Proceedings of the Standing Senate Committee on
Issue 15 - Evidence - afternoon sitting
OTTAWA, Monday, May 4, 1998
The Standing Senate Committee on Transport and Communications, to which was referred Bill C-9, for making the system of Canadian ports competitive, efficient and commercially oriented, providing for the establishing of port authorities and the divesting of certain harbours and ports, for the commercialization of the St. Lawrence Seaway and ferry services and other matters related to maritime trade and transport and amending the Pilotage Act and amending and repealing other Acts as a consequence, met this day at 1:50 p.m. to give consideration to the bill.
Senator Lise Bacon (Chairman) in the Chair.
The Chairman: We are continuing our a study of Bill C-9. This afternoon, we have as our first witnesses, Mayor David Luther, from the City of Corner Brook, and Mr. Erle Barrett, Vice-President of Oceanex. Welcome, Mr. Luther and Mr. Barrett.
Please proceed, Mr. Luther.
Mr. David Luther, Mayor, City of Corner Brook, Newfoundland: I appreciate you granting our municipality the opportunity to present a brief before your committee today. I am also pleased that Oceanex has agreed to join our municipality to make this presentation as well.
I have included an appendix in my brief of some historical and geographical information about the City of Corner Brook, which I feel demonstrates the critical importance that Corner Brook as a port is to the economic livelihood of our community and to our region in general.
I will not go into great detail verbalizing this information, however, I do wish to point out that Corner Brook's port is the second largest freight port in our province. It is in large part due to the importance of our port that the City of Corner Brook has become the hub of western Newfoundland and Labrador, thus becoming the regional service and distribution centre for western and northern Newfoundland and southern Labrador.
Due to the fact that the port is of such vital importance to our city, the council of the City of Corner Brook felt it was imperative to make a presentation at today's hearing and respectfully request that your committee give consideration to exempting the divestiture of the Regional Port of Corner Brook from Bill C-9. While the City of Corner Brook is supportive of the government's initiative to improve the nation's marine transportation system, and we applaud the government's efforts to make it more competitive and efficient, we feel that these results can be achieved by exempting the Corner Brook port from Bill C-9 legislation.
We are not asking that Bill C-9 not be passed, we are simply requesting that our port, and perhaps even other regional ports in similar circumstances to ours, be exempted from Bill C-9. If we are not exempted, we have serious reservations that the passage of this bill as it stands today will have catastrophic consequences on our port and our communities in the province. We fear that if the port is divested, federal funds will not be made available to maintain the economic infrastructure of our harbour facility.
I cannot state strongly enough the potential detrimental effect passage of Bill C-9 legislation can have on our local and our regional economy. As an island province, Newfoundlanders have had close ties to the sea and, for the most part, our very existence came into being because of our proximity to the ocean. The industrial base of the City of Corner Brook consists of many small manufacturing and service-related businesses, along with a number of major industries. The majority of these businesses are dependent on the port for the shipment of goods and services in order to competitively conduct their business in the global marketplace.
All of these businesses contribute to the economic well-being of our community. For example, the Corner Brook Pulp and Paper Mill is one of the largest employers in the city, employing up to 13,078 people, and the mill produces up to 350,000 metric tonnes of newsprint annually. North Star Cement employs up to 95 employees, and markets cement all over the province and in Atlantic and eastern Canada. In the last several years, North Star Cement has invested $4.5 million into their Corner Brook plant as a means of modernizing their operations so that they would be better able to compete on the national and international market. There are three major fish plants in our region, employing, on a seasonal basis, upwards of 400 people. These fish plants are dependent on the port for the export of their products to international markets, primarily in Japan and in Russia.
Atlantic Gypsum produces wall board and gypsum products and exports these products to national and international markets. The plant employs about 62 people. Oceanex operates a regular container service between Corner Brook, Halifax and Montreal, and employs 25 people year round and as many as maybe 60 at peak periods.
The cruise ship industry is a major component of our tourism market. For example, the Queen Elizabeth II visited our port in the late 1980s. In 1998 we have eight crews ships scheduled to visit and we have another nine already scheduled for 1999. Each cruise ship generates in the vicinity of approximately $250,000 to $1 million to our economy.
I have also enclosed, in appendix 1, letters of support from businesses and organizations in our community and in our region. For the most part, these organizations took it upon themselves to write these letters once they learned that our municipality would be making a presentation to this committee. I believe this demonstrates how important the port is to our region, and to industry in general.
We have already been informed by Oceanex that there is a very strong possibility that they will cease their operations into Corner Brook if the port is privatized, which will result in 25 direct jobs lost. It is difficult at this time to determine what other businesses will be indirectly affected by the job losses, and/or what impact port divestiture will have on other major industries.
Unfortunately, the federal government has not conducted an economic impact analysis to determine what effect port divestiture will have on our community or on our region in general. We have not been able to adequately conduct such an analysis ourselves because of the short notice. It is inconceivable that the federal government would even consider divesting itself of these ports without conducting an economic impact study.
We strongly urge that an economic impact study be conducted before Bill C-9 is passed.
From Corner Brook's perspective, the privitization of the port will not only have an immediate effect on our economy, but it will also limit our ability to attract new business into the city in the future. Like the St. Lawrence Seaway, the Corner Brook port is a highway to the rest of Canada. When it comes to transportation and regional economic development opportunities, a fundamental principle of Canada's national transportation policy is that transportation is to be recognized as a key to regional economic development. Commercially viable transportation links must be balanced with regional economic development objectives, so that the potential economic strengths of each region may be realized.
It is obvious that the federal, provincial, and municipal governments realize that the harbour facility in Corner Brook is truly one of our great economic strengths, and they have all invested funding into port improvements.
In 1976, the Corner Brook Harbour Development Study was completed. Its objective was to prepare a 20-year master plan for the development of the Corner Brook harbour. A tremendous economic development potential was identified for the harbour, and, since the adoption of this port, a significant amount of work has been completed to improve the area. This includes construction of three major arterial routes. These routes provide direct road links from our harbour to our major industrial parks, as well as to the TransCanada Highway. This has resulted in improved and safer links for the transportation of goods and services, and has also opened up additional waterfront property for future development, at a cost of millions of dollars.
In 1989, the federal government spent $17 million upgrading and improving the harbour facilities that we have in Corner Brook. Improvements have been done to the on-shore and docking facilities at Barry's Fisheries in Curling, and improvements have been made to our local paper mill, as well. In keeping with the master plan, as a part of the City of Corner Brook's economic development strategy, we have been aggressively marketing our port in order to attract new business investment into our community.
I fear that if Corner Brook's regional port is privatized, port charges will increase dramatically, thus creating a major disincentive for new business. It could also result in existing businesses downsizing, or moving their operations outside of our city. That would lead to significant job losses, and, eventually, to out-migration.
The transportation of goods and services by tractor-trailer, as opposed to be marine freight, limits our economic development ability, and could result in longer delivery times. The size of goods and services shipments would be limited by the capacity of the tractor-trailers, and, in many cases, the cost the business would increase. Marine freight is definitely the most efficient way to transport goods to and from our province.
As I have said throughout this presentation, the City of Corner Brook has deep concerns about the potential negative impact on our region of the divestiture of the port. From an operating perspective, the Corner Brook port is quite viable. The port is not self-sufficient from a capital perspective, however.
As I mentioned earlier, the federal government has spent more than $17 million to upgrade our port over the past 10 years. In spite of this significant expenditure, more capital maintenance is still required to repair the wharf at the Corner Brook dock. It is highly unlikely that a private operator would be able to afford expenditures of this magnitude, nor be willing to invest so much money. The design life of pilings is normally 30 to 35 years, and 70 per cent of the structure in place has already been in service for 29 to 39 years. Expenditures in the range of $15 to $20 million are needed now, or will be required in the next five to ten years, if we are to maintain the current structural loadings.
There is no doubt that the port can only be as good as its docking facilities. If the port's ability to operate competitively ceases, the financial impact on the region will be devastating. We are concerned that, if the federal government chooses to divest of its interest in the Corner Brook port, it could result in major deterioration of the facility, and the eventual closure of our port.
It is important to remember that the Corner Brook port is not a single user port, and we feel that it would be inappropriate to have the port operated by a single user. We are concerned that a single user could potentially set a monopoly on port activities. A private operator has the potential to stop competition and create a monopoly, simply by imposing astronomical port entry fees. This creates unfair competition, and restricts local businesses in their ability to compete in the global marketplace.
If port user fees become too expensive in Corner Brook, all goods and services will have to be shipped into and out of the province from St. John's. That is a distance of almost 1,000 kilometres from Corner Brook, and it will result in a further increase in freight charges. Owing to this, we do not believe that the port should be sold to a single user. Instead, it should continue to be a public and vested port with the federal government. If the port is sold to a single user, it will be detrimental to the current users of the port, and could result in the port's closure.
There is nothing in the Canadian Marine Act to provide that the federal government will take back any ports which fail and are forced to close. In the case of Corner Brook, my fear is that divestiture of the port will result in its closure, and in job losses. Out-migration and economic demise will follow.
If the port is privatized, there is no provision that it will continue to operate in general use. From an operating perspective, the port may never become self-sufficient. From a regional economic development perspective, it is vital to our survival, however.
One component of Bill C-9 deals with the commercialization of the St. Lawrence Seaway, and provides protection for it. Clause 78(d) protects the long-term operation and viability of the seaway as an integral part of Canada's national transportation infrastructure. It is incomprehensible that the federal government could make such a statement about the seaway and not apply the same analogy to the port of Corner Brook.
You must remember that Newfoundland is an island province, and the ocean is our only link to the rest of the country. To us, it is really an extension of the TransCanada Highway. There is no question that the island portion of the province is unique from the rest of the country in this respect, even from communities along the St. Lawrence. While the communities along the St. Lawrence Seaway do rely heavily on it as their transportation network for the delivery of goods and services, they still have the luxury of alternate means of transportation, such as rail and ground transportation. Newfoundlanders do not enjoy that luxury. As you are aware, we no longer have a railway system operating in our province, and we are connected to the rest of the Canada by water, not by road. We have no choice but to rely on marine freight as an efficient and economical transportation mode for the majority of our cargo.
If the federal government divests of all regional ports in the province, the City of St. John's will be the only quasi-public port. All goods and services being imported in or exported out will have to arrive or depart from St. John's or Port aux Basques.
Due to our geological position, we are already disadvantaged in terms of high freight charges and competitive marketing. Our economic viability will only be weakened if we are forced to transport our goods across the province, or if we have them transported in from outside the province via tractor-trailers. Not only will this situation drive the cost of goods and services to unrealistic levels, it will also wreak havoc on the highways in the province. Tractor-trailer traffic will increase on what is already a substandard TransCanada highway. This will impact on all of the residents in the province, and could lead to a major deterioration of our highway link.
In conclusion, before you vote "yes" or "no" on Bill C-9, I beg you to consider the economic impact that it will have on smaller communities. I refer not only to Corner Brook, but also to western Newfoundland and the surrounding areas.
Corner Brook serves a population of approximately 160,000 people. We are currently a very progressive city, and we are working hard to get new industry to come into our area. One of the things that we have been pushing for recently is the availability of a large, well-equipped, deep-water port, and that is one of the biggest selling factors we have in our economic development. Bill C-9, as it stands, will have a devastating effect.
Mr. Erle G. Barrett, Vice-President, Oceanex (1977) Inc.: Thank you for the opportunity to appear before this committee during its deliberations on Bill C-9.
Oceanex is a publicly held company, offering a marine service to Newfoundland and Labrador from shipping terminals in the ports of Halifax and Montreal. On an annual basis, Oceanex moves 50 per cent of the domestic, general cargo imported into Newfoundland, or a total of approximately 500,000 tonnes per annum.
This cargo is distributed through two ports in Newfoundland, with the Port of St. John's looking after the eastern region of the province, and the Port of Corner Brook looking after the western region of the province, as well as southern Labrador. A greater impact of Bill C-9 will be felt in the smaller ports around Newfoundland, so we will restrict our comments to the Port of Corner Brook.
Bill C-9, commonly referred to as the National Marine Act, is a very comprehensive piece of legislation, and it has the noble aim of improving the efficiency of Canada's ports and waterways. There is one area where we must take exception to the act, however, and that is in its efforts to accelerate the divestiture of those ports which are considered to be non-commercial.
In the Scott report of May, 1995, it was proposed that existing ports in Canada either be classified as commercial or non-commercial. In order to be considered a commercial port, the port would have to be financially self-sufficient, with the ability to cover both its operating and capital requirements. All other ports were to be considered non-commercial.
It was suggested that some non-commercial ports would still require federal government assistance. Some of these would be remote sites in the Arctic, or ferry facilities that service private, provincial or federal ferries, some of which are associated with constitutional obligations.
All other non-commercial ports would either be leased or transferred to the provinces, municipalities and/or the private sector. As a last resort, if there were no opportunity for privatization, they would be closed.
This is one area where we clearly disagree with the approach outlined in the proposed legislation before you. Owing to their unique nature, some ports would not be ideal candidates for privatization. At the same time, however, their regional importance means that closing them would create undue hardship.
Corner Brook is one of the ports in this predicament. In the long term, it may have the ability to become self-supporting. This is not presently an option. Most CPC ports in Canada have through-puts well in excess of 1 million tonnes per year, and some greatly exceed that figure. Corner Brook, on average, handles 100,000 tonnes per year over the public wharf. The total general cargo handled in Corner Brook for the past five years is outlined at the end of my report.
In a recent letter from the Minister of Transport to the marine industry, it was stated that port divestiture is not dependent upon the passage of Bill C-9. In fact, it went on to say, port divestiture is an initiative of the government that seeks to place the ownership and operation of public ports in the hands of local stakeholders, who are best placed to manage them in the interests of the local community. This sounds fine and noble. Many local communities do not have the financial resources to manage their ports, however. The letter goes on to state that, since 1995, this program has resulted in the de-proclamation, divestiture or demolition of 316 sites nation-wide.
This sounds like quite an extensive undertaking. However, what was ignored is the fact that in excess of 200 of these sites were precisely that. That is, they were proclaimed public harbours with no port or harbour facilities, no traffic and, consequently, there will be no impact under de-proclamation.
It is safe to say that the majority of these sites had no commercial activity -- or minimal commercial activity -- over the past five years. They were easy to deal with, and they had very little socio-economic impact. Some had none at all.
Of the remaining 233 public ports, 34 are classified as being remote, and will continue to be operated and maintained by Transport Canada, and letters of intent to negotiate a transfer agreement with the government have been signed by 109. This leaves 90 ports for which the government must make a decision as to whether to close or divest. It would be interesting to find out exactly which 90 ports are on the undecided list, and how much these ports contributed to the commercial revenue of the Ports and Harbours Directorate in the past number of years.
Why has an economic impact analysis not been carried out on the potential closure of these ports? It is possible that these ports represent the majority of revenue with the majority of cargo through-put. Any change in the status of these ports could have a drastic impact on the regional economy of the surrounding areas.
It is unfortunate that this process has been undertaken with little or no public input. In the Port of Corner Brook, there was a meeting held in May of 1996 pertaining to the port divestiture program. At this meeting, very little information was available, other than that the federal government intended to divest itself of responsibility for some of its ports.
At the time that was not a very alarming outlook, and it was ignored by most of the participants, as nothing further was heard of the program. We understand that hearings were held in Ottawa on Bill C-9, but none of the stakeholders from Newfoundland were invited to them. We are now faced with a bill that almost completed the approval process before we were once again made aware of the government's intentions towards port divestiture.
We object to the passage of this bill because of the impact that the port divestiture program will have on communities such as Corner Brook.
Our report contains a map of the western and central portions of the island of Newfoundland, outlining the communities that are serviced by the Port of Corner Brook. In addition, communities located in southern Labrador also receive transportation services through the Port of Corner Brook. This area accounts for approximately 30 per cent of the population of Newfoundland and Labrador.
The Port of Corner Brook is not capable of being self-sufficient in the near future. If it is closed, what will the impact on all of these communities that rely on Corner Brook as a regional supply centre be? Suffice it to say that no study has ever been produced. However, should the Port of the Corner Brook be forced to close, the socio-economic impact would be catastrophic. Freight rates would increase as the only competition to road transport was phased out, thereby resulting in an increased cost of living -- this in an area already devastated by the closure of the fishery.
Employment levels would definitely decrease in an area where jobs are a scarce commodity. Oceanex alone provides 25 direct jobs, and our annual expenditures are outlined in the report. These 25 jobs would not be replaced by truck drivers purchasing a little fuel or a cup of coffee.
As Oceanex is not the only company operating in the Port of Corner Brook, we cannot measure the total economic impact of this bill. It is very important that this impact be known prior to any change in the status of the Port of Corner Brook, however.
As justification for continued financial support of the St. Lawrence Seaway, one member of Parliament was heard to comment that the seaway system is considered to be an extension of the highway. Regional ports in Newfoundland should be granted the same status. They are critical elements of the transportation infrastructure, and they can have a dramatic impact on the economy of the surrounding area.
As stated earlier, approximately 50 per cent of the domestic freight moving into the Province of Newfoundland moves through the Ports of St. John's and Corner Brook. The only other port of entry carrying a substantial volume of freight is Port aux Basques, which will continue to receive financial assistance from the Government of Canada because of a constitutional obligation.
St. John's, because of its annual through-put, is already a self-sufficient port. Unfortunately, the only major port of entry, Corner Brook, is not yet self-sufficient, nor will it be so in the near future. Financial assistance to operate this port will continue to be required from the Government of Canada. Without such assistance, the port will be forced to close. Once it is closed, the approximately 100,000 tonnes of general cargo that the port handles annually will be forced on to Newfoundland's highway system. This will only lead to the further deterioration of the these highways.
It will also have an impact on highway safety, and will dump an additional 10,000 tractor-trailer loads of traffic per annum on the highway systems in Newfoundland, Nova Scotia, New Brunswick, Quebec and Ontario.
Senator Forrestall: You do not have toll roads over there yet.
Mr. Barrett: I specify these provinces because most of the goods imported into this area come from Ontario or Quebec.
When it signed the Kyoto protocol on December 10, 1997, Canada committed to a 6 per cent reduction in the emission of greenhouse gases from 2008 to 2012. The potential closure of ports will have an enormous impact on our ability to do that. Perhaps it should be determined which is the cheaper alternative: The maintenance of the Port of Corner Brook, or the maintenance of highway systems throughout four or five provinces, and the resulting increase in pollution levels.
Corner Brook generates revenue of approximately $500,000 per year. As such, it is not capable of meeting its ongoing operational expenses. Unfortunately, Corner Brook is also incapable of meeting its capital expenditures requirement for the major maintenance that must be undertaken on port structures.
The wharf in Corner Brook was mistakenly constructed on concrete pilings, which require significant maintenance. The original piles were installed in 1959, and have now deteriorated to the point where the reinforcing steel is exposed to the elements. Rapid deterioration of the pile structure will result unless immediate repairs are undertaken. In addition, portions of the wharf surface are incapable of supporting today's container handling equipment. The pavement around the terminal has deteriorated to the point where it needs to be replaced.
It has been estimated that rectifying these problems will cost approximately $20 million over the next 10 years. Such an expenditure could never be justified on today's revenues. Without access to Transport Canada documentation, it is hard to estimate the ongoing expenditures for operation and capital needs. A conservative estimate would be in the neighbourhood of $1 million per year, however. How many people would invest in a port requiring an expenditure of $1 million per year, when the current gross revenue is only $500,000 per year? If the Port of Corner Brook is to be considered for privatization, this discrepancy must be addressed.
Under Bill C-9, it would be impossible to obtain financing for capital undertakings, as a security interest cannot be created on federal property. In addition, the federal government will not guarantee any loans for port development. These areas of Bill C-9 must be changed, otherwise they spell doom for ports such as Corner Brook.
Let us assume that the Port of Corner Brook will be closed. Vessels such as oil tankers and paper carriers will still use the port. Who will be left to control safe navigation? Who will ensure that there is no pollution? At present, there is a harbour master on site who bears this responsibility. Once the port is closed, it will be open season for any potential polluters. What impact would a polluted harbour have on the quality of life in such a scenic setting?
In Newfoundland, public harbours are part of our cultural heritage. They are as important to the Province of Newfoundland and Labrador as the railway was to the development of Western Canada. One thing that is constantly overlooked is that such harbours are an ongoing necessity of life in our province. Newfoundland is an island, and our harbours are our lifeblood. Close them down, and you will commence the strangulation of any hopes for future economic development. As we say in Newfoundland, "You may as well pull the plug."
Bill C-9 appears to written with the Great Lakes in mind, not Atlantic Canada. It needs to be modified before it is passed into law. There should be a means under the legislation of ensuring the continuation of regionally significant ports, with suitable financial guarantees.
Ports that are of regional interest should be treated as if they are extensions of the highway network, as the Lawrence Seaway is. Under no circumstances should divestiture of operating ports be allowed to proceed without first ensuring that there has been sufficient public input to gauge the importance of a port to the local regional economy.
The socio-economic impact of port divestiture or closure should be a prime factor in the decision-making process. Issues such as the protection of the environment, safety, and pollution reduction, must also play a part in the decision-making process. The federal government cannot be allowed to abdicate its responsibility in this matter.
The Port of Corner Brook should remain open and under the control of the Minister of Transport, with an assurance of sufficient funding for its long-term survival. Divestiture may even be possible in the long term, provided that a local, regional committee is established with a mandate to proceed in this fashion, and proven capable of increasing the throughput.
If it proves impossible to make the port self-sufficient, it should still remain open because of its regional importance. Meanwhile, funding must be made available to allow much needed capital improvements to proceed.
Should this divestiture program be carried out successfully, there will be no more public ports in Newfoundland, an island that relies on marine transport. The new port operators will have the commercial shipping industry operating at their leisure, and they may force the shut down of this industry if it suits their purposes. This should be totally unacceptable.
One final item that bears consideration is the cultural importance of functioning harbours in Newfoundland. They are part of our cultural fabric, and we should not necessarily change our mosaic in the mistaken interests of economic efficiency. Some things are worth preserving in order to ensure the continuance of a way of life. All members of the nation do not necessarily wish to become part of the Bay Street culture. There is strength in our diversity.
Senator Forrestall: I wish to express my delight that you have taken sufficient interest in your port to come to Ottawa and give us your views.
First of all, I would like to ask about the capacity of the City of Corner Brook to cope with financial support to the port, should divestiture go ahead. I am wondering about the impact on your current assessment and tax rates. Do you have the capacity to raise or to offset the loss of grants in lieu of taxes? Do you have recourse to the province to generate the kind of revenue that you foresee needing? Do you have access to the books?
How is the port structured? Do have you a representative or a friend of the city on the port authority?
Mr. Luther: No, we do not have a representative on the port authority.
Senator Forrestall: Have you seen the books?
Mr. Luther: The only information that I have comes from groups like Oceanex.
To answer your first questions -- we do not have any money. There is no way that we can get money. The provincial government will tell us that it does not have it either. This expenditure is far too large for us to contemplate.
The City of Corner Brook has one of the highest tax rates around, and we are trying do our best to lower it, instead of raising it. There is nothing we can do about raising more money. We are stretched to the limit right now.
Senator Forrestall: I accept that. I am trying to place this against the reality of the port itself, however.
Mr. Luther: There is no port authority. The port is just Transport Canada used by different people. Oceanex uses it, and do the other companies mentioned in our brief. There is no port authority as such. The city has no say. It is entirely separate from us.
Senator Forrestall: Do you get money from the port in lieu of taxes, or do you levy commercial property taxes?
Mr. Luther: There may be some commercial property tax, and there is a small grant in lieu of taxes, but it is not a large amount of money.
Senator Forrestall: Do you recall how much you might get from grants and direct taxes?
Mr. Luther: No. I do not have that figure, but it is not a lot of money. A few months ago, we did our budget for the new year, and it was not even a factor. It did not even enter into consideration because it is so small.
Senator Forrestall: The TransCanada Highway in Newfoundland certainly is in need of substantial upgrading. Have you ever heard any suggestion of the cost of upgrading those 600 kilometres?
Mr. Luther: I believe that the money from the Roads for Rails Agreement is just about used up, but a lot of the highway still needs major repairs. There are sections in central and western Newfoundland that still need major upgrading. If you travel on the highways in Newfoundland, you are faced with tractor-trailer after tractor-trailer. Hundreds or thousands of them go between Port aux Basques and St. John's everyday, on side roads on the northern Peninsula, and so on. If another 10,000 tractor-trailers are thrown into the mix, there will be no room for cars. There are already a lot of complaints that there are too many tractor-trailers.
On the mainland, one can choose to take different roads. We do not have that option in Newfoundland. We just have one highway that goes across the island from Port aux Basques to St. John's, and everyone is on it. More tractor-trailers will cause deterioration, and we already do not have enough room for everyone. There is no need for this when freight can continue to come in by water, thereby solving the problem.
Senator Forrestall: Somewhere along the line it must be made necessary to keep the port open and viable.
Mr. Luther: Yes.
Senator Forrestall: I do not know what we would do without the Montreal-Halifax service. We now have tolls in Nova Scotia, and significant tolls are coming in New Brunswick. You are nowhere near either your market or your shopping centre, which is Montreal. Have you looked at the financial impact on the port if you were to lose that?
Mr. Luther: It would have a tremendous impact. There has been an outcry lately over the increased cost from the toll highways that are opening up in New Brunswick and Nova Scotia. Tractor-trailer operators are saying that they have to increase their rates because of the tolls. It is already having an effect on us.
If everything that comes into the province must be shipped on tractor-trailers, the cost of everything will go up. The price of everything that we need will go up; from food, to clothing, to furniture.
There has been a terrible lack of planning. We were given this beautiful port, and a lot of money has been spent to give us Marine Drive, a beautiful highway systems which has two accesses to the TransCanada Highway. This money was spent in order to allow freight to be efficiently transported to the TransCanada Highway. The road will probably be finished by late fall, but it will be a walking road. That is, there will be no port into which the freight could come, defeating the purpose of the road. There was an awful lack of planning when this was put together.
Senator Forrestall: The bypass through and around Corner Brook absorbed a very significant portion of the federal money that was available.
Mr. Luther: The whole idea was to build the port, and then to have this excellent transportation system. For the first time, we are poised, with the help of government initiatives like ACOA and CIDA, to go out and attract manufacturing business. We could actually put people back to work, bring Newfoundlanders home and employ them, and stop out-migration.
This port is a major factor in accomplishing that goal. Without the port, we will have a lot of trouble getting manufacturers to come in. Manufacturers will have to use tractor-trailers, and some of them just cannot handle that. They need ships to transport their goods.
Senator Forrestall: Could you ask the province to approach ACOA for the funding for an impact study? After all, there may be a phasing-in period.
Mr. Luther: We have not done that yet, because this all happened so fast. On Friday afternoon we were still putting this presentation together, and I flew here Saturday to spend two days reading it over in the hotel room, and preparing for this meeting. This was thrust upon us very quickly. An impact study would have to be looked at, but I think that would take a bit of time.
Senator Forrestall: Has there been any formal coming together?
Mr. Luther: No. We have not had a chance.
Senator Forrestall: Would you like time to pursue that?
Mr. Luther: If we had the proper documentation of costs, it would not hurt. It would be ideal to be able to present that documentation here, because then we could tell you what the impact of the loss of the port would be, not only on Corner Brook, but also on other large communities in western Newfoundland, such as Stephenville and Deer Lake.
The Chairman: Have you had any discussions with Transport Canada about Bill C-9?
Mr. Luther: No, I have not. I was only elected about seven months ago, and I first heard of this issue when it was brought to my attention a few weeks ago. Other politicians had talked to the previous mayor, to some of the councillors, and to the city manager about the possible effects of Bill C-44. It seems as though the whole thing crept up on everyone.
Senator Roberge: Congratulations on your election.
Have you any idea how the other ports in Newfoundland feel about Bill C-9?
Mr. Luther: They totally agree with what we are saying. The proposed legislation would have the same impact on each community.
Mr. Barrett, from Oceanex, said to me earlier today that everyone in the pulp and paper industry may end up having to ship out of one port. We have three paper mills, and they would be forced to go with one area. Right now they are using three: Corner Brook, Botwood and Stephenville.
Senator Roberge: I find it a bit surprising that they have not asked to appear before us.
Mr. Luther: Some of them have written letters.
Senator Roberge: Mr. Barrett, you were saying that the revenue to the port is $500,000. Is that strictly from your operation?
Mr. Barrett: No. That is total gross revenue for the Port of Corner Brook, collected by Transport Canada through various fees: leasing rates, harbour dues, berthage dues, top wharffage, and so on.
Senator Roberge: That figure comes from all of the users?
Mr. Barrett: Yes. Oceanex accounts for about 75 per cent of that revenue, and the other 25 per cent obviously comes from other users of the port.
Senator Roberge: It is pretty clear why you say that port charges will have to increase if something happens.
Mr. Barrett: They will have to increase substantially, although we do not have access to the actual figures.
Senator Roberge: I am trying to figure out if we can get the real figures. I see that you have not been contacted by the department. Some of that information is missing for us, too.
Mr. Barrett: Public Works Canada carried out an assessment on the structure in Corner Brook. Someone there certainly has an idea of what it will cost to maintain it over the next five to ten years.
Senator Roberge: How will the port develop in the future? Have plans or strategies been put down on paper?
Mr. Luther: We want to bring new industries into Corner Brook, and those industries will have to use the port. Improvements will have to be made, because there will be an increase in traffic. We do not know what this will mean, exactly, but we must get these companies to set up first.
It is like the chicken and the egg. We have to get something going before we can know exactly what will happen. Without the port, we cannot have a manufacturing industry come into Corner Brook, and ask it to ship things out. As the representative from Oceanex pointed out, if one company were to take the port over, there would be a monopoly. The company could do as it pleased with the fees. It could push other people out of the way.
Senator Roberge: I assume you could utilize portions of the $125 million divestiture budget.
Mr. Luther: That is an interesting point. If $125 million were spent amongst the ports, I fear that Corner Brook's share would be somewhere in the range of about $400,000. Even $125 million does not go far when it is used for 90 or 100 ports, especially when some of those ports are asking for $20 million each. I fear that there is not much money to spread around. When $125 million is divided by 90 or 100, there is not much to go around.
Senator Roberge: You may want to apply as a remote port.
Mr. Luther: We are a remote province.
Senator Bryden: These are two very powerful briefs. If you had limited time to work on them, you had some very good research help, and you did a very good job. They express positions that have been put forward by others, and which will probably be echoed by some who follow you. The Port of Canso, for example, is in the same situation.
If each port requires in the range of $20 million to become commercially viable, there will not be much money to go around, even if the fund were increased. It is my understanding, however, that the Port of Canso is in negotiations for the transfer of that facility to the local municipality, or to their economic development commission.
In that negotiation, a significant amount of repair needs to be done to bring in order to bring the port up to standards which will allow it to be commercially viable. I think that the figure is $17 million. The government's concern was to bring it up to a minimum standard, as opposed to a commercially viable one. Minimum standard means that you grade it so that it does not erode into the water, and you bank the dock with armour stone.
Your point about the adjustment fund for these 90 ports that remain is very well taken.
Mr. Luther: You are not going to get out of Atlantic Canada with $125 million.
Senator Bryden: Not if these ports are to be brought up to commercial standards.
You referred to privatization. The preferred position from Transport Canada is that it is not privatized in the sense that there is a private operator. It is no longer government owned and operated at the federal level. A non-profit organization would be transferred to a municipality, users and so on. Is that your understanding?
Mr. Luther: No. My understanding is that the federal government gives the provincial government the first choice, and then the provincial government turns it down. The municipality cannot go hand in hand with this.
If, as mayor of Corner Brook, I ask to be given the chance to set up a harbour authority, the provincial government will say no, because it will eventually have to foot the bill. It goes from federal to provincial, and from provincial to private. There is talk that there will be an ad in the paper, asking anyone with an interest in the Port of Corner Brook to state his or her case.
Mr. Barrett: I understand from Transport Canada that the ad was ready to go in the Corner Brook paper about two weeks ago. When officials found out that opposition to the bill would be presented at this hearing, they changed their minds and decided not to put the ad in the paper. They were asking for anyone to forward expressions of interest in the operation of the Port of Corner Brook. It could very well be that a private operator wants it for some unique use of his own.
Senator Bryden: If access to transporting freight by water is removed, there may be issues of pollution and highway deterioration. In appearing before a House of Commons committee on October 28, 1997, the assistant deputy minister of Transport Canada said that the seaway has to be the most precious transport infrastructure that we have.
He said that, at a time when we are debating climate change and all those things, shipping remains the most energy efficient mode of transportation. Do you agree with that?
Mr. Barrett: Yes, I do. It is also the least polluting means of transportation.
Senator Bryden: The governments of Newfoundland, Nova Scotia, and Prince Edward Island are very concerned about the fact that my province, New Brunswick, is putting tolls on a very significant stretch of the new four-lane TransCanada Highway because of increased costs. The tolls will certainly continue in my province, and may well occur in Nova Scotia, as well.
A loaded 18-wheeler causes the same amount of damage to our highways as 10,000 cars do. If have you to move your freight from Corner Brook via the TransCanada Highway and not by water, will the road not simply be driven into the ground?
Mr. Barrett: Yes. Sections of it in Newfoundland are already driven into the ground. There are some sections of that highway that I do not think you would like to drive on.
Mr. Luther: If you were to come to Newfoundland, we could show you what it is like to try to dodge tractor-trailers day and night.
Senator Bryden: In addition to the moose.
Mr. Luther: Yes.
Senator Bryden: You mentioned the private monopoly if this goes to bidders. Is it possible that one of the principal users, perhaps not Oceanex, but let us say the pulp mill, would buy the port?
Mr. Luther: No. The pulp and paper mill has its own docking facilities. I should not be speaking for them, but I know they have been working quite a bit over the past year and a half. Their big concern is all the ice-breaking duties, as well as the other duties, that go along with all this if Transport Canada pulls out. If they end up paying for ice-breaking services in January and February, it will certainly drive up their costs considerably.
There are other aspects to all of this. It is just not cut and dried.
Senator Bryden: If this goes up for tender, which sounds likely, presumably anyone could bid on the port. It is my understanding that those bids are assessed principally on the financial return to Transport Canada, as against the implications for economic development. Is that your understanding as well?
Mr. Barrett: Yes, it is.
Mr. Luther: Mr. Barrett can back me up or not on this point. If Oceanex takes over the port for $1 million or whatever, and they do not have the millions to do the necessary repairs and in two years time it starts crumbling, they will own a dock facility that is useless and they still will not be able to move their freight. Only someone like the federal government can afford to do this. No private industry can afford to go in if it costs $1 million a year to operate the port and we are only making $500,000. No one in their right mind will step into a venture like that.
Senator Bryden: In your estimation, if the port were to close, would the economic impact on the 160,000 people and the communities in that area be worth at least $1 million?
Mr. Luther: It would be much more than that. It would add to the cost of everything from automobiles, food, clothing, and to everything that Oceanex ships into the province. Then what would happen with our gypsum plant and our cement plant, and so on, when all of a sudden they must put their material on trucks? We would be back to the highway situation again. We are going around in circles here. It just cannot work. It may work in some small places where they are not using their port as a viable economic structure. However, this is a major part of Corner Brook's economic development. Without it, we are dead in the water.
Senator Adams: We had a couple of witnesses, one a lawyer, one a native, with us last Monday who came from the mainland Labrador area of Newfoundland. They told us that some of the ports in the Labrador area have been transferred already from the government to the private sector. One of the companies is the John Crosbie Shipping Company, and the witness also mentioned some paper companies. We were told that these companies have a two-year contract. Is CN covering the mainland of Labrador for the shipping of goods to the small communities?
Mr. Luther: In those cases, it is probably a community that has a wharf and one company has a contract to bring in their supplies for the winter months. Their foodstuffs and appliances are brought in on one trip in the fall to get people through the winter. It is not a commercial operation as such. There is no manufacturing, no transportation of goods and services out. It is a contract with a harbour to just bring in the necessities.
Mr. Barrett: If we understand what happened in Labrador, the federal government was obliged to provide a service to coastal Labrador through Marine Atlantic. The Province of Newfoundland agreed to take over this obligation in return for a sum of money. I have no idea how much. I hope in their case it was many hundreds of millions of dollars because they will need it. They agreed to take over this obligation and, in turn, contracted out the transportation of freight to Labrador. It was a public tender and the tender was awarded to a consortium.
You said John Crosbie but it was actually Colin Crosbie, a relative I am sure, and two other companies that are involved in the transportation business. They have a contract to provide transportation to Labrador for two years with an option to renew for a third year. Part of this agreement was the transfer of ports to the Province of Newfoundland. The Province of Newfoundland has taken over responsibility for the maintenance of these ports, which means they will deteriorate and fall into the harbour eventually because they will not be able to afford to maintain them.
Senator Adams: I asked previously who will put money in to build those wharves and I was told that 100 per cent will come from the federal government. Is it the same thing at Corner Brook?
Mr. Barrett: Yes. As a matter of fact, the federal government has invested a substantial amount of money in the Port of Corner Brook in developing the facility there and I think it is part of a phased approach to upgrade that facility. Now that they have it to a certain level they will say, sorry, we are attempting to privatize the port, but the job has not been finished on the structure. That is why we are estimating it will require another $20 million to finish the job that they have already undertaken. It is partly complete, but the structure, without the completion of that job, is actually useless.
Senator Adams: Do you conduct your business between Corner Brook and mainland Canada?
Mr. Barrett: We do not conduct the ferry business in terms of passengers and so on. We are in the freight transport business. We operate from Montreal and Halifax into St. John's and Corner Brook. There is a Marine Atlantic ferry service operating from North Sydney to Port aux Basques.
Senator Adams: In the meantime, are you saying that the government will turn it over to anyone interested in bidding on your dock at the port? Is that a provincial reward to the private sector? How will that work?
Mr. Barrett: We do not know but, if you wish to use as an example what has happened so far, look at what happened to St. John's dockyard. I understand the federal government was very pleased to get rid of its obligations and they have unloaded it to a private corporation. They recovered the sum of $1.
Also, they have undertaken to look after all environmental obligations that may be required by that dockyard in the future. It was a good contract on behalf of the private company that took it over.
Senator Adams: Do you have any fish plants at Corner Brook?
Mr. Luther: Yes, we have.
Senator Adams: Is that government or private?
Mr. Luther: That is private. They have their own docking facilities, but it is all included in the harbour front of Corner Brook, so they have improved them.
Senator Adams: Is it on government property?
Mr. Barrett: They have a facility of their own but they also lease a portion of the government wharf as well and a shed that is on that wharf. They do some of the shipping out of their own facility and some off the government wharf, as well.
Senator Adams: If the government turns that over, will they need to buy that property? How will that work?
Mr. Barrett: They could probably buy it for the same sum that the St. John's dockyard paid.
For their purposes, they could probably operate there for a lot longer than a general freight terminal could. Much more loading on the wharf structure occurs from a general freight terminal with container-handling equipment.
Senator Johnstone: You realize that many ports in the Atlantic region are familiar with your concerns, and share them with you. From a strictly good business sense, it appears that you are telling us that, if Bill C-9 is not amended or changed, it might cost the federal treasury more money in the long run. Some amendments or flexibility need to be built in?
Mr. Luther: Yes. They should leave things they way they are, with this great infrastructure which they have put in place over the years. They should give us a chance to make something out of this, and to get more industry into the area. If they pull the plug, putting all of these people out of work, it will cost more for the highways, for unemployment, for freight, and for travel. The costs just keep going up.
In 10 years, they may save $10 million, but they will have spent $45 million. That seems to be the way that they are going.
Senator Johnstone: There will be no incentive for new companies to come in.
Mr. Luther: No.
Senator Johnstone: Perhaps there will be no incentive for companies to stay there.
Senator Forrestall: We have heard from other parties, and their letters are included in Corner Brook's brief. Sheila Butt, managing director of Nfld. Ship Agencies Ltd., has expressed concern, and supports the brief. Mr. Rob Gillette, from Super-Atlantic Seafoods & Stevedoring, is of the same opinion. The Humber Economic Development Board is lending all the support that it can, openly asserting that Bill C-9 should be amended, and that the Port of Corner Brook should not be considered for privatization. The Corner Brook District Labour Council shares those concerns, as does the Corner Brook Chamber of Commerce.
One of the few commodities coming through the port to show any growth is fish. Mr. Barry, the president of SeaFreez Foods, says that we need to make exemptions. Consideration must be made.
The Atlantic Group Limited, which ships gypsum and other bulk cargo, has said exactly the same thing in its succinct brief. It is quite clear that it shares the concerns of Mayor Luther and the City of Corner.
I do not want anyone to think that the mayor is being supported by only one of the principal users of the port.
Beyond ice-breaking, the cost of the aged mariners, navigation aids, buoy aids, and channel markers, is borne by the Coast Guard. Who pays for that?
Mr. Barrett: Any navigation aids in the Bay of Islands area are paid for by the Coast Guard.
Senator Forrestall: You use some very heavy fairway buoys out there. How would maintain those buoys if they were to become your responsibility?
Mr. Barrett: We could use that good saying that we have in Newfoundland: Up she comes. They will be coming out of the water.
Senator Forrestall: They are too expensive.
Mr. Luther: You mentioned the letters of support. I was amazed at the response. I only managed to have a newspaper article printed a week and a half ago. I attended the Great Humber Joint Council, a group of about 25 communities around the immediate Corner Brook area. They voted their support on a Saturday. When the details hit the Monday morning paper, these letters began to arrive. People were dropping in at my office with letters of support. I had never even heard of some of these companies. This all happened very fast, so I was delighted with the support that we received.
Senator Forrestall: Oceanex can drift down the St. Lawrence, and build up enough steam to get into the port, but she still has to steam back up river. Thank you for coming, and for the frank expression of your concerns. There may well be resolutions to your concerns.
Mr. Luther: On behalf of the people of every small port that is affected by this, I am begging you to find them.
Senator Forrestall: This refers also to the Ports of Halifax, Georgetown, Charlottetown, and Summerside.
Mr. Barrett: I was asked why other ports had not appeared before this committee. If this issue had received more public exposure, you would have been swamped with from Newfoundland ports. They do not know about the potential impacts yet.
Senator Forrestall: Our Chair would not let us travel.
Senator Johnson: Why have people not found out about this?
Mr. Barrett: I suppose that it is because they rely on the media for information, and there has been very little coverage of this. Further, there have not been any hearings in Newfoundland on port divestiture, other than the initial hearings where no one could answer any questions. All we were told was that a program was being developed. We were all to be informed later.
The Chairman: This has been going on for four years.
Senator Johnson: You said that work has been done on the wharf structure, but that it is not complete. To your knowledge, did the government have any intention of completing the work? Now that it has been started, is there a plan for it?
Mr. Barrett: I am not sure if it was approved for capital expenditure. I do know that Transport Canada's regional people in Newfoundland had a plan in place to upgrade the facility, however. I have not idea whether or not it had been approved by Ottawa.
Senator Johnson: What will happen if this bill passes? Are you optimistic that the necessary upgrading will be done?
Mr. Barrett: If this bill passes it will never be done, because no one will be able to afford it.
Senator Johnson: Your predictions about this beautiful port will become reality. In your opinion, you will no longer have a port.
Mr. Barrett: That is correct.
Senator Bryden: What is the Government of Newfoundland and Labrador's position in relation to these issues?
Mr. Luther: I informed them that I was coming here to present a brief. I checked with them, and asked if anyone wanted to say anything. They told me to go ahead and do what I am doing.
Senator Bryden: This is a very critical matter for your area. There are also some other critical matters in relation to the groundfish strategy. A huge effort is being put forward by the Government of Newfoundland and Labrador in that regard, and properly so. I am wondering whether you were aware of any such concern?
Mr. Luther: I cannot speak for them. However, if I were in charge, and someone said that there was a distinct possibility that several small ports would need repairs and it would cost millions of dollars, I would be somewhat concerned. No one has the money <#0107> we cannot afford these repairs. I am not optimistic that there would be any help from the provincial government.
Mr. Barrett: We did meet with officials from the Department of Works, Services and Transportation. They are so firm in their belief that that program is not going ahead that they are not opposing it. They say that it is so totally unreasonable to expect the province to take over responsibility for all these ports that, when they were asked to do so by Transport Canada, they turned it down. Their belief is that the program will never go ahead. We could have taken the same approach and buried our heads in the sand, too. We decided not to do that, however.
Senator Forrestall: Good for you.
Mr. Luther: The fact that you have kept us here so long, and asked us all of these questions is delightful to me. You could have said, "Thank you and good-bye".
The Chairman: We want to allow as much time as possible for senators to ask questions, and for you to express your views on the bill.
Thank you very much.
Our next witnesses are Mr. Thomas J. Hayes, chairman; and Mr. Wade Elliott, executive director, from the Halifax-Dartmouth Port Development Commission.
Mr. Thomas J. Hayes, Chairman, Halifax-Dartmouth Port Development Commission: We appreciate the opportunity to express our concerns about Bill C-9.
For those of you who are not familiar with the Halifax-Dartmouth Port Development Commission, we are a provincial/municipal agency with a mandate to promote and develop business at the Port of Halifax. We also advise all levels of government on matters affecting the competitiveness of the port.
We have had a long history in port development projects, including the Autoport, the Halifax International and Fairview Cove container terminals, double-stack rail service, and initiatives to develop Halifax as a gateway for U.S. Midwest business.
In late 1996, the Province of Nova Scotia and the Halifax Regional Municipality reorganized the Commission's board of directors. This was done in order to encourage greater coordination of metro's transportation and trade stakeholders by adding representatives from the Canadian National Railway, the Halifax Port Corporation, the Halifax Longshoremen's Association, the Waterfront Development Corporation, Trade Centre Limited, the Greater Halifax Partnership, the Shearwater Development Corporation, and the Halifax International Airport Authority.
The Port of Halifax is a modern and diverse port, handling a broad mix of cargo via extensive facilities. Container traffic is particularly important, given its significant economic impact. It is responsible for an estimated 2,000 jobs, $70 million in incomes earned, and $100 million of expenditures, out of a total port economic impact of 7,000 jobs, $240 million in incomes, and approximately $330 million in expenditures.
Container traffic generated by the Port of Halifax is vital to the long-term viability of the rail system east of Montreal. As well, the frequency and diversity of container shipping services, which operate through Halifax primarily in order to serve inland markets, provide Atlantic Canadian producers and exporters with excellent access to overseas markets.
With its relatively modest local market, Halifax's success as a mainline port of call for international shipping lines depends on its ability to competitively access inland North American markets by rail. Traditionally, it has been largely limited to Ontario and Quebec traffic, but, with the opening of Canadian National's St. Clair Tunnel, Halifax now offers fast, competitive service to the U.S. Midwest and beyond.
Meanwhile, developments in international shipping including extensive vessel sharing agreements, consolidation of services and port calls, and the introduction of increasingly larger post-Panamax containerships -- we are the only Canadian East Coast port that can accommodate these large vessels -- fit in well with our natural advantages. We are ice-free, and we have an 18-metre depth in our harbour, which requires no dredging. The port offers the shortest ocean voyage times from North America to Europe, and to Southeast Asia via the Suez Canal.
We feel confident that, given industry trends, and with the development of an appropriate port policy environment, Halifax can fully achieve its potential to become a major East Coast load centre. Unfortunately, however, should Bill C-9 be enacted in its present form, we seriously doubt that this potential could ever be realized.
Mr. Wade Elliott, Executive Director, Halifax-Dartmouth Port Development Commission: The Halifax Dartmouth Port Development Commission has participated in port policy debates for many decades. It pressed continuously for more local autonomy, and, in the early 1980s, was a strong supporter of the federal legislation that led to the demise of the National Harbours Board, and the devolution of some of its functions to local port corporations.
Some of the things in Bill C-9 are positive. For example, the decision to disband the Canada Ports Corporation should bring some reduction in costs, and some streamlining in decision making. Except for one major and negative feature, however, we are not convinced that the new port authorities to be created under the bill will significantly differ in practice, role, or performance from the local port corporations that they will replace. While the minister will not be as free as he has been to make board appointments, the federal government will continue to retain substantial control. Therefore, the bill retreats from the National Marine Policy announced in December 1995.
Most importantly, however, the bill will prevent access to a traditional primary source of funding for major capital projects -- the federal government. At the same time, the federal government will extract an annual stipend from the port, in the form of a charge against its gross revenues. This is the primary negative feature of the bill, and the one which is, in our judgment, sufficient to make it a retrograde step in Canadian port development.
The loss of the federal government's participation in future capital investments, coupled with the demand for an annual stipend, will seriously and unfairly disadvantage the competitive position and growth potential of the Port of Halifax. This is the fundamental flaw of Bill C-9. On behalf of the federal government, Nesbitt Burns conducted an analysis of the impact of Bill C-9 on port self-sufficiency. It should be noted that this analysis only considered sustaining existing developments, and did not look at the need for new major capital investment projects at the Port of Halifax.
Most port facilities are capital intensive, and must be built well in advance of user commitments. Users do not come until the facilities are in place, as the actions of shipping lines have repeatedly demonstrated. In the case of Halifax, very little of its traffic is captive, so, even when users do arrive, there is no guarantee that they will stay. They will not stay if they find another port that provides cheaper access to the markets in the North American interior that they seek to serve.
In these circumstances, the funding needed for the construction of major port facilities could only be arranged, in part, by the private sector. No private sector lender or investor can advance the bulk of such funding against user commitments which may or may not materialize when the facilities are completed. Further, even if such user commitments do materialize, they may not continue until the funding has been repaid. Had Bill C-9 been in effect in the late 1960s, Halifax would not have been able to build and equip a single container berth, and the harbour would have been relegated to playing a minor role in the Canadian economy long ago.
Our recommended course of action is not to lament the situation after the bill's enactment. Put bluntly, anticipated future sizeable capital projects such as the new container terminal will simply not be possible should Bill C-9 proceed as it stands. The provisions of Bill C-9 which govern financing are simply insufficient to accommodate a major capital project. Such projects will require a public/private partnership for investment that will be beyond the capability of port stakeholders and the provincial and municipal governments.
Bill C-9 will prevent the federal government from participating. The government will still collect an annual stipend, however, which will further hamper the port's borrowing capability.
We maintain that it is fundamentally unacceptable for the federal government to continue to insist upon extracting revenues from Port of Halifax, while at the same time refusing to be a partner in future investments.
The Port of Halifax finds itself in a unique competitive situation. American ports enjoy far greater flexibility; they are able to raise capital through tax-exempt revenue bonds, pledging of assets, direct taxation and other means. They also receive considerable subsidies from the government, and they do not pay stipends to it.
Bill C-9 will only serve to aggravate the situation, tilting the playing field even further to our disadvantage. To the north, the Port of Montreal continues to enjoy massive support from the Canadian taxpayer, through the free provision of ice-breaking services. In the meantime, Halifax and it is rail partner, Canadian National, receive no support in their efforts to compete with their subsidized competitors for markets in central Canada and the U.S. Midwest.
Another example of this discrepancy of treatment is illustrated by the provisions that would continue to offer the St. Lawrence Seaway access to the Consolidated Revenue Fund. At the same time, such access is denied to the Port of Halifax. In many cases, the seaway competes directly with Halifax for such traffic as heavy lift cargos, steel, and other breakbulk and bulk commodities.
Bill C-9 goes to great lengths to justify this double standard. Under clause 78 it states that one of its objectives is to:
(d) protect the long-term operation and viability of the Seaway as an integral part of Canada's national transportation infrastructure.
The Port of Halifax/CN gateway is at least as critical a component of Canada's national transportation infrastructure. Given industry tends and changing trade patterns, we would argue that it has considerably greater potential to expand its role in international trade for the benefit of all Canadians. The Port of Halifax deserves to be treated as other Canadian ports and routings are treated, and the federal government must recognize that it has an obligation to be consistent in its support of Canadian port activity.
Mr. Hayes: In conclusion, the Halifax-Dartmouth Port Development Commission strongly believes that the Port of Halifax has the potential to significantly expand its role as a major gateway to North America. This would increase employment, strengthen the long-term viability of the eastern Canadian rail system, and improve access to overseas markets for Canadian producers and manufacturers. Bill C-9 throws this scenario into serious doubt, however, because of the severe restrictions that it will impose on the port's ability to finance future major capital projects. The architects of Bill C-9 unfortunately chose to ignore the competitive reality faced by the Port of Halifax especially vis-à-vis U.S. ports, which have far superior financing capabilities.
Within the Canadian context, the Port of Halifax continues to be competitively disadvantaged, much as the Halifax International Airport has been, as a result of an inconsistent federal government policy. Bill C-9 would further aggravate this situation, and effectively handcuff the port's future development.
We feel that the government's push for speedy passage of this bill is a serious mistake. The mandatory review of this legislation in four years might inspire changes, but that would be akin to closing the barn door after the horse has bolted. The commission prevails upon you not to allow this to happen.
Senator Forrestall: Do you have any numbers? Could you tell us how much money moves by way of grants in lieu of taxes? Do you have a ballpark figure?
Mr. Elliott: I do not have the exact figure. In Halifax, the relationship with the municipality has always been very strong. In fact, the Halifax Regional Municipality and its predecessors, the City of Halifax, have, on occasion, assisted the container terminals through tax assessment reductions in difficult years.
Senator Forrestall: I am looking for a comparison of what you might have to pay to the federal authority, as opposed to what you now receive in terms of grants in lieu of taxes. I also want to know how much you might have to pay in taxes. I want to get a clear idea of how expensive this will be. I understand and appreciate the debate about taxation on the basis of gross, as opposed to net. If we had a figure, it might give us some idea as to what the Port of Halifax stands to gain and lose.
Do you have any numbers?
Mr. Hayes: You referred to the proposal to exact a stipend based on gross revenues of the port. I am not sure if anyone knows the percentage at which that stipend will be fixed. In the corporate world, however, one would never extract on the basis of gross income, rather than net income. That is a negative feature, and we have not really focused on it.
Senator Forrestall: You do not have a figure. You cannot say, for example, that you would gain $200,000 with the present way, whereas you would lose $200,000 the other way?
Mr. Hayes: I do not think that the relationship regarding grants in lieu of taxes will change with Bill C-9.
Mr. Elliott: In terms of grants in lieu of taxes, the relationship with the municipalities should not change. The Halifax Port Corporation currently describes itself as a small business, because its revenues about $15 million per year, and its net earnings are around $3 million per year. When we look to have significant investment in the future, our primary concern is that the amount that we are able to borrow based upon our cash flow will not be sufficient to warrant those large investments.
Senator Forrestall: I assume that it is difficult to put federal land up as collateral for major borrowings?
Mr. Hayes: Doing so is precluded by the proposed legislation. The federal government will continue to own the assets, control the operation, and extract a stipend based on gross revenues, but, in terms of future capital projects, it does not want to come to the table.
Senator Forrestall: If you want to dance, you must pay the piper. If you want to expand the terminal, they will dictate where it goes.
Mr. Hayes: Based on the current revenue stream that the Halifax Port Corporation generates annually, it will not be able to generate the kind of private investment that will be required to put those facilities in place. Without that kind of investment, the port will slowly be relegated to a secondary status.
Senator Forrestall: Have you sat down with the principal users of the facilities to determine whether they could afford to put the facilities in place?
Mr. Elliott: There are discussions about investment under way all the time between the container terminal operators, for example, and the Halifax Port Corporation. If you look at the magnitude of the investment that we would be looking at a few years down the road, a new container terminal would be around $200 million. Considering what we can bring to the table, the federal government's absence from those discussions will likely mean that the terminal will not be built.
The Chairman: Some ports have paid dividends to the federal government in the past. Has Halifax ever paid any?
Mr. Elliott: Halifax has paid dividends, and Halifax has also contributed to special cash payments. Cash payments of about $5 million were paid, and there have been dividends, such as Canada Ports Corporation charges, on top of that.
The Chairman: Have you done any detailed studies on the amount of investment that would be required in the near future to ensure that the harbour stays competitive?
Mr. Elliott: Yes. We have been heavily involved in that over the past few years. Along with other economic development agencies and CN, we have looked at Halifax's competitive situation, and what will be required down the road.
One of the big issues is the increasing size of ships, which works to Halifax's advantage because we have very deep water. These ships require large cranes with a longer outreach to be able to reach across a wider vessel, however. Those cranes cost money, and negotiations are under way to hopefully make that happen.
If we continue to grow, we will be needing larger container capacity in the future. An investment such as the one required for a container terminal will be not be possible if the bill goes through.
Mr. Hayes: The amount of money is dependent on to whom you speak. Whether it is for the upgrading of existing facilities, or for the addition of a third complete turnkey operation, we have heard numbers which range from $100 million to $600 million. It is very significant.
The Chairman: Are those figures based on specific studies?
Mr. Hayes: There have been a number of studies. There is some justification for the numbers, depending on how large-scale the investment is.
We must continue to grow. I do not think that Halifax has a choice. We must upgrade to make ourselves available to these new, larger vessels, or we will be out of the business as we know it today. We do not have a choice.
Senator Bryden: The provisions in the bill which concern the St. Lawrence Seaway allow the federal government to make grants, provide guarantees, and make a call on the Consolidated Revenue Fund in the proper circumstances. Is this what you want for ports such as yours?
If you are to build a $150 million terminal, I can understand that no banker will lend that money if you cannot pledge the asset, or have a guarantor who owns the asset. Are you looking for the federal government to guarantee that expenditure? Would that make it possible for you to support Bill C-9?
Mr. Hayes: We would like the federal government to at least have the option of being a partner in future capital projects. We are not suggesting that it has to be a partner. It would have to be an appropriate investment. It should at least have the ability to consider it, however. Under the proposed legislation, it does not have that ability.
Senator Bryden: It is prohibited from doing it.
Mr. Hayes: Absolutely.
Senator Bryden: What is the Halifax Port Corporation, and who is Mr. Bellefontaine?
Mr. Hayes: He is the President of the Halifax Port Corporation, which is the federal port corporation that currently owns and operates the port.
The Halifax Port Corporation is a provincial/municipal agency, created in 1984. Halifax has a long history of port commissions, but the current commission was enacted under legislation by the Province of Nova Scotia, and we are jointly funded by the province and the municipality.
Senator Bryden: What is the relationship between your organization and the Halifax Port Corporation?
Mr. Hayes: Traditionally, HPC has been the operator of the port. The port commission, in conjunction with the local port corporation, has promoted the development of the port, and looked for new lines to come to the port. Sometimes we disagree on issues of policy. The HPC is an agency of the federal government, and we are an agency of the province and of the municipality. The chairman of the Halifax Port Corporation currently sits on our board, however, so there is an interchange of views. We work together in marketing the port.
Mr. Elliott: You received a submission from the Halifax Port Corporation, and many of the same concerns were raised in it.
Senator Bryden: Last week we heard that one group is sometimes not on speaking terms with the other.
I think that your main point was also raised in the HPC's brief. According to it, the problem is that the bill prohibits the pledging of federal property for mortgages, loans, et cetera. That is just another way of saying what you just said.
Mr. Hayes: Absolutely.
Senator Roberge: I am trying to understand why some of the other big ports do not have a negative reaction to Bill C-9. In the case of Montreal, you mentioned free ice breaking facilities. Are there other reasons?
Mr. Elliott: The financial situation in Halifax is one of the biggest reasons. The primary means by which these new port authorities are supposed to finance new investments is cash flow. In the best case scenario, the Port of Halifax would probably generate $30 million to $40 million. We are talking about expenditures of $75 million to $200 million.
Vancouver and Montreal may very well have sufficient revenues to cover expenditures, because their scale of operation is different.
Mr. Hayes: The Port of Vancouver, the Port of Montreal, and the Port of New York all have significant local traffic, which requires ships to call at those ports. Of the traffic that comes through Halifax, 80 per cent may be shipped beyond our locale. We are what is called a discretionary port. For that reason, it is much more difficult to ensure that ships will be calling well into the future, and that we will guaranteed revenue streams. This is not the case for Vancouver or Montreal.
Senator Roberge: Your report says that you have income of $200 million, and expenditures of $330 million.
Mr. Elliott: Those are the total port economic impacts.
Senator Adams: You mentioned containers a few times. How do the containers get to their destinations from your port facilities? Do they move by highway?
Mr. Elliott: To serve the large markets in Montreal, Toronto, and Chicago, roughly two-thirds of the business moves directly to rail primarily. We have been moving into the Midwest more and more in recent years. About 15 per cent of the business moves around the region by truck. The balance would move on the water; between Halifax and Corner Brook, or St. John's, or New England. There is a lot of rail traffic beyond the local Atlantic Canada market.
Senator Adams: Are you handling grain in the Port of Halifax?
Mr. Elliott: We handle a little bit of grain. Most of what we handle is for the livestock industry in Atlantic Canada. We do not handle much in the way of exports any more, although we do handle that from time to time.
Senator Adams: You say that you have port facilities for the containers, and you are busier every year. If the bank does not lend $200 million to upgrade the dock, will you be able to continue? Further, do you need a deeper channel, or is the water deep enough?
Mr. Elliott: Fortunately, Halifax is blessed with great geography. We do not have any ice or tidal concerns. A glacier created a strategically positioned, beautiful natural harbour, which takes advantage of the trends in the industry. Ships are getting larger and calling at fewer ports. Halifax certainly does fit into those plans well, and there are no costs for dredging.
The costs are all associated with building the terminal.
Senator Adams: Shipping does not slow down all year?
Mr. Elliott: No.
Senator Forrestall: You have given us a large range for the cost of adding expanded facilities -- $150 million to $700 million. Are the powers that be considering coming over to Navy Island Cove? If not, why not?
Mr. Elliott: A number of sites have been discussed in terms of future container terminal development. The one that comes up most often is further north along the Rockingham shore.
Senator Forrestall: How deep is the water there? You know precisely how deep it is, as do I, and you know the cost of recovering that land. This is what drives pricing from $100 million to $200 million.
Mr. Elliott: Shearwater has been discussed, as have a variety of other locations.
Senator Forrestall: The best place in the harbour is the area between the Bedford Institute and the gypsum plant. If that were levelled and pushed out, you would be out to very deep water. That is the largest single block of land, short of filling in Navy Island Cove.
The figures are mind boggling. How much will it cost to install the bigger cranes on the terminals?
Mr. Elliott: That sort of development can be done in a variety of ways. It will probably cost in the order of $30 million per terminal.
Senator Forrestall: Can modifications be made to the existing equipment?
Mr. Elliott: Not if the terminals are to be efficient.
Senator Forrestall: You will have to buy new stuff. Good luck.
Mr. Elliott: You commented on looking at alternative sites. Halifax enjoyed a good year last year. Our container traffic grew by 20 per cent. Midwest traffic grew by 40 per cent. There is an opportunity here, but, because of the nature of our business, we do not have a lot of captive traffic. We think that we can become a major gateway for North America. We are hoping that we will be in a position to consider those types of sites for future port development and new terminals.
Senator Forrestall: We made two mistakes in the past. Why make a third? Let us put in 20 or 30, as we need them.
Mr. Elliott: If Bill C-9 is passed, we will not have that option.
Senator Forrestall: That is what I am afraid of. Where will we ever get the capital?
Mr. Elliott: Absolutely.
The Chairman: Thank you for your presentation.
Our next witness is Captain Claude L. Ball, Executive Director, Halifax Shipping Association.
Captain Claude L. Ball, Executive Director, Halifax Shipping Association: The Halifax Shipping Association, commonly referred to as the HSA, is an organization which represents ocean carriers, stevedoring companies, agents, freight forwarders, service providers, and others involved in the shipping trade of the Port of Halifax. This long-standing organization was formed to keep its membership abreast of current issues at the port, and to represent them with regard to the impact of policy on their operations.
The initiative to redefine Canada's ports comes at a very significant time in the development of global trade and the transportation logistics associated with the world marketplace. In this context, we see the Port of Halifax at a potential cross roads; a time of significant opportunity for growth and development, with much to be gained or lost.
Changes in ocean technology, such as the inception of the post-Panamax vessels, growing ocean carrier consolidations, vessel sharing and a push for consolidation of traffic into hub ports, combined with the capital savings associated with reduced inventories and faster delivery times, play directly into Halifax's strengths. The port has deep water, is located virtually on the "Great Circle Route," has excellent vessel-rail interface, and can service the entire North American marketplace. Halifax can be the shortest "time" gateway between both European and Suez markets, and the Canadian and U.S. Midwest markets.
This potential cannot be achieved by maintaining the status quo, however. A dynamic program of infrastructure development and marketing must be defined and implemented if this potential is to be brought to fruition. We believe that this opportunity for significant growth requires immediate and decisive action. The downside could ultimately result in the port being relegated to feeder port status, serving the maritime marketplace only. In this regard, we have serious concerns as to the major problems Bill C-9 will create in terms of financing major capital projects.
Others could better judge the impact that becoming a feeder port would have on Halifax, Nova Scotia, and even on the Canadian economies. However, the number of jobs lost in our industry at Halifax alone would be in the thousands. With this in mind, we have taken the opportunity of the introduction of the Canada Marine Act to examine the port, and try to define our vision of what the new port authority should look like. We have then examined the bill, to see what in it lends itself to this vision, and what detracts from it.
Our vision for the new Halifax port authority is as a low-cost, customer focused, efficient and financially self-sustaining organization. It would be driven by the private sector to develop the vision and direction for the port. Its goal would not only be to maintain the port's competitive standing as a commercially viable East Coast gateway, but also to reach to the potential of tomorrow.
We recommend that this vision be included in the letters patent as the defining factor for the new Halifax port authority. We believe that, if the port is to achieve its potential, the direction and strategy must be driven by the needs and opportunities of the private sector.
The HSA recognizes that the new bill, in eliminating the Canada Ports Corporation and improving local autonomy, offers some improvement over the status quo. However, these improvements would seem to be overshadowed by the serious problems created on the financing side.
The bill does not ensure that the present and future federal governments would allow the port authorities free rein to pursue commercial goals, unimpeded by political agenda. This is in spite of the fact that the federal government is removing itself as a potential investor in future port projects.
In clause 4 of the bill, entitled "National Marine Policy," paragraph (e) states, "provide a high degree of autonomy..." The definition of high is left entirely open to interpretation. This term should be replaced with the phrase "total autonomy, within the limitations stated in the act."
The bill lists the activities and restrictions under which the authority is to operate. Having the rules of the game spelled out in clear terms is the only way to encourage entrepreneurial development.
At clause 14, entitled "Directors", we note the difference in the wording with regard to directors appointed by the municipal and provincial governments, whereas the remaining directors are nominated by the minister in consultation with the users. Great pains are taken in the act to describe the qualifications and restrictions placed on eligible candidates. In order to ensure that the authorities are properly private-sector driven, the act should actively state the qualities and restriction of the director. Specified user groups such as the HSA should then appoint the allotted number of directors governed by the criteria stated in the act.
In clause 16 we note the "persons excluded" from being directors. This terminology is unacceptably vague as there is no definition of who is a port user. This unnecessarily interferes with the ability of the private sector to demand non-partisan business decision making and lends itself to potential abuses and patronage.
The definition of who is to be excluded must be developed and included in the bill. The definition may be universal in scope or port specific. However, we would like to address what we believe is relevant for the Port of Halifax.
While the HSA recognizes the potential for conflict of interest for the employees of ocean carriers and other customers of the port to sit on the board, this may not be the case for some service providers. More specifically, the Port of Halifax and CN have an extraordinarily independent relationship. CN's participation at the port is absolutely vital to the port's future. Conversely, any failure of the port to continue as a major East Coast gateway to North America would seriously jeopardize the commercial viability of the main line rail link between Montreal and Halifax.
In Part 3 of the bill, which deals with the Seaway, clause 78(d), recognizes the importance of protecting "the long-term operation and viability of the Seaway as an integral part of Canada's national transportation infrastructure." The rail link between the Port of Halifax and the major Canadian markets is also an integral part of Canada's national transportation infrastructure, which contributes significantly to the Canadian economy. In this regard, we must consider what the impact of the loss of the rail link with the rest of Canada would have on the Atlantic provinces and, ultimately, on the entire country. The most productive way to ensure long-term viability of the rail link is through good business principles. To this end, we recommend that the railroad be encouraged to play an even more active role in the port authority.
CN should be given one selection on the board of directors and exempted from the restrictions associated with users of the port. With regard to the remaining directors, the HSA, which has representation from Halifax's steamship community, must be part of the selection process. The restriction on candidates and definition of users must be refined and written into the bill before it becomes law and set so that arbitrary exclusion is eliminated.
The most troubling part of the bill is found in the financial section, namely, clause 25, "No appropriation." Bill C-9 prohibits Canada Port Authorities from seeking federal government loans or appropriations for project funding. In addition, the bill does not permit the CPAs to pledge their real property, which is still Crown owned, as security for bank loans. It therefore places severe financial restrictions on the port, specifically Halifax. These restrictions are likely to result in a negative effect on the port's access to bank funding, especially when large sums of money are required for major port infrastructure projects. This will likely stop the development of any major capital project, such as a new container terminal, dead in its tracks.
The bill proposes the payment of an annual fee to the government based on the percentage of the CPA's gross revenue. Such a fee levelled in this way becomes a senior charge against a port, which will have an effect on the port's borrowing power. The HSA believes that if the federal government is intent on legislating itself out of the ability to consider being a partner in major capital investment, it has no right to further hamper the port's ability to raise financing by insisting on collecting a stipend.
In the U.S., ports are not assessed such a fee. In fact, ports in the U.S. -- that is, our competitors -- still have access to state grand funds. Ports like Seattle and Tacoma actually have taxation powers on property owners to support their infrastructure program.
In conclusion, the Halifax Shipping Association sincerely appreciates this opportunity to present our views. We hold very serious concerns that should this bill proceed without the necessary changes, it will likely strike a major blow to future port development in Halifax, especially as key investment decisions will need to be made soon. The HSA, therefore, strongly urges that you take whatever action is necessary to ensure that the Port of Halifax is not prevented from becoming a major East Coast gateway to the benefit of all Canadians.
Senator Roberge: You made an interesting point about the directorship. You say that an individual, as a director, an officer or an employee of a port, cannot be on the board of directors. On the other hand, the bill states that you must choose someone who has extensive experience related to port management and port usage. There is a double meaning there. Would a disclosure of conflict of interest not be sufficient?
Mr. Ball: I believe so. When people serve on boards elsewhere, they do a credible job. It is beneficial to have people around a boardroom table who know the business. To declare their interests on any given point, as many other board of directors do, should suffice in this case. You would then have knowledgeable people running the port who have great stakes in seeing that things are done properly.
Senator Roberge: There are different circumstances involved here. For example, the Port of Seven Islands has a very particular situation. There are three major corporations using the port. It does not make sense to say that they cannot have something to say regarding the functioning of the port.
Mr. Ball: It is good business.
Senator Bryden: Is there trans-shipping in Halifax from large ships to smaller ships to go down the eastern seaboard?
Mr. Ball: There is some trans-shipment, yes.
Senator Bryden: Is that likely to increase?
Mr. Ball: We hope so. We would like to see Halifax become a hub port. Looking ahead to the post-Panamax ships that will now not be able to get into a lot of ports, and we see them coming in and dumping their cargoes for the smaller ports. This is where the feeder services would come in. With our deep water and close to the ocean routes, this is what we think will happen in the future, given the right economic circumstances.
Senator Bryden: I should like to raise the issue of using water and rail as a means of moving goods, as opposed to trucks. I realize for many types of goods that water is still the very best way to go. How does it compare not just cost-wise but in terms of environmental impact?
It is clear that the Department of Transport is concerned about doing things to help reduce the pollution levels of transport. Minister Collenette stated before the Commons Transport Committee that transportation contributes 27 per cent of the greenhouse gas emissions in Canada. He spoke of the apparently irreversible growth in highway traffic, whereby private vehicle traffic is projected to grow between 50 and 100 per cent over the next 25 years. With respect to its impact on Toronto, the minister observed:
What it means is that with this doubling of truck traffic by 2025 we will require the equivalent of another 401 right through the Toronto region -- another 16 lanes. We can't sustain it.We can't build it. We can't afford it. It won't get done. We have to look at other solutions.
I believe that one of the other solutions being considered by people, in government and elsewhere, is the combination of movement of freight by water by large ships into ports like Halifax, and then the development of high-speed unit rail traffic from those locations into places like Toronto.
Are you trying to put the Port of Halifax in a position to compete in that type of situation?
Mr. Ball: It is true; I do not think road is an option. Road could not handle our boxes right now. This is why a few years ago we went to double-stack trains. The Sarnia tunnel opened so we could get these double-stack trains right through to the U.S. Midwest. That is a plus for Halifax. Our bread and butter in the port is knowing that our markets are along the rail line: Montreal, Toronto and the Chicago area. That is why we want CN as a part of us, so we can get improvement in rail times.
Right now, coming from the ocean, our carriers landing in Halifax can put a box in Chicago before the ship gets into New York because we are the first port in. That is the kind of thing we need in order to be competitive.
Senator Bryden: Would that improve your competitiveness also in relation to ports such as Montreal?
Mr. Ball: Yes, given a level playing field, we can compete with any port right now. You need certain things. In our case we need some government help. We will pay back the money, but it is hard to go to a bank with no collateral and ask for a couple of hundred million dollars. I do not believe we would get it.
Senator Forrestall: I wish to return to this borrowing from the point of view of regulations. Have you seen the draft of the regulations that will be made under Bill C-9?
Mr. Ball: No. I have the bill here. I have seen the sections in the bill that we determined prohibit any participation, so that is where we are coming from at the moment.
Senator Forrestall: They prohibit participation within the limits prescribed by regulations. Just as an aside, earlier last week, I asked the clerk if he could secure for us the draft regulations. Have you been able to do that?
Mr. Michel Patrice, Clerk of the Committee: Not yet. The response was that those draft regulations were not available at this time.
Senator Forrestall: Were we not told that someone was looking at them already?
The Chairman: I was surprised that someone would have them.
Senator Forrestall: I was surprised as well.
The Chairman: No one else mentioned that to the committee.
Senator Forrestall: Did they say when we might be able to look at them?
Mr. Patrice: I must inquire, but they are waiting for the bill, basically.
Senator Roberge: Before making them?
Mr. Patrice: Before making them or giving them out, I am not sure.
Senator Forrestall: I find that heard to accept.
Mr. Ball: We have great faith in the Senate to solve these problems.
Senator Forrestall: It is very important that we find a solution, but we cannot do it alone. I can assure you of that.
Mr. Ball: Rest assured you have our help and cooperation.
Senator Forrestall: Let us just look at clause 27(1) for a minute, for those who have the bill.
For the purposes of this Part, the Governor in Council may make regulations for the corporate management and control of port authorities or wholly owned subsidiaries of port authorities...
Would Sheet Harbour be considered an outport or an affiliated port, or does Sheet Harbour now stand on its own?
Mr. Ball: It would probably stand on its own as a private. Years ago it was compulsory pilotage, but now the pilots of Halifax provide service there on a voluntary basis. It is not compulsory pilotage. It might have been under the old ports and harbours regulations years ago. It certainly does not have the same status as Halifax.
Senator Forrestall: No, it does not, but they were considering asking the Port of Halifax to take it under its wing and help sustain it in that period shortly after the construction of the wharf.
Mr. Ball: One of our stevedoring companies is there providing services.
Senator Forrestall: Under the regulations, the conditions of port insurance will be set forth. Do you have any views on how insurance of the port affects your membership? Do you have any serious objections to the present status? Would you be happy if it continued under the new act as long as it was somewhere in the same general ballpark?
Mr. Ball: I believe so, because some improvements have been made. For example, Canada Port Corporation has been downsized. It cost Halifax $800,000 a year in its heyday. That is being phased out now. We believe that the port will be given access to public funds, after we make our case that it is a viable project. We did studies on a third container terminal when I worked for the ports corporation. With consultants, we looked at Navy Island Cove, Shearwater, wherever, and the most efficient is at right angles. If my memory serves me, that was about $200 million, for two berths. We have the back-up: the rail line was right there, and the water. Of course water that is too deep works against you when you are filling in for a container terminal. You must have the proper fill. You cannot just dump sand.
Senator Forrestall: I should not be bootlegging my private concerns, but I am a real booster of Navy Island Cove. For once, we all have the back-up acreage and rail access to the principal arterial road system. We have containers off the streets of Halifax and the A. Murray Mackay Bridge.
Mr. Ball: It is straight out of town from there.
Before you build, you would have to update that study because it is about five years old. The scenario would be the same. The costs may rise a bit.
We may need help with these post-Panamax cranes you mentioned earlier. The crane has to be higher and reach out farther because these ships are very wide. They are 17 or 18 boxes across. Traditionally, the industry does not get into equipment on the terminal. In the past, the terminal operators supplied the cranes, but now they are close to $10 million each.
The terminal operators are not that affluent. Help will be needed to finance these cranes. You cannot just stick up one post-Panamax crane. As I said earlier, you need a minimum of two per container. You should have three each, by rights.
As I see it, we need help in Halifax to represent the industry. The industry will not come up with any funds because they do not have to do so in other ports. A line will seldom own a terminal, except perhaps in Rotterdam, but there they have mega-boxes going through.
In Halifax, there are several lines at each terminal and they are not required to pay for any infrastructure. They pay a box rate of approximately $820 per box.
You mentioned grants and new taxes. Once a terminal is leased out to a private operator like Haltern, they pay the taxes. Those tax rates are confidential and are negotiated with the city. In some cases, the tax reaches almost $1 million before it is negotiated downward because of the economic benefit that the terminal has on the port. They get a substantial break in the natural tax rate, but it is a confidential negotiation that goes on between the municipality and, in this case, the stevedoring company.
Senator Forrestall: That is the major problem then. The other problem is clause 25, which says that no payment shall be made.
Mr. Ball: As an industry that is paying the shot, if we recommend some directors, we like to see them appointed to the board. We see no point in sending up so many names and having no idea who will be picked. We are from the old school. If the user pays, we should have a little bit of say. Perhaps we are all out to lunch, but in my opinion things would work better if there are qualified people sitting around the boardroom who know the business.
Senator Forrestall: They will have earned millions for their respective companies over the years by the application of good sound business principles.
Mr. Ball: All we need is a fair shake. We are away to the races. Then you can pave the Seaway and run trucks on it.
Senator Johnstone: Captain Ball, it is my understanding that ships are becoming larger. Could this be potentially more beneficial to the Port of Halifax than to the more inland ports?
Mr. Ball: Yes, sir, because these ships will select their port of call. First, Halifax can accommodate them draft-wise and size-wise without dredging. Some ports cannot. Even New York would have a problem. They have problems now. They have to do some serious dredging and then must deal with the highly contaminated dredgeate from the Hudson River. The state is not too happy about that dredging.
We have an opportunity to feed more into New York because these big ships cannot call at very many ports, but Halifax is one where they can. There are a few ports in the U.S. that can accommodate large ships, but we hope Halifax can lighten up their load. We are 18 days away from the Suez. While ships from there are loading in Halifax, we can supply them with fuel and lots of water. That is an added plus for the port.
Senator Johnstone: Captain, you also foresee exciting developments for the Port of Halifax. You state that there is excellent vessel-rail interface and you can service the entire North American marketplace. Can you expand on the changes you want to see in Bill C-9 in order to fulfil the type of future that you foresee?
Mr. Ball: I would like to see us able to borrow from the Consolidated Revenue Fund when we make a good case, which we have always done in the past. If we need additional rail or cranes or container terminals, then that fund is our banker. We will pay it back but we need the initial layout. We are not in a regular business where we can tell the bank that if we build a container pier, this is what will happen.
The customers may come if you build it, but I can assure you that they will not come if you do not. That is the business. Very few customers will commit to you before you have the facility. That is the nature of our business. However, if you have the facility and the quick turn-around time, we are confident that they will come.
Senator Johnstone: Thank you, captain. That is very encouraging.
Senator Adams: Captain, you mentioned the railway system and upgrading container warehousing at the port. If you upgrade, will you attract more railways than CN? Amtrak, for example, runs through Chicago. Is there any problem with the container equipment?
Mr. Ball: CN has the capacity and is a good railway. With more business, they can become more efficient. These double-stack trains running each way in rotation will provide maximum efficiency. More volume is good.
Senator Adams: You mentioned Chicago several times. Do the Americans prefer shipping from Europe through Halifax or through Chicago?
Mr. Ball: In my brief, I talked about just-in-time inventories. Sometimes those boxes contain goods worth $130,000. If you can get it in one day before your competitor, the shipper will use your port. That is the name of the game.
We could not get a double-stack train through to Chicago before CN deepened the tunnel at Sarnia a few years ago. That was a big plus for the port.
Senator Adams: You have double-deckers now for CN. In the meantime, will people from the United States give you a guarantee to use your port if you upgrade the containers? Will they use your port instead of Chicago?
Mr. Ball: People are looking for good service. We have increased our U.S. Midwest cargo every year since the tunnel opened. That means we are doing something right. Service is the name of the game, coupled with price. If we do not do it right, users of the facilities will go somewhere else.
Senator Adams: Will the banks lend you $200 million?
Mr. Ball: I do not want to go down that road. As I said before, I know the senators will fix this right up.
The Chairman: Thank you for your contribution, Captain Ball. We appreciate your attendance today.
The next witnesses are from the Port Alberni Harbour Commission: Mr. Hugh Anderson, chairman; and Mr. Denis White, Port Manager and Chief Executive Officer.
Mr. Hugh Anderson, Chairman, Port Alberni Harbour Commission: Honourable senators, it is a great honour for us to appear before you. If one sees flaws in legislation, there are two ways of dealing with them: Let the flaws pass and hope that they can be corrected later; or, if there is something that can be done beforehand, save the government and ports from embarrassment. We are here as a friend, not as an enemy, with suggestions for improvement. The port system in Canada is complicated; it is not a simple thing.
Honourable senators may or may not be aware that a number of years ago the larger ports in Canada went bankrupt. The federal government got involved in the ports because of the bankruptcy of major ports like Vancouver and Montreal.
Around 1947, Parliament, in its wisdom, passed the Harbour Commission Act. For 50 years, it operated so efficiently that neither the government nor the harbour commissions had anything to talk about. It appeared the only people interested in harbour commissions at that time were civil servants who felt that we had too free a reign and were making too many decisions on our own. We were making money, and they felt that maybe they could obtain a portion or make sure that not too many decisions were made without the process being inspected under a microscope. There has always been a suspicion of harbour commissions because they were not asking for money. Harbour commissions were solvent, making money, had money in the bank and, under the terms of the Harbour Commission Act, were economic generators for their area. I am not speaking about large ports such as Vancouver.
Port Alberni ships out approximately 300,000 tonnes of forest products per year. The Port of Vancouver ships approximately 75 million tonnes, in and out. Compared to Vancouver, we are not in the same league. However, our league of port provides economic stimulus for our areas. We have built three marinas because private developers looked at the cost of developing marinas and the return and felt that they were not a good investment. However, we thought we could bring many people to our area if we provided pleasure boat moorage. Tourism is an area of growth on Vancouver Island, which is where we are from. We call it the gem of the Pacific, and Port Alberni the salmon capital of the world. However, we do not say that too often.
The Harbour Commission Act provided that local authorities would oversee social and economic development. Proposals would be sent for approval and would be agreed to if we had the money. We did that. We have done that for 50 years, for this is the 50th anniversary of the Port Alberni Harbour Commission. We have made a profit every year for 50 years. We have not been a drain on the government. By the same token, we have not sent them money, nor did we send the municipalities money. We kept that money not for the benefit of the commissioners or their staff, but to use that money for economic development. We built a fish plant there because we thought that if we had one, it would attract loading to our docks, which it did. We built an ice plant, with freezers, for flash freezing. Fisheries felt that there was no need for it. We put it in, and it is being heavily used. We thought that if we put these things in, we would provide a service and also increase economic activity.
Things were proceeding well until recently. We were happy to stay where we were. We did not ask the federal government to change anything. We asked them to approve projects that we would fund out of the money we had put away. The government did not give us the money; we put it away.
We would build up $5 million or $6 million in reserve, and ask the government if we could spend $4 million to build a terminal or whatever. We would keep a bit in reserve, build the terminal, and everyone was happy. It was a nice system. We saved money, rather than borrowed. The interest on that money helped us, and then we spent it on capital projects.
Our harbour commission is a three-member board. Two members are appointed by the federal government, and one by the City of Port Alberni. We have 14 staff members. Our average gross revenue is approximately $5 million a year. We receive about a 10 per cent return on our investment; this is the squirrel-away money I spoke about. On average, this amounts to $500,000. We are running a nice corporation.
I am concerned that there are several parts of the legislation which, because they try to bring everything under one piece of legislation and try to make everyone do the same thing, the same way, causes great problems for our harbour commission.
The Government of Canada says that we will pay a fee on gross revenue. Therefore, if we take in $5 million, they want 4 per cent returned to Ottawa, which is approximately $200,000. I am speaking here about gross revenues.
Someone has not kept in mind that, first, there are two different types of ports in Canada. Forget about big ports and small ports. There are operating ports, which we are, and landlord ports, which many of the larger ports are. In other words, a landlord port brings in rent from whatever companies are operating on their land.
If they are a shipping port, as we are, they farm the stevedoring work out as well, and they charge a fee for the use of their facility. As an operating port, we bill the shipper for goods coming over our dock, and we pay the stevedoring companies and the longshoremen. We are a "flow-through," in other words. We collect from the company, flow the money through to the stevedores and the longshoremen, and we get the difference.
You might ask what point I am making. Based on that top figure, we have to pay Ottawa, not what we receive, but all charges, before anything is taken off. If we take $200,000 of $500,000, approximately 50 per cent is gone on that swipe, based on the government formula of gross revenue.
A landlord port does not pay the stevedores. The stevedoring company gives them $200,000 because they are using their facilities, whereas 90 per cent of that $5 million is the flow-through we collect from the shipping companies. We then pay the longshoremen and all other costs.
We have our own forklifts. They are not owned by the stevedoring company. Why? It is because 90 per cent of our $500,000 profit at the harbour commission comes from running the terminals ourselves as opposed to having someone else run them.
The government will take the profit to Vancouver. We say no, that our harbour commission can use it. We will run it. We are smart enough. The reason we do that as an operating port is strictly so that we have more revenue in our community to put into more capital improvements. The government says that they have to make it the same for everyone across Canada, and if it hurts a few, that is too bad for the operating ports. I say that is not the way to do it. Are they punishing us because we have run a good operation for 50 years?
Some of the other witnesses talked about going to the banks. If you take 50 per cent of the money we would normally put toward capital expenditures, you throw another curve, which says you will now pay the municipalities. What amount? We are not sure. No one has good assessments because we have never had to deal with this before.
Let us say it is $100,000. Now $300,000 has gone out of the $500,000. You have $200,000 to play with. I suspect that when we go to the bank and say that we want to build a new terminal for $10 million and they look at our cash flow of $200,000 -- and that is a good year -- they may say that we are not a very good risk.
We can do it the other way. We can tell them to take our money, and we will go to them when we need capital. However, I thought the whole point of this legislation was to put the ball in our court and make us independent. We would save our money and do our thing.
From the point of view of the harbour commissions -- certainly the operating ports, as opposed to the landlords -- this bill will decimate the moneys we used to have for development. We may then have to go to the government, which cannot by law give us any money, but we will not be able to earn it. We will not be able to borrow it. Instead of conducting a project in five years, it may take us 20 years because it will take that long to save the money. You have taken half of our money away. That is a concern. It limits our ability to do the job we thought we were there to do, which is to be an economic generator in our area. Maybe we are not; maybe the government says they can do the job better.
We have operated for fifty years without having to go to the government and ask for money. We have saved it and spent it. It seems that we are now going backward rather than forward. We can give the money to the municipalities and the federal government. Then we will turn around and ask for money back because we will not have enough to operate a port. It may make sense to you, but it does not make good economic sense to us.
In truth, larger ports, such as Halifax, Vancouver and Montreal, would say that they would love to operate under the Harbour Commission Act. They have been trying for years to move toward the Harbour Commission Act. We thought that was great, but we did not want it to move anywhere. Finally, there was a wedding of sorts.
The harbour commissions lose autonomy and the larger ports gather more than they had. This bill puts the small ports -- which is what harbour commissions are -- under a regime that we should never fall under. It is a regime set up for Montreal, Vancouver and the larger ports.
Even the larger ports have problems with Bill C-9. The bill attempts to put everyone in the same slot. But we do not always fit in the same slot, given our size and location, and thus we will be placed in jeopardy.
We do not want to criticize for the sake of criticizing. However, we want you to be aware that by doing this, you will cut into our operating moneys and the moneys we can use for investment. You will limit our ability to provide moneys for capital projects in our area.
We told Mr. Chan, the Minister of International Trade, that the only way we could raise money as a harbour commission was to increase user fees. That is our option. We are already in a situation where we are talking about competitiveness and international trade. I do not think the government intended the harbour commissions or other harbour ports to make up lost moneys by raising user fees, which will make them even less competitive than possibly they are at the moment. However, that is the alternative. I am not sure the Senate or the House of Commons looks upon that as a feasible alternative. There is a price to pay when you do that, and that price is international competitiveness.
I thought, and I am sure the Senate thought, that the whole purpose of Bill C-9 was to make the system more efficient. In the paper we presented to you, we contend that Bill C-9 will make us less efficient. I mentioned that we have a very small staff. We thought the smaller the staff, the more efficient we would be. However, we are to move to seven commissioners or up to 11. The commissioners would almost outnumber our staff. We could have one of our commissioners behind each desk. That is an extra cost.
From a philosophical point of view, if we go to seven commissioners the way the bill reads, there will be a municipal, federal, and a provincial component and four user groups. We have nothing against user groups, but if commissioners are nominated by the users of a port, they may be driven from a different point of view than people who do not have an interest in the industry. These people will have the majority. We are asking if you have given this any thought. We are not opposed to user groups, but we wonder if seven to 11 commissioners is necessary for small ports.
We also come under various authorities that we have never been under before, such as freedom of information, which will constitute costs to us as well. Therefore, the legislation will increase our costs. We will probably spend $100,000 on consultants this year in a variety of areas to satisfy the federal government, at a time when the economy of the forest industry in British Columbia is in dire straits. We know we will have less revenue.
Has anyone thought through the implications of this legislation to the smaller ports? Should the bill not contain a two-tier system, rather than imposing all the requirements of the larger ports on the small ports?
The harbour commissions have served this country well. They have been an engine of growth and have not been a burden on taxpayers. In fact, if we did not have harbour commissions, we would have to create something to replace them because they generate economic activity at no cost to government, which is always looked upon favourably by governments.
There are portions of this act, including the section on gross revenue, which put us at a distinct advantage because we choose to operate our port rather than rent it out. As well, we have a number of cost factors that will further decrease our revenues. We hope there may be some way of incorporating a two-tier system to allow us to operate as efficiently as we did under the Harbour Commission Act.
We are very economical, Madam Chairman. We operate on a stipend which was set by the federal government in 1982 and has not been increased. As a full-time chairman, I earn $500 a month. Ours has been a very efficient, low-cost, low-budget operation. We use the moneys we receive to develop our area.
We would be happy to answer any questions. Mr. White, our Chief Executive Officer, is here to deal with any difficult questions you may have.
Senator Forrestall: It is nice to see you again, Mr. Anderson.
Were you consulted on the former Bill C-44 or the present Bill C-9?
Mr. Anderson: Senator, I came in at a disadvantage. I was on the harbour commission from 1980 to 1986 and came back on again approximately two years ago, after Bill C-44 had come forward. There were discussions with the department. Proposals had been made, but no one knew what the final outcome would be. As things have developed, there have been meetings and discussions at which concern was expressed that this would not work so well. We met with staff today on the gross revenue issue. They tell us that we are not running a for-profit business and that therefore we should not talk about gross and net revenues. Very few businesses operate on the basis of paying taxes on gross revenues. That does not make sense. We have expenses and flow-through.
Yes, we have had discussions and have been told that it is very difficult to create legislation that applies to all ports across Canada. It is difficult to formulate a definition that applies to them all. I agree with that. In my humble opinion, all ports should not fall under one act.
Senator Forrestall: I would not argue with that.
This bill will have a heavy impact on the triggering mechanisms for environmental reviews. How has Port Alberni handled this problem historically? Should this bill pass, there will no longer be anything to trigger an assessment or a review. How will you deal with that?
Mr. Anderson: This is an area of the legislation which has not been finalized, although we have been told that this is the final copy. Until now, we have been subject to both provincial and federal inspections. We are presently building a new marina. Environmental assessments were carried out by both the federal and provincial governments.
Under this bill, there will be a new provision. It will be expensive, and probably unnecessary, because we already have two very strong sets of environmental law with which we must comply and which we assumed would continue in place.
The new provisions will be more expensive for us, but will they improve anything? We believe that we already have enough environmental inspections and that these new provisions will not be an improvement.
Senator Forrestall: It is my understanding that the bill will have the net result of removing you from any and all environmental assessments, putting the onus for this back on your shoulders. How would you deal with that and how would you pay for it?
Mr. Denis White, Port Manager and Chief Executive Officer, Port Alberni Harbour Commission: As Mr. Anderson has told you, in the past we have used the provincial and federal environmental departments to inspect not only harbour commission projects but our customers' projects. We see this new regulation as being another layer of red tape through which the developer must go. It is another layer of government through which a project would have to pass, and we do not believe it is necessary.
Senator Forrestall: I imagine that ports such as Port Alberni -- and there are many of them in Canada -- would have to consult with legal experts and environmental consultants to draw up a plan acceptable to the province with respect to work that is environmentally sensitive to the ecosystem of the port and the surrounding area.
Mr. White: We do not now have a staff that is versed in this type of environmental regulation. I suppose we could hire and train people to do that for the port. However, as I said before, it is already being done by other government departments.
Senator Forrestall: That may come to a crashing end, though. Have you seen the regulations or has anyone suggested what the new regulations might be?
Mr. Anderson: We have seen the bill and the letters patent. That is why we are here. We have not seen the regulations.
Senator Forrestall: Do you have any way of knowing how to deal with gross or net revenues?
Mr. Anderson: Yes, we do. Gross revenue is defined for us.
Senator Forrestall: What percentage is defined?
Mr. Anderson: That is in the letters patent. We have already been given that: 2 per cent is up to $3 million; from $3 million to $10 million is 4 per cent. Those were the figures I was using when I gave you the example of the $5 million.
Senator Forrestall: I wondered if that is what they were for. The Fraser River Commission was talking about that. That is probably what it was.
Mr. Anderson: My understanding is that those percentages will be the same across Canada. This is where we hear the term "level playing field." Depending on your gross, Montreal will pay 4 per cent on over $5 million, and then it goes under other scales, too. In other words, we would all pay the same.
Our problem is, as I mentioned, that some are landlord ports and some are operating ports. That causes a tremendous inequity. We could end up paying more than the Port of Vancouver because they are a landlord port. If that makes sense to you, gentlemen, it certainly does not to us.
Senator Forrestall: You understand how it could happen.
Mr. Anderson: It is obvious to us how it can happen because we are using different figures to calculate gross. They get rent and we get the total figure of salary, machines, everything, on ours. Even though our take-home revenue is much less than Vancouver's, it looks larger because we are paying labour and everything. Our gross, compared to the gross of Vancouver or other ports, may make it appear as if we are one of the giants in the port industry, whereas we are one of the midgets. It depends on how you calculate it and what type of port you are. The government must address this key part. They cannot just let the operating ports hang out to dry because they choose to operate their ports. It is not a penalty. It is not a bad thing to operate ports. Why penalize them dollar-wise for operating?
Senator Bryden: Is it possible for us to get, or do we have copies of, these letters patent?
The Chairman: We could ask for them.
Senator Bryden: Everyone else in the world has them. It would be nice for us to have them.
Mr. Anderson: We could provide this committee with the copies that were provided by the department to us. We have not been told that these are confidential. I am sure that in order for you to reach conclusions, it would be beneficial for you to have the letters patent so that you understand what is being put forward.
Senator Bryden: I am sure that will not be necessary. The department has been very forthcoming. If they know that it would be helpful to us, they will have them on our desk tomorrow morning.
What is the population of Port Alberni?
Mr. Anderson: The City of Port Alberni and the surrounding area within the valley is approximately 30,000. About 19,000 to 20,000 of that is within the city proper.
Senator Bryden: Did you say there were three commissioners?
Mr. Anderson: We have three commissioners, three terminals.
Senator Bryden: Who appoints the commissioners?
Mr. Anderson: One is appointed by the City of Port Alberni and two are appointed by the federal government under the present Harbour Commission Act.
Senator Bryden: Is there a good relationship between the commission and the city?
Mr. Anderson: The city and the harbour commission, over the 50 years that we have existed, have worked hand in hand on a variety of projects to the point that the City of Port Alberni has never asked for any grant in lieu of taxes. This is because the projects were cosponsored with them. It was like an indirect taxation of us because our money went into projects that were jointly beneficial.
I cannot speak for future councils. However, I can tell you at this particular time, that the mayor and council, if it was their decision, would probably advocate leaving the money with the harbour commission and letting them use it for harbour development.
Senator Bryden: You believe that the municipality would support the position you are putting forward today?
Mr. Anderson: I do not think there is any question about that, senator. The gross figure amounts have nothing to do with the city. That is a separate issue with the Government of Canada. However, grants in lieu of taxes are not a high priority of theirs. If it became a question of whether the port could be viable, with grants in lieu of taxes, and stipends back to the federal government, I know that the City of Port Alberni would do everything in its power to make sure that we were to remain a stable and profit-making corporation.
Senator Adams: You mentioned freezers and fish plants. Do you own those enterprises? Who employs the labourers? How does the system work?
Mr. Anderson: As I mentioned, the Port Alberni Harbour Commission is proud of being an economic generator. Port Alberni, for those who are not aware, is off the beaten track. We are not on the east side of Vancouver Island where Parksville, Courtenay, Nanaimo and Victoria are situated. If you go north on the Island Highway, to Parksville, and then west, we are approximately in the middle of the island, on a fjord.
There are good things and bad things about our location: We have beautiful country, and several hundred thousand kilometres with 30,000 people. We grew great trees up until recently. We cannot log them any more, however, as it is a wilderness area.
When it comes to marinas or fish plants, it is difficult to get investors to come to where we are because of the Nanaimos, the Victorias, the Vancouvers and so on.
On water-related jobs, the harbour commission has promoted certain things. We built a fish plant with a processing ice plant and so forth. We have leased it out for a number of years. Some of the companies, because of bad fish catches, go broke and someone else comes in. However, we wanted to have a facility there so that the people who wanted to process could do so. We gave them an opportunity to lease so that they would not have to spend their capital money on a plant in an industry that is cyclical. We installed an ice machine to encourage someone to come in and process there.
Senator Adams: What can you tell me about the length of your season?
Mr. Anderson: The season has grown longer for both our marinas. We have not turned communist by any means.
We pay a lease on a campground from the Province of British Columbia. They did not want to put in camping facilities. We built a marina, and they had the upland, and we said that we were attracting all kinds of people and their boats. We ended up taking a lease from the province on a park that they owned. We probably spent close to $1 million putting in the camp grounds. The province told us that, in putting in the marina, we had caused the problem of people wanting to come there. I thought that that was what tourism was all about.
We were off the beaten track, so, as I said, we tried to build our area up a bit. We put in moneys that private developers chose not to put in. It is not that we want to put money into small craft harbours or fish plants; we would love to have investors come in and do it. When that did not happen, however, we thought that our role was to try to encourage development. Our area is basically forestry and fishery, and tourism has been a relatively new thing there. Whale watching is relatively new. For close to 50 years, we have been trying to promote our own economic activity.
Senator Adams: Does the port charge the fishermen and trawlers for bringing the fish to the fish plant?
Mr. Anderson: We have it leased out to a company. They sell ice to them, and they process fish. We have now a significant amount of fish farming in our area. As I said, we are on a fjord, not on the open ocean. There is a great deal of fish farming going on there, and they are processing fish in our area from the fish farms.
Senator Adams: If your port is privatized, will the fees you charge go up?
Mr. Anderson: No one has ever asked to purchase our facilities. It is difficult to answer a hypothetical question. We would not mind if someone wanted to purchase it.
I suspect that the market would dictate the price of processing. As you know, labour rates vary. I am not trying to hedge, but it is difficult to say.
Senator Forrestall: I have been absolutely fascinated by the growth of ocean kayaking on the West Coast. Has that sport come to Port Alberni yet?
Mr. Anderson: Yes, sir. We have two vessels. One, the Lady Rose, was built around 1937 in Scotland. It is a small steamer that carries freight up and down the Alberni Canal to small settlements, and to some native communities which can only be reached by water. It has become very famous. You can put your kayak on that ship, go down to the mouth of the Alberni Canal, and kayak your heart out. There are nice sandy beaches on the little islands, and it is sheltered water.
The Chairman: Do you have lighthouses?
Mr. Anderson: Yes, and they will now be staffed, I understand. Tourism, in the form of whale-watchers, kayakers, and other areas, is becoming much more of an economic generator.
The Chairman: We will now hear from the Chamber of Shipping of British Columbia. Mr. Ron Cartwright is the president, and he is here along with Mr. Roper, the chairman, Mr. Nicol, the director, and Mr. Stevens, the secretary-treasurer. We welcome you to our committee.
Mr. Anthony G. Roper, Chairman, Chamber of Shipping of British Columbia: We appreciate the opportunity to appear before you, and to present the views of the constituents of the Chamber of Shipping of British Columbia and the North West CruiseShip Association. The proposed legislation is very significant for the maritime community.
The Chamber of Shipping of British Columbia is a professional organization which represents international deep sea ship owners, operators, agents, brokers, and related companies throughout B.C. Our membership, including associate and service members, is in excess of 100 companies. These companies collectively contribute to international trade, and thereby to a benefit of close to $800 million and 9,000 jobs to the Canadian economy.
The North West CruiseShip Association is the Canadian affiliate of the International Council of Cruise Lines of Washington D.C. It represents the international cruise industry throughout Canada. It has dealings, on behalf of its member lines, with public agencies and private organizations with respect to the operation of ports and terminals, the provision of services such as security, pilotage and customs, and the regulatory environment as it affects the operation of the cruise industry in the region.
Representations on behalf of these organizations have previously been made to the Standing Committee on Transportation in 1995 and 1996 with regard to Bill C-44. We would emphasize that our current views on the Canada Marine Act are entirely in line with those that we have previously expressed. We continue to support this legislation as progressive, and we advocate that Bill C-9 be expeditiously implemented in its current form in order to built on the benefits which the act brings.
We are concerned about the potential distortion of the legislation, resulting from changes made subsequent to the public consultation process. Under Part 1, Canada Port Authorities, we find the decision to provide greater port autonomy while retaining federal status to be entirely consistent with the crucial need to maintain Canada's competitiveness. The proposed structure also acknowledges the clear obligation of ports to serve as the gateway for the far-reaching hinterland. This capacity is fundamental to Canada's ability to service the global markets of international trade.
Our desire is to ensure that ports are not subject to multiple layers of jurisdiction, and that they have the ability to set policy, and to function with the certainty and decisiveness of a commercial entity. In this context, we would draw the committee's attention to the commendable manner in which the Port of Vancouver has moved to establish a port transition group in the spirit of the proposed legislation. It is our understanding that this broadly representative body has begun to define the governance process, as well as the letters patent, including the structure and rules of the board. We strongly support the activities of this group as a model for other ports.
It is clear that local considerations should come into this. For example, definitions of what constitutes the core business of a port may have varying interpretations in different areas and should be clearly defined in the local letters patent.
We urge that the group be instructed to continue its work at its own pace, without interference, and that the government be seen to support this work.
On the section regarding public ports, we support the de-proclamation policy in principle. While recognizing that new commercial ports must have some legal grounds for the recovery of the costs of providing services, we would underline our understanding that public harbour dues will disappear on de-proclamation. Transport Canada presentations have led us to understand that the marine navigation services fees introduced by the Canadian Coast Guard in 1996 would effectively duplicate the basis for port dues. We could seek confirmation of this linkage in the legislation.
The part of the proposed legislation that deals with the St. Lawrence Seaway has little impact on our region. We consider the proposals worthy of support, however.
We support the dissolution of the Canada Ports Corporation in clause 139. It is an unnecessary level of jurisdiction in achieving port autonomy.
Under Part 7, Amendments to the Pilotage Act, we support the proposed changes. We would like to emphasize the disputes resolution mechanism and the proposed ministerial review.
Under Part 1, we feel the definition of "user" needs to be unambiguous. We advocate that the term "user" should apply to those paying directly for port services as a result of commercial operations. Under clause 8, the incorporation clause, the role of the Vancouver Transition Group, and similar groups in other ports, should be taken into consideration.
Under clause 8(2)(f), we strongly believe that a ports board must be widely representative of both public interest and users. To maintain effective management, it is essential that directors be selected for their functional, rather than political, qualifications. This sentiment is also clearly in the interests of the federal government as a major stakeholder in a port.
We are in agreement with the proposed make-up. We do have reservations about the additional provincial representation for Vancouver, however. This is a precedent, and a special case scenario. We see no reason why the provincial representation cannot be drawn from the four impacted provinces acting together.
It is our opinion that the CEO function will be strengthened by allowing the board full discretion on the appointment of the CEO, who will be an additional non-voting director to those appointed through the ministerial process. The ability of the port board to function effectively depends on its structure. We strongly advocate that the board elect the chairperson, as set out in clause 17.
While the board will devote its efforts to the area of broad policy, we believe that it has a significant role to play as a court of appeal to counter any potential operational inequity through arbitrary regulation or fee. That is in clause 20.
We support the notion of ministerial appointment, provided that selection is made from a list proposed and compiled by the users. In this respect, the committee's attention is drawn to the existence of the Western Marine Community, an informal coalition of all port users from every sector. As such, this body could well play an objective, key role in the consultation-selection process.
We support the principle that the federal government should have some certainty of return on its investment, and we understand the rationale for a charge on gross revenue. Our concern is that, if set too high, it could place an unreasonable burden on a given port in the case of hard times. We advocate a two-component formula of base perpetual fee, plus a capital factor. The former could be set at a level reflecting the federal government's long-term benefits from the ports through, for example, grants in lieu of municipal taxes. The latter would represent a level of paid-down capital assets in a given year, i.e. this component would reduce to zero over time.
Under clauses 10 to 13, "Continuance of Harbour Commissions", we support the process stipulated in these clauses.
Broadly speaking, we are in agreement with the stipulations under clauses 14 to 22, "Directors". As stated earlier, we do question the rationale for the restriction on the CEO under clause 21(2). Our further recommendation is to see the board function as a court of appeal.
For clauses 34 to 43, the proposed amendments reflect the limited changes discussed through the national and regional process following the earlier recommendations by the Standing Committee on Transportation. In this respect, the Chamber of Shipping of British Columbia and the Northwest CruiseShip Association support the minister's proposals as they apply to the western region.
Regarding clause 47, we have expressed previous concern over the uncertainties caused by the exclusion of the Navigable Waters Protection Act from the activities envisaged by clauses 62, 74 and 98. Our concern in this respect remains.
With reference to Part 7, "Amendments to the Pilotage Act", we would remind the committee that, since the current regime's inception in 1972, the West Coast community has lived up to its obligations to maintain a self-sufficient pilotage service. At no time has the West Coast called for any contribution from the Canadian taxpayer.
The Chamber of Shipping in British Columbia and the Northwest CruiseShip Association represent the ship owners who are the users of the pilotage service. The owner looks to the pilot on the basis of 24-hour, 365-days-per-year availability for the professional guidance of a valuable asset through the hazards of coastal navigation. In this context, the owner's interest is coincident with that of the general public.
The West Coast has an enviable safety record -- it is among the best in the world. The current system, admittedly less than perfect, has evolved with a fine balance between the concerns of safety and the need to maintain efficiency.
There have certainly been some expressions of dissatisfaction with the system during the review process, and these were largely based on the premise that a competitive service would lower costs. We emphatically do not subscribe to this notion. Nevertheless, this prompted an intense review of activity implemented through a Western Regional Task Force, and chaired by the Chamber of Shipping of British Columbia.
The task force concluded that the current arrangement essentially meets the needs of the industry. At the same time, it identified desirable areas for further improvement in both the short and longer term, all of which we will continue to work on. The conclusion was that the service is cost effective in terms of the cost of similar services in the West Coast trading area.
There are positive examples of the progressive collaborative work now being jointly undertaken by the industry, the Pilotage Authority and the pilots. These are a direct consequence of the task force activity, and would include new access to Kitimat, and helicopter boarding to optimize the use of pilot boats.
Other tangible evidence of the positive benefits of the recent soul-searching include the pilots' acceptance of a final offer settlement for contract negotiations. We are looking forward to our participation in the proposed ministerial review.
Our philosophy on pilotage can be summed up by the following. The international shipping industry is entitled to the services of expert pilots when they are needed, and at reasonable cost.
We believe that, overall, this is a good piece of legislation, and it represents considerable compromise during the build-up process. Although we have indicated some desirable features, the bottom line is that we support the legislation in its current form. We hope that our presentation will provide constructive impact, and we wish the committee well in its further deliberations.
Senator Roberge: You were consulted by Transport Canada before Bill C-9 and Bill C-44 came out, were you not?
Mr. Roper: That is correct.
Senator Roberge: That is interesting, because quite a few of the others were not.
Does the chamber see a viable method of contributing to the poorer ports of B.C.?
Mr. Joseph A. Nicol, Director, Chamber of Shipping of British Columbia: Are you suggesting cross-subsidization, from one commercial sector to another?
Senator Roberge: Yes.
Mr. Roper: We would be against cross-subsidization in any form. We are against the principle of cross-subsidization. We feel that "user pay, user say" is the concept, and that charges should be placed where the services are required, and paid for by the people who need them.
Senator Forrestall: When we suggested that a few years ago, you dumped all over us. I admire your consistency.
Senator Bryden: The Chamber of Shipping of British Columbia represents international deep sea shipowners. You represent in excess of 100 companies. Of those, how many would be deep sea shipowners?
Mr. Roper: Of the companies themselves, 25 represent international ships. The owners who are represented are obviously a much wider range, because one agent may represent many international owners. The number of foreign ships arriving in B.C. in a year is close to 3,000, all of which are foreign flagged, with a multitude of international owners.
Senator Bryden: What would be your most localized group? You have international deep sea shipowners, then you have operators, agents, brokers and related companies. How many agents are there?
Mr. Roper: There are about 60 agents.
Senator Bryden: Would those agents represent deep sea shipowners?
Mr. Roper: Yes.
Senator Bryden: Is it the same with brokers?
Mr. Roper: Brokers represent them in a different way. A broker will arrange cargoes, and arrange to put the owner together with a cargo on a commercial basis. The ships may not even come to Vancouver for that. The physical arrival of the ship requires the attention of an agent to take care of its business, however.
Senator Bryden: Are we double-counting any here? You are referring to 100 separate companies. I take it that those would be exclusive of the deep sea shipowners, unless those people are headquartered in Vancouver.
Mr. Roper: They would include some of the deep sea shipowners who are now headquartered in Vancouver.
Senator Bryden: How many?
Mr. Roper: It would include about 20 international owner-managers who are now located in Vancouver, and who manage their tonnage through Vancouver.
Senator Bryden: The rest would be service providers to shipowners.
Mr. Roper: In some form or another -- either by ship agency work or brokering to arrange cargoes. Some of our associate members will arrange for goods to be delivered to a ship, look after its business, and so on.
Senator Forrestall: What is the proportion of management of Canadian-flagged ships?
Mr. Roper: There are no Canadian-flagged ships managed from Vancouver.
Senator Forrestall: You have a large group of agents representing foreign interests, as opposed to Canadian interests. Is that correct?
Mr. Roper: Yes. There are no Canadian-flagged deep sea ships. There are obviously Canadian-flagged barges, but the deep sea ships are all foreign.
Senator Bryden: Would any of these ships call on Port Alberni?
Mr. Roper: Some, but very few.
Senator Bryden: Would they be cargo vessels?
Mr. Roper: Yes. They would load forest products mainly out of Port Alberni.
The Chairman: Witnesses from British Columbia mentioned that some aspects of the bill could hurt the competitiveness of the B.C. harbours. Do you share this view in any way?
Mr. Roper: Competitiveness comes down to the cost of operating. To some extent, that will come back to the fees that the port will have to pay to operate, or to the charges that are being paid to pilots to move the ships around. As long as there is a control on these costs -- recognizing that we are competing not necessarily with other Canadian ports, but with ports on the U.S. West Coast -- that should not be so much of an element. However, it must be recognized that a competitive element must be controlled.
Senator Forrestall: I have done battle over Canadian flags for 25 or 30 years with your group, the Council of B.C. Forest Products, and others, and there is not much I can contribute to the debate.
It is vitally important that foreign-flagged ships come into Vancouver to bring goods in, and to take goods back out. I do not like someone in a shipping office in Hong Kong telling me what is good for the West Coast and what is not, however. I have been listening to that for a long time. If we had a couple hundred Canadian-flagged ships, I would like to see the owners get right in there and mix it up.
I suspect that chains owning 250 registered ships in Canada, and crewed by Canadians, would have an entirely different view on this bill than do you. The thing that qualifies and lends credibility to what you are saying is that you are the reality and I am the fantasy. I understand that.
Mr. Roper: It might be appropriate to point out that some international shipowners registered or based in Vancouver are now managing about 10 million tonnes of shipping from Vancouver. In addition, there are changes currently under discussion to the Canada Shipping Act that may bring about changes in the structure of how Canadian-flagged vessels can be manned.
The people interested in developing this are obviously people who are looking for competitive operations and competitive services. If the changes to the Canada Shipping Act can be brought about in such a way to assist that, people managing tonnage from Vancouver that may be under a Singapore flag, a Hong Kong flag, or a Panama flag could very well decide that the Canadian flag is an option. This is being discussed. It may not be such a fantasy. It is something that could perhaps come about.
Senator Forrestall: I want to thank you for holding this matter to be of sufficient importance that you came a long way in order to let us have the benefit of your views.
Mr. Nicol: In our presentation, we mentioned that we do have 9,000 Canadian jobs, so we are speaking as Canadians. My company employs 30 of those, and we are a foreign ship agent.
The chamber is a non-profit society in its volunteer work, so we do speak as Canadians. Part of its mandate is to promote and develop trade through British Columbia ports. We believe that this will help promote and develop jobs through Canadian ports.
We also fully support the changes to allow the Canadian flag to be more competitive. We have a bit of a problem with one commercial sector paying for another commercial sector, however. We stand on the philosophy of no cross-subsidization from one commercial sector to another commercial sector. We have made it clear to other government bodies, however, that, if the Canadian taxpayer deems subsidies necessary for the economy of a region, that should be done with Canadian taxpayers' money.
Senator Forrestall: Is the Port of Vancouver financially healthy enough to sustain the massive capital undertaking that it is facing in trying to free up and create new space?
Mr. Roper: That question should more properly be put to the port. Have representatives from it made a presentation to you?
The Chairman: They will do so tomorrow morning.
Mr. Roper: Perhaps they can comment on that.
Senator Adams: Did you say that your organization has 9,000 members?
Mr. Nicol: No. We created 9,000 jobs in the Canadian economy. There are 100 members of the chamber, and we have some 3,000 foreign ship calls.
Senator Adams: You support Bill C-9 without amendment. We have heard that some people from the East Coast will lose their jobs if Bill C-9 is passed and their ports are sold to private companies. Perhaps the situation in B.C. is different from the one on the East Coast. Will this bill not result in any job losses in dock areas in B.C.?
Mr. Roper: We believe that this legislation will assist ports to be more competitive, which in turn will develop more jobs. It is conceivable that there will have to be some restructuring within the port office, which may result in one or two jobs being changed.
Senator Adams: Earlier today we heard witnesses from Halifax, who said that their wharf is in need of upgrading and that, if the bill is passed, there is no way the port can be developed to gain more business.
Mr. Roper: I do not understand their objections. We believe that, if the port has the autonomy to do these things and to move ahead, it will continue to develop jobs and it will maintain the jobs that it has.
I must admit that I am not aware of the particular problems at Halifax.
Senator Adams: If the bill is passed, they will need $200 million to upgrade the dock, and they cannot borrow $200 million. My concern is with regard to how they will create jobs.
The Chairman: Thank you very much, gentlemen, for your contribution.
The committee recessed.