Proceedings of the Standing Senate Committee on
Transport and
Communications
Issue 15 - Evidence - Evening sitting
The committee resumed.
The Chairman: Senators, our next witnesses are with the Port of Nanaimo, Ms Patti Miller and Mr. Bill Mills.
Welcome to our committee. We look forward to hearing from you.
Ms Patti Miller, Chair, Port of Nanaimo: Thank you, Madam Chairman and committee members. It is a pleasure to be here today to outline five areas of concern which we believe are worthy of your consideration before you recommend the final acceptance of this bill.
You have already heard from our colleagues in Port Alberni. Since they are the only other harbour commission on Vancouver Island, we share many of the same concerns. We are both forest products ports. Since they have covered many of the areas of mutual concern to us, I will try to be brief because I know you have had a long afternoon.
We would like to comment on directors, the gross revenue charge or stipend, special examinations, the Municipal Grants Act, and the right of expropriation.
I shall comment first on clauses 8(2)(f) and 14(1). Under this bill, the Port of Nanaimo will have seven directors, an increase of two from the present. As the bill is currently drafted, four of these directors will be user representatives appointed by Governor in Council after being nominated by the minister in consultation with the users. We support user representation on the board. It is probably long overdue. However, in our opinion, the user group, or any other group, should not represent the majority on the board. We recommend to the Senate that the bill be amended to ensure that no one group has a majority on the board.
To be more specific, for a port with seven members on its board, we suggest one federal, one provincial, three user representatives, and two municipal appointees. This would allow the same level of input that the Port of Nanaimo has enjoyed for the past 36 years. Both the City of Nanaimo and the Regional District of Nanaimo have substantial areas of their jurisdiction bordering port waters, and we would support their continuing representation on the new port authority board.
We also believe that it is important to ensure that no user representative be appointed to more than one board, which is not covered in the bill, and that no corporation should enjoy the advantage of having several of its representatives sitting on several port boards.
The second issue we should like you to consider is clause 8(2)(h), the gross revenue charges or stipend. Basing the stipend calculation on gross revenues penalizes Nanaimo as it is an operations-based port as compared to a landlord-type port. Port Alberni has already told you about that. We recommend that the bill be amended to have the stipend based on the net income of the port authorities.
To make this point more clear, the Port of Nanaimo, as a self-operating port in the normal course of operations, would have a gross revenue of $10 million which, with the payment of longshore wages and other operating costs, would result in a profit of $1 million.
If we leased our facilities, as in the case of landlord ports, we would end up with $4 million in revenue and a profit of $1 million, and therefore avoid paying the stipend on $6 million, which is $10 million less the $4 million. We have attached to our brief a graph which demonstrates the penalty to the port on an annual basis if the difference between an operating port and a landlord port is not recognized.
To create a level playing field in calculating the stipend for all ports, permitted exclusions from gross revenues in the letters patent must include port-specific operating costs, longshore wages, depreciation and maintenance. It may seem appropriate in theory, but in practice basing the stipend on gross revenues could add to the existing deficit or loss situation. That is a reality for us in B.C. right now.
In 1997, B.C.'s forestry sector experienced economic difficulties, and our port lost $600,000 on its cargo operation despite having revenue over $5 million in this area. It gets worse in 1998. We expect a $1 million dollar loss for handling forestry sector cargoes. To pay a stipend in these circumstances is totally contrary to the principle of businesses paying taxes in profit years based on net income and not paying taxes in years when no profit is achieved.
Our third concern relates to clauses 41, 42, 43, special examinations. These clauses require a port authority to carry out a special examination at least once every five years to determine whether the books, records, systems and practices of the authority are reasonable. In our opinion, this is a bureaucratic requirement which will be costly and unnecessary. It also suggests that the work of the port's independent auditor and his annual reports together with the audited financial statements are not sufficient evidence of the good stewardship carried out by the board of directors and the port administration. In fact, clause 43(1) suggests that the auditor should be the one who carries out the special examination. In fact, if he is doing his job on an annual basis, he will be reviewing systems and internal controls and making the appropriate recommendations to port administration and to the board on an annual basis.
The board of directors and the chief executive officer should be fully capable of deciding when an organizational review or systems redevelopment needs to be carried out. In the last 10 years, the Port of Nanaimo has gone through two major organizational reviews that resulted in significant restructuring of the port operations. These reviews were done as a result of strategic planning, planning sessions with the port board, and operational needs as identified by the CEO. They were not done on five-year cycles to satisfy some bureaucratic process. We recommend that this clause be deleted.
The fourth point deals with clause 182.1, Municipal Grants Act. The Municipal Grants Act is amended to provide a grant in lieu of real property tax in respect of any real property managed or held by a port authority. While we appreciate the need for contributions to the municipalities in which the port operates -- and they are probably overdue -- and the act provides for a three-year transition period, it is important to understand that commission ports have previously not been required to make such grants and have made contributions to their communities in other ways.
We recommend that before the bill is passed by the Senate, each port should be advised of the financial impact of such a grant and the Senate should be made aware of its consequence and ensure that such formulas to be used do not put an unreasonable burden on the port authorities. We have no idea what the effect of the municipal grants in lieu will be on the port.
The minister stated that the purpose of this bill is to make Canada's ports more competitive, and our concern is that the impact of grants in lieu should be fully understood and evaluated for ports that have not previously paid these grants in lieu to ensure that the minister's objectives will indeed be achieved rather than thwarted.
At no time through the process of the development of this bill have we been advised of the formula or the amount of the municipal grant that we will be required to pay when it is fully implemented. If the municipal grant is $100,000 to the Port of Nanaimo, that is not a problem. However, if it is $1 million, the port may very well not be able to sustain itself financially and the objective of the minister to achieve a more efficient and competitive port system will fail.
Our next point concerns the right of expropriation. Under the Harbour Commissions Act, ports have had the right to expropriate land for port purposes with the approval of Governor in Council. We recommend the inclusion of this authority in the bill and that it read similar to the Harbour Commissions Act. Our port experience in the last 10 years involved an incident with a railway. They threatened to use their power of expropriation against the port until we reminded them that, under the Harbour Commissions Act, we had the right to expropriate as well.
In conclusion, we can report to you that the Port of Nanaimo has successfully operated as a Harbour Commission for 36 years without being a financial burden to the federal government. We have carried out our mandate of being an effective instrument in the achievement of Canadian international trade objectives and the national transportation policies of the country, as well as making significant contributions to the social and economic development of the area we serve. Nanaimo is an area that has had high unemployment, and economic contribution to the area has been much appreciated.
In recent years, we have participated in or have been a catalyst in over $100 million of redevelopment in our harbour, including some large parcels of land which have sat dormant for the last 20 years. These developments allowed the port to resurrect revenues from vacant water lots, provide public amenities and develop a cruise ship pier for purposes of diversifying our revenue base and for pursuing the pocket cruise ship business. These are all part of developing and operating a port as we head into the 21st century.
The board of commissioners of the Port of Nanaimo, together with the port administration, through our annual strategic planning exercises, effectively balances the cargo and non-cargo activities of the port and has continually ensured that the port has a sound financial base to serve its clients well into the next century. The board of commissioners believes that the port is a fine example of one of Canada's major ports. With the amendments to Bill C-9 that we have identified in this brief, we feel confident that this port will continue its effective contribution to our community and Canada's national marine policy and international trade objectives.
Senator Roberge: Thank you very much for your presentation. I can see that you have a good relationship with the city. You recommend two municipal appointees.
Ms Miller: Yes, we have very good relations. We have worked hard at it.
Senator Roberge: You mentioned that no user representative should be appointed to more than one port. Do you mean an individual or a corporation, or both?
Ms Miller: We did not think it would be right to have one user sit on three or four ports. I believe that that would be a conflict of interest.
Senator Roberge: My question is, an individual or a corporation? For example, a corporation can be named to a board.
Ms Miller: I believe it was an individual. I think you are bound to have corporations that sit on more than one board.
Senator Roberge: Thank you. What would be your definition of net income versus gross income?
Mr. Bill Mills, Port Manager and Chief Executive Officer, Port of Nanaimo: Our concern is basically in the cargo area.
In terms of an operating port versus a landlord port, we pay longshore wages. We pay administrative staff in the terminal, we pay for our equipment repairs; we own our equipment, similar to Port Alberni. The cost of maintaining a forklift is pretty high, as well as the depreciation on that equipment. We are looking for that to be recognized as one of the exemptions in looking at the calculation of the stipend.
We have both cargo and non-cargo operations. On the cargo side of our operations, our return may be 10 cents on the dollar versus the landlord port, where it may be 80 cents or 90 cents on the dollar.
Senator Roberge: I understand that. However, my thinking was that you may have one explanation for what you want as a net income and another port may have another, so they may charge different things.
Mr. Mills: There has been a concern that a calculation using net income leaves it open to different calculations. It is like an accountant asking: What is two and two?
Senator Roberge: Would have you a recommendation to the government?
Mr. Mills: We would prefer net income. It makes sense; it is a similar practice to that of businesses. Net income can, I believe, be easily defined and calculated.
Senator Roberge: On your special examination, who would control the controller?
Mr. Mills: The bill, under clause 43(1), proposes that it would be the auditor.
Senator Roberge: And you say no?
Mr. Mills: The audit committee of the board controls the auditor. It seems to me that if the auditor is doing his job right, then when he reports on internal controls, meets with the audit committee, he can talk about his recommendations, he can talk about systems. We went through two major reorganizations, changed our whole operation, but we did not adhere to a five-year cycle to make those changes. It is our opinion that to spend money on that sort of exercise -- if the audit process is ongoing and significant enough, then the structure of the operation is under constant examination. We have done that twice over the past ten years.
Senator Roberge: Would it be significant if the relevant clause stays in?
Mr. Mills: In my opinion, it adds to the cost of operations. An expenditure of $20,000 or $40,000 is involved in the examination of all the records, which is what I expect the auditor to be doing on an annual basis -- looking at systems and making recommendations as he is doing his internal controls, production of our financial statements, the annual meetings. That process is sufficient to reflect the good stewardship of the administration and board. Our reorganizations came out of strategic planning exercises that we go through each spring with the board.
Senator Bryden: Do you have any idea of the number of operator ports, as against landlord ports? The harbour commissions, I take it, are operator ports, right?
Ms Miller: Not necessarily. Some people would argue with me but, as far as I know, the only two that we really know are Nanaimo and Port Alberni on the West Coast. I am not familiar with the East Coast.
Senator Bryden: Would one of your solutions be to become a landlord port?
Mr. Mills: It would be, but we enjoy the entrepreneurial spirit. We like getting a better return when things are better. It allow us to put money back into the port, not only in the assets for the cargo side but also the social and economic development in the community on the waterfront. We like to be the risk-takers. We have invested in our equipment; we have over 40 pieces of heavy industrial equipment. We have invested in our docks. We make those capital investments, not the lessees, and we are looking to get the return on those docks.
Senator Bryden: With all due respect, you are not taking very much risk, not like an entrepreneur who was operating them. Is that not correct?
Mr. Mills: In what way do you mean?
Senator Bryden: The commission is a Crown agency, so it is a Crown agency basically dealing with public funds and public operations that you and your management manage. Could you not contract out the services that you now enjoy doing yourself and charge a rent or a dividend for the stevedoring operations for the facilities that are there? Your revenue would then be a net revenue.
Mr. Mills: Yes, we could do that, but if we had done that in the past we would not have enjoyed some of the financial returns we have had over the years that have allowed us to do other things along the waterfront of our port.
Take the "Asian flu," if I can use that terminology, that we experienced in the last year. We are taking a managed loss on the cargo side of our operations. In other words, there is no way we can make money. We recognize that the volumes are just not there. If we had leased out the facility, our terminal operator may not have been able to sustain the loss and may have wanted to get out of the lease. Our position is that we have looked at our budgets and set the tariffs and we realize that this year we need to charge another two dollars a unit to break even. We acknowledge that our customers are not in a position to be able to pay that. It would be unacceptable in competing with the other private port facilities on the island, and so we are operating at a loss, which I call a managed loss, on the cargo side of operations this year.
There is the opportunity, and we have, in prior years, been able to achieve larger returns than we could get from leasing our facilities. That is good for the government. It is also good for the community because we put that money back into our terminals; we put it back into the waterfront where we have created public amenities.
Senator Bryden: If you do not get your wish and this gets fixed, have you given any consideration to going to another system? I cannot see you being prepared to pay off your gross when in fact you could reorganize to pay off what is in fact your net.
Mr. Mills: We would hope that in negotiation of our letters patent that that would be recognized. We feel it is a serious enough matter that we wanted to bring it to this committee.
Senator Bryden: We appreciate that because you and Port Alberni are the only two. You have a unique situation, you and Port Alberni, and it is very successful for you.
Mr. Mills: Yes.
Senator Bryden: On page 2, at the bottom, you indicate that to pay a stipend in these circumstances is totally contrary to the principles of businesses paying taxes in profit years, based on net income, and not paying tax in years when no profit is achieved. You indicated that in 1997 you had -- let us take, for example -- a loss of $600,000.
Mr. Mills: Yes.
Senator Bryden: In business, not only would you not pay tax on that, but you would carry that loss forward to the years when you make profit. Would you want to do that as well?
Mr. Mills: That is a good point. I do not believe anyone has thought of that. Just trying to get someone to take a look at that philosophy is important, I feel. I recognize that the gross revenue charge, or the stipend, is not meant to be a tax per se, but I think the philosophy is very close to being a return on when you make profits. Maybe one of the things we would be better to do is just close the terminal operations for a year so there is no revenue to pay a stipend on and when the Japanese market returns, and the Asian markets return, then we could open up the doors and have our revenue return and pay the stipend.
Your point is very well taken. I would like to pass that on tomorrow at our meeting.
Senator Bryden: As a final comment, I do not think that Transport Canada came up with this without any precedent.
I know you are not operating a shopping mall, but the normal basis of remuneration for tenants of shopping centres is to pay a base rent to open the door, plus a percentage of gross, perhaps 1 or 2 per cent. The reason for that is that the lessor cannot keep an eye on whether someone has a finger in the till, reducing the level of net, or engaging all of their family as workers in the store so that there is no net profit.
I assume the reason that Transport Canada is doing this is to strive for a level playing field. Hence, the person who can best manipulate the numbers between the gross and the net will not have the advantage.
Mr. Miller: Particularly on the cargo side, though, it is fairly clear and obvious which operating costs make a distinction from a landlord-type port.
Senator Bryden: Do you believe those could be covered depending on how the letters patent are drawn for your port?
Mr. Miller: Yes, there should be flexibility there.
Senator Forrestall: You have asked for retention of the right of expropriation. Clause 7(1) states:
Subject to subsection (3), a port authority is an agent of Her Majesty in right of Canada only for the purposes of engaging in the port activities referred to in paragraph 28(2)(a).
It is that linkage with the Crown that gives you access to that authority. Moving ahead to clause 28(2):
The power of a port authority to operate a port is limited to the power to engage in
(a) port activities related to shipping, navigation, transportation of passengers and goods, handling of goods and storage of goods, to the extent that those activities are specified in the letters patent...
Do you see anything in there that I do not see that might allow, if not an exemption, perhaps a full restoration? I think exclusion is fairly tightly excluded, but you would like to have it?
Mr. Mills: The expropriation issue that we were talking about with the railway was the overpass access into our terminal. They were going to close it off. It was actually a negotiation that started in May of 1987. We may conclude that negotiation some time this year. We are back at the table with them because, lo and behold, they have discovered that we have some property on which they have a right-of-way. They put a fence around it but the right-of-way does not give them the right to put a fence around the property. So now we have introduced again the resolve of this overpass that goes into our terminal. As they were flexing their muscles four or five years ago, they threatened to expropriate it. I thought the discussion was getting out of hand. They were reminded by our legal counsel that, under the Harbour Commissions Act, there was a right to expropriate as well. Everyone backed off and went away. I am not aware of any port that wishes to expropriate, but in our case its presence in the legislation allowed for some sensible negotiation to continue.
Senator Forrestall: It is a tool to allow orderly expansion and development.
Mr. Mills: Yes, it would be a tool if necessary.
Senator Forrestall: If the stubborn old fellow says he will not move, you have a remedy. Under the proposed act, there is no remedy. What would you do?Would you revert to the provincial powers? Do you know?
Senator Bryden: It would not be the province.
Senator Forrestall: It is an interesting point. Perhaps this comment can serve as notice to the minister to inform himself before he comes in front of us again so that we might ask for some further clarification.
Incidentally, you are not the only two ports; there are many around the country that have some similar difficulty to that which you are facing.
I commend you as I do other people who have made these ports work by building infrastructure that reflects pride in a community and faith and confidence in community business. You are to be congratulated. I do not understand why we are trying to make changes that will cause you frustration and some years of adaptation. In some cases, it may even be fatal to your long-range planning. I wish you well in your endeavours.
Senator Johnstone: As Senator Forrestall has suggested, we have heard from ports from the East Coast to you people in the West. It is interesting to me that the problems seem to overlap but are still just a little different.
Do you have a naval presence in your port at this time?
Ms Miller: Not really. North of the port is Nanoose Bay. That is a naval base.
Senator Johnstone: It is not significant and it does not add or subtract very much?
Ms Miller: No, it does not.
Senator Johnstone: You also mentioned the so-called Asian flu. How serious is this challenge? Is it significant? If the flu is not remedied as quickly as we might hope, will there be a serious challenge down the road, say in two or three years?
Mr. Mills: We have been fortunate enough to have a number of new initiatives started at the port. One company from Georgia ships in a clay slurry used in the finishing of papers. They have just built a $13 million storage facility at our port. They will have seven or eight ships a year coming in. We have a forestry-related operator who is establishing a log-sort operation to get added value from the logs. We invested in a barge ramp some years ago. It has had limited use but, in the last six months, three or four key operators want to start using it and the hours in the week are starting to fill up.
Someone is looking after us up there. There is an opportunity for diversifying the revenue base. We think it will recover but it is hitting very hard.
We have two mill sites that we lease out on our property; both of them are closed. One of them has been down now for seven or eight months. One just went down last month and will be down for at least a couple of months. The volumes across our docks are normally in the 450 million to 500 million board feet a year. We initially set this year's budget at 300 million board feet. With the mills going down, we are now looking at less than 200 million board feet. Volumes to the end of March indicate a serious problem with repercussions right throughout the province.
We use the word "managed loss" this year. The profit, unfortunately, will be forced to come next year, but we think it will come back.
Senator Johnstone: As one door closes, maybe on a temporary basis, you are opening others.
Mr. Mills: We hope it is more than temporary.
The Chairman: Are there other questions?
Thank you very much for appearing today. We appreciate your coming so far to meet with us in Ottawa, demonstrating your concern and your interest in Bill C-9.
[Translation]
We now welcome from the St. Lawrence Seaway Authority Michel Fournier, President, André Latour, Vice President, Human Resources, Carol Lemelin, Comptroller and Treasurer and André Landry, Director of Planning and Business Development.
Welcome gentlemen. Please take all the time you need to share with us your impressions of Bill C-9. Later, senators will have questions for you.
Mr. Michel Fournier, President, St. Lawrence Seaway Authority: Thank you, Madam Chairman. I am pleased to have the opportunity to express the views of the St. Lawrence Seaway Authority to the Standing Senate Committee on Transport and Communications.
I am here with Carol Lemelin, Comptroller and Treasurer and André Latour, Vice-President, Human Resources, who have both played an important role in the commercialization initiative, and André Landry, Director of Planning and Business Development.
My objective today is to share some information on the progress of the commercialization initiative to date and to talk about some of the steps we are currently taking to prepare the SLSA for a private sector culture change, while ensuring it remains a safe, integrated and affordable transportation system.
In my presentation, I want to address five questions. Why commercialization? How will it work? Why is it the way to go? What is being done in the meantime? What comes next?
Let us address the first question: Why commercialization?
The waterway adds an estimated $3 billion Canadian annually and up to 17,000 direct and indirect jobs to the Canadian economy and $2 billion and 49,000 direct and indirect jobs to the U.S. economy.
With cargo value transiting through the Seaway estimated at $6.7 billion in 1997, shipowners and operators, shippers and receivers rely on the Seaway for their day-to-day operations.
In this context, activities directly impact users' transit times and overall cost competitiveness by managing the efficiency of the Canadian portion of the Seaway's lock system.
What is proposed by commercializing the SLSA is no less than to put users in a position to make a difference in driving efficiency throughout the system.
For this reason alone, we have a lot to gain from commercialization.
Over the past 10 to 15 years, the private sector has led the way with cost reductions to survive in the more competitive marketplace of the '80s and '90s. The free trade economy, globalization of markets and technological progress are transforming the transportation business. It is the era of lean and mean competitors. In this context, the Seaway has to adapt as well.
Increasing pressure from competitors and new costs to the system require that we make important changes. We must reduce the Seaway system overhead in order to compete. This could be achieved by streamlining and consolidating operations of the 13 operating agencies on the Seaway.
The financial viability of the Seaway is a function of both economic prosperity and the competitiveness of the whole chain.
The transportation business is undergoing significant transformation lately.
Alliances, acquisitions, aggressive capital and technology investments are changing market rules and performance benchmarks.
Consider the case of CN, another Crown corporation which has been privatized.
Since its privatization, CN has reduced costs through downsizing its labour force. It has moved from 36,000 employees to 22,000 and from 12 levels of management to 5. They have changed the organization's culture towards customer service and the bottom line.
With new alliances, most recently, CN has struck a deal that will extend its reach even further to the Gulf of Mexico by acquiring Illinois Central Corporation.
The bottom-line impact of all these changes for CN is that revenue ton-miles per employee has improved by 42 per cent since 1992.
The point of this example is that privatization and deregulation now allow railways greater operating efficiency and the ability to set prices more competitively.
To continue to be considered as an attractive solution, the Seaway must also work aggressively towards improving its own competitive position for the future.
Increasingly, cargo that, not too long ago, transited through the Seaway, now ends up with our competitors, the railway companies.
Because we want to work as partners with our employees, I met with all of them recently, in small groups, to make sure they understood our competitive reality: that every cargo lost to the railway leads to lost revenue, and that a loss of long-term revenue often translates into loss of employment.
My message to them was clear: we have to transform the SLSA. We have to make it more effective, more efficient, and thereby, more competitive by reducing costs and we have to improve customer service to ensure that Seaway jobs will be there in the future.
The commercialization of the SLSA is a critical step that direction.
[English]
Let us talk about how the commercialization would work. Under Bill C-9, a not-for-profit corporation would manage the operations of the SLSA -- by that, I mean manage the traffic, the operations, the infrastructure, including the deep waterway canal and all navigational seaway structures. Of course, that includes the day-to-day operations of the corporation. The length of the agreement is set at 20 years with an initial term of 10 years renewable.
User representatives will sit on the board of directors alongside government representatives. During negotiations, users insisted that they did not want responsibility for non-marine assets. That is why all assets such as bridges, tunnels and non-marine-related real estate property will remain with the Crown. Of course, all costs or revenues incurred by those assets will remain with the government.
With respect to financial accountability, it was agreed that the not-for-profit corporation would assume responsibility for things it can control -- in other words, manageable costs such as workforce wages, material costs, and capital costs such as asset renewal.
Under the proposed agreement, the government would assume responsibility for fluctuations in traffic and revenues that the not-for-profit corporation would not be able to control. It is my understanding that this unique arrangement between the government and an operating agency exists because the St. Lawrence Seaway is served by 40 highways and 30 rail lines. This 2,000 kilometres of marine highway connects over 61 Canadian and U.S. ports that depend on the Seaway for their day-to-day business.
The proposed agreement also makes provisions for a mechanism that would ensure users stable and predictable toll increases, which will enable them to better plan their future operations. The agreement suggests financial management based on a total cost approach. Under such a model, the corporation is expected to meet combined annual targets for operating and capital costs.
If the actual costs incurred by the corporation were to exceed the budget, in the following years tolls would be increased to offset the loss, up to an agreed upon ceiling. If, on the other hand, actual costs incurred were lower than budget, the surplus could be used to offset losses and/or to introduce toll discounts in future years.
To support the proposed financial management model, the agreement calls for the creation of a seaway reserve fund with an initial balance of approximately $46 million. The fund would be mainly used to meet deficits resulting from traffic downturns, as well as from transition costs. Under the proposed agreement, five-year operating cost targets have to be set at the beginning of the period.
As for capital costs, total expenditure targets would be set at the beginning of the five-year period, but annual targets would be set at the beginning of each year, based on capital committee recommendations.
With respect to tolls, the agreement proposes a 2 per cent per year annual increase for the first five years. Increases for the following five years would be based on inflation, with a cap of 5 per cent a year. Depending on performance, users could be awarded rebates or assigned penalties.
All major outstanding issues regarding commercialization have been resolved with seaway users.
Let us now look at some of the reasons for our belief that the proposed agreement is a winning proposition. Owing to the huge investment from carriers and shippers, it is in their best interests to manage the Seaway so as to maximize its safety and performance. By transferring the management of the SLSA to the users, the commercialization agreement gives them the ability to shape the system to address their needs. It also allows the SLSA to benefit from the users' private sector expertise. This proposal puts users in a position that will allow them to make a difference by driving efficiency throughout the system. The proposed total cost approach offers significant advantages. It promotes commercial discipline in managing both operating and capital costs, and it provides users with incentives to perform. The users group is already helping us to transform the SLSA into a market player that is equipped to compete head on with its competitors today, and in the future.
Until the enabling legislation is passed by Parliament, I have the responsibility to run the day-to-day operations of the SLSA. Let me share with you some of the initiatives that we are pursuing in preparation for commercialization.
A few years ago, the priorities of the SLSA were clearly set out in a vision statement called Vision 2002. This vision was developed in an attempt to streamline the SLSA the year 2002, using attrition, and the employment downsizing targets that were initially set for 2002 will be achieved by the end of March, 1999. At the same time, we embarked on two major initiatives; the quality service initiative, and the implementation of cross-functional teams to improve operational and maintenance efficiency.
The organization is currently managing ten major initiatives. First and foremost is the commercialization of Seaway operations, which allows us to work very closely with the users group and Transport Canada. In order to shape some of our recent changes at the SLSA, it has been very helpful to sit with the four members of the user group, who have a combined experience of more than 100 years in the marine business.
I would also like to acknowledge the enormous contribution and flexibility of Mr. Ranger, ADM, and his team at Transport Canada, who have worked very hard to ensure a successful outcome to the negotiations. All of these individuals have helped in the pursuit of most of the following initiatives: the development of a ten-year business plan; the re-engineering of SLSA structure and processes to reflect improved efficiency and best practices; and the rationalization of the organization through a voluntary departure incentive program which was developed in cooperation with our union. By the end of March, 1999, 119 employees, representing over 17 per cent of our workforce, will have left the Seaway. This includes employees covered by attrition, and those who have opted for the departure incentive program. This will bring the total workforce reduction to 42 per cent since 1991.
The aforementioned individuals have also assisted in the purchase of a new integrated information technology management system called SAP. It will be implemented in 1998 to help achieve the downsizing proposed in the re-engineering report. The SLSA is also working on the development of a partnership with unions and excluded employees. This will ensure collaboration in efforts to become more market-driven, and it will improve the long-term viability of the organization.
Last December a new collective agreement was ratified, and it will expire on December 31, 1998. We are now working on a partnership aimed at developing a shared understanding of our mutual needs. We are looking to work together proactively, with each partner clarifying expectations and agreeing on mechanisms to manage the partnership.
This initiative rests on a very simple philosophy in which I strongly believe. By increasing employee involvement and autonomy, the management process will contribute to optimizing the potential of all employees. This will lead to a higher level of employee satisfaction and, ultimately, to a more efficient organization. Over the next two years, the existing regional traffic management system will be replaced with a single integrated system, in order to better serve the needs of our users.
In order to address customer needs, we are implementing the second phase of our quality service initiative. In line with the re-engineering of the organization, the SLSA identified the development and implementation of a new job evaluation and global compensation plan as a goal. We took the initiative to commercialize the Seaway into account, as well as the necessity to remain competitive with other modes of transportation. As such, the Seaway's corporate vision was changed to: "We will contribute to making the seaway more competitive relative to other modes of transportation by being efficient and offering our customers quality service adapted to their needs."
A new management structure was put in place to support the Seaway's management challenges, and to lead the organization towards commercialization. In the new structure, the SLSA has the power of final decision-making. A strategic committee is responsible for making recommendations to the SLSA about priorities, plans and strategic directions, and a corporate management team is in place to manage the achievement of corporate objectives and goals. The members of these committees have all contributed significantly in the development and implementation of our major initiatives.
The SLSA is ready for the commercialization of the Seaway and, with users' input, we will be able to take all the necessary steps to ensure an easy transition to a more market-driven culture.
What are the next steps after commercialization? The pension plan is still the major issue for the employees. They do not want to leave the superannuation program with the government. The past president of the SLSA had asked the Treasury Board if SLSA employees could stay with the government pension plan. The Treasury Board rejected this request, because it is contrary to current human resources policy.
After my nomination, union representatives approached me with the same request, and asked if I could go back to Treasury Board to represent their views. Since it was such an important issue for the employees, I enlisted the support of Transport Canada, and presentations were made again to Treasury Board. Its position remained unchanged, based on current policy.
Afterwards, in an attempt to secure the union's support and cooperation, the SLSA and CAW resolved, on November 15, 1997, to sign the letter of agreement in which the SLSA guaranteed that the new pension plan would provide its members comparable pension benefits, and similar features to those provided by PSAC. In spite of all our efforts, we learned last week that the union was ready to strike if employees were not allowed to stay with the government pension plan after commercialization.
We have two different issues to deal with here. The first is that according to the provisions under clause 138 of Bill C-9 the not-for-profit corporation shall provide employee benefits comparable to the employee benefits before transfer, and we have the firm intention to give employees an overall pension plan as good as superannuation. The second issue deals with the fact that the union wishes to remain under the Superannuation Act after commercialization. We have no control over that. We intend to continue to work with union representatives on the development of our pension plan alternatives to achieve an acceptable resolution.
With regard to the operation of the system, the Canadian and American agencies are collaborating in many sectors to improve customer service, but one contentious issue yet to be resolved relates to tolls. The Canadian portion of the Seaway is self-sufficient, with most of its revenue coming from tolls. The U.S. portion of the Seaway, on the other hand, is 100 per cent financed by the U.S. federal government through annual appropriation from a trust fund established under domestic legislation. Since the trade does not wish to deal with big toll increases on down years, it is critical to solve the toll issue over the long term.
We have not had a toll increase for five years. Last year, the past president of the SLSC signed a proposed agreement on tolls with the SLSDC that needed to be ratified by both countries in order to become binding. Canada, however, did not ratify the agreement because the proposed toll increases on some routes were much too high and could have put those routes in jeopardy. We want to avoid introducing toll increases that would translate into lost business. Since then, and in spite of repeated efforts, it had been impossible to reach an agreement with SLSDC. Continuation of the toll freeze would adversely affect Canada's ability to meet funding requirements of the system.
When I realized we were at a deadlock, I had no other choice than to transfer the file to Transport Canada in February of this year. Discussions between Transport Canada and the U.S. Department of Transportation have not resulted in an agreement. To keep pace with inflation in 1998, a decision was made to proceed with a 2 per cent toll increase, which will come into effect on June 1, according to a notice published by the SLSC on April 25 in the Canada Gazette. In 1986, the U.S. made a similar decision to change the funding mechanism on their portion of the Seaway in response to domestic requirements when it replaced the tolls with the harbour maintenance trust fund.
Another issue is the binational concept. It could be the next step once commercialization is well in place. The SLSC is currently concentrating on putting its own house in order by reducing costs as much as possible. Because we act in a more commercial way, our costs per lock are much lower than the U.S., and it benefits both Canadian and American users of the system.
Every agency on both sides of the border should streamline its organization and become more market-driven in order to be competitive with other modes of transportation. Once the agencies have achieved cost reduction, we can move towards a binational agency, but only if we can demonstrate that such an agency would make the Seaway more cost-efficient and provide users with better quality service.
In such a case, the sharing of costs should be equitable between the two countries. As you can see, additional new costs, rewritten market rules, and performance benchmarks are challenging the long-term attractiveness of the Seaway. Marine transportation is still the best solution to continue to minimize the environmental impact of transportation for society in general. We are more energy efficient than other modes of transportation, and we make the best use of the available resources. Our ultimate goal should be to operate a seamless, reliable, safe, and competitive transportation service that shippers and receivers want and that will benefit all Canadians.
Over the past nine months, users have greatly contributed in helping to shape the SLSC into a more commercial operation, and their future contribution is necessary to ensure greater control in shaping the competitiveness of the water way as a whole.
[Translation]
The Chairman: I am happy that you mentioned the negotiations underway with employees. They were here last week and shared with us their concerns about the retirement plan.
Is this something that you will be able to settle with your employees at the bargaining table?
Mr. Fournier: We will try our best. Negotiations have been underway ever since I was appointed president. We have worked hard to establish a partnership with the union and with our employees. Moreover, they are here today. Much work has been done in this area.
Obviously, as I stated in my presentation, we want our employee pension plan to be even better than the one they currently have. A lot of work has gone into this issue and a number of meetings have taken place between management and the union. Sometime in the next two weeks, we should have a proposal ready to be submitted to the union representatives.
We will do everything possible to settle this matter working in total partnership with them. I listened to what was said here last week. Employees stated that they were prepared to strike if their pension plan was not comparable to the PSSA plan. We are dealing with government policies here and there is nothing that I can do about it.
The Chairman: Are you bound by government policy?
Mr. Fournier: Clearly, we will do everything we can to resolve this matter. In only a few months, we have established a very solid partnership with the union. There was evidence again of this last week. You are all aware of the ongoing labour problems in Ontario. The unions are staging rotating strikes in various municipalities. Last week, St. Catharines was the targeted community. We made the necessary arrangements and there was no problem as far as the Seaway was concerned. This was one way to demonstrate that we can work together.
The Chairman: My colleagues were concerned about this point. Have you done an in-depth study of projected traffic on the Seaway? Is there any reason to be optimistic and to think that the traffic volume will be sufficient to ensure the success of the commercialization initiative?
Mr. Fournier: The last four years have been very positive. The year 1996 was the best year for the Seaway of the last six. We have accumulated a reserve fund of $46 million. A great deal has been accomplished in the past few years. Since 1991, we have cut costs by 25 per cent thanks to the work of my predecessor. The workforce has been streamlined and this has been accomplished with the cooperation of the union. There were a number of voluntary departures. No one was laid off. Our workforce was adjusted through a voluntary process, and in a manner which showed utmost respect for our employees. A further 17 per cent of the workforce will be trimmed by the end of March 1999.
One question remains: What kind of traffic will we encounter on the Seaway? Traffic volume has been excellent over the past four years. We have averaged $74 million in tolls collected each year. This is an exceptional figure. Current users are injecting a considerable amount of capital in the system. As I mentioned earlier, we anticipate that tolls will increase by two per cent per year for the next five years and users are willing to pay more to ensure that the Seaway continues to run smoothly.
However, as to exactly how competitive we will be in five years' or in three years' time, it all depends on the global economy. That is what makes it extremely difficult for users of a system worth $5 billion to be responsible for revenues when they have no control over these revenues. If the world economy is healthy and if automobile sales are strong, then steel or iron ore shipments will be strong as well, but if the global economy is in a slump, then traffic volumes will decline. It really all depends on the state of the global economy.
The SLSA has done everything it can to lower costs and to make the system as competitive as possible.
[English]
Senator Forrestall: I remember all too well when we started to try to solve some of these problems. It occurred to me, as you were giving your comprehensive presentation, that you do not need this bill to achieve your basic mandate. You are well en route to achieving it in fact if not in name. I wonder what sense of urgency you might attach to this or whether having it in place would help you; and, if so, how it would help you.
Mr. Fournier: That is a good question. As I mentioned, what we have done in the past nine months was done with the full collaboration of the user group. We did sit all the time with the major issues, and we worked in partnership with the user group. We have other problems right now that we must face. To give you an example, CN is starting to be a problem right now. It is starting to be a problem because of the privatization that they underwent in 1991. You can see what they were able to achieve.
If we stay in our present state, without the commercialization, it is true we did achieve a lot in the past nine months but there is still much to do to finish the job. Do not forget, those users had to do it in the 1980s. For them, it was a survival tactic. They had no choice. Many people around this table who were in business at the time know what happened then. You had to downsize, you had to do a lot of things, if you wanted to survive. Right now, this is what we are facing with the Seaway, too, if we want to be more competitive. I did not talk about those new powerful engines that CN bought last year, or the 33 per cent bigger cars they bought. We will need everything we can get to be able to manage the Seaway properly. I honestly feel that the help that I had from the user group, through all the changes that we undertook in the past nine months, was very important, and we will still need that same help in the future.
Do not forget, that help was offered because we of Bill C-9. If Bill C-9 were not in existence, they would not have come. You cannot imagine the time and energy that we all have had to put into that.
Senator Forrestall: They did it in full belief that the bill would pass.
Mr. Fournier: They thought the bill would pass. The Canadian owners' organizations are pushing for it. The shipping federations, the Chamber of Maritime Commerce, and many other people are saying that this may not be the perfect way of doing it but we should go for it because this is important and at least we are starting with something.
Senator Forrestall: But will you not be doing it on the backs of other people? I ask that because there is a group out there who claims that there are serious downsides in this bill.
I am concerned about the level playing field that will, in a sense, disappear. Under the proposed legislation, you will still have the authority to borrow money, to seek government guarantees, and so forth. However, the ports will not be able to do that. When you look at the Port of Halifax and its capacity, limited as it is, and knowing that they must be able to reach to the post-Panamax shipping fleet that is coming into being, and re-equip and buy the bigger cranes, the long-span cranes, and so on, how do you see the competition in trans-shipment, CN versus smaller seaway-sized vessels? Do you see those vessels becoming eventually a main competitor to CN?
Mr. Fournier: We hear a lot about intermodal transportation. Everyone speaks about intermodal, and have for a few years now, and not only in Canada. It started in the United States. Instead of intermodal, we call it trans-shipment. We will have a ship going in the lower St. Lawrence -- it could be a Panamax -- 50,000 tonnes or more, and we will trans-ship to a seaway-sized vessel of 25,000 tonnes or less, to be able to go up to Chicago, to Hamilton, and so on.
The same thing happens in the other direction. Grain will come from Duluth or Thunder Bay going down to the lower St. Lawrence with the seaway-sized vessel of 25,000 tonnes, again, trans-shipped to a larger Panamax with a self-unloader.
Senator Forrestall: What ports are you thinking of?
Mr. Fournier: As I said, we do business with 61 Canadian and U.S. ports. There are some larger ones and some smaller ones.
On the law itself -- I did not make the law, I am simply dealing with it. I could not tell you if it is all right or not. What I can tell you is that, for the seaway, that is the way I would see it. CN, of course, especially with the acquisition of Illinois Central Corporation, is now not only east-west, but also north-south. That is something the Seaway must consider.
I also do not want honourable senators to forget that we do not have infrastructure right now able to replace the Seaway.
In the past four years, we had close to 50 million tonnes a year of commodity transiting to the seaway in bulk. We have no other commodities, plus we have an international obligation with the United States. That is something we cannot forget. We have good relations with them, except in one major area, the toll issue; the second area is the binational issue.
However, in French we say, "c'est le monde à l'envers," because the way they want to do it is the way that will have some people dominated by President Clinton on the board of directors. We are saying here that commercialization should be the best way to do it because we have the people directly involved in the business. That is my vision of the way we should go right now.
Senator Forrestall: Could you tell us about the Seaway itself? Is it structurally sound? Do you envision any major borrowings in the next one to six, seven years?
Mr. Fournier: Not one to six. It would be middle to long term, in that time period, that I would foresee something.
The Chairman asked earlier: What do you foresee in the traffic in the next two to five years? It is difficult to say. We are in a global economy. If the global economy goes down, we could lose a lot. As an example, five years ago, we had nothing in the bank and a deficit of $75 million or $85 million. Currently, we have a $45 million deficit in the books because of the amortization and we have $46 million in the bank. Things can change quickly.
What Transport Canada had in mind, when we discussed this issue, was to be sure to have a pattern by which users would address the cost issue and do everything to be self-sufficient. Everyone understands that it is not a port that is one or two kilometres long; it is 2,000 kilometres long, with all the accompanying problems. It is worth $5 billion. This is Canadian, this is ours.
In the first place, everyone at Transport Canada wishes to ensure that we will take good care of the Seaway. This is the first thing and is very important. Second, that we will do everything in our power to be self-sufficient. So if we still have years like we have had in the past four years, it will take a very long time before we need some appropriation. It is not something that we will see even in the first ten years.
Senator Forrestall: Who will pay for down river dredging, below the Seaway itself?
Mr. Fournier: Below the Seaway is not our concern. We are concerned from Montreal to here. We are taking care of what we have.
Senator Forrestall: If there is no dredging done in certain sections of the river, you will not even get your 25,000 tonnes up.
Mr. Fournier: All the ports do need dredging. A few months ago, an acquaintance wanted to do something about dredging in the lower part of the St. Lawrence River, but it was going to be much lower than we require for the Seaway. We do not need this much.
Recent newspaper articles about the Seaway neglected to say that the past four years have been going very well, that we cut our expenses, that we made revenues, that we had some very good years.
The Chairman: Good news does not make news.
Mr. Fournier: I agree with you.
Senator Forrestall: I wish you well with it. I do caution you that it is important to those of us in the Maritimes that the playing field be maintained as level as possible. For the federal authority to do something that benefits one section of the system -- and I include the ports from Thunder Bay to St. John's, Newfoundland -- that encourages or enhances the competitive position of one port over another is a grievous disservice. A disservice would be done to the private sector, which invests in the system and the equipment to use the system to service their customers. You know this as well as I do.
Mr. Fournier: You must realize that the Seaway is unique. I am not saying that because I am the president, but it is unique. It is the only one of its kind in the world.
Senator Forrestall: It is very unique for us because it allows us to be profitable.
[Translation]
Senator Roberge: Had you not been able to borrow money, would the privatization of the Seaway have been a viable endeavor?
Mr. Fournier: I do not believe so. Physically, we are talking about a vast transportation system stretching over a distance of 2,000 kilometers. The infrastructure is aging as well. Parts of the system were built in 1932, others in 1959 and so on.
Expenses always have a way of catching up with us. Our system is aging and some parts of it are quite old. However, it is in sound running order and I can also vouch for its safety.
Considering the overall state of the economy, at some point in time, the expenditures that we need to incur with respect to the Seaway will catch up with us. There is no question in our minds about that . As I indicated earlier, our situation is unique in that we do business with 61 Canadian and U.S. ports. In addition, we must fulfill our international commitments and this is something entirely different.
When will we need to incur some expenditures? Again, it depends on the global economy. As long as it remains strong, I feel we will continue to have some profitable years. However, if there is a downturn in the global economy, our reserve fund will shrink.
Senator Roberge: In many respects, your situation is unique. A number of ports can, however, claim to be in the same situation, but to varying degrees.
Mr. Fournier: When you yourself are involved, your situation always appears more unique.
Senator Roberge: I want to congratulate you on your presentation and on your accomplishments over the past nine months.
Mr. Fournier: I will try and do that to provide you with as much information is possible.
[English]
Senator Bryden: Contrary to popular belief, I have nothing against the advantages that Bill C-9 gives to the Seaway and I very much applaud it. In the Seaway section of the bill, it clearly states that the Seaway will strive for commercial viability, but that in doing that it will take into consideration the economic conditions of the community surrounding the Seaway. It also indicates that in those situations which are appropriate, or required, the seaway authority will continue to have access to the Consolidated Revenue Fund for the purposes of guaranteeing financing, or providing grants, and will be paid out of the Consolidated Revenue Fund.
From everything that I have heard from the Department of Transport, from yourself, and from others, this unique water highway deserves that sort of support. I applaud it.
My problem is that there are other sections, other ports, where they do not have the same advantages. I would like to address the importance of, for example, the deep water sea port of Canso, Nova Scotia. Its economic development, along with that of the surrounding communities, is equally as important as the Seaway's development.
Those ports, including the Port of Halifax have no claim on the Consolidated Revenue Fund. They must attempt to become commercially viable, or they will cease to exist.
We would not wish to take away any of the advantages that are going to the Seaway. At the same time, however, in order for the other parts of the water transport system of Canada to be fairly treated, the playing field must be levelled.
You mentioned your concern with CN. The more profitable the traffic that CN moves east, the better it is for the Port of Halifax, the Port of Quebec, or the Port of Saint John. In order to be objective and not parochial, I will talk about Halifax.
If the water highway's advantages are not extended to the ports in order to accommodate commercialization and the improvement to the rail system, it will disadvantage a port such as Halifax. For example, the Seaway does not, as I understand it, pay for ice breaking. Is that correct?
Mr. Fournier: It is not correct. It will be part of the negotiations which we have now with the Canadian Coast Guard. We will have to pay for ice breaking in the future. Navigation needs are also part of the same negotiation. We will have to pay like everyone else.
Senator Bryden: At the moment, you are not paying.
Mr. Fournier: We are paying for our own ships. The ships going through the system have to pay for what they have.
Senator Bryden: You are building a fund of $46 million, a Seaway reserve fund. Do you have it now?
Mr. Fournier: We now have a fund of $45 million, plus or minus.
Senator Bryden: Transport Canada issued a paper regarding Seaway commercialization and background, dated September 19, 1996. The paper refers to the need for commercialization, and also to the Seaway's corporate plan for 1996, and its forecasted depletion of its capital reserves of $45 million. Reference is also made to deficits of $16 million, which will have to be covered by the government.
Mr. Fournier: We did not expect 1997 to be a good year for us, but it was, and that made a big difference. In one year, there can be a difference of $5 million to $10 million.
Senator Bryden: This number is allegedly for 1996. At that time, you were going to be $56 million short.
Mr. Fournier: We did not have the same cost reductions that we are talking about now. There are 119 employees whom we do not have to pay any longer. That is a lot of money. If you take an average salary $50,000 plus 30 per cent for fringe benefits, and multiply that by 119, you see that we are saving a lot money each year.
Senator Bryden: There were no severance costs?
Mr. Fournier: We are paying everything in the year 1997-98.
Senator Bryden: The report refers to another good reason for commercializing the Seaway. Over the last ten years, apparently, the St. Lawrence Seaway has required federal appropriations of $175 million for a major restoration of the Welland Canal. Is that correct?
Mr. Fournier: That was done in between 1987 and 1993.
Senator Bryden: I am most concerned with the part of the report that refers to competition for the seaway from eastbound rail shipments which end up in Quebec, Halifax or Saint John. Those ports could become commercially viable with an increased amount of rail shipments. If the St. Lawrence Seaway continues to have access to the Consolidated Revenue Fund to keep upgrading, and our ports do not, you will not only be able to compete with the railroads, but you will have an advantage over the end point of those railroads, so that those ports cannot compete with your ports.
Mr. Fournier: I would love to be able to tell you that I would give access to the Consolidated Revenue Fund to those ports, but you must ask that question of the minister.
Senator Bryden: I have in the past and I will again.
As you said, many parts of the marine industry want this bill to go through, as do most of the people around this table. We want it to benefit all the people affected by water transport in Canada, however, and not to disadvantage some of those people.
The Chairman: Thank you, witnesses.
Our next witnesses are from the Iron Ore Company of Canada, Aluminerie Alouette Inc., and Wabash Mines.
Please proceed.
[Translation]
Mr. Gilles Blouin, Vice-President, Aluminerie Alouette Inc.: Madame Chairman, allow me to introduce myself. My name is Gilles Blouin and I work for Aluminerie Alouette. I have the most seniority with the company, although I am not the oldest employee. With meet this evening are Damien Lebel, General Manager of Wabush Mines, and Keith Eldridge, Vice-President of IOC. Thank you for giving us this opportunity to make a presentation which, hopefully, will be brief, but topical.
Our presentation will be in two parts: firstly, we will report briefly on our current situation, and secondly, we will focus on the section of the bill which deals with the composition of the board of directors of a port authority like the Port of Sept-Îles.
This presentation today is made on behalf of the three major users and revenue contributors to the Port of Sept-Îles: Aluminerie Alouette Inc., an aluminum smelter which has 572 employees; the Iron Ore Company of Canada or IOC, an iron ore mining and beneficiating company which operates in Sept-Îles, Quebec and Labrador City, Newfoundland and employs 2,250 persons; and Wabush Mines, which operates an iron ore mine and a concentrator in Wabush, Newfoundland as well as a pellet plant in Sept-Îles. This company employs 750 persons.
As you can see on the map, Sept-Îles is located about 1,000 kilometers northeast of Montreal and has a population of over 25,000 inhabitants. A key point that we would like to make is that this city has no suburban population to support its needs, be they economic, social or industrial.
During 1997, and in previous years, the Port of Sept-Îles moved the second largest tonnage of any port in Canada with 24,474 million tonnes, second only to the port of Vancouver. Statistical data on activities at the Port of Sept-Îles is attached to this presentation. These figures were taken from the "National Marine Policy-Harbors and Ports Booklet" prepared by Transport Canada and published in December of 1995.
The three companies represented here today generate over 85 per cent of the operating revenues received by the Port of Sept-Îles and account for over 95 per cent of total tonnage moved.
I would now like to call on Mr. Eldridge to address the bill's provisions as such.
[English]
Mr. Keith Eldridge, Vice-President, Iron Ore Company of Canada: We are generally supportive of Bill C-9, and look forward to its implementation. At the same time, however we are deeply concerned about the part which deals with the composition of the board of directors for the local port authorities.
Clause 14 of the first part of Bill C-9 refers to the appointment of directors, and to their tenure of office and remuneration.
Clause 15 refers to the experience and knowledge which the directors of port authorities should have in order to serve as port directors. We strongly support subclause 15(2), which states:
The directors of a port authority appointed under paragraph 14(1)(d) shall have generally acknowledged and accepted stature within the transportation industry or the business community and relevant knowledge and extensive experience related to the management of a business, to the operation of a port or to maritime trade.
Clause 16 deals with individuals to be excluded from appointment as directors of a port authority, specifically clause 16(e), which states:
16. The following individuals may not be directors of a port authority:
(e) an individual who is a director, officer or employee of a person who is a user of the port;
Our three companies are deeply concerned about this. In a community with a limited population, such as Sept-Îles, this seriously restricts the ability to have appointees who will have the knowledge and experience required in clause 15.
Another concern is that major industries, who provide a significant portion of revenue to a port authority, may be negatively affected by decisions taken by board members who may not have relevant knowledge and extensive experience related to the operations of a port.
We understand that perceived conflict of interest may be a reason for the government to introduce this restriction to the board of directors' membership. We believe that appropriate measures are in place to overcome such perceived conflict of interest, including arbitration through Transport Canada.
Furthermore, when the Government of Canada established NAVCAN over 18 months ago, NAVCAN was permitted to have members from its user community appointed as board representatives, with appointees from the Air Transportation Association of Canada being given board representation. The appointment of representatives from the user community to Canadian port authority boards would not, therefore, create a precedent.
We thank you for your consideration, and sincerely hope that you will receive our presentation with understanding.
We believe that the Government of Canada should make the necessary administrative changes to Bill C-9 that will enable representatives of the user community to serve directly on the boards of directors of cities in a similar situation to that of Sept-Îles.
[Translation]
Senator Roberge: Thank you very much for your presentation. There is no question that Sept-Îles finds itself in a rather unique situation in terms of its relationship with users. I am quite favorable to your request. It is not really necessary to adopt this approach nationwide because there are always ways of eliminating potential conflicts of interest.
Last week, we heard from representatives of the Port of Canso who requested special "superport" status. What difference do you see between the Port of Canso and the Port of Sept-Îles?
Mr. Blouin: I do not think the Port of Canso handles the same tonnage in a year. Unless I am mistaken, Canso, like Sept-Îles, is open year-round. It can also handle a variety of bulk shipments. In fact, much of the traffic at the Port of Sept-Îles is in the form of bulk shipments, whether iron ore, alumina, aluminum and so forth. Quite honestly, I am not that familiar with the Port of Canso, but if there should be a super port in the region, I think Sept-Îles qualifies for the title. That is my humble opinion.
Senator Roberge: Would anyone else care to comment?
[English]
Senator Bryden: Is Sept-Îles considered a deep water port?
Mr. Blouin: It is a deep water port. If you take the main entrance, it is as deep as 900 feet, 150 fathoms at its dock. If we look at Iron Ore Company of Canada dock, which is 150 feet from shore, it has a depth of about 65 to 70 feet. If you take our own installation, we have about 50 to 60 feet of water.
The Bay of Sept-Îles is very deep. It is 18 miles long by four miles wide, and is well protected at its entrance by seven islands, from which it takes it name. There is year-round access to this bay, so it is very deep water.
Mr. Eldridge: In October of 1993, the Iron Ore Company loaded the largest vessel ever loaded in North America with 255,000 tonnes of iron ore. It is a 12-month-a-year port. As Mr. Blouin mentioned, it has 60 to 65 feet of draft. We are able to take up to 250,000 tonne vessels.
Senator Bryden: Do you need to dredge?
Mr. Blouin: At their dock we only need to dredge every two years. We do not need to dredge at our dock.
Senator Bryden: We heard evidence that Canso had a 325,000-tonne tanker in the port, and that it could take an even larger ship.
The Port of Sept-Îles was designated as a regional local port under the National Marine Policy of December 1995. Do you know why it was changed to a port authority?
Mr. Blouin: In the former system, the Port of Sept-Îles was a part of the Ports Canada structure. I believe that six or seven ports were originally maintained under the former structure of Ports Canada. One of the criteria was that they be profitable. Therefore, there was an appeal from the Ports Canada group in Sept-Îles to have the port revert to its former status.
Senator Bryden: I ask that question because of your concern about user participation on the board. Had you remained a regional local port, the three companies could manage the port.
Mr. Blouin: Absolutely.
Senator Bryden: You would not then have this problem.
Mr. Eldridge: That is correct.
Mr. Blouin: Absolutely, but we are not the ones who changed the law.
Senator Bryden: As far as you know, it was changed on representation from the town?
Mr. Blouin: I would say it was representation from the Ports Canada people.
Let us face it, Ports Canada was looking for revenues, and the Port of Sept-Îles, being profitable, was a good source of revenue. In my opinion, that is a good reason to change the authority to Ports Canada.
Senator Bryden: There is much concern about keeping the mining industry in Canada viable and growing. I heard last week that 50 per cent of the iron ore in the world is shipped out of Sept-Îles.
Mr. Eldridge: Actually, 18 per cent of the iron ore pellets produced in the world come from the north shore; Wabush, Compagnie minière Québec Cartier, and the Iron Ore Company.
Mr. Damien Lebel, General Manager, Wabush Mines: I would say that it is 50 per cent of the iron ore in North America.
Senator Bryden: Is it correct that 90 per cent of the iron ore in Canada comes from the north shore?
Mr. Lebel: In Canada, yes. It is headed to 100 per cent.
Senator Bryden: Is there any advantage to competitiveness if the port is CPA, as opposed to a local port? Would either designation be of advantage, or does it make no difference?
Mr. Eldridge: Without having direct representation on the board, and contributing close to $7 million for the Port of Sept-Îles from these three companies, we are concerned that there may be some decisions taken that might not be in the best interests of the three largest users of the port.
Senator Bryden: Do you currently have representation on the board?
Mr. Eldridge: No, we do not.
Mr. Blouin: Under the current setup, there are competent people. There is always access to Transport Canada. While the new structure provides for local administration, who is left to be nominated after those who are excluded by the law are counted out? That is our concern.
Senator Forrestall: I am looking at clause 15(2).
Mr. Eldridge: Clause 15 sets out the knowledge or experience required for people to be appointed to a board of directors of a CPA. Clause 14 talks about the tenure of office, and the appointment of directors. Our concern is with clause 16(e), which says that an individual who is a director, officer or employee of a person who is a user of the port may not be a director of a port authority.
Senator Forrestall: Would that work?
Mr. Blouin: In Sept-Îles, there is no one who does not either work for IOC, Wabush or Alouette, or is not a boat owner.
Senator Forrestall: Sometimes the owner and operator of the grocery store is a pretty good entrepreneur.
I see why you were suggesting that there could be a conflict of interest. However, that type of reason for excluding someone from a port authority does not fly very far today, does it?
Mr. Blouin: No, not today.
Senator Forrestall: Do you have transhipment in the port now?
Mr. Blouin: Absolutely. In fact, there was some transhipment just last week.
Senator Forrestall: Do you tranship any coal?
Mr. Blouin: Yes.
Mr. Eldridge: We transhipped some coal from Devco, as a matter of fact, three or four years ago.
Senator Forrestall: You say that you can handle relatively large ships. They would not be as large as those that we handle in Halifax, however.
Mr. Blouin: Perhaps you should come and visit. We are good hosts.
Senator Forrestall: In no small measure, life on the Seaway depends on whether there will be a continuing demand for steel. We have seen the impact that plastics and other man-made concoctions have had. The impact of that slowed down your operations enormously.
Are there marketing studies that conclude that iron ore going inland will remain healthy for the future?
Mr. Eldridge: We believe that there will be an increasing demand for iron ore, although it will be for a different type than the Iron Ore Company is capable of producing today. The direct reduced iron market will expand very significantly. Through the introduction of a flotation system, we are now able to lower the silica level in the product to around 1 per cent, and we can begin to tap into that market.
With new majority ownership from Australia, the Iron Ore Company is currently studying the possibility of expanding the plant in Labrador, or possibly reopening the pellet plant in Sept-Îles that we closed in 1991.
We believe the market will grow. We have been able to diversify our type of product when there are down cycles. As our colleagues from the Seaway said earlier, the last four years have been pretty good, but there is no question there will come a downturn in the steel and iron ore market. We hope that when that happens, we will be able to stay at our levels because of the diversity of products that we will be able to produce. We are fairly confident for the future.
Senator Forrestall: Are you happy with the environmental laws that surround the operation of the port, as they currently stand?
Mr. Eldridge: We are relatively happy.
Senator Forrestall: The proposed legislation will remove those requirements.
Mr. Eldridge: You are referring to the environmental issues related to the port in Bill C-9. We do not see that as an issue with respect to our operation.
Senator Forrestall: You are quite capable of developing your own assessment procedures that would satisfy the triggering of the national review and, as well, provincial concerns?
Mr. Eldridge: Yes. That is not a concern.
Senator Forrestall: I am pleased to hear that. I hope the environmental people are listening. I did not think it was nearly as large a problem. Sometimes you must trust people to do what is in their best interests.
Mr. Eldridge: Especially today.
Madam Chair, I do not know whether this is appropriate, but Senator Bryden asked about our concerns with the costs of the port, and Senator Roberge spoke about our ability to be competitive in the iron ore business. We are competing with Brazil and Australia. I realize this is not the mandate of this committee; we have made representations to the House of Commons Fisheries Committee. One of our concerns in Sept-Îles is related to the Canadian Coast Guard marine services fees.
The companies represented at this table, together with Québec Cartier Mining, are now being saddled with a cost of $2.6 million a year out of a total $26 million recovery that the coast guard is achieving. Wabush Mines, Québec Cartier Mining and IOC are paying 10 per cent of the cost all across the country. We do not mind paying for services that we believe we really need. I realize that is not the mandate of this committee.
The Chairman: We hear you.
Mr. Eldridge: Thank you.
[Translation]
Mr. Blouin: I would like to congratulate committee members for their kind attention. We appeared before another committee and were certainly not treated with the same consideration.
The Chairman: We do our best.
[English]
Senator Forrestall: The form of port is interesting, and perhaps Mr. Brennan might, with your permission, explain to us what a divisional port is.
Mr. Martin Brennan, Special Advisor to the committee: The Ports Canada Act took over from the National Harbours Board Act. The Ports Canada Act allowed for the creation of local port corporations, and several ports in Canada became local port corporations. They appointed their own boards of directors and were given more autonomy in terms of decision-making. The local port corporations include Vancouver, Montreal, Halifax, St. John's, Saint John, Prince Rupert, and I thought Sept-Îles was one. There are approximately seven of them with that additional degree of autonomy. They are not really subsidiaries of Ports Canada any more, but are more like affiliates. They have more powers than a normal subsidiary would have.
Senator Forrestall: I ask this question because it is interesting how you fit in under the act and where it will leave you. If you looked at it through the eyes of Montreal, Halifax, or Vancouver, perhaps it gives you a different optical of what lies ahead.
Mr. Blouin: It was deleted from the original lists, then it was just added. Some people from the port of Sept-Îles are here, so perhaps they can tell us exactly what happened. I think it is because of pressure from the organization.
[Translation]
The Chairman: Are they here?
Mr. Blouin: Yes.
The Chairman: Perhaps we could ask them to step forward to the microphone and to explain to us what happened.
Mr. Valmont Bourgeois, Captain of the Port of Sept-Îles: My name is Valmont Bourgeois and with me is Guy Gingras, Director of Personnel and Administration for the Port of Sept-Îles.
[English]
Senator Forrestall: Perhaps the captain could walk us through the last 15 years. We heard of the devolution. I am trying to get a handle on this question.
[Translation]
Mr. Bourgeois: You want to know what has been happening in Sept-Îles for the past fifteen years?
Senator Roberge: In five minutes.
Mr. Bourgeois: If we take a quick look back at the last fifteen years, we will see that in the early 1980s, the Port of Sept-Îles survived an increase in the price of iron. In 1979-1980, the price of iron ore fell. The town of Schefferville and the plant shut down. We tried to look to markets other than iron ore to survive. We had to find a way to keep the port open. A committee was struck to find a way to attract at least one aluminum smelter or some other industries to the town.
Beginning in 1985, along with our new director at the time, Jean-Maurice Gaudreau, a committee composed of the then mayor, representatives of the Chamber of Commerce and the industrial commissioner was created to attract other industries to the area. Lobbying began in earnest to attract an aluminum smelter to the town. The committee contacted several companies, but its attempts proved unsuccessful. Why? I cannot answer that question.
We began working with General Investment Corp. to bring another aluminum plant to town. Hence, the name Alouette was born. You can correct me if I am wrong. We picked the name Alouette and the plant, the results of General Investment Corp. and lobbying efforts, came to be.
That pretty much sums up what we accomplished back then. Moreover, we are quite proud of our accomplishments. As Mr. Blouin mentioned, we are now responsible for 572 direct jobs, and when we multiply this by 3 -- That explains the origins of the Alouette aluminum smelter. Like any good thing, iron has proven itself to be a growth industry. Last year, shipments of iron ore totaled 24 million tonnes. This year, with IOC and Wabush Mines, shipments are expected to total a further two million tonnes, bringing us to approximately 26 million tonnes this year. I believe someone mentioned coal shipments as well.
Admittedly, things were better two or three years ago. The outlook has been less positive in recent years. A study is being done to assess the feasibility of constructing a bulk cargo terminal to bring other commodities to Sept-Îles. Does that answer your questions?
[English]
Senator Forrestall: This allows me a basis to ask the following question: Will Bill C-9 give you sufficient scope and breadth to carry on with this and to continue with expansion and the acquisition of new bits of businesses?
Mr. Blouin: We believe that Bill C-9 is acceptable the way we read it. It is not like the situation we had with the Pilotage Act, provided that we have proper representation. That is our main point.
Senator Bryden: As a supplementary, did the Port of Sept-Îles press to be changed from a local regional port to become a CPA?
[Translation]
Mr. Bourgeois: Either last year or two years ago, representatives of Ports Canada and the Port of Sept-Îles, including the mayor, came to Quebec City to attend hearings with Transport Canada and to apply for CPA status.
[English]
Senator Forrestall: However, you always believed you operated as if you were the same as the Port of Halifax or Montreal. You did not operate with any blinkers on.
[Translation]
The Chairman: We appreciated your presentation as well as your answers to our questions. We tried to give you as much time as you needed.
[English]
We now have Mr. John Hamm, honourable senators, the Leader of the Progressive Conservative Party of Nova Scotia.
Mr. John Hamm, Leader, Progressive Conservative Party, Nova Scotia: Honourable senators, thank you for the opportunity to appear before the Standing Senate Committee on Transport and Communications regarding Bill C-9, the Canada Marine Act. I am here today to represent all Nova Scotians in speaking to several unacceptable provisions of this proposed bill. I will speak first about the Port of Halifax and then our other regional ports.
Halifax has one of the largest natural harbours in the world, consisting of an outer harbour about two kilometres in width, eight kilometres in length, with a narrowing channel leading into the inner harbour called Bedford Basin. It has a depth of 16.8 metres at low tide and so is also one of the world's deepest harbours. The approach of the harbour is direct from the Atlantic Ocean. Most important, the harbour is accessible year round -- that is, it is ice-free.
Halifax is the first East Coast port inbound from Europe and the last port outbound for shipping lines. Cargo unloaded from a ship in Halifax can be at its final destination in Quebec, Ontario, Western Canada and into the U.S. Midwest and beyond in hours, long before that same ship arrives at its first U.S. port of call. This is due in large part to the double-stack service offered by CN North America and the opening of the Port Huron to Sarnia double-stack tunnel in May of 1995. Those double-stack cars were made just two miles from my home in Trenton works. I am sure many of the committee members are aware of that. We hope in future to be able to build a great many more of them.
The economic spin-offs from the Port of Halifax are substantial: 7,000 jobs, over $230 million in income, and over $300 million in direct expenditures. The natural advantage of Halifax harbour can easily accommodate the future trends in shipping, particularly the introduction of the larger post-Panamax container ships. Halifax is really the only port on the eastern seaboard of North America that has all the natural attributes required and is ready to be developed as a superport. Unfortunately, Bill C-9 robs Halifax of its potential to be the major East Coast port, and this must concern all Nova Scotians and, in fact, all Atlantic Canadians.
The Port of Halifax is in competition with the U.S. to the south. Ports in the U.S. have available to them a variety of ways in which to raise capital, such as tax-exempt bonds, the ability to pledge assets, and in some cases, direct taxation. Some receive direct money from the state for port investments. Thus, U.S. ports have distinct advantages over Halifax in this regard. We suggest that Halifax's future competitors for post-Panamax traffic are U.S. ports, and this legislation does nothing to alleviate these advantages but rather places Halifax in a distinct disadvantaged position.
The federal government continues to treat the Port of Halifax as a poor cousin to other Canadian ports. A comparison of federal debt and interest write-offs for the major ports in Montreal, Saint John, Quebec, and Vancouver shows that Halifax has received the smallest share of federal assistance.
For example, Canadian taxpayers have spent hundreds of millions of dollars subsidizing ice-clearing services through the St. Lawrence Seaway so ships can make their way to the Port of Montreal, which competes directly with Halifax's ice-free port. This bill not only continues this inequity but further exacerbates it.
Compare. Clauses 25 and 26 require that once port authorities are established, they would be obliged to operate on their own. Government funding would not be available. Further, clause 31 provides that a port authority would be prohibited from giving a security interest, such as a mortgage, in respect of the federal real property in any other way than by pledging the revenues of that property -- not the property itself.
In contrast, in Part 3, clause 80 of the bill provides that the minister may make agreements with the St. Lawrence Seaway Authority as considered appropriate on a variety of matters, including the making of financial contributions or grants or the giving of any other financial assistance.
Thus, this legislation delivers two knock-out punches.
The first punch is that, without the ability to pledge assets as collateral for loans, the ability of the ports to borrow will be severely restricted. The Port of Halifax is planning to upgrade to accommodate post-Panamax ships. Should this bill be enacted, we will face an uncertain future that could be disastrous for Nova Scotia's economy. Any significant erosion in shipping traffic through the Port of Halifax will mean the loss of thousands of direct and indirect jobs, along with millions of dollars in economic spin-offs.
The second punch is the continued maintenance of an uneven playing field by subsidizing the St. Lawrence Seaway without fair and equivalent return in kind for ports such as Halifax. The federal government must recognize its obligation to be consistent in its policies and its support of all Canadian ports. It is completely unacceptable for the minister to give financial contributions or grants to the Seaway and not provide in kind for ports not on the Seaway. These two blows take us to our knees. There are several more provisions, any one of which could deliver the knock-out punch.
There is a fee to be levied on the port for the use of government assets. However, this fee is to be determined on the gross revenues of the port. This does not take into consideration whether or not a port is able to pay, especially if there is a large fluctuation in usage from year to year.
With regard to the small ports, there has been insufficient consultation with the local communities on the impact of this legislation. Further, no economic impact studies have been conducted to determine exactly what effect this legislation will have on smaller ports. Many of our small ports have facilities that need to be upgraded. There is no provision for maintaining or upgrading the current infrastructure of these ports. For example, at the Canso superport, on the Mulgrave side, I understand that 15 million is required for the reconstruction of the south berth. These reconstruction programs cannot be supported financially simply by user charges.
Other points must be considered. Clauses 47, 73 and 101 of the bill provide for exemption from the Navigable Waters Protection Act. Provision for the triggering of environmental assessments must be maintained. Disbandment of the port police forces downloads the policing to other police forces, whether municipal, provincial or RCMP. This means that law enforcement will be different at each port. What criminals cannot do easily in one port they may well be easily able to do in another, and this is unacceptable.
A $125 million divestiture fund will not stretch far. In the case of some of our ports, such as Pugwash, the port is disqualified because it was a profit-making facility. Why should this port not receive assistance just because it was profitable for the government in past years?
Clause 140 of the bill provides for the continuation of services in fulfillment of Canada's constitutional obligations in ensuring the continuation of services similar to those provided by Marine Atlantic Incorporated. This section permits the minister to decide what level of service is required to be continued, what level of financial contributions or grants are to be provided. There does not appear to be any provision for consultation on this matter, nor any provision for at least continuing enough funding to ensure the current level of service. Further, there is no provision in place should Marine Atlantic not be able to fulfill its requirement under this section.
My presentation has covered just a few of my concerns with this legislation. To summarize, my recommendations regarding Bill C-9 are that, first, economic impact studies must be carried out together with adequate consultation with the affected ports before any further action is taken; second, the bill provides a mechanism for ports to secure loans or have government guarantees to be used for maintaining or upgrading facilities; third, that ports be taxed on net revenues, not gross; fourth, that all the triggers necessary to ensure environmental assessments are carried out where necessary and remain part of Bill C-9; fifth, in light of the continued maintenance of an uneven playing field by providing subsidization of the St. Lawrence Seaway, fair and equivalent return in kind must be provided for ports such as Halifax and the Canso superport; sixth, assurance that clause 140 clearly provides for the continuation of at least the current service and funding levels to meet that service.
Over the last few years, Nova Scotia has borne 16 per cent of the job cuts federally while having only 3 per cent of Canada's population. This bill continues the onslaught of unequal treatment. Bill C-9 guarantees the future of the St. Lawrence Seaway but it clearly does not guarantee the future viability of Atlantic Canadian ports. The economy of Nova Scotia, and indeed Canada, cannot afford the loss of thousands of direct and indirect jobs, and millions of dollars in economic spin-offs, as a result of failing to make the necessary upgrades to keep our ports on the leading edge in North America.
Senator Bryden: On a point of clarification, you indicated that you were here speaking on behalf of all Nova Scotians. Were you delegated by all three parties to make this presentation?
Mr. Hamm: I was not. However, I am trying to speak for all our ports rather than a specific port. Perhaps that was not clear.
Senator Bryden: You said that you were speaking for all Nova Scotians.
Mr. Hamm: I am not here representing anything other than the party I represent.
Senator Bryden: If that were the case, you are speaking for less than a third, or a quarter of Nova Scotia's population.
Mr. Hamm: Senator, that may be right, however, I understand that we have not been heavily represented at the table.
Senator Bryden: You have been well represented. There has been someone from the Port of Halifax and from the superport of Canso. Interestingly, they all made the points you made and made them very well.
Mr. Hamm: I have copies of their reports.
One of the difficulties, senator, is that some people in our smaller ports do not have the opportunity to come to Ottawa. I think you have considerable empathy for Atlantic Canadian ports. Many of them are very small and would find it difficult to be represented at this meeting.
Senator Bryden: One of them you referred to is Pugwash. I know the Port of Pugwash very well and I play golf there from time to time. However, you referred to a number of sections where this bill, just to use one specific point, exacerbates the cost disadvantage of ice breaking. Which section of the bill were you referring to there?
Mr. Hamm: We have, in Atlantic ports, moved to a user-pay basis. That does not seem to be the case in terms of ice breaking in the St. Lawrence Seaway. You clearly have some concerns in this regard as well. I am saying that the playing field was not even originally level. With the changes in the way we are dealing with ports, it has become tilted even more against our Atlantic Canadian ports.
Senator Bryden: With all due respect, this bill does not deal with ice breaking. That is another matter.
Mr. Hamm: The bill does make reference, though, to the fact that the St. Lawrence Seaway will still have access to funds to which our Atlantic Canadian ports will no longer have access. It is clear.
Senator Bryden: I do not have any problem with that. I thought I had missed something in the bill that you had picked up, that this bill exacerbated the disadvantage of ice breaking.
Mr. Hamm: Ice breaking in the St. Lawrence continues unabated and the advantages of the Atlantic Canadian ports have simply disappeared with the implementation of various user fees of the ports.
Senator Forrestall: Mr. Hamm, it is good of you to be here today. I think it is important to so many others that we recognize the effort, the time and the cost of coming to do the simple thing of putting your views before, not just this committee, but any committee with respect to national matters. This bill is of particular importance to our coastal ports. Of that, there is no question whatsoever. There is a potential here for a very serious impact upon the capacity of ports to grow. Whether that would come true or not, I suspect the gamble is not worth the risk. One way or another, we must try to persuade the government to make certain corrections.
You speak of an unlevel playing field. I just finished a conversation with Michel Fournier, the new president of the St. Lawrence Seaway Authority, in which I cautioned him to be careful that he does all that he can to ensure that the playing field remains level and that public assistance to the St. Lawrence Seaway in pursuit of its competitive position with, for example, Canadian National Railways, is such as not to leave any impression that the government is doing one thing in one area to the disadvantage of another area or another port. In this case, we do not want them do so much to the St. Lawrence Seaway so that Canadian National will pack up. The seaway would then get this traffic and shut down the Port of Halifax, not to mention the Port of Saint John and other significant ports in Eastern Canada. That potential is there and it is real.
I do not have any doubt about Mr. Fournier's capacity to be the most competitive head the St. Lawrence Seaway has ever had. Anyone who doubts that is living in a dream. He is quite capable of that. I can only applaud him for his capacity to do it, but I would have to oppose him because there are other factors.
I understand what you have said, Dr. Hamm. In preparing to come here, did you have an opportunity to talk to anyone in Yarmouth, Sydney, Pictou, Pugwash, Shelburne, Liverpool, Bridgewater, Sheet Harbour and Country Harbour? Country Harbour may become one of the most active ports on the eastern seaboard in the next year or two. Did you have contact with any of these areas?
For what it is worth, the doctor and I have not had any conversations about this whatsoever. I did not know he was appearing as a witness until Thursday or Friday.
Mr. Hamm: Honourable senators, I talked to people at the Port of Pictou. The office talked to people in Pugwash and the Canso superport. Unfortunately, the interest in this legislation was slow to be picked up. Many smaller ports in Nova Scotia are perhaps still unaware of the ramifications of this legislation. It is very important that this bill is more closely analyzed as to what it will mean for those small ports.
Clause 78 sets out the objectives of Part 3 of the bill. It talks about the St. Lawrence Seaway and promoting a commercial approach to seaway operation; protecting its integrity, viability and competitiveness; protecting the rights of communities adjacent to the seaway; protecting the significant investment the Government of Canada has made in respect of the seaway; encouraging user involvement and promoting continued cooperation with the United States. That is a positive statement. I do not see statements as positive about our Atlantic Canadian ports. This bill makes a very strong statement in terms of support and access to the Consolidated Revenue Fund.
It does not make those strong statements about other ports. In particular, I am concerned about Atlantic Canadian ports and our Nova Scotia ports.
Senator Forrestall: That is a concern I certainly share.
There are a number of amendments. Do you care to suggest areas where you think we should consider moving amendments?
Mr. Hamm: I did not come up with the wording of amendments, but I did indicate in my presentation recommendations that would lead to amendments. I think they are very important.
Small ports play a tremendous role in the local economy of those small communities of which they are a part.
The future economy of Nova Scotia will, to a large extent, be dependent on the proper development of the container business in the Port of Halifax. I think there is tremendous potential there. I look at the difficulty in financing that. For example, under the current setup, the Government of Nova Scotia will bear a tremendous responsibility in being a facilitator of all of this. However, arranging the financing is a problem. I, as well as others -- because you have had representations from the commission and the corporation -- think this bill will make it extremely difficult to raise the capital to do the necessary changes that will make us part of post-Panamax shipping.
As we all know around this table, they are already dredging in New York. I am concerned that, as they dredge in New York, we are simply treading water in Halifax.
Senator Forrestall: You may be right. The question is: Where do we get the money to put the expansion in place now? I had not heard that they were dredging for post-Panamax, but they are doing an exaggerated dredging program to catch up with the neglect of recent years. If they ever started to build an offshore port along that port -- even in the estuaries -- by way dredging, it could spell difficult times for some of our ports.
Mr. Hamm: We are in a much better position to take advantage of what is naturally ours, but it will require a lot to make the jump into the post-Panamax business. We are looking at a lot of financing. I do not see within this bill the framework that will allow that to happen. Therein lies part of my concern.
Senator Forrestall: The people wanting to privatize the airport are having problems because they want a lot of facilities put in place before they accept full responsibility for them. With the ports, they just privatize, and there is nowhere they can borrow money. That is simply a comment and an observation. They are building a pretty unlevel playing field.
Thank you for taking the time to appear before the committee.
Senator Bryden: I want people to know that I personally sent notices of these hearings to every community in Atlantic Canada where I could identify a port interest that had either a mayor, a chamber of commerce, or a port authority. Some people have taken advantage of that, and some have appeared here. We hope that some of that has been corrected.
You said that you had been speaking to people in the ports that Senator Forrestall mentioned. To whom did you speak in Pugwash?
Mr. Hamm: In the Port of Pictou, it was James MacKelvie. I spoke to him myself.
Senator Bryden: To whom were you speaking in Canso?
Mr. Hamm: People in my office did that. I will have the names for you in a minute.
Senator Bryden: You contacted Pugwash, Pictou, and Canso?
Mr. Hamm: Yes.
Senator Bryden: They were contacted by your office?
Mr. Hamm: Yes.
Senator Johnstone: From earlier presentation, I was very pleased and excited to learn of the potential of the Port of Halifax. If you were to have an even playing field with your competitors, would you agree that Halifax is in a position to service a great portion of the North American market?
Mr. Hamm: Yes. We have always been in a good position to service central Canada. With the tunnel, and now with double-stacked rail traffic, a container ship can unload in Halifax, and that container can be delivered to the U.S. Midwest. Previously, that same container ship would have reached New York.
This has given us a tremendous advantage in terms of competitiveness with American ports. We can certainly build on that if we become attractive to the large ships which will be part of the Atlantic scene within five years. We have many natural advantages, but we do need the infrastructure. Without the infrastructure, including a considerable commitment by CN, it simply will not happen.
New York is making preparations to get into this business. We have some advantages over that port, however, in that we are closer, and we can deliver the container traffic more quickly to the Midwest. As well, we have certain loading advantages, in that space is a problem in New York. It is difficult to off-load large amounts of containers at one time there. It is a competitive market, and one that, if we play our cards right, will make a tremendous difference to the Nova Scotian and the Atlantic Canadian economy. We cannot let ourselves lose sight of that.
Senator Johnstone: I can see how you could service certain parts of North America, but could you service its entirety? I cannot see how Halifax could service Florida, for instance. Your main corridor would probably be through CN and into the Great Lakes to serve the Midwest. It makes me realize how important Halifax is to the economy -- not only to the Atlantic region, but to the whole of Canada.
Mr. Hamm: With the shifting of the Asian economy, we will, in time, be in a position to be a land bridge. We would be the land bridge across the North American continent. We would be well-positioned to become the Atlantic entrance to the land bridge.
The potential is tremendous. I would hope that the committee would give some serious thought as to whether or not this bill allows that particular project to proceed.
Senator Johnstone: What you are really asking for is an even playing field in which you will be competitive.
Mr. Hamm: Yes.
Senator Johnson: I come from the Prairies, which is not a region with many ports. I have been struck tremendously today by the presentations of people from the smaller port communities, and by their reactions to this proposed legislation. It is something like MIA. It is one of the issues that has been slow to come to the public mind. Where come from, it is not really an issue. Churchill is a different set of circumstances, and it is not in our face.
My colleague says that notices were sent out. I have been struck by the excellent presentations today and they are all saying the same thing.
It seems to me that we could call for economic impact studies, especially considering the environment. Would that not seem reasonable?
Mr. Hamm: The implications of this bill are huge. We may be creating a situation in which some of our small ports may not survive. We should not do that without knowing what the economics of the situation would be for those communities.
This is an issue which has been slow to heat up. The MAI question smouldered for years before the flames finally appeared. Once that happened, it seemed that everybody wanted to talk about it. This issue would be the same in many small ports. As yet, there has been next to no local media coverage in the small ports. It has gone relatively unnoticed.
My own decision to come here was made Friday afternoon, simply because I looked at who was showing up, and was rather disappointed that groups that should have been represented here were not.
The Chairman: I have to tell you, Senator Johnson, that this bill has been going on for four years, and we had Bill C-44 before that. There is nothing new about Bill C-9.
Senator Johnson: I understand that. MAI has been going on for five years. What is new is that these people are just finding their voice on the issue.
The Chairman: We have heard from a lot of people.
Senator Johnson: I am not criticizing that. This is a big country. When you come from the Prairies, this is not the kind of issue that you follow closely unless you are on a committee such as this one.
I am finding it very interesting that these people have made this effort. This has been going on all day. I am happy that this is happening because it gives us a chance to look at our options in terms of, perhaps, some amendments.
The Chairman: Thank you, Dr. Hamm, for your presentation.
The committee adjourned.