EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, October 24, 1996

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[English]

The Vice-Chairman (Mr. Comuzzi): Good morning, ladies and gentlemen. We convene this meeting this morning to consider Bill C-44 and to take submissions with respect to that act.

I welcome Captain Soppitt from the Port of Saint John. Would you introduce your guest, please.

Captain A.G. Soppitt (President and Chief Executive Officer, Saint John Port Corporation): This is Mr. Peter Glennie, chairman of Saint John Port Corporation.

The Vice-Chairman (Mr. Comuzzi): Who is going to make the presentation?

Capt Soppitt: Mr. Glennie is going to say a few words and then I'll make the main presentation.

The Vice-Chairman (Mr. Comuzzi): You're familiar with the process. We have a half hour set aside for each submission this morning. You can use the whole half hour speaking yourselves and not get any questions, or you can give an eight- or ten-minute summary and then I'm sure the members of the panel here will have some questions to ask. I know of one who would very much like to ask you some questions. So carry on.

Capt Soppitt: Thank you.

Mr. Peter S. Glennie (Chairman of the Board, Saint John Port Corporation): Thank you, Mr. Chairman.

On behalf of the Saint John Port Corporation, we welcome the opportunity to make this submission this morning.

The Saint John Port Corporation strongly supports the objectives of the proposed Canada Marine Act and in particular the establishment of Canada port authorities.

The establishment of Canada port authorities will result in greater local autonomy and flexibility so we can respond to the commercial marketplace and provide cost-effective and efficient management. We believe the new legislation will result in increased efficiency and will eliminate bureaucratic interference, which will allow us to respond more effectively to the needs of our users.

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In our submission today we make certain recommendations we believe will strengthen and enhance Bill C-44. We believe there are certain deficiencies in the legislation, which, unless amended, will hamper Canada port authorities in their efforts to compete and operate freely and unencumbered in a commercially viable manner as intended by the legislation.

For example, we believe clause 24 is too restrictive with respect to the use of port property. We recommend that this clause be amended to allow Canada port authorities to use port property as long as it is predominantly for port-related activities.

We recommend that subclause 27(3) be amended so Canada port authorities be allowed to borrow on the security of their assets.

These are just two of our recommendations. As you can see in our submission, the overall thrust is positive. We believe the legislation can be strengthened in order to provide Canada port authorities every opportunity to succeed.

I now call upon our president and CEO, Captain Al Soppitt, to make further recommendations in this regard. Thank you.

Capt Soppitt: Thank you, Mr. Chairman, Peter.

The port of Saint John is one of Canada's major ports and can be considered the port of New Brunswick.

We handle over 19 million tonnes of cargo per year and a wide range of diversified commodities including crude oil, petroleum products, potash, forest products, bulk sugar and salt, containers and general cargo. We are the east coast load centre for forest products and we are the third largest Canadian port in tonnage moved across port facilities.

I trust the committee has received our brief. It was forwarded earlier this week. Further toMr. Glennie's remarks, and in the interests of time, I'm just going to summarize and emphasize a few of the main points.

First of all, I'd like to comment on the structure of the board of directors, and in particular the involvement of port users.

Saint John Port Corporation operates with a five-member board, which makes it very manageable and capable of dealing with the business of the port in an efficient and effective manner. We believe the size of the board proposed in Bill C-44 is too large for a port such as Saint John. We therefore recommend that the board be limited to five to seven members consisting of the three appointed members from each level of government, that being federal, provincial and municipal, and the balance from a list provided by port users to the Minister of Transport.

Bill C-44 provides for port users to forward the nominations for board members. The port corporation supports this but also agrees that port users should not be members of the board. The presence of port users on the board has the potential of creating any number of conflicting situations. It would be very difficult to make any business decision if board members have opposing interests in business prospects being considered by the port.

Examples of the potential conflicts in general are noted on page 6 of our submission. A couple of situations in point: What if an operator wished to develop a second container facility at our port? What would be the situation if the port had the potential to attract a new line into the port that was trading into an area already being serviced by a current client? If users are on the board, these types of situations would cause some major problems.

We welcome the opportunity given to the users to put forward their nominations for board members. Our board should consist of directors, not necessarily from the marine field, but those who have the expertise, the reputation and success in business or in other significant areas in their local community.

The board role is to set and approve policy and ensure good business practices are applied. The management of the port is the responsibility of the CEO and the management team, who, as they do now, would work closely with our port users in developing the business. However, we need the confidentiality in working with our clients, and this would not be achieved with users being on the board.

Just to clarify, the port corporation therefore recommends Bill C-44 ensure that any situation of conflict of interest is avoided with respect to board membership by prohibiting users from being members on such boards.

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The next issue I'd like to deal with is clause 24, which has been mentioned by Mr. Glennie. Subclause 24(2) states that:

(2) The power of a port authority to operate a port is limited to the power to engage in activities within the port related directly to shipping, navigation, the transportation of passengers and goods and the handling and storage of goods.

This is extremely restrictive regarding the use of port property and it limits the port's capabilities in generating other revenue from land that's being underutilized.

Our ports need the flexibility to use their property for non-traditional ventures and activities that would generate revenue for the port from land that's otherwise laying idle. Such revenue contributes to reducing costs and therefore contributes to the overall competitiveness of the port.

Furthermore, by restricting ports to activities within the port area, as clause 24 does, we will be prevented from conducting a number of ventures and activities that contribute to our marketing efforts and help in producing a positive port image, thus providing the potential for increased business. We've listed a number of examples of these kinds of activities on pages 8 and 9 of our submission.

We do recognize the reasoning of clause 24 in that the government wants to avoid tying up port property with such things as condominiums, casinos and the like. However, there are many opportunities that exist whereby ports could gain revenue for underutilized areas. Priority should be given to marine-related activities and the movement of water-borne cargo.

Next, consideration should be given to industrial activities and non-related activities that would result in the export of goods, such as manufacturing on a facility at the wharf for the export of goods after they have been made.

Finally, we would consider the underutilized property that's now being used for non-port-related ventures. These would be considered on short- to medium-term periods, always taking into consideration the needs of our marine sector and the need for our facilities for marine-related activities.

We also put some importance on giving the public some access to the port in certain areas. In Saint John we have developed a small area that was underutilized as a public park. It's very much used and very popular, giving a very good view of the harbour. We're willing to work with the municipality to expand such areas.

However, as you can see by these remarks, we feel it's crucial that ports do have the necessary flexibility, which is currently not provided in the act.

Bill C-44 is silent on the issue of federal status. The loss of federal status has a significant impact on the port as outlined on page 10 of our submission. To summarize, ports will be faced with an increase in property taxes and subject to provincial sales taxes. Port employees will be excluded from the Public Service Superannuation Act, and the ports will be facing increasing costs for developing a new benefit package for employees. We would be burdened with increased layers of a regulatory process that would be required under provincial and municipal law.

With respect to property taxes, the corporation pays almost $750,000 annually for property taxes. In addition, the lessees of our major terminals pay more than $1 million annually. Where the port would have to pay additional property taxes, we estimate that could increase our taxes by $3 million a year. This would significantly hurt our competitiveness with other ports.

With respect to taxes, the port does contribute significantly to the economy of the region. An economic analysis has shown that the port contributes $165 million a year to the local and regional economy, which is represented by some 2,500 direct jobs and about 2,000 indirect jobs.

Our recommendation, therefore, with respect to this section, is that the Canada port authorities continue to be agents of the Crown.

We have four areas that we wish to address regarding financial issues.

First, Bill C-44 does not provide sufficient financial flexibility to allow for the future development of facilities. The proposed legislation under subclause 27(3) prohibits ports from pledging their assets when seeking financing from private banking institutions and where government funding will no longer be accessible to ports.

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In order to remain competitive, ports will need to continue to develop facilities to meet the changing needs of the marine industry. For example, ports may need to upgrade facilities to accommodate larger vessels or construct new facilities to support new business. It would be very difficult, if not impossible, to maintain facilities if the port authority cannot pledge the very assets to raise the funds needed to operate them.

The current proposed legislation seriously limits the borrowing power of the port. Being unable to pledge assets may seriously affect our credit rating and will adversely affect interest rates, significantly increasing the cost of borrowing.

Our recommendation is for clause 27 to be amended so that ports may be permitted to borrow on the security of the assets they own or manage, in addition to pledging their revenues.

The second point in the financial area is that the proposed legislation indicates that the port authority will be obliged to assume the pre-existing obligations and liabilities of the Crown. This would affect a port's competitiveness in that it could assume obligations and liabilities that would result in significant costs to the port authority, where funds, again, are not accessible from the Crown.

Our recommendation is that the Canada port authorities should not assume pre-existing obligations and their liabilities, and that they rest with the Crown.

A third issue is a very important one. It concerns the calculation of the stipend. The federal government will require a return on investment from the Canada port authorities. It is proposed in the bill for this to be calculated based on the gross revenue of the port. This will reduce the working capital available to us for our operation.

With the implementation of the new marine policy, the port of Saint John is facing a significant increase in costs, as outlined on page 14. These include: the cost of channel dredging, which is no longer being carried out by the coast guard; the possible additional costs for in-harbour navigational aids and vessel traffic services; and increased taxation resulting from the loss of federal status, as we previously mentioned.

The port of Saint John, with its high tidal range, also requires a more rigorous maintenance program than other ports. This is due to the tidal action on the facilities and the need for ongoing maintenance to ensure that the facilities are kept up to required standards. All of these costs must be covered by port revenues, and we believe such costs should be deducted from the gross revenue before the calculation of a national fee is carried out.

We recommend the stipend or franchise should be calculated on the net revenue of the port, but this should not lead to a net loss, however. Alternatively, if gross revenues must be used to calculate the stipend, then costs such as channel dredging, which are specific to the port of Saint John and which may affect its competitiveness with other ports, should be deducted from the gross revenue before the calculation of the stipend.

Finally, clauses 21 and 22 exclude Canada port authorities from parliamentary appropriations for any purpose. There is no provision in the proposed act for funding with respect to recovery from a natural disaster or catastrophic event, or other emergency situation that may require government funding. We therefore recommend that government funds be made available for emergency situations, subject to the approval of the minister.

These few remarks represent the highlights of our presentation. I would ask that the committee, in its deliberations, consider all the points in our submission carefully, including those contained in appendix A, which provides an analysis of the clauses we feel require amendment.

We believe the Canada Marine Act is very important to the future of Canadian ports and to our competitiveness on the world market. Our recommendations have been put forward in a positive light. We believe there's a great opportunity for ports and for Canada in realigning our marine policy, and it is very important to make sure that we get it right this time around.

I would like to thank the committee for the opportunity to appear before you today. I would especially like to thank your staff for their assistance in accommodating us here in Ottawa.

Thank you very much.

The Vice-Chairman (Mr. Comuzzi): Thank you, Captain Soppitt and Mr. Glennie.

Mr. Crête.

[Translation]

Mr. Crête (Kamouraska - Rivière-du-Loup): Thank you for your brief. On page 29 of the English version, you talk about the St. Lawrence Seaway and you state the following:

This clause provides for federal funding of the St. Lawrence Seaway. This creates an unfair advantage to the Seaway and subsidizes its operation where no such arrangement will be available to ports.

Arrangements for the Seaway should be consistent with those for ports.

Could you explain this situation to us and give some examples of unfair advantages that might occur should the bill's clauses in the area of financing remain in their present form?

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[English]

Capt Soppitt: Unfortunately, I don't have the bill with me today, but paragraph 68(a) appears to make allowances for federal funding for the seaway. Ports are not going to be given that opportunity. I think it just goes back to the original intent of providing a level playing field for all ports and marine systems across the country.

[Translation]

Mr. Crête: I did not necessarily want a legal opinion or a lawyer's response, but rather examples of unfair competition, where activities would be subsidized whereas ports would benefit from no such arrangement. Could you give us examples of operations that would be affected and explain to us in what way they would be affected?

[English]

Capt Soppitt: I don't have any specific examples. We wanted to make sure that when this bill went through, we covered all the bases. One thing we would be concerned about is that it would lower the cost to the ships to go through the seaway and would attract them to that area rather than to the Atlantic ports. It has been seen in other areas in going through the coast guard cost-recovery system with respect to marine fees and ice-breaking fees. We're endeavouring to make sure that we're all used fairly and equitably. I don't have any specific examples.

Mr. Glennie: This is what we're saying. For example, if the stipend is going to be calculated on gross revenues, there are some ports that have unusual costs, such as Saint John. For example, on dredging, the port of Halifax doesn't have to pay for dredging, but we do. All we're asking is that when you calculate the percentage, the stipend, if it is on gross revenues, you should deduct, for example, the costs of dredging, or the unique costs that we have to be hit with that other ports don't. That's the example we would use.

The Vice-Chairman (Mr. Comuzzi): Thank you, Mr. Crête.

Mr. Gouk.

Mr. Gouk (Kootenay West - Revelstoke): Thank you, Mr. Chairman.

I have a couple of points, gentlemen. I'll run through them and then let you respond. It might be the fastest way.

You asked for a change in the number of directors. It would go down to between five and seven. I have drafted an amendment that does take it down to five, but leaves eleven as the upper option. You wouldn't be required to have eleven, but it would leave it so that if some ports, say like Vancouver, which by the definition in the bill requires more people because of the additional provincial member....

You asked to continue to be a federal agent. The mood, I believe, of the committee - I'm speaking somewhat out of turn, because I don't know for a fact how we're going - is that it will be to keep a federal agency, but not a federal agent. The difference is that there won't be access to government funding. We won't have liability, but all the other benefits will primarily remain.

In the case of borrowing, I've also drafted an amendment on that. It differs slightly from what you're asking for insofar as you could pledge your assets, including land that you own outright. But you could only pledge federal land with the approval of the minister.

The final comment is on the St. Lawrence. I understand what you're saying, and I support it in concept. It is going to take a little longer, I believe, to get the St. Lawrence so that it is completely independent. It is very important. I've been a great supporter of the idea you have to get that level playing field you're asking for.

One of the big factors is that the Americans are not paying their fair share of the operation of that. We have to get them to do that as quickly as possible, but there does have to be an interim period. Aside from the fact that we will eventually have to get there, I would ask for there to be some understanding and patience in the interim.

You may care to respond to any of those points.

Capt Soppitt: Thank you very much.

If there was a range from five to eleven, I don't think that would be a real problem for us. The bill said nine to eleven, I believe, and we feel that nine members in Saint John would be an extremely big board. We're a very close community, and I believe we can function better in smaller groups. I think that would probably meet our requirement.

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The second comment was -

Mr. Gouk: Agency versus agent.

Capt Soppitt: It's very encouraging that we're moving in this direction.

Mr. Gouk: Yes. I'm saying now - and this is what I've drafted - that I believe there is a general mood in the committee to move in this direction. I don't know if my specific wording will be accepted or not, but that is the direction I believe our committee is moving in on all of these matters.

Capt Soppitt: With respect to the seaway, we recognize there are a lot of costs involved there. We appreciate that it's an international facility as well. It would appear that our comments are being considered.

Mr. Gouk: Thank you very much.

The Vice-Chairman (Mr. Comuzzi): Thank you, Mr. Gouk.

Mr. Cullen.

Mr. Cullen (Etobicoke North): Captain Soppitt and Mr. Glennie, I apologize for missing the earlier part of your presentation, but I came in on the discussion of the stipend, which I have a lot of interest in.

There's been a lot of discussion by the witnesses and by this committee about how the stipend would be calculated, and I found your proposal rather interesting.

I am a chartered accountant. In the port of Montreal the other day we heard the head of the Montreal port say that if you're looking on a net basis, and you have audited statements and the auditors look at it from the point of view of generally accepted accounting practice, one should be able to deal with concerns. I understand the concerns of some of my colleagues that a lot of costs can get buried, to use a colleague's term.

I think you raise an interesting point. I would really come back to the argument that if it's audited by a chartered accountant or a CGA, or whatever, you come to grips with that to some extent. But I think you raise an interesting point. I've also seen a lot of statements, and when you start looking at basing it on gross, there is going to be a big push to put a lot of things against the gross. So when we talk about burying - and I'll use that word advisedly - I think we have the same kind of potential.

The dredging you're talking about may be totally legitimate. I'm not arguing with that; I'm just talking about the principle involved.

One of the arguments against the net, which I think is more forceful, is that you.... Let's say you have two ports; one makes a profit and one makes a loss. Let's say for all other intents and purposes they have the same kind of competitive environment, and let's say that their cost burden is roughly the same. This is somewhat theoretical, but if you base it on net, the argument is that you're really not differentiating between a port that is operating efficiently and a port that is operating inefficiently, other things being equal, which I know in a perfect world is never the case, but -

The Vice-Chairman (Mr. Comuzzi): I'm sure there's a question there somewhere.

Mr. Cullen: Yes, it's coming, Mr. Chair. Please excuse me. It's been pent up, this theory of stipends.

I wonder if you'd comment on this sort of criticism that you're really not differentiating between ports that are operating efficiently and those ports that are not operating efficiently, if you base it on the net.

Capt Soppitt: I understand that in the bill ports are required to be viable, and before they can be a port authority they have to show that they're going to be financially viable for some time - for the foreseeable future, I would say.

I can see your concerns. I'm not a financial expert by any means, but I think what we're looking for here is that we don't want to be paying a fee to Ottawa rather than.... We want to have the incentive to be able to generate business, keep the port competitive, and be able to handle our business.

Mr. Glennie: I understand the concern that if you calculate it on net it may be difficult to decide what is reasonable to deduct as expenses. That's why we say in the alternative that if you do calculate it on gross for ports like Saint John, which have extraordinary costs, we believe costs such as dredging should be deducted before the calculation is made. But I understand exactly what you're saying, and we understand the concerns about calculating on net. I think most franchises calculate it on gross, and if it is in fact a franchise fee, we understand where you're coming from. But in the alternative we're asking that we be allowed to deduct the unusual costs that we're going to be hit with in the port of Saint John.

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Mr. Cullen: Thank you. It's not an easy thing to deal with, but I think we'll see, in the case of other ports, an argument that a lot of these expenses are costs that are below the line and would come up and be netted against gross revenues, and in your case it may be dredging.

Part of that I think is a matter of definition, what you're putting into the act, or the letters patent or whatever. Anyway, I appreciate your comments and I'm sure we'll have more discussions on this.

Capt Soppitt: Of course, it's the calculation. This is all to be negotiated out, I believe, so there may be some answer to what we can consider and what we can't consider as being deducted before. Maybe it should be fairly standard across the board.

Mr. Glennie: We believe, by the way, that right now we are a very efficient port. We went through a downsizing earlier this year, and we're down to 24 employees. I think if you compare that to other ports it's a pretty low figure, and for this reason we believe we are pretty efficient.

Mr. Cullen: Thank you.

The Vice-Chairman (Mr. Comuzzi): Thank you, Mr. Cullen.

Mrs. Wayne.

Mrs. Wayne (Saint John): Thank you. My first question, Al, is with regard to the make-up of the board. When I look at your report and I look at Bill C-44, it looks like only 25% to 33% of the board appointments will come from local interests. I'm really quite concerned. I feel they should be those who have a local interest and also those who have some skills with regard to what's happening at the port.

I've noticed - and this has nothing to do with those who are there right now, Peter - that over the years, and particularly in the last twenty years, at the local level the appointments are political appointments. A lot of people who are there have absolutely no knowledge of operating a port or having any involvement in a port whatsoever. I'm wondering just how you see the make-up of that board or how it should be?

Capt Soppitt: I believe the government's intention is that the user-nominated have the majority. I'm not quite sure, but that's the feeling I get through various meetings we've been to, that they'd like to see the majority be user-nominated. So a board of seven in St. John, for example, would provide that majority, with three from government.

By the way, I didn't mention it in my presentation, but we don't feel the CEO should be on the board.

Mrs. Wayne: No, I saw that.

Capt Soppitt: You're looking at seven people. I think there is a lot of expertise in the city of St. John and in the province - they don't necessarily have to come from the city, I guess - people who are not directly involved in the port. I see the board as providing the policy and the direction with respect to good business practices and things like that.

We've just actually established somewhat of a new team because of the recent changes on our staffing, but I'm endeavouring, and I think I've succeeded - and we have a very good management team in the port. I now have four departments, which will be headed up by professionals in each area, and I think we can conduct the business of the port and keep the board well informed and well advised on what way to go.

I've had discussions with our users, and some of our users are in the opposite direction and would like to see themselves on the board. I do have a problem with that because I was recently appointed to this position as president. I've been harbour master in the port - assistant harbour master and harbour master for the last 16 years - and I can tell you there are conflicts between operators.

Mrs. Wayne: Yes, there are.

Capt Soppitt: If they're on that board, we're going to have problems.

The Vice-Chairman (Mr. Comuzzi): Thank you, Mrs. Wayne.

Mr. Keyes.

Mr. Keyes (Hamilton West): Thank you, Mr. Chairman. Thank you, gentlemen, for your report this morning.

In the case of the CEO, whether or not that individual is appointed or on the board or not on the board.... For example, Mr. Chairman, when we were in Halifax, there was a demonstrated interest by the port that one of their users, CN, be on the board. They feel it is highly important, but it's the community, the users, the port - everyone is in agreement that CN should be on that board.

With regard to the CEO and the board position, I think it could possibly be looked at through letters patent. Where there are individual needs and where there is a consensus of the majority in individual port communities who say this is the way it ought to be, I think there might be room there for negotiation through letters patent to make that particular opportunity available to any port.

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With regard to board appointments, and to allay Mrs. Wayne's fears, if, as the minister and the department have indicated, the whole idea behind the board appointments is to not only give the three appointments - federal, provincial and municipal - to the board but also to draft the remaining members to that board from a list of names that are submitted - and this is crucial; I have to keep repeating it - not by Ottawa to the community but by the community to Ottawa -

So you have a list of names that comes from the port community, and in some cases it's been demonstrated, Mr. Chairman, that it's not necessarily the political nature we're so concerned about. That to us is not as important as ensuring that the community compiles the names that are necessary. There might be names on that list of people who are most important to the community interest as a whole and not necessarily just the users' interest. That's why Ottawa is determined to ensure the list is generated by the community, and if that list of five names comes forward and those are the ones who are in the best interest of the community, they are who the minister wants to appoint.

Just before you comment on that, the other question I have is on the stipend. We've heard this argument across the country, and I put the question back to the ports. If it is calculated on the gross but there is a qualifying paragraph that, to some degree, says if there is ability to pay on the port's part - so we're not reaching in to take money from the port that may need the money in order to sustain itself - so there's a qualifier there based on ability to pay, would that satisfy any concerns you might have, if the stipend was calculated on a gross?

Capt Soppitt: I think that would go a long way to satisfying what we would need.

That same issue, by the way, is a concern of our port users as such, our port operators, and you may have heard from them already, or you may be hearing from them in the future.

I'm very interested in your first comments on the process of the community and the users providing the list. We support that wholeheartedly. We're already in the process of achieving that.

I have mentioned in our submission that the term ``user'' in the bill is very broad. We've heard all the jokes about who it could include, and I'm not going to get into that.

Mr. Keyes: Keep it clean.

Capt Soppitt: We have the port corporation to lead the way and to direct the users and the system. We've already developed a list of what we consider users. We've set some common-sense criteria.

Very briefly, I included our vessel agents in the port, our terminal operators, major shippers and importers. The criteria we used in Saint John was anybody putting cargo through the port in excess of 1,000 tonnes per year. We've used that. We have truckers there, and we've included some government agencies, because the bill says ``commercially using the port and those who provide service''. So we've included the pilotage, the port corporation, the coast guard, immigration and customs. Whether or not they respond is up to them.

We've organized a meeting of port users in mid-November with Transport Canada, and at that time they will have clearly explained to them the process for putting names to the minister. Then they will go away and decide which way they want to do that.

Mr. Keyes: If the government chose federal agency status, to put that into the bill, would you still be prepared to pay grants in lieu?

Capt Soppitt: Yes.

Mr. Keyes: Without hesitation?

Capt Soppitt: Yes.

The Vice-Chairman (Mr. Comuzzi): I would like to thank Captain Soppitt and Mr. Glennie for making this presentation.

I know how important the forestry industry is to New Brunswick, and I think your port is the most efficient and most up to date with respect to moving all types of forestry products, including dimensional lumber, pulp and paper, kraft. You should be complimented on what you've done in that area. I think it's a leader in the country, and hopefully we're going to be sending people down to see how you folks do it.

I assume from your remarks this morning that when you talk about users and being participants on a board, you mean that users are very important, but not to be exclusive. Would that be a correct assessment?

Capt Soppitt: Yes.

Thank you.

The Vice-Chairman (Mr. Comuzzi): Our next witness is Mayor Shirley McAlary.

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Good morning, Your Worship.

Ms Shirley McAlary (Mayor of Saint John, New Brunswick): Good morning. How are you?

The Vice-Chairman (Mr. Comuzzi): Do they call you ``Your Worship'' if you're from New Brunswick, also?

Ms McAlary: Yes, they do.

The Vice-Chairman (Mr. Comuzzi): That's wonderful. Welcome to our committee.

Ms McAlary: Good morning, Mr. Chairman, honourable members. The City of Saint John appreciates the opportunity to be able to appear before you this morning and submit our brief concerning Bill C-44, the Canada Marine Act.

We're very sorry that you were not able to visit the city of Saint John and hold public sessions in our city. We feel that we have the greatest hospitality in Canada, and we certainly would have shown you our city and extended a very warm welcome to you. We are Canada's first incorporated city.

The Vice-Chairman (Mr. Comuzzi): That's his fault, Your Worship.

Ms McAlary: We would like you to come back at any time.

We feel that the success of our port has always coincided with the success of the city of Saint John.

The port of Saint John is a major asset to our city and its growth and prosperity are vital to our well-being. Saint John was the home to a major port before our city was created, and we are the third largest port in Canada in terms of tonnage. You have of course just heard from the port corporation what our major products are.

We fully recognize the importance of being cost-effective, efficient, competitive, and ensuring that our port remains so. We are very pleased to see the new marine act. However, we feel that appropriate amendments need to be considered.

These amendments are necessary for our port and our city to meet the needs of our customers and provide the necessary level of service. We're very proud of our port, and we're certainly pleased to have this opportunity to be here.

In Saint John we have some major industries. Canada's largest oil refinery is located there, as is the sugar refinery. We have two pulp mills, and our potash and our forest products terminal in Saint John is very, very prominent. They're located there because of the location. We provide them with a gateway through which they can deliver their products to the rest of the world. This has been the situation forever in Saint John and is going to continue to be so.

There's an old saying that as the city of Saint John goes, so goes the port. Over time that certainly has been proven. We have a good workforce in the city of Saint John, which has been a major contributor to the way of life for our citizens in the city of Saint John. These are some of the reasons we feel it's so important and why we've made the effort to be here today.

We're going to address the issues that will affect the municipality. Those issues are policing, development of port property, and taxation. No, not everybody wants to hear me talk about taxation. Also, I want to make a few comments on the issue of governance, which the corporation was just speaking on.

We do agree with the port corporation that the federal government should be the shareholder of the port and retain control over the appointment of the directors, the size of the board, the appointment of a chairperson, and the term of office of same.

We recommend that the board size in the Port of Saint John be limited to between five and seven members, having one member from each level of government - federal, provincial, and municipal - appointed by the minister, the balance being appointed by the minister in discussion with the port users.

The appointment of a chairperson and the term of office should be determined by the minister. The chief executive officer should not be a member of the board.

To get down to the major issues that we feel will affect the city of Saint John, the first one I wish to speak on is policing.

The Government of Canada announced in December 1995 that under the new national marine policy, the Canada Ports Corporation police forces would be disbanded. It has been reviewed by a committee in our city and has been discussed by all the port users, and they feel that private security agencies can provide the necessary services that are now provided by the port police.

As a municipality we must make it clear that if our municipal police services are required any more than they are now, on a regular basis as service to the port, we feel that some further remuneration should be received by the city. At the moment full taxation is not received by the municipality for federal property. At the moment, the Saint John police force is called to the port only if a major investigation is needed or for criminal activity. Other than that, port police do the job of the port.

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Given the situation with funding and municipal governments, if we're needed to provide extra policing on a regular basis to the port of Saint John, it's necessary that there be some agreement between the port and the city for additional funding to the city.

We are a city that's steeped in history, and we have retained a great amount of our heritage. The east side of our port is situated in the heart of our downtown. We are most anxious to develop our port property in the future. If you've been to the city of Saint John, you'll know that the port is located right in the heart of our city. On that east side, where we have a major hotel, a market square, and a museum, there's a whole lot of property that we would like to see developed. That's been one of the priorities of the city council. The City of Saint John just recently undertook to do a study to see what development we can do in that area.

There's a lot of under-utilized land in that area. There are port buildings there, but they're not used to the full extent. Also, the Canadian Coast Guard is located in the area.

This is mainly on the east side. The majority of port activity takes place on the west side.

We strongly recommend that subclause 24(2), which limits the power of the port authority to engage in activities within the port directly related to shipping, navigation, transportation of passengers and goods, and handling and storage of goods, be amended to allow port authorities to negotiate and lease port lands for viable development for commercial or industrial purposes that may or may not be port related. We're interested, for example, in putting a business park in that area. If your bill is not amended, it wouldn't be possible to do that.

Allowing port properties to be developed only for port activities restricts the ability of the port to earn revenue on properties that may be able to be developed for other commercial use. It also places a restriction on the municipality, as very often port property has great potential for waterfront activities, as in the case of the city of Saint John.

We are hoping that we will be able to increase our business opportunities with the prospect of future development of our port property. We do agree, however, that port property must adhere to the municipal zoning by-law. It is critical to every community that all lands within its boundaries are subject to proper planning and zoning regulations. Even if this property is allowed future development for any type of business, we still have to abide by the zoning by-laws.

That issue is very important to Saint John. I can't stress it enough, because that's a prime area in our city and we really would like to be able to grow in that area and make our city a better place for everyone.

The other thing is that we would like to have greater access to waterfront property for the public, and in order to do that we must be able to develop those lands. We have a lot of land in the area that at the moment is not being utilized by the port or by the city.

The next issue of major concern to the city is taxation. In the past, the federal port property has been subject to a payment of grants in lieu of taxes; that's what you're doing right now. At one time the grants were determined by the total value of the assessment of the properties. A number of years ago the grants were steadily decreased to the extent that we now receive approximately only 47% of the assessed value of port property.

As a municipality we have some difficulty with the fact that the federal government is exempt from paying full property taxation. The financial well-being of a municipality is dependent on the premise that all property owners must share in the cost of providing service to the entire community. This is the basic premise upon which the property tax system is based. To suggest that some property should be removed because they do not receive direct benefit from services offered is in direct conflict with the system of property taxation.

However, we are very well aware of how competitive ports are in the world economy today. Should the port of Saint John not be competitive, we believe other forms of assistance need to be explored, involving all levels of government. We do not agree that the municipality alone should provide a hidden subsidy by accepting less than full taxation based on the market value of the property. We cannot justify in our community, a community that comprises many industries competing worldwide, an exemption for one particular industry.

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However, having said that, we're well aware what ports are undergoing in a very competitive world. In the past our city has accepted the grants in lieu of taxes, and we would still agree to that.

I'm not going to fight this issue, but my point is that in this case it's a federal property that's being exempt. We don't do that for any other industry in our city. I feel strongly that at least we should have the grants in lieu of taxes maintained.

I know the port users feel they shouldn't pay taxation on a federal property, but it's very necessary for the municipality. I am very much aware that the port users pay property taxes on their buildings and their assets. That's of course necessary also, because a municipal government seems to be at the end of the line. After the other two governments do their cuts, we still have to provide the services. So we still need to collect taxes from everyone.

So those three issues are of prime concern to the city.

Before I close, I do want to mention the issue of ferries, because I know this committee is involved in that. In particular, I want to speak about the Princess of Acadia ferry that travels between Saint John, New Brunswick and Digby, Nova Scotia. This is a vital mode of transportation between the two communities. It is highly critical that this service remain in operation.

Our tourism industry would be extremely affected, as well as our trucking industry, which uses this ferry service on a daily basis. I know the proposals to take over the operation of the ferry service are now being reviewed. I can't stress enough how vital this is to those two communities, our own, and to the town of Digby.

I understand, hopefully, that you won't think this way, but I did hear that perhaps you might think that this ferry service should not continue to operate. We're very much concerned about that, because we do want it to operate.

I know you've received some proposals. We're waiting and hoping you'll select the right one and that it will remain in good form.

The Vice-Chairman (Mr. Comuzzi): Thank you very much, Your Worship. I would imagine that it would be proper for me, ladies and gentlemen, to turn to a former Your Worship to ask the first question from Saint John.

Mrs. Wayne: Thank you very much, Mr. Chairman.

Mayor McAlary, you were referring to port police and the grants in lieu of. I know you've been negotiating with the port authorities with regard to port policing. With the cutbacks you've received already with your unconditional grant, how could you possibly police the port if the port police are gone, if you do not get some form of remuneration from someone so you can engage more police officers?

Ms McAlary: That's correct, Elsie, we do need extra funding if our city police are going to have to provide services to the port more than they do today. Right now, if a murder or something like that happens at the port, our police are responsible because that's in our mandate.

If there was some kind of criminal activity of any kind at the port, our police would go. If we have to go down to the port more often and go through the ships, or do any other activity that we're not doing now and provide police officers on a more regular basis, then we would have to work out an arrangement with the port where they would provide us with more funding.

Mrs. Wayne: My other question is on the grants in lieu of. If you do not receive this, Mayor McAlary, would that mean you would have to increase your tax rate at the local level?

Ms McAlary: Quite possibly, yes. All the municipalities in the province of New Brunswick are having a big cutback on the unconditional grant for 1997-98. If we did not receive grants in lieu of taxes, or more than that - I'd like to see more than this, but at least I will accept grants in lieu of taxes - in the way we're receiving them now with the 47%, it would be a major blow to the municipalities.

Mrs. Wayne: Mr. Chairman, I think the committee should know what has happened in Saint John.

The Vice-Chairman (Mr. Comuzzi): Elsie, thank you very much, but we're running so far behind today.

Mrs. Wayne: I think you should know a drug group bought a piece of property on the waterfront.

The Vice-Chairman (Mr. Comuzzi): Mr. Gouk, please.

Mr. Gouk: I'll just touch very quickly on your three points. First of all, with regard to subsidiary activity and development, I believe there's a move amongst the committee to make some changes on that.

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I've drafted an amendment, and I believe there is general agreement on that.

With regard to policing costs, I've talked to a number of municipal councils. If the ports choose to continue to operate their own policing, then of course there's not a problem. If they do not, then I have drafted an amendment that would require the ports to pay for any costs above the community norm.

I likely expect that you will continue to get grants in lieu, which will be put into the bill, because they will become federal agents. As such, the standard policing that you would provide for anybody else should be provided, but if there is any additional cost beyond that, they should indeed pay for it. I will draft something accordingly.

With regard to taxation itself, first of all, land tax goes to the province in addition to the municipality. If there is a problem with any one specific port with regard to the taxation question, it should at least be borne in that region, as opposed to being spread to taxpayers right across the country who get absolutely no economic benefit.

I realize it goes beyond your own town and your own province sometimes, but to spread it right across the country, if other ports aren't doing the same thing, is a little unbalanced. Given that users will pay full taxes and that the ports in all likelihood will pay grants in lieu, it is the most reasonable formula to go with.

Ms McAlary: If this bill agrees that the grants in lieu of taxes are acceptable, then we're not going to go against that. We want that to remain.

The Vice-Chairman (Mr. Comuzzi): Thank you, Mr. Gouk.

Mr. Crête.

[Translation]

Mr. Crête: Thank you, madam. You have given us a wonderful demonstration. I have taken note of the strategic importance of a port for a town. As you mentioned, Saint John is a major export centre that supports the operations of two pulp mills and of oil and sugar refineries.

It is interesting to see the concrete strategic importance of these choices. It is essential that they be well presented.

My question relates to the ferry service between Saint John and Digby. I would like to know how long the crossing takes and if the federal government is in any way subsidizing the ferry.

[English]

Ms McAlary: Yes, on the ferry line between Saint John and Digby, it's subsidized by the federal government to quite an extent. I'm not sure how many millions of dollars the federal government pays per year for the ferry line.

They did want to privatize it. They did send out proposals. The federal government has received some proposals, and we're pleased to see it's going to be privatized. We're not against that.

We just want the federal government to make sure they select one of those proposals and they keep it in operation, because it's a vital link between the two communities. It's been there for many years. It's very vital for tourism and our regular trucking industry. The problem is to make sure that this ferry service is not taken out of operation, that at least the federal government gives an opportunity to someone who submitted a proposal to allow this business to continue.

[Translation]

Mr. Crête: How long does the crossing take?

[English]

Ms McAlary: Close to two hours.

[Translation]

Mr. Crête: Thank you.

[English]

The Vice-Chairman (Mr. Comuzzi): Thank you, Mr. Crête.

I'm advised that the subsidy is in the neighbourhood of $1.5 million to $2 million a year.

Mr. Jordan.

Mr. Jordan (Leeds - Grenville): Those are all really valid concerns.

With regard to the taxation, why not then just assess the property and apply the commercial assessment and collect taxes from it? Forget about this grant in lieu of thing, which is always rather dicey. Why not just put it on a strictly business basis and generate your local taxation, based on your being assessed? You can assess it. You have some leeway as a municipality in assessing it high or assessing it low.

Ms McAlary: But it's federal property, and the government has always had a policy, since I've known it, anyway, that it's been grants in lieu of taxes. The federal government works that out with the provincial government and the provincial government does the assessing of the property. As a municipality we do not have any authority to say a piece of federal property has to pay taxes if the federal government says no.

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Mr. Jordan: There must be uncertainty, though, for you as a municipality because you don't really control that then.

Ms McAlary: No, we don't.

Mr. Jordan: Wouldn't you like to?

Ms McAlary: Yes, we would like to be able to assess that property the same as all other property is assessed, but the federal government and the provincial governments - it's in the act somewhere, somebody's act - allow federal property only to pay grants in lieu of taxes.

Mr. Jordan: Yes, but the governments are all unloading. They might as well go all the way and give you the authority to assess and levy a mill rate.

Ms McAlary: Then I guess you would have to have it in the act at some point that we could do that. It would not just be only for us but for every port across the country.

Mr. Jordan: Yes, it would have to be consistent.

Ms McAlary: So if you want to do that, then we get full taxation. That's okay by me.

Mr. Jordan: But you control the amount of the assessment.

Ms McAlary: The provincial government really does the assessing.

Mr. Jordan: Yes, but you could make a case for applying a low assessment.

Ms McAlary: Yes, we have input in that.

Mr. Jordan: You wouldn't want to assess them so high that you put them out of business. It wouldn't be in the interest of your city.

Ms McAlary: It would have to be assessed under the guidelines of the provincial government. Then if they wanted to appeal it if they thought it was too high, they'd have to go through the provincial government.

Mr. Jordan: Just like everybody else.

Ms McAlary: Like everybody else, yes.

The Vice-Chairman (Mr. Comuzzi): Thank you, Mr. Jordan.

Mr. Cullen.

Mr. Cullen: Thank you, Mr. Chair. Thank you for your presentations. I have two questions. I don't know if I'll be able to get to both of them.

Some of the municipalities we've talked to have talked about the need to define the mission of the port fairly carefully and to make sure the activities are fairly clearly defined. I guess the reason for doing that is that implicit in that argument is the notion that they want to ensure they get the highest and best use out of the property, and presumably there might be an opportunity cost or revenues foregone.

The question on that is really that you obviously take a different view. You see the port as very much tied to your own economic development, as do other municipalities with a different point of view. Do you see any loss of revenue? For example, you talked about an industrial park within the port. As a municipality would you see any potential loss of revenue or any opportunity cost as a result of the position you've just taken?

Ms McAlary: No, it would be better for the City of Saint John. First of all, the Port of Saint John and the City of Saint John have always worked well together. We certainly understand the community.

If we were able to have an industrial park on port property, the port would have to lease that property. They'd have to be allowed to do that. Then there would be revenues gathered from that industrial part whereas right now the property is not used; it's just sitting there. We have a lot of property at the port that's just there. It may be paved property. It may have a building on it that's empty or it could be just fenced off and not used at all. So we would like to be able to have that opportunity.

I'm not saying the municipality should be able to go ahead without the consent of the port, or the minister, for that matter. If there was a large opportunity for us to have a development on port property and we had to have the consent of the minister, I have no problem with that. I would think that if it was an industrial park development or something of that nature, everybody would be in agreement.

Mr. Cullen: Clarify this for me, please. There's been a lot of discussion about grants in lieu and about contracts for specific services. Are those one and the same or would contracts for specific services provide you with less revenue than grants in lieu?

Ms McAlary: They're not the same. Contract for services - I'm not sure what you mean by that. Grants in lieu are that the property is assessed and then the federal and provincial governments work together and they come out with a figure they're going to charge on that property.

Mr. Cullen: Is that based on services?

Ms McAlary: No, just on the property. Right now it's down to about 47% of the assessed value of the property. But the municipality doesn't have anything in that.

Mr. Cullen: Presumably if it were contracts for services, that would produce less revenue.

Ms McAlary: Do you mean contracts for services for something of a port activity?

Mr. Cullen: The services the municipality would provide to the port authority.

Ms McAlary: That would be a separate issue altogether. We don't provide any services under contract to the port at this time. That might go into a policing issue if the port, for instance, wanted to contract services from the municipality for policing. That would be a separate issue from taxes or rents in lieu of taxes.

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The Vice-Chairman (Mr. Comuzzi): Mr. Keyes.

Mr. Keyes: Thank you, Mr. Chairman.

Thank you very much for coming forward and giving us your presentation. I don't want to get into the old FCM argument on taxation, but I couldn't help but notice the wonderful smile coming from you when we discussed the municipal taxation issue.

Ms McAlary: So were a few people in the room here probably. I want to get out quick.

Some hon. members: Oh, oh!

Mr. Keyes: I wish you had been with us in Thunder Bay, because Thunder Bay so far is the only community that has come out and said, guess what, FCM has it backwards. If you're going to recognize that your municipality works with your port, that your port is a net generator of economic benefit and is a jewel for job creation in your particular port and you yourself say that as the port of Saint John goes so does the city of St. John, why would the municipality want to turn around and tax such a jewel in this particular -

Ms McAlary: I can tell you that.

Mr. Keyes: Only Thunder Bay so far has come out and said, do you know what? FCM has it backwards; I don't want to tax that port, because that port is the backbone of our community.

Ms McAlary: The federal government is downloading on the provincial governments and the provincial governments are downloading on the municipal governments. They're cutting our unconditional grants, and we don't have enough money to provide all the services for all the citizens of the country.

Mr. Keyes: Good. That leads me to my next question, Mr. Chairman.

The Canadian Police Association came before us last week. They stated it would be a dereliction of our duties not to provide a ports police force even though we're only talking about six ports and 89 officers. We've had the benefit of hearing from other ports, for example, the Port of Quebec and the Port of Montreal.

The Port of Quebec already has an agreement ready to be signed off by both sides, where they are going to request and contract with the municipality police services for their port. The City of Montreal has done likewise. They are literally going to save hundreds of thousands of dollars at the port, because they are able to contract with their communities directly and also augment all the private security forces the major companies on the port already have patrolling their particular areas.

The port wins because it's saving literally hundreds of thousands of dollars, the municipality wins because it signs a contract to receive funds from the port for policing services, and the public wins because you have a safe and secure port.

We're looking forward to your ability to negotiate with your municipal police force to meet with the Port of Saint John in order to come up with a policing method that is probably going to save the port money at the same time and make your municipality receive its funding necessary in order to boost the number of officers needed to do that job.

Ms McAlary: Perhaps I could just make a comment on that. The Port of Saint John paid $800,000 for its port police. I think that's far too high. I don't think they need the number of police officers they have at the port right now. I'm quite sure of that.

However, in our own area - and I'm not criticizing anyone here - the port users at our port came up with the solution that they would have private security, that they would pay for that themselves, and that they would not use or need the services of municipal policing. If that's the way they are going to go and they don't need our services, that's fine.

Mr. Keyes: Users have all kinds of wishes and dreams. We've been hearing about them all for a month.

Ms McAlary: What I'm saying is that if you need the expertise of our officers from municipal police forces, the Port of St. John has to sit down with the municipality and work out some arrangement to give us some costing for that, because we just can't afford as a municipality to give that service free to the port.

Mr. Keyes: Absolutely, and as we've said, Montreal and Quebec....

Mr. Chairman, as far as the question raised a little earlier by my colleague Mr. Jordan is concerned, federal agency status of course does not just mean from the taxation point of view. Federal agency status, as we've heard from other ports, is also an important aspect of the port's ability to go out into the global community.

If we're talking about global competitiveness today, the port has to be able to take its case to the world, make its sales, and work with embassies across the world. They do that much better with federal agency status. So it goes beyond the issue of taxation.

The Vice-Chairman (Mr. Comuzzi): Thank you, Your Worship.

I cut you off, Elsie. I'm going to give you thirty seconds.

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Mrs. Wayne: I thought it was important you know that once your committee, with this new act, started to talk about removing the port police, right in Saint John on our waterfront a drug ring was looking at buying a piece of property. Our understanding is that they have it already because they felt they then could have access to the port. They're right there on the waterfront on the west side. It's a major concern, it really is. This is why they feel there's not going to be the policing that was there before.

Ms McAlary: I have to say, Elsie, if this piece of property or this building is not located on port property, then it is the full responsibility of the municipal police force to look after that. Only when it's on port property: that's the issue we're dealing with on that.

The Vice-Chairman (Mr. Comuzzi): Thank you very much, Your Worship, for coming from Saint John this morning.

Ms McAlary: There's one more thing. Any time you're invited to the city of Saint John, if you have public hearings, we would certainly enjoy having you. We're very pleased to have been able to give you the brief this morning.

The Vice-Chairman (Mr. Comuzzi): That's very gracious of you. We hope to see you soon in Saint John.

Next we have the Shipping Federation of Canada, with Captain Nicol and Ms Simard.

Please proceed. You understand the process.

Captain Frank C. Nicol (President, Shipping Federation of Canada): Good morning. With me today is Sonia Simard, my executive assistant. She will be assisting me in my presentation. I would like to thank the committee for this opportunity to present the views of the Shipping Federation on Bill C-44.

The federation, as you may know, represents about 80 Canadian companies that own, operate, or act as agents for over 350 steamship lines. Our members act on behalf of virtually all ocean-going vessels trading to and from Canadian ports in central and eastern Canada.

As major consumers of the services provided by the ports and the pilotage authorities and as the main representatives of ocean-going ships transiting the St. Lawrence Seaway, our members have a vital interest in ensuring that the national marine policy proposed in the bill responds to the needs of government and industry alike.

The submission in the hands of committee members details the federation's position on the proposed reforms related to ports, the seaway, and the pilotage system. This morning I will attempt to summarize our major recommendations, beginning with the Canadian port system.

The vessels under the care of our members generate more than 70% of the operational revenue at the major ports in eastern Canada. Although our members are supportive of the government's approach to port reform, we believe several important issues pertaining to the regime for the proposed Canadian port authorities must be addressed prior to passage of the bill.

I will be referring specifically to three main issues: the mechanism for the nomination of user representatives to the board of directors of the Canadian port authorities; the CPA's limited access to financing and the potential exposure to municipal taxes; and the need for greater user protection in the ports' rate-setting mechanisms.

On the issue of user representatives on the CPA boards, the federation supports the government's attempt to ensure that the majority of directors on the boards represent the interests of users. However, we believe the proposed mechanism for nominating user representatives and the eligibility requirements for such nominees may not efficiently fulfil this objective.

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We respectfully submit two recommendations to address these shortcomings. First, we believe clauses 6 and 12 of Bill C-44, which authorize the minister to nominate user representatives in consultation with users, should be amended to give the users a role more definitive than consultative. Specifically, the minister's role should be redefined to selecting candidates from a list supplied by a committee of users.

Furthermore, we respectfully submit that the federation should be involved in the selection of those candidates slated to represent the interests of ocean shipping. This approach would be very much in line with the user-pay/user-save philosophy. It would recognize that the federation's members generate as much as 70% of the revenue of the major ports in eastern Canada.

Second, we have some concerns with paragraph 14(e), which prohibits officers and employees of users from sitting on the boards of the CPAs. One of the objectives of this marine policy reform is to ensure that maritime expertise on the boards exists. Limiting the pool of expertise to neutral entities, as suggested by the bill, may make this objective very difficult to attain.

Accordingly, we recommend that paragraph 14(e) be removed, thus allowing officers and employees of users who have extensive knowledge and experience of port activities to serve on the boards.

With regard to the financial aspects, the federation is concerned that the prohibition on pledging, the taxation and the charge on gross revenue suggested by the bill may inhibit the port's impetus towards cost efficiency. In addition to higher user fees, these financial restrictions could well place Canadian ports at a competitive disadvantage with their U.S. counterparts.

To alleviate these concerns we recommend that the CPAs be allowed to pledge non-federal real property. We endorse the position of many ports on the importance of maintaining the status quo with regard to municipal property taxes - that is, the ports under the new proposal should pay no more than they are obliged to do under the current system.

It is worth pointing out that any increase in the taxation burden may raise the issue of competitiveness with U.S. ports, several of which pay little or no taxes at all.

Finally, the ports' financial contribution to the government, the reasons for which we don't dispute at this time, should be based on net revenue. A charge levied on gross revenue, as suggested by the bill, could well inhibit the CPAs' abilities to meet essential maintenance and expansion expenditures.

Another issue of concern for our members is the mechanism for establishing port fees. The bill provides users with little protection from the application of excessive fees. Clause 43 merely indicates that interested parties may make representation to the ports on the structure or magnitude of the fees without any obligation on the part of the ports to address these representations. This approach, combined with the ability to conclude confidential contracts, raises concerns about the level of user protection in the rate-setting methodology.

In view of the foregoing, we recommend an amendment authorizing a neutral party, such as the Canadian Transport Agency, to rule on any complaint lodged and to make appropriate adjustments where necessary.

With regard to the ongoing divestiture of public ports, I will limit my comments to two points. Although the rationalization process appears to be under way already, the information disseminated to users has been rather limited. The federation therefore recommends that users at large should be informed of all cases where letters of intent regarding divestiture have been concluded and where an act of transfer has already been agreed to.

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The federation is also concerned about the bill's silence on the divestiture fund and the timeframe for the rationalization process, both of which have been subject to discussion throughout the ports policy review. Although we support the establishment of such a fund, we emphasize the need for an explicit statement defining the source and the amount of such a fund. The statement should also ensure that cross-subsidization between the CPAs and the public ports is either non-existent or limited to the greatest extent possible.

Before turning to the commercialization of the seaway, I would like to have a glass of water,Mr. Chairman.

The Vice-Chairman (Mr. Comuzzi): I didn't think the subject was that dry.

Capt Nicol: I will turn now to the proposed commercialization of the St. Lawrence Seaway. Although the vessels consigned to the care of the federation's members account for more than 95% of the ocean-going tonnage moving through the system, it should be understood that there is a great diversity of usage amongst our members. For example, two members alone contribute in excess of 50% of the seaway's revenue generated by the international sector, while at the other end of the scale, many members generate less than 1%. Considering this large variation of activity amongst our members, the federation, like the minister, must ensure that the interests of all ocean carriers are addressed.

Having said this, and being aware of the negotiations between the seaway users' group and the government, I would like to submit the following recommendations.

The federation supports the commercialization of the seaway operations through the establishment of a not-for-profit corporation. We endorse this proposal as an intermediate step that would ultimately lead to public-private binational management of the system.

Bill C-44 provides very few guidelines on the specifics of the privatization agreement. This, combined with the confidentiality requirement, which perforce has been applied to the negotiations, has led to some concerns about the levels of transparency that should be present in the process. To alleviate these concerns, we respectfully request that this committee ensure that the minister is fully aware of both the diversity of the users and the need to protect the interests of all carriers, small and large alike.

To facilitate this task, the federation recommends that ocean carriers, through the auspices of the federation, be allowed to review, prior to ministerial approval, the privatization documents such as the management agreement, the letters patent, by-laws, etc. We also recommend that the bill be amended to indicate that any election procedures incorporated in the by-laws should be acceptable to users. To complete this subject, we submit that Bill C-44 should stipulate that a code governing the conduct of directors of the not-for-profit corporation must be developed. This code should be no less strict than that applied to the directors of crown corporations.

Another issue of concern to federation members is the mechanism proposed for establishing seaway fees. We support subclause 82(1), which prohibits unjust discrimination. However, we respectfully submit that subclause 82(2), which stipulates exceptions for a commercially acceptable discrimination, should be removed. This subclause reverses the burden of proof and places the onus on users to establish unjust discrimination in certain circumstances, while under the current seaway act it is incumbent on the authority to justify the level of tolls that must be fair and reasonable, without legislative exception for discrimination. Again, we believe that subclause 82(2) is superfluous and should be removed from the bill.

I will now move on to amendments to the Pilotage Act. As the primary users of the pilotage service in eastern Canadian waters, the federation's members support the general amendments to the Pilotage Act proposed by the Canada Marine Act. We fully support the inclusion within the Pilotage Act of a mechanism designed to accelerate the tariff implementation process, which will help reduce the deficit problem the authorities have faced over the years.

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For many years the federation has been a proponent of such a mechanism, which we have defined as a negative disallowance feature. However, we believe the amendments to the Pilotage Act should go further in addressing the vital question of establishing an effective alternative dispute resolution mechanism. We recommend that the Pilotage Act be amended to stipulate that in all cases where no such mechanism is available to the parties involved, either through labour agreements or service contracts, a final offer selection process will be imposed on the parties.

The reasons for these recommendations are fully explained in our brief. However, in view of the importance of this subject, I would like to touch on a couple of them.

The pilots are the sole providers of a legislative service that our members are legally bound to use. Our ships are not permitted to proceed without a pilot. As you can well imagine, this consolidates tremendous power in the hands of the pilots, particularly during contract negotiations and dispute resolution. In order to balance this situation, our industry has long sought the inclusion of some type of ``no strike, no lockout'' clause in the labour or service agreements between the pilots and the authorities.

Recently, with much cooperation from the pilots and the authorities, who really have to be congratulated on a herculean effort to accomplish it, ADR mechanisms were introduced in the various agreements throughout the country. Unfortunately, one group of pilots has recently refused to renegotiate such a clause in its contract, and once again the elusive stability sought by nearly all of the parties involved has slipped through our fingers.

Consequently, the federation wishes to see within the Pilotage Act an alternative dispute resolution mechanism, no strikes, no lockouts, that would be imposed either through labour or service contracts or through legislative provisions applying by default an FOS or final offer selection mechanism.

In view of the time constraints, we have tried to summarize our points as briefly as possible,
Mr. Chairman. I would refer the committee to our complete brief for further details. I would be pleased to answer any questions you may have.

The Vice-Chairman (Mr. Comuzzi): Thank you, Captain.

Ms Simard, do you have something to add to the brief?

Ms Sonia Simard (Executive Assistant, Shipping Federation of Canada): To the brief? No.

The Vice-Chairman (Mr. Comuzzi): Mr. Crête.

[Translation]

Mr. Crête: My question pertains to your recommendation in the area of pilotage that appears on page 11 of the French version of your brief. One reaches the conclusion that attitudes are healthy on both the unions side and the management side but there is one issue there has yet to be agreement on.

If we were to go with your recommendation, that would make this mechanism compulsory, we would automatically be changing the rules of the game for the whole negotiation process. At the present time, it is undeniable that when parties accept an offer and write it into their collective agreement, the intent is to get something else in exchange for that concession, somewhere else in the agreement. This is how the game is played out. I am very aware of this because I have had to negotiate collective agreements in the past. By eliminating that aspect and imposing a mechanism under the law, all of the rules and the lines on the ice are being changed.

Of the six units identified in your table, only one did not accept this process or something similar. Your recommendation strikes me as being like a dam for a creek. What do you think? If my conclusions are wrong, please explain why.

[English]

Capt Nicol: It may seem like that on the surface; however, the option still remains for the pilots and the authorities to negotiate any kind of alternative dispute resolution mechanism that they wish in the contract. They can negotiate anything. It doesn't have to be FOS. It's only in default of this that the FOS would apply. In other words, there is still a lot of flexibility for the pilots to negotiate the type of alternative dispute resolute mechanism - and there are several - in the contract. That's still open.

[Translation]

Mr. Crête: But you must see that as long as this alternative is not written into the Act, it remains a negotiating tool.

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If this alternative were setout in the Act, then that would take away a negotiating tool from the pilots. Have I understood correctly?

[English]

Capt Nicol: Yes, I understand -

[Translation]

Mr. Crête: No. Is my understanding of the situation the right one when I ask this question?

[English]

Capt Nicol: I think we have to consider the fact that most of the pilots throughout the country agreed to have an alternate dispute resolution mechanism in the contract. They did this because there are lots of changes taking place and this was the opportunity for our industry to make major changes to the Pilotage Act.

We considered this, and it was a quid pro quo. The pilots agreed that they would go ahead, and we said as long as we have some kind of protection from strikes and lockouts, because they have a legislated right to provide the service. No one else can provide it. In these circumstances, we need the protection of a no strike, no lockout clause. As long as one appears in the contract between the authorities and the pilots, any kind you care to negotiate, then we will not ask for legislation to apply.

We've adhered to this. The legislative proposal would not apply unless there was no ADR in the contract. So there still is the flexibility to negotiate.

[Translation]

Mr. Crête: How many strike days have you had in the Montreal-Quebec region over the last 20 years?

[English]

Capt Nicol: I don't have that information in front of me, but it's not the strike law, it's just the threat of a strike - the mere threat of one. We have an ice season there. Ships could be trapped. It's the threat of having a ship trapped in the St. Lawrence Seaway, say, over the winter for a period of 90 days at $10,000 a day. You can see the effect this would have on business, especially if you have half a dozen ships in the trade. It is a substantial threat, and the threat can drive away business.

It was to overcome this that the pilots entered into this agreement.

The Vice-Chairman (Mr. Comuzzi): Thank you.

Mr. Gouk.

Mr. Gouk: Thank you, Mr. Chairman.

Captain Nicol, you've presented a brief that has a lot of points. I'd like to touch on a couple and invite your comment.

First, with regard to a shippers dispute mechanism, I do intend to propose one of those, based on the Canada Transportation Act minus, of course, the very objectionable subsection 27(2).

On the use of land, I think there's general agreement amongst the committee that there will be some change on that. I have drafted something, as I suspect they have as well.

Grants in lieu are likely coming because there will be federal agency status. I am proposing that there be a five-year blend-in period for those not already paying that amount, that they pay at least what they pay now and over a course of five years come up to full grants in lieu. So they'll have the blend-in you've mentioned.

I believe the port should be able to pledge assets and property they own and federal properties with the approval of the minister. To be able to borrow funds, certainly you have to put something up. If you have money coming off at your gross, which we - or I, at least - intend to deal with, and can't pledge anything, I'd like to see who would loan them money, because I'll be in line, too.

Finally, with users on the board, we've heard conflicting requests between ports as to whether user employees and officers and so on should or should not be on the board. One thing I do intend to address, though, is that the user should be able to nominate. That is not what the bill says now. It is what the minister said when he came before this committee, but it is not what it says in the bill. I'd like to bring in an amendment that will blend what was said with what is written.

Capt Nicol: The federation decision was that they would like to see employees and directors as users eligible for election to the boards. I think I have to maintain that position. This is the position we would like to see.

We believe there is a lot of expertise there. I have no doubt some type of code of conduct could be developed that would inhibit any conflict of interest.

We had some experience in years gone by, when we had the National Harbours Board, where users were directly elected to the board. I can't remember any major problems occurring.

Mr. Gouk: Okay.

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The Vice-Chairman (Mr. Comuzzi): Thank you, Mr. Gouk.

As usual, Captain Nicol, a very precise and succinct report on very pertinent issues. Your report will be taken with great consideration. We may be calling on you again for further information. I thank both you and Ms Simard for the presentation.

From the pilotage authorities we have Mr. Armstrong, Mr. McLennan and Mr. Michaud.

Just before you begin, let me handle some housekeeping problems.

The House of Commons gave the Standing Committee on Transport the responsibility to study the feasibility of establishing a binational structure for the Great Lakes-St. Lawrence Seaway system. That was given House of Commons approval on May 31, 1996. The report was conducted and given to the chairman of the committee in July 1996.

The chairman then sent to each member of the committee a copy of the report. From the time the mandate was given by the House of Commons there were three intervening factors that I think are worthy of note.

On June 1, 1996, the coast guard imposed a cost-recovery system that affected the Great Lakes-St. Lawrence Seaway. This was in direct opposition to Mr. Keyes's report of the year before from the Standing Committee on Transport. That intervening factor on user fees from the coast guard did not take into consideration the role the transport committee had played and the recommendations of the transport committee.

The other intervening factor from the time this committee got its mandate to the time it submitted its report was that on June 5, the Minister of Transport, Mr. Anderson, and the U.S. Transportation Secretary, Mr. Pena, agreed that a working group should be formed - and it has, but has had only one meeting - to make recommendations on matters that deal with the affairs of the Great Lakes-St. Lawrence Seaway between both countries to see if there is some way to reduce costs.

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The third intervening factor, ladies and gentlemen, was what has commonly been known as the users group, which at the time this committee received its mandate from the House of Commons was comprised of Louis Dreyfus, Cargill, James Richardson, Upper Lake Shipping, Fednav, Dofasco, Stelco, Algoma Steel, and Canada Steamship Lines, entered into negotiations with the Minister of Transport and transport department officials on the users group taking over exclusive use of the Great Lakes-St. Lawrence Seaway system.

Subsequent to that, in July or August - when was that report given, Mr. Keyes - the press release?

Mr. Keyes: July 17.

The Vice-Chairman (Mr. Comuzzi): On July 17, the Minister of Transport signed a letter of intent with the users group, which in my opinion usurped the role of the House of Commons working committee, but that will be debated at a later date.

In any event, this report was submitted in July, and we've had some difficulty, because of the parliamentary process and the committees not sitting during the summertime, in having the report approved by the Standing Committee on Transport and tabled in the House of Commons.

Go ahead, Mr. Keyes.

Mr. Keyes: Mr. Chairman, in the interest of time, because we're running twelve minutes behind now on your schedule, can I just move that we, the Standing Committee on Transport, adopt the report as presented by the vice-chair of the St. Lawrence Seaway committee, which you chair, and move to accept that report?

Motion agreed to

The Vice-Chairman (Mr. Comuzzi): That report now is a public document?

Mr. Keyes: Yes.

The Vice-Chairman (Mr. Comuzzi): Thank you.

Mr. Keyes: It has been for some time, I understand, anyway.

The Vice-Chairman (Mr. Comuzzi): Sorry for that delay, gentlemen. Please carry on. You understand; you folks have been here before. There's about a ten-minute presentation and enough time for questions.

Mr. Dennis McLennan (Chairman, Pacific Pilotage Authority): Thank you, Mr. Chairman. Each of us will have our own presentation and I'll lead it off. I'm Dennis McLellan. I'm chairman of the Pacific Pilotage Authority.

Mr. Chairman, honourable members, thank you for this opportunity to appear once again before the Standing Committee on Transport to talk about pilotage on Canada's Pacific coast. An enormous amount of work has been done by many people during the year and a half since this committee drew attention to a number of pilotage issues in the four separate pilotage regions defined by the Pilotage Act.

Now, as this committee concludes its current hearings and prepares to advise the Minister of Transport on Bill C-44, I want to present a brief but I believe very important message from the Pacific region.

We may be nearing the end of the developmental stage as the Government of Canada puts into place the new Canada Marine Act and a number of changes to the Pilotage Act, but in the Pacific region we view this as a new beginning that holds a great deal of promise for self-sufficient and cost-effective pilotage services, pilotage services that continue to meet their fundamental objectives of public safety and environmental protection in ship movements on the Pacific coast.

In our written submission to the committee dated October 16, 1996, we have noted that our exhaustive reports of July 27 and December 29, 1995 addressed pilotage issues raised by this committee and by the Minister of Transport.

I want to emphasize a few of the points made in our most recent document. First, the Pacific Pilotage Authority has been financially self-sufficient since the current pilotage system was instituted in 1972.

Second, that system has worked well in the Pacific region, largely as a result of the efforts that all parties have put into communications and consultation.

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Third, the work of the Pacific Pilotage Task Force in examining all of the issues and questions raised by the committee and the minister has strengthened our belief that the existing system works and that the necessary improvements can be achieved within the existing structure.

Fourth, our consultation arrangements have been reinforced by reconstituting the Pacific Pilotage Task Force as the Pacific Pilotage Advisory Group. This group includes representatives of all the participants: the shippers, the shipowners, the operators, the pilotage authority, the pilots and the ports. We have identified and have begun to address a number of steps that have led and will continue to lead to an absolute cost reduction in the delivery of pilotage services in the Pacific region. This last point is the most important message that I bring to the committee from the Pacific region.

Let me quickly highlight the major steps that are under way in the wake of the process this committee is now concluding.

First, we are bringing together a plan to resolve issues in our Fraser River pilotage. The Pacific Pilotage Authority is working with all parties to achieve a solution that recognizes the specialized nature of the Fraser River service and the need to achieve cost efficiencies in providing that service.

Second, we are addressing ways to apply the potential of new navigation aids and the optional use of Kemano Sound so that safety concerns can be met with one pilot rather than the two pilots now needed to cover the distance into Kitimat.

Third, the task force report of December 29 detailing the pilot dispatch system employed in the port of Prince Rupert has been examined and found to be the most cost-efficient system possible.

We are examining ways of shifting pilots in Vancouver to reduce the cost of pilotage on the long movements out of Port Moody, Howe Sound, and the two major bulk terminals in Vancouver harbour.

We are looking at cost savings for the cruise ship industry by removing one of the pilots from the northbound ships at Pine Island, off the north end of Vancouver Island. We are discussing the walkover transfers at Triple Islands, where pilots from northbound cruise ships are transferred directly to southbound vessels when the two ships pass Triple Islands within an hour or two of each other.

In Victoria we are discussing with the coast guard whether cost savings can be achieved by using their boats to transfer the pilots to and from ships on the west coast of Vancouver Island and the north end of Vancouver Island.

We have tried pilot transfer by both helicopter and hovercraft. The helicopter trial ended when the aircraft was no longer available to us, and we will look at that option again when the necessary craft comes available. The hovercraft was tried in the mouth of the Fraser River and we're still assessing that as well.

We are seeking options to accommodate the overflow when English Bay anchorage is filled, and having ships anchor in Nanaimo rather than on the southern end of the island.

We have negotiated a five-year contract with the B.C. Coast Pilots to ensure the continuation of the stability of service we have enjoyed in the Pacific region for many years. The contract provides for no fee increase in the first year and increases of 2.5% in each of the following years. The contract includes a final offer selection clause as an alternative dispute resolution mechanism. The contract provides for cost savings on the port-to-port transfer of pilots in Nanaimo and the Sand Heads to end extra unit charges on these routes to and from the sea to British Columbia ports.

What is significant about all of these steps is the fact that we are working together with all interested parties and are achieving change within the existing structure. Collectively, the changes involved add up to significant cost savings in the delivery of pilotage services without impairing the ability to meet safety and environmental....

Let me conclude by saying that the Pacific region supports the changes the government proposes to make to the Pilotage Act and strongly believes in the existing compulsory pilotage system as the best means to protect safety and the environment. Through the Pacific Pilotage Advisory Group we are working effectively to achieve cost reduction measures and administrative changes. We are confident that we can continue to meet the fundamental safety and environmental protection goals of pilotage, and do so on the most cost-effective basis possible.

The Acting Chairman (Mr. Jordan): Thanks, Mr. McLennan.

In the interest of time, we're going to hear from all three authorities and then open it to questions.

We now have Mr. Armstrong from the Great Lakes.

Mr. Dick Armstrong (Chairman, Great Lakes Pilotage Authority Ltd.): Thank you, Mr. Chairman and members of the committee.

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It's our intent to speak very briefly about the issues this morning. The Great Lakes Pilotage Authority Ltd. wishes to make only a brief statement to the committee at this stage of the review of Bill C-44.

We believe that the pilotage provisions of the bill are correct and the continuance of the regional nature of pilotage is essential.

The section dealing with the publication and implementation of tariff revisions is welcomed.

With respect to the issues to be reviewed by the minister before December 31, 1998, this authority is in satisfactory compliance with each of them.

A dispute resolution mechanism exists between the authority and its four pilot bargaining units.

Financial self-sufficiency has been achieved since 1993 and will be sustained in the future. Costs continue to be reviewed and reduced. The tariff was reduced by 2% in 1993 and has been frozen for the last four years, resulting in substantive and absolute cost reductions to the users.

With respect to direct comparative competitiveness, on September 25 the United States published pilotage tariff rate increases that, if implemented, would result in a tariff ranging from 3.5% to 32.5% higher than the Canadian pilotage tariff. These are the same waters, the same pilots and the same distances, so we're not talking apples and oranges here. One of the components in determining these increases is a target pilot income in designated waters of $138,435 U.S. That is substantially in excess of a comparative Canadian value in the Great Lakes.

The matters of pilot certificates and compulsory waters have not been significant issues in the Great Lakes area. The safety of vessels, personnel and the infrastructure of the waterways, as well as the protection of the integrity of the environment, remain the paramount priority.

We look forward to the promulgation of this legislation and to working within the positive commercial environment that these discussions and debates have created. Thank you, Mr. Chairman.

The Acting Chairman (Mr. Jordan): Mr. Michaud, from the St. Lawrence.

Mr. Jean-Claude Michaud (Chairman, St. Lawrence Pilotage Authority): Thank you,Mr. Chairman.

[Translation]

The Laurentian Pilotage Authority endorses in principle all the provisions of Bill C-44. However, we have noted a few problems of a technical, legal and drafting nature. We submitted our comments on that matter to the clerk of the Standing Committee on Transport in a document dated August 28, 1996, which is appended to our brief.

We also suggested an amendment to section 15 in order to ensure continuous service at all times through a final offer selection system, since we were unable to get clauses to that effect upon renewal of the last contract with the pilots of the first region, namely Montreal, Trois-Rivières and Quebec. Such proposal is also made in our submission.

Following the speech from the minister of Transport on September 26, 1996 on Bill C-44, in which he said that the current process for the delivery of pilotage certificates should be upgraded, I immediately struck a committee within our board of directors for the review of our regulations, concerning both pilotage certificates and the apprenticeship of pilots and their certification.

Moreover, the Laurentian Pilotage Authority has undertaken a systematic review of its regulations and has consulted users, particularly in relation to sections 19 to 34 inclusive, which deal with pilotage certificates. To this end, we already have distributed to all stakeholders, namely the shipping industry, the pilots groups and even Transport Canada, a first draft of the revised regulations. Within a few weeks, the remainder of the regulations of the Authority will also be reviewed in depth to be updated and adapted to present technology.

Finally, I do hope that the work of the committee will be wound up at some point during the winter and that the Bill in its entirety will be published come spring in Part I of the Canada Gazette.

As a matter of general information, the issues concerning certification, training programs and other related matters were already being examined by a committee created six month ago, the Joint Standing Committee on Certification. This committee is comprised of three pilots' groups and is chaired by the Authority.

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The area where real progress is noticeable is the one dealing with the criteria used for the delivery of pilotage certificates to the masters and officers of Canadian ships. The joint standing committee has reviewed all of the standards for the delivery of pilotage certificates. Here are the highlights:

- complete overhaul of the training program for those who need a certificate as shipmasters or senior watchkeepers. The trimming of the training program for shipmasters and the recognition given to their capabilities, will facilitate access to the certificate;

- study the feasibility of the development of two or three exams which are different from the present audiocassette language test, so as to give the applicants more versatily and ensure greater fairness;

- the written exams on the Collision Regulations and on general knowledge are based on rules applicable only to pilotage;

- the pilotage programs using simulators offered by marine training institutions will be considered by the Authority as training tools. Once the Authority has approved them, it will be able to establish the credits towards the certificate;

- development of a new and more equitable assessment process and of guidelines for the members of the board of examiners to make the oral exam on the sector knowledge easier.

Finally, rest assured that the Authority, the pilots and the shipowners who use the St. Lawrence are committed and will continue to hold discussions to foster the confidence needed to ensure a safe, efficient and long- lasting marine transportation system.

In conclusion, regarding the self-sufficiency objective, we have already taken measures to bring down operating costs. We believe we will meet our goal by the end of December 1997.

Thank you for allowing the Authority to comment. Should you have any questions, I will be very pleased to answer them.

Mr. Crête: Mr. Michaud, I will ask you the same question I asked the two groups that appeared before you. You are even more involved in this whole process. I am referring to your recommendation to include the final offer system in the bill. How come the four or five other regional authorities agree on that and you don't? Are there any conditions that the other pilots could get and that you did not want to keep? This is not a value judgement on management. Is this situation the basis of your request for an amendment to the bill, which would change the game rules for negotiations in the whole of Canada? Is it not a little much to try to correct your situation by spreading it to the whole of Canada?

Mr. Michaud: I should explain that this request was made following the answers we got to a questionnaire sent to all St. Lawrence Seaway users. I must say that their major or principal demand as far as negotiations are concerned is that there be a different clause in the service contract. It was becoming far more important to have a similar clause than to negotiate hundreds of other issues relating to the contract.

I should also add that, from what I can remember of the experience the pilots' group went through and from what we just went through, my impression is that they do not fully understand the rules pertaining to the famous FOS, final offer selection, clause.

It is unfortunately their second try at the game, if one can call it a game. The rules were unfortunately not favourable to them in both instances. Maybe it is because we are so afraid of losing that we choose to opt out.

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After getting the results for the selection, I invited the president of the pilots' group to come and negotiate another clause separately, not necessarily the FOS clause. We had a meeting and I hope I can continue working with them to get to some kind of an agreement. Maybe, in the end, we will have another type of formula, but I am confident that by communicating and meeting extensively, even with the other pilots' groups in our region, we will be able to draft some clause.

Mr. Crête: I hope this will happen without our having to change the legislation.

Mr. Michaud: This is why I am making this offer before the bill is passed.

[English]

The Vice-Chairman (Mr. Comuzzi): Thank you, Mr. Crête.

Mr. Gouk.

Mr. Gouk: Thank you, Mr. Chairman. I'll make it very brief.

We seem to be a little regionalized, so I hope you guys will take care of the middle while we deal with the two ends.

I will address my remarks to the Pacific Pilotage Authority.

I think the steps that the Pacific Pilotage Authority has taken are good, and seeing as how I'm from British Columbia I'm particularly happy with it. I'm also pleased to note the drop to a single pilot at Kitimat. I was up there recently, and it was a great concern of theirs.

Is there any activity under way that may ultimately lead to single pilotage for the Fraser itself? That was a concern brought up by the Fraser River Harbour Commission; they seemed to feel there is potential there. I'd like to hear your comments on it.

Mr. McLennan: Yes, there is a review under way right now by a committee, with the help of the Fraser River pilots, the B.C. coast pilots, and the industry, to find that solution. So we're actively pursuing it now, and I'm hoping we will find the solution.

Mr. Gouk: Thank you.

The Vice-Chairman (Mr. Comuzzi): I'm sorry, Mr. Keyes, but Mr. Cullen is next. That's the order of reference.

Mr. Cullen: Thank you, Mr. Chairman. Thank you, gentlemen.

We've heard from some individuals and witnesses, I think mostly shipowners, who have talked about the virtue of these simulators that are used to train pilots. As I understand it, the software is developed to simulate conditions in a very specific geographical area. It's how to bring a vessel into a certain dock under a whole range of different circumstances or weather conditions, such as wind and currents.

I'm just wondering whether you use these simulation devices in the training of the pilots. If not, are you planning to? What do you think of them? The shipowners are of course coming at it from the point of view of training the master or the officers to do this themselves. It's obviously no secret to you people that's the tack they're taking. I wonder whether you could comment on that as well, in the most objective way you could.

Mr. Michaud: Is this question for me?

Mr. Gouk: It's actually for the group as a whole.

Mr. Michaud: Maybe it will stop here.

I'm very open to this new concept. As you know, this concept is already very widely in use in the aviation industry. It's fairly new with the marine mode.

There are a few simulators already in existence. There's one in Rotterdam, there's one in St. John's, Newfoundland, and there are a couple in the States. In the St. Lawrence-Great Lakes area, this is being developed with the Marine Institute in St. John's, Newfoundland.

In our modernization program of certification we would like to involve the Marine Institute and Rimouski in a partnership to develop a program in both languages, French and English, because this is of prime importance to the St. Lawrence. We are very open to that new concept, because there's no doubt in my mind that's the way we are going.

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I have already talked to a few groups, such as CSA and the St. Lawrence Ship Operators Association, that are interested in this. They're very open to it.

I have engaged myself, as the chairman of the Laurentian pilot group, to go ahead and work with them to find a long-term solution that will involve training and possibly certification in the long run.

The Vice-Chairman (Mr. Comuzzi): Thank you, Mr. Cullen.

Mr. Cullen: I'm not sure that the second part of my question was answered.

Can that tool be used to train masters or officers on ships to do the piloting on their own?

Mr. Michaud: Of course. The aim of the simulator is to train you better so that you are better prepared when it comes time to do the examination...as opposed to the actual system. This is going to be a big result. It will be very much more efficient and cost-effective for the shipowners.

Mr. McLennan: To comment on that, as part of our apprenticeship program on the Pacific coast, after they've done their 105 trips on the coast and after many years of doing it, we send them to Rhode Island for the simulators. We also send them to Port Prevel in France for the models. The models are equally important, and I'm not of the opinion yet that the simulators are the only vehicle to train them; they need far more than just simulators.

The Vice-Chairman (Mr. Comuzzi): Thank you, Mr. Cullen.

Mr. Keyes.

Mr. Keyes: Thank you, Mr. Chairman.

The conclusions reached on the subject of pilotage in the Standing Committee on Transport report of 1995 created much excitement in the pilotage community, but it certainly can be said that the report of this very committee was the catalyst in bringing the pilots from the four regions of the country together, maybe as they never were before. So I think the pilotage authorities are to be congratulated for the diligence in their coming together, finding some common ground, and compromising on many of the issues of concern to this committee.

That's not to say, Mr. Chairman, that there's not a lot of work still yet to be done vis-à-vis the compulsory pilotage areas, cost-reduction measures, licensing, certification standards, ship masters, officers, as suggested by this committee in this bill...to report in the ministerial review by December 31, 1998. We have had some success in convincing other pilots who have come before us that the review be completed one year earlier, in 1997. Does that meet with your approval?

Mr. Michaud: Since we have so much to do in the Laurentian region, I think that would be a bit too soon for us.

Mr. Keyes: Even though Atlantic, Pacific, and Great Lakes all agree?

Mr. Michaud: Yes, because they don't have the problem to same extent we have.

Mr. Keyes: And one year isn't long enough?

Mr. Michaud: It is enough in a way. You will have a small report as opposed to waiting for two years and having a much better and bigger report.

Mr. Keyes: Now you're arguing for a year, not against it.

Mr. Michaud: Obviously, two years from now we'll have a lot more to report than we will have within a year; it's as simple as that.

Mr. Keyes: On the position of final offer selection, we notice that the Pacific Pilotage, the Atlantic Pilotage, the Great Lakes Pilotage.... Mr. Chairman, when three of four pilotage authorities agree that final offer selection is a necessary part, I can't understand why that particular mechanism cannot be made firm in the bill itself. Would anybody disagree with that?

Mr. Michaud: No, I agree with that; it should be enclosed.

Mr. Keyes: Thank you, Mr. Chairman.

The Vice-Chairman (Mr. Comuzzi): Gentlemen, thank you very much for your submissions today. The hard, tough work has been done.

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Next we have, from the Chamber of Maritime Commerce, Mr. Doug Smith and Mr. Jim Campbell.

Welcome. I'm sure you understand the process.

Mr. Doug Smith (President, Chamber of Maritime Commerce): I do understand the process. Thank you, Mr. Chairman. We are pleased to be here.

Good morning to the members of the committee. I notice you're running behind schedule. We will try to help you with your schedule, although we won't try to dodge your questions. We will be brief, since I know you've been travelling the country and will have heard many of these arguments before. We will just try to reinforce some of the positions that have been placed before you.

I notice that you're here safe and sound this time, which wasn't the case after one of your recent hearings.

The Vice-Chairman (Mr. Comuzzi): That was -

Mr. Keyes: Never mind. Let's just get on with it.

The Vice-Chairman (Mr. Comuzzi): I won't even mention the city that treated us so badly.

Mr. Keyes: The city did well.

Mr. Smith: As the members know, the chamber represents a broad cross-section of businesses to which the marine industry and transport, including shippers, foreign and domestic flag carriers, and many ports, are critical.

In discussing the legislation today, we want to focus on what this legislation says compared with what we had hoped it might say, based on the report of this committee last year.

As you know, the chamber supported most of the recommendations that came out of the committee last year. We were greatly looking forward to the implementation of most of those recommendations. Now we feel as though the air has been let out of the balloon in some areas, and that's what we'd like to focus on today.

Before I go on to talk about this bill and our concern with it, let me reinforce the comments that you made, Mr. Chairman, about the coast guard.

We believe there were very good recommendations out of this committee with respect to implementation of cost recovery by the coast guard and the reduction of the cost of the coast guard. We are not pleased with the progress that's gone on now - and I know you've heard of our complaints and our issues. We urge this committee to stay engaged in the process, because we believe it's a transport issue, not a cost-recovery issue.

Mr. Keyes: Like Fisheries and Oceans.

Mr. Smith: That's right.

Back to the legislation. We feel it backtracks on some of the directions that were identified by the committee before. In particular we note the minister's remarks on the 26th, when he spoke to the committee and said the bill was designed to reduce bureaucratic interference and make changes for competition, jobs, growth, efficiency, and international trade performance.

In some aspects of the bill we think the proposals do in fact encourage that, specifically with regard to the seaway - and I know, Mr. Chairman, you and I may have some disagreements about that. However, we do feel that the treatment of ports leaves some doubt as to whether the results will be an improved competition situation. In fact, we're sure it won't be, unless changes are made to some of the provisions around ports.

We're disappointed with two critical issues of pilotage that have not been dealt with sufficiently. One is the compulsory nature of the services, particularly in the Laurentian region. The second is the assurance of delivery service at competitive prices for those who must use the service.

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We have attached a more detailed brief. In an appendix we have a list of our detailed recommendations for amendments. I don't propose to discuss those in great detail, but I will just highlight them now.

I'd like to move on to the ports subject. Let me first begin with the harbour commissions.

We see that the bill talks about eliminating harbour commissions and allowing them to become Canada port authorities. However, the bill related to Canada port authorities has some major shortcomings. Without fixing those, harbour commissions will be exposed to increased taxes, fees to the federal government, and increased municipal involvement in their affairs, perhaps not a productive involvement.

In the end this could lead to increased user cost and decreased competitiveness. We don't see any great benefit to the harbour commissions, again, unless the provisions related to the ports are in fact improved.

If those provisions of the bill related to Canada port authorities are not changed significantly, then we would recommend that you do not touch the harbour commissions. They're working effectively.

What are the specific concerns we have with the port authority regulations? We think there are significant steps forward, and we're pleased to see those. However, we are concerned about some of the administrative aspects and some of the restrictions on the ports.

The first relates to governance. This is not a major concern, but it is of concern to a number of ports that are members of ours. The board size is rather large. If a large port needs a board of 11, that's fine, but we believe the port should have some more flexibility in selecting a board size that meets their needs.

We are also concerned with the ministerial appointment of the board members, particularly those user board members. We would prefer that users select the board members and appoint them without political interference. I noticed that my colleague from the shipping federation recommended that the appointments be set up by the users with the selection by the minister from a list. That would be an acceptable alternative, but our first choice would be that the users make the appointment.

With respect to federal status for the ports, we think this is very important. It protects them from undue increases in taxes.

I've attended a few of your hearings. It's quite interesting to note that the municipalities are quite anxious to increase those taxes. You should be concerned about that, because the net result of this is an effect on competitiveness. We feel that granting federal agency status will continue the current tax regime, and that's very important. It is also important because these ports will have to deal with other federal agencies. It gives them an equal bargaining power.

Finally, as already referenced in this meeting this morning, these ports have to deal on an international basis, and they have an improved status as a federal agency.

The government proposes to charge the ports a fee, a stipend, if you will, for maintaining their letters patent. It's based on the gross revenues of the port.

We find this to be totally unacceptable. It should be based on net revenues. The ports need to look at putting money back into their port and applying it to expansion, maintenance, or whatever. A net revenue approach would be much more acceptable.

On the capacity and powers of the ports, clause 24 limits the ports to specific activities related to transported goods. It forbids them from incorporating wholly-owned subsidiaries. Further, they are restricted from pledging assets, crown or otherwise, to obtain financing.

We find all of those to be unnecessarily restrictive. We think the ports should be allowed to engage in alternative activities, provided they don't jeopardize the main purpose of the port, which is to provide transportation capability.

We also think the port should be able to obtain financing by pledging assets, even crown assets, if the minister agrees they can be pledged. We don't want you to handcuff the ports. You're setting up a board of directors. They should be responsible for the operation. If necessary, the minister could approve business plans or specific financing arrangements to protect federal interests.

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Those are all my remarks on ports. Let me move on to the seaway.

The Chamber of Maritime Commerce has, among its members, the nine companies that have formed the users group. So, naturally, we support the legislation as written. We endorse the creation of a users group, or at least the intent of the minister to negotiate with them to finalize a deal to have the users take over the operation of the seaway. We also endorse the objective to work with the United States to find new and better ways to run the system.

In our view, it's first things first. We're concerned that trying to get a binational agreement will delay unnecessarily the major efficiencies that can be realized by having the users group take over the seaway. They're ready to do it, and we think it should go ahead.

My final remarks are on pilotage. I was encouraged by the remarks of Mr. Michaud this morning. However, we do find the act as written is disappointing. We thought there were very strong and bold recommendations made by this committee with respect to pilotage, and of course it's created quite a bit of controversy. Nonetheless, we're concerned the bill puts off the progress and delays the action once again.

We fully support the position of the Canadian Shipowners Association in their brief of two days ago. We believe the compulsory pilotage, coupled with a very restricted and biased approach to certification of officers and masters as pilots, mean that a major cost to domestic carriers will carry on unabated. We believe the bill should rectify this by ensuring an open process for certification is endorsed and developed.

However, we also recognize the needs of other users. Allowing exemptions to the domestic fleet should not compromise the service and reliability of that service, or the competitiveness of that service to those who do need it. For that reason, we feel pilotage should be treated as an essential service.

Some kind of final offer resolution or alternative dispute resolution process should be incorporated to ensure there is no work stoppage. A reasonable approach should be looked at on both sides for an appropriate set of labour charges and pilotage charges for the industry, recognizing we do live in a competitive world.

Members of the committee, those are all my remarks. I thank you for your attention. We look forward to moving this bill forward. We believe the recommendations we and many others have made are important for that to happen, particularly with respect to creating and maintaining a competitive position.

The Vice-Chairman (Mr. Comuzzi): Thank you, Mr. Smith. I think the most succinct comment this committee has heard was from one of your members. He said that when we went on the road two years ago, we promised great efficiencies and less costs, and more efficient use of all the marine transportation in Canada. He said that since this Standing Committee on Transport has been on the road, we've seen no change in the regulatory control, and the costs have increased by a hell of a lot. That brought the focus together and brought us to the position that we have to address those issues quickly.

Mr. Gouk.

Mr. Gouk: Thank you, Mr. Chairman.

You raised concerns about what would happen to the harbours commission if the ports were moved into this bill as it reads now. I'm addressing each of the concerns you've raised with some amendments. I believe others will be as well.

You will see significant changes, mostly along the line of what you're looking for. I'm not going to go into my amendments, because I assume you were here a bit earlier this morning and probably heard some of those. I'm sure there will be some interesting debate and, hopefully, lots of cooperation as we move to amend this bill, following all the hearings.

The Vice-Chairman (Mr. Comuzzi): Thank you, Mr. Gouk.

Mr. Crête.

[Translation]

Mr. Crête: At the beginning of your presentation, you said that the cost-recovery policy was of great concern.

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Do you think it would be appropriate to provide in Bill C-44 that the Coast Guard submit its cost increase proposals to an agency that would be independent from the Coast Guard and that would consider the impact of such increases on the ports, officially and publicly, before they are implemented? Or would you have an alternate solution?

[English]

Mr. Smith: The short answer is that sounds like a good solution. We believe there needs to be some regulatory control over those things. In fact, we have proposed such amendments for the Fisheries and Oceans Act, which is also being considered, though not by this group.

[Translation]

Mr. Crête: The Oceans Act was passed these last weeks without the amendments you were recommending.

From your perspective, it might be interesting, given the responsibility of the minister of Transport concerning the economic efficiency of ports, to be able to somehow incorporate your proposals into Bill C-44.

[English]

Mr. Jim Campbell (General Manager, Chamber of Maritime Commerce): As you have suggested, we'd hoped to make major inroads with regard to the Oceans Act. Unfortunately, what we wanted and much of what you had suggested, that being a little bit more control over spending by the coast guard, was ultimately not found in the Oceans Act.

It would be nice if we could deal with the coast guard in Bill C-44, but this is from the transport minister and he has no jurisdiction over the coast guard, which is now under Fisheries and Oceans. This would have been the appropriate place for it, but as you know, a year and a half ago coast guarders moved on to other pastures.

[Translation]

Mr. Crête: The Department of Transport has no jurisdiction over the Coast Guard; its responsibility is to make sure that the Canadian ports system is cost-effective. If, on the one hand, we allow the commercialization of ports and, on the other hand, we have a cost-recovery system that does not make sense, we will wind up with facilities that do not want to take on the responsibility. This would particularly be the case for regional ports.

We have to think about that solution. Should you have any other options, we would like you to share them with us.

[English]

Mr. Campbell: I would suggest that the Minister of Transport ask to have the coast guard be brought back to his department. As Mr. Smith said earlier, although it has been moved on to Fisheries and Oceans, in terms of the services it provides to its clients now, we're not just third parties. We are now customers because we are paying them for particular services. They deserve to continue to be considered members of the transportation industry here in Canada, and we'd like to see this group, this committee, this forum, continue to have a major concern of the coast guard and to have input into the process.

I doubt it will happen, but if you could convince the minister to bring them back, that's really the only place we could see the gelling. We've been trying to get the two together and it doesn't seem to have been working.

[Translation]

Mr. Crête: I hope that at the end of its hearings on Bill C-44, this committee will make a unanimous recommendation along those lines.

[English]

The Vice-Chairman (Mr. Comuzzi): Mr. Keyes.

Mr. Keyes: Thank you, Mr. Chairman. I'm glad you asked me to go next, if only to give some comfort to Mr. Crête and our witnesses.

In fact, Fisheries and Oceans and Transport have come together to pay for a study that is looking into exactly what we're discussing here. That study will be available shortly, and the minister has already assured me that it's the intention of both ministers to move that study to an examination by a joint committee of Transport and Fisheries and Oceans in order that we can, in a coordinated fashion, come to realize that the coast guard and the fees that are imposed in that particular area and the work that's being done on Bill C-44 are accomplished in a coordinated cohesive manner. We're looking forward to the time when we will come together to do this matter further.

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Mr. Crête: Who will decide it ultimately?

Mr. Keyes: The Government of Canada.

Mr. Crête: It will be the minister responsible for that.

Mr. Keyes: Yes, it falls under Fisheries and Oceans, but certainly he's not going to act in isolation of all the issues that are so important to the transportation network as a whole.

The Vice-Chairman (Mr. Comuzzi): Thank you for that information, Mr. Keyes.

Mr. Cullen.

Mr. Keyes: I have one question for the witness. That was why I was glad you let me go next.

I just want to turn your attention to page 2 under ``Harbour Commissions''. I'm sensitive to it, coming from Hamilton. We have a very successful Hamilton Harbour Commission.

For the umpteenth time, the third or fourth time, this committee has received consensus time after time that we either go across this country in study or we go across this country as the deputy minister and myself and others have done to hear from harbours and ports. Then again as a committee, as we go across this country, the consensus is clear that federal agency status must be a part of this bill.

Federal agency status will do what I think Mr. Smith is suggesting: close the door on any exposure to the harbours and ports in this country to federal income tax, provincial income tax, provincial money grabs, municipal taxation, etc., all those things that can reduce the competitive nature of being a port in this country.

This is my question then, Mr. Smith. If federal agency status is adopted in Bill C-44 as an amendment, which brings us back to what was recommended in the SCOT report in 1995, would you agree that the best advice we can all get is to let the harbour commissions of this country determine what they feel would be in their best interests, whether to remain a harbour commission or move to CPA status if the users feel there's an advantage to being part of a bigger picture, being part of a team, being part of a CPA group in this country?

Mr. Smith: Yes, I'd agree with that. I think our position was that if it isn't broken, don't fix it.

Mr. Keyes: Thank you very much.

The Vice-Chairman (Mr. Comuzzi): Thank you, Mr. Keyes. Is that the end?

Mr. Keyes: The answer was shorter than the question. That's good.

The Vice-Chairman (Mr. Comuzzi): Mr. Byrne.

Mr. Byrne (Humber - St. Barbe - Baie Verte): Mr. Smith, you've identified basically the chamber's general satisfaction with the proposals for the seaway. You've expressed the consensus of what we've heard from the shipping industry about pilotage. You've also very articulately discussed many of the concerns the shipping industry has regarding the formation and progress of the Canadian port authorities. You've articulated very concisely and clearly some of the concerns that are arising from that process.

One of the things you have done at the very start of your ports and harbour commissions...you have flagged some concerns regarding the operations of local ports, those ports that don't fall within the Canadian port authority system. I don't think this committee has had any submissions from the smaller ports. I think there are probably about 40 that would fall into that particular category of ports.

Has your chamber received any concerns or had any discussions with your member groups regarding the future of those ports? Could you offer some discussion about anything that has arisen?

Mr. Smith: I think between Mr. Campbell and me we can. We have supported, as have our members, the ideas around not continuing to support ports that aren't economically viable. So we endorse that concept.

The concerns we have had expressed are - if I may say in very colloquial terms - about cutting it loose and exposing them to a lot of municipal oversight or perhaps being taken over by municipalities that have other designs on the ports rather than keeping them as business-oriented, transport-oriented ports.

The one example - I don't mean to cast aspersions on them, but I've heard it used in many hearings already - is that people are worried about a port becoming like Toronto, rather than a business port, where they lose control or they become a port that has condominiums and restaurants and all those things, almost making a business port impossible. I think that would be fair in terms of what we've been hearing.

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Mr. Campbell: Largely it's exposure. There will be a number of ports along the St. Lawrence and the Great Lakes that are quite confident, from the point of view of both the users and the local city officials, that agreement can be found to put together a proposal for Transport Canada to take over these ports in a not-for-profit situation. There are also some that are quite wary of having a particular port looked on as a cash cow for building ice arenas and ploughing roads. That is real. A lot of these users have millions of dollars tied up in these ports and they are already on a knife edge as far as competitiveness is concerned. Having municipalities coming in and thinking this is now their golden cow is of great concern.

I imagine you haven't heard much about local ports because that's going to take place, I believe, whether or not this piece of legislation goes through. For a lot of these ports divestiture is a done deal, and it's just a question now of a lot of hand-holding from Transport Canada for these ports, helping users, operators and municipalities get through so there's a win on all sides.

Mr. Byrne: There are a few ports out there that really aren't seen as cash cows by municipal governments and others. While they have fairly significant tonnages being shipped through, their economic viability as stand-alone ports without any sort of subsidy or assistance may be put into doubt.

Has your chamber received any references to concerns from your membership regarding the future of these ports? Do you have any broad position on that?

Mr. Campbell: We've found largely from our port members and our user members that if there is an opportunity to develop an environment and to put an infrastructure within a particular port, whatever is needed for economic viability in the future, there has been a lot of confidence that this is doable for particular ports. As a matter of fact, having that flexibility is welcomed and encouraged. Thankfully, we have not heard from any particular ports that this is going to kill them.

The flip side is that they are also hoping for - but I believe many have not found - some clear guidance from Transport Canada on how this is going to work, giving them a model of how to talk to municipalities, how to have a win for all parties involved. That's what we would be looking for from Transport. They're kind of making it up as they go along from port to port.

The Vice-Chairman (Mr. Comuzzi): Mr. Smith, at the outset you said that your organization and I might have a difference of opinion in certain areas. I just want to clarify that. I don't think we have a difference of opinion, if you read the report we submitted today.

I know the position of nine of your members. The overwhelming evidence we've heard throughout this process is that users are tremendously important in the whole of maritime business and commerce in Canada. They are tremendously important. The overwhelming evidence is that as important as they are, there is public policy and the user should not be exclusive, whether it's a harbour commission, a port, a seaway or whatever.

I think your organization has agreed that the Great Lakes and St. Lawrence system should be binational. In fact, I think it's been referred to. Our only disagreement is over how much time it will take to get there. I think your organization wants a four-year or five-year time span. I think the majority of the committee wonders why we should go through that intermediate step. If we're going to get there, let's get there fast and stop screwing around.

Mr. Smith: If I may, I don't think our position is that it should take five years. Our concern is that it will.

The Vice-Chairman (Mr. Comuzzi): Well, that's the information we got when we met with your committee.

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Mr. Smith: I think it's not that it should; they're concerned that it will. In the meantime, we'll lose five years of opportunity.

The Vice-Chairman (Mr. Comuzzi): Well, we don't think it's going to take five years.

Thank you very much.

Mr. Smith: Thank you.

The Vice-Chairman (Mr. Comuzzi): Oh, I know why Elsie's been here. We have the Saint John Board of Trade.

Welcome, Mr. Doiron, Mr. Creamer, and Mr. Murray. Is that correct?

Mr. Thomas L. McGloan (Representative, Saint John Board of Trade): I'm Mr. McGloan. I'm substituting for Mr. Murray.

The Vice-Chairman (Mr. Comuzzi): We welcome you all to this committee. We know you've put a great deal of time into your submissions. We're very interested in what you will tell us today.

You understand the process. You have about ten or fifteen minutes, whatever you need, and then the committee would certainly like to ask you some questions.

Mr. Thomas Creamer (President, Saint John Board of Trade): Thank you, Mr. Chairman.

I would first like to introduce those here today representing the Saint John Board of Trade. My name is Tom Creamer and I am president of the Saint John Board of Trade. Paul Doiron is a member of the task force studying the bill for us and Tom McGloan is another member of our task force.

Mr. Chairman, I propose only to highlight our submission, which I believe you have already received. We should be able to make up that twelve minutes you're behind.

First, the Saint John Board of Trade would like to commend the government for its work on Bill C-44 and to say that for the most part the board agrees with the general philosophy outlined in this bill. There are, however, a few areas on which we would like to comment, after which we would be pleased to answer any questions.

On port governance, specifically at the Port of Saint John, we recommend that the board of directors of the local port authority be limited to seven members. As the minister will consult with the users regarding appointments to the board, it is our belief that the current definition of a user is far too broad. We recommend that perimeters be established to clearly identify the criteria under which one qualifies as a user.

Although the act remains silent on the issue of federal status, we recommend that local port authorities retain federal status. Not to do so would, in our view, place the new authorities in a less than desired competitive position by adding costs not now sustained by the ports.

In terms of capacity and powers, often ports own land that is currently underutilized. If this land were available for other activities that could generate revenues for the port, costs could be covered and port competitiveness enhanced. We recommend that clause 24 be amended to allow port authorities some discretion in the use of port facilities for other commercial purposes.

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On financial issues, in order for local port authorities to support borrowing requirements, we recommend that the bill be amended to permit pledging of assets. If there is a restriction, it should be limited to federal real property.

With regard to pre-existing liabilities, we strongly recommend that these continue to rest with the Crown, as to do otherwise would, in our view, contradict the whole thrust of this legislation, which is to make port authorities more self-sufficient and competitive.

In receiving a return on investment, it would seem to us that if the federal government wants local port authorities to operate in a business-like manner, a dividend policy would be more appropriate than a charge on gross revenues. In the alternative, should gross revenues become the base for calculation of payment, we strongly recommend that costs such as channel dredging, which is not applicable to all ports but which is certainly a hefty cost for the port of Saint John, be deducted from gross revenues before calculations are made.

On the St. Lawrence Seaway, we find it inconsistent that although the bill declares the seaway to be an integral part of Canada's national transportation infrastructure, no such declaration is made in respect of Canada's ports. We also do not find it equitable that the seaway should continue to have access to the consolidated revenue fund for financial contributions, grants or any other financial assistance for the continued maintenance, construction or operation of the seaway, an option not available to Canadian ports. We strongly recommend that the arrangements for the seaway be consistent with those for ports.

Marine Atlantic. With regard to clause 127 and the commercialization of the Bay of Fundy ferry services, we would like to emphasize that the current ferry service between Saint John, New Brunswick and Digby, Nova Scotia makes a substantial contribution to the port of Saint John and to the economy of New Brunswick. We strongly recommend that this bill incorporate some assurance of the continued long-term operation of this service.

I'd like to thank you for the opportunity to appear before the standing committee today. If there are any questions, we would be happy to answer them.

The Vice-Chairman (Mr. Comuzzi): Thank you very much, Mr. Creamer.

Mr. Gouk.

Mr. Gouk: Thank you, Mr. Chairman. I have actually visited some of these gentlemen this spring and discussed port issues. I think, as you probably heard this morning, there are numerous amendments going to be brought into this bill that will address the bulk at least of your concerns, if in fact not all of them.

With regard to the seaway, and again it was mentioned this morning, I am a strong believer in user pay, but there has to be a phase-in period for that, because it's a newer concept for the seaway than it is for the ports and there are certain steps that have to be done. I think we have to move towards this. We have to have very definite time lines, but it does have to be done in steps. We can't do it overnight.

One comment I would make with regard to the ferry service, because it's the second time I've heard it - and I'm sure Elsie will give me a dig here - is that I have a little bit of a conflict in what I'm hearing from you about how you want the seaway to be strictly user pay, that there should not be a subsidy to it. I know you did not specifically ask for a subsidy with regard to the ferry but with regard to it assuring that it continue.

On the west coast the ferry service is very important as well, but we expect it to be operated from the west coast without any federal subsidies. I think that as long as there is an economic benefit, not only to Saint John but to the entire province and perhaps both provinces, it likely will continue, but any help, as it were, that might be needed, should definitely come from the region it serves as opposed to the federal government. I would like your comment on that.

Mr. Creamer: I don't know what the answer is for what happens after the five years, but I do know what the end result will be if the ferry is knocked off at the end of five years. We are for privatization of the ferry and we want it to be a viable operation. At the end of the five years, however, there is nothing there if whoever is running it decides just to walk away.

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Just as a quick example, between Digby, Nova Scotia and New Brunswick, the number of buses, for example, that went over there in the past year represent 30,000 room nights, from Digby down. The Pines, for instance, in their best year ever would take in about 13,000 room nights. So you're looking at possibly wiping out that whole industry down along through Digby. The spin-off is approximately $8 million to Saint John and Nova Scotia, and could possibly be more.

Mr. Gouk: I'd like to see it continue too. Do you agree that if there's a shortfall of funding in order to keep this running that it should come from the region it serves as opposed to the federal government and the tax base right across this country?

Mr. Creamer: We would be willing to look at that, but I know one thing; we have to ensure that it continues. We're not looking for any handouts, but it's something that has to continue and be viable.

The Vice-Chairman (Mr. Comuzzi): Thank you, Mr. Gouk.

Mrs. Wayne.

Mrs. Wayne: Thank you, Mr. Chairman. I'd like to ask you, Tom, does the board of trade have any thoughts on who should be included in the user category? Why do you believe that ports should be able to lease out their land for other non-marine related activity?

Mr. Creamer: The board does have thoughts on the users.

Paul, I'm wondering if you could comment on that?

Mr. Paul S. Doiron (Member, Marine Policy Task Force, Saint John Board of Trade): First of all, I believe there has to be a certain tailoring of some of these articles to the individual port. If you look at the broad statements regarding users, it would almost eliminate 90% of the population of the city of Saint John, because the port is very important to the city.

The problem we would have is that there is an awful lot of expertise in the user group. From our standpoint, that user group, who have the biggest stake in the port, must have some say in the direction of the port.

Mrs. Wayne: You don't see a conflict there?

Mr. Doiron: I think with the proper conflict of interest guidelines, and then if it's drawn properly, you should be able to avoid conflicts.

Mrs. Wayne: With regard to the land for other non-marine related activity, you don't see a problem there?

Mr. Doiron: No.

Mr. Creamer: If I could pick up and add to what Paul said there, we believe that some of the people who should be included in the users are the local agents, including the tourism industry, terminal operators, labour, port services, trucking companies, cargo interests with at least a minimum of 1,000 tonnes per year in usage, and Marine Atlantic in the case of the port of Saint John. That may give you some idea of what we're looking for.

As far as the land goes, it seems incongruous to us that the land and/or the facilities should lay idle, contributing to the cost of upkeep with no return. We note in our submission that U.S. ports have greater flexibility in this regard to generate revenues to help cover the costs of upkeep and contribute to the bottom line. It would seem to us that Canadian ports should be able to do likewise.

Mrs. Wayne: Thank you.

The Vice-Chairman (Mr. Comuzzi): Thank you for being so succinct this morning.

Mr. Crête and then Mr. Cullen.

[Translation]

Mr. Crête: Your brief strongly recommends that the Bill give some guarantee of the long- term survival of the ferry service.

Mr. Gouk asked a question on this earlier. I wouls like to know what kind of assurances you are looking for. Are you looking for assurances relating to the infrastructure or assurances relating to some kind of grant for the ferry itself? Things can vary from one region to another in Canada. In Bill C-44, wharves and ferries are not classified in any particular way. I would like to know what kind of protection you would like to get. Would it be protection through grants or protection in the form of assurances that the wharves and physical infrastructure will be of a high quality?

Is there some association or link between the different ferry operators, for instance in the East of Canada, that could make more collective representations in this regard?

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[English]

Mr. Creamer: Mr. Crête, we aren't looking for any handouts as far as the ferry goes. We were for the privatization of the ferry. We realize there have to be changes to make it viable, and we're willing to accept that. We're not looking for any handouts. We're looking for some assurances that the federal government will step in if, at the end of the five years, somebody walks away from it. The infrastructure is there.

We have a boat - and perhaps Tom McGloan can talk better about this when I'm through here - that is in good shape. The infrastructure is in good shape. But we would need somebody like the government to ensure that something is done at the end of five years to facilitate something between the province, the municipality, the federal government, or whatever it takes to ensure that the ferry service continues. It's a vital link between New Brunswick and Nova Scotia, and the jobs that would be lost would be in the thousands.

[Translation]

Mr. Crête: In Quebec, we have the same kind of problem. If it makes you feel better, in Rivière-du-Loup, there is no infrastructure; the wharf has an expected life-span of five years and the grant comes from the province.

[English]

Mr. McGloan: What we're looking for is a commitment longer than five years. Presently the call for proposals issued by the federal government only required the proponents to put in a proposal for five years, and only a five-year commitment.

We're suggesting that in analysing those proposals they should be looking at a commitment of longer than five years, of at least ten years. Although in their proposal call they did require a ten-year business plan, we would like to see it for stronger than that, at least a ten-year commitment and not a five-year commitment.

The Vice-Chairman (Mr. Comuzzi): Mr. Cullen, please.

Mr. Cullen: Thank you, Mr. Chairman.

Gentlemen, thank you for your presentation. I'd like to turn to the issue of payments to the federal government, or stipends. I don't know if you were around this morning for the discussion with the Port of Saint John. You would have picked up that I'm not sympathetic to the net approach.

To me one of the issues is the business of how you differentiate between efficient and non-efficient ports. Your proposal calls for a dividend policy driven on a net basis. What would be the incentive for a local board to pay a dividend? Is there any kind of minimum you'd have in mind, or any cumulative preferred dividends? How would that work?

Mr. Creamer: I guess we'd have to leave that up to the board to negotiate with the federal government. In business it seems if there's a profit you pay a dividend based on that. It doesn't seem fair that you would pay a percentage of gross revenues the way it's laid out right now.

In Saint John we have a lot of things the rest of the country doesn't have to deal with. We're almost unique. We have the highest tides in the world, and they continually beat at our infrastructure. We have dredging. I don't know if any other ports in Canada have to deal with that. So there are things like that.

I heard your comments this morning. We would be willing to go along with what you suggested as far as paying a percentage and skipping the dividend - if you took off dredging, for example, and then paid the percentage after that.

Mr. Cullen: Thank you for that.

There'd be huge pressures on the cashflow requirements, and competing against the dividend would be reinvestment back into the authority, but one other option would be to base it on net with a certain minimum. In other words, there is a certain cost of the infrastructure that the federal government has made available. So notwithstanding the bottom line, there's a certain minimum, perhaps based on the size of the port.

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There would be some flexibility around that, I suppose, in terms of the particular circumstances a port would find itself in. Just leaving it in the hands of a board of directors for dividend I think would be a little difficult. I don't see what the motivation would be to pay a dividend.

Mr. Creamer: I heard your comments this morning. I'm a firm believer that you have to trust somebody until they show you otherwise. I think you have to believe that the users, that whoever makes up the board, will keep everyone honest.

The Vice-Chairman (Mr. Comuzzi): Thank you, Mr. Cullen.

I want to thank you gentlemen for making this presentation. It's always interesting to have someone from Saint John. You are the only group so far from Saint John who hasn't invited us to come and visit.

Mr. Creamer: I didn't get to finish. I wanted to thank you very much, Mr. Chairman.

For those of you who haven't been to Saint John, I hope you will come and see our city. We'll sure welcome you with open arms. If there is anything we can do, let us know.

The Vice-Chairman (Mr. Comuzzi): We've been there. Your port is very functional. It's a very efficient port. You folks should be very proud of what you have there, and you built it yourselves, through your leadership. I think it's one of the fine ports in Canada.

Mr. Creamer: Thank you very much.

The Vice-Chairman (Mr. Comuzzi): From the Alliance of Manufacturers and Exporters we have Mr. Zier-Vogel and Mr. Brian Collinson.

Mr. Ted Zier-Vogel (Chairman, National Transportation Committee, Alliance of Manufacturers and Exporters Canada): I would like to introduce Brian Collinson, director of commercial policy for the alliance.

The Alliance of Manufacturers and Exporters Canada appreciates the opportunity to provide its comments on the proposed Canada Marine Act. The alliance is the voice of Canadian manufacturers and exporters and is concerned with all issues that have an impact on the health and competitiveness of the Canadian economy. The alliance has some 3,500 member companies across Canada, producing roughly 75% of the nation's manufactured output.

Manufacturing and exporting are the economic engine of the economy. Manufacturing accounts for 18.5% of Canadian GDP, the largest contribution of any single business sector, while exporting amounts to 40% of Canadian GDP.

Over 2 million Canadians are employed directly in manufacturing and exporting, while 3 million more have jobs that depend directly or indirectly on these sectors.

The Canadian economy has a heavy dependence on manufacturing and exporting activities, which in turn rely heavily on viable, cost-effective marine transportation. Therefore the alliance welcomes the Canada Marine Act. The comments that follow are given within the overall context of support for the act.

The alliance supports the changes in the act with respect to pilotage authorities. While not as extensive as perhaps some of our members might wish, the alliance commends the changes to allow self-sufficiency in cost reduction, the prohibition of appropriations from Parliament to pilotage authorities, and the other pilotage provisions of the bill.

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Moving on to ports, I have a question. Who are the users of ports? In clause 4 the term ``user'' is defined with respect to the port section of the bill, but the definition does not apply to clause 3.

The alliance believes there must be a clear definition of the term ``user'' for the purposes of the interpretation and application of the national marine policy. We recommend that the definition be moved to clause 2. The alliance also believes that the term ``user'' should be explicitly defined to include any party that engages a carrier for the purpose of shipping its goods to or from a Canadian destination through the port.

On the subject of the Canada port authorities, the alliance supports the division of ports into the larger commercially viable Canada port authorities, which will be incorporated, and into the smaller, less financially viable ports. These will be transferred to provincial governments, municipal authorities, or community or private interests, or else closed within six years.

A high degree of autonomy should be afforded to the largest and most commercially viable of Canadian ports, for the reasons outlined above, and in keeping with the national marine policy. However, many questions remain with respect to regional or local ports, which will be discussed further in detail.

On incorporation, the alliance recommends the incorporation of CPAs, the Canada port authorities, but incorporation should be by means of the Canada Business Corporations Act rather than letters patent, given that clause 23 of the bill makes the CBCA applicable to port authorities. Also, ports should be incorporated and governed in a manner resembling as closely as possible that of the industries the port serves.

With regard to criteria for CPA status, the alliance supports the four criteria for CPA status found in the bill. CPAs should certainly be financially self-sufficient and sustain themselves through their own revenues. CPAs should also have strategic significance for trade, but this should not be limited to external trade.

A port with strategic significance for internal trade should not be barred from becoming a CPA. While links to major rail lines or highways would be a positive attribute for CPA status, it is unclear that their absence should be an absolute bar.

Finally, the criterion of diversified traffic is certainly necessary in order to have the economic self-sufficiency to be considered for CPA status.

On obligations and debts, the alliance supports the provisions of clauses 20, 21 and 22 of the bill. If CPAs are to function as commercial corporate entities, they themselves, and not Her Majesty, must carry their own legal obligations and liabilities.

Similarly, CPAs should receive no appropriation from Parliament to discharge any obligation, liability, or debt. Neither Parliament nor Her Majesty should guarantee the obligation or liability of any CPA; otherwise it would be impossible to fulfil the national marine policy objective of the management of marine infrastructure and services in a commercial manner.

On responsibilities, subclause 24(2) of the bill limits the power of the port authority to engage in activities within the port related directly to shipping, navigation, transportation of passengers and goods, and handling and storage of goods.

We believe the commercial activities of a port should be much more tightly confined to those directly associated with being a port. The bill should control CPA activities with respect to the management, administration and development of land and other infrastructure. Larger commercial ports can abuse their special status on issues pertaining to the development of land.

Because of the potential for conflicts of interest and for anti-competitive practices, the role of the ports should essentially remain that of being a landlord with respect to port facilities. Ports should not be able to use their land for non-port uses. Under no circumstances should a port be found to be in competition with its users.

On board composition, the composition and size of CPA boards may be the single most important issue with respect to the commercial success or failure of CPAs. Paragraph 6(2)(f), which governs the selection of directors, stands to undermine the efficiency of CPAs for several reasons.

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To allow efficient operation, CPA boards should be kept between seven and nine members. Also, the proposed composition of the board is weighted too heavily in favour of the government and is insufficiently representative of users. There should be an absolute prohibition on government representatives holding the balance of power on a CPA board.

The national marine policy, in paragraph 3(f), prescribes that marine infrastructure and services be managed in a commercial manner that actively relies on input from users. Thus, there is no justification for the presence of paragraph 14(e), which prevents users from being on the board.

In fact, shippers, carriers and service providers should each be guaranteed a seat. Paragraph 12(e) should be amended to require that the remaining individuals of the board be nominated by the users to eliminate political or patronage appointments and to enhance the competence of the board to address commercial or transportation issues.

The alliance supports the clause 13 requirement that directors have stature within the transportation industry or business community and the knowledge and experience relevant to port operation. All members of the board should have business or transportation experience, and preferably both.

The Vice-Chairman (Mr. Comuzzi): Mr. Zier-Vogel, I wonder if you could summarize revenues and fees, and then just come to the conclusion.

Mr. Zier-Vogel: I'll try.

We agree that CPAs should pay a charge on gross revenues. We think CPAs should compensate the government for its capital investments, but through a fixed term over a period of years.

With regard to the authority to set fees, we think the ports are given perhaps a little too much leeway, because they can levy fees for any service or any right and privilege conferred. It may be a little broad. We think there should be some dispute resolution mechanism or arbitration mechanism with regard to fairness and reasonableness of such fees.

That really summarizes the end of our position. We talk about regional ports, but that's -

The Vice-Chairman (Mr. Comuzzi): Go ahead. I'm sorry, it seemed those two areas were somehow...regional ports?

Mr. Zier-Vogel: Under part II of the bill, regional or local ports will be transferred to provincial or local authorities, community organizations, or private interests, or else they will be closed within six years.

Many smaller ports are essential to manufacturers and exporters. Many affected enterprises would not be able to sustain the additional transportation costs if they were required to ship goods by alternate means to another port.

Measures that facilitate the transfer of the more economically important of the smaller ports to local or provincial jurisdiction on a financially viable footing are particularly important.

In conclusion, Mr. Chairman, the alliance welcomes the Canada Marine Act, and the long overdue renewal it promises for the marine sector. The overall cost of marine transportation represents a significant competitiveness issue for many of our members.

Manufacturers and exporters need a new type of port in Canada that will bring private sector economies and efficiencies to marine transportation. Such ports must have the right role for port users, the right form of governance and enough autonomy to respond flexibly and competitively. With minor modifications, incorporated CPAs as proposed by the bill would fulfil this role.

Mr. Chairman, the alliance thanks you for the opportunity to express its views on this matter.

The Vice-Chairman (Mr. Comuzzi): Thank you, Mr. Zier-Vogel.

Mr. Gouk, do you have any questions?

Mr. Gouk: Yes, Mr. Chairman.

Usually I start by saying that there are amendments under way that address all of your issues. However, you've presented a couple of different points.

Mr. Zier-Vogel: Great.

Mr. Gouk: One is on subsidiary uses, where you want the port kept to a very tight role. Some of the ports are doing a number of realistic things that the bill, as it is written right now, would prohibit them from doing.

In Vancouver, for example, they would not be able to operate the convention centre. They have parks that are used to provide some compensation to the city. It is future land that they may wish to use at some time, and they would not be able to do that.

There are a number of viable things. I agree that we don't want to have the ports in direct competition with the users, but I think there has to be a lot more flexibility than what is allowed right now.

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Likewise, with regard to gross revenues, I'm not sure if you're the first one but you're certainly one of the very few who has actually recommended that. Obviously the ports don't want it, and usually the users don't want it because ultimately the cost is coming out of their pockets.

There's one other comment I'd make with regard to shipper fees. Something we've heard now from a couple of people - and I'm surprised we haven't heard more of it from shippers - is that there has to be some dispute settlement mechanism for disagreements with shippers. At least, we have some in now because I do intend to offer an amendment regarding that. It's a lot easier to put these amendments through if there's more support from the user community. I'm glad to hear that you've submitted that one.

Mr. Zier-Vogel: We think it's important.

The Vice-Chairman (Mr. Comuzzi): Mr. Dubé.

[Translation]

Mr. Dubé (Lévis): I am sorry I missed the beginning of your presentation, although I had a chance to read it afterwards.

You are a group of shippers and manufacturers. Is your presentation today the result of some consultation with your members on Bill C-44? If so, I may have other questions.

[English]

Mr. Zier-Vogel: We've talked to the membership of the committee about this bill, and yes, the recommendations we have talked to you about reflect the views of that committee.

[Translation]

Mr. Dubé: Did the members of your group come tosome consensus? I would like to know if the members you represent in Quebec agree with the position you set out for us this morning?

[English]

Mr. Zier-Vogel: There were members from Quebec on the committee at the time we considered the subject, and they agreed.

[Translation]

Mr. Dubé: Thank you very much.

[English]

The Vice-Chairman (Mr. Comuzzi): Mr. Byrne.

Mr. Byrne: Mr. Chair, the witnesses flagged regional ports and small ports. In the brief it says that measures that facilitate the transfer of the more economically important of the smaller ports to local or provincial jurisdictions and to a more financially viable footing are particularly important. Could you just elaborate a little bit on what specifics you would have in mind?

Mr. Zier-Vogel: I'm aware that at the moment Transport Canada has set aside a certain sum of money for some ports to enhance their facilities, to make themselves more viable, and possibly to put them over the hump and turn them into port authorities. I'm not familiar with much more than that as to specifically how that money will be apportioned by Transport Canada or what criteria will be used by Transport Canada to do that. Will it be to help a port out but be private or be owned by a province, for example, or will the money only be available to help a port out so that it can become a Canada port authority? I'm not sure about that.

We think those kinds of things are likely to crop up in the devolution of the smaller ports and we think it's relevant that this process be undertaken, because clearly a lot of ports will be closed. That's fair enough, but by the same token there will be some industries or companies that will be affected by it.

The Vice-Chairman (Mr. Comuzzi): Mr. Cullen.

Mr. Cullen: Thank you, Mr. Chairman.

Welcome to Mr. Zier-Vogel, a former colleague in Noranda, and thank you both, Ted andMr. Collinson, for the excellent brief and presentation. I just had a question with respect to the responsibilities of the Canada port authorities.

To my mind, the position you've taken seems to be more in line with what one would expect from the business community, the manufacturing community. When we were in Halifax we had a presentation by the Halifax division or the maritime division of the alliance, and they didn't come on as strong on this point. In fact, they didn't seem to have a problem with it. I'm wondering if that's a function of specific areas and specific ports. Did you want to comment on that?

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Mr. Zier-Vogel: It's hard to say. In the same way that the national caucus of any political party may have regional views that are somewhat different from the national view, we find the same thing in our organization. So yes, to the extent that our group represents more central Canadian interests, and in that sense perhaps a relatively broad range of users compared with what one might find out west or out east.... We, like many political parties perhaps, acknowledge a fair spectrum of views on any given subject. At least political parties are able to control them a bit more.

Mr. Cullen: We can testify to that sort of phenomenon as well.

I have another quick point on the incorporation of CPAs. We heard yesterday in Montreal from the CPPA, the Canadian Pulp and Paper Association. Their view is that it should be incorporated under the Canada Business Corporations Act as well, in line with your thinking. Could you expand on the reason for that or provide examples of the differences that would be in play if it were under the Canada Business Corporations Act versus letters patent?

Mr. Zier-Vogel: I can't, but Brian might.

Mr. Brian Collinson (Director, Commercial Policy, Alliance of Manufacturers and Exporters): In general, I think our position at this point very closely tracks that of the CPPA. Both associations have been in active consultation on this issue, and our views parallel very closely the views of Mr. Foran in this area.

Essentially we believe it should be the case that if ports are to be incorporated and then subject to a legal regime under a particular act, they should be incorporated and subject to all the provisions of that act. We believe that the CBCA is the right act because it more closely parallels the kind of incorporation you would see for a private sector business.

The Vice-Chairman (Mr. Comuzzi): Thank you, Mr. Zier-Vogel and Mr. Collinson, for making your presentation this morning. You obviously have an ally on the board, and your proposals will be given due consideration.

As you said, you represent the people for whom the transportation system is designed. Unless we can get the transportation system working for the companies you represent.... We're in absolute partnership; we work together. People only buy our product because at the end of the road when it's delivered at the door, we're more competitive than anybody else, and transportation plays a big role. We're very impressed with and interested in your remarks this morning.

With that, it's been a long morning. I would like to thank the persons involved in the translation service, as we've been going since shortly after 8 a.m. Thank you for the excellent support we've had from all the people up front and thank you, gentlemen, for being good committee members.

The meeting is adjourned.

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