FOPO Committee Meeting

37th PARLIAMENT, 2nd SESSION

Standing Committee on Fisheries and Oceans

EVIDENCE

CONTENTS

Tuesday, October 7, 2003

Á

1150

The Chair (Mr. Tom Wappel (Scarborough Southwest, Lib.))

Mr. Raymond Johnston (President, Chamber of Maritime Commerce)

Á

1155

Mr. Marc Gagnon (Executive Director, St. Lawrence Economic Development Council)

Â

1200

Â

1205

Mr. Raymond Johnston

The Chair

Captain Ivan Lantz (Director, Marine Operations, Shipping Federation of Canada)

The Chair

Mr. Don Morrison (President, Canadian Shipowners' Association)

Â

1210

The Chair

Mr. Andy Burton (Skeena, Canadian Alliance)

Mr. Raymond Johnston

Â

1215

Mr. Andy Burton

Mr. Raymond Johnston

Mr. Andy Burton

Mr. Raymond Johnston

Mr. Andy Burton

The Chair

Mr. Georges Farrah (Bonaventure—Gaspé—Îles-de-la-Madeleine—Pabok, Lib.)

Â

1220

Mr. Marc Gagnon

Mr. Georges Farrah

Â

1225

The Chair

Mr. Peter Stoffer (Sackville—Musquodoboit Valley—Eastern Shore, NDP)

Mr. Don Morrison

Mr. Peter Stoffer

Mr. Raymond Johnston

Mr. Peter Stoffer

Mr. Raymond Johnston

Mr. Peter Stoffer

Mr. Raymond Johnston

Mr. Peter Stoffer

Mr. Raymond Johnston

Mr. Peter Stoffer

Mr. Raymond Johnston

Mr. Peter Stoffer

Mr. Raymond Johnston

Â

1230

Mr. Peter Stoffer

Mr. Marc Gagnon

Mr. Peter Stoffer

Capt Ivan Lantz

The Chair

Mr. Bill Matthews (Burin—St. George's, Lib.)

Mr. Raymond Johnston

Mr. Bill Matthews

Mr. Raymond Johnston

Mr. Bill Matthews

Mr. Raymond Johnston

Mr. Bill Matthews

The Chair

Mr. Raymond Johnston

The Chair

Mr. Don Morrison

Â

1235

The Chair

Mr. Don Morrison

Mr. Marc Gagnon

Mr. Don Morrison

The Chair

Mr. Don Morrison

The Chair

Mr. Raymond Johnston

The Chair

Mr. Raymond Johnston

The Chair

Mr. Raymond Johnston

The Chair

Mr. Raymond Johnston

The Chair

Mr. Raymond Johnston

The Chair

Mr. Raymond Johnston

The Chair

Mr. Don Morrison

Â

1240

The Chair

Mr. Raymond Johnston

The Chair

Mr. Raymond Johnston

The Chair

Mr. Raymond Johnston

The Chair

Mr. Raymond Johnston

The Chair

Mr. Raymond Johnston

The Chair

Â

1245

Capt Ivan Lantz

The Chair

Mr. Raymond Johnston

The Chair

Mr. Raymond Johnston

The Chair

Capt Ivan Lantz

The Chair

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CANADA

Standing Committee on Fisheries and Oceans

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NUMBER 052

l

2nd SESSION

l

37th PARLIAMENT

---

EVIDENCE

Tuesday, October 7, 2003

[Recorded by Electronic Apparatus]

Á  (1150)  

[English]

    The Chair (Mr. Tom Wappel (Scarborough Southwest, Lib.)): Pursuant to Standing Order 108(2), we are in the middle of a comprehensive study on the Canadian Coast Guard. Today we have witnesses from the Chamber of Maritime Commerce, Raymond Johnston, president; the Canadian Shipowners Association, Don Morrison, president; St. Lawrence Economic Development Council, Marc Gagnon, executive director; and the Shipping Federation of Canada, Captain Ivan Lantz, vice-president.

    Welcome to all. I will just offer my apologies on the record for the delay in the hearing, which was occasioned by nothing that we could do anything about, namely, by votes. As I told you earlier, it's at least theoretically possible that prior to one o'clock we may be interrupted again. We'll just play that by ear and see how it goes.

    Without further ado, we'd be delighted to hear what you have to say. Who's going to go first?

    Mr. Johnston.

    Mr. Raymond Johnston (President, Chamber of Maritime Commerce): Thank you, Mr. Chair, for the opportunity to appear before the committee. We are in fact appearing here representing a much broader group, a collection of marine stakeholders. We have banded together under the umbrella of the National Marine and Industrial Coalition. It is comprised of 35 organizations, including marine organizations, such as those appearing before you today; various labour groups associated with the marine industry; and a number of industry associations, who are actually shippers and users of marine services.

    In total, there are about 700 companies we represent, and the representation stretches from coast to coast. Absent today are three associations that we work with very closely: the Association of Canadian Port Authorities; the Chamber of Shipping of British Columbia; and the St. Lawrence Ship Operators Association. Collectively, these seven groups form the backbone of this national marine coalition.

    The stakeholder group is very broad, including all sectors of industry in Canada, from the mining sector to agriculture, to chemicals, to oil and gas. We have brought together all of the principal stakeholders and shippers across the country.

    The issue we bring forward today is not a new one. We've met with most of you individually and explained our position and our cause. Basically, we're seeking a long-term agreement on the matter of marine service fees imposed by the Canadian Coast Guard.

    I'd just like to give you a little bit of background. Those fees were introduced in 1995 as one of the initiatives under program review. They covered charges for navigational aids, ice breaking, and dredging in the St. Lawrence River. Currently, the coast guard's revenue target is $45 million, which includes dredging in the St. Lawrence, but they are only collecting about $35 million. The reason for the difference or shortfall is that some relief was granted in the matter of ice breaking fees. The Treasury Board provided relief for several years to the coast guard, and the fees, accordingly, were reduced by 50%. In fact, the forecast marine tonnages that would have generated the revenues the targets were set for have not materialized. All the fees were frozen in 1998.

    Again, industry has been objecting to these fees and has expressed great concerns on various aspects of these fees since they were first introduced.

    At that point, in 1998, Treasury Board was assigned to prepare an impact study to try to look at and explain the aggregate impact, or the total impact, of all fees levied on the marine industry in Canada. That impact study and two previous studies were really unsuccessful. They were not able to conclude or demonstrate the impact of all of these fees on the marine industry in Canada. There were probably two reasons for that lack of success. One, it's difficult to establish a methodology that could model such a complex industry, which stretches into so many different areas of the Canadian economy. Second, there is a lack of data when it comes to the marine world.

    In the meantime, the Auditor General produced two reports, a report in 2000 and a report in 2002, which looked at the inefficiencies in the areas of fleet management and the way marine navigation services are provided. We'll come back to that shortly.

    Another piece of background information is that the annual costs allocated to the commercial sector have in fact decreased by $54 million. These are the costs that the coast guard says it spends supporting the marine industry. So in the period of 1997 to 2002, those costs have gone down by $54 million, which is about a one-third reduction in the costs assigned to industry. Fees have not changed during that period.

    By the coast guard's own admission, the fee issue has been one that has prevented us from really building a strong partnership with the coast guard or between the coast guard and industry. The vehicle we used to deal with or work with the coast guard is known as the Marine Advisory Board. I think we've come to the conclusion that it basically has not been an effective tool—probably for either party. In fact, that's evidenced by the fact that the last meeting of this MAB was just about one year ago, on October 19, 2002.

Á  (1155)  

We have not met as an industry with the coast guard for any consultation at a national level in approximately one year.

    Industry has made two unsolicited proposals to the coast guard to deal with the fee issue. The process involved coast-to-coast consultations on the part of industry. We used the MAB structure at a regional level, and we brought together all of the voices from the Maritimes to the west coast, and everybody in between, to collectively put our heads together to come up with a proposal that we took to the coast guard. We also built up this coalition to bring in other stakeholders, or all of the sectors that use marine transportation.

    The first proposal was offered to the coast guard in 2001. A second proposal, very much along the same lines, was offered to the coast guard in August 2002. Today, on October 7, 32 months later, we still do not have a decision from the coast guard or from DFO.

    The proposal, quite simply, is to establish a long-term agreement dealing with marine service fees. We are calling for the elimination of those fees as soon as possible and a commitment and an undertaking on the part of industry to continue to work with the coast guard to make sure the services that industry requires are provided in the most cost-effective fashion possible.

    Just by way of comment, this model is a long-term agreement, which is something new for the coast guard. It's not something new for the Canadian marine transportation industry. In fact, the government entered into a 20-year agreement in matters dealing with the St. Lawrence Seaway, an agreement that has given the industry some stability and a sense of where costs are likely to go in the future.

    I'll turn the balance of the presentation over to Monsieur Gagnon.

[Translation]

    Mr. Marc Gagnon (Executive Director, St. Lawrence Economic Development Council): Thank you, Ray.

    Mr. Chairman, we deplore the fact that marine services fees have made the Canadian industry less competitive. When I talk about the Canadian industry, I'm referring not only to shippers, but also to all economic agents that use our mode of transportation to ship their goods. For our shipping industry, even small cost increases can sometimes have a dramatic impact, particularly on shippers. Additional fees hinder the competitiveness of our economic sectors, again, especially in the case of businesses that produce or import goods.

    This policy places our industry at a competitive disadvantage over the US. The Americans are our biggest competitors and the US does not charge industry for its Coast Guard services, which puts Canada in a difficult position, from a competitive standpoint.

    We can give you examples of loss of cargo in the case of Canadian shippers and of losses for the Canadian economy in general. For instance, Chilean salt is displacing salt from Canadian sources; petroleum products once shipped by water are now being shipped by rail, often because of a difference of a few cents or fractions of a cent per tonne; Canadian pulp and paper plants are being shut down and operations moved to plants in the US because of high shipping costs in Canada; certain cargoes, particularly steel, are now being routed to the US east coast or via the Mississippi because of razor-thin margins.

    Mr. Johnston mentioned various Auditor General reports that have been released over the past 20 years. I want to draw your attention to the 2000 report on fleet management and to the 2002 report on marine navigation services. In 2000, the AG stated the following with respect to Coast Guard fleet management and I quote:

In our opinion, Fisheries and Oceans is not managing its fleet in a cost-effective manner.

    And he continued:

[...] missing opportunities for greater flexibility in sharing resources and for better productivity in providing the fleet service

    We know that Fisheries and Oceans is addressing the comments made by the AG, but we're still in a situation where the fleet is divided into five distinct CCG regions in which practices vary widely. A regional approach is taken to fleet management, whereas ice moves, with no regard for borders.

    The Auditor General also identified other problem areas, namely: funding, unclear responsibilities between fleet management and other CCG programs; accountability; information systems and; human resources. Another key issue for us is the significant imbalance between shore-based CCG support, whose responsibility it is to manage the fleet, and personnel on board CCG vessels. These are just some of the areas addressed by the AG.

    In 2002, the AG stated the following to the committee, and I quote:

The Department has not cost-effectively managed the functions we examined and changes have to be made to ensure the system meets user needs in the future.

    Again, these are not our words, but those of the AG.

    The 2002 report also identified a number of problem areas: the lack of a national strategy for program delivery; the fact that regional operations are not accountable for implementing national policies; inadequate integration of navigational services; no risk assessments of Canadian waterways; services that are still unnecessary—mention is made of some areas of the country where light stations are still staffed where elsewhere light stations are now automated and may even be phased out; and outdated legislation.

    Basically, there are many similarities between the 1983 and 2002 reports. Many of the same CCG problem areas are identified.

  (1200)  

    This past June, a panel reviewed the Canada Marine Act and made the following observation by way of a recommendation:

The Panel agrees with the submission of the Regional Marine Advisory Boards and the National Marine and Industrial Coalition regarding the elimination of CCG marine services fees.

    Having travelled across the country, the Review Panel identified a serious problem with marine services fees and recommended that the Government of Canada maintain responsibility and pay for dredging in waters up to the boundaries of Canadian Port Authorities and in public ports. Currently, this is not the case.

    I want to emphasize that our policy position is based on some fundamental principles. First off, we need to recognize the marine industry's contributions to the Canadian economy. Putting it another way, our raison d'être is to serve the economy and we would like the government to recognize that fact. Our goal is to ensure our industry's competitiveness, both domestically and internationally. Marine transportation is unquestionably the most environmentally friendly mode of transport and we are not alone in stating that fact. Indeed, it is a widely recognized truth, one that we want the government to acknowledge as well.

    We are no different from anyone in business in that our goal is to achieve stability and predictability. Our policy is to work co-operatively with government to reduce costs, for the benefit of both government and industry.

    Lastly, we want to work with the Coast Guard to improve services and to reduce CCG and DFO costs.

    In August 2002, we recommended the following:

All CCG Marine Services Fees pertaining to navigational aids, ice-breaking, dredging and so forth should be eliminated as soon as possible as part of a long-term agreement [...]

    And I want to emphasize our need for a long-term agreement.

[...] whereby the marine industry partners with CCG to improve efficiency and reduce costs.

    That concludes our presentation, Mr. Chairman. Of course, we'd be happy to answer any questions you have at this time.

  (1205)  

[English]

    Mr. Raymond Johnston: Could we just have one more moment with Captain Lantz, or if Mr. Morrison would care to just add a final comment?

    The Chair: No problem.

    Captain Ivan Lantz (Director, Marine Operations, Shipping Federation of Canada): Good morning, ladies and gentlemen. It's a pleasure to be here.

    My name is Ivan Lantz, and I'm the director for marine operations for the Shipping Federation of Canada. At this particular time, we and the Canadian Shipowners Association are celebrating our 100th year as a partner in the Canadian economy for the marine industry. Our concerns and recommendations echo those found in this document.

    The marine industry covers the transportation requirements of 95% of Canada's international and offshore trade, and a significant part of the domestic distribution system is still based on a marine transportation system. That system does not have one single common manager, but it is managed by a number of departments and is fragmented. This is a concern of ours, and we believe the coast guard is one of those parts that needs to be brought under the umbrella of a larger and better organization.

    We believe the marine services fees have to be eliminated over time so that we can compete competitively on the international market and carry Canada's goods in trade.

    The Chair: Mr. Morrison.

    Mr. Don Morrison (President, Canadian Shipowners' Association): Thank you, Mr. Chairman.

    I'll just follow up on Ivan's last comment, to start, and that's to say we're involved every day in international and world competition. Every one of our costs is scrutinized by customers, by shippers throughout the world, and where we can't deliver, someone else will deliver for us, whether it's our own internal system of truck and rail or another international system.

    I'll speak as a shipowner for a moment. What we need in our business, where we're signing long-term contracts every day, is stability. We need to know what the costs are going to be and we have to know that those costs aren't going to change radically. We cannot face what we faced this year with no notice in terms of the new cost structure for dredging in the St. Lawrence. That was published on a Friday afternoon and delivered to us on a Monday, and we had to turn around and tell our members what the cost was going to be for the next three years.

    We have to keep costs down. Shipowners and shippers alike have been working diligently to keep costs down. All you have to do is deal with the shippers in Hamilton, for example, Dofasco and Stelco, and ask them what they've done over the past five to seven or ten years to keep their costs down. In our own business, we've reduced crew sizes. With future fuel contracts, they have come up with more efficient ways of using that fuel. And even on the capital side, instead of building full ships, we build forebodies.

    I think what we're trying to get at today is that we need the coast guard to accept the industry as a partner, so that the intelligence on both sides can be shared. Neither the public sector nor the private sector has a lock on all of the best ways to do things, but we do feel we have a lot to offer the coast guard in terms of their own operations, in terms of how they deal with us in operations.

    And costs are crucial. We are losing business to railways and trucks, as I mentioned, and we have to get to the bottom of this. As Ivan said, both associations have been in business for 100 years. We'd like to see that we still have the members to be in business for the next 100 years.

    Thank you for the opportunity.

  (1210)  

    The Chair: Thank you very much, gentlemen. Thank you for your succinct presentation.

    We'll do the usual questioning. We'll begin for 10 minutes with Mr. Burton.

    Mr. Andy Burton (Skeena, Canadian Alliance): Thank you, Mr. Chairman.

    Thank you for your presentation, gentlemen. It really doesn't leave a lot to be explained, I don't think. It's fairly obvious we need to look at this in a businesslike manner. That's certainly obvious to me. I understand business and economics fairly well. It appears the problem is getting the bureaucracy to think along those same terms and in that same manner. In my mind that is a large part of the problem. Now, how you get the bureaucracy to think like a businessman, I'm not really too sure.

    You talk about the Marine Advisory Board not functioning as an effective industry consultative and advisory tool. Do you have any suggestions on how we might better improve that aspect of the situation, at least as a starting point?

    Mr. Raymond Johnston: I guess I'd start by saying that the Marine Advisory Board is a good concept and it's one that industry supported. In fact, we demanded to have that opportunity to exchange our views and to let the coast guard benefit from our experience.

    The single issue that really has complicated the success and the output of this board has been the marine service fee issue. It continues to drive a wedge between industry and the coast guard. The certainty Mr. Morrison has spoken about, the opportunities for cost savings that we see not being taken advantage of, which the Auditor General has pointed out--these are all things we're trying to get past. The fee issue, unfortunately, has been a deterrent to meaningful discussion.

    I'd also comment that in fact what's interesting is that this national Marine Advisory Board is replicated at a regional level. There are five regional MABs. For the most part they work reasonably well. We don't talk about the fees at the regional level. This is a national issue. It comes to headquarters. It's levied by Ottawa. The regions don't get the money anyway; they just get the costs.

    So we've actually worked enormously well and productively with.... I can give you an example in the Great Lakes region, where from 1996 to today, there are 50% fewer navigational aids in the water. I think in the St. Lawrence the number is probably approaching one-third fewer, and it's paralleled on the east and west coasts. So by sitting down at the regional level and looking at what industry really needs, we've been able to come up with a win-win situation. At least it's a win for the government. It's now costing the government less; it's costing industry the same.

    We think it's a valuable process. It doesn't work at the national level, simply because this fee issue continues to drive that wedge between real, meaningful communication and dialogue.

  (1215)  

    Mr. Andy Burton: Mr. Chairman, if I may, I'll follow up on that. On the one hand, we're hearing there's not very good coordination between all of the different bureaucracies, departments, and so on that get involved with some of these issues, but you'd like to see five separate ones. Would we not have a functional problem there? I understand what you're saying about the five regional groups being more effective. I guess that's closer to home and closer to the problems, but would we run into problems with coordinating that?

    Mr. Raymond Johnston: The way to coordinate it is through national policies and national standards, bringing the issues that are common--and there are a lot of issues that are common--to a national table for discussion and resolution. It's imperative that there be this sort of meeting point of all the regions, and that's the missing link right now.

    Mr. Andy Burton: How would you suggest the industry could work better with the Canadian Coast Guard? It seems the problem at this point in time is that there's almost a stalemate. That's really what I'm feeling. You haven't had a meeting with the MAB in a year and you've had two proposals put forward. That was one of the things I had underlined.

    That was going to be my first question, really: what response if any has the Canadian Coast Guard given regarding your international user fee approach? Well, you answered that question in your document. It seems like it's a stalemate, so the question to the witnesses, Mr. Chairman, is, how do we get over that stalemate?

    Mr. Raymond Johnston: Our proposal is requesting a long-term agreement dealing with marine service fees. This, we believe, would go a long way towards putting this file behind us in some fashion, moving on, and letting us focus on working with the coast guard and dealing with the issues the Auditor General has brought up: where are the opportunities to improve service and do it at a lower cost? We've put our cards on the table, with all due respect. This is what we believe will improve the relationship between these two groups.

    Mr. Andy Burton: If we agree with that--and obviously the committee has to come to some consensus on that matter--the best thing we could possibly do would be to push the minister and the coast guard, through the minister, to do exactly that, come to some sort of long-term agreement so you have stability. That's really the crux of the matter, Mr. Chairman.

    Maybe I'll pass the questioning on to someone else.

    The Chair: Thank you, Mr. Burton.

[Translation]

    Mr. Farrah, if you wish, you have ten minutes.

    Mr. Georges Farrah (Bonaventure—Gaspé—Îles-de-la-Madeleine—Pabok, Lib.): Thank you, Mr. Chairman.

    I'd like to welcome you to the committee. I apologize for my tardiness, but I had an earlier commitment.

    Obviously, the whole question of marine services fees is very important to me, because I know just how crucial the marine industry is, not only to Quebec's economic development, but to Canada's overall economic development as well. Furthermore, I'm from a maritime community, specifically the Magdalen Islands, so I can understand the importance of the marine industry.

    I can also appreciate very much your proposals. Having already met with industry stakeholders in Quebec - in fact, I believe Mr. Gagnon was present at the meeting - I know full well that your call for long-term cost stability is critically important to the sector's competitiveness. I often heard how you had to bid on shipping contracts for a period of five, seven, eight or ten years. When costs change over the term of the contract, this definitely affects your businesses' profit margin, or even their very survival.

    This explains why, although dredging fees on the St. Lawrence in Quebec weren't eliminated, a long-term agreement was worked out. The consensus is that costs are too high, but at least a long-term cost formula is in place.

    I don't know if the subject was discussed earlier--unfortunately, as I mentioned, I arrived late--but I'm interested in knowing what marine services fees are currently charged and what they represent to the government in terms of revenue. In addition, have you calculated the revenue losses that the government has incurred to date? On the one hand, shippers are charged higher services fees, which translates into higher revenues, but on the other hand, higher fees have a negative impact on the economy because often, investment slows as a result, leading to a loss of tax revenues, among other things. If economic activity slows, tax revenues decrease as well.

    Have you calculated the lost tax revenues vs tax earnings and does the government in fact come out on the losing end of the equation? Maybe this is one argument that we could advance to convince the department and the Coast Guard that ultimately both may be losing out. Do you have these figures?

  (1220)  

    Mr. Marc Gagnon: I can answer that question two ways, Mr. Farrah. First off, let me respond from a more regional perspective.

    Although I can't give you at this time the figures corresponding to lost government tax revenues in terms of St. Lawrence fees, I can tell you that for the past 20 years, while shipping traffic has increased worldwide--globally, we're talking about a 600% increase, and on the Mississippi, about a 62% increase--shipping traffic in the St. Lawrence has declined by 25%. I wouldn't go so far as to say that the sole reason for the decline is marine services fees, but the fact remains that overall, traffic is down dramatically which of course, means less revenue for the government.

    However, you are correct to say that the marine industry's goal, first and foremost, is to achieve stability and predictability. Our members--and they total 700 in all--want to know what will happen one, two, three, four or five years down the road. We want the Government of Canada to remember that in order to enjoy a strong, healthy economy, the country needs strong, healthy modes of transportation. It's not simply a matter of comparing profits and losses. The government needs to lend some encouragement to the marine industry which, as I mentioned earlier, represents the most environmentally friendly mode of transportation and thus could help Canada meet its Kyoto objectives.

    In our opinion, the government should begin by focussing on the fact that the marine sector is competitive. Of course, we could do the calculations and give you some figures showing that tax revenues have been lost since marine services fees were first introduced in 1996. However, I think the government would be better off weighing the overall situation and the fact that our businesses and our economy need an efficient marine industry.

    Mr. Georges Farrah: The case of Ultramar is a good example. This company operates a refinery in Saint-Romuald on the shores of the St. Lawrence. It first selected this site about 20 or 25 years ago because this was a good location, strategically speaking. The deep water provided easy access for ships. I've been told that with the gradual introduction of services fees, the company does not enjoy the same advantage it once had 20 or 25 years ago and had the fees been in place back then, Ultramar would probably not have made an investment of this magnitude in Saint-Romuald. This provides a very clear indication of the economic impact of services fees.

    Often, I like to draw a parallel between this industry and the road transport sector. This situation is akin to asking the large tucking companies to help cover some of the costs associated with clearing ice and snow from the highways. That would be a ludicrous request. While it can be difficult to compare two sectors, I think this particular comparison is telling, Mr. Chairman.

    The last point I want to raise has more political overtones. I'm directing my comments to my opposition colleagues opposite, although I realize this isn't a political issue for them and I don't want to drag them into anything. Speaking for myself--and I don't presume to speak either for the government or for the minister--I think marine services fees should be reduced. However, if this was suggested, the opposition would likely first react by saying that this move was designed to help the CSL fleet.

    You are more or less the victims of this situation. However, at some point, you'll have to step back a little and assess the needs of the marine industry in terms of the country's overall economic development, rather than the needs of shipping firms.

    Thank you, Mr. Chairman.

  (1225)  

[English]

    The Chair: Merci, monsieur Farrah.

    Mr. Stoffer.

    Mr. Peter Stoffer (Sackville—Musquodoboit Valley—Eastern Shore, NDP): Thank you, Mr. Chairman, and thank you, gentlemen, for your presentation.

    I just have a couple of small things, and I'm being a little mischievous on my first question. I noticed on the list of members you represent that Canada Steamship Lines is not on there. Are they a member of your organization?

    Mr. Don Morrison: They are a member of the Canadian Shipowners Association.

    Mr. Peter Stoffer: So they are part of this group. I was just thinking of the future Prime Minister's former relationship with this company.

    Also I noticed the Halifax Port Authority is in this group as well. The last time we met a few years ago, I remember abstaining from a particular vote on these fees because there was a concern regarding ice breaking fees Halifax doesn't pay for that you folks do pay for. Are they in total agreement with your presentation today in regard to the removal of all fees?

    Mr. Raymond Johnston: They remain a member of the coalition, and I will be honest and say that this is an issue that is somewhat divisive because it has ended up pitting one region of the country against another. They have a commercial interest in seeing Montreal pay more money than they pay. Now, you can also take a view that they should have an interest in paying less than what the Port Authority of New York and New Jersey pays--also a competitor.

    I think the answer to your question is they're somewhere in the middle. They would stand to benefit from this from a competitive point of view vis-à-vis the American competition they face. However, it would lower the cost of shipping to Montreal.

    Mr. Peter Stoffer: One of the concerns I would have, of course, coming from the Halifax area and representing those interests, is whether there are discussions among yourselves and the Halifax Port Authority to come to some sort of mutual agreement on this. Are there?

    Mr. Raymond Johnston: Yes, absolutely. In fact, I'm going to Halifax on Thursday this week, so discussions are ongoing. I'm not speaking for them, but I don't think it is unlikely they would be satisfied with seeing a long-term agreement put in place.

    Mr. Peter Stoffer: That's excellent.

    A while back we did an MCTS report. Have you had a chance to get a copy of that, and did you review it?

    Mr. Raymond Johnston: Yes, and I read it in February.

    Mr. Peter Stoffer: What was your overall feeling on our report?

    Mr. Raymond Johnston: I think, from my recollection, you captured many of the sorts of problem areas and the opportunities for improvement we have been pointing out: reducing the level of VTS stations, consolidating the different regions, introducing new technology, and modernizing--all the things we have been telling the coast guard. These are all issues that have been brought up at the regional level and at the national level in the MAB, so we fully see that there is an opportunity to make significant progress in that area.

    Mr. Peter Stoffer: These two questions are sort of related. I am rather disturbed that you haven't had a meeting, this Marine Advisory Board, for well over a year. Then, of course, it's the same thing with the Auditor General's office, who I think does a great job of reporting the evidence that is before them. Because this hasn't taken place for over a year--and I've seen the prerequisite of what that board is supposed to do--have you then taken it upon yourself on behalf of the group to meet personally, say, with John Adams and say, look, this board isn't happening so we want to discuss our issues with you personally? Have you had a chance to do that?

    Mr. Raymond Johnston: We have. Mr. Morrison and I met with the deputy minister and Mr. Adams approximately a month ago. Again, keeping current on a day-to-day level...yes, there is discussion on particular issues of interest.

    On the Auditor General's report, I served on an internal board with the coast guard to deal with the fleet management report, so we keep coming back to the table for more, again demonstrating our willingness and commitment to help them get on with doing the job that needs to get done. I spent a year working with these guys trying to deal with their fleet management issues.

    Mr. Peter Stoffer: Along with my colleague from Skeena, who mentioned the log-jam you're in, some people suggested in our study of the coast guard that quite possibly the coast guard should be a stand-alone agency or in another department. If you had the power, would you agree with that, or can you work, as frustrating as it is, with the coast guard being in the department it is in now, or would you have advice as to what it should be or where it should go?

    Mr. Raymond Johnston: The problem we face is that the marine industry is not isolated within a single department. In fact, it goes well beyond DFO; it's spread all over the map. There are about a dozen agencies, 19 different pieces of regulation, and fees all over the place; it comes at us from everywhere. Certainly, any effort or initiative to try to bring some focus to the marine industry, to put a ring fence around it, would contribute to the effectiveness of managing and overseeing the marine industry in Canada. We don't have any particular advice to bring to you other than to signal the fact that there is a spaghetti of administration and bureaucracy out there such that we would welcome some consolidation.

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    Mr. Peter Stoffer: Thank you for that. My final question is this. We've heard concerns, of course, about the dredging required for the St. Lawrence. It can be very expensive when that happens. Is it your opinion that the entire cost for the dredging should come out of the public purse, or would industry be willing to offset some of those costs by assisting in the dredging process, if indeed it happens?

    Mr. Marc Gagnon: We are paying 100% of the costs.

    Mr. Peter Stoffer: Right now, but I understand there are discussions regarding major dredging of the St. Lawrence because of the low water and that it....

    Capt Ivan Lantz: No, no. There are some discussions on using the real depth of waters that are there and the continuous maintenance dredging; there is no.... I work closely with the Port of Montreal on their projects and technical advancements and so on. We want to take advantage of the technical expertise and the technology that is there to be able to use the full depth of the St. Lawrence River channel.

    Again, I would come back to the same issue. Some of our stumbling blocks on fees and so on, we believe, are some of the same stumbling blocks that we find in getting cooperative meetings with coast guards on the Marine Advisory Board and other issues.

    The Chair: Thank you, Mr. Stoffer.

    There's a vote, members, and members should not feel constrained to stay here if they want to go for the vote. However, I'm not going to close the meeting until all questions, including mine, are dealt with.

    Mr. Matthews.

    Mr. Bill Matthews (Burin—St. George's, Lib.): I have just a couple.

    First of all, thank you, gentlemen, for coming, for your presentation. I notice in your presentation here you say you made a proposal to Minister Dhaliwal on February 16, 2001, and then to Minister Thibault in August 2002. Was it the same proposal or was it different?

    Mr. Raymond Johnston: No. In essence it called for long-term agreement. The issue was to come up with a way of dealing with the cost to make industry more competitive, and the commitment to work with the coast guard was the same. In essence they were very similar.

    Mr. Bill Matthews: Did you propose, say, a sliding scale of fee elimination or were you just saying do something as soon as possible?

    Mr. Raymond Johnston: We proposed the concept and pointed out the problem that this is a competitive issue facing the marine industry. We did not think it prudent to tell the government how to do its job. That, to us, is the next step as to what we would actually do or what we would end up with. That's really what we're seeking now, to enter into those sorts of discussions or negotiations, if you will, that would lead to a final agreement. We didn't want to be presumptuous and tell you, with all due respect, what to do.

    Mr. Bill Matthews: Basically, then, do I understand that you are receptive to an arrangement allowing for a term of arrangement that would...? I guess the ultimate goal is to see the elimination of the fee over a reasonable period of time. You are willing to negotiate that kind of arrangement, say, of some scale.

    Mr. Raymond Johnston: We understand the fiscal constraints and realities of the current government.

    Mr. Bill Matthews: Right, okay. That's good.

    The Chair: Thank you, Mr. Matthews.

    Well, I guess that leaves me. I have a few questions.

    Thank you for coming, gentlemen. Page 7 of your presentation.... Actually, I want to go back, just to get a little historical perspective. Prior to the marine services fees being introduced in 1995, what was the situation?

    Mr. Raymond Johnston: Coast guard services were provided to the commercial sector without charge, as they are in the United States.

    The Chair: As they are in the United States, exactly.

    Mr. Don Morrison: And to fishing and recreation. All three groups had the services provided free of charge. What happened in 1995 was those fees were allocated to the commercial sector and not to the fishing sector and to the pleasure craft sector, the recreation sector.

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    The Chair: All right. Was there some explanation for that, such as you guys can afford it and they can't? What was the explanation? Why wasn't...?

    Mr. Don Morrison: I think political sensitivity might be the way to answer the question.

    Mr. Marc Gagnon: The plan was to collect from the three groups, certainly.

    Mr. Don Morrison: The original plan was to collect from the three groups.

    The Chair: Okay, and to date has anything been collected from the recreational? No.

    Mr. Don Morrison: We do not believe so.

    The Chair: All right. Now on page 7 you say in point 6 that the costs allocated to industry were reduced by $54 million annually. What does that paragraph mean? I don't quite follow it.

    Mr. Raymond Johnston: As I described, a lot of things have transpired in terms of the types of services users require. We've adjusted our levels of service when it comes to NAVAIDS, for example. The coast guard have adjusted some of their costs and ways of doing business, so the costs originally allocated to industry were in the order of $160 million.

    The Chair: Allocated by whom?

    Mr. Raymond Johnston: By the coast guard.

    The Chair: By the coast guard, okay.

    Mr. Raymond Johnston: They have a total pot of money. They say this is what NAVAIDS, VTS, and ice breaking cost. Out of that, $160 million is what the commercial sector costs us. We allocate those costs, and it is just an allocation, so it's a lot of methodological assumptions, etc. That $160 million is now down to about $110 million during the course of about a five-year period. So there's been a reduction of costs, because services have been reduced, and the way they are accounted for, costs have gone down.

    The Chair: Page 11, point 3 says “Work together to optimize services and adjust cost structures”. What does that mean?

    Mr. Raymond Johnston: In our proposal we have outlined a number of areas through this Marine Advisory Board process of looking at ways of working with the coast guard to implement new technology. You may have come across the term AIS, automated identification system. As a means of really modernizing the whole VTS and vessel communication services program, that has been very slow in coming. Industry has gone ahead and done it itself in the area of the St. Lawrence Seaway, a case in point.

    Again, review of NAVAIDS, improving the NAVAID service--there's currently a pilot project going on right now to introduce three-dimensional charting for the Great Lakes. One way of combating the low water levels in the Great Lakes is actually to provide better data. The coast guard is engaged, but not really fully engaged, in this project. This is an industry-driven process.

    There are a whole bunch of specific projects and more refined areas, ways of consolidating services with other groups that are doing the same job. These are the things we're putting forward as a commitment to work with the coast guard in a businesslike fashion, to say this is what we need; these are the alternatives to provide the service; this is a cost-effective way of doing it.

    This isn't a one-off. This is an ongoing, multi-year process that we're prepared to get into. We're setting objectives, setting performance measurement standards, and making sure this does produce the desired results.

    The Chair: The Auditor General, just for reference purposes, in paragraph 2.102 on page 21, had the following comment. I'll just read it to you.

The introduction of the Marine Services Fees has also had positive consequences. There has been a more realistic assessment of the number and types of navigational aids that are required to support commercial shipping. The introduction of the fees has also motivated industry to become more actively involved in determining service levels.

    Do you agree with that?

    Mr. Raymond Johnston: I think that is a way of viewing it, yes.

    The Chair: Is that the way you view it?

    Mr. Raymond Johnston: Yes. I think it's a fair comment.

    The Chair: Okay.

    Mr. Don Morrison: It should be pointed out, though, that if we had not moved into helping the coast guard reduce costs, our fees would be the same. The coast guard costs would be higher than they are right now.

    I think it should be pointed out that we took on the challenge of helping them reduce costs by telling them what we didn't need and working very hard at that. This was not a simple process. We had many resources involved in that over a six- or nine-month period. I think it's important to note that we could have stayed out of it. Our costs would have been the same. The coast guard costs would have been higher.

    We're trying to work toward a program where the coast guard would ultimately say, we've reduced our costs, and industry has been really forthcoming in telling us what they do and don't need; we should probably start including them in some of the benefits of this cost reduction. This is what we've really been working for.

    That hasn't happened yet. Not only that, but it hasn't happened even at the conceptual level where we've been able to sit down, as Mr. Johnston said, to engage them in discussions about what could be done and how we could do it, in reply to the gentleman's question.

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    The Chair: What I'm getting at is the marine services fee served a purpose, namely, to get industry motivated, at least according to this, and also to give the government money it didn't have when it needed money in order to balance the budget. Perhaps those goals have now been achieved and it's time to look at some sort of elimination of it along the lines of what you're suggesting. That's all I'm saying. Simply because something served a purpose doesn't mean it continues to or that it should. That's where I was coming from on that.

    A quick question. On page 20, under the Canada Marine Act Review, you have “CMA Review Panel's report....” Who was on the panel?

    Mr. Raymond Johnston: There were four representatives: a lawyer from Halifax, a lawyer from Quebec, a business person from Vancouver, and a business person from southern Ontario, all familiar with marine matters and experienced in various sectors of the industry.

    The Chair: Okay. What has the government's response been? Has there been none?

    Mr. Raymond Johnston: There has not been a response. Industry's response has been overwhelmingly supportive of all of the recommendations. These are only two of them. There were 30 recommendations and observations, principally dealing with Canadian ports, a very positive report.

    The Chair: Finally, going to your recommendation, I want to be clear on this. If I understand it correctly, your recommendation, I take it, is the elimination of the fees as soon as possible. But do you really mean a phased-in elimination of the fees as you work together with the coast guard to better the service? Is that the general thinking?

    Mr. Raymond Johnston: I think the scope is there to interpret it that way, yes.

    The Chair: Is that the way you would like it interpreted?

    Mr. Raymond Johnston: To tell you quite frankly, I represent over 100 members who are shippers and are paying this fee every day. This isn't about one shipping company paying fees; this is about 100 shippers. They want it eliminated now. That's what we really want.

    The Chair: I understand that. That's what you really want, but if you--

    Mr. Raymond Johnston: But that may not be consistent with what the government can do.

    The Chair: Yes, but you're in business; you have to look at things realistically. You have a government that is now collecting money that it didn't collect prior to 1995. It's relying on the collection of that money. You have a ministry, if you believe everybody we hear, that is cash starved and is always looking for money. If we took your recommendation and eliminated the fees instantaneously, this department would have to scramble to find moneys to make up this money that it has come to rely upon. So realistically, an elimination over a period of time would be more in the cards, I would think, than an immediate elimination.

    However, I hear what you're saying. There is the wish list and then there is what you will grudgingly accept, if I can put it that way.

    So back to the recommendation. We'll eliminate these marine service fees as soon as possible, and you want to partner with the CCG to improve efficiency and reduce costs. And here's where I'm having problems understanding. By partnering with CCG to improve efficiency and reduce costs, are you saying that the industry would contribute money? And isn't that the same as fees but in a different way? A navigational aid requires repair. Under your proposal, who repairs it? Who pays for it?

    Yes, sir, Captain.

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    Capt Ivan Lantz: The industry has invested significantly in new navigation technology. The R and D on electronic charts now used to navigate much more certainly and more surely is one of the tools that industry developed and funded and has encouraged navigators to use, and they are using it very effectively. This has contributed to one of the ways we have worked with the coast guard to be able to reduce the numbers of navigation aids. It is a contributing factor; it is not a sole factor.

    Secondly, the automated identification systems now required by the International Maritime Organization have been at owners' expense. It is a carriage requirement. It is not furniture provided by government or the coast guard. This will help ships manage their traffic in their areas in improved safety so they are more autonomous and less dependent on the coast guard and marine services.

    Safety in the construction of ships, the double hulling of tankers, has significantly reduced the occurrence of oil spills and the dependence on government funding and operations and infrastructures to help support the oil cleanup business, because we don't have as many spills as we used to have.

    Navigational aids. We brought on board differential GPS and GPS. Now we have a satellite correction system as well from the satellites. Yet the coast guard continues to maintain Loran towers primarily for political pressures rather than for actual need and use. This is a cost factor and a cost contributing factor that was lumped into the original $160 million that was allocated to commercial industries. When the coast guard cannot close infrastructures due to public pressures, this has to be considered.

    I believe the industry has invested significantly in improving its own lot, and it's now time for us to work with the coast guard in making sure those investments are recognized.

    The Chair: Thank you very much for that answer. It simply seems to me that you folks are paying, and it's only a question of whether you call it fees or whether you call it investment and technology, or whatever it is. You're paying anyway, and every time you make an improvement, hopefully, it costs the coast guard less because you need less navigation; you need less of what you were just talking about. But you're paying. It's money by a different name, R and D, whatever you want to call it. But I get the point.

    Now, the final thing I want to ask about is the U.S. Why doesn't the U.S. charge?

    Mr. Raymond Johnston: They have never charged for coast guard services. They do have other charges levied on the commercial marine sector that partly support the cost of the coast guard.

    The interesting thing in the U.S. is that they do levy fees approaching a billion dollars a year. They are much bigger tonnage numbers than in Canada, of course, but they collect about a billion dollars a year from users. However, they reinvest $4 billion into the commercial marine sector, and that's documented by the General Accounting Office of the United States.

    The Chair: So the U.S. in fact does charge. It's simply not through the coast guard.

    Mr. Raymond Johnston: They do charge a fraction; they don't charge to the coast guard. But in the day-to-day world of a ship enjoying the services of going to a U.S. port through Canadian waters, it would not pay, whereas a ship going to a Canadian port would pay.

    The Chair: Okay.

    Yes, Captain.

    Capt Ivan Lantz: Mr. Chairman, very clearly those are not navigation service fees, and they're not associated with the direct transit of a ship on a per ship basis. They're charged through port and cargo taxes.

    The Chair: Okay.

    Having exhausted my questions, I look around and I bring to my own attention that I've lost quorum. Therefore, it's my duty to call an end to the meeting, but I do want to thank you for coming. We do appreciate you bearing with us through two unscheduled votes. It was unfortunate, but there's nothing we can do about it. We wanted to make sure we got your presentation in because it will form part of the committee's considerations when it is making its recommendations with respect to the coast guard.

    It is always nice to see you, and we thank you very much. We appreciate it.

    The meeting is adjourned.