SMAR Committee Meeting

37th PARLIAMENT, 2nd SESSION

Subcommittee on Marine Transportation of the Standing Committee on Transport

EVIDENCE

CONTENTS

Tuesday, May 6, 2003

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1540

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

Mr. Don Morrison (President, Canadian Shipowners Association)

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1545

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1550

The Chair

Mr. Don Morrison

The Chair

Mr. Jim Gouk (Kootenay—Boundary—Okanagan, Canadian Alliance)

Capt Réjean Lanteigne (Vice-President, Canadian Shipowners Association)

Mr. Jim Gouk

Capt Réjean Lanteigne

Mr. Jim Gouk

Capt Réjean Lanteigne

Mr. Jim Gouk

Capt Réjean Lanteigne

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1555

Mr. Jim Gouk

Capt Réjean Lanteigne

Mr. Jim Gouk

Capt Réjean Lanteigne

Mr. Jim Gouk

Capt Réjean Lanteigne

Mr. Jim Gouk

The Chair

Mrs. Bev Desjarlais (Churchill, NDP)

Mr. Don Morrison

Mrs. Bev Desjarlais

Mr. Don Morrison

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1600

Mrs. Bev Desjarlais

Mr. Don Morrison

Mrs. Bev Desjarlais

Mr. Don Morrison

Capt Réjean Lanteigne

Mrs. Bev Desjarlais

Capt Réjean Lanteigne

The Chair

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

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Mr. Don Morrison

Mr. Joe Comuzzi

Mr. Don Morrison

Mr. Joe Comuzzi

Mr. Don Morrison

Mr. Joe Comuzzi

Mr. Don Morrison

Mr. Joe Comuzzi

Mr. Don Morrison

Mr. Joe Comuzzi

Mr. Don Morrison

Mr. Joe Comuzzi

Mr. Don Morrison

Mr. Joe Comuzzi

Mr. Don Morrison

Mr. Joe Comuzzi

Mr. Don Morrison

Capt Réjean Lanteigne

Mr. Joe Comuzzi

Capt Réjean Lanteigne

Mr. Joe Comuzzi

Capt Réjean Lanteigne

Mr. Joe Comuzzi

Capt Réjean Lanteigne

Mr. Joe Comuzzi

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1610

Mr. Don Morrison

Mr. Joe Comuzzi

Mr. Don Morrison

Mr. Joe Comuzzi

Mr. Don Morrison

Mr. Joe Comuzzi

Mr. Don Morrison

Mr. Joe Comuzzi

Mr. Don Morrison

Mr. Joe Comuzzi

Mr. Don Morrison

Mr. Joe Comuzzi

Mr. Don Morrison

Mr. Joe Comuzzi

Mr. Don Morrison

Mr. Joe Comuzzi

Mr. Don Morrison

Mr. Joe Comuzzi

The Chair

Mr. Stan Keyes (Hamilton West, Lib.)

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The Chair

Mr. Stan Keyes

The Chair

Mrs. Bev Desjarlais

The Chair

Mr. Jim Gouk

The Chair

Mrs. Bev Desjarlais

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1620

Mr. Don Morrison

Mrs. Bev Desjarlais

Mr. Don Morrison

Mrs. Bev Desjarlais

Mr. Don Morrison

Mrs. Bev Desjarlais

Mr. Don Morrison

Capt Réjean Lanteigne

Mrs. Bev Desjarlais

Capt Réjean Lanteigne

Mrs. Bev Desjarlais

Mr. Don Morrison

Mrs. Bev Desjarlais

Mr. Don Morrison

Mrs. Bev Desjarlais

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1625

Mr. Don Morrison

Mrs. Bev Desjarlais

Mr. Don Morrison

Capt Réjean Lanteigne

Mrs. Bev Desjarlais

Capt Réjean Lanteigne

Mr. Don Morrison

Mrs. Bev Desjarlais

Mr. Don Morrison

Mrs. Bev Desjarlais

Mr. Don Morrison

Mrs. Bev Desjarlais

The Chair

Mr. Joe Comuzzi

The Chair

Mr. Joe Comuzzi

The Chair

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1630

Mr. Joe Comuzzi

Mr. Don Morrison

The Chair

Mr. Don Morrison

The Chair

Mr. Joe Comuzzi

The Chair

Mr. Don Morrison

The Chair

Mr. Don Morrison

Mrs. Bev Desjarlais

The Chair

Mrs. Bev Desjarlais

The Chair

Mrs. Bev Desjarlais

The Chair

Mr. Don Morrison

The Chair

Mrs. Bev Desjarlais

Mr. Don Morrison

Mrs. Bev Desjarlais

Capt Réjean Lanteigne

The Chair

Capt Réjean Lanteigne

The Chair

Mr. Joe Comuzzi

The Chair

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CANADA

Subcommittee on Marine Transportation of the Standing Committee on Transport

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NUMBER 003

l

2nd SESSION

l

37th PARLIAMENT

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EVIDENCE

Tuesday, May 6, 2003

[Recorded by Electronic Apparatus]

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[English]

    The Chair (Mr. Roger Gallaway (Sarnia—Lambton, Lib.)): We are resuming our study of the St. Lawrence Seaway system and the Great Lakes.

    I know, Mr. Morrison and Captain, you're quite familiar with the way these committees work. Mr. Morrison, you have about ten minutes, and then there will be questions.

    Mr. Don Morrison (President, Canadian Shipowners Association): Thank you very much, Mr. Chairman. Good afternoon.

    I once again thank you for the opportunity to appear before you to discuss some issues of major importance to this most valuable Canadian asset, the Great Lakes-St. Lawrence waterway.

    CSA was established in 1903, so we're celebrating our centennial this year. The head offices of our members are located in Ontario, Quebec, and New Brunswick. Our vessels are active on the Great Lakes, the St. Lawrence waterway, and the east coast and in the Arctic. We carry some 68 million tonnes of cargo per year for companies such as Bunge, Québec-Cartier Mining, Cargill, Ultramar, Sifto Salt, Stelco, Dofasco, and the Wheat Board. You'll recognize in there names of many large Canadian companies. Canadian shipowners themselves directly employ more than 6,000 people in Ontario, Quebec, the Maritimes, Newfoundland, and Labrador.

    I know you have many issues facing you, and we have many issues we face in the course of doing day-to-day business, and we can discuss several today, but with your agreement, we'll spend a few minutes to focus on a major operating and financial challenge that is our top priority. I'm speaking of the Canadian pilotage system as applied to ships in the coasting trade that are CSA members. Let me address, just briefly, some of the pilotage problems.

    The application of the mandatory pilotage system to Canadian vessels needs to be reconsidered based on transportation policy, innovation, and productivity of marine carriers. The current legislation can be called social legislation, inasmuch as it seems to be more designed to maximize employment of pilots, to the detriment of efficiency, productivity, and pursuit of innovation. The current system is costly and ineffective, particularly in the St. Lawrence River. It's also abusive. We have double pilotage, we have winter navigation rules when there is no winter--this year, as an example, the winter navigation rules finished on April 26. There's no reprieve and no discussion. We most recently had another example of a pilot refusing to board a ship because of his disagreement with some of the policies of his pilotage authority. These are delays that don't cost anyone other than the shipowner and the shipper, the very people the system should be accommodating.

    Marine transportation has to compete with road and rail transportation and the maritime network in the United States. These systems have been modernized. Canadian ships involved in the coasting trade, short sea shipping, are no longer competitive on several routes and in several markets. Overall, cargo in the St. Lawrence River ports has fallen dramatically in the past 20 years. On March 25 you heard departmental officials espouse this very short sea shipping industry. That's basically what the Canadian shipowners do.

    Shipping companies and their clients must be able to manage their costs. Canadian shipowners spend more than $12 million a year in mandatory pilotage charges. This figure accounts for some 5% of our operating costs. It's interesting to note that probably 90% of that money, more than $10 million a year, is spent on the St. Lawrence.

    Our ships' masters and officers pilot their vessels through the waterways and the Great Lakes in Canada and the United States. However, the same vessels, with the same crews and same cargoes, are forced to take on pilots in the St. Lawrence River and ports in the Atlantic region. Over the years pilots have continually fought against the exemption regime as it's applied in the Great Lakes. Canadian ships' masters have local knowledge of the waterways and have access to many navigation management tools, particularly since 1995. This is when we implemented the use of the latest technology for navigation and ship operations. Our fleet is recognized around the world as a major user of these technologies.

    The Pilotage Act, which came into being in 1972, needs to be changed and modernized. Maritime administrations of a number of countries, New Zealand, Australia, the European Union, Singapore, have implemented reforms to their pilotage regimes, including exemption policies in recent years. We have this information available for the committee if you wish, we can provide it to the chairman at any time. Safety at sea and sound environmental stewardship will not be jeopardized if we do change and modernize the pilotage system. We can address some of the safety and environmental protection issues.

    Our members have a culture that focuses on safety and compliance with high standards. A study conducted in 2002 last year for the Great Lakes Pilotage Authority indicated a substantial decline in accidents over the previous decade. A study conducted for the Laurentian Pilotage Authority in the same year showed that there has been a substantial decline in the number of accidents involving Canadian vessels on the St. Lawrence over the past 10 years. According to the Transportation Safety Board, the accident rate for merchant vessels registered in Canada has declined by 16% over the past five years.

    Canadian shipowners have a considerable stake in ensuring the safety of the crew, ships, and cargo carried in the waterway. The pilotage system does not possess the monopoly on marine safety and environmental stewardship. The owner is the person with the most to lose and has the greatest liability. We in the Canadian trade are continuously subject to oversight by Canadian authorities, we can't escape. Our ships, the lakers, the bulkers, the self-unloaders, are bound to the waterway and to Canada by definition.

    We want more flexibility for Canadian ships in Canadian waters, and the flexibility has to be recognized in legislation. This is an issue of productivity and innovation, and it requires a change in culture. The favoured solution is to amend the Pilotage Act to exempt Canadian ships from the mandatory pilotage regime. Pilotage would then be carried out by ships' masters and officers. Certain conditions would apply with respect to tonnage, lakers of 30,000 tonnes or less, and to the skills and training of ships' masters and officers and navigational equipment.

    The potential impact of this initiative, when we wrote this, we said would be a reduction on the St. Lawrence River over a period of time of 45 pilots, $10 million in payroll expenses. Given that the percentage we represent in the St. Lawrence has declined even in the last year, that number of pilots might be somewhere down around 40 now. Quite frankly, if the business keeps going this way, there'ill be a reduction in pilots whether we are exempt or not, because the business won't be there.

    In 1998 Quebec shipping or port-related companies created more than 26,000 direct and indirect jobs, with an annual payroll of $1 billion. This is from the Province of Quebec's marine policy document.

    The legislative change we are talking about would not apply to foreign flag vessels, which would continue to be subject to mandatory pilotage in Canadian waters.

    The panel should be aware that we at the CSA fully understand that the call for the status quo will be made loudly and vociferously by those who wish to retrench to the present system. This position has been pushed relentlessly in the past and, make no doubt about it, will manifest itself again. There is little probability or possibility of unanimity on this issue, and it requires leadership to create the appropriate modern legislation.

    We do have comments on the other issues that form the mandate for the subcommittee, and with your permission, I would just move to a couple of them rather briefly.

    On the St. Lawrence Seaway Management Corporation, I think we can say, by and large, we have been, if not pleased, satisfied with the new business orientation on the St. Lawrence Seaway since it was moved to semi-commercial status in the past five years. Business, not just Canadian business, but foreign shipowners as well, have enjoyed the predictability of costs of the operation of the seaway.

    On seaway infrastructure, we are certainly pleased that the Department of Transport has taken an aggressive lead in the Canada-U.S. study and the agreement that was signed by Secretary Mineta and Minister Collenette on on May 1 of this year. We do expect stakeholders such as the CSA will have a major say in the terms of reference for the study and the ongoing implementation of the study. Seaway infrastructure isn't a capacity issue--there is over-capacity, actually, at this time--but is rather a matter of defining maintenance and continued operations issues and future requirements.

    On declining traffic, all we can do is speak to what has been happening to us. We have lost two million tonnes per year for the last two years, we are down four million tonnes from 2000. There are many reasons for it. If we had a shipper's representative with us here today, you would hear them say Canada is a price taker not a price maker, and cents per tonne matter when you are dealing in aggregates, when you are dealing in iron ore, when you are dealing in coal, when you are dealing in grain. It now is a global village in business, and we have to stay competitive, and the costs are a major problem. We are told Canada is not in a recession, or even in a recessionary mode, but you couldn't tell it by our business.

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    On the toll and fee structure, we understand that under a new deal between Transport Canada and the seaway, the ability to offer rebates is not there. We certainly respected the rebate position the seaway took in the past two or three years. It showed us that the seaway itself was trying to help the business by rebating 1.5% of the 2% tolls.

    For increasing productivity, there are several options that should be examined. All I would say is that any options that are examined for increasing productivity or increasing business and business productivity in the seaway are not simply nice to have. The waterway is in a position now where productivity options are required to save the system.

    On seaway security, Canadian Shipowners and the Lake Carriers Association today submitted security guidelines for the combined U.S.-Canada fleet to the homeland security part called the coast guard and Transport Canada, and we hope these will be accepted. Both fleets have worked diligently, and these would be instead of the very complicated, tough, expensive guidelines that were published in the American register in late December.

    We can't discuss the coast guard without having the coast guard reviewed in respect of efficiency and the provision of services required by systems users. Sometimes these issues are being lost or caught up in the issue of marine services fees. This is a major issue, and we've met many members of the panel here on an individual basis to talk about those, along with the Chamber of Martiime Commerce. Certainly, something has to be done. We talked about predictability for the seaway, and we need predictability involving the coast guard fees. The best predictability would be if they were to go to zero and to stay there. There are some 700 industries and companies across the country that have joined together to combat these. Dredging is also a problem. In the coast guard that's an ongoing issue. I won't comment too much on that right now, because it's forming the basis for negotiations between the industry and the coast guard.

    Mr. Chair, that will be the end of my presentation.

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    The Chair: Thank you, Mr. Morrison.

    We would certainly like that information you offered on the reform of pilotage in other jurisdictions.

    Mr. Don Morrison: Right. We have that.

    The Chair: If you want to provide them to the clerk at the end, that would be helpful.

    We'll turn to questions.

    Mr. Gouk.

    Mr. Jim Gouk (Kootenay—Boundary—Okanagan, Canadian Alliance): Thank you, Mr. Chairman.

    I'm substituting for my colleague, who was unavoidably detained. I've been quite involved with this in the past, but I've been away from it for a while. I'll see that any information gets to him.

    Right now, if a pilot makes an error that causes some kind of liability damage, who is responsible? What coverage is there? Does any of it come from the pilot authority, or is it strictly from the shipowners?

    Capt Réjean Lanteigne (Vice-President, Canadian Shipowners Association): Under the current Pilotage Act the pilot's liability, except for gross negligence, is capped at $1,000 per event.

    Mr. Jim Gouk: So it's minimal. What if they make some mistake that causes damage beyond the ship itself?

    Capt Réjean Lanteigne: The pilot is deemed to be a servant of the shipowner. The shipowners supported this limited liability. The main reason behind this was that if you uncap this liability, you would need insurance coverage, which ultimately would be passed on.

    Mr. Jim Gouk: I understand, and that takes care of my next question.

    You agreed that the ships' officers or masters would need to have certain qualifications in order to be accepted under your proposal. Is there not now a program by which they can get accepted? Is it the qualification that exists now that's too onerous or the lack of the ability for them to qualify and become exempt from having to use a pilot?

    Capt Réjean Lanteigne: It is mostly the lack of the ability for them to be accepted to do their own thing on their own ship.

    Mr. Jim Gouk: But is it because there is not a program that allows them to be qualified or because the program exists, but it's too onerous?

    Capt Réjean Lanteigne: Both, I would say, particularly the second. It is not to be forgotten that the authority that has a financial stake in maximizing the revenue for pilotage is also the authority that grants certificates to our masters to exempt them from pilotage. There is a fundamental conflict in law here.

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    Mr. Jim Gouk: I seem to recall that was a bit of a problem.

    Have you got specifics you can table with this committee on what you feel would be the qualifications they would have to prove, who they would have to prove them to, and who would do the authority? You've dropped the idea that they would still have to qualify, so I would like to see what you say they will do to qualify and who will be the judge of that.

    Capt Réjean Lanteigne: We certainly could provide that to the chair in considerable detail.

    Mr. Jim Gouk: Okay.

    You're talking about Canadian ships, but I have to assume--and again, I'm a little rusty on this--that American ships use these same waters quite a bit. They ply the Great Lakes. What would happen to them if they said, hey, inside Canadian waters you're allowing the Canadian ships to do this, we want the same benefits.

    Capt Réjean Lanteigne: Within the Great Lakes system currently, and we have enjoyed this since 1972, Canadian ships are exempted from pilotage in Canadian waters and U.S. waters. There is a bilateral agreement between the two countries.

    Mr. Jim Gouk: But you've talked in here about the areas where you are now forced to take on pilots, in the St. Lawrence and in ports in the Atlantic region. I gather that there are lots of American carriers, lakers, that operate in and out of the St. Lawrence, out of the Great Lakes, that would be in a similar situation to you.

    Capt Réjean Lanteigne: There are very few lakers operating beyond the Welland Canal, very few lakers coming down the St. Lawrence River, but that provision would not extend to U.S. flagships in the St. Lawrence or the Atlantic. They are deemed to be foreign ships. The bilateral agreement we now have with the United States only covers the Great Lake waters.

    Mr. Jim Gouk: Okay. Thanks.

    The Chair: Ms Desjarlais.

    Mrs. Bev Desjarlais (Churchill, NDP): At present transportation isn't an allowable trade topic. Under the North American Free Trade Agreement transportation is exempt. Should transportation not be exempt, what would then happen? It was being proposed at some point that the government was going to make transportation a trade agreement issue.

    Mr. Don Morrison: It's our understanding that in the negotiations that are going on now, the bilateral negotiations and the World Trade Organization negotiations, the U.S. is refusing to put the Jones Act on the block, so really nothing has changed there. We haven't spent a lot of time recently looking at what would happen. One of the major planks for keeping the Jones Act was to have the American fleet available for military purposes, and given that they've just come through another war, that's even more emphasized now. We don't see any change there at all.

    Mrs. Bev Desjarlais: I don't argue the point that the U.S. wouldn't want to put theirs up for grabs, I was wondering what would happen if Canada opened theirs up, because sometimes there seems to be support for that.

    You mentioned the dredging and the coast guard. Could you just give me some more background on that? You mentioned them together and said there's some discussion, but you didn't get into it further, and I'm just curious how the two are tied together on the issue of dredging.

    Mr. Don Morrison: Historically, the coast guard carried out dredging in certain parts of the country, main channels as well as ports. In the late 1980s and early 1990s they started moving out of dredging in ports. By, I believe, 1995 or 1996, as part of program review, their policy was that they would no longer dredge any main channels. They stopped dredging in Saint John, New Brunswick, the Fraser River, and the St. Lawrence River. In the St. Lawrence the industry needs the dredging to be done, so at that time the coast guard and industry got together and came up with an agreement whereby the coast guard would still take on the contracts for the dredging, supervise the dredging, budget for the dredging, and industy would pay for it according to the tonnage of the vessels that use the waterway. It was still separate from the coast guard ice-breaking and navigation aids fees.

    We had a five year agreement, and recently, the coast guard turned to industry and said, if they were going to carry on dredging, there were going to be increases in the costs of up to 18% the first year and 2% per year after that. Industry found that onerous, and the Canadian shipowners, among others, said we were going to refuse to participate in that dredging program, because we felt the coast guard still had a responsibility to do dredging in some of the main channels. It is being negotiated right now. There is no dredging occurring right now.

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    Mrs. Bev Desjarlais: If the coast guard didn't do the dredging, was it perceived that other operations might?

    Mr. Don Morrison: That's a tough question. I think what industry is after is for the coast guard to take on its responsibilities to do the dredging, whether or not it's paid for by industry.

    Mrs. Bev Desjarlais: You mentioned an increase in cost of 18%, and then 2% each year after. Can you tell me what the cost of dredging usually is per tonne, or however you do it?

    Mr. Don Morrison: Per cubic metre.

    Capt Réjean Lanteigne: On the U.S. side of the Great Lakes there's a lot of dredging performed by the U.S. Army Corps of Engineers. Their average cost per cubic yard has been $8 U.S. in the last few years for large volume. In the St. Lawrence river last year the cost per cubic metre--and you have a slight difference there in volume--was $24 Canadian, which is a very significant difference.

    Mrs. Bev Desjarlais: Am I to understand that it's the U.S. army that does the dredging on the American side? They would consider it to be strategic to have it open, so it would seem reasonable that Canada could use the same option on the other side. Does the U.S. army charge shipowners on the other side for the cost of the dredging?

    Capt Réjean Lanteigne: No. The dredging is done by private contractors, but it's the U.S. Army Corps of Engineers that contracts it out.

    The Chair: Thank you.

    Mr. Comuzzi.

    Mr. Joe Comuzzi (Thunder Bay—Superior North, Lib.): Thank you, Mr. Chairman.

    A big difference between the American side and the Canadian side is that the U.S. Army Corps of Engineers handles a lot of the maintenance and dredging, and they consider that in the best interests of national security. I would imagine at the right time that is an operative term, but that's the way they look at it, and that's why the intercoastal network in the United States and the canal system up and down the Mississippi are maintained by the Corps of Engineers.

    Mr. Morrison and Captain, I thank you for coming today. As you were giving your opening remarks, I marked “hostage” down here. It appears that all hostages haven't been taken in Iraq. This is about a pilot who works for the Laurentian Pilotage Authority, and he didn't have any problems with your shipowner, he had problems with his so-called employer; and he was not going to show up for work because of whatever. Is that correct?

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    Mr. Don Morrison: That's correct.

    Mr. Joe Comuzzi: As a result, the owner, the person you represent, was waiting somewhere along the Great Lakes system for a pilot to get on board. How long did that ship have to wait to get this problem straightened out?

    Mr. Don Morrison: I believe it was six or seven hours.

    Mr. Joe Comuzzi: What's the normal charge? What's $8,000? Is that the demurrage for a day? When a ship is idle for eight hours, what does that cost?

    Mr. Don Morrison: The operating costs would be $15,000 or $16,000 a day per vessel.

    Mr. Joe Comuzzi: Because there was a conflict here, it cost your shipowner an additional $5,000 or $6,000 waiting for the people to release the hostage?

    Mr. Don Morrison: That's correct.

    Mr. Joe Comuzzi: It's a hell of a business if you can get away with it, isn't it? And how long has this been going on?

    Mr. Don Morrison: That was actually the first one where I'd heard the tape and seen the transcript, so I wouldn't comment on that.

    Mr. Joe Comuzzi: Have you had this problem before in a more insignificant way, not maybe as seriously as this?

    Mr. Don Morrison: There have been problems in the past in getting pilots.

    Mr. Joe Comuzzi: Explain that, please.

    Mr. Don Morrison: It might have been legitimate, but there just weren't enough pilots to go around at a given time. Again, when you must have two pilots on a ship, there are fewer pilots to go around for the fleet.

    Mr. Joe Comuzzi: Why would you need two pilots on a ship?

    Mr. Don Morrison: That's an excellent question. That's one of the reasons we want the legislation changed.

    Mr. Joe Comuzzi: Good. Now would you answer the question, Mr. Morrison?

    Mr. Don Morrison: I don't know where it came from. I'm sure the pilots will tell you that you need more eyes in winter than you need in summer, for whatever reason.

    Capt Réjean Lanteigne: The reasons are historical.

    Mr. Joe Comuzzi: It's hysterical or...?

    Capt Réjean Lanteigne: Both.

    Years ago ships trading in the St. Lawrence during the winter time were not built for the St. Lawrence. They were relatively slow, they were not built for ice, ice-breaker availability was not as it is today, and it took a rather long time to travel from the lower St. Lawrence to Quebec City and from Quebec City to Montreal. I'm talking about 15 hours or more. This was deemed to be far too long for an individual. The ships also were not equipped with the technology that exists today. You had basic radar, a magnetic compass, maybe a gyro, and that was the extent of it. So it was deemed safe to have two pilots on board, as they could relieve each other to perform the tasks they were supposed to perform. But 20, 25, or 30 years on ships are relatively high-tech. Navigation aids are well in place, ice-breaking services are available, but more importantly, the design of ships has changed significantly. They are more powerful, their hulls are better built, and the crews are trained for that type of trade.

    So the reason for having two pilots year round on some ships and in the winter time on others has to be challenged, and we are challenging it. It may be valid on some of the older ships that trade on the St. Lawrence, that come there infrequently, but one rule to fit all is not the end game any more.

    Mr. Joe Comuzzi: Is that the Laurentian Pilotage or the Great Lakes Pilotage?

    Capt Réjean Lanteigne: Laurentian Pilotage in the St. Lawrence River.

    Mr. Joe Comuzzi: So you're saying on the St. Lawrence you must have two pilots per ship no matter what time of year it is?

    Capt Réjean Lanteigne: The large ships on the St. Lawrence must have two pilots year round, the large container ships, the large cruise ships, the large tankers. Other ships, including ours, must have two pilots during the winter period, which starts in early December and terminates at the end of April. It's a two-season river, winter and summer.

    Mr. Joe Comuzzi: Last time we talked, several years ago, the number of ships we had on the Lakes could go up and down, but there were something like 140 ships plying the Great Lakes, going back and forth. Would that be all Canadian vessels or Canadian and U.S. vessels?

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    Mr. Don Morrison: At one time there were 140 Canadian vessels on the Great Lakes.

    Mr. Joe Comuzzi: What are we at now?

    Mr. Don Morrison: Seventy.

    Mr. Joe Comuzzi: Have they increased in size for carrying as much cargo, or we have just reduced the number of ships?

    Mr. Don Morrison: Some have increased in size, but we've lost tonnage as well as ships. The reason we lost some of the ships is that we just didn't have the cargo.

    Mr. Joe Comuzzi: These ships can go through the locks, through the St. Lawrence Seaway system.

    Mr. Don Morrison: Right.

    Mr. Joe Comuzzi: When this new group took over the Great Lakes-St. Lawrence Seaway, I think there were 35 or 36 million tonnes a year going through, and now we're down to 30 million tonnes a year.

    Mr. Don Morrison: I don't know if that includes both the Welland and the Montreal-Lake Ontario. I know the numbers are down. I believe that's Montreal-Lake Ontario.

    Mr. Joe Comuzzi: That's a substantial drop in business.

    Mr. Don Morrison: Yes, it is.

    Mr. Joe Comuzzi: So we're losing the ships, the tonnage is down, everything else is still in place. This isn't the first time you've been before this committee to explain that the government has to do something. We haven't done anything. It seems to me we're dealing with an airline here.

    Mr. Don Morrison: Or an almost airline.

    Mr. Joe Comuzzi: You just keep ignoring something, and pretty soon nobody wants to be in the shipping business. Are we headed that way? Or they'd like to be in the shipping business, but they can't afford to be in the shipping business.

    Mr. Don Morrison: That's right. We're here to tell you that we're facing major challenges, and among those major challenges is the operation and the cost of the pilotage system as it's applied to our ships. As you are well aware, as one of the companies is from your town, on the Great Lakes we've had two companies go out of business in the past two years.

    Mr. Joe Comuzzi: But the fees are going up to use the Great Lakes. We're talking about a dwindling number of ships, dwindling tonnage, dwindling business, increased expenses, pilots that won't want to go on a ship--it'll cost you $4,000 or $5,000 because somebody has a problem with their boss--and increasing tolls on the St. Lawrence-Great Lakes Seaway. You don't have year round access, you've got a nine-month operation. I don't think it looks very good.

    Mr. Don Morrison: That's why we're here.

    Mr. Joe Comuzzi: Thank you.

    The Chair: Mr. Keyes.

    Mr. Stan Keyes (Hamilton West, Lib.): Sometimes you like to ask the simplest of questions when dealing with pilotage and safety and the safe navigation of a ship through the waters of, for example, the St. Lawrence Seaway, which Mr. Morrison and Captain Lanteigne are talking about. You have an owner, for example, who has constructed and paid for a vessel worth literally tens of millions of dollars, and they're the ones saying they can do this job. Who's most at risk? The owner who owns the ship worth tens of millions of dollars. If there were to be an accident, who's the individual who would ultimately be sued or taken to court over an accident they could have prevented? They're coming to us saying they can do the job. So there's an element, I think, of trust there in the individual who's invested that kind of money on his or her assets to do the job without pilots.

    By way of comment, on the heels of what my colleague Mr. Comuzzi has said, some of us have had the privilege of these discussions on pilotage for over a decade. There have been some advancements, but the pressing matter is that we need to do more sooner. It's clear that the proposal of the Canadian Shipowners Association to modernize the Pilotage Act by way of an amendment is a simple matter. Once in a while I think the government has to demonstrate by example that it can react quickly to address an industry's concern, just as we've been forced to address an industry concern with the airline industry, in particular Air Canada, and give the industry some predictability.

    Let me be clear. It's important that we hear both sides of the issue on pilotage, and I understand we have the pilots before us next week. Would this committee, for example, be prepared to discuss, if need be--Mr. Chairman, it's your call--in camera, the possibility of piecing out this concern on pilotage to react to the demands and requests of industry, to agree to some kind of resolution that would be put up to the Standing Committee on Transport, to which we have to report, and from there to the Minister of Transport? We're going to be studying this matter, it's going to take some time, as it usually does. Are we going to wait for the Canada Marine Act review to deal with this issue? We can't wait that long. We have to do something and do something quickly. Maybe here's an opportunity for us to do something on this file and do it quickly, with, of course, the support of the opposition at this table, and then at the Standing Committee on Transport, to get it on the table for the Minister of Transport.

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    The Chair: As you know, Mr. Keyes, there are a number of devices and strategies that can be used by committees to do that.

    Mr. Stan Keyes: In our naiveté, would you explain some of them, Mr. Chair?

    The Chair: You can issue an interim report very quickly.

    Mrs. Bev Desjarlais: Should we have a discussion about that while we have the witnesses?

    The Chair: We could discuss that afterwards, but there are a number of devices.

    Mr. Gouk.

    Mr. Jim Gouk: I don't have any other questions, but I would point out what has been, I hope, obvious. I was the opposition transport critic from 1993 to 1997, and I've been away from it ever since. I walk back in today to hear exactly the same things, and I have the same position now: it made sense to make these changes back then. Canadian ships have to be competitive, or we're shooting ourselves in the foot. Stan, you said we need to work quickly, and I agree, but it's like the old adage, I've worked all my life to be an overnight success. I think we did make a recommendation back when I was involved in this, and I agree that we need, after this particular meeting, to act to get some kind of recommendation by the fastest and simplest method to try to deal with this, because obviously it's gone on for far too long. We've recognized the problem in the airline industry, we've made a number of recommendations, all of which cost the government money. This isn't going to cost the government money, it's simply going to save the shipping industry money.

    The Chair: Ms. Desjarlais.

    Mrs. Bev Desjarlais: Has the toll and fee structure that's in place now always been in place, or did it change over the course of the last decade?

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    Mr. Don Morrison: Fees for pilotage have increased at a rate twice that of the consumer price index.

    Mrs. Bev Desjarlais: What about other tolls and fees you pay through the seaway? Do you have any other fees you have to pay?

    Mr. Don Morrison: We pay seaway tolls. I was talking specifically about pilotage tolls.

    Mrs. Bev Desjarlais: What about seaway tolls?

    Mr. Don Morrison: On the 2% per year increase we actually had a 1.5% rebate, which was welcomed by industry. Since we've had a commercial board at the seaway, we have the feeling that costs have been addressed there and that price increases have been kept to a minimum.

    Mrs. Bev Desjarlais: You indicated that pilotage costs amount to about 5% of operating costs. What percentage would your other toll fee structure be of your operating costs? I assume, if you did it for pilotage, you did it for the entire business.

    Mr. Don Morrison: We have. We'd have to say about 15%.

    Capt Réjean Lanteigne: The toll structure for the seaway is separated into two components, the ships and the cargo. The shipper pays a significant amount of it, which is not allocated to the ship. So as a percentage of our operating costs, the seaway is not a large factor.

    Mrs. Bev Desjarlais: I take it that the shipper is covering that cost. What would the shipowner be paying?

    Capt Réjean Lanteigne: I would have to get back to you on the different formula on the Welland Canal.

    Mrs. Bev Desjarlais: You can't give me a rough figure?

    Mr. Don Morrison: We have to add coast guard costs for ice-breaking and dredging.

    Mrs. Bev Desjarlais: My other question was the percentage of the dredging, but I guess you'll have that as well.

    It's too bad Stan's not here, and I could wait until he comes back, because he said we've been doing this for a decade--you've been in government for a decade, why haven't you fixed it?

    I think it would be interesting to have the breakdown of what the costs are. I do see it as very tough for Canadian owners to compete with U.S. owners when so many costs--and I'm not questioning whether the U.S. is right or wrong in doing this--are not put on the industry, they're done under the auspices of security and military strategy, and that includes going down the Mississippi, which is one I have a tough time with. Recognizing that, I think, as a nation, we have to make sure our industry is operating on the same premise.

    Are you aware of what cost the American shippers or shipowners pay on their side. Do they use the same toll and fee structure? Do they pay the same kinds of fees at different ports for dredging and those types of things, or do they not have any of those costs?

    Mr. Don Morrison: They have some of the costs, but they're not all the same. Some of them are assessed through import or export taxes at the ports. They haven't been paying for dredging, they haven't been paying for pilotage in the Great Lakes, but they have paid for pilotage in other places. They don't pay for ice-breaking--they have no ice-breaking. On the U.S. side there are no seaway tolls assessed for those two American lines.

    Mrs. Bev Desjarlais: So pilotage is not necessarily the biggest issue here either as far as the costing goes. There are a lot of other costs the shipowners are paying in Canada they do not have to pay in the U.S., as a result of ports operating quite differently in the U.S.. My understanding is that most of the ports don't have these kinds of costs in the U.S.

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    Mr. Don Morrison: A comment I would make is that all costs are negative. The coast guard costs are negative, we don't like paying them, they affect the bottom line, but they tend to only be costs. The pilotage system applies costs and also affects our operation. We get a double whammy.

    Mrs. Bev Desjarlais: Fair enough.

    You did mention that you had this incident with the one pilot--and this is for you, Mr. Comuzzi, because you laid such great stress on it. You indicated that this was the first time you've had that kind of incident, where you heard the tape and so on. How many times would you have those kinds of incidents, where a pilot would just refuse for the sake of refusing?

    Mr. Don Morrison: I really wouldn't comment on that.

    Capt Réjean Lanteigne: We spoke earlier about the so-called no night navigational rules, where the St. Lawrence River was shut down to traffic between two o'clock in the afternoon and six o'clock the next day, because the pilots would, because of their working rules, refuse to take a ship down the St. Lawrence or up the St. Lawrence. So we were basically stopped in Montreal from travelling the St. Lawrence for 18 hours a day, or a bit more. That happened in December last year and it happened at the opening of the seaway in April. That was a significant direct cost in lost time to our members.

    Mrs. Bev Desjarlais: Any particular pilot can just do that?

    Capt Réjean Lanteigne: These are the working rules.

    Mr. Don Morrison: Those were actually legitimate. Those are working rules that have been legitimized, and they are a cost to the industry. Even though they may not make sense to anyone, they are there, they are archaic, and you can't get them changed. I know the pilotage authority attempted to sit down with the one pilotage district to talk to them about being a little more lenient on winter rules this spring, and they wouldn't even discuss it with them.

    Mrs. Bev Desjarlais: So you have no recourse through Transport? There is no recourse to talk about those rules, to object to them, or to appeal them?

    Mr. Don Morrison: No. When the pilotage authority came out with their required increase of 4%, we challenged it on the basis that it was putting us in a poor competitive position, and there hadn't been consultation. To be very brief, we took it before the Canadian Transportation Agency, and for the first time they found in our favour and reduced it from 3.95% or 4% to 2.5%. But more than that, the report itself makes interesting reading, because they are very critical of the pilotage authority and pilots and the manner in which businesses are treated in dealing with pilots on the St. Lawrence.

    Mrs. Bev Desjarlais: So you did have recourse to the Canadian Transportation Agency on the fee structure, but you definitely don't on the rules that are in place, there is no way of going through the CTA?

    Mr. Don Morrison: We tried.

    Mrs. Bev Desjarlais: Thank you.

    The Chair: Mr. Comuzzi.

    Mr. Joe Comuzzi: I just wanted to read something, if I may.

The Act shall provide for repeal of the Pilotage Act and the dissolution of the pilotage authorities and replace them with a Pilotage Desk/Secretariat which would regulate pilotage in Canada.

That sounds pretty good, doesn't it? It's a document from a committee chaired by Mr. Keyes, the national marine strategy.

    The Chair: When was that, Mr. Comuzzi?

    Mr. Joe Comuzzi: 1995, Mr. Chairman. A member of the committee was Mr. Gouk.

    The Chair: This is a historical document.

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    Mr. Joe Comuzzi: That still applies. That's one of the recommendations we're not acting on.

    Mr. Don Morrison: I agree that it looks good. What we have been frustrated with is that over the years we have dealt with night navigation, we have dealt with double pilotage, we've dealt with governance on the boards, we've dealt with appointments to the pilotage authorities, we've dealt with where they are, we've dealt with whether there should be a desk or not, we keep nibbling around the edges of all the issues on pilotage. For some reason, whether it's a small issue or a large issue, it's studied for two or three or five years, and then it doesn't get done. As the chair of the Canada Marine Act review panel said when we made our presentation, not unlike this one, the way I'm understanding it, we get rid of almost all the problems with pilotage if Canadian ships are exempt. We had to reply yes to that. Nibbling around the edges, we've found, just does not work for us. We've stayed away from it. The pilotage system can stay there, something has to stay, there has to be some form of desk or pilotage authority to deal with the foreign ships that are coming in, there is no question that they require the pilotage system. We're just saying we can keep the safety and security standards being out of it, and then people can nibble around the edges as much as they want with the pilotage system.

    The Chair: I would like to react to a statement you made. You're talking about a reduction or a phasing out of 45 pilots and $10 million dollars. That's a large number to me. What are we talking about? What are these people making on average in pilotage?

    Mr. Don Morrison: We don't have access to those figures, because the pilots are paid through the pilotage corporations. All we can do is take the budget for the Laurentian Pilotage Authority, take 10% or 12% or 15% off for administration, divide the rest by the number of pilots, and try to subtract what the apprentice pilots are paid and what new pilots are paid and what regular pilots are paid. This comes out, I would suggest, at $200,000-plus. We don't know exactly what the pilots make.

    The Chair: So you're talking $200,000-plus a year.

    Mr. Joe Comuzzi: That's our belief.

    The Chair: For what could be an abbreviated year.

    Mr. Don Morrison: Yes.

    The Chair: How many hours?

    Mr. Don Morrison: The agreement is fairly complex. It works out to about 120 assignments of four hours per assignment a year.

    Mrs. Bev Desjarlais: If I could, I'm also curious as to whether that figure includes administrative costs of the pilotages authorities as well. This is just not the cost of pilots, this is the operation of the pilotage.

    The Chair: It's irrelevant.

    Mrs. Bev Desjarlais: I know what you're saying, but I don't want us to leave a false impression here. You're saying about $200,000 per annum as if a pilot is making that. I think that would leave a false impression.

    The Chair: That's what Mr. Morrison is saying a pilot is making. He's talking about taking the global number of the Laurentian Pilotage Authority, removing from that number 12% to 15% for administration of the authority, and then looking at the probable income of those people. They arrive at a number of about $200,000.

    Mrs. Bev Desjarlais: Oh, okay.

    The Chair: This is for 120 assignments of four hours each. Is that what you said?

    Mr. Don Morrison: Six hours, sorry.

    The Chair: So 120 assignments of six hours each, which would be 720 hours.

    Mrs. Bev Desjarlais: What do the pilots on your ships get paid, the ones who would be doing it if these guys weren't?

    Mr. Don Morrison: The ships' masters?

    Mrs. Bev Desjarlais: Yes.

    Capt Réjean Lanteigne: It is anywhere between $90,000 and $120,000, for a significant workload.

    The Chair: That's living on board.

    Capt Réjean Lanteigne: That's living on board, yes.

    The Chair: That's being on board 24 hours a day. And the pilots get about $275 an hour.

    Mr. Joe Comuzzi: That's why we have trouble getting doctors in this country.

    The Chair: I was going to say, why would you want to be a doctor?

    I think we've heard enough. I thank you, on behalf of the committee members, for coming. I think we're going to move in camera to have a discussion on a number of items raised here today.

    [Proceedings continue in camera]