FOPO Committee Report

Section 47 gives the Minister the authority to fix fees for the provision of services under the Act. At the time the Standing Committee on Fisheries and Oceans was studying Bill C-98 in the fall of 1995, this Part of the Act was controversial with stakeholders in Canada’s commercial shipping industry who raised concerns about the delivery of Coast Guard services and about potential economic impacts of fees on the commercial shipping industry.

Many of these concerns were raised again following the announcement in January 1996 by the then-Commissioner of the Coast Guard, John F. Thomas, of the basic principles of a marine services fee. At the time, it was anticipated that the fee would be phased in over a four-year period starting with a revenue target of $20 million, commencing 1 April 1996. Initially the fee was to be applied to aids to navigation. It was also anticipated that fees for icebreaking would be introduced in time for the 1996-1997 season.

During the spring of 1996, the Standing Committee on Fisheries and Oceans conducted a study on the Marine Services Fees in response to the concerns of the commercial shipping sector. On 22 April 1996, the Committee made ten recommendations to the Minister, which were largely agreed to by the Department. These included the recommendations that the Coast Guard be authorized to recover $20 million through fees for aids to navigation commencing 1 June 1996, and that the Coast Guard undertake to commission an independent and thorough socio-economic impact analysis of the cumulative effects of all marine-related fees and initiatives on the commercial shipping industry and dependent industries and regions. Fisheries and Oceans Minister of the day, Fred Mifflin, approved fees for aids to navigation on 9 May 1996, to become effective June 1 that year. The fee was set to recover $20 million in 1996-1997 toward the costs of aids to navigation services provided by the Canadian Coast Guard.

In May 1998, the Minister of Fisheries and Oceans announced a number of initiatives related to Marine Services Fees:

• The federal government would place a three-year cap on fees for marine services provided by the Canadian Coast Guard.
• Starting in the 1998-1999 season, the government would implement a fee for icebreaking services to commercial shipping. The fee was intended to recover $13.3 million out of a total annual cost of $76 million.
• Treasury Board Secretariat would undertake a cumulative economic impact study with the appropriate departments within the next three years, to assess the impact of government cost recovery initiatives on the commercial shipping sector.

In the fall of 1998, representatives of the commercial shipping industry again appeared before the Standing Committee on Fisheries and Oceans to make the case that the Icebreaking Fee had the potential to negatively affect the competitiveness of the Canadian shipping industry with respect to U.S. carriers and other modes of transportation. As a result, the Committee recommended to the Minister that the Icebreaking Fee be set at 50% of the Coast Guard’s proposal, to be implemented 21 December 1998 for a period of one year in order to provide time for the industry and the Coast Guard to work together to find a more acceptable long-term solution.

Then Minister of Fisheries and Oceans, David Anderson, accepted the Committee’s recommendation and, on 4 December 1998, the Department announced an Icebreaking Services Fee revised to 50% of the original proposal beginning 21 December 1998. The fee would remain capped for three years; the impact of the Icebreaking Services Fee would be reviewed between the third and the fourth year; and, in the meantime, the Coast Guard would work with the industry to address costs and service delivery issues.

During the current review of the Oceans Act, the St. Lawrence Economic Development Council (SODES) and the Chamber of Maritime Commerce (CMC) appeared before the Committee to make further representations on the subject of fees for Coast Guard services.

The CMC noted that when the Canadian marine industry was first made aware of the government’s intention to impose user fees for Coast Guard services, marine shippers and carriers asked for two basic provisions to precede the implementation of fees: a thorough assessment of the level of services required by the commercial shipping industry in order to trade safely and efficiently in Canadian waters; and, that the Coast Guard adjust its service levels and therefore its costs assessed to commercial shipping to the service needs of the industry.

The CMC recalled the 1996 review of the Marine Services Fee by the Standing Committee on Fisheries and Oceans in which it made recommendations to the Minister. One of those recommendations was that the Committee should address the issues of Coast Guard services as well as future marine services fees on a regular basis. The CMC endorsed that recommendation at the time and reaffirmed its endorsement during the current review of the Oceans Act.

Supported by the CMC, SODES recommended to the Committee that, before lifting the freeze on service fees or making any other decision relating to the Coast Guard’s cost recovery process, the Minister should:

• allow sufficient time to complete the analysis and review of the structure of the Coast Guard’s costs and services.
• wait until such time as the forums (the Marine Advisory Board and the regional advisory boards) have been able to make specific recommendations with respect to changes that need to be made in order to achieve real gains in efficiency.
• reassess the Coast Guard’s budgetary requirements on the basis of gains made as a result of rationalization efforts currently under way.
• take into account the results of the economic impact study being conducted by Treasury Board.
• ensure that the results of the projects and the recommendations made by the various consultative bodies be reviewed in depth by the Standing Committee on Fisheries and Oceans and that the Committee have sufficient time to make recommendations to the Minister on any measures required, after consultation with the Coast Guard and representatives of the industry.

Phase I of the Treasury Board Study, which includes a review of the possible methodologies, was completed in June 2001. The Treasury Board Secretariat plans to complete consultations with industry by the end of October 2001 in order to obtain agreement on the methodology to be used in Phase II, the study proper. Completion of Phase II is now anticipated by February 2002.

The Committee agrees with the principles recommended by SODES and the CMC and therefore recommends:

Although a separate category has been created for ferries in the Marine Service Fee Schedule, they are still treated as commercial ships. According to SODES, ferry operators believe that this designation does not properly acknowledge their status as a public service. Ferries are required to provide their services to the public under predetermined conditions, generally under agreements with governments, and ferry operators have little flexibility to increase charges or to readjust their schedules. Moreover, fares are generally subject to stringent controls. Most other commercial shippers do not have to contend with these constraints. As ferries can be considered essential public services in many parts of the country, operators believe that they should be categorized as "government ships" for the purpose of Coast Guard service fees, thus exempting ferries from the Marine Services Fee and the Icebreaking Services Fee.

The Committee recommends:

Section 41 of the Oceans Act establishes the powers and duties of the Minister with respect to Coast Guard services. Paragraph 41(1)(a) provides for the safe, economical and efficient movement of ships in Canadian waters through the provision of marine services including aids to navigation, marine communications, ice breaking, and channel maintenance (Subparagraphs 41(1)(a)(i) to (iv)).

SODES pointed out that the St. Lawrence has multiple users and therefore, unlike the well-defined area of a port, cannot be transferred to a single group of users. In SODES’ view, the services required by users of the St. Lawrence take the form of a public good. SODES recommended amending subsection 41(1) of the Oceans Act to provide that the federal government may not abandon or transfer the marine services described in the Act without the consent of the users of these services.

Subsection 41(2) requires the Minister to ensure that the services listed under subparagraphs 41(1)(a)(i) to (iv) are provided in a cost-effective manner. The Chamber of Maritime Commerce recommended to the Committee:

• Adding wording to subsection 41(2) to include that the level of services provided by the Coast Guard will be established only after consultation with users of the services.
• Amending subsection 41(2) to indicate that service delivery can be delivered by government or the private sector in order to encourage the Coast Guard to consider any and all alternatives to the current system of delivering the services outlined in this section.

The Committee agrees with the former of these recommendations and therefore recommends:

The Chamber of Maritime Commerce acknowledged that consultation is now well established at the Coast Guard; nevertheless, they recommended that it be entrenched in subsection 41(2).

Section 42 outlines the functions the Minister may perform with respect to marine sciences. The Sierra Club of B.C. pointed out that this section neglects research studies related to inland areas that affect ocean and marine activities.

The Area 19 Snow Crab Fishermen’s Association complained that, under their co-management agreement with DFO, they pay a great deal for various services as well as an extensive management fee to DFO. In addition, they say they also pay a licence fee, which is supposed to be a management fee. In their view, this puts them in the position of paying twice as much as the fisherman who does not have a co-management agreement.

The Association questioned whether fee-setting should not be subject to some exclusionary provisions such that the fees for a facility which is provided for under the terms of paragraph 33(1)(b) "agreement" would be set by parties to the agreement. The Association recommended clarifying section 47, which authorizes the Minister to fix fees for services or the use of facilities, so that there would be no "apprehension of a double tax" by parties seeking to enter into agreements.

The Area 19 Snow Crab Fishermen’s Association had similar concerns with section 48, which provides the Minister with the authority to fix fees for "products, rights and privileges." The Association’s understanding was that paragraph 33(1)(b) "agreements" may enable the private sector to provide goods and services, which previously had been provided by "government largesse." The Association pointed out that fishermen must now often pay for products and services such as dock-side monitoring, data collection, scientific research and some enforcement that previously had been provided by government.

The Association argued that this "double fee structure" was prejudicial and could discourage others from entering into co-management agreements. The Association also recalled that it had raised the same issue in 1995 when Bill C-98 was before the Standing Committee on Fisheries and Oceans.

It is the understanding of the Committee, however, that fisheries co-management agreements are made under the authority of the Fisheries Act, not paragraph 33(1)(b) of the Oceans Act. It is also the understanding of the Committee that commercial fishing licence fees are paid for the privilege of accessing a public fisheries resource and are, in effect, a rental paid on the resource, not management fees.

Subsection 50(2) of the Act provides for a maximum period of 30 days from the time the Minister fixes a fee under the Act until publishing the fee in the Canada Gazette. Both SODES and the Chamber of Maritime Commerce recommended amending subsection 50(2) to increase the 30-day period to 90 days in order to allow the industry, in partnership with the government, to make an appropriate study of its potential impact of changes to fees.

This recommendation appears to be based on a misunderstanding. The 30-day period specified in subsection 50(2) is provided for public notification, not for public comment. In fact, the fee takes effect as soon as the Minister fixes it. Subsection 50(2) requires the Minister to publish the fee in the Canada Gazette within 30 days of fixing the fee.

Although subsection 50(1) requires the Minister to consult with bodies or persons the Minister deems to be interested, it does not specify a consultation period. However, the Committee agrees with the principle that the Minister should engage in a meaningful period of consultation prior to any revisions to fees for services and that the Minister should report on these consultations to the Standing Committee on Fisheries and Oceans and to the stakeholders.