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Vol. 141, No. 42 — October 20, 2007 Regulations Amending the Atlantic Pilotage Tariff Regulations, 1996Statutory authority Pilotage Act Sponsoring agency Atlantic Pilotage Authority REGULATORY IMPACT ANALYSIS STATEMENT (This statement is not part of the Regulations.) Description The Atlantic Pilotage Authority (the Authority) is responsible for administering, in the interests of safety, an efficient pilotage service within the Canadian waters in and around the Atlantic Provinces. The Authority prescribes tariffs of pilotage charges that are fair and reasonable and that are consistent with providing revenues sufficient to permit the Authority to operate on a self-sustaining financial basis. In accordance with recommendations from the Canadian Transportation Agency and its customers, the Authority strives to be self-sufficient on a port-by-port basis, as well as for the Authority as a whole. The Authority is consequently amending tariff charges for 2008 in 11 compulsory pilotage areas: Saint John and Restigouche, New Brunswick; Halifax, Strait of Canso, Bras d'Or and Sydney, Nova Scotia; and St. John's, Placentia Bay, Humber Arm, Stephenville, and Bay of Exploits, Newfoundland and Labrador. In addition, the Authority is increasing the tariff charges in the non-compulsory areas of Pictou, Nova Scotia, and Summerside, Prince Edward Island, for the first time since 1998. All other tariff charges in the remaining compulsory and non-compulsory pilotage areas will remain unchanged at this time. The Authority has been affected by significant declines in activity and revenue in some ports, particularly in St. John's, Halifax, Bay of Exploits, Humber Arm, and Stephenville. At the same time, the cost of providing a pilotage service per assignment has increased, particularly pilot salary costs and the cost of maintaining pilot boat services. A decision made by the arbitrator with respect to the pilots' collective agreement on December 27, 2006, awarded wage increases averaging 3% per annum, with the final year of the contract having a 4% increase, coming into effect February 1, 2008. As a result of the increasing costs, the Authority is projecting a minute profit of approximately 1% of revenue for the 2007 fiscal year and, without tariff increases, a significant loss would occur in 2008. The Authority is operating with three pilot boats in their fourth decade of service, and must replace these boats in order to continue to provide a reliable pilotage service. In addition, the cost of contracting with pilot boat contractors has increased, particularly in Restigouche, Canso, Sydney and St. John's. The increases in tariff are intended to allow the Authority to remain financially self-sufficient. The proposed tariff increases will also offset inflationary pressures, will provide funding for an increase in pilot resources in some ports, will allow for the improvement of pilot boat services in some ports, and will alleviate cross-subsidization amongst ports. The Authority continues to consult widely with our customers in various ports and address concerns expressed by the customers. During 2007, the Authority sponsored 15 meetings with users in various locations and has attended many meetings sponsored by other parties. In some areas, including the major ports of Saint John, Canso, and Placentia Bay, we have reached an agreement with our customers regarding rate increases. In other ports, customers have not been in agreement. The proposed amendments constitute an increase in charges for 11 compulsory pilotage areas effective January 1, 2008. The tariff increases are applied to those areas that are operating at a loss or have a marginal profit margin. The increase in the two non-compulsory areas is intended to provide an increase in remuneration to entrepreneur pilots in those ports that is approximately equivalent to the inflation since the last tariff amendment. Alternatives Several alternatives were considered in determining tariff charges required by the Authority. The Authority could have maintained tariffs at the status quo in all ports. This alternative would have resulted in the Authority operating in a loss position for the third time in four years and would not have been conducive to the goal of self-sufficiency. Most port users would have been paying less than the cost of the pilotage service being provided. The Authority would have to borrow money to maintain its day-to-day operations—a situation that is not sustainable over time. Ports that remained profitable would have been cross-subsidizing other ports. The Authority rejected this alternative because an increase in tariff charges is necessary to reflect the actual costs for pilotage services being performed, to ensure that the Authority maintains its financial self-sufficiency, and to avoid cross-subsidization among ports. The Authority could have attempted to make incremental tariff increases in certain ports in order to lessen the impact of the proposal. This alternative would have resulted in continuing cross-subsidization among ports and would have made the Authority more vulnerable to downturns in business. The Authority rejected this alternative because it would have exacerbated the negative aspects listed in the first alternative and would have led to increased cross-subsidization among ports. The Authority is also concerned that the result of this approach would have been that ports were not being treated fairly, with those ports that have a history of poor performance receiving preferential treatment over those ports that have been performing well and have been contributing to the Authority's success. The Authority has attempted to keep costs at a minimum. Approximately 50% of the Authority's expenses are allocated to pilot salaries, 30% to pilot boat expenses, 10% to direct operating expenses, and 10% to administrative overhead. The Authority could have attempted to reduce costs by decreasing the number of pilots employed in those areas affected by the proposed increase. The effect of this approach would very likely be delays to ships as the number of pilots was decreased. This reduction in service would not be acceptable to our customers. The Authority's clients have requested increased personnel resources to reduce delays in service and the Authority has worked diligently to meet this request. The current contingent of pilots in these ports is the minimum necessary to provide the service considering the physical size of the territory covered, the level of traffic in the ports, and the necessity to have coverage for illnesses and vacations. The Authority could have attempted to reduce pilot boat costs by reducing maintenance, running boats at slower speed, delaying or cancelling our pilot boat replacement program, or attempting to get concessions from pilot boat contractors. Any attempt to reduce the maintenance or contracting costs of pilot boats could impact on the safety and reliability of pilot boat service. The Authority-owned boats are aging and are nearing the end of their useful life, and further delay in replacing the boats would seriously compromise the Authority's ability to provide the service. These alternatives would reduce the quality of service provided by the Authority. Therefore, these alternatives would be unacceptable to both the Authority and its clients. The Authority has also worked closely with its customers and employees to ensure that pilot boat service remains safe and efficient in all ports served. The Authority's administration costs are kept at the lowest possible level. There are a total of ten employees in our head office, including executive officers. This staff administers a pilotage service that covers four provinces and approximately 33 000 km of coastline in Atlantic Canada. Reductions in personnel would not be feasible in maintaining an effective administration. In order to take advantage of a fixed rate at a reasonable cost, the Authority has recently signed a ten-year lease in a Class C building in Halifax. The Authority rejected any further reduction in administration costs. Benefits and costs The proposed tariff rate increases are intended to alleviate cross-subsidization among ports and to provide funding for an increased pilot work force in some ports. Customers in all areas will find comfort in the reduction and eventual elimination of cross-subsidization. The increase in tariffs in some areas are intended to fund beneficial developments within the ports, such as increased pilot strength or improved pilot boat service. Each port will be dealt with individually below. Placentia Bay The Authority is increasing manpower in the Placentia Bay district. The customers in Placentia Bay have clearly indicated that any delay in providing pilotage service is not acceptable. The pilot boat service in Placentia Bay is also being upgraded with the construction of two new pilot boats at a total cost of $6.5 million. One of these boats was delivered in June, 2007, with a second boat scheduled for late 2007. The proposed amendments are intended to provide the required revenue to support these improvements in service. There have been two tariff decreases in Placentia Bay since 1996, and a reduction on the rate for movages between the Whiffen Head and Come-by-Chance terminals. There was a tariff increase in 2007 in anticipation of the new pilot boats. The increase requested in Placentia Bay is 5%. St. John's The amendments to the Atlantic Pilotage Authority Regulations of May 17, 2006, SOR/2006-73, has had a major impact on the port of St. John's. These amendments meant that offshore supply vessels of 5 000 gross tons or less operating out of the port no longer required a pilot. Assignments in the port in 2007 are less than one-third what they were in 2005. In addition, our pilot boat cost on a per-assignment basis has increased by 50%. We discussed this situation with our customers in the port, and they advised that they wanted the same number of pilots available for the remaining traffic. As a result of the reduction in assignments, and the increased price of the contracted pilot boat on a per-assignment basis, it is projected that, even with the proposed increase, St. John's will remain in a loss position. The increase requested in St. John's is 25%. Humber Arm/Bay of Exploits/Stephenville The central and western coast of Newfoundland has had a dramatic decrease in assignments due to the decline of the paper industry. The three compulsory ports in this district are served by a group of four pilots, soon to be reduced to three. In Stephenville, the 2007 assignment level is only 11% of the 2005 numbers. Both Humber Arm and Bay of Exploits are down 22% from 2005. In 2008, the pilot manning for the district will be reduced to three pilots, all cross-licensed to serve each port. Due to the large geographic area covered by the pilots (more than 400 km from one extremity to the other), it is impossible to reduce the numbers below the current level. The proposed increase is necessary to provide the current level of service to our customers in these ports. The increase requested is 15% in the Humber Arm, 30% in the Bay of Exploits, and 25% in Stephenville. Halifax The vessel traffic in the port of Halifax has declined to the point that, in 2007, it may reach its lowest level since the Authority was established 35 years ago. The port has been in a loss position continuously for seven years, and has been operating with a pilot boat that was built in the mid-1970s. In order to continue to provide a reliable service, the port requires a new vessel in the near future. The Authority is reducing the number of pilots for 2008 in an effort to reduce costs. The proposed tariff is intended to allow Halifax to have in 2008 a positive return for the first time in eight years. For many years, the port of Halifax has enjoyed by far the lowest overall tariff rate in the Authority because of the economy of scale. With the decline in assignments in recent years, much of this advantage has been reduced, but Halifax will continue to have the lowest tariff rates in the Authority in 2008, with a unit charge that will be less than 25% of that in some other ports. The customers of the port have expressed their opinion in opposition of cross-subsidization many times, and the proposed increases will assist in redressing the recent situation of Halifax being subsidized by other ports. The increase requested in Halifax is 8%. There will also be a separate pilot boat replacement surcharge of $100 in Halifax on each assignment for which a pilot boat is used, with a commitment by the Authority that the surcharge will only be in place for a maximum of two years. Strait of Canso In the Strait of Canso, the Authority is increasing the number of pilots to improve service. By 2008, the Cape Breton district will have increased to 10 pilots, an increase from 7 pilots at the beginning of 2006. While these pilots will work throughout Cape Breton, the Canso area has by far the largest share of the workload. It is also expected that a new contract pilot boat will be utilized in the Strait area, which will increase productivity, but at a higher cost to the Authority. These issues have been discussed with the customers in the area, and they support these initiatives. The increase requested in the Strait of Canso is 8%. Bras d'Or Traffic in the Bras d'Or Lake has been in decline, with only approximately 60 assignments expected in 2007 and subsequent years. The Sydney pilot boat is used for this area, and the per-trip cost for this service has increased significantly. This area benefits from being part of the larger Cape Breton district. If pilots and pilot boats had to be provided exclusively for the area, the tariff rates required would be much greater than they are at present. The area has been in a loss position for several years now, and requires increases in tariffs to eliminate the deficit. The increase requested is 20%. Sydney Traffic has also been in decline in Sydney, with assignments in 2007 being 25% lower than they were in 2005. This area underwent a change from a contractor-owned and -operated pilot boat to one in which the Authority owns the boat and a contractor provides crew. It is anticipated that, on a per-trip basis, the cost of the pilot boat in this area will increase by approximately 50%. The tariff increase requested for Sydney is 25%. Saint John Prospects in Saint John look better than they have in several years. A new Liquefied Natural Gas (LNG) Terminal plant is nearing completion, with other projects a few years down the road. However, the increased activity means that manpower must be added, both in the number of pilots and the pilot boat crews. It will also be necessary to upgrade the pilot boat service in the port in the near future by providing a new boat. The proposed amendments are intended to provide the required revenue to support these improvements in service, and to retain the port's financial health. The customers have supported these initiatives, and have agreed with the proposed increases. The increase requested is 7%. There will also be a separate pilot boat replacement surcharge of $100 in Saint John on each assignment for which a pilot boat is used, with a commitment by the Authority that the surcharge will only be in place for a maximum of three years. Restigouche The port of Restigouche has approximately 100 assignments per year, and the Authority has the bare minimum of two pilots available for the port. In 2007, the pilot boat contractor informed the Authority that they were losing a considerable amount of money in fulfilling the contract. The rate being received had not changed in many years. After several months of discussion involving both the customers and the pilot boat contractor, a new agreement was reached. However, the new rate agreed was 2.5 times as much as the previous rate. The customers have expressed their understanding of the situation, and are fully aware that the Authority is requesting an increase of 40% for the area in order to reach a break-even financial position. Non-compulsory ports of Summerside and Pictou Pilots in these ports have requested an increase to approximate the inflationary pressures incurred since the last amendment in these rates. By the end of 2007, according to Statistics Canada, it appears that the increase would be slightly greater than 23%. The Authority is requesting an increase of 25% for these ports. The proposed tariff rates will increase the cost of a pilotage assignment for an average-sized vessel in each port that has a tariff increase by the following amounts and percentages (average-sized vessel based on activity in each port for the period of January 1 to August 31, 2007):
In St. John's, the proposal is for the minimum charge in the port to increase, but for the basic and unit charges to remain status quo. This will aid the port and its customers in attracting cruise ships, which will have no increase in tariff if above the minimum charge. In Halifax and Saint John, it is proposed that the pilot boat replacement surcharge will have a fixed life of two years in Halifax and three years in Saint John, after which the charge will be withdrawn. This charge will create a fund that will be used to design the new pilot boats for the two ports, and contribute to the early construction payment advances. It is projected that the proposed increases in tariff will result in an overall increase of 8.1% in pilotage revenues for the Authority. Without the increases, it is projected that the Authority would have a loss of $447,000 in 2008, while with the increases there would be a return of $951,000, or 5.1% of revenue. Environmental impact In accordance with The Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals, a Strategic Environmental Assessment (SEA) of this proposal was conducted in the form of a preliminary scan. The SEA concluded that the proposal does not have any impact on the environment. Consultation Consultation in various forms has taken place with the parties affected by these proposed amendments. The parties consulted include the Shipping Federation of Canada, the Canadian Shipowners Association, the Halifax Pilotage Committee, the Saint John Pilotage Committee, the Strait of Canso Pilotage Committee, the St. John's Pilotage Committee, the Restigouche Pilotage Committee, shipping lines, port authorities, and local port agents and users. The consultation took the form of numerous meetings, as well as written, personal, and telephone communications with individuals. Alternatives to tariff increases were presented, where applicable, and participation from the attendees was encouraged. When meeting with customers, the Authority provided an analysis of the situation and solicited responses. The response of those consulted has varied, but the majority of our customers accept that the increases are fair and reasonable. Compliance and enforcement Section 45 of the Pilotage Act provides an enforcement mechanism for these Regulations in that a Pilotage Authority can inform a customs officer at any port in Canada to withhold clearance from any ship for which pilotage charges are outstanding and unpaid. Section 48 of the Pilotage Act stipulates that every person who fails to comply with the Act or Regulations is guilty of an offence and liable on summary conviction to a fine not exceeding $5,000 dollars.
Captain R. A. McGuinness
Notice is hereby given, pursuant to subsection 34(1) (see footnote a) of the Pilotage Act, that the Atlantic Pilotage Authority proposes, pursuant to subsection 33(1) of that Act, to make the annexed Regulations Amending the Atlantic Pilotage Tariff Regulations, 1996. Interested persons who have reason to believe that any charge in the proposed Regulations is prejudicial to the public interest, including, without limiting the generality thereof, the public interest that is consistent with the national transportation policy set out in section 5 of the Canada Transportation Act (see footnote b), may file a notice of objection setting out the grounds therefor with the Canadian Transportation Agency within 30 days after the date of publication of this notice. The notice of objection should cite the Canada Gazette, Part I, and the date of publication of this notice, and be sent to the Canadian Transportation Agency, Ottawa, Ontario K1A 0N9. Halifax, October 12, 2007
CAPTAIN R. A. MCGUINNESS REGULATIONS AMENDING THE ATLANTIC PILOTAGE TARIFF REGULATIONS, 1996 AMENDMENTS 1. Schedules 2 to 5 to the Atlantic Pilotage Tariff Regulations, 1996 (see footnote 1) are replaced by the Schedules 2 to 5 set out in the schedule to these Regulations. 2. The portion of item 5 of Schedule 6 to the Regulations in columns 2 to 4 is replaced by the following:
3. The portion of item 7 of Schedule 6 to the Regulations in columns 2 to 4 is replaced by the following:
COMING INTO FORCE 4. These Regulations come into force on January 1, 2008.
SCHEDULE
SCHEDULE 2 COMPULSORY PILOTAGE AREAS — ONE-WAY TRIPS
SCHEDULE 3 COMPULSORY PILOTAGE AREAS — TRIPS THROUGH
SCHEDULE 4 COMPULSORY PILOTAGE AREAS — MOVAGES
SCHEDULE 5 SAINT JOHN COMPULSORY PILOTAGE AREA — TRIPS AND MOVAGES
[42-1-o] S.C. 1998, c. 10, s. 150 S.C. 1996, c. 10 SOR/95-586
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