10

TRANSPORTATION INFRASTRUCTURE

Marine Transportation Infrastructure

Ports

Canada's major ports play a significant role in Canada's transportation system. Vancouver is Canada's largest port and the main terminal for goods being shipped to the Asia-Pacific region. The Port of Prince Rupert, located just below the Alaskan Panhandle, has the shortest sailing distance from North America to Pacific Rim countries. In the east, shipments are divided among several ports, including Montreal, Halifax, Port Cartier, Sept-Îles, Saint John and Quebec City.

Despite the cold climate in winter, many of Canada's deep-water ports are open year-round. The infrastructure that supports the port system includes marine terminals with modern container facilities that connect with container trains, which move goods throughout North America. Port authorities operate some of these marine terminals, but often they are owned and operated by independent companies that rent space from the port.

The Port System

Over the past number of years, the federal government has been working to reengineer Canada's marine transportation system. As part of these efforts, the National Marine Policy, announced in December 1995, set out the government's intention to bring more commercial discipline to the marine sector to improve efficiency and give local regions more control over their ports. The commercialization of the St. Lawrence Seaway is an important part of this policy.

The Canada Marine Act (CMA), which received Royal Assent on June 11, 1998, enabled Transport Canada to implement the National Marine Policy. The policy called for three categories of ports: independently managed Canada Port Authorities (CPAs), regional and local ports, and remote ports.

Canada Port Authorities are self-sufficient ports that have been deemed essential to domestic and international trade. As a group, they make up the National Ports System and include ports that were formerly Ports Canada local port corporations, major Canada Ports Corporation divisional ports, and most harbour commissions.

To date, 17 of the 18 ports designated to become Canada Port Authorities have received their CPA status and have established their boards of directors:

• Halifax, Montreal, and Vancouver on March 1, 1999
• Fraser River, Prince Rupert, Quebec City, Saguenay, Saint John, Sept-Îles, St. John's and Trois-Rivières on May 1, 1999
• Toronto on June 8, 1999
• Nanaimo, North Fraser, Port Alberni, Thunder Bay, and Windsor on July 1, 1999.

The Port of Hamilton, the only designated port left to be established as a Canada Port Authority, will receive CPA status when it completes the letters patent process. In addition to the original 18 ports listed in the Canada Marine Act, Transport Canada has received applications for CPA status from two other ports -- Belledune and Oshawa. Their letters patent are under development.

The Canada Ports Corporation is targetted for dissolution in 2000. The corporation has been kept open with minimal staff during the implementation phase of the National Ports System to ensure that all ports have been either transferred to Canada Port Authority status or divested to local interests.

On March 1, 1999, Part II of the Canada Marine Act came into force for existing public ports, which consolidated regional and local ports with other public ports. This category includes Transport Canada facilities that are not deemed to be remote facilities, as well as any Canada Ports Corporation facilities or harbour commissions not incorporated as Canada Port Authorities.

Regional and local ports are being offered to other federal departments or to provincial governments, municipal authorities, community organizations or private interest groups. As Table 10-7 shows, Transport Canada has divested a total of 357 public ports since 1996. These ports were either transferred, deproclaimed or demolished, or had Transport Canada's interests terminated. The largest transfer of ports took place in 1996, with the devolution of 277 ports. In 1999, 35 facilities were divested, while 1998 and 1997 saw the devolution of 11 and 34 ports, respectively.

Table 10-7 summarizes the changes that have taken place in responsibility for ports' operations since 1996.

As of December 31, 1999, a total of 192 regional, local and remote ports remain under federal control. Table 10-8 summarizes the regional distribution of the ports administered by Transport Canada from 1995 to 1999. The federal government will continue to maintain remote ports that serve the basic transportation needs of isolated communities unless local interests express a willingness to assume ownership of such port facilities. While 26 remote ports were divested in 1996 and 1997, there have been no further divestitures of remote ports since then. Transport Canada continues to administer 34 remote ports in Quebec, Ontario, Manitoba and British Columbia. A growing number of "other" ports are being operated by provincial or municipal governments and private interests as Transport Canada divests itself of its facilities.

At the end of 1999, there were 108 other ports, including 57 private, 33 provincial and 18 municipal ports. These ports vary both in terms of size and activity. They include sites such as Port Cartier, Quebec, used to ship large volumes of cargo and Quyon, Quebec, which is used for an interprovincial ferry service on the Ottawa River. This category of ports has been growing as facilities have been transferred under the National Marine Policy.

Figure 10-6 shows the divestiture status of regional, local and remote ports, highlighting those that have been transferred or deproclaimed, as well as the number of ports yet to be divested.

Audited financial statements for 1999 are not yet available. As a result, the following financial results for 1998 are provided for Ports Canada ports, Harbour Commissions and Transport Canada facilities not divested prior to December 31, 1998.

Ports CanadaNote 3

In 1998, Ports Canada posted total revenues of $231 million, with a net income of $20 million and operating cash flows of $62 million. The seven major ports handled 83 per cent of the volume and generated roughly 77 per cent of the total revenues of Ports Canada ports

Table 10-9 shows 1998 revenues, expenses and some key ratios for Ports Canada ports and for divisional ports as a whole.

The overall operating ratio for Ports Canada ports was 75 per cent in 1998. Taken together, the major ports had a ratio of 81 per cent, with individual ratios ranging from 70 to 95 per cent. Except for Vancouver and Halifax, ratios for all major ports were above 80 per cent. For divisional ports, the operating ratio as a whole was 56 per cent.

The return on assets for Ports Canada ports was two per cent in 1998. Montreal had the highest return on assets, at eight per cent, with its investment income almost as large as its operating income. Taken together, the major ports' return was one per cent, compared with ten per cent for divisional ports.

While revenues at major ports declined three per cent in 1998 from that reported in 1997, operating expenses have also declined by six per cent. It is noted, however, that approximately one-half of these reductions are as a result of the new financial statement format adopted by the Prince Rupert Port Corporation in 1998 whereby only direct revenues are reflected in revenues earned by the Corporation. In prior years, revenues realized by the terminal operator were included in operating revenues. Despite this revision, revenues earned at major ports have increased five per cent over the five-year period, while operating costs have declined by four per cent over the same period.

At the divisional ports, operating revenues and operating expenses have decreased by 12 per cent and eight per cent respectively from 1997, or 14 per cent and 13 per cent respectively over the five-year period. Overall, the operating ratio for all ports remained relatively equal to that reported in 1997, with a four per cent improvement over the five-year period.

Total 1998 net income of all ports, major and divisional, has more than doubled, moving from $9.2 million in 1994 to $20.1 million in 1998. These financial changes occurred as traffic volumes increased by one per cent between 1994 and 1998. During this period, revenue per tonne remained relatively stable at $1.29. Expenses per tonne, however, dropped from $1.04 in 1994 to $0.97 in 1998, a decrease of almost seven per cent.

Table 10-10 shows revenues, expenses and incomes for all Ports Canada ports from 1994 to 1998.

Harbour Commissions

With the exception of Toronto, all harbour commissions reported close to positive net incomes in 1998. The Fraser and Hamilton harbour commissions posted the largest net incomes at $1.3 and $2.4 million, respectively. Total revenues were $55.8 million and expenses were $53.3 million, creating an operating ratio of about 96 per cent. Net income of $8 million provided a return on total assets of 2.1 per cent.

The financial data for harbour commissions between 1993 and 1998Note 4 shows that both revenues and expenses increased during the period. Expenses grew by five per cent, revenues by two per cent. As a result, operating income declined from $4 million to $2.5 million during the period, although the operating ratio deteriorated from 93 to 96 per cent.

Traffic volume was 44.1 million tonnes in 1998. Tonnage handled at harbour commission ports rose by 15 per cent over the five years between 1993 and 1998 (with year-to-year fluctuations). Comparing 1998 with 1993, revenues and expenses expressed on a per-tonne basis were about 11 per cent and eight per cent lower, respectively. Net income also fell during this period.

Table 10-11 gives financial results for all harbour commissions for 1998.

Transport Canada Ports

Approximately 10 per cent of the ports remaining under Transport Canada's control generated 70 per cent of the total revenues in fiscal 1998/99. Gross revenues for the same year were $18.6 million, while expenses were $24.3 million. This left an operating revenue deficit of $5.7 million and an operating ratio of 131 per cent. Capital expenditures for the year were $4.1 million. An additional $1.3 million came from grants and contributions related to transfers associated with ports divestitures.

Revenues increased by 44 per cent during this time, but will decline as more ports are divested. This revenue rise is due to traffic growth and fee increases since 1994/95. Expenses fluctuated over this period but, like revenues, are expected to decline as more and more ports are divested.

Between 1993 and 1998, revenues per tonne have increased from $0.15 to $0.23, or by 53 per cent, while expenses per tonneNote 5 have remained relatively stable at approximately $0.31 per tonne.

Table 10-12 summarizes the financial details of ports and harbours remaining under Transport Canada's control from 1994/95 to 1998/99.

Port Traffic

The following preliminary data shows the traffic at some Canada Port Authorities in 1999:

• Halifax: almost 14 million tonnes; 107,837 cruise ship passengers
• Montreal: 20.6 million tonnes; 18,300 cruise ship passengers
• Nanaimo: 2.1 million tonnes
• Port Alberni: 1 million tonnes
• Prince Rupert: 8.9 million tonnes
• Quebec City: 16 million tonnes
• Saint John: 20 million tonnes
• Sept-Îles: 20.9 million tonnes
• Thunder Bay: almost 9 million tonnes
• Trois-Rivières: 2.2 million tonnes
• Vancouver: 71.2 million tonnes; 947,659 cruise ship passengers
• Windsor: 5.7 million tonnes

Port Traffic Statistics

Based on Statistics Canada data (available only up to 1998), Canada's ports handled a total of 376.1 million tonnes of cargo in 1998, almost the same quantity as in 1997.

Figure 10-7 shows traffic shares by port groups for 1998.

In 1998, Ports Canada ports handled the largest amount of traffic, with a 48 per cent share of the total. Harbour commissions' ports transported 12 per cent of total, while another 21 per cent of cargo was moved through Transport Canada facilities. The remaining 19 per cent was handled by other facilities, including those managed privately and those managed by or on behalf of the Department of Fisheries and Oceans and provincial and municipal governments.

From 1997 to 1998, the total amount of cargo handled at Ports Canada ports and Transport Canada facilities decreased by four per cent, while cargo handled at harbour commissions decreased by three per cent. Overall, the total tonnage of cargo moved through Canada's ports remained constant year over year, with increased traffic in "other" ports offset by equivalent tonnage decreases at Transport Canada facilities, Ports Canada ports and harbour commissions.

At those declared public ports where Transport Canada has no facilities and cargo is transported across private wharves, cargo shipped totalled 25.8 million tonnes, or 33 per cent of the total traffic handled by Transport Canada ports. In total, 73.6 million tonnes crossed "other" ports, of which Port Cartier handled the most at 19.3 million tonnes.

Table 10-13 gives details of tonnage handled by Canada's port system.

Small Craft Harbours

The Department of Fisheries and Oceans (DFO) administers harbours used for commercial and recreational boating under the Fishing and Recreational Harbours Act. DFO is divesting all recreational harbours under its responsibility, as well as derelict and low-activity fishing harbours. All facilities essential to the fishing industry will remain the property of the federal government to ensure that these sites preserve their commercial status and that they continue to provide services to communities. Over the last decade, DFO has encouraged the creation of local non-profit organizations known as Harbour Authorities to take over the management of commercial fishing harbour facilities, as well as to assure the maintenance of the sites and to provide services to users. It should be noted that DFO will retain only those fishing harbours managed by a Harbour Authority.

Fishing Harbours

As of the end of January 2000, a total of 1,070 fishing harbours were still in the Department of Fisheries and Oceans' inventory, a decrease of 17.1 per cent from 1994. Harbour Authorities currently manage 51 per cent of these harbours. By 2003, however, approximately 750 are expected to be managed by Harbour Authorities, while another 300 derelict and low-activity harbours will be divested. It should be noted that 13 per cent of the remaining small craft harbours are classified as derelict (sites in a state of disrepair with no activity, which are slated for demolition).

Table 10-14 reports the fishing harbours remaining under DFO's responsibility as of January 2000, by region and type of management.

Recreational Harbours

The Department of Fisheries and Oceans is also gradually divesting all recreational harbours. Under Program Review, the federal government committed to withdraw from programs whose function was seen to be more closely aligned with provincial, community or private-sector interests in tourism and local economic development than with federal priorities. The recreational facilities are transferred mostly to provincial and municipal entities for a nominal cost and with the assurance that the recipient will continue to operate the facility for its current purpose and, essentially, at its current level of operations for at least five years.

Prior to transfer, the Department of Fisheries and Oceans considers making essential repairs to transfer the installations in a safe and reasonable condition. The divestiture program is targetted to end in 2001. No additional funding was allocated for the divestiture of recreational harbours, and funds used are, in fact, diverted from the Fishing Harbour Program.

Divesting all recreational harbours will free up funds for the repair of core fishing harbours. Projected small craft harbour expenditures for fiscal year 1999/00 are about $59.8 million. Maintenance (minor and major capital) accounts for 82 per cent of expenses, while operations account for seven per cent. Salaries and contributions make up the remainder with nine and two per cent, respectively. Revenues earned from leases, licences, and berthage and wharfage dues are projected to drop by 30 per cent in 1999/00 as a consequence of the divestiture program. The largest decrease is expected to be observed in Ontario, with revenues declining by close to $450,000, or 31.4 per cent.

Tables 10-15, 10-16 and 10-17 summarize, by region, the status of the recreational harbour divestiture program, the recipients of harbours divested and the type of management of the remaining facilities in the Department of Fisheries and Oceans' inventory.

St. Lawrence Seaway

The St. Lawrence Seaway connecting the Port of Montreal and Lake Erie is a shared responsibility between Canada and the United States. Canada is responsible for the eight locks of the Welland Canal and five of the seven locks between Montreal and Lake Ontario, while the US Saint Lawrence Seaway Development Corporation (SLSDC) operates the remaining two locks.

The Seaway can accommodate vessels 225.5 metres in length, 23.8 metres in beam and eight metres in draft. As a ship travels west through the Seaway from the Port of Montreal, the locks eventually raise the ship the height of a 60-storey building above the water level at Montreal. Figure 10-8 shows the St. Lawrence Seaway system.

The St. Lawrence Seaway Under New Management

In 1999, the Canadian Seaway saw its first full year of management by the St. Lawrence Seaway Management Corporation (SLSMC). Management was handed to the Corporation, a not-for-profit, private-sector organization controlled by Seaway users, on October 1, 1998.

In keeping with the introduction of commercial discipline to the Seaway, the Ottawa head office of the St. Lawrence Seaway Management Corporation was closed and services were merged with the Cornwall office. While the lands and fixed assets of the Seaway system remain the property of the Government of Canada, the corporation is responsible for its management, operation and maintenance (see text box). As part of the transfer agreement, the corporation assumed risks relating to cost and the federal government assumed risks relating to revenue.

One of the cornerstones of the Seaway agreement is a five-year business planning cycle. The first plan, now in effect, sets specific targets for operating and asset renewal costs, as well as anticipated revenues for the next five years.

Traffic in 1998

The total value of the 51.1 million tonnes of combinedNote 6 cargo transported along the Seaway for the 1998 season was estimated at $7.5 billion, a 4.4 per cent increase in volume over the 49.0 million tonnes of traffic handled in 1997.

The main commodities moved along the Seaway are grain, iron ore, coal, other bulk and steel. They generally account for over 70 per cent of total cargoes. The success of the 1998 navigation season can be attributed to a substantial increase (more than 37 per cent) in shipments of general cargo, which includes steel slabs and other steel products, mostly from Europe. US grain movements also increased because of their link to steel imports (as a backhaul cargo). Movements of iron ore, coal and other bulk cargo, however, remained steady during 1998.

As shown in Table 10-18, total traffic on the Montreal-Lake Ontario (MLO) section of the Seaway increased by about 6.4 per cent to 39.2 million tonnes, while total traffic on the Welland Canal section decreased by 0.6 per cent to 40.7 million tonnes.

There were 4,366 vessel transits in 1998, including 64 vessels that came into the system for the first time. The number of ocean vessel transits through the system grew by 28 per cent over 1997, from 1,122 to 1,438, corresponding to the high level of steel imports through the Seaway system in 1998.

Preliminary Data for 1999Note 7

Cargo volume for the combined Welland Canal and Montreal-Lake Ontario sections of the system was about 47.6 million tonnes, or seven per cent lower than in 1998, largely because of reduced demand for steel imports.

In 1999, Canadian grain shipments increased by 7.6 per cent on the Montreal-Lake Ontario section and 2.7 per cent on the Welland Canal over 1998, to 6.0 and 5.8 million tonnes, respectively. American grain traffic also increased, by 5.5 per cent to 5.7 million tonnes on the Montreal-Lake Ontario section and by 3.8 per cent to 5.7 million tonnes on the Welland Canal section. Total grain traffic increased by 5.7 per cent on the Montreal- Lake Ontario section and by 2.5 per cent on the Welland Canal in 1999.

Iron ore shipments on the Montreal-Lake Ontario section were down only slightly to 10.0 million tonnes, while shipments on the Welland Canal section decreased 15.4 per cent to 5.3 million tonnes. This reflects a greater reliance by Canadian steel mills on iron ore originating from Quebec-Labrador.

Coal traffic remained close to its 1998 level. Traffic on the Welland Canal decreased by 1.3 per cent to 4.2 million tonnes. On the Montreal-Lake Ontario section, coal traffic recovered somewhat to 266,000 tonnes. In 1998, coal movements to New Brunswick facilities were lost to a South American source, resulting in a 343,000 tonne, or 64.2 per cent, decrease to 191,000 tonnes.

In 1999, general cargo traffic, largely iron and steel products, on the Montreal-Lake Ontario section registered a substantial decrease of 2.5 million tonnes, or 36.3 per cent, for a total of 4.3 million tonnes. General cargo traffic on the Welland Canal section registered a decrease of two million tonnes, or 37.7 per cent, for a total of 3.3 million tonnes. After a record year in 1998, the drop can be explained by a sharp decrease in imports of iron and steel products in 1999 as the US and Canada acted to curb alleged dumping of steel, as well as by large surpluses built up by US and Canadian importers.

Table 10-19 shows commodity movements on the St. Lawrence Seaway from 1990 to 1998.

Rates and Tariffs

In keeping with the terms of an agreement negotiated with Seaway users, a two per cent toll increase for the Canadian section of the Seaway was implemented on June 1, 1998. This was the first increase since 1993. A further two per cent toll increase was implemented in 1999.

As part of this commercialization agreement, a two per cent annual toll increase with no discounts/ reductions was negotiated for 1998, 1999 and 2000. However, the agreement obliges the St. Lawrence Seaway Management Corporation to increase tolls beyond the two per cent level if it cannot achieve the cost targets set out in the business plan. Because the successful 1998 season allowed the corporation to meet and even exceed their targets, the toll increase for 2000 will remain at two per cent. In years four and five of the plan, toll discounts/reductions will be allowed if the corporation continues to exceed the business plan requirements.

Financial Profile

As a consequence of the transfer of the management of the Seaway to the corporation on October 1, 1998, the financial statements from October 1, 1998, to March 31, 1999, reflect only three months of operating revenues (October to December, as the Seaway closes for the months of January through March) and six months of expenses (October 1, 1998, to March 31, 1999). These expenses include the winter works program comprising the asset renewal and most of the major maintenance costs. Therefore, the financial results for the first six months of the corporation's existence are not representative of a full year's operation of the Seaway and are therefore not presented in this report. Furthermore, the financial results of the corporation will not be comparable to previous years' financial statements, as they exclude the revenues and expenses pertaining to the non-navigational assets, the income taxes relating to the St. Lawrence Seaway Authority, amortization expenses, as well as other expenses that are treated differently.

Table 10-20 shows the financial performance of the St. Lawrence Seaway from 1988/89 to 1997/98.

Marine Pilotage

Legislative Framework

The Pilotage Act of 1972, as amended in 1998 by the Canada Marine Act, governs marine pilotage in Canada. Under this Act, four regional pilotage authorities were established -- Atlantic (APA), Laurentian (LPA), Great Lakes (GLPA) and Pacific (PPA). Each authority is mandated to provide safe and efficient pilotage services that respond to the particular requirements of its traffic, as well as to the varied geography and climatic conditions of the waterways concerned. Although they are not considered agents of the Crown, all authorities report directly to the Minister of Transport.

Ministerial Review of Outstanding Pilotage Issues

In August 1998, the Minister of Transport asked the Canadian Transportation Agency (CTA) to conduct a forward-looking examination of the marine pilotage system in Canada (see boxed text).

The agency's report and the Minister's response were jointly tabled in Parliament in late November 1999. The four pilotage authorities have been asked to submit an implementation plan for the recommendations by May 2000.

Financial and Operating Performance

In 1999, pilotage revenues, on a nationwide basis, once again exceeded expenditures. As shown in Table 10-21, three of the four pilotage authorities managed to return modest surpluses, while the Great Lakes Authority's loss was covered by its retained earnings.

The results for 1999 represent a continuation of the trend toward positive net incomes over the last few years. Financial results for each authority from 1995 to 1999 are shown in Table 10-22.

Total revenues have risen only slightly, while expenses have generally kept pace with inflation over the five-year period. Nevertheless, Figure 10-9 shows clearly the trend toward improved bottom lines for pilotage authorities.

To measure efficiency of pilotage services, the average number of assignments per pilot is commonly used. Based on this measure, efficiency has increased between 1995 and 1999 by 3.1 per cent.

Table 10-23 shows the number of assignments for each pilotage authority and the total for all authorities between 1995 and 1999. The variations among the authorities and the fluctuations over the period are in response to traffic levels. Overall, total assignments have grown by 9.4 per cent since 1995.

Canadian Coast Guard

Responsibilities

The Canadian Coast Guard's (CCG) mission is to ensure safe and environmentally responsible use of Canada's waters; support understanding and management of ocean resources; facilitate the use of Canada's waters for shipping, recreation and fishing; and provide marine expertise in support of Canada's domestic and international interests.

The Coast Guard has undergone major restructuring over the past several years as it merged with the Department of Fisheries and Oceans (DFO). In keeping with this new partnership and with its main role of ensuring safe and environmentally responsible use of Canada's waterways, the Coast Guard works with its counterparts in the DFO sector to advance the department's oceans mandate.

The Coast Guard is divided into five business lines that cover all five regions of DFO. These five lines include: marine navigation services; marine communications and traffic services; icebreaking operations; rescue, safety and environmental response activities; and fleet management.

Under these business lines, the Coast Guard delivers a wide range of marine programs, policies and services that encompass several sectors within the marine community: commercial shipping interests, recreational boaters, the fishing industry, ferry services, tug and barge re-supply operations in the North, cruise lines, private-sector shippers, and provincial, municipal and territorial governments, as well as federal government departments.

In addition, the Coast Guard serves the general public through its role in protecting their interest in preserving ecosystems, ensuring water supplies remain unpolluted by oil and chemical spills, and protecting recreational resources.

The Department of Fisheries and Oceans has two key result commitments: the conservation and biological sustainability of fisheries resources, marine and freshwater habitats and a protected environment; and the provision of safe, efficient and accessible waterways and harbours. The Coast Guard's contributions to these commitments are found in each of its business lines. These include such areas as response to marine oil emergencies, efficient and effective aids to navigation infrastructure, annual deliveries by ship to northern settlements and military sites, and client and public awareness of programs and policies.

Marine Navigation Services

The Coast Guard's Marine Navigation Services (MNS) group provides, operates and maintains a system of navigational aids that include 262 automated light stations, 52 of which are staffed; 5 LORAN C communication stations; 18 Differential Global Positioning System (DGPS) transmitter sites; more than 6,000 land-based fixed marine aids; and more than 13,000 floating aids. In addition, the group develops and maintains waterways, ensures the public's right to navigation is protected, and protects the environment. These responsibilities are in keeping with the Department of Fisheries and Oceans' commitment to safe, efficient and accessible waterways.

The Marine Navigation Services division will continue with and move forward on a number of activities in support of its mission, including continuing to modernize aids to navigation through several initiatives. One of these is the complete implementation of a full DGPS by the spring of 2000. In addition, the division will continue to modernize, maintain, implement and upgrade information systems such as national databases on the use of Canadian waterways, the Aids Program Information System (APIS), the Marine Aids Costing Model (SRAN) and the Navigable Waters Database System. Marine Navigation Services will also pursue amendments to the Navigable Waters Protection Act.

Marine Communication and Traffic Services

Marine Communication and Traffic Services provides distress and safety communications and co-ordination; vessel screening to prevent entry of unsafe vessels into Canadian waters; regulation of vessel traffic movements; and management of an integrated system of marine information and public correspondence services. In addition to ensuring safe marine navigation, Marine Communication and Traffic Services supports economic activities by optimizing traffic movements and port efficiency, and facilitating industry ship/shore communications. All of these functions are derived from a regulatory framework that is based primarily on the Canada Shipping Act and the Safety of Life at Sea Convention.

The group's supporting infrastructure includes staffed communications centres and remote transmitter and receiver sites.

By the nature of its operations, Marine Communication and Traffic Services is a key element of the national movement toward sustainable development for oceans and marine resources. It fully supports Oceans Strategy by exploring ways to improve the monitoring and management of protected marine areas.

The group is also improving its surveillance capability by developing implementation strategies for universal Automatic Identification Systems (AIS) technology, a leading-edge marine navigation technology that offers both mariners and competent authorities a more efficient and cost-effective means of service delivery. This group also improves communications capability by continuing the implementation of the Global Maritime Distress Safety System (GMDSS), as well as continually reviewing infrastructure to provide possibilities for further efficiencies through the application of technological changes.

Icebreaking Operations

Icebreaking operations include such activities as providing icebreaking escorts, channel maintenance, flood control, harbour breakouts, and ice-routing and information services for marine traffic navigating through or around ice-covered waters. This business line also co-ordinates the movement of cargo for the annual re-supply of northern settlements and military sites using contracted commercial carriers.

The Icebreaking Program has moved from its traditional role of providing a wide range of free services to a more client-focused, demand-driven service role that reflects recent downsizing activities. Commercial users now pay a percentage of the allocated costs in the form of an icebreaking service fee. The program's challenge in providing these services is to match the ice season and client requirements with service capacity on a year-to-year basis so that resources are used efficiently.

The program also maintains international expertise and recognition through its involvement with the US Coast Guard, North Atlantic Ice Patrol and other governments involved in icebreaking. It has also strengthened its alliance with Transport Canada's Marine Safety Branch for the Harmonization of Polar Ship Rules, to protect Canada's position and take a proactive role in forums dealing with ice operations or ships operating in ice-covered water. An economic study on the benefits of icebreaking services continues; preliminary results indicate that benefits far outweigh the costs of the service.

Rescue, Safety and Environmental Response

The objective of the Rescue, Safety and Environmental Response (RSER) group is to save lives and protect the marine environment. The group provides maritime search and rescue (SAR) services, and environmental response and departmental national emergency preparedness. It also promotes boating safety to the public through prevention and regulation. The group's supporting infrastructure includes search and rescue stations with in-shore rescue boats, as well as several spill-response equipment depots.

This group implemented a number of major new measures to improve boating safety in 1999. These include ensuring mandatory operator competency, age and horsepower restrictions, and modernizing small vessel regulations; and improving the effectiveness of oil spill preparedness and response regime through a review of the regime's regulations, standards and guidelines. In addition, the group continued to develop a hazardous and noxious substances response regime for Canada by maintaining consultations with major stakeholders and providing an effective maritime search and rescue service through quality initiatives and enhanced evaluations.

Fleet Management

The goal of the Fleet Management group is to provide a safe, efficient and cost-effective sea and air fleet and the related services necessary to support Department of Fisheries and Oceans program activities, as well as improve client satisfaction. In keeping with this goal, the Fleet Management group acquires, maintains and schedules the department's sea and air fleets in support of the following program areas: Marine Navigation Services; Marine Communications and Traffic Services; Icebreaking Operations; Rescue, Safety and Environmental Response; Fisheries Management; and Fisheries and Oceans Science and Hydrography. The funding to crew and operate the fleet is provided by the particular program areas. Fleet Management also arranges for any necessary increase in fleet capabilities by co-ordinating with other government departments and the private sector to provide additional sea and air support to the programs.

Fleet Management is in the process of moving toward a base-fleet concept in which an established minimum number of vessels would deliver the program requirements and provide a stable base for financial, operational and human resource planning. The group is also continuing to implement the fleet safety management system to meet the standards of the International Management (ISM) Code for the Safe Operation of Ships. Future plans for the group include implementing a costing model to give managers and clients a true understanding of the cost of fleet operations.

Financial Performance

Through a combination of efficiency measures and reduced operations, resulting in lower expenses, the Coast Guard has permanently reduced its net expenditures on the services described above by $140 million, or 30 per cent, over the four-year period ending 1998/99. Table 10-25 shows the Coast Guard's financial results for its five major business lines from 1995/96 to 1999/2000.

The Coast Guard has implemented user fees for some programs to obtain a fair contribution from users for programs from which they directly benefit. The Marine Navigation Services Fee was first introduced in June 1996. It offsets, on average, 27 per cent of the full costs of providing marine navigational services to the commercial shipping industry.

In September 1997, a Maintenance Dredging Services Tonnage Fee for the St. Lawrence Ship Channel was introduced. This fee is only an interim measure to cover the total costs incurred by the Coast Guard to provide these dredging services. The Coast Guard is currently working with representatives of the marine transportation industry to arrive at a long-term arrangement, including the possibility of transferring responsibility for these dredging services to industry.

On December 4, 1998, the Minister of Fisheries and Oceans outlined elements for a revised Icebreaking Services Fee (ISF) proposal that would generate $6.65 million annually plus administrative costs. The proposal is built around a transit-based icebreaking fee that will be uniformly applied to each transit to, from or within the ice zone during the ice season. Table 10-26 shows the breakdown of the Coast Guard's revenues and expenditures by its five main business lines for the fiscal year 1999/2000.

TRANSPORTATION INFRASTRUCTURE

Rail Transportation Infrastructure

Road Transportation Infrastructure

Marine Transportation Infrastructure

Air Transportation Infrastructure

Appendix 10-1 Personal Expenditures on Transportation, 1998

NOTES

3 In subsequent annual reports, the information presented here will be reported by Canada Port Authorities (CPAs). Given that the most recent year for which the information is reported in this report is 1998, and that most CPAs were created in 1999, a breakdown by CPA will be presented in Transport Canada's 2000 annual report.

4 As of 1995, all harbour commissions operated on a calendar-year basis (January to December). Prior to this, the Toronto Harbour Commission operated on a fiscal-year basis (April to March).

5 Tonnage statistics include cargoes moved across private facilities within Transport Canada public harbours.

6 Combined for Montreal-Lake Ontario and Welland Canal sections.

7 Year-to-date data to the end of November 1999