[Recorded by Electronic Apparatus]
Thursday, March 21, 1996
.0911 
[English]
The Chairman: Order, please.
Good morning, ladies and gentlemen. This is our first meeting of the newly constituted Standing Committee on Fisheries and Oceans.
We have some new members on the government side. I think Harold Culbert is the only new member attached to the committee. Our past chairman - we're having difficulty getting rid of him here - is Ron MacDonald. He's back, at least for today. I welcome him back. We also have Harry Verran and George Baker. From the Bloc Québécois we have Yvan Bernier and Mr. Rocheleau. And there is Mr. Gouk.
Mr. Gouk (Kootenay West - Revelstoke): Just to set the tone of the meeting, Mr. Chair, I would like to start on a point of order. You pointed out that this is our first meeting since the organizational meeting. I draw you back to the organizational meeting, at which Mr. Scott, the chief critic for the Reform Party, who has been very actively involved on both east and west coasts on this issue, raised the point that he could not be available this week and was concerned that this is a very critical witness to come forward. It's something he's been very actively involved in and put a lot of time in on, and he asked if this particular meeting could be held not earlier than the week of March 25.
That was tactically agreed to at that meeting. In view of the fact that the witness called before us is in fact a senior civil servant and therefore I would assume at the call of the chair, within reasonable scheduling commitments, it is proper that this meeting not take place except as agreed on at that meeting, at least not without contrary negotiations taking place so Mr. Scott can have his concerns properly laid out and dealt with.
I've come in on very short notice, and I have a very heavy commitment on my timetable too. This is pulling me away from two other meetings I'm supposed to be at right now. I would ask why, after that agreement was made at that meeting, we now find ourselves having a meeting with the witness who, it was agreed upon at that meeting, would not be called before March 25.
The Chairman: At our founding meeting Mr. Scott indicated he wouldn't be here this week. We were setting up our agenda on TAGS, the marine fees, and a general briefing from the department on the current state of affairs in the department. I recall Mr. Scott indicated he wanted to be here for the general briefing from the department because of his interest in the Pacific Coast. I don't recall him saying he didn't want the marine fees to be discussed in his absence.
Anyway, the two departments, HRD and Fisheries and Oceans, couldn't get their act together quickly enough to have a hearing on TAGS, so we couldn't do TAGS this week. I didn't want the committee to be doing nothing for three weeks after the House had opened. So the current pressure was on for the marine fees. Mr. Thomas had come up with a new proposal. He's been going across the country discussing his new proposal. We wanted to get this committee working and we called the meeting with Mr. Thomas.
Whether that's right or wrong, that's the way it is, and I think we'll have to continue.
Mr. Gouk: For the record, then, I would just like to state that we object to this meeting taking place today, given the agreement that was made and given the fact that it presents Mr. Scott, our chief critic on this, no opportunity to question at the committee the chief person responsible for the marine fees proposal.
The Chairman: Okay, we'll take note of that and in the future we'll give you fair warning of any changes to the agenda.
Mr. Bernier.
[Translation]
Mr. Bernier (Gaspé): Mr. Chairman, my goal here isn't to fly to your defense this morning but I would like to say, as representative of the Official Opposition, that I have been anxiously awaiting this meeting with the commissioner.
I also deplore Mr. Scott's absence, but he can read the proceedings. Just to reassure our colleague from the Reform Party, I'd like to tell him that this morning is only the beginning of this committee's work. Mr. Scott will have ample time to come back here, because I intend to ask for a follow-up to this morning's meeting.
.0915
We'll have to hear the industry stakeholders again and the government will have to tell us what kind of agreement they're seeking. This is only the beginning.
Once again, I want to repeat that I was ready for this meeting well before this week. With everything we've been reading in the media, it was about time we had this meeting with the commissioner.
[English]
The Chairman: Thank you, Mr. Bernier.
Let's continue with our witness, Mr. John Thomas, Commissioner of the Canadian Coast Guard. Mr. Thomas, did you want to introduce the people you have with you?
Mr. John F. Thomas (Assistant Deputy Minister, Marine, Department of Fisheries and Oceans; Commissioner, Canadian Coast Guard): Yes, thanks very much, Mr. Chairman.
With me are Michael Turner, the Deputy Commissioner of the Coast Guard; Mike McNamara, who has been the project manager for the marine services fee project; and Diane Cofsky of his staff, who has been looking after the financial aspects, the policy aspects, and in fact just about everything else we're doing with the marine services fee.
The Chairman: Okay. We have approximately two hours. I think we have to be out of here around 11 a.m. I would ask the committee to remain at the conclusion of the hearings for ten minutes in order to determine what we want to do with marine fees in the near future - whether we need hearings or not.
Do you have a presentation, Mr. Thomas?
Mr. Thomas: I have some words, Mr. Chairman.
Mr. Chairman, about a year ago we started the development of the marine services fee with industry. It was introduced in the budget of February of last year, and we immediately started working with them. That led to the holding of public hearings by the Standing Committee on Transport, and an arrival at a number of recommendations. We have been following those as principles, in fact.
We developed a discussion paper over the summer, and we released that in October. We sent it to about 150 people and we've received over 300 responses, so there was a large amount of interaction with it.
In January, we developed the principles for a marine services fee. We have been in steady consultation since then with industry, as we look to use those principles in order to shape them to see what would be the best approach for the marine services fee for industry.
With that as a bit of an introduction, what I'd like to do is to use the copies of the overheads that you have in front of you and go through them in a little more detail.
The reason we moved to put a marine services fee in in the first place was that at the time, you'll recall, the Canadian Coast Guard was part of the Department of Transport. Overall, we were trying to move the transportation system in Canada to be more efficient and more competitive. There were a number of aspects that we had to follow through on in order to be able to do that.
Part of that was reducing the deficit, pure and simple. The Canadian Coast Guard has probably the largest part of the cost of marine services in Canada, so we needed to work as partners with industry to see how we could reduce the deficit. Our part of it was going to be the reduction of our costs, which I'll come to later on and which we are following through on. What we were looking for from industry was for them to follow through on their part, and that was with respect to the marine services fee.
We also wanted to reduce the burden on the taxpayer for those services that are directed at specific users. Again we were able to identify those services for commercial transportation that we felt they should pay for. When we talked about paying a fair share, we decided it would be appropriate to start at one-third of the actual cost of delivering the services, and that because there had been no charges for these services in the past, it wasn't appropriate to move to full-cost recovery. So we looked at one-third cost recovery, even then phasing it in over four years in order to give the industry an opportunity to adjust to it.
Finally, when we looked at what we were doing with all the modes of transportation - with air, rail and road - we were moving away from subsidies. Subsidies were seen as not being the way to set up an invigorating and invigorated commercial transportation system, so the government as a whole started moving away from subsidies. We took them out of rail going west and we took them out of the railroad coming east; and because a lot of the marine services are seen as a subsidy - for instance, things like search and rescue are not purely and simply related to safety but are seen as being a service to a particular user - we needed to find some way of reducing our costs, perhaps by reducing the levels of service and then having industry pay for their fair share of it.
.0920
In doing this, we have been working, as directed by the Standing Committee on Transport, with the Marine Advisory Board. Unfortunately there are two groups that are not part of the Marine Advisory Board while they have many members represented at the Marine Advisory Board. The Chamber of Maritime Commerce and SODES are not part of the Marine Advisory Board per se, but there are eleven organizations on the CMC, for instance, for which we have similar and overlapping representation on the Marine Advisory Board.
Next I'd like to go to the concerns that have been raised by SODES and by the CMC and respond directly to those concerns. I'm sure you will be hearing about them.
First of all, SODES, as you'll see from the slide, believes that a fee for service, period, is prejudicial. So it would appear from this that they don't support a cost recovery because they are not supporting a fee for service.
They went on to say the approach we were taking was supporting Atlantic Canada and western Canada to the disadvantage of the river. I'll answer that. Definitely we are not. In fact one could argue that the majority of the representation on the Marine Advisory Board is from central Canada. In fact that's been one of the concerns raised by the east.
They also said there needed to be an in-depth economic study, and we agreed to that. We feel that user-pay - that is, where you pay specifically for the services you use - is as close as we can get to the government's intent, and we don't understand how SODES can take the position of saying they don't agree with paying for the services they use.
If we look at the Chamber of Maritime Commerce, they want a relationship between the fees we're charging and the services. We've approached that by dividing the fees by region, first of all, and then by actual service so we can tell whether it's ice-breaking or aids to navigation.
They say they don't support taxation; neither does industry as a whole and neither do we. Taxation, a national fee or an omnibus fee are as far away as you can get from the notion of the user-pay principle, because it just muddies the water. You need to be able to relate the fees you're paying to the services being delivered, and a broad-brush approach doesn't help with that.
There's a concern about looking closely at the coast guard's cost reduction efforts. Members of the Marine Advisory Board, I'm sure, are up to their eyebrows and fed up with looking at the details of cost reductions within the coast guard.
I have some information here that's been widely available, and we can certainly make it available to anyone who would like to see it. In fact I'll deal with that in a few more slides.
We have had significant cost reductions within the coast guard. A total of $133 million is currently planned in detail. We're already finished the first year and the money is coming out. We have almost $70 million more before the minister. We're looking for decisions in about May. All together something like $200 million cash is being taken out of the coast guard's budget over the next four years.
So we have had significant cost reductions within the coast guard and we are planning further significant cost reductions in the coast guard, and that has all been done with openness and transparency with the 22 members from industry who are sitting with us on the Marine Advisory Board.
There's concern that we need to look at the economic impact analysis. We agree. We had a survey done. I would hesitate to call it a detailed impact study; it wasn't intended to be. We had sent out the fee structure to industry. We asked them to look at the fee structure and to look at the impact on their particular industry. We hired a consulting firm to meet with them and do a survey, if you like, to get information from them as to which of the options seemed best for them and how they saw this impacting.
As a result of that, by and large across the country the recommendation was that we could go ahead with the $20 million, that is, the first year of the cost recovery, but that we needed to take a more in-depth look particularly at ice-breaking and at some of the more sensitive areas before we moved to the $40 million and $60 million, and that is in fact what we're doing.
We have agreed to undertake a detailed socio-economic study that will be national in scope. It will start at the port level and will come up to the regional and then up to the national level.
.0925
We will be doing that in close cooperation with both Transport Canada and the three federal economic development organizations, ACOA in Atlantic Canada, WDO in western Canada, and FORD-Q in Quebec. We've already had discussions. They've agreed to participate.
We have also agreed that we would share the terms of reference with the provinces involved, the ones I have talked to - but in any case we would share with all of them - to make sure the study we're undertaking does have the scope and will provide the kinds of information we need before decisions are taken to move ahead on the forty and sixty; and we agree on that.
The CMC then goes on to say the principles outlined by the standing committee have simply not prevailed. The next several slides are in fact the principles that were put forward by Scott, and I'd like to respond to that charge. We believe we are following through on the recommendations from Scott, and I'd like to demonstrate how.
Recommendation 23 said we shouldn't go ahead until we could clearly identify the costs for services and the levels required and we have costs under control. In essence that's it.
We have looked at the full cost using government common practices. That's your cash outlay plus your overhead, plus your depreciation on capital, plus the cost of capital - the normal business approach to accounting for operations. We have taken that and applied it to those services where we're looking for cost recovery: aids to navigation and ice-breaking. We have done that within each region. That provides the cost base which is the underpinning for the cost-recovery process.
We have been working very closely on a monthly basis, and in the case of ice-breaking it's been down to perhaps two and three times a month, as we work with industry to see how we can reduce the levels of service to those they feel they require. We have been doing that for a long period, but in a concentrated manner over the last several months. In the St. Lawrence there are areas where industry has said, yes you can take out these buoys right now, and when the new precision navigation system comes in you can take out more, perhaps 80%. We generally agree with that principle. We have talked about taking out other services, and we are moving on it.
So we are reducing our levels of service as industry, the user, determines that we can reduce them. We are not opposing that. We agree. We have to reduce our budgets - I have the pressure on me - and I can reduce the budgets only if I reduce the level of service.
I believe we have our costs under control. We have a budget that was $600 million. It's now at $500 million. It is coming down. But we're within 1% in terms of managing that cash budget. I'm not sure whether that's what the CMC was getting at when this was an approach that was taken to Scott and then it came back, but we do have our costs under control, and we are looking at reducing those costs, through the plans I've touched on.
We do have consultations with the Marine Advisory Board. That is the board we were directed to focus our attention on and to work with as representing industry. I would say probably a third of the time has been oriented towards cost reduction. Most of the time, two-thirds, especially recently, has been on the machinery around cost recovery: what is the best way of putting it in place.
If I turn to recommendation 26, the recommendation there was that there should be cost recovery for dredging. In fact we are moving to full cost recovery for dredging. In some cases we're moving out of it and letting industry take it over. For instance, that is the way they would like to do it on the Fraser River, on the west coast.
We've had discussions with all the ports along the St. Lawrence River. They also had that option of taking it over and doing it in conjunction with the dredging they're doing for their own ports now. They have indicated they would rather we continue with the dredging, but they will pay full cost recovery.
We've had discussions with the Port of Sain John and they have accepted that they will take the responsibility for dredging. We need to work out the mechanics of how we actually do this, charge for it. We are also moving out of dredging in a large number of small ports across the country. That was a recommendation in Scott. We're moving out of that and we're discussing that with the ports and communities involved.
Recommendation 26 was that there should be no cost-recovery program for ice-breaking until we can say what ice-breaking is for in the commercial sector. We can clearly identify that. We track who we do the ice breaking for. We track it by ship, by the amount of time, where the ship is going. The system captures that in detail.
We also know what ice-breaking we do that is public policy - for instance, for flood control on the St. Lawrence River. When we're breaking ice and no traffic is coming through, we're doing it for flood control.
.0930
So we do have full cost determined for route assistance - that is, convoy work - for harbour breakouts, and for flood control. That's clearly identified. We are not charging the commercial sector for flood control, nor are we charging them for harbour breakout related to other sectors, for instance fishing harbours. It is only for the harbours related to commercial transportation.
The cost of ice-breaking services in the north are not being attributed to the commercial sector, so that in ice-breaking we can identify the cost and we are only looking to charge the commercial sector for those services they use.
Recommendation 29 was that in putting in place an ice-breaking service we should take account of the design of the ship, that it should be able to operate in ice, and that there should be some incentive. In fact, that is part of the proposal we have been discussing.
Currently, we have an incentive of 5% for precision navigation. What we have discussed is that when we bring in the fee structure for ice-breaking, there will be a further 5% or thereabouts for ships designed to operate in ice. So we agree with that and we are implementing that recommendation.
On recommendation 30, that search and rescue should not be charged in terms of cost recovery, we are not doing that. We agree with the recommendation. We are implementing that. We are considering, though, charging cost recovery for frivolous use of the service. We had three good examples on the east coast last year - somebody trying to wind surf from St. John's across the Atlantic, a balloonist who just got carried away...we do get that. We are looking at not just the very wild ones like the examples I have given, but there are other areas where there is frivolous use of the service because the person is simply not taking adequate caution.
Recommendation 31 - and this is a key one - is that there should be full and open consultation on the development and implementation of any national cost recovery program and that the Marine Advisory Board should play a pivotal role in the process.
We have been following that scrupulously. The public consultation paper, as I say, went out to over 150 clients and we've had well over 300 responses to it. We have met with industry groups across the country. We have been meeting regularly, that is, monthly, with the Marine Advisory Board.
There are 20 members on the Marine Advisory Board. It is chaired by someone from the private sector, Johanne Gauthier, from the Canadian Maritime Law Association, who was elected by the other members from industry. I would say, by and large, that the working relationship at the MAB is excellent. I am very pleased with the way it's working. A lot of information has come through, but I think we all have a reasonably common understanding. It doesn't mean we have unanimous agreement, but we certainly have a common understanding of the principles in what we're doing.
There is a task force under the Marine Advisory Board, oriented strictly towards ice-breaking. It has seven members on it. It's chaired by industry, a person out of Imperial Oil and then CPPI. It has representation from the Port of Montreal, from the St. Lawrence River, from the lower North Shore, from Newfoundland, from the north shore of New Brunswick, all those people who have a vital concern about ice-breaking. They are tasked with looking at how they can reduce the cost of ice-breaking, and then having done that, what is the best way of putting a charging structure in for them. They are working on that, and we expect to have recommendations this June.
So I believe there has been substantive alignment with the recommendation here, recommendation 31.
One of the points that came up early on was that we shouldn't have cost recovery unless the coast guard was doing its best to control its costs, reduce its costs - different perspectives.
On the next slide, you'll see highlights, if you like, of the.... We have a detailed plan available that shows how we are reducing by $133 million. It's made up of a number of components. This is reducing our appropriations. Some of them you're very well aware of, like the destaffing of light stations on the coast. Some others are: the integration of marine communications and traffic services where we're going from 44 manned sites across the country down to 22, and eventually down to 12, and possibly beyond that; and reducing headquarters' overhead, both at the national level and at the regional level. There are detailed plans for that $133 million.
But we have been working with the Marine Advisory Board to go beyond that. We have what we have been referring to as strategic initiatives within the MAB. Essentially, that's saying how much further can you go in everything you're doing? Whereas before we were going from 44 to 22 manned sites, we are now going to 12 manned sites.
.0935
With the new technology that won't be here until around 1999 we believe we may be able to get down to four or five sites across the country. We're piloting that with industry now. We're moving in that direction.
In moving in that direction, the pilots are being worked out with industry. We have two on the west coast, two out of Newfoundland and two in the St. Lawrence River where industry is putting up money as we're putting up money for the shore side in order to push this technology. We are well ahead of the rest of the world. We aren't looking for international decisions, but we think we may be able to do a lot within Canada even without that. That's what we're doing.
We are looking at things like privatizing the Canso Locks. It's not something we need to do. It can be turned over to the main users.
I mentioned that we were getting out of the main dredging, the main ports. This additional $6 million reflects the fact that we're getting out of old dredging.
We have been working with the differential global positioning system - that's precision navigation - over the last couple of years in terms of the placement around Canada. Because of the geography, such as mountainous areas on the west coast, for instance, you have to position the transmitters to get good coverage. We have done that. By December of this year we will have DGPS, differential global positioning, in place south of 60. This means we will have navigation that is accurate to within ten yards.
For most areas, except for Labrador and a good part of Newfoundland, we have the electronic charts available. Once we have that in place, we will be able to take out a good chunk, perhaps 50% to 80%, of the traditional floating and fixed aids. Again, we're working very closely with industry on this. Industry has to put the money up for the equipment aboard the ship and we're putting the money up for equipment ashore. There is a significant reduction of $16 million.
We are looking at our marine navigation standards. There are areas where a long time ago you had to have a light of a certain strength, but now with the kind of navigation systems you can reduce the power of the light. There are areas where we don't need foghorns for landfall any more. We're looking at reducing our standards to one which is seen around the world as a more appropriate standard. And there are some reductions there.
Altogether the department will be decommissioning around 44 vessels. I'm sure you'll be hearing about that later when you talk to Pat Chamut from the fisheries management side. But a large number of them, 14, perform traditional coast guard functions such as ice-breaking and buoy-tending.
Our capital budget is being reduced. As we reduce the number of sites and the number of ships, our demand for capital goes down. As we multi-task our ships and use a SAR vessel, a search-and-rescue vessel, not just for search and rescue but also for enforcement, the demands go down.
So altogether that's an additional $67 million. When we talk about a reduction of $200 million that's where the basis of it is.
I come back to consultations. Again, they were one of the key parts of the recommendations coming out of Scott. While it was directed at the MAB, we have of course gone much broader.
MAB was and is an excellent starting point. But we developed the MAB using national associations like the Shipping Federation of Canada, the Canadian Shipowners Association and so on, including the shippers. The problem is that few of those national associations are headquartered in the Maritimes or in Newfoundland so we've had to reconsider the membership. We have discussed and will be making adjustments for more representation from the lower north shore of Newfoundland, the north shore of New Brunswick, and Nova Scotia.
In order to make sure that it wasn't the Marine Advisory Board, which to a lot of people's minds had a focus in the central and Laurentian regions, we have been doing what I would call validity tests. We have developed the paper with this group. We developed the principles and sent them out and then went broadly across the country. We were trying to bring as many people as we could into it because as much as you try to focus through a marine advisory board, as we were directed, you do need to get out on a broader basis. We have been doing that.
.0940
The modifications we have been making to the fee proposals as we've been going along are as a result of that. Consultation means that you put forward a position but you're flexible enough to be able to change that as new information comes to light. I don't see that we've been compromising; I don't see that we've had to bend in the wind.
There are a lot of negative connotations put on it. In fact, I look on it very positively. You go out and set a straw man that people can look at. As all those people come to the table with their particular concerns, you ask how you can adjust for that. That's what we have done. I think the consultations have been particularly successful, and I'll come to that at the end, when I try to summarize where we are in the consultations.
There's been a lot of concern about the impact. The SODES press release from yesterday talked about the fear of the impact on the competition in the St. Lawrence River. Initially there was fear from the longshoremen in Halifax that they were going to lose 10,000 jobs. I think a lot of it is a fear of the unknown as opposed to a fear of factually what's going to happen.
At $20 million, the marine services fee is one-thirtieth of 1% of the cost of cargo. At full implementation, $60 million, it would be one-tenth of 1% of the value. That's not necessarily a good way of judging it, but it's a measure. If you look at all the port costs associated with a ship coming into a port, depending on the ship and where it is and so on, the marine services fee would be of the order of 2%, 3%, or maybe 5%, at the top end, of the actual cost of coming into a port. So it's a relatively small portion.
When we had the IBI independent study conducted, what they came back and said was they had looked across industries, and while there are some that are sensitive when you move to ice breaking and when you move to the full $60 million, they believe we could implement the $20 million without diversion of traffic to the U.S., which was one of our main concerns.
We recognize that we need to go much more broadly. We need to touch base with many more industries, not just the 45 we talked to. We also need to look at the cumulative impact of not just the marine service fee, but dredging, the privatization of the ports, and the pollution response fee. There are several of them. We need to look at all of that together because that's what impacts on the ports.
That's the kind of thing where in Prince Edward Island, for instance, where they have four ports and they pay for dredging, they have to look at the privatization and there's the question of pilotage in the Atlantic. All of those things come into play and they have to think of how they will manage. For the larger ports it is not as much of a problem. It's the smaller ports that we have to look at. That's why we're undertaking this study, as I mentioned before.
Two of the principles that we've tried to put front and centre all the way through this are fairness and equity. In the discussions there are a lot of people saying that fairness and equity are exactly the same thing. As it turns out, I don't believe they are and they're not being interpreted in the same way.
In most people's minds equity means that people pay an equal amount or an equal share: everybody pays. The west coast has taken that approach in looking at a flat fee, so they have broadly gone to all the marine interests and have taken a flat fee approach to their structure.
Fairness to others means that you pay only for those services you use. You don't pay for services for another region; you pay for the services you use. That's why we have moved to the three regions: west, central Laurentian, and Atlantic. The shipping interests in those three regions are somewhat different.
On the west coast you have a very large cruise industry, a very large tug and barge industry, and a well-coordinated and orchestrated ferry industry, as well as the deep sea. They have come together as a group and have reached an agreement, and essentially it is that they want to know what their fair share is based on their costs. They will distribute that amongst all their membership, they will collect from them, and they will remit a cheque to us at headquarters. In other words, they want to manage it.
One of the reasons they want to do that is they can manage the administration for about $100,000 to $150,000. They know they have to pay for the administrative costs, they know can do it more efficiently, and they're saying just let us get on and do it, and we have agreed. That's part of the proposal.
In the Atlantic they have looked at fairness and said they want to pay for those services they use. When we started off, the best measure of that was to look at mileage as a component. There was a fair bit of pressure over the last few months to somehow consider mileage as a component in the fee structure.
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What they did not want to do was move to a national fee because people want to be able to control the costs in their region and in driving down the costs have an opportunity to perhaps limit the actual cost recovery, which you can't do in another region. That applies generally for all three regions; I think they all want to do that.
It also recognizes their unique make up. They are deep sea ports and are quite different. Few of them are destination ports. When you go to Montreal, you go to Montreal and you unload everything. When you go to Halifax, you may only unload a fifth of the actual cargo. When you go around Newfoundland, a ship may make 15 stops unloading 200 or 300 tonnes at each place. There is no road to bring it from the mainland there, so they're using shipping. So the nature of the business is different, and that again is why there seems to be support for the three-region structure.
The way we again determine fairness here is that you pay for your fair share of the costs. We know what the costs are in each region, and each industry group would pay the same percentage of their costs. That also then provides an incentive for them to work to drive down the costs. As I say, on the west coast we're working very closely to do that, and from the visit I just had in Halifax yesterday, they have already started to organize themselves to do the same thing. As they drive their costs down, obviously their share across the whole country goes down. It's an incentive, from my perspective, for you to work to drive the costs down, because you are then working to drive your share of the revenues.
The final point that I'd make under fairness and equity is that having regionally based user fees - that is, down to a specific region - is a much better linkage between services used and fees paid for them than either a tax, which was one of the options, a national fee, which was also one of the options, or the east-west split. In fact, that's the way the consultations have gone from very broadly looking at what other countries do when they treat the country as a whole, although most of those countries are quite uniform. If you look at northern Europe or Australia or New Zealand, they're very uniform in their traffic, but that is not the case here in Canada. That's why the approach taken in other countries offshore is not the appropriate one for here. What we needed was something that was much more specific to the services here in Canada.
If I look at the regional reaction to the proposals, on the west coast they strongly support the proposal. They agree with the three regions, they agree with the actual fee structure, they have organized themselves to administer it, and they have organized themselves to work with us to drive down costs and to look at other more efficient ways of providing services. For instance, with marine weather on the west coast, which we need for our destaffing of lighthouses, they have agreed to work with us and have industry do that as part of a package. So I'd say that on the west coast there are excellent working relationships. As a result, I see a long-term mutual benefit coming out of it.
In the Atlantic, again they strongly support the three regions. They agree that the tonne-mile approach, which they were supporting very strongly initially, has served its purpose and that in the long run it may not be the way they'd like to go. But in terms of implementing the fee, they're quite happy to stay with it. We agreed on some minor adjustments to it at the meeting yesterday. That is, we will cap the largest tonnage that you'll actually be charged for at 50,000, which is similar to what we have in central and Laurentian. They will only pay once for trans-shipping, and again that's similar to what we have in central and Laurentian.
And what we're looking at now is the fact that because there is a mileage component, some ports like Come By Chance, Belledune, and Dalhousie have longer mileage because you're going up a bay or a long way up a river or whatever. They therefore pay perhaps a disproportionate cost. What we agreed to yesterday is that we would make adjustments to it either by putting a cap on the mileage or in some other way.
But the bottom line is that all of the players around the table yesterday agreed to go ahead with the proposal, with these minor adjustments. They have also agreed to come together as one region - that is, the whole of the Atlantic region - and will identify the new members for the Marine Advisory Board in order to have ongoing consultations. They have agreed to work with the coast guard to see how fast we can put in place cost reductions beyond what we've talked about, an ongoing pressure for this.
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The third region is the central and Laurentian region. The central and Laurentian region, while initially strongly supporting a national fee, based on the discussions on Tuesday and again the latest press release I don't think are opposed to the three regions, but neither have they necessarily supported it. It's probably neutral. The difference in cost on a tonnage basis is minimal. The national fee structure was 14¢ a tonne for the central and Laurentian region. The approach that's on the table now is 15¢ a tonne, so there's only a modest change in fee structure.
The actual fee structure that is using cargo loaded and unloaded with a cap is what they wanted. There is the cap, there is the trans-shipment allowance, so that virtually all aspects - and I would suggest even the cost aspect - have been met within the central and Laurentian region.
Their main concern, which in fact is exactly the same concern that the Atlantic region has, is that there needs to be an in-depth socio-economic study. The concern, I believe, is based on uncertainty; that is, what will be the impact of ice-breaking and aids to navigation fees on commerce in the river and in the Great Lakes?
That concern is going to be addressed through this economic study. What we have agreed is that we will not rush to go to the $40 million and $60 million, that is, to go to the next phase, without having a study done. The minister has agreed to that.
That study, as I mentioned, will address all of the marine initiatives that impact on this same group. There are a lot of initiatives from the government, everything from Agriculture, from Environment, all over, but we can't open the arms to encompass all of them. What we're looking at are those that impact on the marine community: port privatization; the privatization or commercialization of the seaway; the pilotage issue, which is primarily one for the St. Lawrence River; dredging; the marine services fee, both aids to navigation and ice-breaking; and the pollution response fee.
That's enough, mind you, but that's a large package. It will be a very comprehensive study. We'll start, as I say, with terms of reference in April and complete in the fall before we need to go to the next phase.
The second issue I would raise, which has come up broadly from industry, is the need to move quickly on this. This is industry speaking, and I fully agree with this. We had intended to put this in place for April 1, and that was based on the Marine Advisory Board coming together with a package that looked right. As a result of the consultations, it clearly wasn't right and it clearly wasn't supported.
What we said is we would rather extend the time, continue with the consultations and move to get it right, rather than rush it through. That's what we've been doing. It means now that the implementation is targeted for June 1.
The problem with the delay if you go beyond that is that parts of shipping are almost seasonal. For instance, in the Great Lakes if you missed the summer, then those people who are working through the fall pay all of it. If you're on the west coast, you miss most of the cruise industry, and the same with the east coast. So you need to put it in place as quickly as you can, and June 1 is the target that in the discussions with industry is acceptable to them. If it goes any later, they really run into difficulties with it. I believe we have moved to a degree of understanding that this target is doable.
Mr. Chairman, I'd like to summarize with where we have agreement, because I believe we have agreement on all the essential points.
The Chairman: Please summarize very concisely because we'd like to go to questions.
Mr. Thomas: There are five points.
The notion of there being a fee for service or cost recovery on a user-pay basis is supported by everyone in the industry. No one is opposing that. There is general agreement to the $20 million for the first year. There is no support to go to the $40 million and $60 million until an economic study is done.
The Atlantic coast and the west coast agree to the three regions. There doesn't appear to be opposition from central and Laurentian, but neither have I seen any strong support from it. I mentioned that there's only a modest difference in their actual fee structure. The point is that with the central and Laurentian region they are virtually half the cost and they would pay half of the fee. They also have half the cargo to carry that.
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The fee structure in each region is exactly what the industry in that region wants. That is, it's a flat fee on the west coast, cargo plus loaded and unloaded plus a cap in the central Laurentian, and tonne-mile with a variation for the Atlantic.
Everyone has agreed to the need for a socio-economic study on a very broad base to look at the cumulative impact before proceeding to the $40 million and $60 million. Everyone has agreed to the modification of the Marine Advisory Board to ensure that we have adequate representation from the Lower North Shore, Newfoundland and the Maritimes.
So we agree on all of those essential points, which in fact are the framework for the proposal that's on the table, Mr. Chairman.
The Chairman: Thank you very much.
We'll go immediately to the ten-minute round with Mr. Bernier.
[Translation]
Mr. Bernier: Before going any further, I'd like to make sure that I understood Mr. Thomas correctly. At the beginning of this presentation, I understood him to say that the people in the St-Lawrence region, the people in Quebec and Ontario, would not accept to pay the new rates. You were referring more specifically to the people from SODES and the Maritime Chamber of Commerce group. Do you also have the perception that they're not ready to pay the fees?
[English]
Mr. Thomas: In the latest press release they said they support cost recovery and user-pay. They don't support the actual proposal that's on the table, but I don't have an understanding of what it is they don't actually support about it, because they support everything I've gone through.
I was quoting from a letter from SODES, which I believe is part of the underpinnings of their concern, and that is, SODES, in a letter to me and I think to the minister, said they disagree with paying for the fee. In their latest press release they haven't said that.
Mr. Bernier: That's why it's important to hear these groups soon. The last sentence from the last press release of the Maritime Chamber of Commerce and SODES says: "Yes, we're ready to pay, but not based on the present proposal".
[Translation]
The other question I'd like to put to Mr. Thomas may be the keystone to this whole problem. Why, all of a sudden, are we in favour of the regional concept? Why do we have to divide it in three while Mr. Thomas is clearly saying that the impact studies aren't finished yet and that we can't put figures on anything? Why is it all of a sudden so important to divide it up in three? Maybe it's just to divide the players. He's just said the West Coast seems to be in agreement.
Could he tell us what the basis is for the division into those three regions he's talking about, even though everyone says they agree to pay? Can you prove that this is necessary?
The people working in the marine area have a rational, Cartesian approach and they demonstrated that they're willing to participate. In the report, it says that over 300 participants answered the calls for consultation. So there is a willingness to participate. Why don't we take the time to sit down with those people and tell them: "We have nothing to show you that would justify the split into three regions"? The handicap would simply disappear. Why not use a flat rate? The only thing left then would be the $20 million from the Martin budget. Can the commissioner tell me why this is so important all of a sudden?
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[English]
Mr. Thomas: It isn't that it's important all of a sudden. In fact the notion of region-specific has been on the table for some time, certainly for several months, as have other options. Being region-specific, which was part of the initial proposal, is the only way we can meet the needs of the specific client groups. What the client groups in each region want as a fee structure is different, and there was no way a national approach or something going across all of Canada would have satisfied those three groups.
It isn't something we've imposed on them. We've looked at how to meet the needs of those three groups. It's the one that brings the fee for service closest to reality, that is, you pay for the services in your region.
That also means that in paying for those services, if they want to reduce costs, they can look at them in their region and they can organize by region to do it. It's very difficult to talk about reducing costs here if you see somebody in another region doing something that may increase costs. It's out of your control. That's why they want it to be much more specific.
In that sense it was the best approach for disciplining the demand for services. Everyone agreed - and it certainly came out loud and clear - that in some areas perhaps the coast guard services were too rich. Ice-breaking is always used as the example. We said fine, if you don't want that service, tell us and we won't provide it. I'm not mandated to. There's nothing saying I have to do that. I was doing it because it was put on the table as something they wanted. If you don't want it, we won't do it.
That only works when you come down to a region-specific basis. I can't have the Atlantic saying ``We don't want ice-breaking, therefore take it off the table'', and the central Laurentian saying ``Yes, but we want it''. There has to be some way of relating the service to the users, and again, region-specific was the best way of doing it.
The reason it is fundamentally unfair to go to a national approach is the west coast fee would double. They are paying for their share of their costs, exactly the same as all the other regions are paying the same share for their costs, but if they paid a national fee, they would be paying almost twice as much as what other regions have been paying.
So for instance, for most of the benefit of the national, it was the difference between 15¢ a tonne and 14¢ a tonne in the central Laurentian, but a lot of what they were doing was going east. Because you have such large tonnage in the central Laurentian region, 1¢ a tonne makes a big difference in dollars. So while it only seems like 1¢ a tonne, when it's all coming from essentially one port in Vancouver, that's seen as fundamentally unfair.
As to the fact that it's only 1¢-a-tonne difference for the central Laurentian region, they are the actual costs for that region. It's hard to argue against the principle that you pay for the services you use, and it's really hard to argue that somebody else should pay for the services you use. That's the principle we tried to put in place.
[Translation]
Mr. Bernier: Mr. Thomas, what impact would this one-cent increase have for the St-Lawrence region?
I'm ready to believe in user pay. But why, in the past, did the East have to pay more than its share for railway transport in the West? That's what I was trying to get at earlier when I asked you why the idea of regions was so important all of a sudden.
From reading the print media and the different documents that came to me from various groups, I get the impression people want to see the big picture. It's misleading to state that the present debate is over only a penny. People want to know how much it's going to mean overall. Once we know, we'll be able to measure the impact on the various industries of the St-Lawrence Seaway. You say that in some cases it could go to a maximum of 2 or 3%.
What's the profit margin of those big iron ore companies, and so on? They need a lot of volume because their profit margin isn't very big. Two or three percent could mean the whole difference between reinvesting in an area or leaving it. Are we to think that whole industries will have to move around all across Canada? On top of that, we're now looking at market globalization. Every time you talk about one penny or you mention 2 or 3%, I hit the roof. We have to wait.
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If you have to meet the $20 million target set in the Martin budget, fine, but maybe the Revenue Department should be collecting it. It's up to you to establish a partnership to determine how marine transport is going to work in the future so everyone of the players can feel like a stakeholder. You don't want to take the elastic beyond the breaking point.
[English]
The Chairman: Mr. Thomas, and then Mr. Gouk.
Mr. Thomas: The study will be in place and will be completed before we move beyond a cent. That's why I'm talking about a cent. We won't be moving beyond the one cent if there's a significant socio-economic impact. So to say that it's some figure up here and it's going to cause disastrous results isn't a fact, because I'm sure the government would not be going ahead if there were disastrous results. That's the position that the minister has taken on this thing: He will look to see what the result of this socio-economic impact is. One cent a tonne as the difference at this stage is all we're concerned about.
You have to look at a regional concept in this light because we're not talking about just a general sharing of the wealth, as we do in many other areas on the social side. What we're talking about here is competition. It isn't right for one part of industry to somehow subsidize its competitors. What industry has to look at is who their competitors are. On the west coast, the competitors for Vancouver are not back here. The competitor there is Seattle-Tacoma. That's what they have moved towards. That's what they're driving towards.
In their discussions with us they haven't focused on Montreal or Halifax. What they've focused on is their competition there, on the fact that they know what their margins are, and that they are willing to pay their fair share of the costs, but won't destroy competition. And in the news release that has come out from SODES, that's exactly what they're saying. Having them pay twice the rate to go to one that's national would destroy that competition, and that isn't fair.
If we look at the traffic in the Atlantic, again the competition, largely from Halifax, is down through New York. Again, they've said they don't mind paying their fair share. In fact, that's kind of negative, because they have said they are willing to pay their fair share. But they have to look at who their competition is, and by and large it happens to be the east coast of the U.S., so that's what they're focusing on.
So the regional examination hasn't been regional so much in terms of competition between the west coast and central-Laurentian or central-Laurentian and Atlantic. What they've been looking at is the competition that happens to be south of the border for most of them. That's why they're saying they'll pay for their fair share but can't help somebody else and destroy their competition.
[Translation]
Mr. Bernier: On that, Mr. Thomas...
[English]
The Chairman: Mr. Bernier, your time is up. You have fifteen minutes. We'll come back. We have lots of time here this morning.
[Translation]
Mr. Bernier: He'll answer with a yes or a no, while the iron is hot.
[English]
The Chairman: We'll go over the two hours. Is your question one sentence?
Mr. Bernier: My question will be short and he will just answer with a yes or no.
[Translation]
As we speak, you don't have any tool in hand to measure that impact. True or false?
[English]
Mr. Thomas: The tool that we have with which to measure the impact was the study that was undertaken.
[Translation]
Mr. Bernier: Yes or no?
[English]
Mr. Thomas: Yes, we did have a tool.
The Chairman: Thank you.
Mr. Gouk.
Mr. Gouk: I can't help but start with an observation. Call me a naive little rural west coaster - and I know Mary would love to, along with a lot of other things - but it just seems astounding to me. I can't get over the anomaly of the Bloc saying they don't like this, that they want Canada to pay a share of the whole thing, while they sit in Parliament and try to say they don't want to be part of it. It just astounds me, and I can't figure out how they rationalize it.
At any rate, Mr. Thomas, it sounds like both you and Atlantic Canada certainly have come a long way in the last week or so. I've had hearings on both the west and east coasts and I know there were a lot of concerns raised. It sounds like you have dealt with a lot of those concerns, and I would like to acknowledge that because I think it's a very positive step and we can move towards more agreement.
I have a policy for our party on user pay, and I have put it out. There are three points and two of them you have now met: paying only for what you use and using only what you want. The third part of it is paying at a commercially fair and reasonable value.
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One of the concerns I've heard raised sounds like a pretty reasonable concern to me. I'd like your comment on it. If you go to the various users and say you want them to pay your costs, are you prepared to open your books to those users?
Mr. Thomas: There are two parts to the answer. If we were going to have them pay for the full cost, I would be very happy with that. We're asking for only one-third. There may be some questions about whether we are as efficient in all respects as a commercial provider. Perhaps we're not, but we have other things. I can come back to that. But we are charging for only one-third of the actual cost.
Second, of course our books are open. We have been working with industry, with the 22 people around the table, and with anybody else who would like to take part. I don't recreate a set of books to deal with someone. The books are open. They are public books. By all means they are open and people can see what they are.
I want to come back to the commercial issue, to whether we are as efficient as some others perhaps are. We now contract out one-third of our aids works, our buoys work. We did seek to contract out our aids and ice-breaking in the western Arctic. The proposal we received was not competitive. It was not a lower price than we can deliver on. We did seek to look at our vessel traffic management with a large, multi-billion-dollar organization. The starting point was one of the sites they are quite familiar with. We asked them to look at it and give us a price. In a letter they said ``We can't do it more efficiently than you can.''
I'm not saying that we're as efficient as the private sector overall. I'm sure we're not. But neither are we as sloppy as some people would like to suggest. I would think the fact that we're charging only one-third of the cost as we continue to drive down costs would give them some degree of comfort.
Mr. Gouk: Are you looking at going beyond that one-third at some point in time? Is the ultimate objective to go to full cost recovery?
Mr. Thomas: In quite a different way. The way we're trying to go at it is that right now it's one-third of $180 million. I mentioned earlier that we are taking $200 million off our budget. Of that $200 million one might think that perhaps 30% to 40% might relate to the commercial sector. We are trying to move down the ceiling. I can only charge cost, so I'm trying to move down the ceiling with industry and put a cap on it. In essence it moves up to 100% cost recovery, not by increasing the 20%, 40%, 60% beyond that, but by reducing our costs so there are no other costs to charge.
Mr. Gouk: When you speak in terms of one-third, are you talking one-third of the full operating budget of the coast guard?
Mr. Thomas: That's nowhere close to it. The operating budget of the coast guard is $500 million. If we look at our total cost budget it's $840 million. We're looking at 7% of our total cost budget.
Mr. Gouk: Okay.
Mr. Thomas: When I mention one-third it's one-third of those services for the commercial sector, but only about 40% of our work is for the commercial sector. We have other clients in terms of fishers and the recreational boaters who demand services as well.
Mr. Gouk: Okay. Would that account for no cost recovery for north of 60?
Mr. Thomas: North of 60 is now seen as a public policy arena. A commercial vessel going to the Arctic couldn't afford to pay. You would stop all Arctic development. You'd stop all industrial development.
We're looking at that as a public policy. We have started a study. Obviously it will be public. We're looking at what the government's thinking is with respect to public policy in the Arctic in this day and age. At one point there was a heavy emphasis on sovereignty. There was a heavy emphasis on northern development. We are looking at whether all those points are still valid because ``here's how much it costs and this is what you're getting for it''. That study's under way.
In the meantime we are reducing our levels of service in the Arctic. We are taking ice-breakers out of the Arctic, both in the west and the east, as part of our cost reduction plan. The ice-breaking is 20% of our budget. If you're going to reduce the coast guard budget, you have to reduce in all areas. Ice-breakers are actually coming out of service.
Mr. Gouk: When you talk in terms of Atlantic Canada, where you're on a net-tonne-unloaded mileage basis, what does that include? Does that include the navigational aids and vessel traffic management?
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Mr. Thomas: It includes all aids to navigation, which are electronic aids such as LORAN, radio beacons, etc. It includes vessel traffic management. It includes fixed aids, such as the markers you see. It includes buoys. Those are all under the heading of aids to navigation. It also includes ice-breaking in the sense of convoy or route assistance, as well as harbour break-out for the commercial sector.
There is a third part, still under ice-breaking. We provide ice information. We were spending $18 million. We cut it to $14 million. We have now cut it to $10 million, as we use RADARSAT. The cost is coming down and our budget is coming down. That is a service that we provide to industry as to what is the best route through the ice.
Mr. Gouk: With regard to VTS, I understand that Halifax raised a concern that your formula is based on recovery of approximately 50% of the operating cost, when they have statistics that they claim show that they use less than 7%.
Mr. Thomas: Most countries around the world - the U.S. is a good example, because it's so close - are moving to expand vessel traffic management. It is seen as being positive. We have a model for doing cost-benefit studies, which we have used to see where we should put the vessel traffic management.
It's a matter of how you manage risk, and the risk is largely from trying to prevent an accident and whether it's a straight accident or pollution comes after that as part of the risk.
Around the world it is expanding, and in fact we are supporting Canadian industry with that expansion because we're getting contracts.
In Canada the shippers have little understanding of it, so I'm not sure they would play into it. But the shipowners and the associations are not happy with vessel traffic management, which they see as being a cost.
That isn't universal. The cruise industry has no argument with it. The west coast is in support of it. But they want it done for the least cost. That's the main thing.
That's the area in which, with what we have on the table now, we're going from 44 sites to 12 sites. The technology that we're looking at with industry will allow us to go to maybe four or five sites across Canada. It can't be delivered any more cheaply than that anywhere.
We understand that they don't particularly like it, so instead the approach we're advocating is to drive the costs down as fast as we can and as low as we can so it won't become an issue.
Mr. Gouk: There is something I'd like to clear up while I've got you here, because I don't want to end up having Transport playing off against the coast guard on this issue.
Harbour fees, which now are collected by Transport Canada as opposed to DFO or the coast guard, are going to a potential of twelve times value. Although the reality is that it will be something less than that, it is a considerable jump. Instead of charging vessels based on five visits per year, it is going to go to five visits per month. This money is collected by Transport Canada, but is that funding provided to or in any way turned over to the coast guard for their operating costs, navigation aids or otherwise?
Mr. Thomas: The short answer is no.
On the harbour fees, the coast guard at one time was responsible for the harbour commissions and the transportation harbours and ports across the country. When we came into Fisheries and Oceans, that was left behind in Transport Canada.
There are other ports, but they're fishing ports that are still within Fisheries and Oceans. There are charges related to that.
In terms of the commercial ports, the ones you're talking about specifically here, I'll give you my perspective. I'm not with Transport, but it's my perspective that you've asked for.
You have to look at the increase in fees in the context of another part of the marine policy, which is the privatization or commercialization of the ports. The ports have to be able to stand on their own, because that's the way they're going. The government is moving out of all of them except for remote sites.
The very large ones of course can do that. They come through the regulations and they set their fees, and that's how they get the revenue. The small ports have to do the same thing. Sometimes it's difficult for a small port to put that revenue in place. The person lives there; it's part of the community. It's very difficult for them to do.
I don't know that this is the case - so it's speculation - but the government's moving towards increasing the revenues as a way of helping that port stand on its own two feet would make sense to me.
There's about a five-year period for the ports to move to that commercial footing; that is, where the port or the community or some structure would come together to manage that port on their own. In some cases, the sooner they do it, the better, because the writing is on the wall and you know you're going to have to rationalize the number of ports. The sooner you do it, the more access you're likely to have to the $25 million a year that will allow you to build the infrastructure.
I'm sorry, it's a complicated answer, but you're talking about two different policy issues coming together.
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Mr. Gouk: You're talking in terms of the implementation period. Would you be agreeable to a full review after one year as to the impact of this with an eye to the concept of altering it substantially if user input indicates that this particular system is not working well, and an alternative would be proposed?
Mr. Thomas: Absolutely yes. In fact, we said to them that we would even do it before then. That is, as we come to put it in place for next April, I fully expect that the regions, the Atlantic for instance, may say that they don't want to do it quite this way with this fine tuning. They may all agree. If so, then, by all means, we would do that.
My concern is getting the revenue out of the region in a way that's supported by the industry that's going to pay. What I can't do is have ten different approaches in a region with everybody looking to maximize his own benefit.
For instance, the west coast has a certain fee structure that it is building in for tugs, cruisers, liners, and so on. It may want to change that. That's perfectly fine with me. We said that we would even consider doing that before the next fee, that is, for next April. But certainly whether it was a year's time or whatever, the mechanics of how we actually collect should be what they want, what they see as first.
Mr. Gouk: I've heard some suggestions. Your implementation date is June or July, I understand?
Mr. Thomas: June 1.
Mr. Gouk: Is that going to be retroactively collected to April?
Mr. Thomas: You can look on it as being retroactively collected, but that's not quite the case. The fact is that $20 million is what is required in this fiscal year. So if we start on June 1, that means I've missed April and May. It's an accounting exercise, but the way the government works, if we don't have the revenue in our hands, we can't count it. Unlike the private sector, accounts receivable doesn't work. So I have to have the revenue, which means I miss the revenue from March.
Therefore, we've looked at nine months. Therefore, in order to get $20 million this year, we have to set a fee at 28, but the 28 includes the incentive and administration. But there is only $20 million coming into the government this year.
Mr. Gouk: It's hard on them to collect a year's worth of revenues in nine months.
Mr. Thomas: In talking with the industry, it said it can just do that, but they couldn't do it over eight months. It would be impossible over a shorter time. So that's why there's some pressure. It's to see if we can't meet that demand by having it in on June 1. I believe that's doable.
The Chairman: Thank you, Jim. Mr. Culbert.
Mr. Culbert (Carleton - Charlotte): First, I'm delighted to welcome Mr. Thomas and the staff here this morning for this presentation. I think it is extremely timely.
Mr. Chairman, if you would just bear with me a minute. Since I am a new member of this committee, I should tell you that my riding is in western New Brunswick. It's more specifically in southwestern New Brunswick along the coast of the Bay of Fundy.
I can tell you that the diversified fishery and, in more recent years, the aquaculture industry, is extremely important to that area. I also want to tell you that the ports in the region play an extremely important role in trade, commerce, and the economy of not only our region, but of all of New Brunswick and Atlantic Canada.
So from that perspective, it's extremely important to me, and certainly, I might say, to the people of New Brunswick, who are more specifically concerned with the port in my region, in Bayside and the port in my colleague's region, in Saint John, which is extremely important to trade and commerce and to the economy of the province of New Brunswick. I wanted to give you that overview before I ask a couple of questions.
First, there's one thing that is extremely important to me and about which I'm very concerned when I see the comments in here. I'm not sure I know what it means. I'd like to have you explain it perhaps in regard to cruise ships.
Just to give you a brief background, over the last two or three years, we've worked very vigorously and very hard to get our American cruise ships to stop, for example, at the port of Bayside. I'll let my colleague talk about Saint John, but in the port of Bayside last year, I think we had around fifteen cruise ships in there.
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Here's the importance of those cruise ships. They have anywhere from 700 to 1,000 people who spend the day in St. Andrews or St. Stephen, which is in my region, purchasing goods and services. They usually come in the early morning, if not the night before, and leave that same night.
It's extremely important, so I'm concerned with the comments in there as it affects cruise ships. First of all, what does this 19¢, as I read it, really mean? I just assume it means 19¢ per gross-rated tonne per trip, to a maximum of one per month.
I guess, first of all, I'd like to know what that means on average in terms of the cost, and then in comparison to what cost, if any, might be incurred at the present time.
Mr. Thomas: Putting in place this fee means that the ship - say it starts in Bayside and it's going to Saint John and around to Halifax and around - pays once; it doesn't pay at each port. That's the first thing. They don't come to Bayside, period, going nowhere else in Canada; they're usually part of a cruise. So they pay on the basis of a trip, and the trip doesn't relate to the port per se. It's one trip per month. So if they were coming up and going around and ending up in Sydney with four or five stops, they only pay once.
The 19¢ for say a vessel of 20,000 tonnes is $3,800. So that's what they would pay for that ship.
If you look at a cargo vessel coming in, depending on the nature of it, they could be paying that same amount of money on the one stop. It's a different structure. We looked at the services used by the different industry.
I realize there may be some differences in terms of who would actually come to Bayside - I'm not sure who it is - but the cruise industry by and large works across Canada. It's the same owner, and they have been part of the discussions as we've gone along here.
It isn't seen as being an unreasonable amount. The way that we've tried to lessen the impact - we understand the spin-off to the economy - is that they pay on a one-per-month basis, which is what we do with our domestic ships, in fact. You only pay on the basis of once per month. It's an annual fee, and you can make as many trips as you want.
Mr. Culbert: One per month. Do I understand that if there were six cruise ships in, there would be one payment per month?
Mr. Thomas: No. If that same cruise ship made six different trips, say they did the cycle six times, they only pay once per month.
Mr. Culbert: Per month in the same month.
Mr. Thomas: Yes.
Mr. Culbert: What are the costs now? Are there any costs? Is this a 100% new cost as far as the coast guard is concerned?
Mr. Thomas: As far as we're concerned, yes, it is new.
Mr. Culbert: It's a 100% new cost to them?
Mr. Thomas: Right.
Mr. Culbert: How would that compare to the ports of Boston and New York, where most of our competition, quite frankly, comes from? Have you any idea what their cost would be?
Mr. Thomas: No, I don't. I suspect that the $3,800 for any number of stops in a month would be considered to be a relatively low amount.
Mr. Culbert: Just for your own explanation, most of those cruise ships that come in perhaps come from the port of New York to Bayside and go from Bayside perhaps to the Bahamas or somewhere south. That's the concern. That's where our competition is. It's with the eastern seaboard of the United States. So that's certainly what our concern is there.
Mr. Thomas: There are other costs that they would be paying that are substantially higher than what we're talking about here, whether it's pilotage or just coming into the port, period. Now they're already established, so it is additional.
Mr. Culbert: This is on top of that, is it not?
Mr. Thomas: Yes, it is.
Mr. Culbert: So this is just going to make it that much more difficult to compete with our U.S. eastern seacoast ports as well. We have to be very careful of that.
There's another thing that I have received correspondence on that is of great concern. Perhaps my colleague across the way will be following up on it as well, but I want to touch on it.
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I understand that as part of the program there will no longer be dredging costs assumed by Ports Canada, and I'm speaking specifically of the Port of Saint John, which has an annual sediment that runs off with the ice flow that comes out of the Saint John River. I understand statements have been made that they will no longer participate in those costs. Is that the case?
Mr. Thomas: Yes. There are a couple of points to make there. It wasn't Ports Canada who was paying for the dredging. Saint John is a CPC port, but Ports Canada wasn't paying for it; the coast guard was.
The coast guard is moving out of all dredging, so we've had discussions with the Port of Saint John over the last several months. They're well aware that we're doing it, and in the most recent letter I received from Bob Youden, who is on the Gateway Council, and he is looking at this whole aspect, they have accepted that cost. What we're looking at now is the best way of charging the users for that.
Mr. Culbert: Is that going to be implemented? Is that part of the program that's going to be implemented? You spoke of original implementation of this program in early April, which now we're talking early June.
Mr. Thomas: The marine services fee is one aspect; the dredging is a different aspect.
Mr. Culbert: So it's already in effect.
Mr. Thomas: Yes, it's being phased out over two years.
Mr. Culbert: Over a two-period it will be phased out?
Mr. Thomas: Yes.
Mr. Culbert: Okay, so this will give the entrepreneurs there an opportunity to assume some of those costs over a two-year period.
Mr. Thomas: That's right. They're almost at the end of the first year, and they have one more year to go.
Mr. Culbert: The other thing I want to follow up with you is in regard to your trip this week, as you indicated, your meetings in Montreal and Halifax. Perhaps you could relate the response and feedback you got at those meetings, what you expect as follow-up response, and when you might expect to have received that from the parties involved at the meetings.
Mr. Thomas: I would say the response in Montreal was neutral to negative, as a overall sense coming out of it. I believe there are some there who would accept the fact that it's happening, and they know it's going to be happening but would like that it hadn't happened. There is that sort of a sense.
On Friday I'm meeting with two of the main players who seem to be most concerned, and I will try to elicit from them specifically what it is that they see needs to happen, because I seem to have agreement on all the principles and yet a reluctance to go ahead. What I'm not sure of is what the fundamental basis for that is, and on Friday I intend to get that. That's the follow-up there.
With respect to Halifax, I would say it was a very positive meeting. It was constructive. There were lots of things put on the table. For instance, at some point a group had met Tuesday and considered that maybe Newfoundland should not be part of the Atlantic, that they should separate and have Newfoundland done as a separate region and the Maritimes as a separate one. When we considered that, the rest of the players around the table said that was not acceptable, that it will be the Atlantic zone, and we came to that. So I'm not saying it was all milk and honey. There were issues that were put on the table.
I would say that virtually everyone there had an opportunity to speak, and that by and large what we've agreed is that while the tonne mile, which was initially generally what was seen as being pushed from the region, is not seen as being where they want to be in the long run. They will accept it, they will go with it for this year with some minor modifications, but over the next year or two they really would like to move to something more port-specific. That wasn't unanimous, but there was a reasonably strong feeling and we've said we will work to see whether that could be done, a port-specific one.
The changes that have to be made to the proposal were all agreed, and that is, that the proposal you've seen in the paper, plus a cap of 50,000 tonnes for the low value bulk cargo, plus an allowance that you don't charge twice for trans-shipped cargo, plus that we need to make some adjustment for those smaller - I say they're smaller ports; they're big ports like Belledune, like Dalhousie, but smaller than Saint John and Halifax, that are right on the ocean. We need to make some adjustment for the fact that the distance to them is three and four times what it is to Halifax and therefore the rate is three and four times the rate of Halifax and has a fundamental unfairness to it now.
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What we're looking at is how to make a minor adjustment to that. They've agreed to go ahead with this in this year.
Mr. Culbert: I have one more question before my time runs out, Mr. Thomas, and then you can follow up on both if you might.
Have you done a comparison between our ports in Atlantic Canada and the ports in the eastern seaboard of the United States of the total costs that would be attributable, whether it be cargo or cruise ships? Have you done that type of comparison of what this would mean? If so, would it be available? If not, could it be done and supplied to the committee?
Mr. Thomas: We haven't done that. What we have done is looked at the cost of the marine service fee in comparison with all the other costs that a ship pays when it comes into Saint John or Halifax. We have also looked at the cost of the marine service fee in comparison with the total cost of going from a foreign port to here. We have done that but we haven't looked at the total costs in, say, Halifax versus Baltimore for a similar type of cargo, and I think you'd have to look at the total costs.
The Chairman: Thank you very much.
Mrs. Wayne (Saint John): Mr. Chairman, I have a point of clarification.
There was a statement made, and I think it's very important for the record. I raise this with respect, because the honourable member asked a question.
I have to say that yes, Mr. Youden wrote to you on February 21, Mr. Thomas, saying everything was agreed to. Since then, on March 7 you received a letter addressed to you from the port authority in Saint John saying they do not agree with the dredging. They do not agree with the $1.8 million. I have a copy of the letter. You have also received a letter from myself sent to you at that time. They do not agree with what the gateway has said. Just for the record, so we know, that is not what is agreed to, sir.
Thank you.
The Chairman: Mr. Rocheleau.
[Translation]
Mr. Rocheleau (Trois-Rivières): Mr. Thomas, I'd like to get back to the question of a flat rate all across Canada because that's the fundamental question underlying a lot of this debate. You answered to that, according to an article in La Presse yesterday:
- In an interview, Commissioner Thomas indicated it would be unfair: "A flat rate for the whole
country means the West Coast would be subsidizing marine traffic on the East Coast..."
Mr. Thomas, I'd like to draw to your attention two points of information that came up following the efforts we made to get some information. One of them is that the single buoy for the ports of Baie Comeau, Port Cartier and Sept-Îles - there is a buoy 20 miles off those two ports - is costing the ships navigating in that area $1 million a year. One single buoy! That's only one example of the impact it can have.
Someone from the community told me it was a topsy-turvy world, whereas you say in your document that detailed costs were calculated for en route assistance, breakouts and flood control, the remaining costs being attributed to commercial navigation.
Finally, ice-breaking is being done in the St-Lawrence by the private sector, more specially by CANMAR with its new container ships that are more powerful than most ice-breakers. Any ship can follow through after them. Ice-breakers are thus going back to their historic role which is to break up ice jams and avoid flooding to protect the public interest.
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I would remind you that the committee has strongly suggested that unless the cost of commercial services could be established with the greatest precision, you were best not touching that. Now, it hasn't been demonstrated that you have been able to establish the real cost of Coast Guard aid to the commercial sector. When I see your cuts and rationalizations, I have my doubts, Mr. Thomas. We have at hand the report from Captain Tremblay whom you doubtless know. He's the director general of the port of Trois-Rivières in my riding. He wrote you on February 20 and says nothing about those efforts that were supposed to have been made in the Coast Guard. He mentions nothing of what might have been done. On the other hand, he does have to deal with the very practical problem of the elimination of 10 ice-breakers out of 20. These cuts are in the order of $89 million.
[English]
The Chairman: I'd just like to remind colleagues here that if you're going to take your five minutes asking the question, then you're not going to get an answer. You should ask your question and we'll get an answer.
[Translation]
M. Rocheleau: Individually, that can be justified, when we go with tariffs for seaways, etc. Even if we don't agree with the principle, when we add all that together.... Are you concerned about the competitiveness of ports along the St. Lawrence in the same manner as you seemed concerned by the competitiveness of Western ports?
It's in that sense that we deplore and denounce the fact that no socio-economic impact study was carried out before steps were taken along those lines. Are you concerned by the socioeconomic impact and the competitiveness of ports along the St. Lawrence after the implementation of these measures?
[English]
Mr. Thomas: Yes, I am, in fact. I'll start with your first points and go through them.
You're right that there are a number of commercial ships that most often require no ice-breaking, and I would expect that the industry task force that is looking at the best way of charging for ships would take that into account.
There are three groups from the St. Lawrence River - Port of Montreal, the Groupe DesGagnés, and the Iron Ore Company, as well as others - who are asking how to reduce costs and what is the best way of charging for those people who need the services. I expect to get that result in June. If they say that large vessels that don't require ice-breaking shouldn't pay for ice-breaking, then that will be the structure. I'm not fighting it. If I don't have to do it, I won't do it. If they get stuck and I have to go pull them out - and when I say ``I'', I'm personalizing the coast guard - then they would pay the full cost for that. I suspect that would be part of the fee structure.
So right now it is in the hands of industry, of the people who use it, to determine what is the best way of charging the ships that need it. I don't dispute what you're saying at all, but neither am I saying that I'm charging for them. I don't know what the structure is going to be; industry is going to tell me that.
The second thing is that when we look at the competitiveness of the areas, what's driving us is not so much looking at things across the country. In terms of putting in place a user pay, you gave a number of examples where Ontario and Quebec were supporting fishing or Ontario and Quebec were supporting Hibernia or whatever. That may very well be the case. One of the significant differences here is that we're talking about direct competition, and I have the lashes on my back to prove it. From industry's point of view it makes all the difference in the world when you're talking about competitiveness as opposed to wondering how to group together to support the tar sands or something else.
This is looking at it from a purely competitive angle, and the principle here is that the users pay for the services they consume. If they don't want the services, they don't have to pay for them. If the industry in the St. Lawrence says, as Tremblay has said, that they want to do away with ten ice-breakers, then I presume that's exactly what would happen.
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I don't believe Tremblay for a minute. I don't know the gentleman, so I'm not saying he's not truthful or not trustworthy. I just don't think you can take out the ten ice-breakers and say there's no impact. I don't believe that.
When we had a hint that there was one ship out of 1,100 coming out it hit the press in the City of Quebec like ``you can't do that!'' That was one ship. To talk about taking ten out.... In any case, I don't have ten ice-breakers in the river. I'd like to have ten but I don't.
The Chairman: Thank you. Jim, and then Ron.
Mr. Gouk: I'd like to open with one comment. We heard from the Bloc about all the things they have done for the west by way of a quid pro quo. I would just like to remind them of the national energy tax. We in the west think we've done some balancing.
Mr. Thomas, you've certainly sounded very accommodating this morning in terms of your discussions with industry. You've talked to industry. Industry has talked to you. That suggests there's a balance there.
You have come before this committee and given us your assessment of these talks and of what has taken place. You have given us your position and your explanations, which I found very interesting. Do you agree that it would now represent ``balance'' to allow the various industry users to come before this committee to provide their points of view and then have the committee work toward harmonizing any differences between your position and theirs?
Mr. Thomas: As I understand from the chairman, that's exactly the discussion you're going to have after you close off the session. And that discussion is whether you have enough information to proceed now or whether you feel it's necessary to talk to others.
Mr. Gouk: Do you think that would provide a fair balance? I'm asking for your opinion, sir.
Mr. Thomas: I've no objection to talking to industry to get their input. I believe that if you talk to a balance of people from all three regions there is no better solution to be put on the table. I believe you would find very strong, clear, majority support for the elements now on the table.
I guess I'm focusing on the central and Laurentian regions because both coasts have agreed with this. If central and Laurentian have a better proposal I would like to have heard it over the past month. It would have been useful at this stage. It may be something they can look at for next year, but as for cargo loaded and unloaded with the 50,000-tonne cap paying for their costs, I don't know if it can get any closer to the pure principles of cost recovery.
Mr. Gouk: You would certainly be interested in hearing some alternate proposal if they have one.
Mr. Thomas: I can certainly look at that for the next year in terms of how we would modify.
In response to your earlier question about us being willing to change the structure in a year from now when we've had some experience, that was one of the principles we put out on January 5 and we still hold to it.
It's the first time this fee has been put in place in Canada. To think that it will be perfect with all the ``i''s dotted and ``t''s crossed the first time round is unrealistic. That's why we've said that we'll put it in as best we can and then make allowance for the impact study before we expand it. As well, we will make allowance for what I would call ``fine tuning'' adjustments or even for major structural adjustments if that's what is in order.
Mr. Gouk: Okay. As I say, we've received good input from you. Now we should listen to how industry reacts to your position, see what recommendations they have and see how we can best harmonize those.
The Chairman: Thank you. Mr. MacDonald.
Mr. MacDonald (Dartmouth): I want to start by doing something I rarely do, which is to congratulate departmental officials for what I consider to be a job very well done. I'm the first to criticize when I think departmental officials have not been doing their public duty. Therefore I should be one of the first to acknowledge it publicly when I believe public officials have done their duty.
Mr. Thomas, I think the level of consultations you've undertaken and the amount of grief you've allowed to be heaped in your direction as well as in the direction of members of your department would perhaps cause many people to back off. You certainly haven't done that. I think the consultative process you've gone through is a model, not just for the Department of Fisheries and Oceans, but indeed for other departments of governments and crown agencies as well as for provincial governments.
This process started quite a while ago. I took exception to the fees that were initially published and I want to put it on the record that you were almost immediately available to discuss them. You did listen and you did go forward with further consultations. There has been tremendous movement from the fee proposal put forward initially and there will indeed probably be additional movement before it's concluded.
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I want to ask some very specific questions. The first deals with the impact.
There were proposals put forward in the meetings that took place in Halifax around a month ago. The provincial government had been highly critical of this process. I don't know if Mr. Mann, the Minister of Transportation and Communications, subsequently issued you an apology when he called your process a sham. He seems to be supporting it in the local paper today, but perhaps I should remind him that he might get his pen out again and write another letter to you on that.
I want to know specifically, however, about the impact on a place like Statia Terminals. I know my colleague, Francis LeBlanc, who couldn't be here - he's off doing some government business - had raised some concerns with you over the last number of weeks about these latest proposals and the impact on Statia.
I read in the paper, and I hear from you this morning, that you're looking at putting a cap back on. First of all, could you comment on that? Just scribble that down, because I know our chairman has a very sharp watch here.
The second thing is that I am still slightly concerned about the impact on some other ports. Halifax will do well under the proposals that you put forward, and I'm very pleased to see that the interests of the Port of Halifax have been so concise in putting proposals forward - proposals that you seem to have accepted.
I am concerned, however, about some other ports, like Pugwash, Wallace, Charlottetown, Belledune, and Saint John, because I'm not one of those people who thinks it's great if Halifax survives but to hell with all the rest, you know. That's not the way we approach public policy in our Atlantic caucus, at least.
Secondly, perhaps you can give me some sense as to how the fee per tonne may impact on some of those areas where the distances are much greater.
The third thing would deal with the impact study you talked about. I'm one of those people who think there should be two studies, one conducted by the coast guard - you have the data - the second conducted by the standing committee over the next little while, in order to determine exactly what is the cumulative impact of the various fees. I'd like for you to tell me what you think the components of that study should be - what they should look at, what types of fees. And indeed, can you give me some sense about whether or not somebody is going to look at the impact of provincial fees as well?
I listened intently at the hearings in Halifax about a month ago, and everybody was talking about the fees and the impact per container being shipped out of the Port of Halifax. Now maybe you can tell me, on this new fee proposal, what the average, additional cost per container being shipped through the Port of Halifax would be. My concern was not just on that fee, because we have a highway that the province is going to be tolling up in the western part of Nova Scotia. Between 10% and 20% of the containers out of the Port of Halifax have to go through that highway. My mathematics tells me that the impact of that fee, just on the 10%, could equal or surpass the total impact of the fees that have been proposed on navigational aid recovery. So perhaps you can cover that.
Lastly, I want to know a little bit about process. You're talking about implementing this on June 1 - a nine-month year - which means the fees will be about 20% to 25% higher than what they otherwise would have been. But I want to know if these fees have to be gazetted, and if so, when they have to be gazetted. I'm trying to find out the time line here. Does that mean we have two weeks if it's a thirty-day or sixty-day gazetting that has to take place for a June 1 implementation? Perhaps you can tell me when you have to place those notices in the gazette.
Thank you, Mr. Chairman.
The Chairman: I think Mr. MacDonald has picked up the Bernier disease here.
Ms Clancy (Halifax): May I associate myself with those questions, please?
Mr. Thomas: I sure am glad I was taking notes.
The Chairman: Go ahead, Mr. Thomas.
Mr. Thomas: Let me start fairly quickly.
I talked with Dick Gooley at Statia Terminals. He's located in Florida and I had invited him up to the meeting. I wanted to make sure that the person who is on the hook for Statia was there at the meeting so that for whatever we came up with, he would have had a chance to have his oar in the water.
I had also talked to Francis LeBlanc earlier on. I told him that from my perspective, the proposal that was on the table was responding to the interests that had been made to me about a month ago, but that I also saw there were some concerns with it. At this stage, however, I didn't want to go back saying that I heard what what was being said but didn't want to do what was wanted, I want to do something else. I wanted to go back saying I was listening and that I am going to do what is wanted, but I also have concerns.
I expressed those concerns to Mr. LeBlanc. He wrote a letter to me - it was copied to a number of other people - in order to make sure there was a full airing of the issue. The issues relate to exactly what you're talking about here.
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As to the cap, we have looked at $50,000. Maybe it will be $55,000 and maybe it will be $60,000. That was suggested at the meeting. We had looked at $30,000, $40,000 or $50,000, and one of the questions was what happens if it goes higher - how does it work out? So we are going to put that in place. That was point one.
Second, you didn't mention it here, but the other issue was the trans-shipment. When we talked with Dick Gooley at the table, he said if we put in the cap at $50,000 and if we put in the trans-shipping, he would be happy with that. In other words, the proposal was on the table with those two adjustments.
Those two adjustments weren't just for Statia. Irving Oil and Come By Chance have exactly the same concerns. It's just that they had been raised by Francis LeBlanc, and therefore the focus was there.
The only issue then left at the table was, now that you've had the mileage component, what about these smaller ports that have a little longer distance to go, such as Belledune? They're not smaller ports, but they're not in the big limelight. There's Hantsport, Belledune, Dalhousie.... There's half a dozen of them. While for some of them it was relatively small money, it just was patently unfair that they were paying three and four times the rate of big Halifax. That was understood and accepted around the table.
What was said, though, was let us go with what we have and let's make some adjustment to deal with that. In the long run we don't see staying with the tonne-mile, because it isn't fair. New Brunswick Power pointed out they have coal coming in from two different areas, and they're paying twice the rate in one area as in another area for the same coal, simply because the distance to it is twice.
There was agreement that I would go back and say ``What adjustment?'' Adjustment may simply be putting a cap on the mileage; that is, if it's over forty miles, you don't get any increase. That would be a simple way of doing it. We'll have a look at that. I committed to them that I would make the adjustment as fairly as I could. I don't have an axe to grind here; it's what is the best balance. I'll do that and I'll send it back to them before we actually go to gazetting.
With respect to the impact study the coast guard is doing, it's not just the coast guard doing it. I realize there would be a significant difficulty if the coast guard were doing it. I have to have people accept and believe the results when it comes out. While I understand everybody believes what the coast guard does and trusts us, I'm not sure they would necessarily believe in the study. That's why we've asked the three independent groups that are related to the economic development in the regions - that's ACOA, WDO and FORD-Q - to be involved.
We've also said we would have the terms of reference go back to the provinces involved, because of course they have a vital interest in those. So in terms of scoping out the study, we're trying to get other players into it so it isn't just a coast guard study.
As to whether the standing committee would do another one, I'm not sure of the real benefit of that. I am absolutely sure, though, that the standing committee would want to examine the results of this study before we went ahead, and I'm sure the minister would want that as well.
As I've mentioned a number of times, before the minister pushes ahead to the $40 million and $60 million, the commitment I made to the Marine Advisory Board - and the minister has confirmed it - is we will have the study done.
In terms of the approach we're taking, we need to have the fee structure for the aids to navigation and we also need to have the fee structure for ice-breaking, because of course that has significant impact on the ports. That's how you determine it.
We would start with the ice-free ports first, that's the west coast and southern Maritimes, because they can do those without any consideration of the ice-breaking. The ice-breaking results recommendations should be here in June. We'll complete that. The consultants that are engaged would then continue on into those ports which require aids to navigation and ice-breaking. We're looking to have that completed in September or October.
We're looking at 20 to 25 ports across the country. We're clearly looking at the top ten, because if you look at the top ten you get the vast bulk of the cargo, that's where most of the employment is and so on and so forth. I need to do that to deal with, for instance, the issues Mr. Mann was raising about the damage it's going to do to the port of Halifax or to Saint John. I don't believe that for a minute, but I need to have the study done. So we're looking at the ten largest ports.
.1100
We're looking at ten other ports across the country that are sort of in the middle. Everybody will want their own port to be on the list but you can't do it for everything. We're trying to do it on a fairly broad basis. We would start in a port with the industries servicing that port, in terms of the shipowners and whatever the shippers are bringing through that port. We'll go to the community, go to the region and then come up to a national level. A lot of the products we're talking about are dealt with at a national level. At a national level we would have some balance to this.
In terms of the scope, it looks at those seven fees I mentioned earlier. The feeling is that you have to cut the cloth somehow in order to get something meaningful. I understand provincial fees. I understand what environment is doing and what agriculture is doing. There are a lot of fees. The question is: how reasonable can we be about this? These are the ones that seem to be coming together and that seem to be interlinked.
We were looking at restricting it to that. As a result of the discussions, the terms of reference and discussions with the provinces, there may be some adjustment but I want to try to constrain it.
In terms of process between now and June 1, Mr. Chairman, this morning you will decide the extent of further discussions and hearings with your colleagues. Here's the kind of timeframe we're looking at. Within two to three weeks the minister would need to make a decision in order to be able to meet the June 1 timeframe. That allows for the gazetting process. In block terms that's what it is.
You asked what the additional charge was per container. For Halifax, handling about 1,350 TEUs, it would be 84¢ per TEU.
The Chairman: Mrs. Wayne.
Mrs. Wayne: If I'd had known you when you said hello to me on the plane yesterday I would have seated myself next to you and bent your ear. I wasn't quite sure until I came in this morning.
You mention in your news release that two comprehensive studies will be undertaken. One is the socio-economic impact. Along the same lines as my colleague, Harold Culbert, I'm wondering if when you're looking at your proposed fee structure you'll be looking at the United States and what they charge down there, because Saint John, Halifax, and St. Andrew's are the ports we stand to lose.
In the U.S. they're going out of their way to make it cheaper all the time. I know that right now in New York we've got an opportunity like never before to take all of that cargo because they're having a real problem in New York. That cargo can come to Halifax, to Saint John and down to St. Andrew's. But we have to make sure that we present them with a proposal that can compete with what they've already had or they're going to look someplace else in the U.S. Is your study looking at that?
Mr. Thomas: The study will definitely look at whether there is a risk of diversion of traffic whether it's to the east coast for your ports or whether it's to Seattle and Tacoma. That will definitely be part of it. The diversion of traffic to the U.S. is one of the main aspects. It's definitely not the only aspect but it is one of the main aspects.
Mrs. Wayne: With regard to cruise ships, I have the same concern Harold does because we have a lot of cruise ships that come in and Halifax has a lot of cruise ships that come in, but I know that if we start charging them so much for docking, I have to tell you, they're going to look somewhere else. We have to be very careful.
When it comes to your fee structure and nautical miles and fee per tonne and so on, we're really concerned about the nautical miles fee. I've shared this concern with some of my friends on the government side. Because you know it is good for the port of Halifax, but as Ron MacDonald said this morning, he has concerns about our port as well. I really appreciate that because that can hurt the port of Saint John.
Mr. Thomas: Mr. Chairman, it might be good for the port of Halifax. Frankly, it was too good for the port of Saint John.
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The way it was defined was in terms of the shortest distance to get out of Canadian waters, the twelve miles. While a ship would never do it, you can get out of Canadian waters in seventeen miles from Saint John.
That's why we need to go back and that's why there's agreement that we need to move away from the actual mileage that was being pushed at the beginning. When I say we, I mean the industry has agreed to do that. In the meantime, Saint John is getting a bit of a bonus.
That's why when we look at making adjustments for these smaller ports, it means somebody has to pay. There was a degree of support from Halifax, which was the main concern, but I suspect it would come from Saint John as well. It's likely that the people who are going to pay are the bigger ones, because first of all they are at the minimum cost. There's no way of getting it lower than what we have now. So I would see it probably going up somewhat. It only has to go up a few hundred thousand to help offset some of the smaller ports, but that makes a big difference.
Mrs. Wayne: The Chairman's getting you a copy of the letter from Mr. Krauter with regard to dredging, and I'll give you a copy of this. That is the major concern, because it is $1.8 million a year. When it comes to dredging it's a major concern that we have, so I will give this to you because you are going to be having meetings and I note that you're going to be dealing with dredging. You haven't made up your mind yet, is that correct?
Mr. Thomas: No, we have made up our mind. We are having meetings because there are.... For instance, in the fall I met with Irvings to talk about it. I talked to Mr. Krauter and Bob Youden about it. We've had a lot of discussions. It's not just myself; I've had them, but so has Bob Kingston, the regional director general.
We have moved to the point of trying to make sure there is an understanding. We're moving out of dredging, and the stage we're at now is not whether we do it or don't do it, it's how to have that charge passed on to the people who need it. For instance, do you just have it as an increment on the marine service fee for everybody coming in, or do you put it as a flat rate for everybody who goes through there?
The size of the ship isn't such a big factor with the dredging, it's the wave action. You could have a small vessel creating wave action that will bring in the silt from the side. For instance, the way the St. Lawrence River is looking at it is that every ship going through would pay a flat rate. A flat rate is only something like $170 when we move to the full amount, so it's a relatively small amount. That same kind of approach might be used in Saint John. What we're working on with them now is what the best approach is and how they would have the authority to actually do it.
Mrs. Wayne: As a final note, I'm very pleased to see somebody from Saint John on your marine advisory board, but I note there isn't anyone else from the Atlantic region on that board. Have you expanded it?
Mr. Thomas: Yes. I mentioned earlier on that we are expanding to include people from Nova Scotia, Newfoundland, and the lower north shore of Quebec. What we're looking for is that those people would also be on a regional advisory board, which we are encouraging them to establish as a way of working together. Then we would have four of five people from the Atlantic zone on the MAB.
The Chairman: Thank you, Mrs. Wayne.
Mr. Thomas, would your response to Mr. Culbert about the cruise ships on the east coast apply to the cruise ships on the west coast, say the cruise ships leaving Washington or Oregon and coming up the Pacific coast?
Mr. Thomas: It's similar in the sense that it's per trip, and the trip is when they come into Canadian waters. All of that was considered one trip. We didn't look at stops in between. The rate might be different because the rate is what was negotiated out there.
The Chairman: That's an internal rate.
Mr. Thomas: It could happen in the Atlantic as well. It could be that we put in place the structure we have now and that over the next several months agreements between the towing industry, the cruise industry, the ferry industry, and deep sea cargo come together and say they think this would be a better sharing.
In the early discussions I had the group from Saint John come to see me because there were some who were willing to pay more in order to take the burden off others because they had a lower value cargo. They had reached an agreement as to how they were going to keep all the ships. If you can keep all the ships in there, that's what you want to do. That's best. People were willing to make adjustments. They've already done that on the west coast, and I would say that there may be some adjustment like that happening over time on the east coast as well.
The Chairman: Thank you. We'll conclude with Mr. Bernier and Mr. Wells.
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[Translation]
Mr. Bernier: I will try to be brief this time, Mr. Chairman.
I want to make sure that I understood Mr. Thomas' response to my last question. I asked him if he had, at present, tools that allowed him to foresee economic impacts. I thought I understood that he had studies in his possession. That's what I had understood from his answer.
Does he have economic impact studies, given the concerns of the people in the central region? Does he have them at his disposal at present? That is what I understood from his answer earlier.
[English]
Mr. Thomas: I may have misunderstood what you said. We don't have a tool to do an ongoing economic analysis. That is, I don't have an ongoing tool. What we have is a study that was done to give us a notion of the economic impact.
The difficulty with that study is that it was based on the early rate structure, the early options. So it was adequate to be able to say that, yes, we can go for the first $20 million, but it wasn't adequate to say what the impact was across all the industries.
That's why we need to do this more in-depth study. We will be looking at a different fee structure now, so that.... Yes, we have a tool to allow us to go to this stage, but, no, it's not a tool that I would rely on to go to the $40 million and $60 million.
[Translation]
Mr. Bernier: Yes, but in French terms, in my opinion, that means that you do not have tools. You have an idea, but that is not a tool.
So, we can understand the concerns of industry that has to write out a blank cheque for 20 million dollars to you. You don't have any tools.
[English]
Mr. Thomas: A tool implies to me that it's something you can use over and over again in different areas, like an economic model. We don't have one, nor do I believe there's one available in Canada as an economic model whereby you plug things in and you get an answer out.
But we have a tool in the sense that we have the study that was done. That's what we have. That is what has allowed us to go ahead with the first $20 million. We're basing it on the results of that.
I identify and agree that there are concerns that we didn't go far enough. As I say, we only talked to 45 organizations. Maybe we didn't go in depth enough for them. But they were looking at the full $60 million. They said yes, you can implement the first $20 million without concerns about the merging of traffic or having an undue.... In other words, in the words they used, it could be absorbed by industry. That's the tool we have, and that tool has been made available.
[Translation]
Mr. Bernier: I will continue to say that industry is right to be concerned. I repeat to you that industry is not presently opposed to paying 20 million dollars. It is opposed to the manner in which you want it to pay. It does not want to get its hand caught in the wringer. When 20 million dollars disappear all of a sudden, first it's the wrist that is caught, and then it will be the elbow and very soon the shoulder.
I would like you to pass that on to Minister Mifflin. By the way, Mr. Thomas, I am not criticizing you, but how many bosses have you had in two years? There have been four. I think that the message should be passed on to the most recent one. This is what the people from industry want.
[English]
Mr. Thomas: I've had three bosses in the last few years. I've been very fortunate to have Mr. Young, Mr. Tobin, and now Mr. Mifflin. They've all been very consistent in their direction to me and in the way in which we've been going, because it's the direction in which the government is going. From that perspective, the bosses have changed on me; I haven't changed bosses. The fact that the bosses have changed hasn't caused any change in direction from where we've been going.
I'm glad to hear you say that industry would support the $20 million. It's just the way it's being done. Here's what I'm suggesting. My understanding is that the way we have it now, which is based on tonnage with a cap, is what they want. If they have a variation or changes to that, we would be more than willing to consider it. That's what we're recommending to go into place now.
[Translation]
Mr. Bernier: They want an economic impact study. They don't want any other proposal, Mr. Thomas. Their words were very clear: they want an economic impact study.
[English]
The Chairman: Mr. Bernier's boss changed too.
Mr. Bernier: But only one; he had four.
Mr. Wells (South Shore): I want to talk a little bit about some of the smaller ports that affect me more directly.
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Most of the discussion in Nova Scotia to date has been on Halifax and Port Hawkesbury. That's been exhausted, I think. I'm more interested at this point in ports such as Bridgewater, Liverpool, Shelburne, and Yarmouth. I haven't heard those mentioned at all in any of the discussions.
A voice: They're all gone.
Mr. Wells: They're all gone, are they? Oh, okay. You've eliminated those, have you?
A voice: And Digby.
Mr. Wells: And Digby. I thought so. I didn't see Digby on my list here, if that applies.
Who's been speaking for those people? What type of consultation have you had with users of those smaller ports?
Mr. Thomas: The kinds of people who've been attending are, for instance, from gypsum, potash -
Mr. Wells: Newsprint?
Mr. Thomas: Yes, newsprint. There has been a raft of people there. I don't know specifically whether they were from those ports, but they were representing small interests.
One of the reasons you may not have heard too much about them is in terms of how it's actually applied. What you look at is the tonnage going in, and it's relatively low tonnage. When you look at the mileage, they're all relatively close, in the order of say 20 miles. If you take the rate of 0.004 times 20 miles, that gives you 8¢ a tonne. If you look at 8¢ a tonne - and I don't think any of them would be more than 10,000 or 20,000 tonnes - that's the kind of money you're talking about. It's a very small amount. The port of St. John's would have more cargo than all of those, and the Port of St. John's I think is $10,000 total for the year.
Mr. Wells: For the port.
Mr. Thomas: Well, we attribute it to the port, but it's the people who are using the port.
Mr. Wells: Of the ones I mentioned, if you do it by tonnage, the one that may have the most might be Liverpool, which has the Bowater paper mill. They do a lot of shipping of pretty heavy product. Do you have an analysis done on each of the ports of what it would cost?
Mr. Thomas: We can do that. We have done probably about twelve or fourteen ports in the Atlantic, but to get the actual tonnage that's going through.... We can provide that information.
Mr. Wells: I'd like to get a list of the names of the people who have been consulted, if I might, so I can determine who would be speaking on behalf of these ports. I would probably identify the names and any types of impacts you would have looked at with respect to.... In my case I'm looking now at Nova Scotia, particularly the smaller ports on the south shore, in the southwest Nova area, such as Digby, Yarmouth, Bridgewater and Liverpool.
Mr. Thomas: We can do that. We will provide that to you.
Mr. Wells: Thank you.
Mr. Gouk: I'm curious, because I'm sitting across from Mr. Wells, about how he looked that much more questioning than I did. It's not that I had a great deal of questions; I was just surprised at your decision there.
There is one thing I would like to clear up, Mr. Thomas. To my previous question you said you certainly had no objection to witnesses coming before this committee, to us getting an opportunity to hear and to give the users an opportunity to express their concerns or their position. You further stated on a number of occasions, with regard to the position of the users, ``It is my understanding...''. You used that phrase quite a number of times.
But then you later also said you don't think it would be a useful exercise for these marine users to come before this committee. You have put a kind of counter-recommendation into what you earlier said in response to my question. Could you clarify that? Are you recommending that the users not come before this committee, that we do not listen to the marine users with regard to this issue?
Mr. Thomas: No, I didn't say that, and I hope I wasn't interpreted that way.
The first point is, clearly - and you will understand this - it isn't up to me who comes here to speak to you. It's up to the chairman and you to decide that. I was giving you my perspective that we have done broad consultations. To have some people come in to validate what I'm saying I think would be quite appropriate. To go to public hearings again I don't think is appropriate. I don't think you're going to get a lot of new information.
The consultations we've been in have been so extensive and have taken place over such a long period of time as we've narrowed this down that, for instance, if I go to the west coast, I know there's one person who happens to chair the western marine community. He's been elected to that. He could come here and represent that interest. I would say he would be strongly supported by all the members. That's everybody in the industry out there.
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On the Atlantic, it hasn't come together quite to that stage yet, but I think it's getting closer. There would be a few people who would represent those interests. They were virtually all at the table yesterday.
When you come to central and Laurentian, I suspect there would be the Chamber of Maritime Commerce, probably SODES, and there may be a few others, but once you hear them, I don't think there are other people who would bring significantly different....
I guess the point I was making is I that don't believe you need to go to public hearings. I think you could do it with a relatively small number of people to get it from them. I think they would probably appreciate the opportunity to provide that input.
I don't think it's going to change anything, because nothing I've heard from them would cause me to say that what you're doing here is not what I want. I want something totally different.
The east and west coast agree with the direction were on, and from what I can see in central and Laurentian, they don't have another alternative on the table. They talked in a news release in terms of promoting a common position. The common position is that they want a thorough and independent assessment done. We agree with that. They want to clearly assess the levels of service required for safe and efficient transport.
Of course we agree with that. That's why we're working with industry in any number of task forces. Ice-breaking is the most critical one. They will define the level of service they need. So we're doing that.
Look at the third thing, which is to find the least expensive way of delivering these services. That's what MAB is working at. It's usually not the nickel and dime thing. It's to bring in technology to significantly reduce it, like precision navigation, like AIS technology, and so on. We agree with that.
Finally, there's developing with industry a fair and equitable cost-recovery formula with the opportunity for a formal right of appeal. I agree with the first part of that, which concerns developing with industry. I think that's what we have been doing over the last several months: a fair and equitable cost-recovery approach.
I don't agree with a formal right-of-appeal process, because we are using the government regulatory process. In other words, there is a process already in place. Why think in terms of yet another one?
This comes back on an earlier proposal that the Chamber of Maritime Commerce had, which they have now withdrawn. But at that time, they wanted to establish a parallel board to their main advisory board, which would provide direction to the minister. Of course the minister works with you. He's the one who's responsible. He didn't need to take direction from somebody else. Not only that, I think it would be somewhat unconstitutional. But they've withdrawn that part.
But now they're talking about having a formal right-of-appeal process. Here's the way I've seen that work in the pilotage area. Frankly, it's just a way of stalling it. You object and say, fine, now I don't have to pay anything until it gets resolved. Therefore, it's worth the lawyer's salary to object every time something comes up.
In this case here, that's the only piece of what they're suggesting that I wouldn't agree with.
The Chairman: Thank you, Mr. Thomas.
With reference to Jim's comments before he asked the question, I intend, as chair, to give the opposition every opportunity to ask questions to the witnesses. I think you had 20, 25 minutes; Mr. Wells had none. He was on the list. He had indicated that he wanted to ask a question before you did. So I really don't see why you're so sensitive about when you ask a question and when you don't.
You are going to have to trust me that you are going to get every opportunity, including the associate member, to question the witnesses when the witnesses are here. We've gone a half-hour over our time, and we'll stay longer if you people want to. You have ample time to ask a question.
Mr. MacDonald: Mr. Chairman, I have a point of order. I watched the rotation of speakers. The way it's normally done in any committees I've sat on over the last seven and a half years is that no member gets to speak a second time until all the members of the committee have spoken.
The fact that the Reform Party only has one person here does not negate the fact that this rule has always been in place. Indeed, Mr. Chairman, nobody on this side objected, although we did raise our eyebrows at the fact that you allowed that extra five minutes for the opposition.
The member who raised the point has been around here long enough to know that he did not have a second turn at questioning until all the members who had put their names on the list had a chance to question. So I would say to my friend opposite that he actually got an extra round in, and the government member sat back and allowed that to go on.
Perhaps if we're going to follow the rules the next time, somebody on this side would object and push it back over here first.
The Chairman: Are there any further questions?
Mr. Gouk: May I clarify that comment, seeing that it's been brought forward, Mr. Chairman?
The Chairman: Yes.
Mr. Gouk: I am not used to the Standing Committee on Fisheries and Oceans. I'm used to the Standing Committee on Transport, in which Liberal is Liberal - it's not Liberal, Liberal, Liberal, Liberal - and Reform is Reform. It is the opportunity of questioning for the party. Otherwise, the Liberals, by virtue of their majority, would have a three-to-one ratio of questioning. If that's the intent of the committee, well and good, but I'd just like to make sure that's the clear intent.
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The Chairman: When in Rome, do as the Romans do.
Mr. Gouk: There would be three times as much questioning from the Liberals. That's the way it would work.
The Chairman: Thank you. I want to thank our witnesses for coming. You're very easy on your colleagues. They were very supportive, I'm sure, but it was a very interesting morning.
You answered the questions very well. I know you have a very difficult job balancing out three different parts of the country and making everybody happy. It's almost an impossible task, and I wish you very well. Good luck on your endeavour. Thank you very much for coming.
Mr. Thomas: Thank you very much, Mr. Chairman. I appreciate the opportunity to come here and respond to your questions. Thank you very much for your participation.
The Chairman: I think we'll meet now in camera to determine how the committee will proceed from here.
[Proceedings continue in camera]