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37th PARLIAMENT, 2nd SESSION

Subcommittee on Marine Transportation of the Standing Committee on Transport

EVIDENCE

CONTENTS

Tuesday, March 25, 2003

1550

The Chair (Mr. Roger Gallaway (Sarnia—Lambton, Lib.))

Mrs. Christine Nymark (Associate Assitant Deputy Minister, Policy Group, Department of Transport)

1555

1600

1605

The Chair

Mr. Gerard McDonald (Director General, Marine Safety, Safety and Security Group, Department of Transport)

1610

1615

1620

The Chair

1625

Mr. Andy Burton (Skeena, Canadian Alliance)

Mrs. Christine Nymark

Mr. Emile di Sanza (Acting Director General, Marine Policy, Policy Group, Department of Transport)

Mr. Andy Burton

Mr. Emile di Sanza

Mr. Andy Burton

Mrs. Christine Nymark

Mr. Andy Burton

Mrs. Christine Nymark

Mr. Andy Burton

Mr. Emile di Sanza

Mr. Andy Burton

Mr. Emile di Sanza

1630

Mrs. Christine Nymark

Mr. Andy Burton

Mrs. Christine Nymark

Mr. Andy Burton

The Chair

Mr. Andy Burton

Mrs. Christine Nymark

Mr. Andy Burton

Mr. Emile di Sanza

Mr. Andy Burton

Mrs. Christine Nymark

1635

Mr. Andy Burton

Mr. Gerry Frappier (Director General, Security and Emergency Preparedness, Safety and Security Group, Department of Transport)

Mr. Andy Burton

The Chair

Mr. Roger Gaudet (Berthier--Montcalm, BQ)

The Chair

Mr. Joe Comuzzi (Thunder Bay—Superior North, Lib.)

Mr. Gerard McDonald

Mr. Joe Comuzzi

Mr. Gerard McDonald

Mr. Joe Comuzzi

Mr. Gerard McDonald

Mr. Joe Comuzzi

Mr. Gerard McDonald

Mr. Joe Comuzzi

1640

Mr. Gerard McDonald

Mr. Joe Comuzzi

Mr. Gerard McDonald

Mr. Joe Comuzzi

Mr. Gerard McDonald

Mr. Joe Comuzzi

Mr. Gerard McDonald

Mr. Joe Comuzzi

Mr. Gerard McDonald

Mr. Joe Comuzzi

Mr. Gerard McDonald

Mr. Joe Comuzzi

Mr. Gerard McDonald

Mr. Joe Comuzzi

Mr. Gerard McDonald

Mr. Joe Comuzzi

Mr. Gerard McDonald

Mr. Joe Comuzzi

Mr. Gerard McDonald

Mr. Joe Comuzzi

Mr. Gerard McDonald

Mr. Joe Comuzzi

1645

Mrs. Christine Nymark

Mr. Joe Comuzzi

The Chair

Mr. Joe Comuzzi

Mr. Gerard McDonald

Mr. Joe Comuzzi

Mr. Gerard McDonald

Mr. Joe Comuzzi

The Chair

Mr. Andy Burton

The Chair

Mr. Joe Comuzzi

The Chair

Mr. Andy Burton

Mr. Gerard McDonald

Mr. Andy Burton

1650

Mr. Gerard McDonald

Mr. Andy Burton

Mr. Gerard McDonald

Mr. Andy Burton

Mr. Gerard McDonald

Mr. Andy Burton

Mr. Gerard McDonald

Mr. Andy Burton

Mr. Gerard McDonald

Mr. Andy Burton

Mr. Gerard McDonald

Mr. Andy Burton

Mr. Gerard McDonald

Mr. Andy Burton

The Chair

Mr. Joe Comuzzi

Mrs. Christine Nymark

Mr. Joe Comuzzi

Mrs. Christine Nymark

Mr. Joe Comuzzi

Mrs. Christine Nymark

Mr. Joe Comuzzi

Mrs. Christine Nymark

Mr. Joe Comuzzi

1655

Mrs. Christine Nymark

Mr. Joe Comuzzi

Mrs. Christine Nymark

Mr. Joe Comuzzi

Mrs. Christine Nymark

Mr. Joe Comuzzi

Mrs. Christine Nymark

Mr. Joe Comuzzi

Mr. Emile di Sanza

Mr. Joe Comuzzi

Mr. Emile di Sanza

Mrs. Christine Nymark

Mr. Joe Comuzzi

Mrs. Christine Nymark

Mr. Joe Comuzzi

Mrs. Christine Nymark

Mr. Joe Comuzzi

Mrs. Christine Nymark

Mr. Joe Comuzzi

Mrs. Christine Nymark

Mr. Emile di Sanza

Mr. Joe Comuzzi

Mr. Emile di Sanza

Mr. Joe Comuzzi

Mrs. Christine Nymark

Mr. Joe Comuzzi

The Chair

Mr. Joe Comuzzi

The Chair

Mr. Andy Burton

Mrs. Christine Nymark

Mr. Andy Burton

1700

Mrs. Christine Nymark

Mr. Andy Burton

Mrs. Christine Nymark

Mr. Andy Burton

Mrs. Christine Nymark

Mr. Andy Burton

Mrs. Christine Nymark

Mr. Andy Burton

Mrs. Christine Nymark

Mr. Andy Burton

Mrs. Christine Nymark

Mr. Andy Burton

Mrs. Christine Nymark

Mr. Andy Burton

Mr. Emile di Sanza

Mrs. Christine Nymark

Mr. Andy Burton

Mr. Emile di Sanza

Mrs. Christine Nymark

Mr. Andy Burton

Mr. Emile di Sanza

Mr. Andy Burton

Mrs. Christine Nymark

Mr. Andy Burton

Mrs. Christine Nymark

Mr. Andy Burton

Mrs. Christine Nymark

Mr. Andy Burton

The Chair

Mr. Joe Comuzzi

Mr. Gerry Frappier

1705

Mrs. Christine Nymark

Mr. Joe Comuzzi

Mrs. Christine Nymark

Mr. Emile di Sanza

Mr. Joe Comuzzi

Mr. Emile di Sanza

Mr. Joe Comuzzi

Mr. Emile di Sanza

Mr. Joe Comuzzi

Mrs. Christine Nymark

Mr. Joe Comuzzi

Mr. Gerry Frappier

1710

Mr. Joe Comuzzi

Mr. Gerry Frappier

Mr. Joe Comuzzi

Mr. Gerry Frappier

Mr. Joe Comuzzi

Mr. Gerry Frappier

Mr. Joe Comuzzi

Mr. Gerry Frappier

Mr. Joe Comuzzi

Mr. Gerry Frappier

Mr. Joe Comuzzi

Mr. Gerry Frappier

Mr. Joe Comuzzi

Mr. Gerry Frappier

Mr. Joe Comuzzi

Mr. Gerry Frappier

1715

Mr. Joe Comuzzi

Mr. Gerry Frappier

Mr. Joe Comuzzi

Mr. Gerry Frappier

Mr. Joe Comuzzi

Mr. Gerry Frappier

Mr. Joe Comuzzi

Mr. Gerry Frappier

Mr. Joe Comuzzi

Mr. Gerry Frappier

Mr. Joe Comuzzi

Mr. Gerry Frappier

Mr. Joe Comuzzi

Mr. Gerry Frappier

Mr. Joe Comuzzi

The Chair

Mr. Gerard McDonald

The Chair

Mr. Gerard McDonald

The Chair

Mr. Gerard McDonald

The Chair

CANADA

Subcommittee on Marine Transportation of the Standing Committee on Transport

NUMBER 002

2nd SESSION

37th PARLIAMENT

EVIDENCE

Tuesday, March 25, 2003

[Recorded by Electronic Apparatus]

¹ (1550)

[English]

The Chair (Mr. Roger Gallaway (Sarnia—Lambton, Lib.)): Witnesses, we welcome you to this first, if I can call it that, “real meeting” of the Subcommittee on Marine Transportation. We have with us today, from the Department of Transport, Ms. Nymark, who is the associate assistant deputy minister; Mr. di Sanza, who is the acting director general of marine policy, policy group; Gerard McDonald, director general of marine safety, safety and security group; and Monsieur Frappier, who is the director general of security and emergency preparedness, safety and security group. Welcome to you all.

I know you've had vast experience before committees, so we would welcome you to start. Ms. Nymark.

Mrs. Christine Nymark (Associate Assitant Deputy Minister, Policy Group, Department of Transport): Thank you very much.

It's a pleasure to be here this afternoon to discuss the Great Lakes and the St. Lawrence Seaway system and other Transport Canada initiatives.

Let me start by giving you an overview of the marine sector. The sector supports a vital trade gateway connecting us to the world. Our international marine traffic was valued at more than $100 billion in the year 2000, greater than 7% of GDP, and our sector employs approximately 30,000 people. Every year more than 3,700 large vessels carrying over 2 million people--that's crew members and tourists--and more than 3.5 million intermodal containers pass through our ports. The 19 Canada Port authorities and the St. Lawrence Seaway Management Corporation manage almost $2 billion in federal assets altogether.

Now, during the last two decades the Canadian transportation system has undergone an enormous evolution. The privatization and commercialization of many of our largest and most important transportation facilities have been rewarded with unprecedented improvements in efficiency and the availability of market capital to expand and upgrade this infrastructure.

Let's turn to the St. Lawrence Seaway Management Corporation. On October 1, 1998, after 40 years of government operation, the day-to-day management of the St. Lawrence Seaway was commercialized. Major bridges not related to navigation were turned over to a new crown corporation, the Federal Bridge Corporation Limited. The former crown corporation, the St. Lawrence Seaway Authority and its corresponding act, were dissolved on December 1, 1998.

Now, commercialization of the seaway at that time was seen as the best way to ensure the long-term survival of the system by creating new incentives to lower costs and to maintain continued downward pressure on costs. Users of the seaway were seen as the interest with the strongest incentive to ensure the long-term vitality of the system.

Under a 20-year management agreement with the federal government that remains in force until March 31, 2018, responsibility for the operations and maintenance of the navigational aspects of the seaway passed to the St. Lawrence Seaway Management Corporation. In addition, the movable capital assets, intangible assets, and working capital related to the operation of the seaway were transferred to the seaway corporation along with the capital trust fund.

The seaway corporation is a not-for-profit corporation under part 2 of the Canada Corporations Act and is governed by a nine-member board of directors. The board reflects the diversity of seaway stakeholders. One member is chosen by each of the grain, steel, and iron ore industries and by domestic shipowners, international carriers as represented by the Shipping Federation, and other shippers. In addition, there is also a member appointed by the federal government and one each by the provincial governments of Ontario and Quebec and the seaway corporation president.

The government continues to own the fixed assets and as well alone bears the risk on traffic and revenues. If revenues from operations are not sufficient to cover operating costs and asset renewal costs, the government is responsible for covering the resulting deficits.

The 20-year management agreement requires that the seaway corporation's operations be guided and measured by two five-year business plans that set specific targets for operations and asset renewal costs. I think it's fair to say that the first five years of the commercialization of the seaway have been a success. The corporation has met its performance targets in the first five-year business plan and we are now moving into the second five years of the management agreement.

Negotiations between Transport Canada and the seaway corporation to establish the business plan for the second five years of the agreement are progressing well, and it is recognized by both parties that there will be challenges ahead, primarily due to lower traffic levels and higher maintenance costs. It's anticipated that government appropriations may be required in one or two years.

Let me first address the traffic levels, and then I'll turn to the issue of the maintenance costs and the department's corresponding initiatives.

The main commodities transported on the seaway are bulk commodities such as iron ore, coal, grain, salt, cement, and partially processed steel products. These commodities are obviously closely linked to the performance of the North American economy.

Traffic in the 2001 and 2002 navigational seasons has been over 10% below traffic of the previous three seasons. The main factor has been the mild economic recession in both the U.S. and Canada. Lower demand in the steel industry in particular caused reduced movements of iron ore, coal, and steel imports. Grain movements have also been greatly reduced by drought and reduced production.

This, in our view, is not an unusual or extraordinary situation. Over the last 45 years there have been cyclical increases and decreases in traffic levels generally corresponding to the performance of the economy. So it is believed that the present situation is a cyclical low. It would appear to be more likely that traffic will increase as the economy recovers to reach the levels of the previous three years, which produce break-even results.

¹ (1555)

[Translation]

The seaway is getting older, and inevitably, maintenance costs are rising. It is important that we ensure the economic maintenance of the seaway network. As owner of the Canadian seaway fixed assets, the federal government is preparing a long-term, innovative strategy regarding the network. At the same time, we must take our financial capacity into account.

Transport Canada is committed to ensuring that the seaway infrastructure will remain a safe, sustainable, dependable and effective component of Canada's transportation network. The conditions of the agreement ensure that the renewal of assets, which include fixed assets as well as major and current maintenance work, will be sufficient to safeguard national transport network interests. For instance, a fixed assets committee made up of two government representatives and two members of the St. Lawrence Seaway Management Corporation board of directors approves the asset renewal plan, and the government may verify the state of these assets at any given time.

Strategic planning for the seaway will mean common approaches will be necessary among the many people who have a role to play in marine transport. Decisions concerning seaway infrastructure must be taken within the context of an integrated transport network and must continue to ensure market frameworks are in place to deal with socio-economic and environmental factors related to sustainable transportation.

[English]

As many of you are aware, Transport Canada has been holding discussions with the U.S. Army Corps of Engineers and the U.S. Department of Transportation on the possibility of engaging in a collaborative process to evaluate the future infrastructure needs and to assess the potential investment requirements for the Great Lakes-St. Lawrence Seaway system.

Initially, the corps was contemplating a $20 million U.S. multiple-study proposal over five years, with the reconnaissance study as the first phase. The reconnaissance study identified five project options and made an initial estimation of project benefits. Transport Canada, in particular my colleague Emile, was approached to participate jointly in this multiple-study proposal.

We believe there would be many benefits in a collaborative approach with the U.S. to develop a strategic plan for the Great Lakes-Seaway system. However, our preference was that funding should be considered on a study-by-study basis. Such an approach would allow for continuing evaluation as to whether such studies were meeting Canadian needs.

We also believe that appropriate due diligence and transparency should be conducted before we embark on a number of wide-ranging studies. In this regard, Transport Canada carried out an independent scoping exercise to highlight areas of particular importance from a Canadian perspective and to provide a framework and some guidelines that would ensure the protection of Canadians' public interest. We have copies of this study for distribution today.

Two principal conclusions can be drawn from the scoping exercise. First, from a Canadian perspective, consideration needs to be given to developing a realistic portrait of the existing Great Lakes-Seaway system in the absence of any infrastructure enhancements. This means looking at the ongoing maintenance or replacement of existing infrastructure without substantially changing the overall structure of the system. This approach was not considered in the corps' reconnaissance study. This scenario is itself likely to be characterized by significant investment.

Studies to evaluate the condition and reliability of the system and to develop an initial investment plan to sustain the existing infrastructure into the future, including an overall assessment of the associated benefits and costs, would provide a point of reference for evaluating future investment alternatives. It's very important to understand the factors and trends likely to result from efforts to sustain the current capacity over the long term.

º (1600)

Second, from our scoping study we surmise that a proper socio-economic evaluation should take into account not only providers and users of the system shipping services, but also third parties who may be affected positively or negatively. This will provide information that would help to determine whether and under what conditions different investment alternatives for the Great Lakes-Seaway system are likely to provide positive net benefits to Canada. It should include an assessment of the likely responsive water and overland carriers to enhancements in the seaway and of market factors to determine how transport savings will filter through the economy.

While we were undertaking our scoping exercise, the corps was seeking funding for the multi-study proposal. The Congress authorized the funding of only $1.5 million.

It is expected that the corps will undertake an initial phase of studies over a 12- to 18-month period.

Following the completion of the initial phase and an evaluation of the results and assessment of appropriate further studies, the corps may return to Congress to seek further funding. But the result is that the approach they're taking now is very consistent with Transport Canada's position that funding should be provided on a study-by-study basis.

A lot of work has been accomplished over the last few months in developing an appropriate framework for conducting the necessary studies to evaluate future infrastructure requirements. We are continuing to work with the U.S. Army Corps of Engineers and the U.S. Department of Transportation to develop this framework and to better define the scope of the initiative. So we are seeking to establish a protocol governing Canadian and U.S. involvement. It is anticipated that the oversight and management of joint Canada-U.S. studies would fall under the purview of a steering committee and a management team, respectively.

To ensure that Canadian interests are addressed, Transport Canada senior officials will play a lead role in all decision-making authorities governing such studies and they will be directly involved in developing the terms of reference.

About a month ago the minister tabled in Parliament a vision for transportation called Straight Ahead, which I assume you're familiar with. Straight Ahead stresses the need for a sustainable transportation system, supported by strategic investments in infrastructure and with a focus on intermodalism. The study of the future infrastructure requirements of the Great Lakes-Seaway system is provided as an example of the high priority Transport Canada is placing on feasibility studies in support of investment into an integrated national transportation system.

Another example is Transport Canada's exploration of possible opportunities to promote short-sea shipping. In fact, short-sea shipping has the potential to create new market opportunities for users of the Great Lakes-Seaway system. Straight Ahead contains a commitment to explore possible opportunities to promote short-sea shipping as a means to help alleviate highway congestion and facilitate trade, improve utilization of waterway capacity, and reduce greenhouse gas emissions.

Short-sea shipping is a flexible concept and generally refers to the movement of cargo and passengers by water, between points situated within relatively close proximity to one another. This may include domestic as well as international marine transport along coastlines, to and from nearby islands, or within lakes and river systems.

The objectives of short-sea shipping include the alleviation of congested road transport and bottlenecks, improving utilization of waterway capacity, the promotion of sustainability in transportation, and the reduction of greenhouse gases, and advancing intermodalism and facilitating trade between adjacent regions. Generally speaking, short-sea shipping is designed to increase the efficiency of the overall transportation system in order to meet current and future demands arising from economic expansion and changes in population growth. So we think the concept truly fits into the vision of transportation in Canada, as set out in Straight Ahead.

Short-sea shipping operations may have application to the movement of containers and road trailers, dry or wet bulk cargo, conventional and general cargo, and bulk such as paper, wood, or steel, and passengers. It may also involve a regularly scheduled charter service through term contracts or on a spot basis, consisting of a short-term contract covering a specific number of voyages, days, or a given quantity of cargo.

º (1605)

It could help to reduce congestion and bottlenecks on roads around urban areas and at border crossings. We believe available waterway capacity exists in the Great Lakes-St. Lawrence Seaway as well as on other river systems and on coastlines, with most ports being able to accommodate more traffic. All this doesn't mean that the concept is without challenges. It's relatively unknown in Canada, so its reliability and transit times would have to be proven. Long winter months produce significant ice coverage, and that could also seriously affect cost-effectiveness and practicality.

However, the European Union has carried out a substantial amount of work on the subject since the early 1990s, resulting in short-sea shipping becoming a key European Union transport policy priority. The U.S. has also recently turned its attention to short-sea shipping, so we believe there are opportunities to share information and experience in the development of this concept in Canada.

In the community and the United States, short-sea shipping has aimed at shifting cargo from roads to water, while at the same time benefiting the environment. This implies, then, that the emphasis is on container and roll-on and roll-off traffic. But application of short-sea shipping solutions may be considered just as useful for other cargoes and for passenger transport if circumstances support it. Addressing the areas of congestion along the Montreal-Windsor-Niagara corridor, around greater Vancouver, and at key border crossings are natural starting points, but they are not the only potential applications.

So we have begun to investigate how short-sea shipping fits into our programs, and we are beginning to promote the topic with industry and other government departments.

Let me now turn very quickly to the Canada Marine Act.

[Translation]

I now want to take this opportunity to give you an update on the review of the Canada Marine Act, or CMA. As you know, on May 26, 2002, the Minister of Transport announced the appointment of an expert panel to help him conduct that review. The first role of the review panel was to undertake consultations with the stakeholders. To facilitate those consultations, Transport Canada prepared a policy document to provide general information and a summary of CMA-related issues which had been raised until then.

These consultations took place in eleven cities and seven provinces. The panel received over 140 briefs and heard more than 75 witnesses. You may be interested to know that the commercialization of the management and operation of the seaway has been a resounding success, according to the vast majority of briefs received by the committee.

Currently, the panel is finalizing its report, which will be submitted to the Minister of Transport in good time, so that he may table his report to Parliament in June 2003.

[English]

I know I've taken up quite a lot of time, but I'd like to now turn over the microphone to Mr. McDonald, and he will address pilotage, which I know is of great interest to you.

The Chair: Thank you, Ms. Nymark.

Mr. McDonald.

Mr. Gerard McDonald (Director General, Marine Safety, Safety and Security Group, Department of Transport): Thank you very much, Mr. Chairman.

As many of you know, marine pilotage is a fairly contentious issue, one that has been the subject of considerable debate over the past many years. In an effort to frame our discussion today, I thought it might be beneficial to give the subcommittee members a brief overview of the overall structure of pilotage in Canada, Transport Canada's oversight role with respect to pilotage, the legislative framework under which pilotage is administered in this country, an outline and status of the ministerial review of outstanding pilotage issues that was tabled in Parliament in 1999, the scope and status of the review of the Canada Marine Act with respect to pilotage issues, and finally the proposed increase in U.S. Great Lakes pilotage interest, in which the committee members have expressed some interest.

A short deck has been prepared, which the members may wish to use to follow my presentation on these matters.

[Translation]

As most of you know, Marine Pilotage involves directing and controlling the movement of a vessel through coastal and inland waters and providing navigational and/or ship handling advice to the master of the vessel for this purpose. The Pilotage Act of 1972, as amended in 1998 by the Canada Marine Act, governs marine pilotage in Canada.

Under this act, four regional pilotage authorities were established as crown corporations—Atlantic (APA), Laurentian (LPA), Great Lakes (GLPA) and Pacific (PPA). The four Pilotage Authorities are mandated to provide safe and efficient pilotage services that respond to the particular requirements of local traffic, as well as to the varied geographic and climatic conditions of the waterways concerned.

The four authorities, among other functions, control the supply of pilots and the circumstances under which they must be engaged, negotiate the remuneration of pilots, determine the areas where pilotage is compulsory, and set tariffs for pilotage services. In Canada, there are over 400 licenced pilots to conduct over 55,000 assignments per year aboard Canadian and foreign- flag vessels. Eighty-five per cent of all assignments are for international or deep-sea vessels and only 15% of the service relates to domestic trade.

º (1610)

[English]

Organizationally, the four pilotage authorities report directly to the Minister of Transport. Transport Canada provides assistance to the authorities by acting as the primary point of liaison and coordination on national pilotage issues and practices.

We do this by assessing their operational policies and programs; providing policy advice as well as technical expertise on matters relating to marine pilotage and on the interpretation and application of the Pilotage Act and associated regulations; liaising with and providing information to industry, pilot associations, unions, and other government departments on pilotage matters; and aiding the authorities in the processing of their regulatory submissions.

º (1615)

[Translation]

Under the legislative framework of the Pilotage Act the authorities are responsible for the development of their respective regulations under the act, and, as I mentioned, we assist them in processing the regulations once they have been developed.

Generally, each pilotage authority has a tariff regulation that is adjusted on a regular basis and one or more operational regulations. Each of the authorities is responsible for setting tariffs that are fair and reasonable, and at a level that permits the authorities to operate on a self-sustaining financial basis.

Like all regulations, proposed tariff increases are published in the Canada Gazette to keep the public informed of any changes and to provide interested parties with the opportunity to express any objections. If any objection occurs, the matter is referred to the Canadian Transportation Agency (CTA), which can provide mediation services between the objecting party and the Pilotage Authority or—if mediation is not an option—conduct an investigation to determine if the proposed increase is fair and reasonable, and at a level that permits the authority to operate on a self-sustaining financial basis.

The Pilotage Act requires that all authorities be financially self-sufficient and forbids the federal government from providing them financial assistance to discharge any obligations or liabilities.

[English]

There have been many reviews of pilotage in the last 30 years, culminating in the “Ministerial Review of Outstanding Pilotage Issues” in 1999. With the coming into force of the pilotage section of the Canada Marine Act, the Minister of Transport was required to review five distinct issues with respect to the pilotage system. These were the pilotage certification process for masters and officers, training and licensing requirements for pilots, compulsory pilotage area designations, dispute resolution mechanisms, and the measures taken in respect of financial self-sufficiency and cost reduction.

In August of 1998 the Minister of Transport asked the Canadian Transportation Agency to conduct a review of Canada's pilotage system with the objective of developing recommendations that would promote an efficient, viable, and safe pilotage system to meet the present and future expectations and demands of all users. In August 1999, following considerable research and extensive consultation with stakeholders from all segments of the Canadian marine industry, the CTA pilotage review panel submitted its report to the minister, identifying some 21 recommendations for improvements to Canada's pilotage system.

In November of that same year, the minister tabled his report to Parliament, entitled the “Ministerial Review of Outstanding Pilotage Issues”, in which he responded to and for the most part accepted the panel's 21 recommendations. The “Ministerial Review of Outstanding Pilotage Issues” has been and continues to be a critical step forward in the modernization of the Canadian pilotage system.

The first recommendation of the review called for the development of a risk-based assessment process to assess any changes proposed for operational pilotage regulations. This led to the development of a pilotage risk management methodology, or PRMM, that is now employed by each authority. This methodology requires each pilotage authority to assess the risks associated with any amendments they propose to make to their regulations before they are processed; to consult key stakeholders and involve them in each step of the risk assessment, the proposed mitigation solutions, and the decision-making process; and finally, to document their risk assessment, consultation, and decision-making processes.

The pilotage authorities have addressed all of the recommendations under the review with the exception of four, which are still the object of ongoing review and discussion with user groups. These include recommendation 2, where the panel recommended that the Atlantic Pilotage Authority and the Laurentian Pilotage Authority be required to carry out in consultation with interested parties a risk-based assessment of vessel size limits and types of vessels subject to compulsory pilotage. Both authorities have completed their risk assessment studies in this regard and are now preparing the necessary implementation plans, which will be followed by changes to their respective regulations.

Recommendation 4 proposed that the Laurentian Pilotage Authority be required to carry out a risk-based assessment to determine whether and when requirements for double pilotage are valid, including the current requirement for double pilotage on all vessels during the winter, the requirement for double pilotage on tankers over 40,000 tonnes, and the requirement for double pilotage on passenger vessels over 100 metres in length. Following a survey on PRMM priorities with its stakeholders, the authority decided to postpone its review of double pilotage. It hopes to address this issue after other outstanding recommendations have been addressed.

Recommendation 14 suggested that the Laurentian Pilotage Authority be required to implement a modernized certification process based on a training and evaluation program adopted by the LPA certification steering committee. The authority has completed the training program and is working with industry and l'Institut maritime du Québec on the acquisition of a pilotage simulator to facilitate the training of individuals for a pilotage certificate in district 2, which is the area between Quebec City and Les Escoumins.

And finally, in recommendation 15 the panel recommended that the Great Lakes pilotage regulations be amended to enhance requirements for exempting vessels from compulsory pilotage in the Great Lakes Pilotage Authority region. The GLPA has completed its review and is now working with the Canadian Shipowners Association to come up with a workable solution to this recommendation, one that is acceptable to all parties.

º (1620)

[Translation]

Under section 144 of the Canada Marine Act, the minister was obliged to complete a review of the “provisions and operation” of the CMA during its fifth year after receiving royal assent. That review is ongoing and must be completed by June of this year.

As the Canada Marine Act changed portions of the Pilotage Act, there was some question as to how much the CMA review should concentrate on pilotage issues. Given that the CMA only affected certain portions of the Pilotage Act, and the fact that many of the issues addressed by the aforementioned ministerial review would require a certain amount of time before their effectiveness could be assessed, only two issues were raised in the discussion paper preceding the CMA consultations. These were the financial autonomy of the authorities and their governance and representation on their boards.

With respect to financial autonomy, many users feel that the requirements for self-sufficiency and the requirements for fair and reasonable tariffs may not be consistent. Their position is that the users of the pilotage service have little say and control over the expenses that authorities incur and yet they are required to cover all expenses by way of rate increases.

On governance, the authorities are directed by seven-person boards, consisting of a chairperson, two pilot representatives, two shipping industry representatives and two public interest representatives. The authorities believe this practice ensures an effective balance of the various interests and contributes to an effective governance model. Some users, on the other hand, would like to see a greater number of shipping industry representatives on the Pilotage Authority Boards, such as are on the St. Lawrence Seaway Management Corporation.

The CMA Review Panel has completed its consultations, and is now finalizing its report for the minister. I understand the review is on track, to be completed by June of this year, and we look forward to any recommendations on pilotage which may be contained therein.

[English]

Finally, I was told that the subcommittee might be interested in the recently proposed increases in U.S. pilotage rates. On January 23, 2003, the U.S. Coast Guard's director of Great Lakes pilotage published a notice of proposed rule making that would increase U.S. pilotage rates on the Great Lakes by an average of 26%. This proposal may come into force as early as April 30 of this year. However, the U.S. Coast Guard is still accepting comments and, we understand, will be holding a public hearing on April 14, 2003, in Washington, D.C.

While pilotage tariffs are primarily a domestic issue, we are concerned with not only the magnitude of the increase but with the impact it will have on all stakeholders and the competitiveness of the St. Lawrence Seaway system and the Great Lakes system as a transportation route. Transport Canada and the GLPA are monitoring the consultation between the U.S. Coast Guard and Canadian stakeholders.

In addition, we are liaising with Canadian embassy officials in Washington, the U.S. Coast Guard, and legal counsel here to determine the appropriateness and the format of any official representation by the Government of Canada. Given our obvious concern with this and future increases, the department is planning to open longer-term discussions with the U.S. Coast Guard regarding bilateral pilotage issues on the Great Lakes.

I hope this presentation has been informative, and we would be happy to answer any questions you might have.

Thank you.

The Chair: Thank you, Mr. McDonald, and I'm sure there are questions.

I'm going to start with Mr. Burton.

º (1625)

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

I'd like to go to Ms. Nymark, if I may. At the beginning of your presentation you mentioned that there's a 20-year agreement in place right now for the operation and management of the St. Lawrence Seaway system under the management corporation. My first question is, what happens after 20 years? Is there a grandfathering clause where it will continue automatically, or is it going to be reviewed in the meantime? What's the prognosis after 20 years?

Mrs. Christine Nymark: I'm going to ask Emile to answer that question, if you don't mind.

Mr. Emile di Sanza (Acting Director General, Marine Policy, Policy Group, Department of Transport): Thank you very much.

Actually, there's a provision in the agreement for two five-year business plans. However, after the first 10 years there has to be a re-evaluation of the conditions under which the business plans are approved. After 20 years, new agreements will have to be put in place, so we have another 15 years to determine what kinds of agreements would be necessary at that stage.

Mr. Andy Burton: Would you anticipate something similar then, or is it just too early to say? You're just into it a little way, so what's the feeling?

Mr. Emile di Sanza: I'd have to say at this stage that it's probably somewhat early to be able to determine under what conditions we would have an agreement in another 15 years.

Mr. Andy Burton: That leads into my second question. It is my understanding here that the government is responsible for any costs exceeding revenues, so is that basically a blank cheque? I realize you have to put a business plan in place, but from time to time business plans don't come to pass as expected. Is it basically a blank cheque? Is there no bottom line? How would you control that?

Mrs. Christine Nymark: We do this through the business planning process. Their business plan has to be approved by the Treasury Board.

Mr. Andy Burton: I understand that, but as things change, perhaps a business plan is no longer viable due to, for instance, war. Is there a bottom line or a control on the costs of the business plan?

Mrs. Christine Nymark: That's correct, there is. Every year it's reviewed.

Mr. Andy Burton: So it would be reviewed annually. And what would happen then if things were getting out of hand in terms of cost?

Mr. Emile di Sanza: The agreement provides for certain performance measures for the corporation. Now, there are incentives for the corporation to exceed those performance measures because it provides for rebates to users and that sort of thing. So there are checks and balances built into the agreement to ensure a degree of efficiency in the way the corporation carries out its activities.

In certain circumstances it could be envisaged that there may be deficit situations. There again, it would have to be scrutinized very carefully as to the causes of those deficits, and it would have to go through the same kind of rigorous examination that exists in other crown corporations, for example.

Mr. Andy Burton: I fully understand that, but I still don't see how it would be dealt with. If the corporation got itself into a situation where the deficit was just out of hand, would the government just step in and take it over again? Is there a process here? It seems to me that it's basically a blank cheque at this point in time.

Mr. Emile di Sanza: Well, there are two principal components to the business plan. The first is the operational costs, which I guess the corporation has some degree of management over. The other costs are capital costs associated with the maintenance of the seaway.

One would have to examine carefully the reasons for the deficit, what kinds of plans are in place, and what kinds of maintenance requirements there might be. One would have to evaluate the different components of the costs associated and the reasons for the potential deficit. Is it a question of traffic decreasing dramatically? Is it a question of management costs not being carefully controlled?

There is considerable due diligence being carried out even at this stage with regard to the seaway corporation in terms of what kinds of processes it has in place for their day-to-day operations and what kinds of processes it has in place for determining the nature of the maintenance and capital projects that are being applied. There are various mechanisms in play, first of all, to mitigate the potential for deficit and also to provide an early warning system should there be a reason to anticipate any such deficits.

º (1630)

Mrs. Christine Nymark: I think it's important to understand that in terms of asset renewal, the government--there is a capital committee, but it is composed of government members--has the authority to approve any asset renewal plans. There's no blank cheque here whatsoever; they have to get approval through us for any expenditures they might make that exceed their revenue base.

Mr. Andy Burton: I understand that. Given that there are some $2 billion in assets--I think you put a value of roughly $2 billion as a rule of thumb--a certain percentage per year needs to be spent on assets to maintain them and improve them, so obviously that is built into the budget. My concern is if the revenue is not there to meet these targets, are the assets going to suffer, or does government come in and spend that money on maintaining or upgrading those assets? That's not clear to me.

Mrs. Christine Nymark: I think the government would if they felt the integrity of the system were at risk. We would do that kind of an assessment before we would make any commitments, financially or otherwise, and obviously we would have to balance those risks and the needs of the seaway against other priorities across government. That's a very hypothetical question. Because they've done so well over the last five years, it's a bit difficult to answer. We do anticipate that they will need government appropriations, but we'll be looking very carefully at what they would use that for and what the real need is based on risk assessment.

Mr. Andy Burton: How much time do I have, Mr. Chairman?

The Chair: You have about three or four minutes.

Mr. Andy Burton: Thank you.

What I'm struggling with a little bit here is that at the beginning you said it was commercialized, but it's like being a little bit pregnant; you're commercialized, but we're still hanging onto you. That's not really clear to me, so can you explain that a little more?

Mrs. Christine Nymark: Do you want to take a crack at it, Emile?

I can assure you, you can never be a little bit pregnant.

Mr. Andy Burton: You understand my analogy.

Mr. Emile di Sanza: Ms. Nymark, in her comments, made reference to a capital committee, which has two representatives from Transport Canada, along with representatives of the corporation. The purpose of that capital committee is to evaluate the kinds of projects that should be applied to ensure the maintenance of those assets.

At the beginning of the five-year business plan, and they're in chunks of five years, there are a number of projects that are outlined, and there's a cost associated with those projects over a five-year period. The purpose of the capital committee is to evaluate the degree to which these projects come into play and whether there need to be any adjustments made within that broad envelope that is applied at the beginning.

As I mentioned earlier, a number of due diligence studies have been carried out to ensure that the systems and processes the corporation has in place determine as accurately as possible what the maintenance requirements are. Short of a major disaster, typically the corporation would be expected to stay within that envelope for the five-year period. Our experience in the first five years is that they had very much done so and had exceeded, in some instances, the performance measures associated with that. The report, the due diligence studies we've carried out, demonstrate that they do have the kinds of systems and processes in place to ensure that their work is carried out in a professional and efficient manner.

Mr. Andy Burton: I have one more question. There's a certain amount of involvement here between Canada and the U.S., with the U.S. Army Corps of Engineers and so on doing some studies and Canada doing some studies. At the end of the day, when certain things are determined as needing to be done, who pays for what and how do you break down the cost associated not only with studies but with projects, repairs, and so on?

Mrs. Christine Nymark: Again, it's very difficult to answer your question with any precision. We are negotiating with the Americans on this studies phase, which does not commit us to any particular expenditures or any changes in assets, and they are far from that as well. Each case would have to be assessed on its own merits. We are responsible for more of the locks than they are, and it would depend on whether the locks were in Canadian territory or whether they're U.S. locks, etc., so it's very difficult to answer that question with any precision.

It's hard to predict in fact which way things may proceed, but I think what's noteworthy is that while the corps was suggesting they wanted $20 million to do this study, they were given far less, and in the scope in terms of reference they had proposed in terms of expanding the seaway, etc., their wings were severely clipped by Congress in terms of the scope and scale, much more in line with what we had suggested to them was more realistic. I think we would have to see the results of each of those studies before we can answer your question more specifically.

º (1635)

Mr. Andy Burton: Security and safety are obviously big issues these days, and obviously there will be costs involved in that. How is that built into your five-year plan, your ten-year plan, and how do you anticipate dealing with these cross-border issues, which I think are going to become quite significant?

Mr. Gerry Frappier (Director General, Security and Emergency Preparedness, Safety and Security Group, Department of Transport): From a security perspective, we are doing some analysis right now. We're certainly discussing with the U.S. government, and at this point in time any new security requirements would be viewed as part of the cost of doing business, so the seaway would be looked upon to handle those for the things that have to do with their assets.

Mr. Andy Burton: Thank you.

[Translation]

The Chair: Mr. Gaudet.

Mr. Roger Gaudet (Berthier--Montcalm, BQ): Thank you, Mr. Chair. I am a new member of Parliament; I have only been here since December, and so I am not thoroughly informed about this file, but I would like to have the texts of presentations that have been made so that I can...

I have no questions for you at this time, as I have not apprised myself of the file, but I will do so. I will let someone else have my turn.

The Chair: Very well, sir. We have them here.

[English]

Mr. Comuzzi.

We will have copies made.

Mr. Joe Comuzzi (Thunder Bay—Superior North, Lib.): Thank you. Mr. Chairman. I thank our people for coming with us today. I think it was on short notice.

Let me get rid of some of the initial issues and I'll get down to some of the real questions I want to discuss today.

With respect to pilotage, we're not going to be able today to discuss all the issues that involve all the pilotage problems we've had over the years. I think--

Mr. Gerard McDonald: I would imagine not.

Mr. Joe Comuzzi: --yes, we would not have enough time, Mr. McDonald, am I correct?

Mr. Gerard McDonald: I would say that sounds like a good assessment.

Mr. Joe Comuzzi: And it's also correct that the costs of pilotage to the shippers who use the Great Lakes-St. Lawrence system--I'm talking now exclusively Great Lakes-St. Lawrence, because there are basically other rules on the Atlantic Ocean and the Pacific Ocean. The costs are borne by the shipper, and he's bound by the rules of Transport Canada with respect to pilotage and rules that are governed by the Laurentian Pilotage Authority and the Great Lakes Pilotage Authority. Is that correct?

Mr. Gerard McDonald: Yes, the pilotage authorities are responsible for the regulations.

Mr. Joe Comuzzi: And basically, under certain guidelines, they can raise their fees as they see fit, depending on their needs and so on, after some approvals.

Mr. Gerard McDonald: They can, after some approvals, and if there are objections, there is a mechanism to deal with objections through the Transportation Association of Canada.

Mr. Joe Comuzzi: Yes, and this is, as I'm told, a very heavy cost item with respect to all shippers who use the Great Lakes-St. Lawrence Seaway system, one of the serious cost items with respect to--

º (1640)

Mr. Gerard McDonald: I wouldn't dispute that pilotage costs are significant. The percentage of the operational cost is a matter of some debate; I've heard anywhere from 3% to 5%. I haven't looked at what the actual number is in many years, but it's not insignificant, no.

Mr. Joe Comuzzi: It's not insignificant.

Therefore, our pilotage system under the four, but the two exclusively that I'm talking about, is dealt with in the United States by the coast guard. Their supervisory board is the United States Coast Guard. Your supervisory board is you guys, Transport Canada.

Mr. Gerard McDonald: It's a bit of a different structure given that we have the crown corporations that administer pilotage here. Transport Canada plays a very limited oversight role with respect to pilotage. It is the authorities themselves who propose the regulations, and we help them move them through the system and we ensure that they follow a stipulated process, but it is the authorities themselves who have the responsibilities to make the regulations under which they operate.

Mr. Joe Comuzzi: That's right, and the authorities are basically structured for those who are interested in pilotage affairs.

Mr. Gerard McDonald: Yes, primarily, as I said, there's a board comprising seven members. You have a chairman, you have two pilots on the board, two shipping industry representatives on the board, and two public interest representatives on the board. All of those appointments are made by the Governor in Council on the recommendation of the Minister of Transport.

Mr. Joe Comuzzi: Right, and that's a fundamental difference in the operation between the United States pilotage and Canadian pilotage, where the United States pilotage is by and large governed by the United States Coast Guard and the Department of Defense. They can have no vested interest in their pilotage, where we may--I'm not accusing now--have a vested interest in the operation of the pilotage authorities in Canada by the very fact that--

Mr. Gerard McDonald: I really can't comment on the U.S. system. I'm not all that familiar with it.

Mr. Joe Comuzzi: No, I don't expect you to. But can a U.S. pilot go on a Canadian ship?

Mr. Gerard McDonald: Yes.

Mr. Joe Comuzzi: In Canadian waters?

Mr. Gerard McDonald: Yes, as a Canadian pilot can go on a U.S. ship.

Mr. Joe Comuzzi: So they're interchangeable.

Mr. Gerard McDonald: It's only in the Great Lakes that you have this arrangement. Because of the pilotage areas, ships go back and forth in certain areas in the Great Lakes and St. Lawrence Seaway. Ships are crossing between Canada and the U.S. many times obviously because the border runs down the middle of the system. So what they have is a system of tour de rôle for assigning pilots coming through the system. So depending on when you come into the system, you may get a Canadian pilot or a U.S. pilot.

Mr. Joe Comuzzi: So they are interchangeable.

Mr. Gerard McDonald: Yes.

Mr. Joe Comuzzi: They're travelling in the same amount of water, the same type of water.

Mr. Gerard McDonald: In certain areas, yes.

Mr. Joe Comuzzi: Then the pay scale may be different.

Mr. Gerard McDonald: The pay scale is different, yes.

Mr. Joe Comuzzi: Does it not make sense that for the pilotage system they have one administration for pilots and we have another?

Mr. Gerard McDonald: I'm sorry, I don't....

Mr. Joe Comuzzi: They have one administrative structure to control their pilotage, the coast guard--

Mr. Gerard McDonald: They have one. The rules are governed by the coast guard, but as I understand it, in the U.S. there are a number of pilotage organizations that operate under the coast guard, ranging from large corporations such as you might see on the St. Lawrence, the Laurentian Pilotage Authority, a large pilotage operation, to rather smaller ones.

Mr. Joe Comuzzi: But the substance of my question is that since they're interchangeable, pilots on the Canada side or the United States side are interchangeable, travel the same waterways, and there are differences and so on, why wouldn't we have just one pilotage authority in the interests of...? Let me tell you where I'm going. We're getting a lot of complaints from the shipowners on the.... Why wouldn't we try to reduce costs by having one pilotage authority?

Mr. Gerard McDonald: There's a question of whether or not costs would be reduced. We haven't looked at this issue in great detail.

Mr. Joe Comuzzi: You would think on the surface that if you got one structure instead of two, costs have to be substantially reduced.

Mr. Gerard McDonald: Certainly there may be some administrative cost savings, but anywhere from 85% to 90% of the cost of pilotage is the actual cost of the pilot wage. The other cost is to support the small administrations you have and the dispatcher systems.

Mr. Joe Comuzzi: I just use that, Mr. McDonald, as an example to get to my next question, which is a fundamental question.

Tell me what Transport Canada is doing with respect to the many issues that are involved with the ongoing problems we have in maritime shipping in Canada with the...I don't want to use the word “conflict”, but let's say different core values between the shippers and the pilotage. What is Transport Canada doing in a constructive way in order to try to reduce...and what institutions have you got in place trying to remedy this problem that's been in existence, Mr. Chairman, for I don't know how many years?

º (1645)

Mrs. Christine Nymark: If I might answer that question, we have under way a marine navigational services study, and that services--

Mr. Joe Comuzzi: Ms. Nymark, with the greatest respect, I don't think there's anything that has been studied more in Canada than the Great Lakes-Seaway nor the pilotage authorities.

Am I correct on that, Mr. Chairman?

The Chair: I'm not disagreeing with you.

Mr. Joe Comuzzi: So let's not talk about more studies; let's really talk about.... We're in a different era. What are we doing in a constructive way?

Mr. Gerard McDonald: As I mentioned in my presentation, there was the ministerial review, the latest review that has been undertaken, which made a number of recommendations with respect to pilotage. We are working on those recommendations and trying to move forward on them.

This was probably one of the biggest consultation exercises that was done on pilotage, short of the royal commission that was done in the late 1960s. So we feel that since that was based on an extensive consultation exercise and there were tangible recommendations coming out of it, these were the areas that we, as the government, should be pushing the pilotage authorities to move on. We are moving on them, and we are making some progress--perhaps slower progress in some areas than we would like.

Mr. Joe Comuzzi: Would you be kind enough, Mr. McDonald, to provide the committee, for circulation, those areas that are presently being discussed by Transport Canada and the pilotage authorities, all four pilotage authorities, with the ongoing review of the process? Then we may have to call you back. Would you mind doing that?

Mr. Gerard McDonald: Certainly.

Mr. Joe Comuzzi: Mr. Chairman, I have two other issues that I want to talk about: the actual operation of the seaway and then security.

The Chair: I will interrupt you, Mr. Comuzzi.

Mr. Burton, do you have more questions?

Mr. Andy Burton: I do, actually.

The Chair: All right. We'll pass over to Mr. Burton and then come back to you.

Mr. Joe Comuzzi: Okay.

The Chair: Go ahead, Mr. Burton.

Mr. Andy Burton: Thank you.

I want to go to the pilotage thing too, if I may. One thing that sort of raises a flag to me is that you said the authority proposes and makes the regulations, and I assume enacts the regulations too? Clarify for me the--

Mr. Gerard McDonald: The authority would propose the regulations. The regulations would be made by the Governor in Council.

Mr. Andy Burton: But then the pilots work for the authority, right?

º (1650)

Mr. Gerard McDonald: The pilots work for the authority.

Mr. Andy Burton: So you're making the regulations, or at least proposing the regulations, and presumably getting them passed by government. You're actually putting together the rules and regulations under which your own people would work, presuming the government approves that.

Mr. Gerard McDonald: That is correct. That is the structure under which it works.

Mr. Andy Burton: It seems a little odd to me. How do you justify that? Shouldn't it be more arm's length? I guess that's what I'm getting at.

You're making the rules, and then you get to play by them. That's pretty nice.

Mr. Gerard McDonald: I would just note that I didn't make the rules, but this is the way the administration of pilotage has been structured since the Pilotage Act. It was enacted in 1972.

It has been reviewed. There were changes proposed under the Canada Marine Act, and it was extensively debated whether these areas should be changed. The government at that time decided it did not wish to change the way in which it was administered, and we respect those decisions. We help administer the Pilotage Act as it's written.

Mr. Andy Burton: Mr. Chairman, I'm just making the point so that we, as a committee, can be aware. I think this is a bit of a flag. We possibly need to pursue this further and see how it unfolds down the road. I think we have an issue there.

My other question at this point in time is on the double pilotage aspects. You said that's sort of postponed right now. Well, I'm from the west coast. In fact, I've lived on the coast most of my life, in northern British Columbia. There's a situation there, and I don't know if this is similar on the Great Lakes or not, but they pick up pilots at what's called Triple Islands, outside of Prince Rupert, and it calls to two pilots. If they picked them up an hour further inshore, they'd need one pilot. This is adding tremendous cost to bringing ships into a port like Stewart, for instance, where I live. I'm telling you, if you need a pilot on the Portland Canal, you'd better get another job; you shouldn't be running the ship. She's like that. You can't get lost. Yet we have to have two pilots.

My point is, we're adding a lot of cost. That's only one example. I suspect this happens all over the place. I think we need to deal with it. How would you suggest we deal with it?

Mr. Gerard McDonald: With respect to the Triple Islands situation, it is--

Mr. Andy Burton: I don't want to specify just that one.

Mr. Gerard McDonald: Well, that's one that I am aware of, but it's a question of safety as to the most appropriate place to board the pilots, the safest place for them to board. It has been studied on numerous occasions by the authority to see whether there is some merit in moving the boarding station closer, and each time those studies reveal that it would decrease safety by moving it closer, because many of the difficult pilotage areas actually occur within that space between Triple Islands and...I forget the name of the closer station.

Mr. Andy Burton: Portland Inlet.

Mr. Gerard McDonald: Yes.

So that's one of the areas. We're not saying pilotage cannot change or where pilotage applies it cannot be changed. All we say is that as an organization, if we're going to change any of the rules, we should assess the risks, assess what the safety impacts are to changing these rules, and assure ourselves that the authorities have consulted all stakeholders when these changes are being proposed.

Mr. Andy Burton: With all due respect, I'd like to ask who would actually do this assessment of risk.

Mr. Gerard McDonald: It would be the pilotage authority.

Mr. Andy Burton: That's exactly my point. I think we have a real problem here. I'm not going to pursue it further right now, but I think we need to pursue this.

Thank you.

The Chair: I think from the reaction of Mr. Comuzzi, he's in total agreement.

Mr. Comuzzi.

Mr. Joe Comuzzi: Thank you.

Ms. Nymark, if I may, for the next couple of minutes until the next round I want to talk about the operation of the Great Lakes-St. Lawrence Seaway since it was commercialized. That was from October 1, 1998, until the present, or, as you say, the first five years.

It was previously run by Mr. Glendon Stewart and then it was commercialized after his tenure. I remember asking Mr. Christopher that question. Is that correct? It went directly from the management of Mr. Glendon Stewart.... It was only four or five years ago.

So it went right from there to this commercialization because we needed to get private enterprise involved in this. They were going to do a job.

How much have we increased the volume?

Mrs. Christine Nymark: The volume is down, as we've said. The volume doesn't reflect management as much as it probably reflects economic circumstances.

Mr. Joe Comuzzi: How much have we increased or decreased the volume, Ms. Nymark?

Mrs. Christine Nymark: At present we're at a cyclical low. I don't have the exact numbers.

Mr. Joe Comuzzi: Will you undertake to give the numbers to the committee?

Mrs. Christine Nymark: Absolutely.

Lately it's been in the range of 50 million metric tonnes a year, but that's down from a previous three-year better performance.

Mr. Joe Comuzzi: I'm not looking at one year.

Mrs. Christine Nymark: I understand.

Mr. Joe Comuzzi: I'm looking at a pattern. If I recall, we did this because we were unhappy with the volumes that were being processed through this very valuable asset, and we were assured in the presentations that business and the volumes would increase. Now I want to know what that increase is.

º (1655)

Mrs. Christine Nymark: I'm not sure I have the exact number, but for the first three years of commercialization volumes did go up.

Mr. Joe Comuzzi: Well, I'd like to know how much it was.

Mrs. Christine Nymark: I will make sure you get the accurate numbers.

Mr. Joe Comuzzi: During that period of time did we increase the rates?

Mrs. Christine Nymark: There were toll rebates during that period of time.

Mr. Joe Comuzzi: Explain that to me.

Mrs. Christine Nymark: If the seaway does well, because it's a not-for-profit corporation it provides tolling rebates to--

Mr. Joe Comuzzi: They go to the users, depending on the cargo they were carrying.

Mr. Emile di Sanza: In the agreement there are specific provisions for rate increases. There are also measures regarding under what conditions rebates are provided to the users.

Mr. Joe Comuzzi: It's a volume discount, is it not?

Mr. Emile di Sanza: That's correct.

Mrs. Christine Nymark: They've been able to give a 1.5% toll rebate in each of 2001 and 2002.

Mr. Joe Comuzzi: What was the net profit of the seaway--the bottom line?

Mrs. Christine Nymark: I'm afraid I don't have those numbers at hand.

Mr. Joe Comuzzi: Every time you have a profit you put it in the bottom line and use it for a year when you don't have a profit. It seems to me there was a substantial reserve in the seaway when it was taken over. We turned over the asset. We turned over the amount of money that was on the books as retained profits over the years.

If my memory serves me correctly, some things the seaway was operating, such as tunnels and bridges and all that kind of stuff, were really taking out of the profitability of the seaway. We turned those over to another corporation to administer. Is that correct?

Mrs. Christine Nymark: We turned over movable capital assets and tangible assets, working capital related to the operation of the seaway. You're quite correct.

Mr. Joe Comuzzi: Okay. The three things I want to find out as we come up to the first five years as an arm's length, not-for-profit corporation are: Did we retain all of those assets? What did we do with respect to maintenance on those assets? And did we operate at a profit?

Mrs. Christine Nymark: Legally, you can't. It's not for profit, which is why, on a 2% rate increase, we gave a 1.5% toll rebate.

Mr. Joe Comuzzi: That's why it goes on the bottom line.

But that doesn't answer the question I asked at the outset. Regardless of whether you gave a rebate, did we raise the tolls during that period of time?

Mrs. Christine Nymark: Yes, we did.

Mr. Emile di Sanza: There were specific rate increases.

Mr. Joe Comuzzi: Could you give me the information? It doesn't have to be today. I want to look at it.

Mr. Emile di Sanza: Yes, we'll provide the data.

Mr. Joe Comuzzi: Can you tell me what we raised the toll to? If we raised it 3% and we gave 1.5%, then we raised the toll 1.5%.

Mrs. Christine Nymark: We'll give you the basic numbers plus the toll rebate and therefore the net increase.

Mr. Joe Comuzzi: I want to see how it has operated over five years under commercialization.

The Chair: Do you mind if we take a break and move to Mr. Burton?

Mr. Joe Comuzzi: No, no, go ahead. I'll come back to another issue. But I really want those numbers. I want to start to compare what we've done over the five years.

I'll just finish, Mr. Chairman. You have to give me how much money we spent in maintenance also. Maintenance was always a huge problem with the seaway. Tell me what we're spending on maintenance. I have the other statements that show what we were spending until you folks--or whatever the corporation's name is--took it over.

Thank you.

The Chair: For clarification, I wanted to understand your point about a 2% rate increase and a 1.5% rebate. When you spoke about these percentages, were you saying you gave back 75% of the rate increase? Okay. Thank you.

The chair recognizes Mr. Burton.

Mr. Andy Burton: To continue with this, just to clarify it further, you had some revenue targets, which you exceeded, so that allowed for the rebate.

Mrs. Christine Nymark: That is correct.

Mr. Andy Burton: Okay, thank you.

When you first made your presentation, Ms. Nymark, you said the volume was down currently, compared to, say, the first three years, and you said the U.S. and Canada are in a mild economic recession.

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Mrs. Christine Nymark: I didn't say they are; I said they were.

Mr. Andy Burton: I thought you said “are”. I'm sorry.

Mrs. Christine Nymark: Well, the U.S. may be in a recession, but I don't think we are.

Mr. Andy Burton: I'm not trying to be political here, but we are being told fairly consistently that we're not. And yet if we're not, why is it affecting traffic? How much of the traffic downturn can you blame on the U.S. recession, in terms of percentages?

Mrs. Christine Nymark: I would agree that Canada is not in a recession. The U.S. demand for steel and grain, for example, has gone way down, and it has affected traffic.

Mr. Andy Burton: Is that a major part of your traffic?

Mrs. Christine Nymark: It is very significant and it has affected more than just the seaway. It has affected the Port of Churchill and other ports as well.

Mr. Andy Burton: Are there any other effects on container traffic or ships, that type of thing?

Mrs. Christine Nymark: It doesn't work that way. It's really on bulk shipments. It really isn't the container stuff that's the most significant at this point.

Mr. Andy Burton: What percentage of traffic overall has been affected? I'm not very familiar with the seaway, obviously. I'm from the west coast. I'm looking forward to learning more. And this is our first session, actually, so we're all a bit green--at least I am.

What percentage of the traffic on the seaway would be bulk commodities, as compared to containerized or general freight?

Mrs. Christine Nymark: The vast majority is bulk. Containers are not as significant. That's obviously going to change over time, but it has changed very, very slowly. Bulk is very significant.

Mr. Andy Burton: So on the west coast, container traffic is expanding almost exponentially.

Mrs. Christine Nymark: It's the opposite on the west coast. That's correct.

Mr. Andy Burton: But it's not that way on the seaway.

Mr. Emile di Sanza: No, the containers come into the Port of Montreal.

Mrs. Christine Nymark: And Halifax--

Mr. Andy Burton: And they're distributed from there?

Mr. Emile di Sanza: That's right.

Mrs. Christine Nymark: But what goes down the seaway into the Great Lakes, or the other way, is bulk.

Mr. Andy Burton: Okay. Do you see this changing over time?

Mr. Emile di Sanza: There have been some discussions, some studies of time, to investigate whether there could be some potential to develop the container market along the seaway. That's one of the things that may be considered as part of what was referred to earlier as short-sea shipping--look at some of the market opportunities there. There may be some scope, but it has to be evaluated, possibly some auto parts, some of that supply chain logistics. And southern Ontario might be suitable for containers, yes.

Mr. Andy Burton: The short-sea shipping thing is of interest. I'm sure you're aware that Deltaport in Vancouver, for instance, has this huge problem with traffic congestion, with trying to get this stuff out of the port. I can certainly see down the road that there is some major benefit there if we can move these things around on barges or whatever.

You were talking about integration and the fact that the European Union already had a policy of integration on the short-sea shipping and these types of things. How would you see that happening with the U.S.-Canada border situation in the short term and then in the longer term? Are we going to be able to work this through? If so, how?

Mrs. Christine Nymark: I think so. We have a history of very positive cooperation in the Great Lakes and the seaway, and with the International Joint Commission. I think in the long run there's no question we should be able to work this through.

In the short term I think we've seen over the last couple of weeks very little impact on the security side. So I'm convinced that if things have stayed as effectively as they've stayed over this past week, there's no reason to assume we shouldn't be able to do something here in the long term.

Mr. Andy Burton: I understand with the Homeland Security Act, since October 1 there has to be 48 hours' notice, or something like that.

Mrs. Christine Nymark: It's 24 hours' notice for the marine...and we've had that in play for quite some time now.

Mr. Andy Burton: You don't see that as being an issue?

Mrs. Christine Nymark: No.

Mr. Andy Burton: Okay. That's fine. Thank you.

Thank you, Mr. Chair.

The Chair: Mr. Comuzzi.

Mr. Joe Comuzzi: Thank you again, Mr. Chairman.

Just to get back to a couple of issues on the administration of the seaway.... No, we don't have time. We have to vote fairly soon on a critical issue that we would like to miss but we can't.

Let me talk about security. That's really what I want to talk about today, and that's what we're going to talk about on Sunday and Monday in Washington, I think. Tell me what we've done.

Mr. Frappier, you think you're getting away scot-free. Now is your time.

Tell me what we've done since 9/11 on the analysis of the cargo that goes up and down the Great Lakes-St. Lawrence Seaway. We get back to the 3.5 million containers you say we ship through all aspects of marine transportation. How many of those containers come in as far as Montreal and then find their way to Chicago on the CNR or find their way to other parts of Canada or the United States? How many of those containers do we use in our transportation facilities in Canada to transship to the United States?

We are a transshipment point, right? I'd like to know how many containers of that 3.5 million we use. I don't expect you to answer that today, but I want that answer. Can you do that now? Are they available?

Mr. Gerry Frappier: I don't have the numbers on the number of containers.

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Mrs. Christine Nymark: Half of the containers get transshipped through to the United States.

Mr. Joe Comuzzi: So they come in through Halifax or Montreal, they get on a train or a truck, and they find their way into the United States. That's 1.75 million a year. Part of my security issue--

Mrs. Christine Nymark: No, no.

Mr. Emile di Sanza: Excuse me, half of those go to Montreal or Halifax. Probably about 40% of those get transshipped beyond that.

Mr. Joe Comuzzi: So 40% of 50%?

Mr. Emile di Sanza: Roughly speaking here. We can get you some precise numbers. Out of Montreal there's about 40%.

Mr. Joe Comuzzi: So we have 1.2 million containers a year that are transshipped through Canada into the United States.

Mr. Emile di Sanza: That are in transit, yes, or transshipped to the U.S.... There are some in Vancouver, but not to the same extent as you would find coming out of Montreal.

Mr. Joe Comuzzi: I think that's an important figure. We'll do Vancouver, with the greatest respect, Mr. Chairman, in another issue.

I guess we've been trying to establish the amount of containers that we bring in from other countries, usually Antwerp and the Soviet bloc, and the ones that come into Saint John, Halifax, or Montreal, and then are transshipped into the United States.

We'd appreciate it if we knew that, Mr. Chairman, before the weekend.

Mrs. Christine Nymark: Yes, we can get you those numbers, of course.

Mr. Joe Comuzzi: We want to find out, Mr. Frappier, up to this point in time, how we establish and with what certainty what is in those containers that we allow to use our transportation modes in Canada before we offer them to other countries to accept.

Do you understand what I'm asking?

Mr. Gerry Frappier: Yes, I think I understand. Let me paraphrase the question back to you, and if I didn't get it straight, you can stop me.

I think what you're really talking about is the security of the cargo and the chain of events it goes through, leading to wherever they might come from internationally to the end position, which, of particular concern, might be the United States.

We've been doing an awful lot of work with both the United States and the international community in a wider sense to try to put in place a series of security measures associated with shipping, one of which has to do with the inspection that occurs at the border, which is a Canada Customs and Revenue Agency function. There's a certain amount that will get inspected as they arrive. There's an awful lot more work that's going on to set up known shippers, and Operation Safe Commerce is one example of that.

We're really trying to increase the amount of intelligence we have on what's on the containers so that we can better target which containers we do want to isolate or do a more in-depth inspection of. And it has to be done globally, because these containers go all over the place, all the time.

We adjust the amount of information that has to be coming in to the Government of Canada before they even enter our waters or our ports. So that's where most of the emphasis has been going on. Then, with that additional information, there is a cooperation between ourselves and the U.S. government, and we look at these questions. If this is what they say is in the containers, if this is where they've been to, if this is what we know about that port, then are these the containers we want to look at or not?

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Mr. Joe Comuzzi: I'm going to throw out a figure. Other than looking at the manifest, do we really know what's in the container? Let me give you the figure of 2%. Do we know anything about what's actually in a container, in excess of that 2%, by the means we have available or have implemented since September 11?

Mr. Gerry Frappier: Well, it depends on what you mean by what we're doing now. If what you're saying is that we physically--

Mr. Joe Comuzzi: Do we know with certainty?

Mr. Gerry Frappier: I guess to know with certainty would imply that we, the government, have put our eyes on what's inside the containers.I think there's a lot more to this that has to do with things like trust and shippers.

Mr. Joe Comuzzi: Let's not say we put our eyes as a government. We have different ways of putting our eyes. We have X-rays; we have different technology to put our eyes on this thing. When I'm talking about that, that's what I want to know. Tell me about the 2%.

Mr. Gerry Frappier: Do you want to talk about the 2% or the 98%?

Mr. Joe Comuzzi: Tell me, is 2% a fair number of what we know?

Mr. Gerry Frappier: Customs uses 2% as the number that is inspected in detail, with a further 1%, which brings it up to about 3%, that are what they call “tailgate inspections”. You'd really have to talk to customs to get more detail on that.

Mr. Joe Comuzzi: So 97% come in and all they have is a manifest.

Mr. Gerry Frappier: Well, it has a history, though.

Mr. Joe Comuzzi: It has a history, but it has a manifest.

Mr. Gerry Frappier: I think it's important that it does have a history on where it has come from, which ports it has been to, who has shipped it, who has packed it, and how often do those sorts of things come back and forth. Those are important from an intelligence perspective, but we are looking at mechanisms by which we would be able to do a greater amount of security.

Mr. Joe Comuzzi: Thank you.

Can you get this information for us on what we do with cargo coming into Canada as transshipments? I think it's important for us to have it. We've talked to the U.S. Coast Guard, which is rightly very concerned about what's inside the container. You have talked to the U.S. Coast Guard. So could I get the information on what we're doing and what we propose to do with respect to the security on what's inside those containers?

In the little bit of time I have available, I'm interested in all of the infrastructure on the waterways, particularly the infrastructure of our bridges and canals, and what we've done to protect our other marine transportation in Canada since the terrorist acts of 9/11, which have really restructured the way we are doing things.

Tell me what we have done up to now, in a concrete way, to protect the Ambassador Bridge and the Blue Water Bridge, or the fundamental marine transportation structures in this country. What involvement do you have with the Canadian Coast Guard, and have they been of assistance? What do you plan to do?

Mr. Gerry Frappier: I'd like to answer that in a couple of ways, first all with respect to coordination, which you brought up. I think it's very important.

As you all know, there are lots of departments with a role to play in securing something like the Ambassador Bridge, which is also a border crossing. So the government has set up an interdepartmental marine security working group, whose membership includes the coast guard, customs, immigration, and the OCIPEP, the Office of Critical Infrastructure Protection and Emergency Preparedness. There is a total of about 17 departments and agencies who are members of that working group. It's a very active working group. It also has an operational component, which is staying in touch with what is occurring, both from an intelligence and day-to-day operations perspective.

Mr. Joe Comuzzi: I understand. It's under Mr. Manley.

Tell me what Transport Canada is doing to protect our marine assets, which is our fundamental responsibility.

Mr. Gerry Frappier: That's right.

The coordination is important because you want to do it efficiently, so there are certain things we can get the coast guard to do and there are certain things we can get customs to do. Transport Canada leads that interdepartmental working group, so it is the quarterback, if you like, to make sure there is overall security.

With respect to infrastructure, you talked about bridges and canals and things like that—

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Mr. Joe Comuzzi: And the channels, the locks—

Mr. Gerry Frappier: Yes.

Again, a big part of it starts with increasing the amount of attention put onto things as they arrive into North America. Between ourselves and the U.S. government, we are definitely working to try to push out the security line, if you like, as far as we can. The issue comes back to knowing what is coming in and up the Great Lakes system. So we are doing more inspections and analysis of things before they enter the Great Lakes system at all. This is a first and important piece.

Mr. Joe Comuzzi: Are these inspections of containers or bulk cargo?

Mr. Gerry Frappier: It's bulk, but it is mostly concentrated on containers.

Mr. Joe Comuzzi: I thought we just went through this, that we're only doing 2% or 3% of them.

Mr. Gerry Frappier: Yes, 2% to 3% of them are being inspected, but again, we don't want to minimize the role of making sure it's the right 2% or 3% that's inspected.

Mr. Joe Comuzzi: That's not in dispute, but 2% or 3% are inspected and 97% are not inspected.

Mr. Gerry Frappier: Right.

Then with respect to bridges, customs is inspecting some things before they get onto bridges and whatnot, and as these things leave Canada. There is a certain amount of this.

A lot of work is being done with OCIPEP to develop critical infrastructure, both to identify and to take a look at the vulnerability of it. Transport Canada is undertaking a vulnerability assessment right now with respect to the locks of the St. Lawrence, to see where there are perhaps additional things that should be done.

Mr. Joe Comuzzi: When did that begin?

Mr. Gerry Frappier: There's a request for proposal on the street right now, so it is an item that's going to be contracted out. The contract is expected to be awarded probably in early April. I forget whether it will be in the next week or the week after that.

Mr. Joe Comuzzi: What is the request for proposal for?

Mr. Gerry Frappier: It's to develop assessment methodologies for several areas within the marine system, particularly those associated with the locks of the St. Lawrence Seaway, which comes to your question. So this will give us a better—

Mr. Joe Comuzzi: Offhand, would you know if the Americans have done this already?

Mr. Gerry Frappier: They have not done it in the way we're talking about.

Mr. Joe Comuzzi: Okay, thank you.

The Chair: I have just one question of clarification.

Mr. McDonald, you referred to a ministerial review. What is the difference between a departmental review and a ministerial review? Alternatively, what is the involvement of the minister in a ministerial review? Is the minister present?

Mr. Gerard McDonald: No, the minister himself was not present. The way the act was written, it was the minister who was charged with undertaking the review. The minister decided that the way he would like to undertake the review was to use the Canadian Transportation Agency to do it, which he saw as an impartial third party in this debate. He asked them to do so. So it wasn't the department that undertook the review but the CTA, which made recommendations to the minister, who then responded.

The Chair: During this case then, what is the difference in your opinion between a ministerial review and a departmental review?

Mr. Gerard McDonald: In my opinion?

The Chair: Yes.

Mr. Gerard McDonald: A ministerial review is one that is directed by the minister, as opposed to the minister asking his departmental officials to undertake the review and to report to him.

The Chair: Thank you.

I thank you for this time here today. We apologize for starting late and for quitting early—which is an ideal life.

This is a very interesting and a good beginning for us. Thank you for coming.

We are adjourned.