Proceedings of the Standing Senate Committee on
Transport and
Communications
Issue 11 - Evidence
OTTAWA, Thursday, April 2, 1998
The Standing Senate Committee on Transport and Communications, to which was referred Bill C-9, for making the system of Canadian ports competitive, efficient and commercially oriented, providing for the establishing of port authorities and the divesting of certain harbours and ports, for the commercialization of the St. Lawrence Seaway and ferry services and other matters related to maritime trade and transport and amending the Pilotage Act and amending and repealing other Acts as a consequence.
Senator Lise Bacon (Chairman) in the Chair.
[Translation]
The Chairman: Today we are considering Bill C-9, an Act for making the system of Canadian ports competitive, efficient and commercially oriented, providing for the establishing of port authorities and the divesting of certain harbours and ports, for the commercialization of the St. Lawrence Seaway and ferry services and other matters related to maritime trade and transport and amending the Pilotage Act and amending the repealing other Acts as a consequence.
[English]
With us today is the Honourable David Collenette, Minister of Transport.
Mr. Minister, I believe you will have enough time to answer all of our questions after your presentation, and my colleagues have many questions to ask you this morning. If we do not have enough time to complete our questioning of you, we may ask you to return at a later date.
Please proceed.
[Translation]
Honourable David Collenette, P.C., M.P., Minister of Transport: Thank you, Madam Chairman. It is a great pleasure for me to discuss Bill C-9, the Canada Marine Act, with you this morning.
[English]
The importance of this particular bill must be judged against the backdrop of the challenges now facing Canada and against our overall trade and transportation objectives.
The marine sector handles some 260 million tonnes of freight we ship each year, accounting for about 40 per cent of our trade with other countries. This translates to more than $2.5 billion a year in revenue and more than 45,000 Canadian jobs. Having said that, we recognize that Canada's marine sector must adapt to the challenges of the next millennium.
This bill, the Canada Marine Act, is the result of a lengthy consultation process where we asked Canadians how we should consolidate and streamline our maritime institutions. It began in 1994 with a ministerial review of the marine management of the regulatory regime.
In 1995, the House of Commons Standing Committee on Transport travelled across the country and reported on the views of provincial governments, municipalities, organized labour and other maritime industry stakeholders. Following additional discussions with port users and other stakeholders, the government announced its national marine policy in December of 1995.
In June of 1996, we introduced the Canada Marine Act as Bill C-44 and the Standing Committee of the House of Commons travelled across the country in a series of hearings before making extensive amendments to the bill. Bill C-44 was referred to the Senate but did not receive third reading before Parliament was dissolved in April 1997. I regret that and recognize that honourable senators have not had time to review the bill in detail. Obviously, a good discussion this morning and other discussions you have will help discharge your responsibilities.
After I became Minister of Transport, and before reintroducing the act, I met with port managers, seaway and port users, ship owners, shippers and people with an interest in pilotage matters. Their message was strong and it was the same in every case. They wanted us to proceed with the bill as quickly as possible and without further delay. They all agreed that compromises made in the bill represented a good balance of interests. They were concerned that a rethinking of the package at this stage could cost us the consensus that was achieved for the bill with its original extensive consultation process that it went through.
It is my view that considerable discussion and consultation have already taken place with a wide range of stakeholders before this bill was reintroduced as Bill C-9.
I should also tell you that I raised this matter and I have had discussions on this bill with all of my provincial counterparts. Without question, there is a general acceptance of the government's direction and understanding of where we are going with the bill. This has not been an issue of major contention with the provincial ministers of transport. They understand the reasons for it and they feel that we must get on with it.
[Translation]
The following are some of the things that the bill accomplishes. It creates a ports system with 18 independently managed Canada port authorities that handle 62 percent of current marine traffic. It gives them the tools they need to operate commercially and efficiently. It reduces overhead costs and red tape by dissolving the Canada Ports Corporation. It gives strong business expertise to port boards. It increases board accountability and transparency of operations through rigorous disclosure requirements. Port projects requiring investment will be subject to commercial risk assessment.
This bill also allows us to continue the administration of public ports and port facilities that serve remote communities, commercialize the seaway and streamline the delivery of pilotage services.
The recent review of Bill C-9 by the House of Commons has produced some key amendments. Marine employees leaving federal pension and benefit plans will be entitled to comparable benefits from their new employer. The new employer is also obliged to take all reasonable steps to negotiate a pension transfer agreement with Treasury Board. Former harbour commissions are given a phase-in period of four years for paying grants in lieu of taxes to their municipalities.
These and many other changes were made to the bill during its two journeys through Parliament. It will come as no surprise to you that no one got 100 percent of what they wanted in these changes. But we have moved wherever possible to meet legitimate concerns.
Even so, representations continue to flow from some of the parties, such as harbour commissions and some of the municipalities where harbour commissions are located.
Their position seems to see the glass as half empty, by emphasizing what they feel are continued shortcomings of the bill.
In my view, the glass is half full, based on the positive gains, for both ports and municipalities, of which I will mention only two.
Port authorities must begin paying grants in lieu of taxes to their municipalities, unlike present-day harbour commissions. Port authorities must publish detailed financial statements and are subject to the Access to Information Act, unlike harbour commissions today.
[English]
The unprecedented level of financial disclosure and transparency required by the bill will make the new port authorities much more accountable to users and local interests than any of the existing port regimes. We now have a bill that does the right thing -- not only for our ports and the seaway but also for their employees. These are the kinds of reforms that the port communities have wanted for many years and we are happy to be moving in that direction.
Like any minister who has responsibility for a piece of legislation, I have been engaged in the art of the possible so far as making changes to the bill. A strong majority of stakeholders simply want the bill passed now that their main issues have been resolved.
From those witnesses who want further changes, you will be hearing about four main issues: The future of smaller ports, the separate rules for harbour commissions, disbanding of the port police, and port investments. I understand that concerns have been raised about government funding of the seaway as well. I must provide you this morning with some comments on each of these issues in anticipation of your questions.
On the issue of smaller ports, in line with the 1995 marine policy, we have commenced the transfer of local ports to local interests under the authority of the Federal Real Property Act and the Surplus Crown Assets Act. It is important to underscore the statutory authority for the divestiture program is in place and proceeding.
The policy called for these divestitures in order to place decision making in the hands of local interests who will be free to set their own tariffs and to make investments based on business decisions that are free from federally imposed restrictions.
In the same decision, we reaffirmed our commitment to public ports that serve remote locations. The future of these smaller ports is not up for discussion and the department will continue to look for the most effective way to meet the ongoing service requirement of the 34 current Transport Canada operations that fall into the remote category.
When the policy was announced, Transport Canada had responsibility for 549 harbour and port facilities. To date, 114 sites have been transferred, two have been demolished, and 199 have been deproclaimed as public harbours, totalling 315 or 60 per cent of sites.
Transport Canada officials have contacted the mayors and councillors of most of the municipalities where regional and local ports are located and to this date some 200 public meetings have taken place where we explained the divestiture program and indicated how interested parties can go about receiving all available technical, environmental and financial information.
We have signed letters of intent with local interests for 109 of the remaining 234 sites and the process is already well in advance in 66 of these cases, including Bayside, New Brunswick; Port Hawkesbury and Mulgrave, in Nova Scotia; and Kenora and Sault Ste. Marie, in Ontario.
An amount of $125 million has been set aside as a port divestiture fund. This was established to ease this transition to local operation with about $100 million still available for allocation at this time. This fund ensures that local authorities are taking over facilities that are in safe condition for future operations. Approximately $5.6 million has been committed to essential repairs at Charlottetown and Summerside, in Prince Edward Island, where local authorities are working through the necessary business plan to determine whether a joint operation of four PEI ports could satisfy the criteria for becoming a new port authority. It is crucial that Prince Edward Island retain at least one port, hopefully all four ports, and perhaps the route to go is the Canada Port Authority.
We set a six-year target for these local port transfers. Obviously, we are making good progress. For greater certainty, an amendment has been suggested to clause 72 of the bill to state that operating responsibility would remain with the minister for public ports and public facilities that are not divested pending the resolution of individual situations. That means that the final adjudication over certain ports that cannot make it is left in the political domain. Therefore, it becomes a political decision. Politicians must be sensitive to regional and local interests.
[Translation]
With respect to harbour commissions, I have already indicated that some of our municipalities and harbour commissions see advantages to retaining their current rules. Our policy, however, is to eliminate the multitude of different port regimes and to establish a level playing field for all port authorities.
The bill includes many desirable features of the harbour commissions model, including municipal representation on the board and the election of the chair by the board.
In addition, port authorities are provided with many powers not currently available to harbour commissions. For example, they will no longer require Governor in Council approval for individual borrowings within established limits. They will have new authority to lease and purchase land, and they will be able to charge harbour dues without Governor in Council approval. And municipalities will benefit from the payment to the municipalities of grants in lieu of taxes.
[English]
The issue of port police has been one of some controversy in recent months, at least with some news outlets. As I said earlier, the overall policy is to remove government involvement from the equation on most port decisions by strengthening the links to local communities and port users. Through consultation, we have determined that local law enforcement institutions can handle all requirements over and above the basic security function for which the ports are responsible. There being no requirement for a national ports police force, we initiated a closure process. This action has respected all accumulated rights and entitlements for the individuals involved. As of last December 31, all six detachments of the former ports police have been disbanded and police duties have been transferred to local police forces.
That being said, it is important to clarify that federal law enforcement remains in the hands of the Royal Canadian Mounted Police and Canada Customs for such crimes as smuggling and illegal immigration. It is very important that this critical function remain under federal control and be governed by a common set of laws and regulations.
I was quite surprised to hear speculation in the media that somehow the disbanding of the port police means that there is no agency dealing with crimes such as smuggling narcotics, and so on. In fact, the RCMP dealt with that before and they continue to do so now. There has been no change. The change is that the port police, who handled basic security measures, have been disbanded. This responsibility has been handed over to local security and local police forces.
With regard to the crucial element of port investment, I am sure you will hear representations that investments in new port facilities should continue to have access to the federal treasury. This is a concern, for example, of the Port of Halifax. They want to ensure that they have facilities for the generation of ships that is likely to want to call there after the year 2000.
The government's policy on this is clear. We say that the correct investment for ports and the users of new facilities and commercial lending institutions is their responsibility. These partners are much better placed than the federal government to say how much investment makes sense and when it is needed. I have great confidence that, with the new structure, the people of Halifax can raise the necessary funds. We have seen this time and again at airports across the country. Ottawa has just announced a $250 million expansion for the Ottawa airport. There is money available and the airport devolution policy has shown that this can work.
Studies by the financial advisor to the department, Nesbitt Burns, indicate that long-term financial viability is expected for all new port authorities under the proposed rules. This includes a finding that the Port of Halifax is financially self-sufficient and should be able to access funding from commercial lenders in amounts sufficient to meet its planned capital requirements. We are quite confident in their ability to raise these moneys.
[Translation]
A number of questions also have been raised regarding the St. Lawrence Seaway. The 1995 National Marine Policy recognized that the seaway needed to be commercialized in order to remain a cost-effective and competitive transportation route.
The financial self-sufficiency of the seaway is vulnerable to traffic fluctuations. The government needs to assume a portion of the risk, since the seaway serves a complex role in the economy, as evident through the fact that many ports and industries depend on the seaway for their continued existence.
The Great Lakes-St. Lawrence waterway is an integral part of Canada's intermodal transportation network, linking rail, trucks, pipelines and marine shipping. More than 40 provincial and interstate highways and nearly 30 railroad lines connect Great Lakes ports with key cities throughout the U.S. and Canada. Thus, the seaway is structurally very different from ports and functions more as a marine highway, providing access to ports.
Additionally, the seaway is a binational undertaking. The Canadian government must work with the United States and cannot ignore the other special seaway roles related to flood control and riparian interests.
The marine policy has the same goal for future management of both ports and the seaway: increased efficiency and user involvement in the management.
A different approach is being used for the seaway because of its broad scope and binational character, but the direction is the same. Based on current forecasts, commercialization will result in the seaway being self-sufficient over the next five years.
[English]
In conclusion, I think you will agree that a safe, efficient, competitive, environmentally sustainable transportation system is what we must require for the future. That is in the interests of every region of Canada. That is what this bill seeks to put in place for the marine sector.
We have shaped this bill so that Canadian importers and exporters can meet the increasing competition which they face in the global economy, with the confidence that they will be effectively served by a revitalized national port system. I believe that Bill C-9 provides us with the right tools to face these challenges.
Over the past two years, everyone affected by this proposed legislation has had the opportunity to bring forward their views and concerns. We think we have found a good balance which is acceptable to most stakeholders as an important step in the right direction.
Change always involves an element of risk. The statutory review authorized by clause 144 of the bill ensures that after four years, every aspect of this bill can be re-examined to see whether more change is required. In other words, this law must come back to the House of Commons and the Senate for review. This is not the final product. There will be an opportunity to deal with outstanding issues. I know that certain members of the House of Commons and the Senate are concerned about this. I must reassure them that this is not the final word. After we have a chance to see how well the law works, it will be back before us in four years.
You must decide whether you can support the implementation of this much needed legislation. I know that you will be diligent in discharging your duties. We want to work with you and answer all your questions. We want to go the extra mile to assure you that this is good legislation in the interests of all Canadians.
The Chairman: What sort of arrangement do you have in mind to replace the operations of the St. Lawrence Seaway Authority? This Crown corporation will cease to exist when this bill becomes law. Who will run the seaway then? Who makes up this new group, and what led you to choose them as distinct from any other group?
Mr. Collenette: Parallel to this bill going through Parliament, we have been negotiating with the users to put in place a not-for-profit organization which will manage the seaway, in the same way as we have with various airports. Those discussions have gone exceptionally well. We are close to making a deal. We need this bill to give us the statutory authority to make that deal.
This is in the best interests of all the users. They have been unanimous in their support of it and the effect will be to have a much more efficient organization to drive down costs and to operate in a way that is more commercially viable.
The Chairman: How would you characterize the United States' view of the legislation we have in front of us as it applies to the seaway? Are they supportive, neutral, concerned, or what?
Mr. Collenette: We have some issues with the Americans right now that I can be reasonably open about, namely, that the Americans have withheld toll increases for the last number of years. We find that unacceptable. They would like the commercialization issues to be dealt with after we establish a binational agency. We disagree with that. We say that we are quite prepared to discuss and collaborate effectively in the creation of a binational agency, but we must deal with it today. We must get the commercialization process through to become efficient, for the reasons I gave earlier.
We want modest toll increases now, taking into account the inflationary pressures over the last few years. We are on the point of saying to the Americans that we will go ahead and do that. We have the legal authority to do that. We would like it to be within the framework of the seaway legislation but, just as the Americans have done with unilateral tolls over the past 30 or 40 years, we can go ahead ourselves.
We are not too far apart from the Americans. They are an interesting player to deal with, and they are large. This is not a huge issue on the transportation radar screen in Washington, but it is key to many interests, especially in the Great Lakes. We agree to disagree on this because it is not the end game, it is how you get there. We are saying to them that once we get the bill through and the commercialization is done, we will give them an assurance that we will sit down government-to-government to look at the binational agency issues.
Senator Bryden: We do not have a great deal of time left. I should like to challenge a couple of things that you said in your, but I will not do so. One point is that you have an adequate statutory floor for making the divestitures that you are doing. I am sure you have a legal opinion that says that. I have a legal opinion that says the reverse. Perhaps we could get our two lawyers together to talk about that later. That is why a specific provision is included in Bill C-9, namely, to give the minister a clear right to divest ports. However, if we indulge in that discussion at this time, I will not get to more substantive concerns.
As I understand it, section 5(d) of Canada's Transportation Act sets out the provisions for our National Transportation Policy. I should like to read it into the record. It states:
Transportation is recognized as a key to regional economic development and that commercial viability of transportation links is balanced with regional economic development objectives so that the potential economic strengths of each region may be realized.
It is my understanding that that section is still in force and that nothing in Bill C-9 detracts from that. Is that correct?
Mr. Collenette: That is right.
Senator Bryden: In light of that, you indicated that you have had no concerns from provincial governments in relation to the implementation of the act. The Minister from New Brunswick, Sheldon Lee, submitted a brief in which he requested that this provision be incorporated in Bill C-9. Can you tell me what happened to that request?
Mr. Collenette: By "this provision", do you mean the Canada Transportation Act?
Senator Bryden: I mean that paragraph 5(d) of the Canada Transportation Act should be incorporated into Bill C-9 as it relates to waterways.
Mr. Collenette: With respect, we do not need that in this act because it is already in the Canada Transportation Act.
Senator Bryden: Everything that is contained in the bill must be consistent with what is contained in the Canada Transportation Act; is that correct?
Mr. Collenette: Exactly. The laws must be consistent.
Senator Bryden: The bill itself is curious in that it sets out two sets of objectives. One is called the National Marine Policy, which is declared in clause 4 of the bill; the other is a separate set of objectives for the St. Lawrence Seaway, which is set out in clause 78 of the bill.
The provisions in clause 4 apply to all ports other than the seaway. The objective of the act is to:
(f) manage the marine infrastructure and services in a commercial manner...
In clause 78 the seaway objective is stated only to:
(a) promote a commercial approach to the operation of the seaway;
It seems that the standards being imposed or required of all ports except the seaway and the seaway ports are much more onerous than what is being required of the seaway. Is that correct?
Mr. Collenette: I would challenge that, based on your interpretation of the wording. I do not think that is necessarily borne out by the facts.
Perhaps I could ask one of my officials to clarify that.
Mr. Louis Ranger, Assistant Deputy Minister for Policy, Transport Canada: The seaway has a very special vocation. It is like a highway serving many ports. As the minister indicated in his opening statement, the seaway is served by 40 highways and 30 rail lines. It is a highway. It is critical to our exports and trade.
Having said that, the approach is essentially the same, the objective is the same, and we are confident that both ports and the seaway can be self-sufficient. The traffic in the seaway fluctuates considerably with the national economy. It is now operating only at half of its capacity. We hope that traffic will go up, in which case it will be self-sufficient. However, traffic has been capricious over the last 20 years and we must be mindful of that.
Senator Bryden: Would that not also apply to the Port of Vancouver at the moment, where East Asia is in an economic funk, and presumably their traffic has fluctuated down but it will increase next year, hopefully. The before year it was doing very well. Is it fair to say we can subsidize the seaway because traffic fluctuates but we cannot subsidize Halifax or Port Hawkesbury because their traffic fluctuates?
Mr. Ranger: The mandate that was given to our financial advisers is to look at the 18 national ports that we have identified. They had to determine whether those ports were currently self-sufficient and whether they would be self-sufficient in the future. The answer was "Yes" to both questions for the large ports that we have identified. That is the big distinction, whereas with the seaway there is a risk involved with the very complex nature of it.
Senator Bryden: Is it not the case that the seaway is currently losing money?
Mr. Ranger: Currently, the seaway has a capital reserve. It will be the fortieth anniversary of the seaway next year. It is becoming an old structure. It will need major capital requirements in the next 5 to 10 years. We must be mindful of that. We are quite confident the seaway will cover all its operating and capital costs for the next five, six, or seven years, but beyond that period there is uncertainty. We wish to anticipate that.
Senator Bryden: Talking about the capital required, there was an article in The Wall Street Journal that indicated the capital required to bring the seaway up to standard would be $45 billion U.S. Is that the capital you are talking about injecting in here?
Mr. Ranger: No. This is a very different vision of the seaway. That kind of money would be required to deepen the seaway and widen the seaway. This is not what we have in mind. We have identified the amounts required to keep that structure in good operating condition.
Mr. Collenette: In politics, we all know never to believe everything you read in the papers. You must ask why articles like that appear. The fact is that there are people who would profit from the decline of the seaway, principally, the railways; in some cases, the trucking companies.
These various interests are assiduous at getting their points across in various trade journals. We should not point to just one article but look at the total picture.
Senator Bryden: There are also some ports in Atlantic Canada that would profit from the decline of the seaway, including Halifax and Saint John, and the improvement of our fast trains.
One reason why so much investment is required is that the new ships which are being built cannot go up to the seaway.
Mr. Collenette: There is obviously a restriction on the size of the ships. In certain cases, the shippers are willing to build new ships to fit the seaway's narrow locks. Last year, one big cruise line built a tourist ship specifically to get through those locks. It docked in Toronto and in other Great Lakes cities, down to Chicago. There is a willingness to still use the existing structure. You do not have to build an entirely new structure as was alleged in The Wall Street Journal.
Mr. André Pageot, Director General, Marine Policy, Transport Canada: I wish to add a few points about the seaway. The seaway is not in competition with ports. Look at the seaway like the Trans-Canada Highway between Toronto and Montreal. The Trans-Canada Highway is not competing with the city of Montreal nor with businesses in Toronto. The seaway is an artery which feeds the traffic. It is also a complex work which involves power generation for the state of New York and the Province of Ontario. It affects Hydro-Québec. Presently, we are discussing water levels and traffic flows in the seaway because of flooding and other controls plus safety of navigation.
The seaway is not in competition with the port. It also has American usage which amounts to about 40 per cent of traffic. The principles are different not because we want to have special treatment. It is our philosophy to get the users involved. If 40 per cent of the users are American, we do not want Canadian firms to subsidize business and steel interests in Chicago. This explains the difference.
Vis-à-vis the small ports, we are not giving away regional development objectives. Senator De Bané understands regional development better than anyone.
Senator Bryden: That is a broad statement. I happen to live in one of those places.
Mr. Pageot: The objective is to get the users involved. If the users are to be involved, you will not do that by a master plan in Ottawa. We have nice office buildings here but the view of the ports in Newfoundland and New Brunswick from the office tower will not be very good.
A study from the United Nations, which predates our policy, states that the best way for our ports to win is to maintain close contact with port users -- that is, to listen to them, to discuss with them, to help them and to satisfy them. That is what this bill is trying to do.
Senator Bryden: Does the seaway include the ports along the seaway?
Mr. Collenette: No. The ports are ports in their own right. For example, the Ports of Montreal and Thunder Bay are seaway ports and they come under the ports section. They are not under the seaway section. The seaway section includes the locks, largely between Kingston and Montreal, the Welland Canal, and the Sault Ste. Marie locks.
Senator Bryden: Is the Port of Trois-Rivières on the seaway? Would that be considered a seaway port?
Mr. Collenette: It is on the St. Lawrence but the seaway starts in Montreal.
Senator Bryden: I want to be absolutely clear. You are saying that the seaway, as an entity -- and I have lots of information here -- has a call on the Consolidated Revenue Fund for assistance, for grants and for guarantees, but that call is not available to any ports or port authorities along the seaway. Further, you are saying that the port authorities along the St. Lawrence and in the seaway system, no matter how large or how small, must be competitively viable and financially self-sufficient, the same as is required of Port Hawkesbury?
Mr. Collenette: They do not have to be, they already are.
Senator Bryden: All of them?
Mr. Collenette: Yes, as I understand it.
Senator Bryden: I want to make sure I have this on the record because it solves a bit of my problem. If one port does not and if that particular port is handling, for example, asbestos, and its main shipper goes out of business or has a real downturn in its industry, the port will lose money and continue losing money for two or three years. They must raise the money to keep themselves afloat from banks without any federal government guarantees and without any assistance whatsoever from the Department of Transport?
Mr. Collenette: They do not get any assistance. I stand to be corrected by my officials, but the reason we are setting them up as CPAs is that they do have corporate status. It not unusual for corporations to run losses and make them up down the road. By giving them arm's length status, they are able to raise money and to finance their operations.
You raised the issue of the Port of Vancouver. It may be very right that traffic is down because of what is happening in Asia. The Port of Vancouver obviously has to make adjustments. You make adjustments with the labour force and other costs go down. However, if they should start to lose money, then they would have the wherewithal to finance this in other years. Recessions do not last forever.
Senator Bryden: Are there any ports along the seaway system that are not CPAs?
Mr. Collenette: All the major ports will be CPAs and they are self-sufficient.
Senator Bryden: Are they now?
Mr. Ranger: There is one harbour, Oshawa, which does not meet the requirements and it will be treated differently, but all the major ports in the seaway are self-sufficient.
The not-for-profit corporation that will manage the seaway will have on its board some people who have a genuine interest in the viability of ports. We are talking about the big users. We are talking about large ship-owners and large shippers such as Stelco and Dofasco, and large carriers such as FedNav and Upper Lakes. Those people have a genuine interest to ensure the ports are viable.
Senator Bryden: So that I am absolutely clear, no port along the St. Lawrence Seaway has any call on the federal Department of Transport for assistance, either capital, maintenance or operational? I am talking not about all the ports. I am concerned about the little ports. The big ports can worry about themselves. They have their own lobbyists, and so on, but the little ports are not in that position.
What is the position of the little ports, if there are any, along the St. Lawrence?
Mr. Randy Morriss, Director General, Ports Programs and Divestiture, Transport Canada: There are some ports such as Goderich and Sarnia that will fall into the group of regional, local ports which will be divested under the divestiture program and have access to the $125 million fund which the minister discussed. There are the two categories along the seaway but most of the large, so-called financially viable ports are CPAs.
Senator Bryden: For example, Sarnia will be treated exactly the same way as the Port of Hawkesbury?
Mr. Morriss: That is correct.
Senator Bryden: And it has no additional call on the treasury of the country?
Mr. Morriss: The only "call" on the treasury of the country is the access to the $125 million fund that is available to the other small ports. That is on a case-by-case basis, depending upon the details of the negotiations.
Senator Bryden: In the objectives and purposes relating to the seaway, there is an interesting provision in clause 78(c) in relation to setting its objectives. It refers to the protection of the rights and interests of the communities adjacent to the seaway. What does that mean?
Mr. Pageot: The communities along the seaway include certain aspects such as Indian land near Cornwall or Montreal or the bridge. We have another clause that refers to the fiduciary obligation of the federal government vis-à-vis some of the Indian bands, and so on.
The spirit of that clause is more to ensure that none of our obligations vis-à-vis the people that live along the canal will be hurt. It is not for special intervention.
Mr. Ranger: It was also to capture the obligations that the government will continue to have regarding the environmental impact, spills, and so on. The government continues to own all these assets and therefore is responsible if there is an oil spill or anything else of an environmental nature affecting the communities.
Generally speaking, on this board of the not-for-profit corporation, there will be a seat for the Province of Ontario and the Province of Quebec as well as some federal representation, precisely to represent those broader community interests.
Mr. Collenette: I can understand, Senator Bryden, why you might come to the conclusion that there is, perhaps, favouritism for communities along the seaway because it gives the impression that it is somehow a commercial protection for those communities, but it is not, as was explained.
Senator Bryden: Why would there not be a similar provision in relation to the other ports?
Mr. Collenette: The cities are on the board. The provinces are on the board. The local interests are there to look after the interests of that city.
Senator Bryden: Once again, I consider ports such as Summerside in Prince Edward Island, which may end up being owned privately. However, if that does not occur -- and, you may have spent $5 million on the island -- the ports may have to be closed because they cannot maintain financial viability. As we all know, there are four ports there.
In that circumstance, it would seem to me that before making a decision either to close or divest yourself of a port, whether Summerside or Port Hawkesbury or Placentia, you would take into account the interests of the surrounding communities.
I will use PEI, although it is not a particularly good example. They ship a huge amount of potatoes through there. Other ports are dedicated to forest products, for example, in Newfoundland, New Brunswick, and in other locations. In the worst case scenario, the impact of divesting one of those ports is dramatic not only on the little community of Bathurst, or wherever it is that the facility closes, but also on the community, the woods workers, the trucking industry, and so on. In fairness, a provision where you would take into account the impact on surrounding communities should be included in Part II as well as in the seaway portion.
Mr. Collenette: You seem to assume that "divestiture" means "failure." I reject that. Mr. Morriss talked about Goderich in Ontario. I am active on that file with the local MP there. There is one shipper, Sifto Salt, that mines under the harbour. As long as there is salt there, and as long as Sifto Salt can have the operation, then, obviously, the harbour will be viable. However, if there is no salt, you cannot blame that on the structure of governing the harbour. The fact is that the commodity is gone. You can also use that analogy with potatoes, although potatoes will always be shipped from PEI. It does not matter what port structure you have, it is the industry that determines viability.
In the case of PEI, we have tried to go the extra mile under the program because Prince Edward Island was looking to be the only coastal province that would not have a CPA. That is why, before Christmas, I made the announcement in Summerside for financial assistance. We are setting up a group to try to organization the CPA because we believe that if we have four ports as a CPA, it can function. In the meantime, we have given assistance to keep the ports in good repair until the CPA status is determined.
Senator Bryden: I am not saying that every one that is divested will fail, but I do not believe for a minute that every one will succeed, either.
Currently, it is my understanding that the Department of Transportation spends about $40 million per year to maintain and support small and regional ports. An adjustment fund of $125 million to be spread out over five or six years is being proposed. That means $20 million a year for six years.
When we are spending $40 million a year currently -- sometimes it is $37 million, sometimes it is a little more -- and we are still not able to keep our ports up to snuff, it is difficult for me to understand how, by spending $20 million each year for five years, we will now be able to pass it all over the private sector. For half the amount of money, you say these ports will be successful. If they are not, it is my understanding that they close and are sold.
Mr. Collenette: I hate to admit this publicly, but the private sector has proven that it can run many of these assets better than the government. With great respect to the colleagues at the table from the department, the fact is that there are certain inefficiencies that are built into public ownership.
The airports have done a lot better under private ownership -- and I am not just talking about Toronto, Vancouver and Montreal, the big airports, I am talking about small airports across the country. They have done a lot better. They have the flexibility to attract traffic and to manage costs properly and contract out in ways that make them much more efficient.
I must admit that while they are in public ownership, yes, we spend a large amount every year, but we do not think that if we follow through with the commercialization aspects of this bill, those costs would have to be maintained. That has been substantiated by our financial advisers.
Mr. Pageot: On the nature of ports, I must agree with you that these small ports are very important. They are part of the fabric of Canada. There is absolutely no intention to privilege large ones rather than small ones. However, you must understand our roles. Civil servants do not run terminals. Civil servants do not build hangers. You must look at a port like an industrial park in your city. It is not city hall or the mayor of a city that runs an industrial park. If you provide services, proper taxation, access roads and the proper environment, then the business leaders of your community would build a terminal and do manufacturing in your city. That is what we are trying to do here. We are trying to provide the right rail access in the Maritimes, and the building of better connections with the Midwest and getting proper infrastructure would help. The infrastructure has a life of sometimes 25 to 50 years or more, which will give us ample time to review in four years the fund that my colleague is managing to determine if it is adequate right now, because we have a lot of money still not committed.
You must look at the tenants of the ports as the driving force in the ports. It is like the post office. Small post offices were more strongly defended by local communities than they were by someone in Ottawa. All these ingredients will be contained in our bill. It is not a lack of commitment.
Senator Bryden: That is what I am trying to do for the small ports.
Mr. Collenette: Mr. Morriss might want to talk about the $125 million fund.
Senator Bryden: How did you arrive at the $125 million figure?
Mr. Morriss: The $125 million fund was based upon the savings that we would be able to generate from various other parts of the program, It was designed as the start-up fund that we would be able to discuss with the various ports.
The issue around the difference between what we spend as the federal Crown and what is available is more easily explained if I explain the process by which we discuss this with the individual ports.
When we go into a community to discuss the divestiture of a port, we provide all the available information that the federal Crown has on the facility. That includes the technical, environmental and financial aspects. We also have $125 million to help fund feasibility studies for the various communities. Through that funding, business plans are structured to examine the viability of the ports. We then determine what amount of money would be required.
We provide a 25-year forecast of what the federal Crown would have spent at the port in terms of capital and operating costs. We then do a net present value calculation to come to an amount of money that would be a reasonable and fair transition fund for the port, which can include a harbour development fund.
We attempt to position the ports into a win-win situation. There is no margin in our setting the ports up for failure. Our objective is to give the ports sufficient funds to be managed properly, in a businesslike manner, and to have the funds to do the additional work.
Senator Bryden: One of the witnesses is quoted as saying in another hearing that the $125 million is a one-of-a-kind deal. Is it correct that the fund is not ongoing?
Mr. Morriss: It is not an ongoing fund in the sense of an ongoing subsidy. However, to say that the $125 million is a finite amount is not accurate. I cannot go to the Treasury Board and argue that we need more money. We still have $110 million to dispense.
Senator Bryden: Under what vote or appropriation is that found?
Mr. Morriss: It is under the vote for the ministry.
Senator Bryden: Is it separated?
Mr. Morriss: This is an ear-marked fund in the ministry.
Ms Margaret Bloodworth, Deputy Minister, Transport Canada: This is an ear-marked fund from which we can only expend funds for items meeting the criteria.
Senator Bryden: Is that defined by Treasury Board?
Mrs. Bloodworth: That is set by Treasury Board, yes.
Mr. Collenette: As Mr. Morriss has said, the lion's share of this fund is available for the weakest or the more tenuous of the port operations. Those are the last items to be divested. That is important to keep in mind.
Senator Roberge: Presuming that this committee hears overwhelming opposition to this bill from small ports and that the committee wishes to analyze that in more depth, would you consider withholding some of those clauses from Royal Assent or splitting the bill?
As you know, for the CPP legislation, the Minister of Finance withheld some of those clauses from Royal Assent in order for the Banking Committee to study those issues more carefully.
Mr. Collenette: As a general answer, I would disagree. However, you must be specific as to which clauses.
Senator Roberge: I was talking about clauses which relate to small ports.
Mr. Collenette: Are you referring to Part II?
Senator Roberge: Yes.
Mr. Collenette: No. This is integral to the bill. This is government policy. This is reflected program review of expenditure reductions of the past four or five years. This is part of the government's financial program.
This bill was brought back as passed in the House last year and was considered a priority by the Prime Minister and cabinet as it is crucial to pass for the reasons that I gave in my presentation.
Senator Angus: I am pleased at your public acknowledgement about the efficiencies of the private sector managing businesses.
There is a big outcry in the maritime community and a sense of urgency that this bill be passed. I certainly share that sense of urgency; however, if it was such a big priority for the Prime Minister, it is difficult to understand why they could not have taken a couple of days more last April before calling the election.
The passage of time obviously takes its toll. You are the third Minister of Transport involved with this bill, is that not correct?
Mr. Collenette: Yes.
Senator Angus: Could you say whether or not there has been a change in government policy related to this bill?
Mr. Collenette: No. Modifications were made at committee stage and they reflected a number of concerns that were raised, but the basic principles are there.
You asked why, if this proposed legislation was so important, the election was not delayed. That is a different argument. Prime Ministers must determine when to go to the people. At the time, the feeling was that the bill had been extensively debated. Public hearings had been held across the country. There were many witnesses and many amendments, and the bill should have been passed. I recognize from the Senate's point of view that you did not have enough time, and one accepts that. Yes, I am the third minister overseeing this bill. Perhaps the third time will be lucky.
Senator Angus: I hope that you are successful. On the other hand, as with the exigencies of calling elections that you just described, you must accept the consequences. Obviously, we must do our duty to ensure that the bill is acceptable.
I asked about a change of policy because, in listening to the people who have made representations to me, particularly with respect to the seaway, I perceived that you may have a different view of this issue than your predecessors. If that is not the case, that is fine. I should like this clarified.
Mr. Collenette: This was the bill passed in the House of Commons. David Anderson was the minister at the time. I have been minister for the amendments proceeding through the House. I have just made a speech in support of this bill. I do not have a different view of this. This is government policy.
Senator Angus: That is fine. There has been no change at all since the National Maritime Policy was announced in December 1995, until this morning.
Does the policy as articulated in this document have the whole-hearted support of the government?
Mr. Collenette: Yes. I am here as a minister of the government. This is a priority bill that was put on the fast-track in the House after the election. We are all behind this.
Senator Angus: Fine. I just wanted to ensure that was the case.
I take it from your answer to Senator Roberge that you are basically opposed to any amendments at this stage. Is that correct? Would you countenance amendments coming out of this committee?
Mr. Collenette: I must be delicate about this. You are a legislative body and you have your own constitutional jurisdiction and responsibilities. However, this bill has been thrashed out for three years. Everyone has been consulted. Many compromises were made. Not everyone received what they wanted. What makes Canada such a great country is that we can put aside our differences and can come together where the objective is valuable and justifiable and reach certain compromises.
It is essential to have this bill go through the Senate after your discussions. We are here today to convince you of the need to pass this bill as it is and explain to you how the compromises have been made, why so many stakeholders believe that this is the best bill that we can put forward and why it is beneficial for the country.
Another chance will be available to review this legislation in four years. This is not forever. Everyone will have a chance to decide whether or not this bill has worked. We believe it will work.
Senator Angus: That is comforting.
In respect to the seaway, which I am particularly interested in, the expression "commercialization" is used in the policy document and in the bill itself, in the preamble, and in your remarks.
Could you say for the record, so there is a clear understanding amongst the senators, what in your view or in the government's view is the difference between "commercialization" and "privatization"?
Mr. Collenette: "Commercialization" is where all the benefits of private enterprise are deployed but the profits that arise from the management are ploughed back into the institution.
You were involved in debates on the Pearson airport between those who wished to let the private sector run it and those who believed that the airport authority model should be in play. Obviously, our government felt the latter was the best way. That is, whether it is Pearson airport or Vancouver, or any of these CPAs, the profits are ploughed back into the ports themselves so that the dividends go to the stakeholders -- that is, everyone with an interest in the port -- in the same way as they do with the airports. That is the prime difference. There is no private sector shareholder that will get a dividend out of the better management of these ports.
Senator Angus: On the other hand, if there are any losses, they will be passed on to the taxpayers, is that correct?
Mr. Collenette: I have explained this in answer to Senator Bryden. The fact is that these are commercial entities that we believe are commercially viable in the short-, medium- and long-term. Therefore, if there is a downturn in traffic and if this is a shortfall, then that can be managed in the same way a business manages it. It has all the attributes of a business except this is a non-shared corporation and the profits go to the owners who still own these ports, namely, the people of Canada.
Senator Angus: That is correct, with all the responsibilities therein, as I understand it. There is no hidden hook on this question. When you start off with a not-for-profit organization which will do the daily operations and the management, I gather you already have something in place and you need this enabling legislation. That is all fine, but the financial responsibility, whether it is capital improvements, fixing up the Welland Canal or whatever may be necessary, still is a government responsibility. Is that correct?
Mr. Collenette: Yes. I think we are mixing apples and oranges here. On the seaway, we have covered that issue for the reasons that my officials have given. The seaway is not a port, it is a highway. It is an important conduit for goods in the country. Therefore, it is being treated differently.
Ms Bloodworth: The big difference with commercialization is that there will be built-in incentives. In other words, it is not simply a question of a not-for-profit corporation running it and if this year they happen to have a loss, too bad, the treasury will cover it. That is not the kind of deal we are proposing to have. There would be incentives, for example, that would reflect in the tolls, which would go right back into it.
If something major is required, the government would be there, but they would not be there on a day-to-day basis. The deal would clearly put the operation onto the corporation.
Senator Angus: Are you envisaging there would be no losses?
Ms Bloodworth: We are certainly structuring a deal so as not to have losses. However, we accept the fact that, on the seaway, because of the nature of it and the nature of the assets that we are talking about, we cannot sit here and say, "No, it will never be." That is not because of operating losses but because of capital requirements.
We also have the added complication of the seaway, namely, that it is an asset that we share to some degree with the Americans and we must consider our relationship with the Americans in terms of what we do with it. We are certainly not structuring a deal planning to experience losses.
Senator Angus: No. Everyone who starts up a new business has the same hope but, unfortunately, looking at the number of bankruptcies and insolvencies in recent times, it does not always work out that way.
You have raised the issue of our partnership with the Americans in the seaway. Most of us can remember what a great joint venture the construction of this waterway was and how it has worked pretty well up to now as long as the infrastructure has not fallen into disrepair and as long as the trading patterns -- east and west, in particular -- continue as they have in the past. That may be changing, but it has been a good partnership.
As you have said yourself, Mr. Minister, we are proceeding with this commercialization at a time when our partners -- and, again, this is our opportunity to clear it up -- are not comfortable with the way we are going. They may have been in December of 1995, but I understand they wish that we would not proceed the way we are planning to proceed. It makes bad politics and bad sense to fly in the face of our partner in this venture -- our rich, deep-pocketed partner, who gets most of the traffic.
Mr. Collenette: Where you are correct is that, yes, there is a feeling in the U.S. that they would like a binational agency established before we move to the commercialization. About 80 per cent of this facility is in Canadian hands and is in Canada. We feel that we have every right to proceed with the commercialization since we are the prime part of it.
You must ask yourself where the U.S. pressure is coming from. Is it coming from the U.S. government? Is it coming from Congress? If so, who is driving it? When you look at some of those issues, then you will understand why there is a certain feeling and a certain response to pressure in the U.S., and that there is some unease on the part of some of the U.S. unionized workers that this is the way to go. Pressure is being brought upon certain congressmen in the Great Lakes area on this particular point and they articulate those views.
As I said before, the administration does not have the seaway as a big item on its radar screen. When congressmen stand up in the U.S. system, they must be listened to because the administration needs other bills through Congress. There is an element of U.S. domestic politics in here that is separate from what are commercial and legislative reasons for this opposition.
Senator Angus: I wish to be sure that you and your officials and your colleagues in the government are comfortable that we are not cutting off our nose to spite our face vis-à-vis our American partners. It has been a happy enterprise until now. I know about Congressman Oberstar and I have been impressed with the way you have responded to him, but I do believe that there have been ongoing talks with our American friends with a view to resolving those differences. Where do those talks stand?
Mr. Collenette: I met with Secretary Slater last year in Denver and I put this issue on his radar screen. This was not an issue that he was knowledgeable about because they did not think it was a problem. They now know the toll issue is a problem. He now knows that the issue of commercialization is central to our government's policy.
I feel that they are more understanding of our position. It gets down to a semantic kind of game as to who goes first. We have said to them, point blank, "We will go ahead and raise the tolls but we are committed to meeting your objective, which is sitting down in the U.S. government and looking at a binational agency and working towards that." Just because some interests in the U.S. -- and, it may not necessarily be the administration -- are a little uncomfortable does not mean to say that the whole Canadian government and legislative system must stop dead in its tracks.
Senator Angus: No. I agree with you -- that is, as long as it is clear and we will not create a disturbance here. It is my understanding that a witness is coming later and the industry is ready to take its chance and they are ready to go. They need this bill and I salute that.
My sense is that circumstances have changed since 1995. I would not like to see the wonderful cooperation between Canada and the U.S. prejudiced by precipitant moves in this regard.
Mrs. Bloodworth: I agree with you. It is certainly not our intention not to work with the Americans. In both 1988 and 1994 the Americans acted unilaterally and, one could say, contrary to the agreement we had with them when they decided that, for the 13 per cent of the asset they owned, they would use not tolls but some other mechanism. We objected in 1988, but that did not stop us from continuing to work with them. We have made significant efforts over the last year and a half or two years to coordinate Coast Guard inspections and so on. We intend to continue to do that.
We feel a responsibility to the Canadian public because 87 per cent of the seaway is owned and paid for by Canada. Any bi-national agency that we create must recognize that. We have not seen any proposed model which reflects that. We are not opposed to trying to find a better way to do that; we just realize that these things are not accomplished that quickly. We do not think we should wait. We have dropped our costs. Our costs per lock are lower than theirs and we will continue that way. That benefits our shippers and theirs.
Some of the major users are American shippers. We view it as a common asset for all shippers on the Great Lakes/seaway and want to plan for it in that way.
Senator Angus: I am pleased to hear that.
On a technical note, I see in clause 203 that this legislation involves the repeal of the St. Lawrence Seaway Authority Act and all the regulations that go with it.
I am quite familiar with that act and those regulations, but I see in Bill C-9, and Bill C-44 before it, that there are many provisions in Part IV dealing with enforcement. For example, there is detention and arrest of ships, seizure and sale, and disposition of proceeds. At first blush, those provisions seem to be quite different from the provisions in the St. Lawrence Seaway Authority Act. Can you give us some assurance in that regard and describe the process?
Mrs. Bloodworth: If you are asking whether we have all the authorities we need, I have been assured that we do. Mr. Bowie can add to that.
Mr. Bruce Bowie, Executive Director, Marine Reform, Transport Canada: There are a number of initiatives in the maritime area underway at the current time. One of those is the amendments to the Canada Shipping Act. We were cognizant of that when proceeding with our legislation in the Canada Marine Act. A great deal of effort was expended to ensure that the provisions included in this legislation are consistent with the intended policy in the Canada Shipping Act.
Senator Angus: Am I correct, though, that those provisions that deal with the Federal Court, the arrest and detention of vessels for non-payment of tolls and the entrapment by quasi-judicial powers within our borders and our seaway, are quite different from the existing ones in the Seaway Authority Act?
Mr. Bowie: I do not see it that way. The Seaway Authority is operating as a Crown corporation. The authorities it had in that respect were consistent with the way in which the Crown dealt with those issues in other areas.
To be responsible for navigation in a specific area, you must have the tools to ensure safety and to ensure that you can deal with ships stuck in a channel and that sort of thing. You must have the tools and the regulatory authority to address those issues and maintain safety and operation in the seaway channels, as we have in the harbours.
Senator Angus: There is a potential for a conflict of laws here. You have embarked on a program which includes Bill C-15 and amendments to the Canada Shipping Act. The whole body of Canada marine legislation is under review. I gather that this is proceeding nicely in your department. However, if I am worried that, if this act comes into effect, in the interim there will be two different processes for the arrest, sale and seizure of ships.
If you do not think that is the case, I would be happy to hear your assurance on that matter.
Mr. Bowie: As far as we are aware, there is a great deal of consistency between the two initiatives.
Senator Angus: This legislation also involves the substantial amendment or abrogation of the Navigable Waters Protection Act and the provisions that it triggers for environmental protection.
I do not profess to be an expert on environmental matters, but I believe that the federal jurisdiction will be losing the very powerful tool of environmental protection law by removing the Navigable Waters Protection Act. Do you have any comments on that?
Mr. Bowie: Yes. That issue arose after Bill C-44, when Bill C-9 was considered in the house previously. A lot of concern was expressed about the ability, through that previous legislation, to oust the authorities under the Navigable Protection Waters Act. That is why there were changes to Bill C-9 during the review process which have established a new regulatory provision. In other words, the Navigable Waters Protection Act could not be replaced through this legislation until regulations are put in place to allow that to happen. Another regulatory process would be followed first.
The purpose of the regulatory process is to ensure that the proper mechanisms are in place at the harbours and within the seaway to replicate the protections that are contained in the Navigable Waters Protection Act.
Senator Angus: I was taken, Mr. Minister, by your comment that one of the underlying goals is to make our integrated transportation system environmentally sustainable. I am placing a certain meaning on the word "environmental." From your answer, I am not sure whether the concerns that have been expressed are valid. If we pass this bill, there will be a hiatus during which our environmental protection tools will be diminished. Am I correct, or can you assure us that that is not the case?
Mr. Bowie: I can assure you that that is not the case. The Navigable Waters Protection Act triggers an assessment for works that may have an impact on navigation. That trigger will continue until there is a regulation which ensures that the ports have a procedure in place to ensure that there will not be any environmental implications.
You must consider all of that in the context of changes that are happening to the Canadian Environmental Assessment Act as well. This legislation requires all the bodies established under it to be covered by the Canadian Environmental Assessment Act, which has regulatory authority over projects and the requirement for an environmental assessment in all of these entities. The trigger that is currently contained in the NWPA would be replaced by these new regulations under the Environmental Assessment Act.
Senator De Bané: Will the new entities be covered?
Mr. Bowie: Yes. These entities will be subject to the regulation pursuant to the Canadian Environmental Assessment Act. The loop will be closed in that respect.
Senator Angus: You have an interdepartmental group working on it which is ready to proceed once this enabling statute is in place?
Mr. Bowie: Yes. The CEA advisory committee has that on its agenda now.
Mrs. Bloodworth: To clarify, until that happens, this act would ensure that the existing triggers stay in place.
Senator Angus: I am pleased to hear that.
Senator Adams: We have about 46 ports in the territories. You said that you have travelled to other communities. We do not have a big port in the Arctic. It is only open two or three months per year. Most ships are unable to get into the ports. They anchor out at sea and use a smaller vessel to unload the ship.
You mentioned something about privatizing every port. It is very difficult when there are 45 communities in the territory and not much traffic. Will it be the municipality that controls maintenance and support?
Mr. Collenette: In the territories, because of the remote nature and the issues you just raised, we have so far transferred 45 of the 46 ports to the Department of Fisheries, which will keep them operating. The government will remain liable for those ports but the Department of Fisheries and Oceans will manage them through the Coast Guard.
Senator Adams: Is there any private corporation coming in that may be charging? How will that work?
Mr. Collenette: I do not believe there is any commercial interest in any of those ports.
Mr. Morriss: In the very early part of this program, the Coast Guard accepted the transfer from us of all the ports north of 60 under the aegis of Transport. They will continue to operate them as they have in the past. As you say, many are simply anchorages where the ship drops a hook, puts the commodities across the beach, and leaves. That will continue.
Senator Adams: What with an operation like the NTCL, based in Churchill and dry-docked in the wintertime in the southern territories in places like Hay River and Mackenzie Delta? What happens with NTCL in the future if they want to get out of Churchill and move to Rankin Inlet, for example? How will they get funds to build warehouses, tank farms and that kind of thing in order to deliver good stuff to the communities, for example? Will the Department of Fisheries and Oceans fund that?
Mr. Morriss: If there were port infrastructure issues in a Department of Fisheries-owned port, that would be the department to deal with for upgrade of those facilities.
Senator Atkins: Welcome, Mr. Minister. It is always reassuring to see a review provision in legislation. Under this bill, however, it seems that once a decision is made it will be pretty difficult to reverse it. Where do you see the possibility for review in this bill?
Mr. Collenette: That depends on the circumstances and the questions that come forward at the time. The reason for the review provision in there is to reassure people that any issues can be addressed. The fact is that if Parliament passes this law, Parliament can amend it or repeal it entirely. That would only be done if absolutely necessary and if there were a consensus to do so because something had not turned out as planned or needed to be changed in some way.
I do not agree that once this bill is passed it can never be changed. Parliament will determine that.
Senator Atkins: I refer to certain aspects of the bill. Once you proclaim public harbours, for instance, the chances of re-establishing them are pretty remote.
Mr. Morriss: Deproclamation of public harbours is a regulatory provision under the Public Harbours and Ports Facilities Act. It is not further enabled by this legislation. That statutory authority currently exists. We go through the regulatory process when there is no longer any requirement for the minister to have regulatory authority over the bodies of water we are discussing. It is separate and distinct from port divestiture.
Senator Atkins: How do you decide which ports would be deproclaimed?
Mr. Morriss: The recommendation is made from a regulatory perspective. Where there is no requirement for the federal Crown to continue to conduct regulatory authority over the surface of the water in right of the Ministry of Transport -- that is, we have no more physical facilities on the shore side -- it makes sense that we would deproclaim. The minister mentioned the 199 deproclamations earlier. Those were essentially ports for which we no longer had any use, where there had been no use of the facilities for five years. In many cases, they were merely bodies of water which had historically been proclaimed as federal public harbours, but there was no activity there.
As we withdraw from the operation of the shoreside facilities, the wharves and so on, it also makes sense to deproclaim any regulatory authority we would have on the surface of the water. That is not to say, however, that other federal legislation does not continue to apply because, clearly, environmental laws and so on continue.
Senator Atkins: Are you saying that those 199 harbours were not being used, even by small operators?
Mr. Morriss: That is correct. There might have been a few pleasure boats using them, but not in the sense of a commercial harbour over which the minister would need regulatory authority.
Mr. Collenette: Frankly, in the past governments were somewhat liberal in declaring certain areas to be public harbours. Today, we cannot afford those luxuries. We must face reality.
Senator Atkins: I know a lot of members on the east coast who would agree with you. I feel sorry for some of the small operators in these small ports in our province of New Brunswick.
What is the reason for Oshawa being separate?
Mr. Bowie: When we were initially preparing the list of potential Canada port authorities, a major study was done of potential candidates by an investment adviser. The study looked at the financial situation of all the ports and at the future prospects for development of the potential candidates. That was one part of an analysis of four criteria to determine whether a port would qualify as a Canada Port Authority. They looked at self-sufficiency.
In addition, there is a requirement that the ports be important and significant generators of activity in the area and region it serves. It should have a major railway or highway serving it, as well as significant and varied activity at the port.
The conclusion of the analysis of financial self-sufficiency and the other criteria was that the nature of the activities at Oshawa did not satisfy those criteria and therefore it was not included on the list.
Senator Atkins: Is Hamilton in or out?
Mr. Collenette: Hamilton is a CPA. There were some outstanding local issues that had to be resolved and were able to resolve them.
Senator Atkins: So your colleague is happy now?
Mr. Collenette: The government is solidly behind this bill.
Senator Johnstone: Mr. Minister, we thank you for this opportunity to voice our concerns. My concern is the small ports. I notice that some $5.6 million has been committed to essential repairs in Charlottetown and Summerside. I understand that this will be short-term and non-recurring. Summerside has special problems, such as dredging. It is not considered viable on its own at the moment.
Am I to understand that there is no arrangement for continuity if Summerside does not become viable, regardless of the impact on the community, on industry -- particularly the potato industry -- and on processing plants?
Mr. Collenette: This is why it is crucial to work toward establishing CPA. We believe that the four ports taken together will generate enough revenue to operate a viable Canada Port Authority.
To give them time to reach that status, we have put this money in to make a number of essential repairs at both Charlottetown and Summerside and, in the case of Summerside, to do not only berth dredging but channel dredging so that the port can keep in good operational shape until the issue of CPA is resolved. We have done this, and while I would not say we have bent the rules, we have certainly been as flexible as possible within the rules because we feel strongly that there should not be one coastal province that does not have access to a CPA. Try not to look at it as Summerside on its own but as part of the four.
Senator Johnstone: You are really saying we should not worry, we will be all right?
Mr. Collenette: We think so. I spent an hour with George Proud and Joe McGuire yesterday. If you reassure them and keep them happy, things should be okay. I think people in Summerside want to take the leap of faith to be part of a Prince Edward Island port authority, and they think they can make it.
Senator Johnstone: Thank you. That makes me feel a lot better.
Senator Callbeck: Thank you, Mr. Minister, for attending today.
I am not a member of this committee, but I am genuinely concerned about the four ports on Prince Edward Island. I want to thank you for the consideration that you have shown our province to date with the $5.6 million that you mentioned this morning. It shows that you realize the importance of the port system to the economy.
As you know, we are a small province surrounded by water. We have been working very hard to become self-sufficient. We are making great strides and we want to continue down that road. In my opinion, to continue down that road we must have a viable port system. As you are aware, we do not have any rail connection, which makes the port system even more important. My concern about this legislation is that I do not see any commitment for long-term operation of the ports in the province.
You mentioned a study -- and certainly we welcome that -- to see if we can have a designated port authority. My understanding is that that would include a business plan to show that we will be self-sufficient. Senator Johnstone has just referred to that, and in your answer you said that you think this study will determine that we can be self-sufficient.
I hope you are right, Mr. Minister, but I have real concerns about this study done by Portability International showing that we can be self-sufficient. That is why I am here this morning.
If the study, which I understand will take about two years, concludes that it is not possible to have a self-sufficient authority on Prince Edward Island, what happens?
Mr. Collenette: Again, senator, I like to look at the glass as half full rather than half empty. I think it will show that there is a viable port operation. The government is committed to ensuring the viability of the Prince Edward Island port system. We believe that Prince Edward Island, as a coastal province, must have a port system. I think that can include keeping the four ports open. As you know, Georgetown actually makes money. Summerside has good revenue and has potential to make money. The study you referred to just dealt with Summerside and did not look at them as a package, I believe.
Senator Callbeck: They are all here.
Mr. Collenette: Yes. Souris, of course, is assured because of constitutional ferry obligations. We believe, for a number of reasons, that Charlottetown is viable in the long run. Put together, we think the pluses will outweigh the minuses.
Let us assume that the glass is half empty. I am sure that you will be here in four years and you will be able to make that point to the government. You will be able to say, "It did not work." The ultimate guarantee is that this bill will be reviewed. The money we are putting in will take us well into the early part of the next century in terms of viability for repairs and dredging. In the meantime, the CPA structure will be put together and I think it will work.
Senator Callbeck: Thank you, Mr. Minister. I certainly hope you are right. I, too, believe in looking at the glass as half full.
You say you are committed to the viability of the port system on Prince Edward Island. Can I take it from that that if this study shows that we are not self-sufficient, money will be forthcoming from the federal government to keep our ports viable? According to this study of the four ports, roughly $50 million must go into the ports in the next 10 years for dredging, maintenance, upkeep and so on. The Prince Edward Island government does not have that kind of money and certainly the communities do not. This is why I have a very deep concern. I know that in four years it will be reviewed, and I welcome that. I hope the results of that study are what you think they will be.
Mr. Collenette: I do not mean to knock the government or the overhead of the government, but since we announced this there has been every indication that dredging costs will come in lower than they would have been forecast had the government done it.
You talk about $50 million. I do not know whether that is an accurate figure, but the fact is that there will be revenues that come to the port. The port as a CPA will be able to pledge assets and revenue streams to make repairs, and they will do it in the most efficient way possible. They will do it in the way that will enhance the business.
However, if all else fails, clause 72(8), which was included at the behest of Mr. Byrne, an MP from Newfoundland, provides for continuation of the ports that are not transferred by the end of the program. That is an absolute guarantee that if there are absolute political needs the government will have to continue with those ports. As I said, the government is committed to the viability of the Prince Edward Island port system . That applies not only to P.E.I. ports but to others as well. That is a bit of a safety net.
Some will say that just means the minister can make a decision for or against a port. Any government that makes a negative decision would have to justify the action and pay the political price.
Senator Callbeck: I do not know whether these figures are accurate or not. They are figures which, according to the study, were provided by Transport Canada. Perhaps they will come in lower. I certainly hope that they do. I am very much comforted to hear you say that you are committed to the viability of the ports and I thank you very much.
[Translation]
Senator Poulin: Thank you, Mr. Minister, for your excellent presentation. We very much appreciate your availability, the information you have provided and the discussion it generates.
[English]
If I correctly understand the presentation and the reading that I have done, the new management model appears as a three-pronged system; the seaway, the large harbours and the small ports.
Mr. Collenette: Essentially those are the three variances, yes.
Senator Poulin: How long do you foresee the transition period taking from the current management model to the future one?
Mr. Collenette: We are doing it pretty fast. We have transferred 114 ports to date. We have letters of intent from 109. We are moving as quickly as possible.
We are also constrained by the program review of the government that requires certain cash relief, from a government spending point of view.
Senator Poulin: Would you see the transition taking two or three years?
Mr. Collenette: Ideally completion is set for 2002.
Senator Poulin: You were saying the objective is efficiency. How much money will Transport Canada be saving?
Mr. Morriss: The federal Crown will be saving about $40 million a year on the smaller ports.
Ms Bloodworth: It is important to realize that is longer term because, as part of the savings, the government has created the $125 million fund. That is the one of the three prongs; the other two are on slightly different terms.
We propose to implement the Seaway Authority once the bill is passed and during the current shipping season. We have up to a year after Royal Assent, but we would be looking at early next year, if not the beginning of next year, to bring into effect the Canada Port Authorities. There are three different tracks because of the nature of them being quite different. On the small ports, the track is the longest, if I can put it that way, because we have until 2002.
Senator Poulin: My concern is the smaller ports. One of the key philosophies of Canada has been rebalancing the country with help from the richer regions to the poorer regions, to the regions that are further from the large centres.
I am from Sudbury. When privatization of the railway system was discussed a few years ago, it sounded extremely good. It sounded like it was done for all the right reasons. Today, there is no train that links Sudbury to Ottawa or Toronto. It has been a major loss for the area. We know that communications -- be it transportation, telecommunications or broadcasting -- is a pre-requisite for the success of all Canadians, wherever they live.
There is a small port in Sault Ste. Marie. What will this mean for the people of Sault Ste. Marie? What will it mean for the people who live in other small communities in this country?
Mr. Collenette: I will deal with the general philosophy and perhaps Mr. Morriss can talk about Sault Ste. Marie.
I share your view of the country. We have succeeded in creating a country that is the envy of the world because we have been willing to share. Those of us from the wealthier parts of the country, like Toronto and other big cities, certainly believe that what goes on in northern Ontario or in a small port in New Brunswick or Newfoundland is important. We want the country to remain viable. We do not want everyone from Newfoundland going to Toronto, not because we do not like them but because we do not believe they all want to go there. They want to have the dignity to work and live in their own province. I concur with your philosophy.
The government has obviously tried to balance that inherent belief and set of principles with the fiscal reality with which we have been confronted in the last few years. Some argue that we have devolved too much. Others say we have had to do it in the short term, but we will continually review this and that is why we have the four-year provision in this bill.
On the subject of rail service, I can make good arguments for the policies which have been implemented. The privatization of CN has gone reasonably well. There are a few bumps in Saskatchewan with regard to wheat farmers, but by and large most of the track that has been abandoned has been taken up by short haul operators and the railways have become much more viable.
The question of passenger rail is a different issue. You put your finger on a good point. I have asked the House committee to review the passenger rail issue and report to me very quickly because we must do something with VIA Rail. We must reorganize, refinance and recapitalize it very quickly. If we do that with better equipment, you are likely to see more smaller communities resume rail service. There could be a good commercial argument to restore rail service from Sudbury and area to Ottawa. Although one of the lines has been abandoned, there still is a way to do it. That is an issue for the future. We must get VIA on its feet to do that.
Mr. Morriss: With specific regard to Sault Ste. Marie, as you know, the wharf is used essentially for the movement of petroleum products, with only a few other purposes. We are in final negotiations and expect that that port will be transferred to local interests under their management.
[Translation]
Mr. Pageot: I could definitely add trade. For the past seven or eight years, the value of Canadian exports has risen from $100 billion to $223 billion. The last figures on imports, from 1996, rose from $86 billion to $157 billion. Canadian traffic increased by approximately 200 to 250 percent and is increasingly competitive with that of foreign countries. That traffic is shared among the smallest and the largest ports.
The best way to react to competition is to reduce costs more efficiently and to eliminate overhead. I don't have much in the way of direct administration in the ports, but I administered the ferry docks. When you have to repair a ramp at the ferry dock in Newfoundland or Blanc-Sablon or put up a sign indicating the departure and landing points for the ferries, it's incredible the number of months that can take. We have to receive a request through a regional head office that comes from the federal government. Then we have to have an approval in principle document. Then we have to enter into a contract and use Government Services people. Most of the savings will not come from local job cuts, but from administrative overhead, from cuts to the bureaucracy. So that can go pretty quickly.
We do not have many examples around the world. No ports in the countries where there has been privatization have been closed. Since these decisions were made in the private sector, New Zealand ports have become much more competitive than Australian ports. And the results have been quite impressive to date.
[English]
Senator Poulin: To come back on the issue of efficiency, the deputy minister said a while ago that, with the three-pronged process, the savings in one area have established the pool of funds to help certain small ports during the transition period. Can we have a copy of that evaluation of savings and additional costs for the next five-year plan?
Ms Bloodworth: I am not sure we have a specific document, but we can certainly explain to you how we arrived at that. I was referring to the $125 million fund. When it was established and approved by the Treasury Board, it was on the basis of certain savings that would be generated by the Transport department.
Mr. Morriss: The savings were created in the department's budget from anticipated reductions in costs that we would have around the ferry service when it was devolved to various companies and so on. It would be difficult to track it. Suffice it to say the $125 million does exist as real money in the department's budget for use specifically for the port divestiture activity.
Senator Poulin: What will be the process for the small ports to access that fund?
Mr. Morriss: It is not a fund to which you apply. It is a fund available to us once we enter into discussions with the local communities to come to a mutual agreement on what amount of money they feel they need to operate into the future. For example, we did a deal in North Bay quite recently, and the consideration provided by the federal Crown was $50,000, which they felt was sufficient to see them into the future.
Senator Poulin: Coming back to Sault Ste. Marie, I noticed also in the briefing notes that there will be a transition for employees who will move from a public servant job to a position with a small private port.
Mr. Morriss: I am not aware of there being any Crown employees in Sault Ste. Marie who work for the Department of Transport in harbours and ports. Our ports are typically run by a fee of office appointment as a wharfinger and, if necessary, a harbour master, which are ministerial appointments, and they are remunerated on a commission basis based upon the amount of traffic they generate. They are not employees of the Crown.
Ms Bloodworth: You may be referring to the Seaway Authority employees and the Port Authority employees. Both of those groups of employees will move to a different status. There is provision to continue their benefits, salaries and so on.
Senator Bryden: I would like to refer to the so-called faint hope clause, clause 72(8). It says, subject to the regulating section:
...the Minister continues to have the management of public ports and public port facilities that the Minister has not disposed of or transferred.
That is very clear. My concern, and perhaps that of Senator Callbeck and some others, is not the ports you have not sold or got rid of or transferred to municipalities, but the ones that you did, and then they failed.
The ports do not fail because there are no potatoes. They do not fail because the mine has run out. They fail due to bad management or whatever. All of us have been in business and politics long enough to realize that there exist some unscrupulous groups and individuals who may very well treat this program as an opportunity for five years of very good revenue. When the money is gone, it is gone.
Is it possible to put in a provision comparable to what is here if you are left with some ports for whatever reason? I do not know why you would ever be left with a port because, as I read the divestiture, you go through the province, the municipalities, the not-for-profit organizations and the private sector, and the rules say that it then goes to tender. Under the tender process, presumably the highest bidder gets it on the point system, which I do not understand and I do not need to go through.
There is a question as to whether, if we apply the system for the next five years, there will be any that have not been disposed of. If there are some, I accept that the minister will still be responsible for them. On the other hand, of those that have been disposed of, some of them will not be successful. Where is the faint hope clause if those ones happen to be critical to a province or a community?
Mr. Collenette: The first point is that there is a review in four years, but there is a transition that I think will give you some comfort. I will ask Mr. Morriss to elaborate on that.
Mr. Morriss: Senator, there are two tracks. You made reference to the public tender process. That process is only used, as you say, when all other avenues have been exhausted. We would have gone to the local community. We would have tried to attract all the local users, both political levels, other stakeholders, businesses that depend on the port, and the port users themselves into some sort of entity that would see to the future viability of the port. If we have tried that and failed, it is only because no one was interested. We only go to the public tender process when no one else has expressed an interest in continuing to operate the facility.
For the facilities essential to particular provinces or particular cities, it flies in the face of logic that they would not be interested in continuing the life of their ports. The public tender process is the last chance to put it in the hands of a user who might be able to make good use of it.
The other side of the equation is where we have entered into an arrangement with a group which subsequently fails for some reason. In that transaction we will have imposed an operating and monitoring period during which the group must agree to operate the port. That period is for a minimum of two years and a maximum of 10 years, depending upon the financial consideration provided by the Crown. If they fail during that time, the Crown has the option to take the port back for a nominal value. That is not to say that we would have to continue to operate it. If the group failed because there was no viable business, we would have to assess whether it made sense for the Crown to continue to operate a port with no business.
Assuming the group had gone bankrupt due to bad business practices, for example, we would have the opportunity to reacquire the port and decide whether to continue to operate it or to seek other operators for it.
Similarly, in the monitoring period that goes beyond that, depending upon the financial value of the transaction, we would share in any profits the entity made if it flipped the facility. This is the windfall profit protection that protects Her Majesty if, after having contributed $500,000, the day after the operating period ends the group flips it for $5 million for condos or something. The Crown gets a share of that proceed during the monitoring period. In some cases, that period can be in the neighbourhood of 20 years or more.
Senator Bryden: Could you give us a sample of one of those documents? Are you saying that if you do one of these deals and it goes bad, it is like the minister being the mortgagor; he just takes the property back?
Mr. Morriss: That is right.
Senator Bryden: I believe I heard a term of up to 10 years.
Mr. Morriss: The operating period; that is right.
Senator Bryden: In that instance, it is probably the case that the port would still be vested in the minister.
Mr. Morriss: There is a transaction done. It is a title transfer. A set of legal documents is executed. However, in the terms of the arrangement, there is this operating period during which the operator must comply with a certain series of conditions antecedent to the deal. One of those is that they cannot do certain things and so on. That is in return for the Crown having put the money on the table for them to operate with. The money does go. We do not attach any string to the money.
Mr. Collenette: You are right, senator. If we have title for a dollar, then clause 72(8) becomes applicable and we are obliged to operate it.
Senator Bryden: The property goes back to you.
Mr. Collenette: That is right.
Senator Bryden: To get back to my original line of questioning, before the prior bill was introduced, Bill C-44, there was a great deal of analysis and discussion on the policy with the large port authorities, with the seaway and on pilotage. However, I have looked and have been unable to find analyses or studies on the impact of this policy on small ports and surrounding communities.
Could you let us have a copy of the studies that were done in that regard?
Mr. Ranger: There was a study done by Ernst and Young on the efficiency gains that would be achieved by the entire marine policy, including all the other elements; seaway, major ports, pilotage and so on.
I assume when you raise that question you specifically have in mind small ports. I am not only ADM policy; I am also a transportation economist. I have been in that field for 24 years and have worked around the world. If I were asked to conduct an impact study of the small port divestiture program, my professional advice would be that you must look at each case.
Whenever we discuss this, in the first two minutes of the discussion we start using examples. This is precisely the approach that we have adopted. The minister initially said that there have been 200 public meetings. We engage the province, the municipality and the local business interests, and we develop a business plan. You cannot develop a business plan out of thin air. You must look at the economic drivers in a given community, at what moves now and at what will move in the future.
Senator Bryden: To come back to my question, you said that if you were going to do that analysis you would need to deal with each port on a case-by-case basis. Prior to the policy being implemented in the bill, which cases did you look at? Did you examine in advance Port Hawkesbury or Harbour Grace, for example, with the same level of concern and attention that appears to have been involved in looking at Halifax and Saint John?
Mr. Pageot: There were two streams. In the first, the focus was on the overhead, the bureaucracy and how to speed up decisions. You must keep in mind the spirit of the reform. In the reform we are involving local people in dialogue and decision making.
Senator Bryden: Can you give me specifics? I know that now that is happening.
Mr. Pageot: We cannot have a master plan for what should happen in New Brunswick or Ontario. The nature of our reform is not to decide for you; it is to let you be part of the dialogue and let each region decide how they will proceed. Only after these discussions are held on a case-by-case basis could we measure. We had an overview of what the impact would be for overhead, the bureaucracy, reductions, and speeding up decisions, so that it would not take 18 months to give permission for a container crate.
Senator Bryden: That is once you have determined that there will be a policy. You talked to many people but, prior to the introduction of the policy what studies were done of the impacts of the policy or of what policy would be most appropriate for Port Hawkesbury, Summerside, et cetera? I know you are saying that the only way you can do that is to look at specific cases. Did you look at those specific cases to determine what the most appropriate policy would be for them; not for Halifax, not for the seaway, but for these small commercial ports that are dramatically important, socially and economically, to many regions, and certainly the region from which I come?
Mr. Pageot: There is no denying the importance of that. Perhaps I am not expressing myself well. The major element of the policy is the involvement of users and participation by municipalities and other groups. It is not possible to reach an impact statement on a port site basis if that is your policy. It is impossible to do what you would like to do unless you go back to the 1960s and develop master plans where Ottawa would decide on behalf of everyone in every region.
Senator Bryden: You are misunderstanding my question. When the policy was being developed, were the people who lived in the communities, dependent on the small ports, asked what will be the appropriate policy for the year 2000 and what will be its impact on their port? If they were, I would like to see a copy of that.
Mr. Pageot: A parliamentary committee chaired by Mr. Stan Keyes visited all the regions of the country. People intervened on the policy and made recommendations and suggestions. That was a source of guidance for our legislation.
Mr. Collenette: I think we agree, senator, that it is better that the input for policy making come directly from political people who understand the regional sensitivities than from hired guns from the big four accounting companies in Toronto or Montreal who are given an arbitrary set of assumptions. As I said in my opening remarks, this is the culmination of a consultative process. Parliamentarians asked for the opinions of people across the country. They held hearings across the country. Users and others participated. We can give you the record of that debate. As a result of that commentary, the department formulated a policy.
On the question of divestiture, we have told you that the $125 million is there. One can ask whether that is enough. If it is not, we will have to go back to Treasury Board and make a case for more money to assist in certain instances.
On the question of the small ports that are divested to private industry and fail, there are guarantees that they will revert back to the Crown.
I do not want to be argumentative, but I think we have addressed each of the legitimate concerns that you have raised. This is probably the first time that these concerns have been dealt with in as intricate a manner, as a result of your questioning. With great respect, I think that we have given you the assurances you require.
Senator Bryden: Where I come from little distinction is made between whether a particular initiative which affects people's lives is a Department of Transport initiative or a Department of Fisheries and Oceans initiative. As we know, studies were done and transfers have been made of the work that used to be done by the Department of Transport or by the Department of Fisheries and Oceans in some instances, and by the Coast Guard. It has all been moved around.
The Hickling report was done to determine the impact of those so-called major marine initiatives. It is interesting that the report concluded that the impact of port reform would be neutral in most cases. I do not know on what basis they assumed that. I presume it is on your basis. However, they also found that the impact of these major marine initiatives were disproportionately heavy on Atlantic Canada.
The report summary says:
Summary Impacts of the Marine Initiatives by Province
The impact of the Marine Initiatives is not spread evenly but falls harder on certain provinces, as shown in the figure below... The Atlantic provinces experience the highest costs due to their reliance on ice breaking and in some areas, such as the Miramichi, due to high dredging costs.
The graph shows that Prince Edward Island is impacted by $1.2 million, Newfoundland by $.8 million, and New Brunswick and Nova Scotia by $.8 million. The impact on Quebec and Ontario is very low and there is no impact on B.C. As a percentage of the total transport costs, the Atlantic provinces are bearing the highest costs of these Maritime initiatives.
These other costs for which you are no longer responsible is one of the reasons many of these smaller ports may be in jeopardy, because it does cost more money in Atlantic Canada for ice breaking and for dredging.
The report concludes that "none of them reached the $40 million impact level." What is the $40 million level that Hickling is talking about? Is that the $40 million that the Department of Fisheries and Oceans or the Coast Guard had to cut for their restructuring?
Mr. Collenette: As a result of that study and other criticism that were made, DFO has changed its ways. The Coast Guard has a new commissioner and they are reviewing this.
I met with my colleague Mr. Anderson this week on the ice breaking issue. It is not for me to divulge details of that meeting except to say that I firmly believe that the ice breaking issue will be dealt with to the satisfaction of everyone.
This is a legitimate concern. It has been raised and it is being dealt with. This is over and above the institutional or structural issues we are dealing with in this bill on the management of ports.
Mr. Pageot: I was on the steering committee of the Hickling report. The objective was to review the recommendations of program review which suggested Coast Guard targets of $20 million, $40 million and $60 million. The consultants were asked, "If ever you meet a target such as $60 million or $40 million, what would be the impact?" They identified sensitivities which resulted in the Coast Guard changing its approach.It reduced the overall recovery and created the Maritime Regional Advisory Board, which meets regularly with them and is now determining a much more appropriate level.
The Coast Guard will also consider a fee review mechanism for sensitive commodities. For example, for commodities such as gypsum, which was identified by Hickling as being sensitive, a special rate was negotiated. The name of the game is to be more competitive, not less competitive. Port reform should allow that if you reduce the cost of overhead and management fees, all these issues are examined with regional advisory boards across the nation.
Any charge is often the subject of debate, because it gets you into the area of government accounting and accounting measures. In the end, however, everyone is a winner. A system where users not only pay for the service but also have a say in its operation is much closer to the needs than one where all decisions are made in Ottawa.
Mr. Collenette: I have told Senator Bryden privately that, because of his immense interest, we are prepared to take time to discuss his concerns with him individually.
The Chairman: We can also invite senior officers from the department back if necessary.
Senator Bryden: My last question concerns Port Tupper and Port Hawkesbury in Nova Scotia. Martin Marietta runs an aggregate company in that area. As a result of the study, it is clear that if the level of its costs for ice breaking continues, it will close. The company has made it very clear.
Hickling concluded that 60 jobs would be impacted by the disruption, $10 million of local spending, and that the company payroll remittances of $210,000 in corporate income tax would be lost. There are a number of other examples of that. These are some of the concerns. They are not directly related to Bill C-9, but this is the only chance that we will get to discuss some of these concerns.
That has left a huge impact on the community. There are other areas that have been impacted as well. The Miramichi had basically the same impact. They just stopped using the port as a port. They may use it for a marina or something, but they changed their method of transportation. They are paying more. Ultramar is also paying more to bring goods in by rail. How long will that remain competitive?
This is a concern that is being voiced by Senator Callbeck and others. It is a concern that eats away at us. What will be done to deal with that?
Mr. Collenette: As Mr. Pageot said, as a result of this study, changes have been made. I can tell from meetings that I had this week that the icebreaking issue will be amicably resolved. Everyone involved in the discussions with my colleague has given input, including users such as the ones you describe.
I am glad you recognize that this does not directly affect the structural issues we are asking you to deal with in this bill with respect to ports. I realize that it has another impact, but it is an impact that is being dealt with and will, I believe, resolve the situation.
Senator Bryden: Is there anything of a similar nature happening in relation to dredging?
Mr. Collenette: The Coast Guard is looking at that issue because it is an outstanding file that must be dealt with in government. I will be urging my colleagues to deal with it with the same sensitivity with which we are dealing with the icebreaking issue.
Mr. Pageot: All these issues are under active review by our colleagues in the Coast Guard. Keep in mind that there were a few dimensions to the report. When the users are involved or have to pay a bit more, they expect you to be efficient. The Coast Guard has been actively looking, as have we with this bill, at reducing the costs and the overhead and being more efficient.
They have also been looking, as have we, at alternate service delivery through partnerships with people who can contribute to growth. As an economist, I can say that if I pay an interest rate of 6 per cent on a mortgage, and the costs are lower everywhere and transportation is more efficient, I am a lot more confident in the growth that we will see over the next few years. We are already seeing results. The ports will share in that.
Senator Atkins: Can you bring us up to date on the privatization of ferry services in Atlantic Canada? How many services are in the process of being transferred? What problems are you encountering?
Mr. Collenette: We did not come prepared to discuss that, but we will certainly give you a written detailed report on what has happened so far with costs, et cetera. Of course, we are still constitutionally responsible for some the of the ferry services such as the one Marine Atlantic runs to Newfoundland. We support other services to P.E.I. and to the Magdelaine Islands. We can detail that for you.
Senator Atkins: Did they move the headquarters of Marine Atlantic?
Mr. Collenette: We are close to making a decision on that.
The Chairman: Thank you, Mr. Minister and witnesses.
Our next witnesses are from the Shipping Federation of Canada.
Mr. Francis C. Nicol, President, Shipping Federation of Canada: Honourable senators, most of our points have been made by the minister earlier today. Nevertheless, some do bear repeating.
Our federation represents 78 Canadian companies which either own, operate or act as agents for about 90 per cent of ocean vessels trading to and from ports in Atlantic Canada, the St. Lawrence and the Great Lakes.
The vessels handled by our members provide an essential service to Canada's manufacturers, exporters and importers by transporting overseas virtually all of their trade, which is about 150 million tonnes. As major users of the services provided by the three eastern pilotage authorities, by the ports, and also as the main representative of ocean shipping using the St. Lawrence Seaway, the federation has a vital interest in Bill C-9.
The federation testified before this committee last April to express support for Bill C-44, the predecessor to Bill C-9. We are here today to lend our support to the passage of Bill C-9.
The proposed legislation was not developed in isolation overnight. It took three years of hard consultation between government and the various sectors of the maritime industry; three years of active debate, compromise and collaboration. From an industry point of view, such collaboration would have been unimaginable several years ago. Yet, today nearly all of our industry agrees to accept Bill C-9. Although it may not be exactly what they want, although it may not address the specific needs, everyone believes the bill to be so valuable to our industry that we should push ahead with it.
I should like to revisit some of the essential components of the bill. I will begin by highlighting the pilotage section. This section contains three essential features which call for the reduction and elimination of deficits of the authorities, a more expeditious rate-setting process, and the introduction of a no-strike, no-lockout regime. This would come into play during contract negotiations between the pilots and their employers.
Nowhere was the spirit of cooperation and compromise more evident than in the agreement between the industry and the pilotage sector to accept the introduction of a no-strike, no-lockout clause. This step is without precedent in our industry. The development of this clause, which ensures the uninterrupted flow of Canada's commerce overseas, would have been inconceivable just a few years ago.
The members of the federation account for approximately 70 per cent of the pilotage revenue earned in eastern Canada, and we are confident that the features we have just mentioned will make the system much more efficient. We must seize the momentum and implement these progressive amendments as soon as possible. They are large steps indeed.
Pilotage is not our only reason for supporting the proposed legislation. Over the last three years, the federation has worked with other parties to address Canada's need to rationalize its marine infrastructure. Carriers have long believed that our port system was outdated and overburdened with bureaucracy. This greatly reduces the efficiency of the ports and makes Canada less competitive in the international marketplace.
We, as the major users of the port, believe that although the national port system proposed in the bill may be less than perfect, it incorporates important changes, checks and balances which will allow Canada to develop a better system and will encourage individual ports to implement important efficiencies.
The key elements of the proposed system include the elimination of bureaucracy, the introduction of greater commercial discipline, the appointment of user representatives to the boards of the various port authorities, the implementation of an appeal mechanism for fees, and other interesting features.
Finally, with regard to the seaway, the federation believes that the Bill C-9 provides an acceptable basis for both the initial commercialization of the seaway and the eventual implementation of a bi-national management structure for it.
The introduction of greater cost efficiencies is necessary, and we believe that the transfer of management to the private sector is an important first step in this direction.
We would again emphasize the progressive aspects of the bill, and the importance of such aspects to both the marine industry and the Canadian economy as a whole.
As I have said before, we do not pretend that the proposed legislation is perfect or that we should rest on our laurels. On the contrary, we believe that, once implemented, the act should be carefully monitored and amended as necessary to ensure that Canada's marine policy continues to evolve to meet the changing needs of its international carriers and the country as a whole.
In this regard, we are very pleased to note that clause 144 of the bill calls for the complete review of the act within five years, and we believe the ongoing involvement of this committee will play a vital role in that process.
In view of all we have said today, it must be apparent to the committee that the federation is eager to participate in the implementation of the act's major provisions, and I would like to assure you all of our cooperation in that respect.
Thank you for taking the time to hear us today.
The Chairman: Thank you, Mr. Nicol. Are you satisfied with the provisions regarding the appointment of directors of the Canada Port Authorities?
Mr. Nicol: We would, of course, have preferred to have direct representation of our carriers, but we are satisfied with the minister making the appointment from a list proposed by carriers and users.
The Chairman: There will be a dividend or stipend paid to the federal government. Since it seems it will be based on gross revenues, do you think this stipend will be fair?
Mr. Nicol: We would have preferred to see net revenue, but gross revenue is acceptable. This bill is so important that, even if it has a few warts, we can live with them. I think you would find that my confrères in the other Maritime associations have very similar views. The bill is not perfect.
Senator Roberge: I have a technical question. What is the mechanism in the pilotage authority under the no-strike, no-lockout clause if you do not come to an agreement?
Mr. Nicol: A selector is appointed.
Senator Roberge: Is he an arbitrator?
Mr. Nicol: He is like an arbitrator. They call him a selector. It is final-offer arbitration. Each side puts in its best offer. The arbitrator tries to bring both sides closer together. If he is unsuccessful, he takes the final offers and decides on one or the other. The idea is to have both sides put in their most logical and best final offer, as that is the one likely to be chosen by the selector.
Senator Roberge: What is your opinion on the port policing?
Mr. Nicol: Port security is very important to our members. As a matter of fact, the Shipping Federation of Canada was deeply involved in the forming of the Ports Canada police many years ago in the days of the National Harbours Board. At that time, we had unfenced terminals and break bulk cargoes arriving in packages with little protection. Theft was rampant on the waterfront. A police force was formed and did an effective job of controlling that type of theft.
However, the industry has progressed since then. We no longer have the break bulk packages that attract theft. Goods arrive in containers which thieves have difficulty getting into. We are now experiencing a different kind of theft, which requires a different kind of policing. Nowadays, the whole container goes, and that involves a lot of fraud as well with the cutting of false documents and reshipment overseas. A different kind of policing is required from that which we used to have.
As the minister said earlier today, there are the other enforcement agencies on the waterfront, such as Customs. The Shipping Federation of Canada has been very involved with Customs in the drug interdiction program.
Senator Perrault: The RCMP are still deeply involved.
Mr. Nicol:Yes. Customs and the RCMP are the two agencies involved.
Senator Roberge: You believe that the new regime of municipal police will be satisfactory with regard to fraud and theft?
Mr. Nicol: I believe it will be up to the board of directors of the various port authorities to come up with an effective policing system for their ports. It may not be the same system in each area. Different areas have different needs. Different cargoes require different means.
Senator Roberge: Are you saying that we will basically be reverting back to port police?
Mr. Nicol: No, I am not saying that. It is up to the ports to decide that. They may use security guards, and they may require fewer of them because of the type of commodities going through their port. Every port will be different. It is up to them to provide their own security. I know that if the security is not good, the user representatives on the board will let the ports know very quickly. I am not worried about the security system.
I am sorry to see what has happened to Ports Canada police. We were involved with them very much in the past and I have a lot of friends there, but we have evolved and there has been a change in our needs.
Senator Perrault: We have received a very heartening report.
Senator Bryden: My question relates to policing and safety.
A study done a few years ago indicated that most of the accidents that occur in marine transport are a result of human error. Atlantic Canada is very much an accident waiting to happen due to conditions there.
It is suggested that the increased competitiveness and the quicker turnaround time, with everyone trying to be more cost effective, will increase the possibility of a tanker doing something in violation of our environmental laws or regulations. With no port police on the scene and no harbour masters in some places any longer, that vessel may be more apt to just slip away. Is that a concern?
Mr. Nicol: Not really. If there were a contravention and a vessel were arrested in Canada, it would be very difficult for it to flee. We have the Coast Guard and the navy. The ship would require a pilot to get out of the port and pilot clearance would be withheld. There would be very little chance of a ship slipping out.
Senator Bryden: I am referring to the Brander-Smith study of 1990. I would like to read you the following quote:
The overwhelming majority of tanker accidents are caused by human error.
The Coast Guard is seriously under-resourced and cannot provide the level of monitoring, inspection and surveillance required to adequately protect our waters. Despite the fact that it commits most of its inspection resources to compulsory inspection and that Canada is a signatory to an international agreement requiring inspection of 25 per cent of all foreign tankers entering its ports, only 8 per cent of foreign tankers are inspected.
He found the Coast Guard to be under-resourced in 1990, before the restructuring and the cutbacks. Would this situation not be even worse today?
Mr. Nicol: One might be led to think so, but that is not the case. We are inspecting more ships every year. We are working up toward 25 per cent.
Senator Bryden: Is this being done by the Coast Guard?
Mr. Nicol: Yes.
Senator Bryden: As you are probably aware, the CBC ran a series on drug smuggling and organized crime through the ports. Former officers stated that the pressure to be competitive as a port authority, to do a maximum amount of business and to be profitable, lends itself to discouraging the inspection of goods because the longer a ship has to stay in harbour, the more it costs. Have you had any indication of that? If that happens, does it happen frequently enough that we should be concerned about it?
Mr. Nicol: No.
With regard to drug interdiction, within the last three or four years the members of the Shipping Federation of Canada got together with Customs and designated special areas in ports where suspect containers are taken and inspected as a result of intelligence received. The container is opened, inspected, and then restored.
This has been a successful program so far, but it is costly. No one knows if their container will be inspected. When it is, you can imagine the screams we hear, because it costs extra money to do that. This permits the ship to keep going.
It is not necessary to hold container ships or liner ships that are on regular trade to Canada. They or their sister ships will be coming back. They are on a regular service and can be processed.
It is a little different with tramp ships that may not return for years. These ships carry bulk cargo such as ores, sugars and grains. They arrive empty, so the chance of concealing something is less than on a container ship.
Senator Bryden: That is very useful and informative.
Senator Perrault: My port is the Port of Vancouver which holds certain records on the West Coast for bulk shipments. Containerization has certainly cut down on theft. However, we are plagued with a very high level of theft of luxury automobiles which are loaded into containers to beat the law. Is that a problem for our eastern colleagues?
Mr. Nicol: Yes. As a matter of fact, I personally have had two cars stolen. When the second one was stolen, we got together with the local police and we realized there was a problem. The municipal police and the RCMP sat down with the industry to see what they could do about it.
Someone who ships cars oversees would bring a car to an agent. They would have all the documentation, and the agent would have no reason to suspect them. They just put the cars in a box and take them away.
We have been able to train people to look for false documentation. People are alerted to it. It still happens, but it is not as prevalent.
Senator Perrault: It was very bad a year or two ago.
We are looking forward to learning about the new high-tech method that you have developed to go beyond the container and make it even more secure.
Mr. Nicol: The new technology is amazing. They even have sniffers listening for heart beats to detect stowaways inside containers.
The Chairman: Thank you very much for your presentation today.
The committee adjourned.