SMAR Committee Meeting

37th PARLIAMENT, end SESSION

Subcommittee on Marine Transportation of the Standing Committee on Transport

EVIDENCE

CONTENTS

Tuesday, May 13, 2003

º

1620

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

Mr. Richard Le Hir (President, Shipping Federation of Canada)

º

1625

º

1630

º

1635

º

1640

The Chair

Mr. Andy Burton (Skeena, Canadian Alliance)

Mr. Richard Le Hir

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

Mr. Andy Burton

Mr. Richard Le Hir

Capt Ivan Lantz

º

1645

Mr. Andy Burton

Capt Ivan Lantz

Mr. Richard Le Hir

Mr. Andy Burton

Mr. Richard Le Hir

Mr. Andy Burton

Mr. Richard Le Hir

Mr. Andy Burton

Ms. Anne Legars (Director, Policy and Government Affairs, Shipping Federation of Canada)

Mr. Andy Burton

Mr. Richard Le Hir

Capt Ivan Lantz

º

1650

Mr. Andy Burton

The Chair

Mr. Andy Burton

Mr. Richard Le Hir

Mr. Andy Burton

Mr. Richard Le Hir

Mr. Andy Burton

Mr. Richard Le Hir

Mr. Andy Burton

Mr. Richard Le Hir

Mr. Andy Burton

Mr. Richard Le Hir

Mr. Andy Burton

The Chair

Mr. Roger Gaudet (Berthier—Montcalm, BQ)

º

1655

Mr. Richard Le Hir

Ms. Anne Legars

Mr. Roger Gaudet

Mr. Richard Le Hir

Mr. Roger Gaudet

Mr. Richard Le Hir

Mr. Roger Gaudet

Mr. Richard Le Hir

»

1700

Mr. Roger Gaudet

Mr. Richard Le Hir

Mr. Roger Gaudet

Mr. Richard Le Hir

Mr. Roger Gaudet

Mr. Richard Le Hir

Capt Ivan Lantz

Mr. Roger Gaudet

The Chair

Mr. Andy Burton

Capt Ivan Lantz

»

1705

Mr. Andy Burton

Ms. Anne Legars

Mr. Richard Le Hir

»

1710

Mr. Andy Burton

The Chair

Mr. Richard Le Hir

»

1715

The Chair

Mr. Richard Le Hir

The Chair

The Chair

Mr. Tim Meisner (Acting Director General, Marine Programs, Canadian Coast Guard)

The Chair

Mr. Tim Meisner

»

1725

»

1730

The Chair

Mr. Andy Burton

Mr. Tim Meisner

Mr. Andy Burton

Mr. Tim Meisner

Mr. Andy Burton

The Chair

Mr. Andy Burton

Mr. Tim Meisner

Mr. Andy Burton

Mr. Tim Meisner

Mr. Andy Burton

Mr. Tim Meisner

»

1735

Mr. Andy Burton

Mr. Tim Meisner

Mr. Andy Burton

Mr. Tim Meisner

Mr. Andy Burton

The Chair

Mr. Roger Gaudet

Mr. Tim Meisner

Mr. Roger Gaudet

Mr. Tim Meisner

Mr. Roger Gaudet

Mr. Tim Meisner

Mr. Roger Gaudet

Mr. Tim Meisner

Mr. Roger Gaudet

The Chair

»

1740

Mr. Tim Meisner

The Chair

Mr. Tim Meisner

The Chair

Mr. Tim Meisner

The Chair

Mr. Tim Meisner

The Chair

Mr. Tim Meisner

The Chair

Mr. Tim Meisner

The Chair

Mr. Tim Meisner

The Chair

Mr. Tim Meisner

The Chair

Mr. Tim Meisner

The Chair

Mr. Tim Meisner

The Chair

»

1745

Mr. Tim Meisner

The Chair

Mr. Tim Meisner

The Chair

Mr. Tim Meisner

The Chair

Mr. Tim Meisner

The Chair

Mr. Tim Meisner

The Chair

Mr. Tim Meisner

The Chair

Mr. Tim Meisner

The Chair

Mr. Tim Meisner

The Chair

Mr. Tim Meisner

The Chair

Mr. Tim Meisner

The Chair

Mr. Tim Meisner

The Chair

Mr. Andy Burton

»

1750

Mr. Tim Meisner

Mr. Andy Burton

Mr. Tim Meisner

Mr. Andy Burton

Mr. Tim Meisner

Mr. Andy Burton

Mr. Tim Meisner

Mr. Andy Burton

The Chair

Mr. Roger Gaudet

Mr. Tim Meisner

Mr. Roger Gaudet

Mr. Tim Meisner

Mr. Roger Gaudet

Mr. Tim Meisner

The Chair

Mr. Tim Meisner

The Chair

»

1755

Mr. Tim Meisner

The Chair

Mr. Tim Meisner

The Chair

---

CANADA

Subcommittee on Marine Transportation of the Standing Committee on Transport

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NUMBER 004

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end SESSION

l

37th PARLIAMENT

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EVIDENCE

Tuesday, May 13, 2003

[Recorded by Electronic Apparatus]

º  (1620)  

[English]

    The Chair (Mr. Roger Gallaway (Sarnia—Lambton, Lib.)): Today we're resuming our study of the St. Lawrence and the Great Lakes. We have with us, from the Shipping Federation of Canada, Richard Le Hir, Anne Legars, and Captain Ivan Lantz.

    Mr. Le Hir, you know the routine before these committees. Please proceed.

[Translation]

    Mr. Richard Le Hir (President, Shipping Federation of Canada): Merci beaucoup, monsieur le président.

    Good afternoon, ladies and gentlemen and members of the Subcommittee on Marine Transportation. My name is Richard Le Hir and I'm the President of the Shipping Federation of Canada. With me this afternoon are Captain Ivan Lantz, Director, Marine Operations, and Anne Legars, Director, Policy and Government Operations, who will be happy to answer your questions as well.

    To begin, I'd like to say a few brief words about the Federation and its membership. The Shipping Federation of Canada, incorporated by an Act of Parliament in 1903, represents 95 per cent of ocean vessels trading to and from ports in Atlantic Canada, the St. Lawrence River and the Great Lakes. Its membership consists of the Canadian companies that own, operate or act as agents for the foregoing vessels, which transport virtually all of the trade between eastern Canada and ports overseas.

    The Federation is celebrating its centennial this year, under the theme: “100 years of contribution to the Canadian economy”. The long-term objective of all the Federation's activities is to achieve a safe, efficient, competitive, environmentally responsive and quality oriented marine transportation system.

[English]

    I must say we are very pleased with the decision to establish a subcommittee on marine transportation, because we believe it is time to move forward with a comprehensive, coordinated, and well-articulated marine agenda.

    Most of the federation's members trade in the St. Lawrence-Great Lakes system, and we have therefore had a historically strong interest in all issues related to the viability of this route. Indeed, the federation has members that have invested in the construction and purchase of ships designed for the St. Lawrence-Great Lakes system, based on their belief in the future viability of that system.

    This view is largely shared by all segments of the shipping industry from one coast of Canada to the other, as reflected in the vision document entitled “The Great Lakes-St. Lawrence Waterway: A 20/20 Vision for the Future”. It was developed in 2000 as a cooperative effort among all of Canada's major marine associations, which we fully support.

    From our perspective, the St. Lawrence-Great Lakes system has a nodal point--the St. Lawrence Seaway. However, although the existence of the seaway is a necessary condition to the existence of the St. Lawrence-Great Lakes system as an international trade route, it is necessary to look beyond the seaway if the future viability of the system as a whole is to be ensured. Indeed, a number of other elements must be taken into consideration if Canada and the United States are to reap the full benefits of the exceptional geographical advantages offered by the St. Lawrence-Great Lakes system.

    If we look first at the seaway, from a user's perspective the St. Lawrence Seaway is a model from both an institutional and an operational point of view. A key tool in this respect is the federation's seaway committee, comprised largely of members who trade in the seaway system. It addresses operational issues and serves as a channel of consultation, communication, and discussion between federation members and seaway management.

    Although a variety of challenges lie ahead, the history of past cooperation between the seaway and its stakeholders bodes well for the implementation of future decisions that are in the interests of all of the stakeholders involved. Moreover, the seaway governance structure has proven to be so effective that it has essentially been a non-issue since its implementation five years ago. As a result, we as users view the seaway model as a source of inspiration for other government structures that have raised concern.

    The seaway's governance structure is articulated through the bylaws of the St. Lawrence Seaway Management Corporation, under which five out of the nine individuals who sit on the board of directors are appointed by users as industry representatives. Of those five industry directors, one represents international carriers. The bylaws mandate the Shipping Federation of Canada to act as the facilitator for the nomination and election of persons who will represent international carriers on the board of the SLMC. The federation takes this role seriously and is proud of its accomplishments to date.

    The foregoing structure has resulted in the establishment of stronger links between the seaway and its users. This in turn has played an important role in successfully resolving a variety of operational challenges that have arisen in recent years. The industry and the seaway have collaborated closely on draft studies to maximize use of the existing water column in the waterway. The industry and the seaway have worked closely with Transport Canada and the U.S. Coast Guard to harmonize seaway inspection procedures. This cooperation between agencies was renewed and reinforced following the events of September 11, and can now be viewed as a model of transborder and inter-agency cooperation.

    The industry, the seaway, and the pilots have worked closely together in the development of standards linked to the new requirements for automatic identification systems--AIS, as they are known--that became mandatory for all ships transiting the seaway as of March 2003. The seaway has been the leader in implementing this system, which will eventually become a worldwide IMO requirement for ensuring ship safety and national security. We believe this is due, in part, to the links that exist between the seaway administration and seaway users.

    The strong ties between the seaway and its users have facilitated the efficient resolution of a number of serious operational challenges that would have otherwise been very disruptive to trade. This has built up a pool of goodwill, trust, and confidence over the years, which all of the parties will need to draw upon in order to address the seaway's future challenges.

º  (1625)  

[Translation]

    Indeed the Seaway will have to solve a number of issues in a not-so-distant future.

    Firstly, in terms of infrastructure renewal, the ocean shipping sector has invested heavily in ships designed for Seaway service. Since 1995, shipowners have invested close to $500 million in new ships with an anticipated service life of between 25 and 30 years. Such investment is a clear expression of users' confidence in the future existence of the Seaway and Great Lakes system as a vital artery that provides access to ports and cargoes in the North American heartland.

    We believe that the strong level of confidence expressed by Seaway users should provide government with ample justification for continuing to make the necessary investments in the renewal of Seaway infrastructure that will be required in the not-too-distant future. Given the significant sums of money that the industry has expended on ships, it expects no less from the government with respect to the expenditures that are necessary to maintain the Seaway's infrastructure.

    Moreover, discussions on infrastructure should include an assessment not only of whether current assets should be renewed, but also of whether they should be upgraded, and if yes, to what extent.

    In addition to raising financing issues, this also raises economic, commercial and environmental concerns that will have to be addressed and assessed before any decision is undertaken. And, because these are far-reaching decisions that affect society as a whole, they will ultimately have to be made at the political level, once the needed information and studies have been made available. Thus, it is clearly not the role of industry organizations such as the Federation to make decisions as to whether and to what extent the Seaway's infrastructure should be upgraded.

    What the Federation has done, however, is to express strong support for the federal government's decision to participate in the US Army Corps of Engineers' study process, so that Canada can develop and document various scenarios before rendering a decision. Towards that end, Transport Canada and the United States Department of Transportation signed a deal on May 1, 2003 to jointly participate in the US-Canadian Great Lakes St. Lawrence Seaway Review. The Federation applauds this initiative, which marks the first step towards building the waterway of the future.

    Next, with respect to the economic impact study, the Federation, along with other industry leaders, has promoted the benefits of an Economic Impact Study that will serve as a solid basis for industry and governments to discuss the value of marine transportation to Canadians. The government has completed the general outlines of such a project and we hope that it will now proceed swiftly with the actual study.

    Regarding the extension of the navigation season, due to the complexity and cost of operating locks in freezing temperatures and ice conditions, the Seaway closes for three months every winter. However, modern technology and engineering indicate that there are ways of continuing to operate the system through the winter, which would enable the Seaway to recapture those cargoes that have shifted to alternative modes and routes for the winter months and never returned.

    Given the declining cargo volumes of the past two years, the Seaway must now direct much of its focus on rebuilding its cargo base, and extension of the current navigation season is one way of so doing.

    Water level variations, which may become even more of an issue as a result of global warming, are another challenge facing the Seaway system. This is an issue that is being closely monitored by the industry, and which should be factored into the Army Corp of Engineers' study due to its relevance to the Seaway's future viability.

º  (1630)  

[English]

    The future of the seaway is linked to the viability of the St. Lawrence-Great Lakes system as a trade route. As important users of this trade route, we have identified three main components that affect its viability. These are competitiveness, infrastructure, and security.

    Freight transportation is a very competitive industry in which modes and routes compete to deliver cargo to its final destination at an optimal price. The main factor influencing the competitiveness of a route is the door-to-door price that the client of the transportation service will pay to have his or her cargo delivered. The client does not really care about the route taken, as long as he or she obtains the best possible price.

    On the other side of the equation, the carrier has a huge range of costs with which to contend, including ship, crew, and bunkering costs; coast guard charges; seaway tolls; tug services; marine pilotage fees; and other service costs. If the carrier cannot meet these costs with the freight rate the shipper is prepared to pay, he will be unable to cut the deal.

    Unfortunately, this is precisely the situation that carriers operating in the St. Lawrence-Great Lakes system have faced over the last few years, as increases in the costs of trading through the system have made it increasingly difficult for carriers to cut an acceptable deal for the carriage of cargo on the seaway route. Indeed, new costs such as those associated with aids to navigation and ice-breaking fees, combined with increases in the fees charged by service providers who are in regional monopoly situations, have had a cumulative negative effect on the St. Lawrence-Great Lakes route, and have steadily eroded its competitiveness.

    In the final analysis, it is the commodities and cargoes carried on board ships that must absorb the costs associated with trading through the system. However, the commodities moving through the St. Lawrence-Great Lakes System comprise largely coal, grain, iron ore, stone, and cement, the majority of which are low-value cargoes that move because they can do so in bulk at a low per-ton cost.

    Although cost control is of paramount importance to maintaining the system's competitiveness within such a context, such control has been exceedingly difficult to attain. For example, the Shipping Federation has requested the gradual reduction of coast guard marine service fees, with a view to ultimately eliminating this unilateral and unfair burden on transportation. While the industry awaits a response to this request, the government continues to cut the budgets of the coast guard and Canadian Hydrographic Service to such an extent that their ability to contribute to the safety and security of marine navigation has been placed in jeopardy.

    Another key transportation cost is that associated with the provision of marine pilotage services. Although the federation views pilotage as an absolutely essential service that contributes immeasurably to the safety, security and efficiency of shipping, the cost of the service, which represents about $60,000 per voyage for the average ocean carrier trading through the Great Lakes system, is an issue of major and ongoing concern, and one that must be addressed.

    As we well know, grain has long been a staple of marine transportation through the seaway. However, despite the existence of studies indicating that significant cost reductions amounting to as much as $2 per ton could be attained through the rationalization of costs and services at Thunder Bay, no such action has yet been undertaken.

    A ship making a voyage into the lakes to discharge its cargo and then load another cargo for the outbound trip will pay about $250,000 U.S. in seaway tolls, marine service fees, port dues, tuck services, marine pilots, stevedores, surveyors, port wardens, and the like. A two-port call on the east coast of Canada outside the St. Lawrence River would incur about half these port costs at only modestly reduced freight rates. Therefore, from a ship owner's perspective, the rewards for a round-trip voyage via the Great Lakes are often not worth the bother.

    As far as the cargo owner is concerned, there are a number of competitive transportation alternatives from which to choose, including the use of rail to move the cargo between U.S. east coast ports and Great Lakes destinations, or marine shipments via the Mississippi route. As indicated earlier, the cargo owner's overriding interest is to move his shipment from door to door as seamlessly as possible at the best possible price. Given this basic reality, there is clearly a need to seriously consider the compounding effects of regular service charges on the competitiveness of the marine mode through the Great Lakes system.

    We have circulated a table showing the evolution of costs for a standard cargo shipped in the last ten years. You may wish to discuss this document further with us during the question period.

º  (1635)  

    It is also important to note that the effect of the foregoing cost issues on the system's competitiveness has been exacerbated by the fact that the various modes with which the St. Lawrence-Great Lake system competes have not had to face similar issues. A prime example can be found within the trucking industry, which does not have to pay any of the costs associated with infrastructure, maintenance, snow removal, or highway signage, and is thus free of the kinds of impediments to competitiveness that are of such concern to the marine mode.

    Although the new transportation policy expressed in Transport Canada's Straight Ahead document, which purports to level the playing field among modes, may help to re-establish the competitiveness of the St. Lawrence-Great Lakes route vis-à-vis other modes in Canada, the government will have to be prepared to make its fair share of investments, if division articulated in the document is to become a reality. For example, although short-sea shipping may appear to be an appealing concept, it is worth noting that the concept is working in Europe and the United States because it has benefited from significant governmental investment and financial support.

    Now we will move to infrastructure.

[Translation]

    Marine infrastructures include ports, intermodal facilities, dredging operations and navigational services such as icebreaking or buoy tending. Although shipping and navigation fall under federal jurisdiction, the government's narrow application of this responsibility has led to the erosion of the industry's ability to serve the national economy to the extent that it could.

    We understand from Transport Canada's presentation to this committee that the Department views the Seaway as a strategic asset and is willing to fully explore the system's potential, especially with respect to its role in easing congestion and reducing the pollution caused by other modes.

    It should be remembered that marine transportation is the quietest, safest and most efficient mode of transportation in terms of fuel per tonne shipped and the most environmentally friendly mode in terms of greenhouse gas emissions. Therefore, we wholeheartedly support the department's decision to thoroughly explore the potential of the Seaway and Great Lakes. However, we do take this opportunity to underline that the development and financing of infrastructure are key roles of government.

[English]

    As mentioned in previous meetings of the subcommittee, security is a major issue in today's trade environment and has grown significantly in importance since the events of September 11, 2001. It is also a major issue for the future of the St. Lawrence-Great Lakes route, given the volume of cargo that is destined to the United States as its final destination.

    The coming into force of the International Ship and Port Facility Security Code, or ISPS, next July will increase the security burden even further by requiring the allocation of significant new financial and human resources by all of the ports and marine facilities located in the Great Lakes, including the seaway. Those funds will be expended on a variety of ISPS initiatives, including security risk assessments of marine installations and the implementation of certified security plans.

    To ensure compliance with the ISPS code, all personnel working for the seaway and all persons working at ports and terminals throughout the Great Lakes will be assigned tasks in the event of an elevated threat. Every port and terminal will have to conduct a security check on all individuals and implement security card systems. Those are just a few of the minimum requirements for even the lowest risk installations.

    It is important to underline that there exists a strong sense within the marine industry of the need to put up fences if it wishes to maintain its market share, because a fenced client is the only kind of client the U.S. will accept, and 60% of seaway and Great Lakes business is U.S. business.

    Given the foregoing, the Canadian government must make a concerted effort to convince U.S. customers that Canadian ports and transportation systems are safe, and that Canada is still a good place in which to do business.

[Translation]

    Summing up, the Federation believes that the St. Lawrence-Great Lakes system is an irreplaceable asset for Canada, but one that is not used to its full potential. The industry we represent has invested in this system and is committed to its future viability. However, the government also has a role to play in ensuring that the system remains as competitive as possible, that the needed infrastructure is in place and that the system adheres to the new security requirements that have become the norm.

[English]

    I wish to again commend the subcommittee for initiating this study and for taking the lead in the development of a comprehensive and coordinated marine agenda for Canada.

º  (1640)  

[Translation]

    Ladies and gentlemen, members of the committee, thank you for your attention. We will now be happy to take your questions.

[English]

    The Chair: Thank you, Mr. Le Hir.

    I will now proceed to questions. We'll start with Mr. Burton.

    Mr. Andy Burton (Skeena, Canadian Alliance): Thank you, Mr. Chairman, and thank you for your presentation.

    I have quite a few questions, but I think I'll start at the beginning and just work through, as time permits.

    On the second page you say you're very pleased about the decision to establish a subcommittee, because you believe “it is time to move forward with a comprehensive, coordinated and well-articulated marine agenda”.

    Can you maybe elaborate on that a little bit and just let us know what you mean by that, so we can see if we're thinking along the same lines here or not?

    Mr. Richard Le Hir: We believe that the federal government has for some time perhaps not recognized the full contribution the marine industry could make to Canada's economic agenda. We welcome the creation of this committee as a step in the right direction to perhaps correct--and that might not necessarily be the right word--but certainly to increase the level of the federal government's attention toward the marine industry.

    Ivan, would you like to add a comment or two on this?

    Captain Ivan Lantz (Director, Marine Operations, Shipping Federation of Canada): Thank you.

    With the security arrangements coming on board and the customs elements coming into play--security, coast guard, transport--it's very important that we focus on coordination. We have many issues that have to be dealt with, from immigration, to agriculture, to customs, to port coordination, working together with the United States, railroads, and our intermodal clients. These are all extremely important in bringing together a marine policy and a marine structure.

    The various departments dealing with the marine mode have not been working as well together as they should. Especially since September 11, 2001, there have been some less than totally coordinated initiatives. In order to promote the idea that we have a good infrastructure, support for the infrastructure, safety, and a viable and growing marine industry, all of the government departments and the industries have to work together. That has to be better put together under the leadership of Parliament, and the Ministry of Transport is probably the lead place for that.

    Mr. Andy Burton: Okay. Thank you.

    You mentioned the governance structure and say it seems to be working very well. So how do you see the necessary changes, vis-à-vis the way the structure is working already? What needs to be changed to make it better?

    On the one hand you're saying there needs to be more government understanding; and on the other you're saying the governance structure is working very well. But obviously it's not working well enough, so what do we need to do here?

    Mr. Richard Le Hir: I think the governance model put in place should clearly be used for other organizations, because it is working very satisfactorily. There are some minor concerns.

    Do you want to add to that?

    Capt Ivan Lantz: I think you're referring the seaway governance structure. Is that correct?

º  (1645)  

    Mr. Andy Burton: Yes.

    Capt Ivan Lantz: If we're referring strictly to the seaway governance structure, it was brought about with the advent of the idea of putting a management company in place to operate the seaway--the seaway structure owned by the federal government, by the Crown, and managed by a private not-for-profit company--and creating a new relationship between the management and the landlord, if you will.

    This model has certainly been attractive. We have not had controversies with the seaway management since the inception of this model. It's been a good one.

    Mr. Richard Le Hir: There's one thing I would add to that. Ivan made the distinction between the management company and the landlord. There doesn't seem to be enough of an understanding of the responsibilities of both, particularly at the government level. When you're a landlord, you have responsibility to maintain the infrastructure. It is not up to the management company, which is not the landlord, to assume that responsibility.

    The discussions that have taken place between the management corporation and the federal government--and we happen to be represented on that board through the structure that was set up--have clashed, and that's a strong word, around the question of who should be paying for what. In that respect, we feel that the government is trying to shift too much of the onus for maintaining the structure onto the management corporation. In due course, what is imposed on the management corporation becomes imposed on the users. That in turn raises the question of competitiveness, which we have addressed at length throughout our presentation.

    Mr. Andy Burton: I think that's sort of what I was getting at. Obviously some things aren't totally perfect yet. It sort of puts me in mind of the situation with the airports. They were basically devolved to the private sector, yet they still collect huge rents. But it also depends on the agreement between the owner and the management company. I'm in the rental business too in another life, and you can make certain agreements. Maybe the agreement wasn't well made in the first place. I don't know, but that's something that obviously needs to be worked on.

    You mentioned further on--it was in the French part, so I have to sort of go by memory here--that the industry has put money into the study with the U.S. corps of engineers.

    Mr. Richard Le Hir: No.

    Mr. Andy Burton: Oh, I misunderstood. I know the government's involved there. I understood that the industry was too.

    Mr. Richard Le Hir: At this stage it's strictly a matter of agreement between two sovereign countries.

    Mr. Andy Burton: I was aware of that, but I misunderstood about the industry.

    Ms. Anne Legars (Director, Policy and Government Affairs, Shipping Federation of Canada): The industry has put money into ships that are designed for the seaway and the system.

    Mr. Andy Burton: We have had some background. I'm not trying reinvent the wheel, but I just want to get it on the record and clarify it somewhat.

    On the extended navigational season, we have heard quite a bit about that already, and it's obviously something that needs to be addressed. I think we did hear some suggestions for possible solutions. Do you possibly have some suggestions on how the season might be extended? Let's deal with that one first.

    Mr. Richard Le Hir: Ivan, that's your turf.

    Capt Ivan Lantz: I think the extension of the seaway season has two major challenges. One is logistical. How do you make it possible to navigate, with the ice in the channels and the locks, and so on? The seaway has started some engineering undertakings and studies to have a look at exactly how they can do that. I think they've found some interesting ways, with new extended bubbling systems, to keep the ice out of the hinges of the gates, and issues like that, and how to manage the ice system.

    The other key factor in extending the system is, of course, the demand to move cargo and developing that cargo base to make it viable to continue the operations through the winter. They are definitely going to be more expensive than summer operations, so that's the other side of that puzzle. Work has been started, and some of the grain and steel interests seem to indicate there are cargoes there. So it's a project that I believe is causing new discussions, and it's going to continue.

º  (1650)  

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

    The Chair: You have lots of time.

    Mr. Andy Burton: I have a lot of questions. We'll be doing a couple of rounds.

    If you increase the season, you'll obviously increase the tonnage. Do you see it increasing by 10% or 30%? What is the sort of projection here, if you have a longer season?

    Mr. Richard Le Hir: It's a tough call because it's predicated upon our ability to gain the interest back into the system of people who have chosen other routes for all kinds of reasons, mostly due to competition.

    As Ivan mentioned, there are some indications that in the grain and steel business there would be cargo, and therefore there would be volume. But as we have seen in recent years, that cargo can be fickle, to put it mildly. Grain has dropped in price, and steel has been affected by all kinds of policy decisions and arguments between Canada and the United States. We're hopeful it will come back, but it is very hard to say by how much and when.

    Mr. Andy Burton: We've heard a fair bit over the last little while about the potential for containerization. How critical is that in the long term? What do you see as the future of containerization and its possible effects on shipping through the canal, with a longer season?

    Mr. Richard Le Hir: The trend is toward more containerization, even of goods that are currently not containerized, so of course that's going to go up. The question is, how much of that business are we going to get in Canada? There are indications that business has grown and our share of that business has grown, but it has not grown as much as it has elsewhere.

    Mr. Andy Burton: I guess I'm trying to get at that if there's a role, as you're saying, for the federal government or the owner of the canal and so on to upgrade, looking toward creating the viability of more business for you, there also has to be an onus on you and some way of showing there's a cost recovery there. Somebody will have to pay for this somehow at some time. I'm not suggesting the industry should be paying for all the upgrading, but there has to be some sort of projection--

    Mr. Richard Le Hir: There are already mechanisms in place. There are tolls based on actual traffic, so if the tonnage goes up, the tolls go up.

    Mr. Andy Burton: Talking about dollars is always a favourite topic. I also see pilotage in your evolution of cost. That's your favourite topic, right?

    We've heard a lot about pilotage--the pros and cons, the needs and requirements, and whether it's necessary or unnecessary in certain areas. Can you elaborate on that a bit for us?

    Mr. Richard Le Hir: I think we clearly make the point that pilotage is an absolute necessity for us. We represent foreign ship owners, and clearly the ships coming into Canadian waters are not staffed by people who are familiar with the Canadian coastline, the St. Lawrence Seaway, the St. Lawrence River channel, and everything. So there is no question, from our point of view, that pilotage is an absolute necessity.

    Mr. Andy Burton: You're talking about foreign bottoms. What about Canadian bottoms?

    Mr. Richard Le Hir: We can't speak for them.

    Mr. Andy Burton: You don't have an opinion?

    I'll leave it at that for now, Mr. Chairman. Thank you.

    The Chair: Monsieur Gaudet.

[Translation]

    Mr. Roger Gaudet (Berthier—Montcalm, BQ): Thank you, Mr. Chairman.

    Mr. Le Hir, why does your Federation wholeheartedly back the US Army Corps of Engineers' study process when you know for a fact that it will have an incalculable impact on the Seaway and Great Lakes environment, as well as on the Montreal economy? Moreover, we've yet to see the text of the cooperation agreement signed between the United States and Canada.

º  (1655)  

    Mr. Richard Le Hir: When the Seaway was first built, many of the questions we're dealing with today weren't an issue, particularly environmental questions. We committed to the process, mindful of the benefits to be derived by both countries from the Seaway's presence. The studies done at the time were the best possible. There is no question is our minds that the benefits promised have materialized.

    From an environmental standpoint, no one has yet proven that the work undertaken when the Seaway was constructed resulted in an ecological disaster. On the contrary, recent indications are that construction uncovered problems unknown at the time and in some cases, allowed for harmful situations to be rectified.

    Ms. Anne Legars: If I might just add one more thing, people often jump to the conclusion that because we support the comprehensive study to be undertaken by the US Army Corps of Engineers, we wholeheartedly support the expansion of facilities and so forth. Jumping to such a conclusion is somewhat premature. We support an in-depth study with a view to developing various scenarios. As an industry, we agree with the decision to document matters and conduct a comprehensive study. Once all of the data is in, decisions will be made at the political level. Your responsibility as elected representatives will then be to ensure that these political decisions are in fact made.

    Right now, we think it's important to develop various possible scenarios and we encourage the government to do just that.

    Mr. Roger Gaudet: Thank you. This also relates to my second question, Mr. Chairman.

    How would you feel about a new study, not on the expansion of the Seaway, but on friendlier, more sustainable alternative solutions? This morning's edition of Le Devoir reported that the federal government had no intention of expanding the Seaway. Surely you can come up with some solutions that might...

    Mr. Richard Le Hir: There are no solutions. In fact, if you consider the environmental impact of different modes of transportation, you'll inevitably come to the conclusion that marine transportation is without question the most environmentally friendly mode. Compare marine transportation with rail or road transportation and you'll see right way that in terms of Canada's commitments under the Kyoto Protocol, one of the few ways we have of meeting our commitments is by making the shift in large part away from surface to maritime transportation.

    Mr. Roger Gaudet: In your opinion, will the dredging of the St. Lawrence and of the Seaway really increase the depth of the water? I'd be greatly surprised if that were the case.

    Mr. Richard Le Hir: That's another problem. Water levels are one problem, while dredging is another. As we noted, one problem that warrants the federal government's attention is water level variations.

    Dredging, on the other hand, is a problem affecting navigability and operations. They're two different, albeit related, issues.

    Mr. Roger Gaudet: Do you think Montreal and Quebec City should become unloading points for barges, a move that could lead to an increase in barge traffic on the Great Lakes or St. Lawrence?

    Mr. Richard Le Hir: If you take a look at the current usage map for the Port of Montreal, you will note that the port is already used fairly extensively. If you were to add barge traffic, considering that barges are relatively small vessels but take up a considerable amount of space, I'm not convinced that this would result in optimum use of the space available in the Port of Montreal. I'm not convinced either that this wouldn't create any environmental problems.

»  (1700)  

    Mr. Roger Gaudet: The industry pays hefty fees to the Coast Guard for icebreaking and other operations. Can you tell us how these fees compare to those charged to our US neighbours? What kind of fees do the Americans pay?

    Mr. Richard Le Hir: For icebreaking operations?

    Mr. Roger Gaudet: For icebreaking, for Coast Guard services, for dredging and so forth.

    Mr. Richard Le Hir: As far as we know, these fees are paid by the US government. There's no impact, therefore, on industry users and clearly, this puts us at a disadvantage, from a competitive standpoint.

    Mr. Roger Gaudet: With respect to piloting fees, would you not agree that St. Lawrence and Great Lakes pilots constitute our eyes and ears? They play a role in avoiding ecological disasters that can accidently occur. Cuts can likely be made in other areas. In your opinion, where should we be looking to make cuts, given these costly piloting charges?

    Mr. Richard Le Hir: Ivan will be able to provide additional details later. Obviously, piloting charges include increasingly hefty administration fees. We question the advisability of maintaining such a high number of piloting authorities in operation throughout the network. Couldn't these operations be consolidated? We're inclined to think that they should be.

[English]

    Capt Ivan Lantz: The cost of pilotage is important. We don't have a system of port pilotage exactly here in this St. Lawrence-Great Lakes system. We have a system of pilotage along the highway, if you will, because there is one pilot after the other up the river to Montreal, to the Great Lakes, and through the Great Lakes. We are continually under pilotage.

    There is no place in the world where there is such an extended length of pilotage, nor where the pilotage bill represents such a significant part of the port costs of a transportation venture. We have to contain that within the reality that we also need to be competitive and move that cargo at a competitive price, otherwise it just simply won't sell. So it is beneficial to Canadian trade to keep a really tight handle on the costs we associate with pilotage, albeit that it is essential for the completion of the venture at the same time.

[Translation]

    Mr. Roger Gaudet: Thank you.

[English]

    The Chair: Mr. Burton.

    Mr. Andy Burton: You say:

...the government continues to cut the budgets of the coast guard and the Canadian Hydrographic Services to such an extent that their ability to contribute to the safety and security of marine navigation has been placed in jeopardy.

    That's a pretty strong statement. Can you elaborate on where we may be in jeopardy? Do we have to deal with it immediately? What's the situation?

    Capt Ivan Lantz: There are a couple of incidents happening here. Every ship needs charts to be able to navigate. They're required by law and they're the cheapest and safest aid to navigation on the entire ship.

    The Canadian Hydrographic Service is a relatively small organization with a lot of very outdated charts. It does not have the funds to re-survey those areas to update the charts, verify the quality of those charts, and get them back onto the market so they can verify that they have given the ship the best most up-to-date information. We're talking about information that is 10 years old and more being used on the bridges of some of the ships. It has not been verified in a number of years.

    If Canada is to be a player in the world of hydrographics, the Canadian hydrographer needs to be funded. Surveys of the ports and harbours in Canada need to be done, and the waterways and approaches to our ports need to be done. We need to have those tools. That is safety and environmental protection, you name it. It means everything for a ship to have a good chart on board.

    More recently, moving toward the digitalization of charts and so on and the location by GPS and DGPS, we also need to make sure those new chart utilizations in digital form are compatible with the chart data that's available. That has not been done in all waterways and in all places, and it needs to be done. It adds an extra load that is more pertinent.

    I've been working with the Hydrographic Service on their management models, priorities, and stuff like that, and they are seriously going to have re-engineer the way they work if they are to remain under the present fisheries department and continue to work.

    The coast guard has come under severe cost cuts. We have been told that in the St. Lawrence River they want to reduce the fleet by one buoy tender. That one buoy tender is going to extend by three weeks the period of time between the beginning of the placement of the buoys and the ending of the buoys, and so on. So during the removal of the buoys in the fall and then their replacement in the springtime, their proposal is to extend the period when some buoys are in and some buoys are not in the water.

    Those are the most risky times of driving--sort of the dawn and dusk periods. They represent periods of questionable safety, when safety is not a certainty in the placement of the buoys and the navigational aids. Are we providing navigational aids or are we not? We have to make up our minds what the hell our business is going to be.

»  (1705)  

    Mr. Andy Burton: That was a very interesting answer. I think we need to take note of it. It's an issue we'll definitely focus on in the report.

    On pages 11 and 12 you say:

...although short-sea shipping may appear to be an appealing concept, it is worth noting that the concept is working in Europe and the United States because it has benefited from significant governmental investment and financial support.

    We heard a bit about this when we were down in the U.S.A. two or three weeks ago. There's been significant investment from the government in the U.S.A. and in Europe. Can you elaborate a little bit on what they've done that we haven't done, or that we should be doing? You've probably touched on most of it already.

[Translation]

    Ms. Anne Legars: Several initiatives were undertaken with a view to eliminating irritants or obstacles, administrative or otherwise, to short-haul maritime transportation. Investments were made with a view to facilitating multimodal transportation. Not long ago, I read in a specialized electronics magazine that the European Commission recently confirmed France's right to subsidize this kind of service. This was not viewed as unfair competition, but rather, well within the framework of European competition policy because it was a common policy. Various countries grant subsidies to promote this mode of transportation.

[English]

    Mr. Richard Le Hir: I might add that particularly in Europe, the population density and the density of the traffic are such that in order to avoid outright congestion they really have to find alternative ways of shipping. Historically, they've always relied on barges, but they have to take a much higher interest in such solutions for the future, just to alleviate the congestion they are already faced with.

    Obviously in Canada we are not faced with congestion on that scale, except in very concentrated areas, particularly around Toronto. But we should consider the benefits from an environmental point of view. It's true we don't have the congestion because we are extended as a country over a very wide area, with practically no concentration of population, certainly when compared to Europe. However, the distances are long, and when you look at the use of fuel and the consequences on the environment, there's clearly a strong benefit for Canada as well, for environmental reasons.

»  (1710)  

    Mr. Andy Burton: Thank you, Mr. Chairman.

    The Chair: Thank you, Mr. Le Hir, Ms. Legars, and Captain Lantz.

    You've provided us with this chart on evolution of cost, which is very helpful. Obviously pilotage fees have been a central theme in what we've been hearing. Nobody likes them, everybody hates them, and everybody regards them as being, in one sense, out of control.

    When one looks back over the past 15 years, an example we've heard is if you had taken a plane 15 years ago for a flight of some distance and duration there would have been four pilots on board. Now on that same flight there are two, because technology has evolved and GPS and other devices have cut the staffing needs in half.

    We've heard that on a boat of x feet you need one pilot; on a boat of x feet plus 50% you need two pilots; and in many cases you have no choice but to have two. If one divides this into two contributing forces or elements, one contributing matter is technology. One assumes that would mitigate against having two pilots. You could somehow cut the number of them in half or perhaps eliminate them. The other one is politics, in the capital-P sense, amongst and within the pilots themselves and their various divisions.

    Can you tell us which is it? What are the contributing factors? Is it simply technology or the lack of it? Do ships not have sufficient technology, in terms of GPS, to ensure safe passage? Are pilots not adequately trained, or is it just a monopoly?

    Mr. Richard Le Hir: Let's address the issue of technology first. The development of technology has caught up with the marine sector. For instance, we were alluding to the introduction of AIS. There is a move toward the availability of more technology to assist in the safety and security of navigation. But when it comes to pilotage, particularly in certain areas where you need to have a lot of experience and knowledge of local situations, local conditions, and formations of ice at certain times of the year, it's a very complex situation. It requires a great deal of knowledge and experience, which the pilots provide. It's not a question of being able to obtain economies of scale. They are not possible on the same scale as commercial aviation, for instance.

    Then you raised the issue of monopoly. As is the case with any monopoly, there are situations that become abusive over time. I think we are within that range. I'm trying to couch this as carefully as I can because we rely on the pilots a great deal and have to maintain a good relationship with them. However, this is something we have discussed with them and they are aware of our concerns.

    We've told them in very stark and blunt terms, “Look, our business is your business. If we don't have any business, you don't have any business”. The light is easier to see for some than for others. Clearly there have to be some changes, and we hope they will be forthcoming.

    In the area of pilotage administration, there is definitely room for improvement, consolidation, and a reduction in the burden of costs. We hope this will be an outcome of your committee.

»  (1715)  

    The Chair: I should remind you that this is a parliamentary committee and you can claim protection from libel and slander laws while you're here in person. I thank you very much for coming here.

    Mr. Richard Le Hir: Mr. Chairman, I have enough experience that they would hold it against me anyway.

    The Chair: Thank you for coming; it's been very helpful. You've confirmed a lot things, particularly what we heard in the United States.

    We're going to suspend for about five minutes while our next witnesses come forward.

    I want to tell members that we have received notice from Mr. Keyes, who unfortunately was called away. It appears in “other business” as a motion, but it's a notice of motion that he will be presenting when the 48-hour notice expires. It's with respect to pilotage issues, for our report.

    Thank you very much. We'll suspend for five minutes

»  (1717)  

---

»  (1724)  

    The Chair: Mr. Meisner, you appear to be the Maytag man today; you're here all alone. I have to ask you to start.

    On the Great Lakes today, the name Meisner has a lot of history. Are you related to the Meisner family of shipping?

    Mr. Tim Meisner (Acting Director General, Marine Programs, Canadian Coast Guard): No, but I've been asked that many times.

    The Chair: There you go--one more time.

    Mr. Tim Meisner: They actually originated from Nova Scotia and are a different set of Meisners.

    Thank you, Mr. Chairman, and good afternoon.

    It's my pleasure to be here this afternoon to discuss the role of the Canadian Coast Guard, and specifically how it pertains to the St. Lawrence Seaway and the Great Lakes. A short presentation has been prepared to provide you with a brief overview, and you may wish to use it as you follow my remarks.

    The Canadian Coast Guard is a national institution that provides services for marine safety, protection of the marine environment, and facilitating maritime commerce. The Canadian Coast Guard also provides support to marine science and Canada's maritime priorities.

    Page 3 of the presentation provides a snapshot of the size and scope of the Canadian Coast Guard. We have more than 4,400 employees supported by 5,100 auxiliary volunteers. We operate in five regions, and our headquarters is here in Ottawa. We have 262 light stations and a system of 18,000-plus aids to navigation. Our fleet comprises 104 vessels, three of which are hovercraft. We have 27 helicopters and two fixed-wing aircraft, and operate out of 11 bases across the country.

    On page 4 I have provided you with a map that geographically depicts the presence of the coast guard in the five regions and the national headquarters, and the number of employees that are based there. Of particular interest to the subject being examined by this subcommittee are the central and Arctic region and the Quebec region, which together comprise over 1,300 employees.

    Turning to our legislated mandate, I have provided a summary on pages 5 and 6. The coast guard's legislative authority is derived from four principal pieces of legislation. The first is the Constitution Act, which provides the federal government with the power to legislate with respect to navigation and shipping. The Oceans Act establishes the Minister of Fisheries and Oceans as the minister responsible for the Canadian Coast Guard. The Canada Shipping Act contains the coast guard's legislative and regulatory framework for most of its services. Finally, the Navigable Waters Protection Act provides the department with responsibility for protecting the public right to navigation, and provides federal powers to approve works or remove obstructions.

    The Canadian Coast Guard provides services that cover the longest coastline in the world, in addition to the 3,700 kilometres of inland waterways that stretch from the Gulf of St. Lawrence to the western end of Lake Superior. The main services and programs we deliver are search and rescue; boating safety; ice-breaking operations; communications and traffic services; marine navigation services; environmental protection; and support to fisheries conservation and protection, science, and other government departments.

    As I mentioned previously, the coast guard is organized to deliver services throughout five regions. In our headquarters, based here in Ottawa, we have four directorates that collaboratively provide leadership on the development of legislation, policies, standards, and guidelines for our operations in the regions. These four directorates are marine programs, fleet, integrated technical support, and integrated business management.

    On the last four pages of the presentation I've provided some information on the coast guard's operations and programs in the Great Lakes and St. Lawrence. The coast guard's central and Arctic region and Quebec region share the responsibilities for these operations. The central and Arctic region has its headquarters in Sarnia, and operates facilities out of various locations throughout the region, including bases in Sarnia, Prescott, and Parry Sound. The region also operates three marine communications and traffic services centres at Prescott, Sarnia, and Thunder Bay.

    The Quebec region has its headquarters in Quebec City and operates bases in Quebec City and Sorel, as well as four marine communications and traffic services centres at Les Escoumins, Rivière-au-Renard, Quebec, and Montreal.

    Each region operates ships and helicopters for the delivery of services and programs. The central and Arctic fleet operating in the seaway and the Great Lakes includes three large vessels that carry out ice breaking, aids to navigation, and search and rescue duties; 14 smaller vessels service aids to navigation, support science, and conduct search and rescue; and two helicopters.

    The Quebec region operates six large vessels to carry out ice breaking, aids to navigation, and search and rescue; two hovercraft; and five smaller vessels to support science and conduct search and rescue, in addition to the eight helicopters.

    As I mentioned at the beginning of my presentation, the coast guard's mandate continues to be marine safety, environmental protection, and support to maritime commerce.

»  (1725)  

    In delivering this mandate, the coast guard delivers programs and services throughout Canada. Modernization of these programs and services is an integral part of the coast guard's strategic and business plans, and has application to the Great Lakes and St. Lawrence Seaway. Examples of this modernization include the use of new technology, such as global positioning systems and automatic identification systems. The coast guard is committed to consultation with clients as we move forward with our modernization initiatives.

    I know this has been a brief overview, but I hope it gives you some information. I will now be pleased to answer any questions you may have on the coast guard or operations in the Great Lakes and St. Lawrence.

»  (1730)  

    The Chair: Mr. Burton.

    Mr. Andy Burton: Thank you for your presentation. My first question is on budget cuts. In the previous presentation, we heard there were serious cuts to the budget of the coast guard and they were possibly creating problems. Are you aware of any? Can you just elaborate a bit on the budget process? Is it allowing you to do your job? Do you need more money in specific areas? Where are we at here?

    I was on the fisheries committee last year and we heard about budget problems with the coast guard on the west coast. Do you have similar problems?

    Mr. Tim Meisner: It's no secret that our asset base--mostly our fleet--is aging. We needed money to invest in the fleet and other assets, and as of the last federal budget we did receive a little over $47 million a year to reinvest in our capital asset base. So that did improve the situation.

    On the rest, there are challenges with the budget. Since program review in 1996, the coast guard budget has been reduced significantly. We are still in the process of adjusting to that budget reduction. As I mentioned, we have modernization initiatives underway to look at how we can be more efficient and effective in the programs we deliver. The department overall is looking at a program to align its priorities with the budget exercise to ensure that the dollars are allocated to the right programs. But at this stage I would not say that any safety issues are in question.

    Mr. Andy Burton: I don't like to be too site-specific, Mr. Chairman, but we were recently in your riding of Sarnia. There were some issues brought up about dredging needs in the St. Clair River, specifically around the harbour in Sarnia. I see your mandate is shipping channel safety, which I assume includes dredging. On page 13, it says dredging has been undertaken in the Detroit and St. Clair Rivers, yet we heard of a specific instance.

    Can you perhaps address why it hasn't been dealt with, or is it outside your mandate? What's the issue?

    Mr. Tim Meisner: Maybe I can give you a little bit of the history of dredging. I'm not sure I know the specifics, but maybe you can expand on them after I give you the history.

    As part of the program review exercise in 1996, dredging was one of the programs the coast guard extracted itself from. In fact, the Standing Committee on Transport at the time heard that and made the recommendation that the coast guard get out of dredging, where there was a commercial benefit to it.

    We have for the most part removed ourselves from managing dredging, except in the Detroit and St. Clair Rivers, where we have an international obligation with the U.S. to do so. In that particular waterway, I know we've allocated a certain amount of money this year to do the dredging, so I wasn't aware of any issue with those rivers on dredging.

    Mr. Andy Burton: That's interesting because we certainly heard about a specific instance.

    The Chair: It's actually in Sarnia harbour, as opposed to the St. Clair River and the Detroit River.

    Mr. Andy Burton: I said it was the entrance to the harbour, Mr. Chair.

    Mr. Tim Meisner: As I said, we've extracted ourselves from the dredging program, so we don't have any more responsibility for dredging, other than in the river itself.

    Mr. Andy Burton: Okay. I guess navigational aids is a similar issue. I know we're here to talk about the St. Lawrence Seaway and the Great Lakes, but in terms of navigational aids, is it the mandate of the coast guard to continue the commitment to provide navigational aids in waterways?

    Mr. Tim Meisner: Yes. The right to navigation or the protection of navigation is a federal authority, and the coast guard continues to provide aids of navigation within areas where there are safety issues. For example, if the water's charted we will provide aids to navigation; if it's not charted we probably won't provide them.

    Mr. Andy Burton: What if you get into a situation where the water was charted, but the charts need to be upgraded and that's not being done?

    Mr. Tim Meisner: If there were a safety issue because the charts were outdated, we would probably review whether we would provide aids to navigation there.

»  (1735)  

    Mr. Andy Burton: Would that lead to possibly providing those aids?

    Mr. Tim Meisner: It might lead to them having to be re-charted. If we're already providing them there, we could extract ourselves if it's a safety issue; if the waters weren't charted properly.

    Mr. Andy Burton: So if they weren't charted properly you could take the navigational aids out.

    Mr. Tim Meisner: Possibly. There's a process you go through in consultation. You offer others to take them over, etc.

    Mr. Andy Burton: Thank you, Mr. Chair. Maybe I'll come back.

    The Chair: Mr. Gaudet.

[Translation]

    Mr. Roger Gaudet: Thank you, Mr. Chairman.

    Mr. Meisner, which particular measures proposed by the Shipping Federation of Canada do you agree with?

[English]

    Mr. Tim Meisner: Do you mean in reference to the St. Lawrence Seaway infrastructure? They talked about a lot of proposals in the shipping federation, and the Canadian Coast Guard has no jurisdiction over many when it comes to expansion of the seaway. Is there a specific proposal you are thinking about, or is it all of their proposals?

[Translation]

    Mr. Roger Gaudet: I as speaking about all of the recommendations in general. Are there any that both the Shipping Federation of Canada and yourself agree on? You don't have to go into every single recommendation, but can you name a few that you do agree on, or conversely do you disagree about any particular ones, and why?

[English]

    Mr. Tim Meisner: I'm going from memory here, but since the coast guard is an integral part of the marine industry we would have to agree with the importance of the seaway and keeping it alive for marine traffic--keeping it active. It is an important marine transportation route through the seaway and the Great Lakes. I guess I would personally support recommendations that would maintain the seaway as a viable marine route.

    On recommendations concerning infrastructure investment in the seaway, that's a little beyond the mandate of the coast guard.

[Translation]

    Mr. Roger Gaudet: In light of the $47 million you mentioned earlier, has the situation improved any for the Coast Guard in so far as its fleet of vessels is concerned? The Auditor General of Canada identified a number of problems in 2000.

[English]

    Mr. Tim Meisner: As I mentioned in response to the previous question, our fleet and our other assets are aging and we're getting to the point where we have to consider significant upgrades. We just received an additional $47 million in the February budget. We're in the process now of developing plans on where best to put that money to improve both the fleet and other shore-based assets. No final decision has been made on that, but it will certainly help.

[Translation]

    Mr. Roger Gaudet: Have safety considerations changed for the Coast Guard since September 2001?

[English]

    Mr. Tim Meisner: Yes, things have changed. I think they've changed for everybody.

    I think it's important to note that the coast guard does not have a security mandate, although we do have a security role. Our primary role in security after 9-11 is two-fold. Basically we have a presence on the water through our vessels, and they can observe, record, and report things they see.

    More important is the infrastructure we have for getting information from vessels that are operating in Canadian waters, and passing that information on to our security partners like the RCMP and DND, which use it as intelligence. As part as the security budget, the coast guard got a little over $27 million to implement the automatic identification system that was referred to by the previous witness.

[Translation]

    Mr. Roger Gaudet: Thank you.

[English]

    The Chair: Mr. Meisner, you made reference to program review in 1996. A number of complaints from users, both within and without the system, emanated from program review. One was that the cost of doing business with the coast guard was apparent, particularly for things such as ice-breaking fees that were extracted, yet users could never determine how the coast guard arrived at those numbers.

    You've made reference to consultations. Can you tell me what has improved, in terms of dealing with users on these fees and allowing those who pay a way to determine if they're getting value for money?

»  (1740)  

    Mr. Tim Meisner: The fees you refer to were part of the program review--the aids and navigation fee that was first implemented in 1996, and the ice-breaking fee that was implemented in 1996. It's no secret that they were very confrontational. They still remain confrontational because the industry, as you heard from the previous witnesses, thinks they have an impact on their business.

    We did extensive consultation before putting the fees in place, and continued the consultation with the industry through a marine advisory board, chaired by the commissioner of the coast guard, with representation from industry from each region. This marine advisory board set up some working groups where we examined our costing processes, how the fees were developed, and all the impact statements.

    I won't sit here and tell you there was total agreement on all the decisions, but we opened all our processes to them so they would be aware of the decisions that were made and how they were made.

    The Chair: Are you telling me that the industry--if I can call it that--is well aware of what your cost base is and how you arrived at these fees?

    Mr. Tim Meisner: I'm sure they must be aware of that. I wouldn't say that applies to every one of them, because this was a working group set up with representation from different members of the industry. Being aware of it and agreeing with it are two different things.

    The Chair: All right.

    What is a consultation?

    Mr. Tim Meisner: Do you mean in general?

    The Chair: You've used the word in your vocabulary.

    Mr. Tim Meisner: Consultation, in terms of fees and delivery of services, involves conducting a proposal, discussing that proposal with the stakeholders, making adjustments where necessary, and finally--I guess the decision is going to be a ministerial decision--providing the feedback on the decision and why it was made.

    The Chair: Are there public records or some sort of records on consultations?

    Mr. Tim Meisner: There are many of them. We keep minutes of all the marine advisory board meetings.

    The Chair: Are the minutes of those meetings available to those attending?

    Mr. Tim Meisner: Yes.

    The Chair: Are the minutes of those meetings circulated to those being consulted?

    Mr. Tim Meisner: Yes.

    The Chair: Are they asked to agree with what was recorded by the secretary?

    Mr. Tim Meisner: Most definitely.

    The Chair: Okay.

    Were the mathematical calculations, in terms of cost recovery, circulated to those people to reveal to them how you arrived at these fees?

    Mr. Tim Meisner: They were circulated in great detail to the working groups we established. The concept was that they represented their own regions, so they would take those back and have discussions so there would be a fan-out on the details, not on the overall policies and principles around the details. I assume most would know about them, but not necessarily everybody would have them. There were a lot of spread sheets and Excel sheets in there that would not necessarily be part of any minutes of any meeting.

    The Chair: Okay.

    You used the term “modernization”, and you made reference to the increased capital budget, which has to be encouraging to you.

    In terms of ice breaking once again, is there a capital cost factor built into the ice-breaking fees, or is it strictly an overhead that is an operational cost?

    Mr. Tim Meisner: Both the navigational aids fee and the ice-breaking fee have a capital component. On the ice-breaking side it's significantly higher because ice breaking is delivered through ice breakers, which are ships that are capital intensive. We include that in the cost base as a depreciation amount.

    The Chair: If there's a capital cost built into it, this past winter there was a considerable amount of ice on the Great Lakes, particularly on Ontario, Huron and Superior, but at least in the three years prior to that, particularly on the lower two lakes, there was virtually no ice at all. Do you factor in cost recovery after the fact? Obviously your cost of breaking ice was much lower when there wasn't any ice. Have your fees been adjusted? Have they gone down? Are they adjusted annually, or do they just stay the same?

»  (1745)  

    Mr. Tim Meisner: We put in the ice-breaking fees in 1998 at a proposed level. The fees were based on costs that were derived from 1995, which was deemed to be a typical ice year. I must admit that the fees cover less than 10% of the costs, so the cost factor would have to fluctuate greatly for the fees to go below 100% of the cost. But in any event, we fixed them in 1998 and they haven't been adjusted since. They were put in place originally through an aide-mémoire to cabinet. They agreed to fix them for the three years until 2001, and they have been extended another year to 2002.

    The Chair: So you're saying your calculation was based on a 1995 base year, if I can call it that, the fees were set in 1998, and they're the same today as they were then.

    Mr. Tim Meisner: The rates are the same. The revenue fluctuates and so do the costs, obviously, so the cost recovery percentage fluctuates from year to year, but the rates haven't changed.

    The Chair: I just want clarification on this. So the amount charged to the industry is more or less 10% of the actual cost to the coast guard for the operations for that period of time.

    Mr. Tim Meisner: Yes, including the capital portion, what we call our full costs--

    The Chair: Are you aware of the proposal by certain shipping associations to provide their own ice breaking? I wonder what your view is on that. They think they can do it cheaper than you can.

    Mr. Tim Meisner: On your first question, I am not aware of that. Secondly, if there is a proposal it would certainly be taken under consideration.

    I think we have to keep in mind here that our ships are not pure ice breakers. They also have a search-and-rescue function, and in some cases they have an aids-to-navigation function. In other words, they're multi-task vessels.

    The Chair: On the aids to navigation, at the same time in 1996 or 1997 a lot of navigational devices were removed from the system, particularly those related directly to what I call recreational boating on the Great Lakes. There are 850,000 boaters in Michigan who come into Canadian waters constantly.

    In terms of the rationalization of all of that in 1996-97, what kind of cost saving did the coast guard realize? What was the net effect? Can you give us a ballpark figure?

    Mr. Tim Meisner: That's a good question. We deal with the fees and full cost, which is the depreciation, so I'd have to research the budget impact and get back to you.

    The Chair: Is there any cost recovery on the whole business of recreational aids to navigation, if I can call it that?

    Mr. Tim Meisner: Not right now. Our three main client groups are commercial shipping, fishing vessels, and recreational boating. We only recover costs from the commercial shipping industry. Having said that, we've only allocated a portion of the cost to that industry as well. In other words, they're not paying for the cost of aids provided to the other two client bases.

    The Chair: My final question involves the seaway, but it's a little bigger than that. Does the coast guard operate the training courses for recreational boats larger than 12 feet, or whatever it is?

    Mr. Tim Meisner: Do you mean the operator competency courses?

    The Chair: That's the name of it.

    Mr. Tim Meisner: We accredit the provider of the course; we don't deliver the course.

    The Chair: So you're the accreditation agency.

    What percentage of recreational boaters on the Great Lakes--Canadian-registered boats, and I use that term lightly--have complied with that? What is the average cost of taking the course?

    Mr. Tim Meisner: I'd have to find out. Are you talking about recreational vessels that have been licensed?

    The Chair: I assume they have to be licensed.

    Mr. Tim Meisner: The operator competency card is for the operator, not the vessel.

    The Chair: Okay. Sorry.

    Do you have any idea of percentage of compliance?

    Mr. Tim Meisner: I'd have to find out and get back to you.

    The Chair: Okay. Thank you.

    Are there any other questions?

    Mr. Burton.

    Mr. Andy Burton: Maybe just to clarify for my own knowledge more than anything, is ice breaking just a fixed fee for the winter, or is it based on an hourly charge per vessel?

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    Mr. Tim Meisner: It's a fixed fee per transit. So if a vessel transits from one point to another during the winter period it will pay a flat fee.

    Mr. Andy Burton: I mean the ice-breaking charge itself that you put on.

    Mr. Tim Meisner: That's what I'm talking about. It's $3,100, or in that order, per transit, with a ceiling. You only pay a maximum of--

    Mr. Andy Burton: Even though it might not be as far one time as another, it's just....

    Mr. Tim Meisner: Yes.

    Going back to the marine advisory board and consultation, we had an industry group work with us to develop the fee structure itself. It was a trade-off of accuracy of services used versus simplicity. That's the most simple fee to put in place.

    Mr. Andy Burton: If you do 10 transits one winter and 100 the next it would be 10 times--

    Mr. Tim Meisner: We've actually put a cap on it, so you don't pay for any more than nine per year. So once you hit nine, the rest are free. That recognizes things like ferries that have frequent transits.

    Mr. Andy Burton: Okay, thank you.

    The Chair: Go ahead.

[Translation]

    Mr. Roger Gaudet: I have one last question concerning icebreaking operations. Since there are no icebreaking operations on the US side, could you not ask the government to cover icebreaking costs? That would effectively reduce costs for Seaway users.

[English]

    Mr. Tim Meisner: I'm sorry--ask the U.S. government to pay for...?

[Translation]

    Mr. Roger Gaudet: Not the US government, but the Canadian government. The Americans have no costs associated with icebreaking operations.

[English]

    Mr. Tim Meisner: When you get into a comparison between the U.S. and Canada, it's a very complicated issue because they have different tax structures and everything else that they recover costs from. We have a government policy in Treasury Board that imposes cost recovery for user fees where there's a benefit. So we're simply adhering to that Treasury Board policy on cost recovery by implementing fees for services. I'm not sure how you would twist it around and do it through the U.S. Maybe I don't quite understand the concept you're proposing.

[Translation]

    Mr. Roger Gaudet: I'm not talking about recovering costs through the United States. I'm talking about the Canadian government picking up the tab. If fees continue to escalate, traffic will decline on the St. Lawrence Seaway and Great Lakes. Goods will be shipped either by train or by truck. If fees continue to rise, at some point, a ceiling will need to be imposed.

[English]

    Mr. Tim Meisner: There have been multiple economic impact studies conducted to try to determine that threshold. The coast guard did two of them in 1996 and 1997, and the Treasury Board Secretariat did an impact study on all Canadian government fees in the marine industry. It's very difficult to be conclusive on what that threshold would be because there are so many factors to be considered. There probably is a threshold, but I'm not sure how you would determine that if three economic impact studies weren't able to.

    The Chair: This subcommittee was in Washington a number of weeks ago and we heard from the Transportation Security Administration that they had a TWIC card--a transportation worker identity card. It covers anybody who works in or is remotely connected to the transportation industry.

    In terms of post-September 11 security in ports, what role does Transport Canada play, and what are they doing about it?

    Mr. Tim Meisner: The previous witness said it would be nice to have government collaborate. Building on that, Transport Canada is the lead department on transportation security, and in particular marine security, and they have established an interdepartmental working group of 13 departments. The six main ones are coast guard, transport, DND, RCMP, CSIS, and customs and immigration. They have collectively put the package together on security initiatives. It was announced by the Minister of Transport last January.

    They used a collaborative approach to come up with the initiatives and what will best serve Canada as a whole when it comes to maritime security. So I think it's a good example of where the departments are working very well together in the interest of marine security, in this instance. They will continue to meet monthly to discuss issues around that, led by Transport Canada.

    The Chair: Approximately 10 days ago the Minister of Transport put out a press release. He had been in Washington and signed what I would call an accord or agreement with certain departments within the U.S. government to re-study the St. Lawrence-Great Lakes system. What can you tell us about it?

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    Mr. Tim Meisner: I think I will have to defer to my colleagues at Transport Canada on that one, as they're the lead on it. From a coast guard perspective we'll be consulted as the study progresses because we'll be providing service, or not, as it goes on. But I really don't have a lot of details at this stage.

    The Chair: I understand that.

    Thank you very much for coming.

    Mr. Tim Meisner: Thank you.

    The Chair: The meeting is adjourned.