the port generates close to 5,000 jobs, the airport close to 6,000. It may surprise you but the rail service generates close to 500 jobs and truckers close to 600 jobs for almost 12,000 jobs. In terms of multipliers, this number is close to 1 in 10 and Halifax Regional Municipality with over 1.5 billion in total GDP.

Our strategic plan project looks out from 2005 to 2015. We set some targets to grow container traffic from about 550,000 million TEUs to 1.4 million TEUs; air passengers from 3.2 million to 5.4 million. Air passengers rose to 3.4 million, a new record last year. Air cargo, I am still waiting on the figures but we are going to try to increase that quite substantially, almost doubling the number. And cruise passengers, I can tell you a little bit about an initiative we have to attract cruise home porting to this port; the number of passengers is just shy of 200,000 last year.

We want to increase the regional economic impact by over 50 per cent by 2015.

In terms of key issues, they can be summarized by market development — actually the consultants out West thought that government policy was going to be number one, but we said, ``No, no, no. We want to grow this.'' There is a big difference between this gateway and the Western gateway. Out there, it is all about congestion and infrastructure and here it is about building capacity and growing the market.

We have identified a few infrastructure tweaks. I think you heard yesterday from the partnership about some of the economic and industrial development initiatives around the transload initiative and some government policy tweaks, mainly related to air policy. Many of those initiatives are underway with negotiations with the EU and other potential open skies partners.

Our priority project for this year is building the transload sector. We did a study last year, had a trade mission to Savannah and Charleston, and have put a business case together to try to grow this sector. It is very important in terms of making Halifax bigger than the population and the market size would dictate. It is a strategy that is unique to Halifax. We feel this is a sector with quite a lot of potential.

I do not know if you learned more than you wanted to yesterday about transload but I can speak more specifically about that if you like. We also did an air cargo market study and business case and there is follow-up going on now. One finding is that about 60 per cent of our seafood is trucked out of this region to places like Boston and Montreal. That seafood is airlifted out of those airports instead of here. Seafood is highly perishable and the more it is moved the more susceptible it is to damage. It retains its value and the producer benefits the less it is moved. This is important. One of the unique characteristics of this market is that unlike virtually every other air cargo market in North America, it has many high-paying exports. We just do not have a very large import market. It is very different.

We have identified some research needs around the supply chain, around identifying cargoes to target. We have identified some things we want to do in terms of marketing. I think you heard a little bit about that yesterday.

The Halifax Gateway Council has so far operated under the radar screen so it is going to increase its profile. We need to do some things in terms of inter-governmental affairs. However, the communication is really quite good and at the last meeting on membership development, we established the priority of attracting more private sector members. We will be paying more attention to that in the coming months.

John Hamblin, Member of the Board of Directors, Halifax Gateway Council, and President, Clarke IT Solutions: Thank you for this opportunity. I am one of the private sector members of the committee. I am president of a company called Clarke IT Solutions and among other things, we provide the information technology services for Halterm; a major trucking company, Clarke Transportation; and also for Armco Capital, which is one of the largest developers in the Halifax and Nova Scotia region.

I moved to Halifax about two years ago and heard of the activities of the Halifax Gateway Council. I decided at that time to join, specifically because the companies I am involved in have an interest in container facilities, expansion of the transload facilities and trucking. As Mr. Frost mentioned, in the coming year it is the intention of the council to involve the private sector more. It has been a great opportunity for me and I feel, as a newcomer to Nova Scotia, that Halifax is strategically-placed and can provide container handling and other transportation requirements for a good portion of North America. The main reason for the Halifax Gateway Council is to ensure that we expand the capabilities here and increase the share of volume within our port and our area.

The Chair: In your document, Building the Halifax Gateway: A New Vision for the Future, you mention four issues that must be addressed to realize the gateway's vision, and one of them is government policy. You mention government policy was identified as a key area that needs to be addressed to expand business to the gateway. Can you expand on that area? What do you need from the government?

Mr. Frost: In most respects, issues identified in our strategic plan that relate to air policy are being taken care of in present negotiations and the Open Skies initiatives. On the marine side there are some things. I guess we are waiting for the new Canada Marine Act to pass. There are other things. To encourage short sea shipping, there may be some aspects of the Coasting Trade Act or the policy regarding the duty on imported vessels.

There may be things the government can look at. Transport Canada has done a wonderful job promoting the concept of short sea shipping, and they have held workshops across the country. There is all kinds of interest. There is interest on the part of public sector people and on the part of private sector people that want to invest but significant obstacles have been identified and they are working hard at overcoming them but that is what I am thinking about.

The Chair: Another issue is market development. As you mentioned, marketing in business development activities will play a critical role in the continued development of the Halifax Gateway.

Mr. Frost: Yes.

The Chair: Do you feel there is enough market development?

Mr. Frost: No, we will come forward with initiatives to leverage the existing funding that our members provide to enhance marketing development, in partnership with both the province and the federal government, and I think both governments have expressed their openness to that kind of approach. The Halifax Gateway Council and the Port of Halifax have acknowledged they cannot do it alone and there are areas where we can leverage everyone's efforts and resources to that effect.

Senator Oliver: I have the impression that there is a proliferation of gateway organizations and yours is yet another organization, the Halifax Gateway Council. A Memorandum of Understanding, MOU, has been signed by the federal government and the four provinces, and they have set up a committee to develop a strategy. You say that your main objective is to develop a strategic plan. They are also developing a strategic plan so are you on the council? Have you been consulted? Are you a stakeholder? What is your involvement and how can you avoid duplication?

Mr. Frost: That is a good question. The Halifax Gateway Council is one of three official gateway councils across the country. There is the Greater Vancouver Gateway Council, the Southern Ontario Gateway Council and the Halifax Gateway Council. There are other gateway initiatives in the Pacific region, the Great Lakes-St. Lawrence and the Atlantic.

Our gateway council was established before any of the other regional gateway initiatives were established and it has its own membership. We have our own strategic plan and we are moving forward with that plan. All the while, we are working in concert with the other folks, though. If you read our plan and you read the Atlantic Gateway Business Case they are similar and so are the studies that have been done by the Nova Scotia government.

Senator Oliver: I am worried about duplication, wasting private and public money and people doing the same thing a thousand times.

Mr. Frost: Yes.

Senator Oliver: I do not see a lot of cooperation, and the waste of money begins to worry me. How large is your organization? What is your budget? How many employees do you have?

Mr. Frost: How large is our organization? It has a half an employee and it has those number of directors. It meets four times a year but I think it will ramp up. The budget is less than $100,000 a year. We leverage the resources of the resource members to prepare the strategic plan, the economic impact study, the transload study and the air cargo study. I have been struck by the amount of goodwill around this initiative and the fact that people are on the same page. They are pushing ahead in the same direction. However, the difference between the gateway on this coast and the one on the West Coast is that, on the West Coast, they are dealing with one province and Alberta. Alberta is a big part of the Pacific Gateway because a lot of Alberta commodities move through the Pacific Gateway. In this region we have four provinces and we have more great ports per square inch than you can count but this gateway council is focused on Halifax.

Senator Oliver: My final comment is that I am interested in entrepreneurialism and I am interested in things that make profits. As Senator Tkachuk pointed out to a number of witnesses, the rate of revenue growth in Halifax compared to Savannah and other great container ports has been flat, to be modest, but we have gone down.

Mr. Frost: Yes.

Senator Oliver: Where is the future and where will the business impetus come from to make this gateway viable? Where will it sugar off and suddenly become profitable and interesting? What is lacking? Will the fact that we are now looking at three container ports in Nova Scotia — Sydney, Melford and Halifax — help this dilemma?

Mr. Frost: In terms of what will give some lift to this gateway, if you read again some of the studies done in the last two years, ports in this region are pinning their hopes on the Asia-Suez boom and the fact that there is, I have lost count, over 300 vessels that cannot squeeze through the Panama Canal.

Senator Oliver: However, they are not coming here. They are going to Savannah and everywhere else.

Mr. Frost: They are not coming here yet. Most of them are yet to be delivered. They will be delivered between now and 2011. What typically happens with these large vessels is they are deployed on a route from Asia to Europe, then Asia to the trans-Pacific and then they tend to cascade down to where they serve the ports on the North Atlantic.

Savannah has benefited from congestion on the West Coast but also, about 20 years ago, they built a huge distribution park in anticipation of the congestion. It was good luck, good planning or a bit of both but they built a huge business park and it attracted distribution centers. They have over 20 major distribution centers in that port so they have made themselves a must-call port. However, they have benefitted from the revival of all-water Panama services, and those services tend to come as far north as New York and then back down through the Panama.

The future for the Atlantic Canada region is trans-Atlantic, Mediterranean, and especially the shift in manufacturing from China to Vietnam and Malaysia. Potentially, we are also seeing the shift to India where the ports in this region have an absolute advantage in terms of sailing time and sailing distance. The development will not happen instantaneously and it will take a lot of work by a lot of people to see this happen.

Senator Oliver: Anyway, I have some concerns. Thank you.

Senator Cowan: Following up on Senator Oliver's points, I was an early proponent of the Halifax Gateway Council, and I know seed money was provided by the government to start the project. However, I have the same concern about the proliferation of organizations that promote similar but not absolutely identical aims. I think we all do. I worry that we are not as focused as we should be to achieve the objectives that we generally share. We may be spreading ourselves too thin by promoting too many competing suppliers in the broadest sense, and we will miss the boat or the boat will pass us by.

Mr. Frost: The boat floats by.

Senator Cowan: I want to pursue the relationship between the council and your partners in developing the initiatives and planning studies that are underway pursuant to the Atlantic Gateway strategy. I think they hope to produce a strategy within 24 months. Is that correct?

Mr. Frost: As far as I know that strategy is done, or will follow from the Atlantic Gateway Business Case.

Senator Cowan: Yes, I think they told us yesterday that they were developing a strategy. I am not sure when the 24 months began; perhaps last fall, or earlier.

Mr. Frost: I do not know.

Senator Mercer: It started in October, did it not?

Senator Cowan: It was announced in October but the group has been meeting since May 2006, I think. That governmental organization is composed of representatives of the federal and provincial government. It has been meeting with stakeholders but it is not clear to me, or I think many of us, that the necessary coordination and openness is in that process to ensure that we take advantage of the opportunities as quickly as we can. It is a rambling way of expressing a concern.

Mr. Frost: I share that concern but the gateway council, with its limited resources, is ploughing forward with its own agenda, especially the transload initiative. I think we are way out in front there, and we cannot be all things to all people. It behoves us to focus on what we can do with the resources we have. We are plugged into that other process. I was invited to a federal-provincial meeting three weeks ago where they laid the groundwork for this other initiative. I agree: We do not have seven years because by then, the Panama Canal will be expanded. These opportunities tend to be fleeting and they must be well-organized to take advantage of them. We are trying to participate, and we have those stakeholders at the table. Our initiative is Halifax-centric. The other ones are not; they are a more regional approach.

Senator Cowan: If you look at the West Coast, British Columbia is a huge- capacity province. A massive amount of money is required to build the infrastructure and all that sort of thing. Here there is some infrastructure. The Melford Group says it does not want any government money, and it has all the money it needs to do what it wants to do. Elsewhere, it seems that there are some relatively minor infrastructure requirements and yet we have not made that leap on the container side. The airport is a different but related issue.

Mr. Frost: Yes.

Senator Cowan: I agree with your comments about the difficulties in growing the cargo traffic at the airport because of the imbalance.

Mr. Frost: Yes.

Senator Cowan: It is not simple but everybody agrees there is traffic out there and we have not been able to attract it. What are we doing wrong, and what can we do quickly to attract traffic before it becomes locked in somewhere else?

Mr. Frost: I am not sure we have done anything wrong. The recent reductions in port traffic are due to corporate decisions made in Denmark and Hamburg, and consolidation within the industry. In some respects, the decisions are out of this area's control. We did not lose as much as we could but we have not gained either. That is all the more reason to put our best foot forward, develop a good plan and execute on that plan.

The Greater Vancouver Gateway Council was established around 1992. They worked away on an agenda for 12 or 14 years. They laid out a course of action. They identified, they told me, A, B, C and D list of projects, major priority items so that when the B.C. government became involved, they knew exactly what they wanted to do. Then, when the federal government became involved in that Pacific strategy, the council had done all their homework over the course of 10 or 12 years. We are at the beginning of this process. We are not at the beginning of being involved in the container industry, as you know. We have been involved for 40 years. The big difference now is that so many more people are engaged other than port interests. In the past, the Port Authority, perhaps the old Port Commission and the terminal upgraders worked together with CN. A lot more stakeholders are involved this time around and I think that involvement is healthy.

Senator Mercer: I share the concern of Senator Oliver and Senator Cowan regarding the number of gateway groups. I also appreciate the little history lesson you gave us regarding the Pacific Gateway. However, I guess I am like all Haligonians or everybody else from Nova Scotia in that we are tired of always being a bridesmaid and never being a bride. The big prize keeps sailing across the ocean in front of us, and we cannot seem to attract this traffic. One thing I will say about your presentation and your organization: With a budget of less than $100,000, you have given us more material than other organizations whose budgets are significantly higher. I will not name those other organizations.

Mr. Frost: I should have brought my 50- or 60-page presentation.

Senator Mercer: You can fill in the blanks. However, it seems to me that we need to bring this project together. Yes, it took 12 or 14 years for the Vancouver gateway people to become the Pacific Gateway people. Then, for a time we had a minister responsible for Asia-Pacific, a Secretary of State in a previous government, and it was abolished. The cabinet position ended again with another previous government. It seems to me that by having a Secretary of State for Asia-Pacific, somebody came to the cabinet table weekly as the champion for the Pacific Gateway. Every time there was a discussion about anything, he — it happened to be a man all the time, if I recall correctly — could say, this is important for the Pacific Gateway. He could always put everything in the context of the Asia-Pacific traffic. We do not have that position and we do not seem to have a champion either. I am not being critical politically of the three ministers from Atlantic Canada but they all have other large responsibilities. Am I correct in saying there does not seem to be that champion, that Captain Atlantic, who leads the charge for us?

Mr. Frost: My understanding is that Peter MacKay has —

Senator Mercer: He is the minister. I am not being critical of Peter MacKay.

Mr. Frost: Through his responsibilities for the Atlantic Canada Opportunities Agency, ACOA, he is the champion of the Atlantic Gateway.

Senator Mercer: I am trying not to be political in criticizing Peter MacKay but he is the Minister of Foreign Affairs, the Minister of ACOA and the regional minister for two provinces, P.E.I. and Nova Scotia. He has a heavy plate.

Senator Oliver: He is a talented guy.

Senator Mercer: I say he has a full plate. I will not go that far, Senator Oliver. I think we need a minister, or someone, not necessarily a politician, who can champion the Atlantic Gateway and can bring these things together. Is there any attempt by anybody to bring all these little pieces together?

Mr. Frost: My understanding is that he is engaged and interested in the Atlantic Gateway file. He took a lot of interest in the Atlantic Gateway Business Case, as well as putting together that MOU. He encouraged both those initiatives and I believe he is leading a mission to India this month.

Senator Mercer: He is going to India, I understand that, yes.

Mr. Frost: He is going with Minister Lawrence Cannon. We see that step as an incredibly positive one, and we congratulate that initiative. Assuming we can marshal more resources, bring in more members and boost our budget, I think you will see us take a higher profile and ramp things up a little.

Senator Mercer: That brings me to my next question. We have heard a number of times about the large amount of money that has been put aside for gateways but not specifically designated for the Atlantic Gateway or the Halifax Gateway. Have you thought of, or have you applied for, any of that funding that was announced in the most recent budget? As we know, the budget has a specific line for money for the Pacific Gateway.

Mr. Frost: Yes.

Senator Mercer: We do not. We apply to a pool of money. Have you applied to that pool of money?

Mr. Frost: As we understand it so far, there is no mechanism to apply for that funding so we have been giving some thought to it and we have a paper in development but how was that expressed at that meeting? The terms and conditions, Ts and Cs, are not finalized to access those funds yet. I do not think it has passed through Treasury Board yet.

Senator Mercer: It is frustrating. It was a good announcement. We all wish the budget had a line item for the Atlantic Gateway but now, even though we must apply to this pool of money, there is no mechanism to apply. Obviously, we need to pursue this matter. You identified under key issues, ``infrastructure development and funding.'' What key infrastructure items do you refer to?

Mr. Frost: We are looking at developing a distribution park or ``distripark'' of some sort, probably in the Burnside area to bring distribution and transload facilities together in one cluster. Road improvements in that area and that sort of thing might be required.

Senator Mercer: Are improvements needed on the air cargo side?

Mr. Frost: Yes, and the air cargo as well.

Senator Mercer: Senator Cowan did not take a bow as past Chairman of the Halifax International Airport Authority for all the good work.

Mr. Frost: My understanding is they are moving forward with a project. They have identified a developer and they want to move forward and do something.

Senator Mercer: Fish is one of the main products you are targeting?

Mr. Frost: Yes, fish exports, and I think with new life in offshore oil and gas, it will help in terms of the inbound cargo for the EnCana project and maybe help move cargo to Newfoundland as well.

Senator Mercer: Of the products shipped by air freight, are lobsters at the top of the list?

Mr. Frost: Yes.

Senator Mercer: Mainly to France in December?

Mr. Frost: No, it is year-round.

Senator Mercer: Year-round but December is the busy time because of the people of France and lobster at Christmas?

Mr. Frost: That is an issue of seasonality, yes.

Senator Adams: My question relates to air cargo. I live in the Arctic where there are no highways. We pay a lot of money to the airline for cargo. Sometimes we deal with people in restaurants in the South, especially for Arctic char and products like that, and we cannot compete with Boston and fish landing in there. I do not know how this works with Air Canada but we have two major airlines in Nunavut and the Northwest Territories, First Air and Canadian North. Some people in the community have a fish plant where they process 200 tonnes of turbot and Arctic char every year. They have an agreement with Boston restaurant owners and the restaurant owners do not want frozen fish. They want only fresh fish on ice. Do you ship the ice up to Baffin Island, then down to the Boston and Montreal? You have to pay by the kilogram for the ice and the fish but how does the system work with Air Canada? Sometimes we used a system called backhaul where the airlines come up North with a big load and come back empty. I was wondering in your organization how the system works. There should be more partnerships and joint ventures with some of the people up there. It is sometimes difficult to ship copper and some of the products from the North. If a company wanted to ship anything to the South, they had to start their negotiations with shippers somewhere between March and April. They had to start negotiating for one ship. Between May and June it was too late and they would have to wait until September. Those are the kinds of problems we have in the Arctic to ship freight.

Mr. Frost: I think there might be an opportunity there because I know the airport in Halifax is interested in developing links with Baffin Island. The flying distance is not that much greater than from Ottawa or Montreal, the normal places that service parts of the North. The new CEO of the Halifax International Airport Authority, I believe, was the CEO of Canadian North.

Senator Adams: Yes.

Mr. Frost: He probably knows that area and that market extremely well. I know some folks in Labrador also prepared a study, I think, this time last year looking at links with the North so there may be some follow-up we could do. I think your point is well taken if you could take advantage of backhaul opportunities. Most of what is shipped is going in, and not coming out. I think you might be onto something there.

Senator Adams: We have a system for fresh fruit, food and things like that.

Mr. Frost: Yes.

Senator Adams: And we have subsidies from the government.

Mr. Frost: Yes.

Senator Adams: Especially in the community Co-op stores and things like that. For anything they buy, the food prices are so high. A steak up there, one piece of steak, a T-bone steak, is around $16.

Senator Tkachuk: It is the same in Saskatoon.

Senator Adams: According to an agreement with other provinces, we pay no PST in Nunavut. If I go to a store and buy furniture, they automatically say, ``You do not have to pay PST.'' If I buy furniture in Ontario, and have it shipped to the community in the North, they are supposed to deduct the PST for someone living in the Arctic. We still pay GST, but we do not pay PST. That issue needs to be looked at, especially in relation to the airlines. Right now I ship sometimes from Ottawa. I pay so much a kilogram for fuel to ship it to Rankin Inlet. One shipment was over 1,000 pounds, including a 750-pound machine. It cost me $200 for shipping up there for the aircraft and fuel plus GST and PST on top of that. The freight was $800, and with the shipping charge, NAV Canada and everything on top, it came to over $1,100. Those are the kind of charges we are paying in the North.

Senator Tkachuk: I want to return to the port because we are studying containerization. I brought up the issue of the static amount of cargo, not cargo but containers, coming into the Port of Halifax. When I moved my father from his home to a seniors' apartment facility, I phoned SaskTel first and told them I was disconnecting from them and they said, ``Who are you reconnecting with?'' I said, ``I am reconnecting with Shaw.'' They said, ``We have this new seniors' program that is competitive with Shaw.'' I said, ``Yes, but my father has been a customer of SaskTel for over 60 years, as long as SaskTel has been in existence. No one ever phoned my dad and told them about the new special deal they had for seniors.''

It comes back to, the most expensive customer is the new customer, and often we do not look after our old customers, the customers that provide the bread and butter. I was looking at the numbers. However, when the port was before us they said they dropped to around 450,000, which is 1997 levels, from what I can tell. Nobody said, there is a problem and we are losing our customers, customers that have been delivering products and containers to the port here. Instead, we are talking about new emerging markets. Yes, that is true: There are new emerging markets but we should not be losing old ones. We have a trade official in India and a person in New Jersey but we have a lot of customers in Europe. Those customers are the ones we should service the heck out of because we want to keep the customers we have. We do not want to lose them because their replacement costs are so high. However, not one group has come before us and said this problem is serious. We must deal with it and we have a plan that is all-inclusive to deal with the customers that we are obviously not servicing well because we are losing them, they are going somewhere else and we did not know that they were going until it was too late. They told us they were going after the fact. They had already made their decision. I do not get it. Has your group had a meeting about this problem to discuss, ``What are we going to do? How are we going to solve this problem?'' This situation cannot continue to flatline. It has been flatlining for 10 years. Not one person has said, this problem is serious, and we have a major problem on our hands; not one group in the day and a half that we have been here.

Mr. Frost: I guess we are focused on the future but the lines that are still here are legacy carriers. That is the best description of them. They have all been here since absolutely day one.

Senator Tkachuk: I would be kissing their ass.

Mr. Frost: We are. Atlantic Container Line, Zim and Hapag-Lloyd have all been here since the late 1960s or early 1970s. They are incredibly loyal to this port and incredibly loyal to this region. They are critical to this region as well because they provide refrigerated containers for seafood exports, blueberry exports, french fry exports and those sorts of commodities. Of the lines that have left, Maersk was here only for 20 years, since 1987. China Shipping was here only a couple of years. Maersk was immersed here. Obviously, their leaving was a big disappointment but yes, we are focused on retaining existing business and existing customers but we are moving forward with a plan. The interesting thing about the Halifax market is that it serves a myriad of markets. Vancouver it is pretty well Asia-Pacific. Asia is a big place obviously but most of their traffic is Pacific Rim. Most of the Montreal market is North Atlantic; North Europe to Montreal through to the Midwest. In the case of Halifax, only a handful of lines are not served directly from this port. The port is losing cargo in some of its traditional markets but growing cargo in some of its non-traditional markets so we must service traditional markets but especially, we must go after the new, emerging markets. I agree with you, which is why we need more than the resources that we have. We could have people on the ground all over the place but we must be focused.

Senator Tkachuk: You must focus still on the customers. If you have the customers, it is easier to focus on them because you already have a relationship with them so you need to pound the pavement and visit them, solve their problem, be competitive and make sure they do not go anywhere else. Maybe I am simplifying it. I do not know. I have been in business and I always used to teach that your present customer is your best customer.

Mr. Frost: Yes, the landscape has also changed in terms of who the customer is. It used to be we could go to XYZ Shipping Line and that was all we needed to concentrate on. Now, we need to concentrate on the shipping line, the shipper and the consignee. It is much more complicated.

Senator Tkachuk: It is big money.

Mr. Frost: The whole Savannah thing has shown that we need to concentrate. The shipper drives a lot of the port selection process.

Senator Oliver: Mr. Hamblin, do you want to respond?

Mr. Hamblin: Yes, in the same vein, since my background is primarily transportation in the systems area but historically I have worked with Clarke Transport, which is one of the larger land shipping companies in Canada, I think keeping existing customers has always been our focus. One of the focuses, although it is not obvious in the presentation of the Halifax Gateway Council, was to examine the current customers too to see what we can do to improve service for them. The only way that a port like Halifax, which is a discretionary port for the major container lines, will grow, is if we offer more facilities such as the transload distribution centers. If customers have a choice of going to Savannah, which has several acres of industrial parks and distribution centers within two or three miles of the actual port, or going to Halifax where we have a fractionalized distribution network, then they will go to Savannah. Maersk made a huge investment in Savannah, and for them to eliminate coming through Halifax was not a major decision we could do much about. It was not something that the Port of Halifax or Halterm, who I work closely with as their main company here for the container business, could do much about. The senior management of Halterm and people from Ceres and the Port of Halifax are spending a great amount of time with the current customers in Europe, which is their main market. Our real direction is two-pronged. One is to improve the facilities here so that the historical customers and clients will continue to come, and the other is to look at the emerging markets like India.

Coming from the private sector, I have a couple of other little comments. I am used to quick decision-making. The senior management of the company I work for are quick to seize opportunities. I attended the signing of the MOU and saw the lovely presentations that said there was a fund of $3.7 billion or whatever for infrastructure and gateways. Many people seem to be jumping on the gateway process. As you alluded to, there is a fractionalization of the way things are going because there is an Atlantic Gateway, and an initiative here and an initiative there. We cannot represent the world but the Halifax Gateway focuses on Nova Scotia. After the MOU was signed, and the lovely presentation, people from the federal government came and we sat down and discussed the future. As Mr. Frost alluded to, the way it was presented to us was that the funding application was not in place so it is there but we cannot access it yet. I think we need to move and do things, not that this is not a wonderful opportunity for us to present this information, but we are interested in both current customers and the future.

Senator Oliver: You said that one of the problems here is what you called the ``fractionalized distribution network.'' What do you mean by that? Then you said, to improve Halifax's chances, we need to ``improve the facilities here.'' What facilities need to be improved?

Mr. Hamblin: As Mr. Frost alluded to, the focus is changing. Maersk will not decide suddenly to bring the ships back here unless their major customers, the shippers, want to come here. The facilities I am looking at are the distribution centre, distribution park. We have an initiative underway in Burnside. Several different initiatives look at other areas of Nova Scotia to provide facilities for the major customers; the Wal-Marts, Home Depots, et cetera.

Senator Oliver: Can you tell me what kind of facility you are talking about? Is it a warehouse?

Mr. Hamblin: I am talking about large warehouses that are equipped with the proper infrastructure in terms of road access and highway accesses that allow shipment and containers to travel from the port to the warehouses, and then out to the rest of North America.

Senator Oliver: We do not have those warehouses now in Halifax?

Mr. Hamblin: We do not have them in the kind of scope we need, or that are in Savannah, or wherever else. An initiative is starting. I believe the next speaker is from Consolidated Fastfrate, which has an excellent initiative underway in that area. Right now, there are a lot of warehouses within Halifax but there is no real centralization or consolidation, and Halifax is not sold worldwide in a marketing initiative that says we have these facilities, because we do not.

Mr. Frost: We will be centralized.

Mr. Hamblin: We will be, and that is the biggest initiative that I see in the short-term future. One of the companies I am heavily associated with is probably the largest landowner in Nova Scotia in terms of property available, and we are looking at a number of different areas and initiatives in that area too.

Senator Oliver: Are those initiatives for warehousing?

Mr. Hamblin: Yes, they are in warehousing but warehousing specifically aimed at deconsolidation of shipments coming in by container and redistribution throughout the country via road or rail; not warehousing in terms of long- term storage.

Senator Oliver: No.

Mr. Hamblin: Distributions, yes.

Senator Oliver: Do I understand you correctly that for Maersk to reconsider coming back here, they would want this kind of distribution infrastructure to be available in the Halifax area?

Mr. Hamblin: First, they would have to know it is available, and, second, their major customers would need to say, ``This is a place we want you to go because we can distribute to the Northeast U.S., the Central U.S. and Central Canada from there easily and efficiently.''

Mr. Frost: Can I clarify or amplify what Mr. Hamblin mentioned about distribution centers? There are a number of examples in the U.S. of massive distribution parks being built around rail hubs in Chicago, for instance, and in Dallas, and closer by, in Savannah. In Europe, they call these centres ``distriparks'' but the idea is to cluster these warehouses around the transportation modes: around rail, highways, airports and ports if possible. Some places can do all four but usually, it is three out of four. That is the kind of thing we want to replicate and the kind of thing we are talking about under infrastructure development and funding. If you want to come back in a few weeks, we can probably elaborate on this plan and show you a couple of concepts.

The Chair: Thank you for your presentation and feel free to send us more information whenever you have it before we table our report. That information will be important to us, too. Our next witness is from Consolidated Fastfrate, Rob Pittman, Halifax Branch Manager.

Rob Pittman, Halifax Branch Manager, Consolidated Fastfrate: It is a pleasure to be here today and thank you very much for the invitation.

[Translation]

Welcome to everyone from Quebec, it is my pleasure to welcome you here.

[English]

Of course, a happy Hockey Day in Canada to everyone who will be watching today.

I have a brief 10-minute presentation. It is a not a polished presentation but it is my way to invite you to the Fastfrate Transload Distribution Warehouse, TDW, in Burnside without you actually going there in person. I want to invite you to, more or less, a day in the life of any transload facility. You will have to excuse me if I boiled it down to the basics, but I wanted to leave here knowing that everybody has a basic understanding of the value-added aspect of a transload facility.

Consolidated Fastfrate is a national transportation company. We have been around over 40 years so we are not new to the market or the industry. For the sixth consecutive year, we have been on the Financial Post list of Canada's 50 Best Managed Companies. We have 17 terminals from coast to coast with 1,600 full-time employees. Most of our terminals in Montreal, Toronto, Thunder Bay and westward are co-located with Canadian Pacific. We are co-located with CPR so that Montreal and westward are all Fastfrate intermodal operations, so a little history there.

We have companies operating under the Fastfrate umbrella. The transload division that I will speak of falls under Consolidated Fastfrate Inc. Fastfrate Logistics is a logistics company that takes care of cross-border movements. Canada Drayage Inc. is a full-load division and the company who works on and off the pier or on and off the CN ramp here in Halifax. Koch Transport is a Southwestern-based company that does a lot of cross-border less-than-truckload, LTL, transportation, and full-load transportation.

In about 2004, there were issues out West, as you all know, and the labour issues in Vancouver. Initial talks were going on about Halifax as an alternative so ideas were tossed around various agencies, the Halifax Port Authority being one, about a Halifax transload center. We purchased approximately 15 acres. Currently, we are operating in a 65,000-square-foot facility with capacity to expand. I will not go into all the geographical advantages that we all know about Halifax, and the natural attributes of our harbour. I think this information might have been relayed by previous witnesses but there was a Halifax opportunity, we invested in it and that is the building we are in now. Our previous facility in which Senator Mercer had the pleasure to visit, was approximately 11,000 square feet. We built the business case and we went straight ahead and forward, and it has been an endeavour to date.

One of the points on the slide is the export portion. At Fastfrate, we deal mainly with the incoming container traffic. That is what we call transload. Transload, in our application, is removing commodity or product from a marine unit and moving it into an intermodal container that we call a domestic unit. Hence it stays within the country.

For the exporter, transload allows that asset to be emptied, usually within a 24-hour period, so that asset is available for the exporter. Nova Scotia has a balance in exports and imports, more or less. When we try to sell transload, and convince major retailers in Canada of the value-added benefit, we must explain why they should remove product when it is already inside a unit; why remove it and put it in another one? The more times product is handled, the more risk there is of damages and what-not, so we must make that point about why to transload. I will touch on that point in the upcoming slides.

Fastrate's Halifax TDW, is really the drayage provider to and from the port through Canada Drayage Inc., CDI. We are a transload provider throughout Canada Fastfrate. Obviously, we can offer over-the-road service as well, too. It all stems from what we can do with the freight once it is removed. It could be regional distribution or distribution to the major distribution centers in Toronto and Montreal.

An interesting situation exists with one of our current customers, a large Canadian retailer that I will not mention. However, of the freight for Canadian Tire that comes through our terminal, easily 20 per cent comes back and is redistributed to the Maritimes. Again, that is another sell. We have the warehouse so in the future, maybe we can hold that product here. We can remove it from the marine container, store it in our warehouse and distribute that commodity and that product to their 19 retailers in the province directly. Obviously, there is a cost savings to the importer and it probably is a good thing for the environment to move less cargo to Central Canada so I think it would have a positive environmental impact by not adding that extra line haul move or long haul move.

This slide is what I was telling you about. I want to invite you over to our facility. Step 1 in our operation is to send this truck driver with an empty chassis to one of the container piers, be it Halterm or Ceres. In this picture, we are looking at Halterm. The containers are discharged, they are placed on the port and that driver picks up the containers. Obviously, the lift at the port picks up that box, places it on that bare chassis and the truck brings it back to our beautiful new 65,000-square-foot facility in Burnside. There is close access to the road going over the bridge.

We bring that unit in. Usually, it goes directly into a door to avoid movement within the yard. A clamp attaches to a truck, and the workers remove the product from that marine can carefully, and they reload it into a domestic unit. This slide is how a typical marine container arrives from overseas. Some of them hold less but most of them are packed tightly to maximize the capacity.

This next slide is an example of a domestic intermodal container into which that commodity is transferred. It is important to maximize and optimize the space in these units because that is our sell: We save the customer a move by optimizing this space. Four 40-foot marine containers will fit into three 53-foot domestic units, so there is more savings than only the cost efficiency of that one less line-haul move. As soon as the container is discharged from the vessel, it goes by railcar to its destination. Various shipping companies have different agreements for time allowed with the container but usually for a container shipped to Toronto, Chicago and what-not, in most cases, companies exceed their allowed free time so a detention surcharge is applied to the importer. The argument to the importer for a transload is, if we free up that container, we will return it to the port, to the shipping line, in its allowable free time. There is an indirect, and probably a direct, cost saving.

That, in a nutshell, is what the transload portion of Fastfrate offers in Halifax. We are not the only company providing this service. We probably have the most volumes at this point. In terms of quantifying, we ship, on average, 150 40-foot containers per week out of our terminal. With some fancy crewing and creativeness, we could reach a capacity of up to 500 but I think we would be comfortable with 400.

The larger facility is great for the distribution work inside the warehouse but when you hear the terms infrastructure, and how Halifax needs to build infrastructure, a lot of how we make it through a busy and intense week is by having yard space to bring in those marine containers. If we do not have the yard space, then we are looking at renting other areas. Then, our reach distance in getting into our branch is longer and that makes us obviously less productive and not as cost-efficient as we would like to be.

I apologize for the simplicity, but that is the role of Fastfrate and our transload division here in Halifax.

The Chair: Thank you, Mr. Pittman. That presentation was interesting.

When the committee visited the Montreal port and held hearings, a representative of the trucking industry in Montreal told us it was almost impossible to earn a living while respecting the rules. Is that because of the competition in the trucking industry? Is competition that harmful for the industry? Is it because there is a need for new investment and infrastructures, or investment in new technologies? What is the main reason that people are not able to follow the rules while doing their job?

Mr. Pittman: Can you be more specific on which rules?

The Chair: You know your rules more than I do.

Mr. Pittman: Fastfrate follows all the rules.

The Chair: You know them all so I do not have to tell you.

Senator Oliver: They include licensing, inter-provincial and hours of work.

The Chair: Hours of work also are important.

Mr. Pittman: Absolutely; at Fastfrate in Halifax, and I am talking strictly about the transload division, it is a global type of a supply chain because we are receiving product from all around the world. We are working it and forwarding it to the end customer. However, our activities in the Halifax branch are local in nature as well. During higher volume weeks, if there are delays on the bridge that do not allow us to reach these assets and bring them back to our yard, or if there are traffic jams in either of the port operators, it creates challenges. However, you must understand that we do not cut corners. We must work smart and complete the job but we must work safe as well. We meet with our people constantly, both drivers and warehousemen, to be productive but always to work safe, as well.

The Chair: We were also told that the security rules vary from one federal port to the next — I tell you only what we heard — which causes truckers long, complicated, redundant security checks. Are you experiencing the same problems?

Mr. Pittman: I will answer in the context of the transload. We are impacted by the randomness of a container check from the Canada Border Services Agency, CBSA. That is part of the business. That is part of the security initiative so yes, we will receive notice electronically that a container may be on hold for Customs inspection. Whether the inspection is on the port or whether it is a full, in our language, ``de-stuff,'' in which the container must go to a field office in Burnside — the CBSA personnel will fully unload and do their due inspections on that commodity — impacts how quickly we finish our week at times. However, it is the end customer that is affected, and I suppose in some terms, the shipping line too would be affected.

The Chair: Are the security rules the same in all ports?

Mr. Pittman: I do not think I can answer that question. I am not knowledgeable on the subject of other ports. I know the procedures and some of the protocols, more or less, in the Port of Halifax, if the CBSA identifies particular containers or conducts a random check. That is really the only exposure I have to security measures.

Senator Oliver: I like your presentation; I like your proposal. I like what you do but I have questions and concerns because you said the less you handle things, the better it is for everybody. All the handling involved in taking cargo out of four containers and putting it into three means there are problems with potential breakage, security, theft, contamination and loss. Those concerns are major. First, what has been your experience with those types of problems? Second, if you take cargo out of four containers and put it into three, you may not be able to fit it all into three, depending upon the size and shape of a particular parcel. What do you do if you have something left over? How do you handle that problem?

Mr. Pittman: That is a great question. I am not a computer gamer but I remember a game called Tetris where you try to fit all these shapes that come down the screen into the allowable shape that is on the bottom of the screen. I am not familiar with the game but I have seen it. That challenge is exactly the load planning that goes into a day in the life of a transload coordinator. We have visibility of this commodity coming in from overseas, and over time and history — the same product comes in and it is rare that something comes in that we have not seen before — and with experience we learn to —

Senator Mercer: You have the corporate banner.

Mr. Pittman: That is correct. For example, we must respect weight limits as well on these domestic containers so we have the visibility of the commodity coming in. We will definitely want to put the heavier, denser freight on the bottom and, if available, lighter freight on the top. A commodity example would be a treadmill. We would probably want to put coffee makers, if I can use that example, on top so we maximize the space but do not affect the integrity of the commodity underneath. As you have mentioned, sir, it can be a real challenge because, in some ways, we must play the hand we are dealt in the freight that comes off the port. It would be nice if we could always have about 40 or 50 cans sitting. Then, we load-plan and strategize, but it is not always the case.

To address your point on the more we handle, that point could apply in this situation or in a palletized environment or, I would argue, even in a courier-type of situation: the more we handle anything, the more risk there is. Handling obviously elevates the risk of something happening. We address that issue by training. We address it by feedback if there are incidents, and active on-floor supervision at our terminal. Some issues could be with the vendor in Asia, for example, inadequate packaging that caused exterior box damage or product damage. A number of different factors are involved but I believe that, at the end of the day, if damage ratio that leads to a freight claim exceeds well over 1 per cent of total revenue, then we probably have a serious problem. Anything under that number is probably acceptable. There is no such thing as perfection.

Senator Oliver: What is the situation with theft and contamination? They must be major concerns.

Mr. Pittman: On the question of contamination, we do not have an existing customer that has any food-type material. The commodities we handle now are general commodities. There is no risk of contamination. There are no hazardous materials at this point. It is all consumer goods. Fastfrate has been proactive in addressing the pilferage, or that sort of issue, by installing a security system at our new building. It has both exterior and interior 24-hour video watch so it is a deterrent. Again, it is never 100 per cent. However, everything is on film.

Senator Tkachuk: There was the idea that packaging and unpackaging for local markets was not something that would be done here because most of the stuff is for export; it gets on a train and goes out of town. I do not know whether we were told that or we assumed it because the market here is small. You have obviously found some way, because we export and need that container back, to use that situation to your advantage, and that is intriguing. Do you think there is a larger market for this service? We heard earlier that it would be an advantage for the port to offer more of this warehouse and packaging and repacking service but after awhile, it will not pay. Halifax is not like New York where there are 20 million people to service right here. Halifax does not have that here so how large is that advantage, or is the market only a small niche that you have established for yourself?

Mr. Pittman: We need to start somewhere, and a previous witness said something in terms of, ``We need to convince the major retailers, the bigger box stores and what-not for something like this to really take off.'' You are absolutely right. We are not highly populated in Halifax. We are demographically disadvantaged. However, if I can use the example again of the 80/20 rule with the imports from Canadian Tire, if 20 per cent of that cargo is redistributed to the region, an argument can be made that there is a need and a cost savings for something like that. However, I agree that a lot of the sell is not a local sell as much as it is to the decision makers of larger retail box stores. These stores are all over North America. They are the people that will make those decisions, and in a lot of cases when we are not talking major importers, we need to go to the source and convince these shippers in Asia and Europe. A good point was made about Europe earlier. We need to convince them that Halifax is not only the Halifax opportunity. It would be the Halifax advantage.

Senator Tkachuk: Do you believe you can do this? It seems to me you have relatively inexpensive land rather than say, the Toronto or New York area, and it would be cheaper, probably, to take it out of the box. So I am clear and the committee is clear, you think Halifax can take advantage of this opportunity, and that there is more business to come if we put our mind to it?

Mr. Pittman: Absolutely; I believe we would like to act as a regional distribution center for our customers.

Senator Tkachuk: Can I ask why you are not at the port? We were given a tour the other day and there is an art gallery, a coffee shop and a convention center. All these things have nothing to do with the port but they are pretty. However, would it not make sense to be closer so you could all these things and move the cargo out?

Mr. Pittman: I was not privy to the land search at the time. I know there was a land search, even though the port owns a lot of real estate. I do not believe that it could have been a lack of space for what we wanted. It could have been zoning. It could have been costs on our end. There could have been a lot of areas but there has been an initiative to build Burnside into a distribution logistics park. I guess, looking at it from your point of view and others' points of view, it would be most efficient to have a facility like ours located near the port.

Senator Tkachuk: Yes.

Mr. Pittman: The only way we can go to Cerescorp or Halterm is over a bridge or around the Bedford Basin, for those who are familiar with the area. Either option is still not a long distance. However, when winds are extremely high and there are traffic and incidents on the bridge, it affects, and it impacts on, our productivity. I hope that answered your question.

Senator Mercer: I think one of the answers to that question is that both terminals are land-locked in that they are boxed in, Halterm by a park that cannot be touched and the other one by highways and residential areas that are in the way. For a facility of 65,000 square feet on 15-plus acres, you could not find 15-plus acres near either one of those terminals, right next to them, in this city. It would be hard to find. Which leads me to your facility — you have gone from 11,000 square feet to 65,000 square feet. You have increased your space by about six times. What has that increase done to your workforce? Has it increased equally?

Mr. Pittman: Has the business increased?

Senator Mercer: How many employees have you added because of your new location?

Mr. Pittman: Day one into our operation was not a scenario of, ``If you build it, they will come.'' It was more a scenario where we moved into the new facility and worked through the lacunas and what-not of a new facility. The volumes have increased gradually. We are receiving more and more commitments from our major customer. In bodies I would say we have added in the vicinity of 20 and in that number, we have probably added five or six drivers as well. The physical building, the physical work area has increased by six times. That made us more efficient. I do not want to talk too much of the past, but in that 11,000-square-foot facility, we did not have enough yard space. We rented two compounds in Burnside to bring in the domestic unit, the full marine containers. To bring a container in a door, it was a three-kilometre round-trip endeavour. Then, we had to put the container in a secure compound. The efficiencies we gained from day 1 in the new facility were absolutely staggering, from both the number of doors we operated and yard space.

Senator Mercer: I saw the old facility and it was crowded; 11,000 square feet is not a lot when you are in this business. A couple of my colleagues and the chair, in particular, asked about security because you go to both terminals. Is security different at Ceres and Halterm, or are they the same?

Mr. Pittman: The simple answer is yes, they are the same. They both have their gatehouse and we go through a process at the gatehouse. We provide certain information before one of our drivers or carriers can pick up boxes from either one. Whether it is Halterm or Ceres, as far as CBSA is concerned, imports and exports are going out of a port operator so they both have security measures in place and to my knowledge, security measures at both terminals work well for them.

Senator Mercer: We have talked at length over the last couple of days about the Melford terminal. One thing they seem to be marketing is the availability of green field space for operations such as yours. To your knowledge, is Fastfrate part of any discussions with the Melford terminal, or are they marketing this space on their own?

Mr. Pittman: We are not working with them currently. From what I understand of Melford, their operations are probably three or four years out. Fastfrate is a service provider and a privately-owned company. Who knows what the crystal ball holds for Melford in terms of volumes, whether cargo comes through Halifax, the world economies, the China and India questions and things like that. We all know Halifax is not operating at full capacity. Will there be enough business to go around: absolutely. I operate Fastfrate Halifax and if there is a business case and a customer need for us to be in Melford, I am sure our executive board and what-not will determine what that need will be and how we become involved. However, right now we probably have enough on our plate to try to increase our top line, and to deal with the container traffic coming into the Port of Halifax.

Senator Adams: You mentioned you have customers; mostly Canadian Tire?

Mr. Pittman: That is correct, yes.

Senator Adams: You have no other customers, Wal-Mart, Home Depot, Costco or Hudson Bay?

Mr. Pittman: We have been speaking to many companies, sir but our main customer is Canadian Tire. We have also been working with an Atlantic Canadian company called Kent Building Supplies as well but not at the same volumes and levels as the Canadian Tire Corporation.

Senator Adams: Wal-Mart, Home Hardware and others operate on the basis of free on board, f.o.b., from Europe right to the warehouse; is that how the system works? For Canadian Tire, you put the freight in another container, then onto trucks and the container goes back to the ship?

Mr. Pittman: That is right, yes.

Senator Adams: How much difference is there between security for containers you have unloaded and other containers that have not been touched? Is it more difficult to go across the border or things like that? How does the security system work for containers in the East? In the States and the West we are more concerned with freight coming from Asia; a few years ago humans in the containers, and all that. It may be cheaper to unload freight and put it in other containers but how much difference is there between the East and the West for security?

Mr. Pittman: If I understand your question, as the service provider, let us say, we open the seal to a marine container once it has touched ground at our terminal, and we follow standard operating procedures, SOPs. If we find anything, for example, a security problem, we would definitely report it. We report it directly to the authorities but we have not come across any examples that you brought up. I believe there was a strange-looking insect in one of the boxes last year. We went through the proper channels and protocol, and we took care of things.

Senator Mercer: Nobody was having lunch.

Mr. Pittman: We did not disturb any lunches or anything. There is nothing to date of that magnitude, fortunately.

Senator Adams: We were at the port yesterday in Halifax and they have a place in the yard that they say they have 200 cameras, and they take serial numbers for the containers. Do you have a connection? Do you work with the port, and how does this work? Do you have your own address right to your warehouse for Canadian Tire? Is it f.o.b.?

Mr. Pittman: The asset itself, the marine container, I reiterate, is not a Fastfrate-owned asset. It is a shipping line asset so the onus for a lot of the tracking and what-not of these marine units is on the shipping line and, to some extent, the port. The onus is on them to have their systems talking to one another. On our end, for our implication in the security and our responsibilities, it is everyone's responsibility to ensure that safe trade takes place. At the local level, first, Fastfrate will report anything that we feel we should be reported. Second, we made the investment in our local security system, which captures a photograph of the driver and the license plate of vehicles coming in and out of the yard so we have tightened up in that area. That is not to say that it is ever 100 per cent because there are always various cracks in policies and protocols. However, that is how we become involved in security, as a service provider. As only a service provider in the supply chain, I feel we do our part.

Senator Adams: What is the difference in suppliers, such as automotive parts and other suppliers? We know sometimes you can have an agreement with Canadian Tire, for example, so that even if you have a delay there are no penalties. The committee completed a study three or four years ago about how long the driver can drive. People do not want to have a penalty if they arrive late with their materials. Do you have some kind of agreement with Canadian Tire to the effect that you do not have to deliver it in a certain time or, if it is delayed by one day, there are no penalties?

Mr. Pittman: There are delays. When we are talking about marine traffic crossing the North Atlantic, we experience delays in freight coming in. In terms of security and following regulations, and if I understand correctly, hours of service for drivers coming in, we make sure our drivers understand through their log book notations that they do not exceed the maximum allowable hours of work. Even if something is late, it may be late but we make sure we follow the rules and the drivers arrive at their end destination safe and in shape, and they return home at the end of the day. We do not want to push. At the end of the day, the most important asset we have is the human one.

The Chair: Feel free to send us more information, if you have any, to distribute to the senators. Thank you for your presence here this morning.

Mr. Pittman: Thank you very much. It was a pleasure to be here.

The Chair: Senators, our next witness is James Wooder, Chief Executive Officer of Laurentian Energy.

James Wooder, Chief Executive Officer, Laurentian Energy, Sydport Container Terminal Project: Thanks for fitting me in on short notice yesterday. My predecessor at the podium here said that his presentation was not that polished and I will confess to the same, largely driven by the fact that I did not know I was coming here until eleven o'clock yesterday.

It is nice to see my former colleagues in law practice, Senator Cowan and Senator Oliver here. I arrived in Sydney in the Fall of 2005 after 12 or 13 years in the oil and gas industry here to take on the role of Chief Executive Officer of Laurentian Energy Corporation. Laurentian Energy owns the former Point Edward naval base, now Sydport Marine Industrial Park. I will come to a slide shortly that will show you what Sydport includes.

The next slide is a photograph taken in 1940 with convoys forming in the basin but the area is where the Sydport park is today. When I arrived, I was immediately fascinated by the prospect for the green field site, which is immediately adjacent to the old naval base. Nothing was ever done with the site so the 450-acre site is the proposed location of our container terminal. I start with this slide when I talk to people because it demonstrates the proud and significant Maritime history of Sydney. Some of you who are not from Atlantic Canada may not be aware of it but Sydney was a port of call for the international fishing fleet for many years. When coal came into fashion, Sydney was an international bunkering port. It was the heart of the first half of the 20th century industrial activity in Atlantic Canada driven by coal and steel. The Point Edward base was built here in 1960. About 1,800 vessels formed in convoy here during the Second World War to support the war effort. It is a strategic location and its world-class assets have put it back on the stage as a potential gateway for container traffic. The master port plan for Sydney that was presented two weeks ago and commissioned six months ago confirmed that in 2006, 2,500 jobs were contingent on port activity, which makes it about the fourth largest port in Atlantic Canada by volume. It is a significant port, as we speak.

In my slide presentation, I will introduce you to Laurentian Energy. Then, I will talk about the container terminal, and why it is located in Sydney. The Sydney Marine Group is a group of operators that came together in Sydney to help market the port. one of the distinguishing features of Sydney is that there is no port authority so we have a de facto port authority now by consensus, and I have been elected as the chairperson of that group. I will talk about the group's immediate action plan as well. Dredging is a critical component to the business plan for Sydney so I will say more about that component shortly.

Laurentian Energy was formed in 1999 to acquire Sydport park. The shareholders include 10 local business leaders who employ over 1,000 people. Significantly, five Cape Breton-based organizations are major shareholders including Membertou First Nation, a 10-per-cent shareholder, the first indigenous government in North America to be ISO certified, representing 1,050 band members and, of course, leaders in progressive business development. New Dawn Enterprises is the oldest community development company in Canada, and serves about 600 people locally with their various activities. BCA Investment Cooperative has 350 individual Cape Breton shareholders who have invested 17 per cent in Laurentian Energy and it is an RSP-equivalent-type vehicle. Grow Cape Breton Holdings is a similar vehicle. The Sydney Port Authority has answered our most recent cash call with a significant investment.

The impression I want to leave you with is that this company is a broadly-held Cape Breton-based company with deep community roots. The company is interested in what we can do to continue to modernize the local economy. The mission of Laurentian is that we are a development company with a community economic development focus.

This picture shows Sydport park now. I have given a before-and-after picture. A lot of this infrastructure is dated from after the Second World War. You will see the Coast Guard College in the foreground. When Sydport was a naval base, 22 vessels were stationed here. This building is a current fabrication facility. In this building, as a matter of historical note, there was a marine slipway where Corvettes were serviced, but you get the picture. There are 500 people working here in about 30 odd different businesses. This view faces north, showing the mouth of the harbour.

The next slide is an aerial view looking back in this direction at the green field site so you can see the approximate footprint of this parcel. There are 320 acres here. You will see on this side of the harbour the international coal pier where Nova Scotia Power imports its coal. This site is the infamous Muggah Creek leading to the Sydney Tar Ponds. We have the Sydney Ports Corporation cruise pavilion here and so on and as you go up into the harbour. The town of Sydney is on the left. This park is on the west side of the south arm, which means it is not in the main part of town. Any rail traffic leaving here for points west does not go through any level crossings in town, making it a useful place to contemplate locating a container terminal.

One thing I forgot to identify in my previous slide was the rail connectivity. Existing on-dock rail comes into the park and terminates right now in front of this fabrication facility. So the rail link that we need to build for on-dock rail at a new terminal simply needs to bridge this little inlet here, about 50 meters of rail. This line comes out of the park and I will show you how it connects into the main system with this slide.

This area is the proposed green field site. These areas are the four berths here, the rail line through the existing park that comes through here and intersects this 1,200 acre parcel of land that Laurentian holds under option. To give you a sense of the size of that parcel, my predecessor at the podium said his Fastfrate operation had 15 acres, so we could put 75 of those parcels inside this parcel. The land is completely flat land and the rail already exists so the rail spur that we maintain comes to here. It connects with the main Sydney-to-North-Sydney line and points west. This line represents the existing Sydport highway, which services the current industrial park so the park has good rail and road connectivity. The schematic simply shows that one of the interesting options about this location is that we could locate our rail yard here. As you have probably heard from some of the Melford people, the current fashion of 10,000-foot unit trains requires a significant amount of space to build up trains so this space is a veritable dream in terms of a sandbox to play with any type of on-dock or off-dock rail configuration, or whatever we want to do.

Carrying on then with rail connectivity, you have probably seen a slide something like this one before but the rail line goes from Sydney through Iona, through the Strait of Canso to Truro where the interchange is with CN.

Why Sydney: The takeaway line from the consultants we engaged to undertake a container feasibility study is, this site is the lowest cost, quickest to market green field site in North America. The study was prepared for us in 2006, and took seven months.

TEC has an international port practice. They are based in Annapolis, Maryland. They currently are building terminals in Sao Tome off West Africa and in Indonesia and South America so they are experienced. They also work with the U.S. Navy remediating naval sites, which is important for us because part of the critical feature of our play here is that we need to dredge the channel to access Sydney Harbour.

The harbour itself is the closest mainland port. Many other areas make this claim but Sydney is the closest mainland port to North America. If we set our GPS in the Suez Canal for mainland North America, we would land in Sydney. It is six miles from the sea buoys so there is no major travel from the ocean route. It is an absolutely superbly-sheltered naturally deep harbour and this fact is one of the misnomers about Sydney. People think that it does not have deep water. It does. It needs a one-time dredge of the channel to give access to the harbour and we will talk more about that shortly. There are absolutely no operating constraints to this harbour in terms of air draft and turning radius. The government built a naval base there for a reason, and I guess some of the analogies to other places like Prince Rupert probably apply.

We know we are not dealing with dredging into bedrock because of a Public Works Canada geotechnical program that was completed in 1988, which we have had the benefit of, so we know that 77 bore holes were taken in this channel. This slide shows the footprint to reach 17 meters here. The sea buoy is here. They come in and they turn at South Bar and here is the proposed terminal. We intend to use the dredge material to fill in essentially, and recover, about 120 acres of land to create a two-phase, four-berth facility. We are dealing with gravel and sand. We know it is extremely good fill, from the bore work that was done in 1998. There will be no ocean dumping, of course, which is not something that we want to enter, given the concerns from environmental interests. We recently finished a program in January of this year where we took sediment samples from the channel. We are pleased to say that the legacy of the Tar Ponds does not seem to have extended into this footprint so we are hopeful we will not have any major challenges as we contemplate the terminal design.

Dredging is the key enabling event for Sydney. It is not only about Laurentian. Xstrata, the operators of the Donkin mine who intend to ship up to 5,000 tonnes of coal a year as Cape Breton re-enters coal production hopefully by 2010, have publicly stated that Sydney Harbour is of great interest to them but not with its current draft limitation. The current limitation in Sydney Harbour is just below a Panamax-sized ship because of a high spot in the channel so it is a significant opportunity for Sydney. It goes way beyond containers. It is about coal export. Nova Scotia Power currently imports 2,700,000 tonnes of coal a year. They imported that coal last year in 47 Panamax-sized ships and they had dead freight on every one of those vessels because of the load restriction due to the high spot at South Bar. There is a coalescence of interest among Nova Scotia Power, Xstrata and Laurentian all focused on access to the deep water that currently exists. Our master port study has indicated that about 4,000 jobs are contingent on this event taking place.

The site is situated away from downtown and residential areas. It has existing on-dock rail with double-stacking capability. It has an existing highway and 1,600 acres of flat land with direct rail access in the two parcels I showed earlier: 450 acres on-dock and approximately 1,200 acres behind. It is easily transformed into a modern container terminal. That point is made in the business case because the terminal development costs, as far as we are aware, are superior to anything else that our consultants have encountered. If the committee is interested, we are talking about $116 million in operating costs for the phase one facility, consisting of two berths 750,000 twenty-foot equivalent units, TEU. It compares favourably even with Prince Rupert's recent construction for phase one. In terms of operating costs, because of the sand box we have to play in, we can have an efficient design. In terms of labour costs, no pre-existing labour agreements apply to this project. We have had good conversations with the ILA who operate out of North Sydney. We can have flexible start times, which will make the operating costs competitive. I mentioned that terminal designs can be whatever the operator of the day wants because of back-up lands. The business case focuses on large vessels, the ships of 8,000 TEU to 12,000 TEU or 14,000 TEU requiring deep draft and unobstructed air gap that will discharge large volumes of cargo and need a highly efficient ship-to-intermodal-rail transfer facility.

While some of the carriers we talked to have spoken about possible transshipment, our view at the moment is, the business likely will be extremely heavily weighted to rail. Obviously, Sydney is a bit out of the way and it is a big place in relative terms for Nova Scotia but there are not a lot of consumers so the cargo must go to market somehow.

The community: we feel this feature is an important part of the business case. Twelve per cent of the people in the province live in the Cape Breton Regional Municipality and with that population comes lots of infrastructure and a highly skilled labour force. This port is easily expandable from what it is today to what it could be with the benefits of dredging. We have a regional airport, a regional hospital, lots of infrastructure, a college and a university, so the ability to take some of the expatriate tradesmen that are working in Alberta and bring them into the existing ILA structure is real. The community is transitioning into a new era and they are mobilizing right now around this opportunity to put the port back on center stage. The private sector is stepping up and driving things, and there is a renewed sense of optimism and confidence in the business community there.

In terms of where we are with our project, the project team is in place. We are currently in the environmental assessment phase. We have tremendous local community support, which will not surprise you, given that the owners of Laurentian are almost 100 per cent local and the company is broadly held. Negotiations are well advanced with our preferred carriers, terminal operators and beneficial cargo owners. In parallel, we are talking to major investment houses in terms of the model and we will put the deal together. Our preferred dredging partner is engaged, the largest dredging company in the world operating out of the Netherlands. We have unit price quotes from them as of last year, and in theory, if the environmental assessment goes as we hope, we can have this terminal up and running by the fourth quarter of 2010.

I hope I am not taking too much time but I think it is important that the committee understand the breadth of the partnership involved in the Sydney Marine Group as we move the port forward. There is no port authority but this group has come together into a Memorandum of Understanding to drive development in the port, and the group includes every major owner or terminal operator in the port. My time there suggests that the conventional wisdom is not true that if you put five or six Cape Bretoners in a room, they cannot agree on anything. This group has worked extremely well for the last two years, and it is one of the nicest things that has happened to me since I arrived. Our MOU initially was to focus on how we collaborate to bring this port back where it should be, and the initial focus was to create a port master plan. We raised $400,000. We commissioned TEC to do the study and that plan was launched about three weeks ago with 400 people attending at the marine pavilion in downtown Sydney. We have developed a shared vision. We have a well-articulated business case for growth. We have a practical road map, and one of the things we need to focus on is future port governance. The investiture from the federal government has not happened with the harbour bottom. We do not have a port authority and as we grow the port, we need to formalize the existing arrangement with this ad hoc group.

In summary, one recommendation, in terms of capital projects, is to deepen the navigation channel. That project is the key enabling event of this port. It has implications for expanded coal shipping that would benefit Logistec, Provincial Energy Ventures and Nova Scotia Power. My organization will develop a new container terminal. There are opportunities to upgrade existing break bulk and so on. The cruise business is alive and well. They need a second berth by 2012. Marine Atlantic is one of the members of the marine group and they have ongoing planned upgrades.

There are a lot of capital projects but we believe there are business cases to support them. The critical piece in all this is that we must maintain the rail connectivity that currently exists because without that, none of this happens.

I mentioned the launch. One thing of interest to the committee is that we had a complete turnout from local government, provincial government, and the two federal MPs. We have had a complete non-partisan political endorsement of the recommendations of this plan, so everybody is onboard to move it forward. As I mentioned, the environmental assessment, EA, for the channel dredging is underway.

I sit at the federal-provincial table for the Atlantic Gateway representing Sydney. We are now in the process of bringing together stakeholders to come up with a kind of coordinated presentation to the federal-provincial committee that runs that.

The Port of Sydney governance is one of the things that must be fleshed out further. In our master plan, a number of models were looked at, Halifax and others, to see where Sydney should go and how we will move the regulatory issues related to divestiture of the harbour bottom forward, and put in place an organization that will see the port grow into the future.

In summary and conclusion, the Port of Sydney is definitely positioned for success. A lot of the myths are debunked as to why it cannot happen there, whether it is a lack of water or ice. The opportunities are clearly articulated. The business leaders are engaged in driving the agenda, and community and government support are evident. In my view, as a relative newcomer to Sydney, the Tar Ponds cleanup that is now well underway has been cathartic for Cape Breton. It sheds that image of a coal and steel industrial place that has gone into the doldrums. A lot of good things are happening in Sydney right now. A lot of them are focused on the port. I think people understand that the port is an economic engine of the future and it has the potential to put a financial underpinning into Cape Breton that has not existed there since the early 1900s.

In terms of the project itself, there is no question that the container terminal project is an absolute world-class play. The business case is compelling. We have third-party market validation and it is a significant opportunity, not only for Cape Breton but for Nova Scotia and Canada. What happens beyond Halifax for containers is important for the province. We must build a terminal there that will compete, and we are pleased that we are well on our way to bringing it to a conclusion.

Thank you for your indulgence and I will take any questions.

The Chair: Mr. Wooder, this morning a representative of the International Longshoremen's Association Council of Unions appeared before us, and he seemed worried about the workforce, as far as the Melford project is concerned. You mentioned a master plan of 4,000 jobs. Where do you recruit people for the 4,000 jobs? Do you find them in the region?

Mr. Wooder: First, a chapter of the ILA in North Sydney works in the Marine Atlantic organization. We have been engaged with them for over a year. They are confident they will be able to bring the labour required to start up a new container terminal. The 4,000 jobs apply to more than the container terminal. They also include the arrival of the Donkin coal export opportunity. Remember, those 4,000 jobs are direct, indirect and induced so not all of them come from the local area. Of the 2,500 jobs related to the port today, 833 of them are direct jobs, according to our master port plan. There are 110,000 people in the regional municipality. There is a high unemployment rate here. We have 2,500 members of the Cape Breton building trades working in Alberta that are desperate to come back home to work so we are cautiously optimistic that we will not have a problem to expand this port rapidly. With the training facilities there, the community college and the university, we will be able to cross-train people. These projects will have a lead time of two or three years before they come online so we think there are real reasons why it makes a lot of sense to develop this port from a labour point of view.

The Chair: The number of containers in the Port of Halifax has declined. You are still optimistic about your own port?

Mr. Wooder: We have watched with dismay as well that Halifax numbers have declined. I am from Halifax. I know Karen Oldfield, President and CEO of the Halifax Port Authority. I have a lot of sympathy for the challenges that port faces. It is not only about capacity. The issue for us is that the business model is changing for international shipping to large ships and, in the case of the carriers we are currently talking to, a Suez shuttle-type service where they dump a large number of containers. Based on what people are telling us, Halifax may not be the preferred methodology for that type of a business to develop. We see an opportunity to work collaboratively with Halifax and, hopefully, not take any boxes or jobs out of the place. That is basically the business model. We do not see ourselves competing directly and doing exactly the same things that Halifax does today. If CN or the province of Nova Scotia is able to capture the Suez, whatever the Suez opportunity becomes and we can debate that, let us hope that even if it has been delayed a little because of the market conditions in the U.S., it will still be there. We know the big ships are coming. We know they will go somewhere. If they do not go to Halifax, we do not want them to go to Virginia or New York. We want them to come to Sydport. A lot is at stake here for the province to get this right and to make sure there is not only capacity but the kind of capacity that the carriers and the shippers will want going forward.

The Chair: If you are not competing with the Port of Halifax, will you compete with the Melford project?

Mr. Wooder: I am asked that question a lot and I have not seen Jon Vickerman's presentation lately. I have heard various things. Sometimes it is transshipments and sometimes it is intermodal. I think it is safe to say that the model that Melford aspires to is closer to the model that Sydney aspires to than it is to the Halifax model.

Senator Oliver: Following along on that answer, do you not think we will have overcapacity if both Melford and you carry out your plans by 2010 or 2011? Halifax is operating at only 40 per cent of its capacity now so it can take a lot more TEUs.

Mr. Wooder: In terms of the business case for us, if you think in the context of an 8,000-TEU ship commencing a weekly service into Sydport, dropping its boxes there, phase one of our facility would be taken up with one service. I think that you are right if Melford is built and Sydport is built and they chase the same kind of cargo. I am not an expert in cargo volumes but I can tell you that our job right now is focused on bringing something to market that will be supported by those that can bring the cargo to Nova Scotia because it will be the cost leader. I do not have a crystal ball so I do not know what will happen to Melford but I have some sense that the business model we aspire to is not the same business model that Halifax is currently geared up to accommodate.

Senator Oliver: I have a series of short, direct questions. First, you will do some dredging. How much will it cost to dredge, and do you have the money?

Mr. Wooder: We have been carrying the cost of dredging in our terminal project costs. I do not have the $40 million identified.

Senator Oliver: It is $40 million?

Mr. Wooder: It is $40 million, give or take. We have produced a new bathymetric map that we are, as I speak, feeding into our dredge 3D model so we have a unit price kind of costing, and we hope that the dredge volumes will go down. We estimate cost based on a harbour chart that we put into our models, so now we have better information but cost is probably in the order of $30 million to $45 million. However, when you think in the context of what people spend to dredge harbours of this quality in other parts of the world, given the economic opportunity, the cost is a drop in the bucket.

Senator Oliver: I was worried about the cost and where the money will come from. Will someone like Provincial Energy Ventures or Nova Scotia Power act as partners in the dredging costs with you?

Mr. Wooder: We are taking it one step at a time, senator, and those parties contribute financially within our marine group in Sydney as we move the environmental assessment forward. I have had conversations with Nova Scotia Power and I know that in 1998 it was very public that Chris Huskilson, when he was there, looked at this issue closely. I think Xstrata will be an important driver for the dredging.

Senator Oliver: My next question is about Xstrata. You said that they will ship 5,000 tonnes of coal a year. Do you a contract with them to transport any of their coal?

Mr. Wooder: It would not be with me. I can tell you that before Christmas, they were evaluating two delivery options. They have evaluated about 20. I think they are down to a short list of two. I cannot speak for them but I am well aware that the Port of Sydney is one of those short-listed possibilities. I think the other alternative that they are looking at is building a standalone facility at the mine at Port Morien. I also understand that every option has its vices and there are certainly vices attached to building a new dock in an active fishery at Port Morien.

Senator Oliver: In your business plan, do you have any revenue coming in from the Donkin mine?

Mr. Wooder: Sir, the Donkin mine is not in production yet. It is in the pre-feasibility stage.

Senator Oliver: If it comes on stream and they produce their 5,000 tonnes of coal a year, can you add revenue to your balance sheet from Donkin?

Mr. Wooder: The port would certainly solicit that traffic. As it currently stands, there is a rail link from Lingan Power Plant into the port so when Nova Scotia Power imports its coal to the international coal pier, it puts the coal on rail cars and the rail cars go to Lingan. For Donkin to access Sydney by rail, Nova Scotia Power would need to build another small piece of rail line from Lingan to the mine. I forget how long it is but I think it might be seven kilometres. Once that happens, it will not be me but Logistec or Provincial Energy Ventures that would be the operator of the coal facility for Xstrata. The export of coal would take place again outside of Sydney and this is really important to Nova Scotia Power because, all of a sudden, the draft that is required for cape-sized ships to carry 120,000 deadweight tonne cargoes is the same as post-Panamax containers. It is about 16 and a half meters. All of a sudden, Nova Scotia Power's economics for importing coal becomes better. Donkin has a reliable sheltered harbour to export its coal out of and that would drive a lot of commercial activity in the harbour. Coal would not come directly to Laurentian because Laurentian does not own the land that the coal would be shipped from but Logistec or Provincial Energy Ventures stand to inherit that opportunity. I do not know if I was clear.

Senator Oliver: That was good. Thank you.

Senator Mercer: Thank you for coming here, particularly on such short notice. I have a number of questions.

You mentioned ice. My recollection of Sydney Harbour over the years is that there has been ice. Unlike Halifax and the Strait of Canso, it is not ice-free. We have had cases where ferries to Newfoundland cannot leave North Sydney because of ice. How do you overcome the ice problem?

Mr. Wooder: We have been blessed that, within the marine group, we have Captain Terry Pittman who is Chair of the Board of the Sydney Ports Corporation, a qualified ice master of 40 years who has operated in the Port of Sydney, the St. Lawrence, the Strait of Canso and Halifax. The first point is that the ice that forms outside the harbour is the same ice that people must traverse to go to Halifax or the Strait of Canso. When they come in on the great circle route, they face the same conditions. In terms of the ice that caused the incidents you referred to, two recorded incidents since 1983 have prevented traffic in and out of the harbour but the ice was not in Sydney Harbour. In fact, it is the ice that potentially comes into Sydney Harbour during the spring break-up of the Gulf of St. Lawrence. Because there is so much controversy and misinformation around this issue, we have retained the Centre for Cold Oceans Resources Engineering, C-CORE, which is an adjunct of Memorial University, and spent $30,000 to have them study the question. The conclusion was that the probability of having an ice problem in Sydney Harbour is one in four years, with a potential delay of up to five days. That is the statistical likelihood of having a delay in Sydney caused by ice. Frankly, it is far less of an issue than the Port of Savannah has with fog. The professional advice from people who operate in ice as ice masters, and the professional opinion of C-CORE, is that ice is not an impediment in any shape or form to establishing a modern container facility in Sydney, period.

Senator Mercer: If Donkin comes on stream, if the mine opens, I am confused. We have Nova Scotia Power who imports coal for the Lingan Station.

Mr. Wooder: Right.

Senator Mercer: Then, they will be mining coal in Donkin. Should they not sell the coal to Nova Scotia Power, which then reduces the net amount of coal coming into the port, which reduces the business for the port?

Mr. Wooder: Bob Kazamel, who runs the international coal terminal, sits in our marine group and you are correct that there is a potential for some Donkin coal to be purchased by Nova Scotia Power but the caloric value of that coal and its chemical composition with sulphur, et cetera, means that it is at best, a blend. I am not the person to answer the question but my understanding is that potentially there would be some reduction in the 2.7 million tonnes of imported coal. However, it would not be substantial, by any stretch. There will be a huge net gain of activity if Donkin comes to Sydney even if there is a small reduction in what Nova Scotia Power imports as a result of that mine.

Senator Mercer: Assuming we have a container terminal at Sydport, how many of these containers will be shipped by rail and how many by truck? What is your estimate of that volume?

Mr. Wooder: It will be almost zero by truck, senator. It is too far away. The carriers that have interest in Sydport are talking. My best guess is that it will be almost 100 per cent intermodal rail but there is some talk of transshipment. Virtually zero containers would shipped by truck. There are not enough consumers within a reasonable driving distance.

Senator Mercer: That answers my next question because the highway is not twinned from Sydney to the Strait.

Mr. Wooder: No, the highway is not twinned and that is something that, no doubt, the Eastern Cape Breton Atlantic Gateway Council will have something to say about. However, it is not even so much that the highway is not twinned, which is a problem, but the distance factor. We are not serving consumers in the Midwest by truck.

Senator Mercer: We are not worried about the highways but we are worried about the railways, and the rail is owned by Rail America. Is that correct?

Mr. Wooder: Fortress owns Rail America but the rail between Sydney and Truro, I understand, is owned and operated by Cape Breton and Central Nova Scotia, CBNS, owned by Rail America, owned by Fortress.

Senator Mercer: These people are the same ones who, in Cape Breton and mainland Nova Scotia are having terrific public relations problems because of an increase in the fees for people running on the same tracks that they have used for a long time. What is the state of readiness of those rail beds? Not a lot of rail traffic goes in and out of Cape Breton these days and I am concerned that there will be infrastructure costs. Will Rail America pick up the costs for fixing these railroad tracks, or the rail beds, rather?

Mr. Wooder: Sydport represents about 50 per cent of what is carried on the CBNS line currently. Three trains a week from Sydney transit to points west so the rail line is an operating one. I think the conventional wisdom is that some maintenance has been deferred on that line since CBNS has operated it. I have had the benefit of a report by a third party consultant that was produced by one of the terminal operators that has interest in Sydport. The consultant, a rail expert, did not condemn the line in any shape or form. Obviously, some upgrades and maintenance will need to be performed if we start shipping 6,000 boxes or 7,000 boxes a week on the line. However, the line is a 115-pound rail, it is in reasonably good shape and it is capable of double stacking so I assume CBNS has been looking for ways to underpin the viability of that line desperately for the last number of years. A provincial subsidy is in place now to support that line. It will expire in two years so I am confident that they are extremely interested in what we are up to here, and that any financial enhancements to that line would be more than forthcoming if we could present them with a business case.

Senator Mercer: We have a port in Halifax that is at 40 per cent capacity. We have a proposed facility at Melford that will be a million units or two million units in the second phase in their plan. Then, we are talking about a new terminal in Sydney.

I hate to put all our eggs in one basket but I would like to have one basket that was full at some point in time and not a lot of money needs to be spent in the Port of Halifax because everything is there. We can more than triple our traffic in Halifax without spending an extra nickel so I find both Melford and Sydport difficult.

Melford says there will not be any government money. They say that. You have not said that so I suspect that you will want either some Gateway money or another type of government money to assist in some of the work in Sydport. I guess the ultimate question for all of us is, why would we do that when we have a port in Halifax we can use today if we had the business?

Mr. Wooder: Let me try to answer a couple of things. First, Laurentian has not approached government for any support for this terminal. The dredging issue is an interesting one because it is a common one. Nova Scotia Power, Xstrata and Laurentian are enabled by it. It facilitates a lot of commercial activity in the port way beyond the containers so whether there is a public-private partnership there that looks at dredging is another conversation. In terms of the capacity in Halifax, I do not doubt for a minute that the clever operators at Halterm and Ceres can stuff 10 pounds of feathers in a five-pound bag and do things more efficiently but we will not put money into this terminal. It will be driven by private sector investment where they see a need and an opportunity so if the terminal is built, presumably it will be because a fundamental business case there may not be satisfied in Halifax, or not satisfied in a way that is satisfactory to the users of the facility. The best I can do is talk about feedback we have had from the market. People that we are talking to, at least, do not see a Suez shuttle — large ships dumping large volumes at one time — necessarily in Halifax, or a terminal that has some of the land site infrastructure constraints that Halifax does.

Senator Cowan: The plan is an ambitious one, and I have a number of questions arising out of it. Perhaps following what Senator Oliver and Senator Mercer discussed, you talked about how this container terminal will handle a different type of traffic than Halifax, or would handle traffic in a different way than Halifax does now or can do. Can you comment on that difference? You said that the Sydport container terminal will be similar to the style of terminal that Melford plans. It will not be of the same magnitude but similar to the style and, I assume, operating methodology as well. Melford seems to be well-advanced in its planning, perhaps further along than Sydney at the present time. What happens to the Sydney plan if Melford is opened before your terminal?

A final unrelated question is, have you been invited to go along on this junket to India that will be led by ministers Peter MacKay and Maxime Bernier, although I understand that Minister Bernier will not go there. Are you part of that junket?

Mr. Wooder: Let me try to answer those questions, maybe in the reverse. In terms of the India visit, we are not participating. I have had a discussion with Brian Bohunicky about that trip, and the thinking behind who was invited was that the two terminals that have existing container business would be represented, which are Saint John and Halifax. Neither Melford and Sydport were invited. I think the point of that mission is to market Nova Scotia, and that is of benefit to all of us so I am not particularly upset about the fact that I was not invited. Your speculation about how far advanced Melford is that we have been working on this terminal for almost two years. We have spent probably in excess of $1.5 million. We are pleased where we are in the marketplace right now so to suggest they are further along than we are, I am not sure.

Senator Cowan: Let us assume for the purposes of discussion that they are.

Mr. Wooder: Right.

Senator Cowan: I am not comparing the two proposals at all. I am only saying, assuming they are open for business before you are, what does that do to your business?

Mr. Wooder: I guess we will see. There is a penchant in the business now for these carriers, and I think that penchant speaks to your first question. Carriers take delivery starting in 2008 of a large number of 16,000 TEU ships. I understand there are 8, 10 or 12 now on the books. They all have significant requirements in terms of the physical assets that they occupy, and some of these carriers are concerned about berthing priority. These ships cost about $125 million to $150 million a copy. Operators want to keep them moving. The ships are their core asset. They are concerned about the land side operation servicing them efficiently. You can visualize, with what we have here, easily putting together 5,000 foot unit trains or 10,000 foot unit trains simultaneously for different destinations. We have opportunities here that Halifax does not have, in the context of organizing themselves for success around that business case. It is not a condemnation of Halifax. Halifax does a lot of things well. As was commented earlier, they are constrained in both terminals by land and flexibility. Do you renovate your old house or do you have a big yard in which to build a new one? That is the reality of the situation.

Senator Cowan: Is that what you meant by the differences in approach?

Mr. Wooder: Yes: if we did not have the Suez Canal and if we did not have large vessels coming on-stream that pushed the envelope in terms of the requirements of the ports, then we would not be talking about this project because of the existing capacity. There is capacity in a lot of places right now. We have to service the client. If the client has a need that it feels is not met, then we fill that a different way. I think that is what Sydport represents. It is an opportunity whose time may have come because of a change in the way international shipping is taking place. We believe we could have this terminal up and running by Q4, 2010. Until the business community tells us that the project is not a runner, we will pursue it with the intention of being the next container terminal in the province.

Senator Cowan: Good; good luck and thank you.

Senator Adams: Your company has some interest in investment in wind generating?

Mr. Wooder: That is an interesting question. In fact, Luciano Lisi, who is of some notoriety now in the province, operates a company called Cape Breton Power. He hoped to install a multi-megawatt wind farm on our green field site but he is off doing other things, so we do not have any specific aspirations in terms of wind power at the moment.

Senator Adams: I am not sure in what area but I saw in the magazine that some company was interested in wind generating. Some people have tried it in the Arctic. There was a trade show at a conference in L.A. last June. We will have another one in Texas in June. We are looking to something in the future in the Arctic, in Nunavut. We are promoting more windmills. We have high-cost power. Right now, I own a house at Nunavut, and it costs me 45 cents a kilowatt hour. If I have a motel or something like that, it is 47 cents a kilowatt hour. We are looking for companies that may be able to visit there in the future to try mostly the windmills that are made in Europe. They have not really been tested in cold weather in the Arctic and in the summer months. Usually, they can operate in winds only up to about 60 kilometres an hour. They have to slow down and put the brakes on, and the brakes do not work in winds that go up to 70 or 80 kilometres an hour. Is your company, energy or something, looking into future things like windmills in Arctic?

Mr. Wooder: I know, from talking to Mr. Lisi, that the wind regime in Cape Breton is superb. Of course, many turbines are being installed but none of Laurentian's business plan is related to wind turbines at the moment, sir.

Senator Adams: I have another question relating to another committee I am on in the fishery. About three or four years ago, we travelled to Halifax and New Brunswick and talked about a natural gas pipeline to Boston and New York. I do not know what happened in Halifax.

In the meantime, the military or navy in the future are looking to build a tank farm along the coast between Nova Scotia and New Brunswick because of what happened in New York, 9/11. In the future for the tank farm, have you been looking between the American coast, Boston and New York, et cetera, and the East Coast of Canada?

Mr. Wooder: I have some understanding of the oil and gas business because of my previous life. Again, in the context of Laurentian and what I am up to in Cape Breton, natural gas is the furthest thing from my mind right now. I wake up thinking about containers, to be perfectly honest.

The Chair: Thank you, Mr. Wooder, for your presence here and your interesting presentation. We look forward to knowing more of what happens next.

Senators, we are at the end of our meeting in Halifax. I think we have all benefited from the warm hospitality of Nova Scotia, and I wish to thank the witnesses who appeared before us. It will be interesting to know how much these meetings help us in preparing our study and the report that we will table as soon as possible.

Thank you, senators for your presence and your great cooperation. We appreciate the work by our translators, our technicians and staff to prepare for this trip and make it the best trip possible here in Nova Scotia. We enjoyed the hospitality of the Port of Halifax and we appreciate the cooperation we had from everybody here.

The committee adjourned.