[Recorded by Electronic Apparatus]
Tuesday, April 8, 1997
.0906 
[English]
The Chairman (Mr. Joe McGuire (Egmont, Lib.)): Good morning, everyone. We'll call the meeting to order.
I'd like to welcome back once again the new commissioner of the coast guard, David Watters, and the assistant commissioner, with whom we're familiar, Mr. Mike Turner.
Before we begin, the answers to the questions Mr. Watters promised us at our last meeting are being circulated, so you should each have a copy of them.
We're here this morning to discuss the long-awaited impact study of the new marine fees on shipping in Canada, so we might as well get right to it and ask Mr. Watters to give his opening statement.
Commissioner David B. Watters (Canadian Coast Guard): Thank you very much.
One of the documents I tabled was a summary of the new approach the minister announced a couple of weeks ago. If the committee likes, I will take just a few minutes to summarize the key elements of the approach. The summary also contains an overview in terms of the economic impact study.
The Chairman: Right. Do we all have that copy?
Commr Watters: Two weeks ago, the minister outlined a change in direction in terms of the marine service fee for both aids to navigation and ice-breaking. This was in response to a variety of concerns that had been expressed by industry.
First of all, there has been quite a focus and concern about fixed revenue targets. The particular concern was how you could relate these fixed revenue targets to cost reductions inside the coast guard. We believed it seemed to make sense and we should change the system to what seemed to be a unanimous point of view that it should focus on a percentage of direct costs.
Secondly, there were a number of adjustments to the current fee structure that were proposed, such as the ten-mile approach, a zonal approach in the Maritimes, and a quarterly fee for recognizing the seasonal nature of some of the operations. These seemed to make a great deal of sense as well, in terms of improvements to the existing regime.
There was also a view by industry that the process for setting the fees could be better and there should be a strengthening of the roles of the advisory boards, both regionally and nationally. These are areas we've tried to respond to as well.
The more fundamental group of concerns is outlined on slide four of the deck you have entitled ``The Marine Services Fees, A New Approach''.
First is cost recovery based on a percentage of direct costs. Since the announcement, I've tried to get out to each of the regions and discuss these proposals with the regional advisory boards. There is a meeting of the national advisory board next week to set out an agenda for the work on each of these items.
.0910
On the improved consultation process, there was a desire to have a stronger link between the regions and the national committee. We discussed a number of ways of doing that, such as ensuring that either the chair of each regional advisory board is a member of the national committee, or there is a significant strong representation there. In terms of the work of the national advisory board, we discussed getting an agenda for the calendar year out so the regional advisory boards can see it, participate in a timely fashion, and make sure their representatives to the national board have significant input.
There was also a concern that there should be fairer cost recovery principles. I think one of the key items here will be looking at the economic impact of any proposed changes in fee structures in the future - how they will affect particular industries and particular regions of the country. There's a strong willingness by the industry, of course, to participate in developing appropriate principles here.
There has been a good discussion on an independent fee review mechanism. This came out in one or two of the proposals from the industry. There's a wide variety of possible options here. Many in the industry are interested in trying to define it. Would it be a panel of five? Would it be something at arm's length from the minister? Would it review cases where there were concerns and a particular community or industry felt that the fee structure wasn't quite sensitive enough to its needs? We've offered to set out a three- or four-page discussion paper with a variety of these options to assist the industry and the advisory board in forming a particular view as to what they think is appropriate.
In one particular region there was a sense that this kind of fee review board wasn't necessary. I think the industry and the advisory boards would probably want a fair amount of discussion on this question.
We need to do further work on appropriate levels of service. A lot of work has taken place, but it varies from region to region. Everyone agrees that we want to make further efforts to determine these appropriate levels of service and costing of those services.
On alternate service delivery, there has been quite a positive reaction to pursuing it in a comprehensive way. We suggested we would take the lead in getting some work done in this area. I have asked for input from each of the advisory boards on what areas might be more susceptible to either commercialization or contracting out. I expect at the national advisory board meeting next week we'll get some good input from each region of the country and from the industries.
On the final point, in terms of strengthening the boards, I think we've talked about that. We want to operate in a more business-like way, setting out an agenda for the year - the schedule of the issues to be looked at and identifying who should be on the specific working committees, because we need to begin that work immediately.
On the 1997-98 transition year, these were changes we felt could be made by July 1. In other words, they're just minor changes to the existing system, whereas the other issues will take seven or eight months to try to settle on.
Here we wanted to try to respond to areas where there was a strong feeling in the industry that improvements could be made, such as the ten-mile approach, the zonal fee structure for the Maritimes, and a quarterly fee for other domestic operations that recognizes the seasonal nature of them.
There was a need to have better consistency between rates for the coasting trade and domestic vessels. There was a concern in terms of the approach being taken on the west coast with a reduction in the fee as of March 1 for one of the five categories of ships in that area. The problem is that induced an inequity between that region and others. We followed a principle that each region should pay the same percentage of its costs, and that is the way it's been constructed for this transition year. Each region then pays no more or no less than any other region as a percentage of the costs in that region.
Restructuring the rate for cruise ships was felt to be important.
.0915
One of the issues identified in the economic study about aggregates and gypsum was to put a cap on that if that was going to be required. In discussions that seems to be the case, so what we would look at is a regulatory change that would be able to give effect to that concern raised in the economic study.
The basis of a number of these changes was to be sensitive to the economic impact study. The sense in looking at the accumulation of the seven initiatives looked at in the study was that the impact on the industry and on regions was in fact quite modest. It was based, as you know, on the level of $40 million. This impact, then, was about one-tenth of 1% of the value of the commodities that are shipped.
Because there is no ice-breaking fee for the transition year, the impact, at a level of $26 million, is even less than the $40 million which was the basis of the study. In other words, there's even less of a risk of diversion.
Concerns were identified in the study, however, about bulk commodities: gypsum and aggregates. There the approach taken was if in terms of the amount of the fee you were getting up to a 3% value of the cargo being shipped you might see some diversion, so we felt it safe to take a level below that, 2%, and to look at a cap there which would be appropriate. That's the approach we would take to ensure there is a safety ceiling below the 3% level, at a 2% level.
On the Miramichi ports affecting Chatham and Newcastle, in discussions with the industry...they are taking steps to use other means of transportation from that area. The particular problem is the very low level of shipping in that particular area, about 250,000 tonnes, whereas in Saint John and Halifax you're up around 12 million to 14 million tonnes.
Overall, while the study indicated one could move forward with all of the initiatives at the $40 million level, there was a sense that we should take a more measured pace in the approach and not introduce the ice-breaking fee. There really is a lot of work that has to go on in that area and it's going to take some time, beginning now, to be able to get that one ready, especially when, for both aids and ice-breaking, we go on to the new system industry wants, which is a percentage-of-direct-cost system. The total amount of the fee being proposed is at the $26 million level, which is within the $40 million level.
There seems to be a strong interest by regions and by the industry in taking advantage of the period particularly between now, let's say, and the fall to try to get work done on each of these very significant areas which have been identified: ultimate service delivery, looking at an independent review panel, doing more work on the level of service requirements, changing the system to a percentage-of-direct-cost system for both ice-breaking and aids to navigation, and to try to orchestrate that in a way in which we could hopefully get a consensus on most of these items by the fall.
On the next steps, I have met with each of the advisory boards now. We had a teleconference call with the national advisory board immediately following the minister's announcement. We're putting together an agenda for the meeting of the national advisory board next week. I've alerted the regional advisory boards about the key issues, which they are quite familiar with, and the importance of setting out an agenda of work for the next seven or eight months which everyone is going to feel comfortable with.
We also have to ensure we can make the minor changes in the approach by July 1. A lot of work needs to be done there.
.0920
On the next steps, focusing on 1998-99, this really is the work I just talked about, looking at these more fundamental issues. The concern I have is that we need to get the committee structured to be able to work on that right away. It's not something we can leave for the summer; we need to do it right away. That would be the intent of the national advisory board meeting next week.
That's the overview, Mr. Chairman. Thank you.
The Chairman: Okay. Thank you very much.
Mike.
Deputy Commissioner Michael A.H. Turner (Canadian Coast Guard): I have nothing to add, Mr. Chairman.
The Chairman: That's very unusual.
Commr Watters: Mike will answer all the questions, Mr. Chairman.
The Chairman: Okay.
Mr. Canuel.
[Translation]
Mr. René Canuel (Matapédia - Matane, B.Q.): The Coast Guard plans to recover$20 million. You talked about the industry. It seems that you and the industry are working together well. In fact, I am surprised they are not making more noise than they are; at some point, they will have to pay and make others pay. It will come to that. But I'm happy to see the industry is prepared to cooperate. That makes things easier.
However, when we consider Canada as a whole and as a federation, we must ensure that everyone from West to East gets a fair deal. I can also see that adjustments for Prince Edward Island and Newfoundland might cause some difficulty, in comparison with British Columbia.
I have listened very carefully to you today, and it seems you will do everything in your power to ensure an even playing field across Canada. But that is easy to put on paper - I would like to see what concrete steps you will take to avoid penalizing eastern Canada in relation to western Canada. If you say you can manage an even playing field, congratulations - but I am not convinced you can and I would like some details.
Mr. Watters: We have calculated overall figures for the cost of navigation services, and on the basis of those overall figures, we have calculated the cost for each region. As I have said, our basic principle is that each region must have comparable participation. For 1997-1998, each region ends up with 27%. That is how we establish a system that would be fair to each region.
[English]
Mr. John Cummins (Delta, Ref.): Just for the record, Mr. Chairman, have arrangements been made to get Mr. Matkin here?
The Chairman: Not yet. We're in the process.
Mr. John Cummins: Okay.
I want to thank you, Mr. Watters, for responding to the questions we put to you last time. I just note that I do have some difficulty with the 30-minute response capability that you mention here with Roberts Bank. It may be that you can get somebody moving in 30 minutes, but if there is a problem at Roberts Bank, I doubt very much that you're going to be on the scene in 30 minutes from the Kitsilano terminal, for example. It's just an impossibility. Perhaps you could define what you meant by 30-minute response capability.
.0925
But I'd like to come back to that, because there's another issue I want to raise with you this morning. It's slightly off topic from what we did this morning, but it's probably a continuation of what we were talking about last time, and that is the provision of services.
This morning we're essentially talking about fee for service, fixed revenue targets, cost recoveries, and all those things, and of course they're very important and I'll address some of those issues later. But on the west coast we've just finished the herring fishery, and two elements of service provided by the coast guard were compromised or eliminated during that fishery.
As you may be aware, mariners and aviators depend on good weather reporting. There is something called ``special weathers'', which light-keepers provide in between the three-hour weather reportings on the coast when there's a dramatic change in the weather at their station. Those ``special weathers'' were withheld from publication or from broadcast during the recent herring fishery. As well, the light-keepers were precluded from reporting the transit of the herring fleet during that fishery.
Both those items are long-standing practices on the west coast. Both of them were removed without any warning being made to the fleet. This happened at a time of very unpredictable weather. In fact during that herring fishery there were a couple of occasions when there were winds in excess of 100 kilometres per hour.
You made it very clear to us last time that somehow, although you did not have experience with the coast guard and your experience was as a bureaucrat in another ministry, you were going to be abreast of these types of decisions. I'd like you to justify the decision to remove those two services without any warning to the marine community.
Commr Watters: I'm not aware they have been withdrawn. I can certainly investigate.
Mike, you probably have a sense.
Let me ask Mike to make a response.
D/Commr Turner: I can report, sir, that we have been made aware of a complaint in this regard. From our initial investigation, in contact with our regional staff, it appeared that someone at the local level in one of our radio stations made a decision not to broadcast some of the ``specials'' that were being provided.
In our view, that does not make sense. If the information is available and there, it certainly should be used. The network we are structuring on the west coast to maximize the use of personal and direct reporting of weather by all observers and participants in the system will in fact make sure that happens.
As I said, we don't have the details of the particular circumstances in this one, but we are in the process of looking into why that happened, because this is a complaint that's reached us from another source as well.
Mr. John Cummins: Will you report back to the committee on why the movement of the fleet was not reported as well? It directly assists search-and-rescue teams and enables them to marshal resources if they know where the fleet is, yet my understanding is the light-keepers were precluded from providing that information.
D/Commr Turner: We'll check and see if it was a question of the light-keepers not being asked to provide the information because other people had it, or whether it was some misunderstanding on the part of the people at the local level.
But all of the information and data of that nature - both the movement of the fleets and weather reports - should certainly be made available both to our officials, in terms of the SAR system and weather broadcasts, and to the users, which is precisely our objective in creating the new marine weather reporting network up the coast.
Mr. John Cummins: I look forward to your response on that one at your earliest convenience.
.0930
I have another question. I have reports that 10 new executive positions have been created in the Pacific region, and rumour also has it there are 40 positions nationwide. Is there any truth to the rumour that there have been some new positions created for some people who are supposed to be kind of bureaucratic hotshots who are going to make the operation run better, and who are being hired in addition to current staff?
Commr Watters: There is a program within the department, as part of the initiative I believe the government is undertaking called la relève, involving the sort of renewal and replacement of the guard. In looking at the demographics of the public service and the fact that there is a significant aging of the public service with a lot of people approaching retirement, it is an attempt to ensure that there is new blood, younger blood in the system, and those people will be able to assume positions of responsibility a little bit faster than normal.
Within the department, then, there is an initiative to try to create some positions and to fill them with deserving candidates who could get that experience faster than they would normally be able to do. So that is correct.
Mr. John Cummins: So we want to ensure continuity at the bureaucratic level, and we're doing that at the same time that we're cutting the actual number of people who are providing the service and dealing directly with the public, whether as coast guard crewmen or in the provision of vessels. We're cutting hours at coast guard stations, demanning light stations, doing all kinds of things, but at the same time we're going to hire some extra people to ensure good continuity at the bureaucratic level, when retirement comes.
Commr Watters: Yes, and I think it's important. As an institution you've got to be sure that you're going to have competent people who are going to have the experience to take over senior positions. In fact, many of those people do have a lot of experience in coast guard operations themselves, and what you're doing is giving them an opportunity to get more experience at a faster rate than they might normally be able to do, so that when this demographic shift takes place and quite a significant number of senior people leave, you've got experienced people within the organization to be able to take over those jobs.
D/Commr Turner: Could I perhaps add something to that? You mentioned 10 people in the western region and 40 across the country, sir. In fact there is one position being created in the western or Pacific region for the entire Department of Fisheries and Oceans, not in the coast guard.
No new staff are being hired for these positions. These are simply positions that are being created with a set of project management duties that would allow candidates to get experience at a management level within the organization a little faster, as the commissioner says, than might otherwise be the case. It's not a case of bringing in new staff or hiring new people off the street. And as I said, there is one individual for the Pacific region.
Mr. John Cummins: There's one now. Are there more on the road?
D/Commr Turner: No, sir. There is one position in each of the regions, and one in each of the so-called sectors in headquarters, and that's it.
Mr. John Cummins: How many is that in total?
D/Commr Turner: For the entire country I think there are 11 in total.
Mr. John Cummins: You mentioned in your presentation that fee levels for the west coast region, which were decreased to a lower level on March 1, will revert to their previous levels to be consistent with those in the rest of the country. I find that rather curious. The competition for west coast ports is not Montreal or Halifax, but west coast North American ports, whether it be Seattle or Tacoma or Los Angeles. How do you justify this reverting to a previous fee, in light of the fact that our competition is not ports on the east coast of this country? If we're going to compete, we've got to compete with Seattle or Tacoma and Portland and these other west coast ports.
Commr Watters: The principle we are trying to follow here is to ensure that each region pays the same percentage of the cost of the services being provided. For the transition year that works out to about 27%. We felt that was the best way to ensure an equity as we went into the 1997-1998 year.
It also gives us a chance to look more fundamentally at a more basic redesign of the program, if that's what the consensus is across the country, and certainly there is a consensus in things like the percentage-of-direct-cost approach.
.0935
Mr. John Cummins: But the point is that if grain from the prairies is going to be shipped out of this country and you increase the costs in Vancouver, that grain isn't going to necessarily then go and be shipped through Thunder Bay or Montreal or Halifax. That grain is going to go down to Portland or Seattle. Why then would you persist in a policy that equalizes costs across the country and deny that reality?
Commr Watters: There is no evidence that there will be a diversion of traffic at the fee levels being suggested. The economic impact study was useful in terms of making a determination of that.
There is an issue there that each of the regional advisory boards will have a view on, and will have to work on and try to get a consensus on.
There still is a very significant subsidy being provided to the marine industry. As I indicated, the 27% figure means there is still a 63% subsidy being provided. What we have to look at with the industry is getting at the definition of direct costs, and the issue of what is a fair and equitable approach to be taken across the country.
I suspect the industry should be looking at the question of the economic impact. In other words, I think the economic impact study was quite useful in raising a couple of principles that should be looked at again.
One of the issues is do we pay a significant amount of money to have another economic impact study, or can we look at some mechanism like an independent fee review panel that has that kind of expertise and can look at any fee increase from year to year - and this can be four, five, six, or seven years from now - in terms of the kind of impact it's going to have on a region, on an industry, perhaps even on a particular community? That expertise needs to be there. The industry itself has not grappled with these issues yet, and that's something it should be focusing on between now and the fall.
The Chairman: John, we'll get back to you.
Derek.
Mr. Derek Wells (South Shore, Lib.): Thank you, Mr. Chairman. How long do I have?
The Chairman: Ten minutes.
Mr. Derek Wells: This committee, as you know, had hearings about year ago. I'm not sure if you sat in on those. I know you weren't -
Commr Watters: We heard about them.
Mr. Derek Wells: Yes, you heard about them. I think Mr. Turner perhaps sat in on them.
D/Commr Turner: I was present for some of them, yes.
Mr. Derek Wells: One of the things that disappointed me is the fact that it's been a year before really getting back to this issue, from the time we made our recommendations a year ago. The initial study we had recommended and that was eventually carried out was scheduled to report in September, but didn't come in until March. What was the delay? Why was it such a difference in time?
Commr Watters: My sense is that there were two main reasons. There was a depth of concern by industry and by regional advisory boards about the approach being taken, and a need to try to understand the nature of those concerns.
Secondly, there was a series of very comprehensive proposals that came in from various parts of the industry or advisory boards. As you can well imagine, they were not uniform. There were some common elements, but there were a number of differences in approach being suggested. It was a matter of trying to look at these and to assess what we could do in the short run, and what really needed to be fixed more fundamentally in the longer run.
That was the approach taken when the announcement was made in March - to look at a category of things like tonne-mile and a zonal structure for the Maritimes, see if we could make those changes within a very short period of time, and then begin the work on the more fundamental questions of moving the entire system to a percentage of direct cost basis, looking at alternate service delivery and looking at things like introduction of new technology and whether that could be done faster and make savings. So I think it was really to try to respond to the needs of the industry in terms of the kinds of concerns they had and the proposals they were putting forward.
.0940
Mr. Derek Wells: But were these recommendations in the Hickling report?
Commr Watters: No, these were in communications with the minister by associations or by regional advisory boards. These were concerns the industry was expressing about the nature of the fixed targeted system that was being put forward. Then they raised a variety of other concerns we tried to respond to.
Mr. Derek Wells: Are you familiar with the recommendations made by this committee a year ago? Have you had an opportunity to review those?
Commr Watters: Yes, I have.
Mr. Derek Wells: How do you treat those recommendations? What is your approach? Again, we made them a year ago. We didn't hear back. We weren't kept in the loop through the next year. How do you treat these recommendations?
Commr Watters: I believe one response did go to the committee in June, a progress report on what had taken place. My sense of the recommendations of the committee is that they have been quite central in the work that has taken place and the guidance on issues looked at by the advisory boards.
I don't think we've proceeded as quickly with... For example, there was a recommendation about looking at alternate service delivery, and while one or two proposals came up in an ad hoc way, the sense I had was that what was being suggested by this committee and what seems to make more sense is to do a comprehensive review of it; and that's what we're willing to initiate in the department. One of the things we want to check with the industry on, though, is whether this meets their needs, and also, with the advisory boards, how they want to structure this kind of review.
In my opening remarks I mentioned that one of the things I've been asking the advisory boards and the industry about is what their sense is of the areas that might be appropriate for commercialization or for out-sourcing. I met with the Shipping Federation of Canada yesterday and was asking them the same kind of question.
Industry has not identified any particular areas at this point, but within the next week or so I would certainly like to get their views. This would be helpful in directing the assessment that has to take place.
Mr. Derek Wells: I would like to look at two specific recommendations this committee made. One was that the study, after it was completed, be reviewed by an appropriate committee of Parliament. To my understanding that was not done. You can correct me if I'm wrong on that.
The other one was we talked about giving port-specific incentives to reduce costs. Maybe doing away with the fixed-revenue targets will help in that regard. I'm not sure. But I think we felt because you were going to collect set amounts regardless of how much each particular port reduced its own costs, there was really no incentive to do so.
Could you comment on the recommendation about having it reviewed by committee, and secondly, on whether or not you feel the recommendation that we develop port-specific incentives to reduce costs has been met in any way.
Commr Watters: On the first matter, I think there is a very definite role that would be extremely helpful in trying to pull together a redesigned system. In other words, for this transition year the changes being made are important, I think, but they are not major changes in the system. The major changes in the potential to redesign the system will come about as the advisory boards do their work over this...I would like to see it done by about mid-fall at the latest. I think there would be a very key role for the committee in participating and looking at the nature of ways to make the system much better, fundamentally.
.0945
On the question of a port-specific approach, the Maritime region in particular looked at this question. They found it very difficult to get down to a costing of port-specific services provided. One of the difficulties is that the coast guard doesn't construct its operations on that basis. It does have regional operations for the five regions; therefore, we are able to provide industry with the cost structure for the services provided in that region.
The Maritime Seacoast Advisory Board then began working on a sub-zonal basis and made some progress with that. That's what we've tried to respond to with the approach for the transition year. But they themselves had difficulty getting onto a port-specific basis.
One of the concerns that I think collectively everyone affected by Maritime industries should look at is how far we want to go in terms of a port-specific fee. This begins to induce a lot of competition between ports within a particular zone. There's a question as to whether or not one could even allocate the costing structure of the coast guard on that kind of a specific basis.
Mr. Derek Wells: I'm not sure if that directly answered the question about the incentive to reduce costs, but I guess what we're saying is that the specific incentive to reduce costs in these particular ports is really not in there now.
Commr Watters: What I'm saying is that the Maritime Seacoast Advisory Board was trying to address that question and look at it. They couldn't do it. What they could do was to get this down to a zonal basis. There were a number of reasons for that in terms of just getting the data and being able to link it to the cost of providing services. In other words, we don't provide costs on a port basis.
One of the analogies that has been used is that it's like operating a bus service, and knowing what's the cost of picking up people at a certain point in Kanata. We don't know that, but in terms of a general route or in terms of the operation of the costing of the system as a whole, you can determine that, and you can determine a fee structure on that basis.
The Maritimes group, in trying to look at the port question, couldn't get down to that level of detail, but they felt comfortable with a zonal approach. That seemed to satisfy them. Nobody else that I'm aware of is pressing for looking at a port-specific fee.
Mr. Derek Wells: I wasn't talking about a fee as such per port. I was talking about an incentive so that each particular region, I guess, rather than port, would have an incentive to reduce their cost, because a reduction in their own costs could in fact reduce what they pay. If they're going to be paying $10 million anyway, if your cost is $50 million, $60 million, $70 million or $80 million, and they're paying $10 million fixed, if your costs go down to $40 million and theirs is still $10 million, what's the incentive for them to reduce it to $5 million if they're not going to save anything?
I guess that's put as simply as I can.
Commr Watters: There's no question, incentive exists on a regional basis. That's why going to a system of percentage of direct costs is something everybody wants to try to do.
Mr. Derek Wells: That may have addressed that particular recommendation. That was the simple point I wanted to try to zero in on. Maybe that's the simple answer - the new formula does address that.
Commr Watters: Absolutely. If there's one area that everybody feels much more comfortable with it's trying to move to a percentage-of-direct-cost basis, because then the direct link between getting our cost structure down and what they're ultimately going to pay is there.
Mr. Derek Wells: That was one of the major recommendations that may have been addressed.
Commr Watters: Yes.
D/Commr Turner: If I could add to that, the other thing we've done over the period since those recommendations, Mr. Wells, is to create a structure in each region with the user groups that are in fact paying towards the marine services fees. The focus specifically is on a number of things. What services are we providing in that particular region? How can they be best adjusted? Are we providing the right level of service? Are there recommendations on how it can be done at less cost or more efficiently?
So the creation of those regional advisory boards is a direct outcome of your work and of the recommendations in here looking at ways to ensure there was a greater input into what services were actually required by industry.
.0950
Mr. Derek Wells: I have one other question, and that's on your revenue target of $40 million, which is now down to $26 million for I guess the 1997-98 year. This leaves you with a $14-million revenue shortfall. How do you adjust for that?
Commr Watters: We will have to absorb that within the Department of Fisheries and Oceans, and that's what we'll do.
Mr. Derek Wells: How do you see that happening? I'm not sure how your funding or your budgeting is done, if it's a coast guard component or a DFO enforcement component. Is that going to come out of what was traditionally coast guard services?
Commr Watters: I think it's going to come primarily out of the capital program. There are thousands of contracts on the capital side, and they progress throughout the year at different rates. With a capital program that size there are many that naturally slow down.
What one always has the opportunity to do then is to try to push others up in terms of increasing the speed on those. So what we're going to try to do is to manage the capital program very carefully this year. You're right that we have to make up that amount of money, but we think it's possible to do that.
Mr. Derek Wells: Okay.
The Chairman: Thank you, Derek.
We'll start our second round now. Because John has to go to another committee, we'll have him ask his gypsum question.
Mr. John Murphy (Annapolis Valley - Hants, Lib.): Thank you.
I'm a member from Nova Scotia, from the Annapolis Valley. There we have two gypsum companies, National Gypsum and Fundy Gypsum, with roughly 300 jobs involved. I've been working with this issue for the past couple of years. Some solid recommendations were made, as you know, with regard to the gypsum industry so as to fit, if you will, the high bulk and low return involved in that industry.
I wonder where we now stand. Are we taking into account in our policies that the gypsum industry needs to be treated differently, I think, because of the nature of the commodity? I tell you also that one of our difficulties is that we're on the borderline.
We're going to hear from the industry next week. A lot of synthetic gypsum is coming into the market now. If we can't stay competitive under the old rules of the past year, the fees... Our people are having a hell of a time staying afloat.
Just where we sit now, I would like to know the cost per tonne. What are we looking at? Maybe you could bring me up to speed.
Commr Watters: I would be very pleased to.
We have addressed that issue and we think we have a solution to it. We're going to put a cap on the fee that would be paid. This falls out of the economic impact study, which indicated that if a fee structure was at about 3% of the total cost of the goods being transported, you could have diversion. So we looked at a level well within that of 2%. If the impact of the fee hits that level, a cap would be placed on it. We would absorb the difference.
So we've tried to address that. A number of representations have been made by the industry. Don Downe from the government came to visit and to talk about that issue. It was one that came out of the economic impact study.
I think one of the questions for industry in general is whether a principle is being established here that would apply, then, across the board. That's something we want to try to get some advice on from advisory boards and from industry.
Mr. John Murphy: From the industry itself.
Commr Watters: Yes, absolutely.
Mr. John Murphy: When are we looking at the fee being struck?
Commr Watters: The fee would be struck by July 1. We want to try to have a discussion of this with the national advisory board on April 16. We want to try to get out some draft language for the advisory boards and industry to have a look at and to get their comments back as we begin to put it together.
Mr. John Murphy: Is your mind made up as to the fee now?
Commr Watters: The fee flows out of the approach the minister announced in terms of the transition year - the $26 million. In going across the country, what I've tried to do is explain and provide more information on that, and we'll then work through the advisory boards in working out the... Basically, we try to facilitate in identifying the exact costs of the fee. We're in the process of doing that with each of the regional advisory boards.
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Mr. John Murphy: Thank you very much.
The Chairman: Thank you, John. You've certainly been single-minded on this issue, and should be commended for your efforts and concern on behalf of the gypsum industry.
Mike.
Mr. Mike Scott (Skeena, Ref.): Thank you, Mr. Chairman.
I sat through all the committee meetings last year, when industry came and told us what their concerns were with regard to the new fee structure that was proposed. There were some basic principles that the industry really wanted to see established and followed. Most of the industry did, at least, although not everybody in the industry did.
The first things they wanted to identify were the services they actually needed, used and required. The industry basically was saying they wanted to have the opportunity. Until now, the idea has been that the funding for the coast guard came from general revenues. This meant that the taxpayers of Canada were funding all of the activities of the coast guard. Based on the restructuring and the new way of thinking at the coast guard - which many of us agree with in terms of cost recovery, by the way - the notion was put forward that those people in the industry who were availing themselves of coast guard services should pay for them. Rather than seeing the taxpayer in Saskatchewan paying or the taxpayer in Antigonish paying, the industry that is actually using the service should pay for it. I think most people would agree with that notion.
The industry said fine, if you want to start levying fees on that basis, we don't have a problem with it. Most of the industry said let's identify the services that we actually need and actually use, let's determine whether or not we can provide those services ourselves or whether we need the coast guard to in fact provide them for us, and let's base the fee on the actual service we are using or that we require.
In the case of British Columbia, we don't have ice-breaking. The aids to navigation are certainly much reduced when compared to some of the ports along the St. Lawrence Seaway, and the cost of doing business should therefore be lower. I know my friend Mr. Canuel would not agree with me, but he is thinking in terms that see British Columbia ports - Prince Rupert and Vancouver, for example - subsidizing the ports in Montreal and Toronto, and subsidizing other ports that are more expensive because of their location and geography. That idea was not incorporated into the fee structure in 1996. I'm hoping you're going to tell me that it isn't in 1997.
I see here that the fee levels for the west coast region, which decreased to a lower level on March 1, will revert to their previous levels. I'm hoping you're going to tell me the fee structure in British Columbia is based on what it actually costs to do business in British Columbia, and not on costs associated with doing business in other parts of Canada.
Commr Watters: Yes, that's correct. The fee structure in B.C. is based on the costs of the services provided in B.C., and it's the same percentage that is being paid in each of the regions. The minister has made the statement that if a region is not receiving a service, it should not pay a fee for that service.
Mr. Mike Scott: Just to follow through on this, then, you have identified the costs in each region. Is that right?
Commr Watters: Yes, that's correct.
Mr. Mike Scott: And you're levying a percentage of the cost per region against the shipping industry. Is that how this is working?
Commr Watters: That's right.
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Mr. Mike Scott: Okay. I was concerned about that, because I don't understand what your rationale would be for decreasing and then increasing again. Maybe you could explain the rationale behind that.
Commr Watters: This decrease was put into the system for one category of ships last year. The rationale was that if you permitted that to continue, you would have an inequity across the country. The principle we're trying to establish for this transition year is that each region pays the same percentage of the cost of the services provided in that region. That's what we're focusing on.
Mr. Mike Scott: Right.
The next question follows through on my first one, Mr. Watters. I think most of the industry was quite adamant that there are some services that either are provided or were proposed to be provided by the coast guard, and that members of industry felt they could do themselves. They felt they could do it on a more cost-effective basis than could be provided for by the coast guard.
You'll have to bear with me. I haven't had an opportunity to go right through the entire impact study that's been done. I will ask you this though: Has provision been made for the industry to be able to provide its own services? Is there a provision in there for negotiations in which industry - maybe the Port of Halifax - could say that it will look after its own aids to navigation, that it will service those aids on its own, that it will figure out how to do things in ways that are going to share the costs among the people who are benefiting from them, and that it doesn't need the coast guard to provide those services any more?
Commr Watters: There have been very few proposals from industry, and they have tended to be quite isolated in terms of the particular coast guard functions they would like to be able to provide. I had actually expected more, and I'm trying to encourage more suggestions from industry, but I have noted that there really hasn't been much. What we're trying to do through this study is suggest to them that we look at it comprehensively, that industry provide us with some input in terms of drafting up terms of reference and so on, and we can then look at the results.
In addressing proposals though - and this is one of the things we have to be careful about and that the industry has to understand - there is an accountability to Parliament in terms of a statutory basis for the delivery of these programs. We therefore have an obligation to ensure that, even on a contracted basis, you are still going to provide a safe and efficient waterway for use by Canadians.
In part, there's an education process that has to take place there. It could still be done on a contractual basis, but we'd have to be assured and we'd have to assure this committee, the minister and Parliament, that the statutory mandate of the coast guard is still being carried out. One can still sub-contract. There's no problem with that. But in terms of the contractual terms, you have to ensure that the relationship is meeting the kinds of standards and levels of service that Canadians would expect in all parts of the country.
Mr. Mike Scott: I have one more question. I know there are a number of issues I'd like to be able to discuss with you with regard to specific services in British Columbia right now, but I think that would be a little off topic.
I'd like to just ask this: As a committee, we received representations from 35 to 38 different industries, sectors or groups from right across the country, although I can't remember exactly how many. For weeks and weeks in these meetings, this committee was literally seized with hearing witnesses' testimony with respect to impact or potential impact and so on. I'm not sure how long this impact study has... Actually, my copy came into my hands yesterday, and I haven't had a chance to properly review it, and I haven't heard anything from industry at all in terms of its review. Has industry been given copies of this impact analysis? Is there any thought given to the idea that we would invite industry to -
The Chairman: Next Tuesday.
Mr. Mike Scott: And that will be here in committee?
The Chairman: Yes.
Mr. Mike Scott: Very good.
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The Chairman: Has there been any reaction to this from the industry during these past two weeks?
Commr Watters: There has not been much of a reaction during the past two weeks. Prior to that there were some concerns by industry about one of the question areas you were beginning to move towards. In other words, you have an impact study that looks three or four years into the future, but what you need is a kind of rolling assessment. Plus, as economic conditions and transportation trends change, you need to find a way to keep that information up to date. That's one of the reasons why some kind of an independent fee review panel with a secretariat that can keep its eye on that and that would have that industry and regional kind of database would be quite helpful as one looks at the appropriateness of changes in fee structures. Otherwise, you're kind of committed to do an economic impact study part two that keeps it up to date and maybe extends it a few years. So industry has had some concerns about that.
Some parts of the industry wondered if the criteria used in looking at diversion went far enough, that perhaps other criteria that relate more to the profitability of particular businesses should be looked at. I'd like to get the views of industry on that. If we were going to look at the creation of this independent fee review panel, you would have to give them the criteria by which they would make judgments about whether or not a fee structure is appropriate. Therefore, if we want this kind of a panel, we should all be looking at what the criteria should be.
Those might be areas where the industry could be helpful in terms of offering suggestions.
The Chairman: Has industry's concern about ships being diverted to American ports been alleviated? What kind of a relationship do we have with our neighbours to the south as far as fee structures and costs are concerned as compared to theirs?
Commr Watters: There isn't a problem with the existing fee structure, but I think there is a legitimate concern by industry about the future if the fees do increase. Let's look carefully at the competitiveness of the Canadian transportation system, the marine system, to make sure we're not doing something that may end up with traffic diverting itself to American ports. I think those are concerns we should be looking at quite carefully.
The Chairman: Is there already diversion down the Mississippi because of the fees?
Commr Watters: The economic impact study identified the potential, that one could be getting close, and I think they talked about two boatloads.
D/Commr Turner: Beyond the $40 million mark you will start to see some sign of minimal diversion down the Mississippi, but at the present levels there is no evidence of diversion. I should add that prices on the Mississippi barge system fluctuate very dramatically, with much more of an impact than our little fee, so it's difficult for any analyst to pin down that precisely the cause and effect at the level of fee we have now.
Commr Watters: But I think that in general, Mr. Chairman, there is an issue here we should be sensitive to as the fee system develops.
D/Commr Turner: Perhaps I could just answer your question about the reaction of industry to the report. There has been fairly positive reaction within the last two weeks to the announcement as to how we're going to proceed in the future. But with regard to the report itself, there has been very little reaction largely because it has been on the table for a long time. We did this collegially with the Marine Advisory Board, and the results and details were presented to the board back in the fall, apropos Mr. Wells' question. Although technically the report has only just recently been released, it is the same report and the same material the industry and the Marine Advisory Board saw in the fall. So essentially there are no surprises, which is probably why there has not been much reaction so far.
The Chairman: Derek.
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Mr. Derek Wells: Perhaps I'll ask just one last question, which has to do with the policy, I guess, that such things as search and rescue would not be part of the cost recovery because they represent a public good. Also included in that, of course, is ice-breaking for the purposes of flood control.
When you look at some of these, you see a combination of private good and public good. How does your department determine what is to be for a private good and what is to be for a public good, and what type of criteria do you use to establish that a particular service may be for a public good?
Commr Watters: These are challenging issues that we've tried to address as best we could. With respect to the vessel traffic, the 50% - I think it's 50% - allocation for the commercial side is based in part on the best available data we have. We have to continue to update our database and look at where we're providing the service.
For example, in going to the 1997-98 year, we've updated the database and are using it on the basis of 1995-96 data, I believe, which is better data. And in terms of going to the tonne-mile system, the Canadian shippers have to give us better data. They didn't have it before. Everybody is trying to get data that is accurate and more up to date.
I think one of the corollaries is that we'll be able to pinpoint the commercial activity of the services that we provide in a better way, but there still are elements of judgment.
With respect to search and rescue, quite clearly there's a sense that it is really a public service, a public good. You could begin to make divisions within that. A question was raised at the last committee meeting here about some of the difficult situations you get into where adventurers get into situations and require very costly search and rescue activity. On the other hand, Canada has international commitments to assist any mariner in distress that we have to balance this with. We're really not looking at cost recovery in those situations. We think we can work with various committees that are putting on these kinds of events and encourage them to take appropriate precautions.
It's an issue that I think we still have to continue to look at. And I think as our database gets better, both ours and the industry's, we'll increasingly be able to have a better representation of what is commercial.
Mr. Derek Walls: Are you establishing or will you establish a criterion simply on the basis of public versus private good? I don't know if the data helps us too much on that. We have to look at a particular service like ice-breaking for the purpose of flood control. I don't know if it's obvious, but there appears to be an element of public good in that for sure, and there's also a private advantage. Obviously the ice-breaking is going to help private interests. Somewhere in between, is the cost going to be shared or what? But are you going to develop criteria to determine that? It's going to be an issue we're going to have to face in a year or two, and I'd like to know how you're going to establish the criteria.
D/Commr Turner: We are doing some work on that right now, sir, with respect to the policy aspects of what should be considered a legitimate target for cost recovery in the sense that it is a service provided primarily for the support of commercial industry, as opposed to, as you put it, a service provided for the public good. This is not an easy question in any administration, and many people have wrestled with it.
To answer your earlier question about what kinds of criteria we used, they were pretty basic, because at the first cut when we were first introducing the fee, we were introducing the fee at a level that was such a small portion of overall cost to the coast guard that we could afford to make fairly macro judgments about what was a public good and what was a private good.
To take your example of ice-breaking for flood control, that is very much a case wherein we concluded that clearly the main purpose, the raison d'être, of the program was flood control. That's how we got into it and that's how we manage it and run it. Therefore, since the primary beneficiaries were members of the public, like riparian owners and others who were not impacted by flood waters, then it would be considered a public good in this first cut.
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However, it's quite obvious to anyone who sees how the system operates that there is some secondary or even tertiary benefit to commercial shipping because they are more easily able to get up through the system into ports that might otherwise require ice-breaker support.
The converse of that, however, is that as ships become more capable... For example, ships like the big container ships going up the St. Lawrence into Montreal don't need our help at all in terms of ice-breaking, and in fact are doing our job for us sometimes. So I suppose one could also, from their perspective, make the claim that since they're contributing to the public good we should give them a break on the fees.
It becomes a very complex issue, in other words. We have a small group looking at the issue with respect to ice-breaking, for example, and that complexity is part of the reason for the need for some more time to work on the question of public and private good. We have looked at it in terms of the international practice for traffic management systems and have again made a macro decision that since roughly half of the impact of traffic management systems, by our estimate, was for the public good, we would not include it in the costs.
By the way, when we talk about a percentage cost recovery, it doesn't include any of those public good costs. But again, it's an area that can be refined. Our traffic fees are the lowest in the world at the present time. Part of that may be because we have concluded that a good part of the service really is for the public benefit.
The policy criteria that need to be established are not quite so clear at this point that we could say this is what they are in the sense of bang, bang, bang. But over the next eight months we are going to be doing some further work on trying to pin those down with a little more precision so that they are clearly explainable and defensible when it comes time to stand up and talk about what the next move is going to be on fees.
I think it becomes increasingly important for everybody, ourselves included, to have accurate definitions of these things as the level of cost recovery is increased, whereas in our introduction of cost recovery that really was not a significant problem.
Mr. Derek Wells: I have one last quick question. I know this question has been answered, but I've missed it somewhere along the way. Of the original 20%, 40%, 60%, I know we've dropped back to $26 million for the year that was supposed to be 40%. Is the plan now to go to 40% the year after? And is 60% still in the plans?
Commr Watters: There are no fixed targets. I think we have to look at trying to change the system to a percentage of direct costs. There are key elements that we'll have to discuss. First of all, what are direct costs? We'll have to get agreement on that. Second, what is an appropriate timeframe to work with for having an increasing percentage of those direct costs as fees? As well, we have to include within that discussion the introduction of the ice-breaking fee. Those are the critical elements in terms of working with the industry. A set figure is no longer part of the approach we're advocating or putting forward.
Mr. Derek Wells: But you're still planning to collect over and above the $26 million in the years to come.
Commr Watters: I think the Treasury Board policy is that one should in fact recover full costs. There are some exceptions in terms of recovering amounts that are less than that. Basically it's focusing on direct costs as well. That's what we think is probably appropriate to zero in on, and that's what the industry feels is reasonable as well.
Mr. Derek Wells: I think we'll probably review this issue again in September - some of us anyway.
The Chairman: Those bells you're hearing, by the way, are for a vote, but the vote, I've been told, is going to be deferred until this evening, so we still have some time.
I wonder about the impact of Bill C-44 on the coast guard. Is that going to make your job more expensive? What impact will that bill have on the operations of the coast guard?
Commr Watters: There's a tremendous degree of anticipation, I think, from the industry, and obviously from the ports, in terms of the changes being proposed. My sense is that it's going to take some time in order to be able to see how this is implemented and to see the impact it will have on us.
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Quite honestly, Mr. Chairman, I think it's just too early. I think we're generally aware of the nature of the proposals that are being put forward, but it's a matter of how this will operate in practice. There's quite a significant degree of autonomy in the structures that are being proposed. Right now we have good relations with the ports in the seaway, very good relations, and I expect those are going to continue fully under the new system.
The Chairman: I was wondering if your responsibility within the seaway system is going to be different from that outside the seaway system.
Commr Watters: That I'm not sure of. I know there have been some suggestions that in the management of the seaway and the Great Lakes system as an entity maybe there will be a need for a higher degree of coordination. We would be quite willing to participate in our areas of responsibilities if that were felt to be appropriate. But my sense is these are just preliminary ideas that are being voiced. I think people are really waiting for the passage of Bill C-44 to begin to look at those kinds of issues.
D/Commr Turner: Could I add to that, though, that there are actually two elements to the seaway. One is the question of the responsibilities within the seaway proper, from Montreal to Lake Erie, the two stretches it operates, which already operate in a different way. Some of the services inside that are the direct responsibility of the seaway rather than the coast guard. The second is the question of the larger Great Lakes and seaway system. In that context, in fact in both contexts, we are members of a working group with the United States: the Canadian Department of Transport, the St. Lawrence Seaway, the Canadian Coast Guard of DFO, plus the American seaway, the United States Coast Guard, the United States Department of Transportation, and the U.S. Army Corps of Engineers and Transport Ship Safety. We are all together around the table, looking at opportunities to work more cooperatively together on overall services in the Great Lakes. Just as we now, for example, have a treaty between Canada and the U.S. whereby the two coast guards share ice-breaking support back and forth, we are now working more closely together on a similar kind of arrangement for aids to navigation, buoy maintenance and so on, with a view to reducing the overall costs in the system.
We're also working with the seaways to make sure there's a compatible system. An example of that would be the introduction of new technologies we're pushing, such as what is referred to as AIS, Automated Identification Systems, for traffic management, to ensure that any system the Canadian Coast Guard, for example, might be installing in the St. Lawrence River system is compatible with what the United States St. Lawrence Seaway Development Corporation and the Canadian Seaway Development Corporation, and then the U.S. Coast Guard in the Great Lakes, all also install. In other words, sequentially, as you move up through the whole Great Lakes and St. Lawrence system, you have to have one consistent system of aids to navigation, including the new electronic systems. So we are working closely together on that.
Whether the provisions in Bill C-44 on the future commercialization of the seaway will have any impact on that is, as the commissioner has said, still too early to say, but from everything we've seen from an operational point of view we're working closely together, and we'll continue to do so, I expect, despite whatever management mechanism is put into place for the seaway proper.
The Chairman: Mr. Steckle.
Mr. Paul Steckle (Huron - Bruce, Lib.): I'm new to the committee, so I haven't been privy to the ongoing discussions and some of the arguments that have been put forward, and certainly I don't come with a lot of background on this, but I bring in a perspective on the middle waters, as the only one on this committee who comes from central Canada, representing the Great Lakes. I come from Ontario, the port of Goderich being part of my riding.
Salt is mentioned as a product that does not have a high value on a per-tonnage basis. We take out a lot of salt in Goderich. It's the largest salt mine in Canada, at 4 million to 6 million tonnes a year. In the past there has been a wide variance in the cost of fees that have been applied, particularly in transportation. We're in this whole issue of divestiture of ports and harbours. We're in the midst of that right now with the port of Goderich.
If we take Goderich and we take Windsor, there's a tremendous variance in the cost because the salt mine people in Windsor own the dock. They don't in Goderich. No one could ever determine the true cost per tonne of a shipment out of that particular port. Even to this day, we've never been able to determine that.
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I guess my concern is if you determine that a certain cost is to be applied as a real cost - we believe in cost recovery - what medium does the marine industry have if they decide that perhaps this is not a reflection of the true cost? How do they appeal? Do they go through their member of Parliament? How do they come to get a resolution of this problem?
We're hoping to resolve this issue in the case of Goderich by putting it under a private authority whereby local people can look at it and put a real cost to it. I think perhaps the fact that local people will make local decisions is something that we can live with, but how can the marine industry, in terms of the cost of transportation, determine the real cost? Where do they go if they determine that their figures don't stack up with your figures?
Commr Watters: The primary avenue is one that I think is working quite well. Each region has a marine advisory board. There is one for central Canada. I met with that board just last week in Toronto. You have representation there from all of the key industries and the associations as well. These are quite flexible structures in terms of membership. If someone feels they want to be represented, then I think there is an opportunity to bring that to the attention to the chair. The chairs of these, I think in almost every case, are private sector individuals, so this is not the kind of operation that is run by the coast guard.
Across the country, these advisory boards have developed differently, reflecting unique features in their particular regions. We find they're very effective for ensuring that the concerns of a regional perspective, even a zone within a region, meaning a particular area, are brought forward. So my sense is that this is the key way to ensure these concerns are put on the table and then met.
One of the issues in the future, though, could be - we need to get some advice on this - in looking at the setting of fees, is there a feeling in industry that there should be a fee review mechanism? This is so that maybe the particular industry you're talking about makes its point of view known at the regional advisory board, but in terms of the fee structure, that gets levelled out as you're trying to develop a national approach.
Maybe it feels that there are still some unique features of this that have not been taken into account. The question is, would it be useful to have a review panel independent from the coast guard, but still reporting to a minister, that would look at these kinds of issues? Then within a short period of time - you want this body to make decisions in time for the next shipping season and so on - it would look at the issue and give its independent view as to whether or not the fee structure is appropriate in that particular case. That would be a longer-term solution, but the short term is very much concerned with the involvement of the advisory boards.
Mr. Paul Steckle: Are you quite receptive to that kind of approach in terms of bringing accountability to the fee structuring?
Commr Watters: Yes.
Mr. Mike Scott: I have two quick questions.
First, the first paragraph at the top of page 8 of the briefing notes you've distributed talks about a $14.3-million revenue shortfall in 1997-98 that will be applied in 1998-99 with respect to ice-breaking services. Just for clarification, this increased fee is going to apply to ports that actually require ice-breaking services. Is that right?
Commr Watters: Right.
Mr. Mike Scott: But it won't apply to ports that don't require it.
Commr Watters: I'm sorry, the basis of the fee still has to be worked out. The recommendations are that the industry will look at a transit fee and an hourly fee. It would apply to a ship and not a particular port; it would be the ship that would pay the fee.
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Mr. Mike Scott: What about if the ship were coming into Halifax or Prince Rupert?
D/Commr Turner: The plan we have on the table at the present time, at a very preliminary stage with the industry, is that we will define ice-covered areas and ice seasons. If you were sailing within or between two ports in that ice season, in that ice area, you would be subject to the ice fees. If you were sailing, for example, from a non-ice port into an ice area, you might be subject to half the fee, but if you were sailing either outside the ice season defined in regulation or into ports at which there is no ice and no ice-breaking, you would pay no ice fee.
Mr. Mike Scott: So then, Mike, you can give me your assurance that shippers and ships on the west coast are not going to be subject to this fee?
D/Commr Turner: Unless the climate changes quite dramatically, the minister has already made it quite clear that he has no interest in seeing ice-breaking fees applied in areas where there is no ice being broken.
Mr. Mike Scott: So the increased fee you're talking about that's going to be applied in 1998-99 is not going to be applied necessarily everywhere. It's going to be applied to those areas where ice-breaking services actually are applicable.
D/Commr Turner: That's right. That's the expectation, though we would want to be careful we're not too precise, because we want to give the industry the opportunity to have this discussion with us. This is exactly how we should apply it.
Mr. Mike Scott: Okay.
I have one other question. Is there any plan to have the minister before the committee in the next week or two?
The Chairman: No, there are no plans.
Mr. Mike Scott: No plans?
The Chairman: We'd like to conclude the impact study with the members of the industry next Tuesday. After that I don't think there will be a great deal of time to bring anybody in. Maybe in the fall, as Mr. Wells said...
Mr. Mike Scott: I think you're anticipating.
Some hon. members: Oh, oh!
The Chairman: I'd like to ask one small question before we finish here this morning, regarding number 5 on page 8 about search-and-rescue vessel service, traffic services, and ice-breaking for the purposes of flood control and the fact that they may represent a combination of both private and public good. I was just wondering why dredging wasn't included in there.
Commr Watters: I'll give a general approach and ask Mike to provide a little more information.
In the review of the programs of the coast guard, there was a feeling that dredging is not a core activity, despite the fact that this is something the coast guard has been providing for a long period of time.
Looking at how the service is provided now, it's primarily on a contractual basis. In other words, the private sector basically has the machinery and equipment to do this, and the coast guard by and large functions as a project manager. Therefore there was a feeling that if the private sector can provide this, that is something that in fact they should do.
Also there was a sense that in terms of the basic uses of a waterway, dredging is not a fundamental requirement. It is more oriented towards commercial access. Because of that and the fact that the private sector can provide the service and has the expertise, there was a feeling that we should be looking at a transition in terms of getting out of that activity and instead focusing on the search-and-rescue and the aids in the ice-breaking.
The Chairman: Private has the machinery. Who has the money to pay for that machinery?
Commr Watters: That's...
The Chairman: That's my concern. Who pays for it? There are some areas where dredging has to be done or the port closes, and in a lot of cases the revenues are not there to do dredging.
D/Commr Turner: We must be careful to distinguish between dredging of main channels, which was the coast guard's responsibility, and dredging within the ports.
The Chairman: That's right. I know.
D/Commr Turner: With regard to the main channels, the decision was taken - with, I must add, the support of your colleagues in the Standing Committee on Transport - that the coast guard should be transferring the cost of dredging and dredging programs to the ports and to the commercial users and beneficiaries. That's the course we've been following for our main channel dredging program.
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For example, in the Port of Saint John, we have already transferred over that responsibility; the port is taking care of it now. And we are currently in discussions with the St. Lawrence ports and St. Lawrence industry on the transfer of that responsibility, over a period of two or three years, directly to the users. It may be through a direct service fee for total cost recovery or it might be through them setting up their own cost recovery mechanism without the coast guard or the government needing to be involved at all; that is yet to be decided. But we are going to make sure that in the interim we continue to work closely with the industry to make sure the St. Lawrence remains at the same depth.
On the west coast we're currently in negotiations with the Fraser River Harbour Commission with respect to the transfer over to them of the responsibilities that we've had, of course along with the capability they have, through their harbour dues and port fees, to collect for the cost of dredging.
In the smaller harbours, particularly the small craft harbours that are maintained by the Department of Fisheries and Oceans, inside-the-harbour dredging is really done as quite a separate program in support directly of that small craft harbour and is not part of the main channel dredging program of the coast guard.
The Chairman: But on the east coast there are still a number of harbours that actually require dredging to remain open.
D/Commr Turner: That is correct, yes.
The Chairman: With all due respect to our colleagues in the transport committee, often we don't agree with them, and in this case we vehemently disagree with them.
Some hon. members: Oh, oh!
D/Commr Turner: Well, the plan at the present time is to withdraw in steps, as the ports become more self-sufficient, from the main channel dredging program and transfer that over to the individual port administrations or to a mix of port and industry, depending upon the situation.
The Chairman: Can those port administrations then apply to coast guard for funds for dredging?
D/Commr Turner: No, sir. The intention is to transfer the responsibility in total, not to be subsidizing dredging in support of the commercial operation of the port.
The Chairman: Are there any further questions?
If not, thank you very much, both of you, for coming here this morning. The only person I'm sure will be back this fall is the member from Labrador. He just got his new highway, so...
The meeting is adjourned until next Tuesday.