8 MARINE TRANSPORTATION

INFRASTRUCTURE

CANADA'S PORTS AND HARBOURS SYSTEM

Canada's ports and harbours provide crucial links between economic activities and otherwise inaccessible markets. Canada's major ports are vital gateways in the national transportation system, connecting with both the rail and road networks.

Following the announcement of the National Marine Policy, the federal government initiated a plan to reorganize Canada's ports system in December 1995. It has since implemented a restructuring process to commercialize marine infrastructure. The National Marine Policy, which has been realized through the Canada Marine Act (CMA), specifies three categories of ports to facilitate this restructuring: (1) Canada Port Authorities (CPAs), (2) regional/local ports, and (3) remote ports.

Under the National Marine Policy, 19 major Canadian ports have been deemed vital to Canada's domestic and international trade. The following Canada Port Authorities have also met criteria pertaining to financial selfsufficiency, diversified traffic and intermodal connections: Fraser River, Vancouver, North Fraser, Nanaimo, Prince Rupert, Port Alberni, Thunder Bay, Windsor, Toronto, Hamilton, Montreal, Quebec City, Trois-Rivières, Saguenay, Sept-Îles, Saint John, St. John's, Belledune and Halifax. These include former Canada Ports Corporation's major divisional ports as well as former harbour commissions. Independently managed, these 19 CPAs are essential links in Canada's domestic and international trade. The Port of Oshawa remains the last harbour commission operating in Canada.

CPAs are incorporated by Letters Patent for the purpose of operating a particular port. As agents of the Crown under the CMA for certain purposes, CPAs possess the power to engage in activities related to shipping, navigation, transporting passengers and goods, and handling and storing goods. CPAs may also engage in other activities deemed in the Letters Patent to be necessary to support port operations, although they are not agents of the Crown with respect to these activities.

Letters Patent are issued to grant a special right, in this case the right to operate and manage a port. CPAs cannot issue shares. They may be given Crown land to operate and manage, but not to own. They may, however, acquire and own land in their own name. In order to cover costs, CPAs have the authority to establish fair and reasonable fees for use of the facilities or services provided at the port. They may not discriminate among users of the port, but they may differentiate in their fees and services based on the volume or value of goods or on any basis that is generally commercially accepted.

CPAs are required to demonstrate public accountability. Each board of directors is composed of between seven and eleven members, as set out in the CMA. (All CPAs have seven members, except for Vancouver, which has nine). Each board is responsible for appointing the officers of the CPA. A majority of each board is appointed in consultation with port users. In addition, the federal and respective provincial and municipal governments each appoint one director.

The majority of Transport Canada-owned ports are regional/local ports, which range from ports with a high volume of regional and local traffic to smaller ports with little or no commercial activity. In accordance with the Port Divestiture Program, the federal government is terminating its operational and ownership interests in regional/local ports by transferring them to other federal departments, provincial governments or local interests, including municipal authorities, community organizations or private interests.

Transport Canada continues to administer remote ports that serve as the primary transportation portals for isolated communities. Transport Canada will retain control and administration of such facilities unless local stakeholders are willing to take over ownership of them.

PORT DIVESTITURE

The Port Divestiture Program was originally scheduled to end on March 31, 2002; however, it has been extended by Cabinet until March 31, 2006. Therefore, Transport Canada will continue to transfer ownership and operations of its regional/local ports. Giving local communities more control over port operations is part of the federal government's efforts to modernize Canada's marine system by instilling commercial discipline and efficiency. This will ultimately lead to a more effective and efficient port system with local accountability. By having greater autonomy, ports will be able to apply more effective business principles at the same time as they promote employment and economic growth. Once ports have been transferred, Transport Canada ends its operational role, which includes directly enforcing regulations, collecting user fees, and monitoring port operations.

Of the 549 public ports and port facilities originally controlled and administered by Transport Canada before the National Marine Policy came into force, 457 have been transferred, deproclaimed or demolished, or have had Transport Canada's interests terminated. As of December 31, 2004, Transport Canada still had 92 sites under its control. In addition, there are 18 sites where facilities have been transferred but cannot be deproclaimed because the harbour bed has not yet been divested. For detailed port information, see tables A8-1 and A8-2 in the Addendum.

Table 8-1 summarizes the classification of ports as of December 31, 2004.

Note: Additional detailed information on ports is presented in tables A8-1 and A8-2 in the Addendum, including a summary of the provincial distribution of the ports administered by Transport Canada from 1996 to 2004 and a summary of the divestiture status of regional/local and remote ports on a regional basis.

N/A = Not available.

1. Includes 18 sites where facilities have been transferred but harbour bed has not yet been deproclaimed, 64 sites that were transferred to the Department of Fisheries and Oceans and one site that was transferred to Health Canada.
2. Public Harbours deproclaimed between June 1996 and March 1999.

Source: Transport Canada

As of December 31, 2004, 65 sites had been transferred to other federal departments and 40 to provincial governments, while 116 sites were divested to local interests. In addition, 25 sites have either been demolished or have had Transport Canada's interest terminated (through lease or licence terminations).

Since the start of the program, 271 public ports have been deproclaimed. Of this number, archival research identified a further 26 harbours in addition to the original 549 port sites identified in the National Marine Policy. Transport Canada continues to administer 66 regional/local ports and 26 remote ports nation-wide.

FINANCIAL PERFORMANCE

This section used results for 2003 because audited financial statements of Canada Port Authorities for 2004 were not available in time. In addition, some 2002 figures have been restated to reflect changes in accounting policies, as reported in the 2003 audited financial statements. For detailed financial information, see Addendum tables A8-3 to A8-5.

Generally, 2003 was a positive year for most CPAs. In 2003, CPAs had total operating revenues of $299 million, a nine per cent increase over the 2002 total of $275 million. Vancouver and Montreal accounted for approximately 57 per cent of this total. Eleven of the 19 CPAs reported an increase in revenues, ranging from $0.05 million to $7.6 million. Halifax and Vancouver reported the highest increases, at $7.6 million (41 per cent) and $7.5 million (seven per cent), respectively.

Overall expenditures increased by $15.9 million, with individual increases ranging from $0.03 million to $9.2 million. Only five CPAs reported decreases, ranging from $0.05 million to $1.51 million.

The overall operating ratio for the CPAs was approximately 79 per cent in 2003. Individual ratios ranged from 42 to 157 per cent. The return on assets stood at three per cent. Trois-Rivières (15 per cent) and Saguenay (14 per cent) had the highest return on assets.

In 2003, five of the nineteen ports reported increases in their net income, ranging from $0.3 million to $3.8 million, for a combined increase of $8.4 million. The ports reporting decreases had a combined loss of $5.8 million, with ranges of $0.02 million to $1.5 million. While the majority of CPAs have relied on operating revenues to fund capital projects, Transport Canada has recently experienced an increase in the number of requests by CPAs for expanded borrowing limits. This indicates that a large number of CPAs are planning to make significant capital investments in coming years. For example, the Port of Vancouver is planning for investments of over $1 billion in the next ten years to accommodate growing container trade with Asia. The Minister of Transport recently issued Supplementary Letters Patent to increase Vancouver's borrowing limit to $510 million from its former limit of $225 million.

Tonnage for CPAs increased from 215 million tonnes in 2002 to 227 million tonnes in 2003. Five CPAs accounted for 69 per cent of total cargo by volume: Vancouver (30 per cent), Saint John (11 per cent), Sept-Îles (10 per cent), Montreal (9 per cent) and Quebec City (nine per cent). The revenues per tonne increased from $1.30 in 2002 to $1.31 in 2003, while expenses per tonne increased from $1.03 to $1.04.

At public ports still under Transport Canada control, gross revenues in fiscal year 2003/04 were $12.4 million, while expenses were $21.8 million. Capital expenditures were $5.4 million, while $1.7 million was spent in grants and contributions for port divestiture transfers. The result was a total net loss of $16.5 million in 2003/04. Addendum Table A8-6 provides details.

PORT TRAFFIC

Based on preliminary data provided by Statistics Canada, Canada's ports handled 443 million tonnes of cargo in 2003 (latest available data), up about nine per cent from 2002.

Figure 8-1 shows traffic shares by port groups in 2003, based on port classification as of December 31, 2003.

FIGURE 8-1: TRAFFIC SHARES BY PORT GROUPS, 2003

1. Includes Fisheries and Oceans Canada, provincial and municipal governments, and private facilities.

Source: Statistics Canada

Actual traffic (cargo handled) at some CPAs in 2003 included: Halifax, 14.2 million tonnes; Montreal, 20.3 million tonnes; Prince Rupert, 4.0 million tonnes; Quebec City, 20.3 million tonnes; Saguenay, 0.44 million tonnes; Saint John, 25.9 million tonnes; Sept-Îles, 22.7 million tonnes; Thunder Bay, 7.8 million tonnes; Toronto, 1.8 million tonnes; Vancouver, 67.9 million tonnes; and Fraser River, 13.7 million tonnes.

CPAs handled 227 million tonnes, the largest amount of port traffic in 2003. This accounted for 51 per cent of the total. Transport Canada facilities moved 66 million tonnes of cargo, which accounted for 15 per cent of the total. The "other" facilities — which includes those managed privately, those managed by or on behalf of the Department of Fisheries and Oceans and those managed by provincial and municipal governments — handled 148 million tonnes, or 34 per cent of the total cargo. In this category, Come-By-Chance, Newfoundland, with approximately 43.7 million tonnes, handled the most cargo, followed by Port Hawkesbury, Nova Scotia, with 22.9 million tonnes. The one port still classified as a Harbour Commission as of December 31, 2003, handled approximately 180,000 tonnes. The remaining 170 ports reporting cargo tonnage to Statistics Canada handled the balance of cargo. (See Addendum Table A8-7.)

SMALL CRAFT HARBOURS PROGRAM

Fisheries and Oceans Canada

The Small Craft Harbours Program (SCH) at the Department of Fisheries and Oceans currently owns 1,240 harbours across Canada, 1,007 fishing harbours and 233 recreational facilities. The department's long-term objective is to retain only core active fishing harbours. About 750 are targetted to be kept by the program in the regions. Other harbours (i.e., all recreational and low-activity inactive fishing) will be divested.

Fishing harbours

Since the late 1980s, the SCH program has supported the creation of local harbour authorities (HA) to manage the commercial fishing harbours in their communities. The SCH leases the harbour to the harbour authorities, which are local, non-profit organizations, made up of fishers and other harbour users that provide services, maintenance and harbour management. As of December 31, 2004, harbour authorities managed 679 sites across Canada, about 91 per cent of the SCH program target. Fishing harbours not generating enough community interest to form a harbour authority will be divested or, if necessary, demolished. Such harbours usually have little or no activity and a negligible impact on the commercial fishing industry or the community at large. To date, 286 fishing harbours have been divested and 84 are in the final stage of divestiture.

Table 8-2 shows how many fishing harbours remained in the SCH portfolio as of December 31, 2004, by region and type of management.

1. Totals include 47 mooring buoy sites in British Columbia.
2. There are no Harbour Authorities in Northwest Territories, Nunavut or the Yukon.

Source: Small Craft Harbours, Department of Fisheries and Oceans

Recreational harbours

The SCH program intends to divest all 845 recreational harbours originally in its inventory. Since 1994/95, the SCH has divested, or is in the final stages of divesting, 647 recreational harbours (77 per cent of its original total). The SCH disposal strategy, approved by Treasury Board in 1995, permits disposals at a consideration of $1.00, subject to conditions that include a requirement to maintain public access for at least five years. Before a harbour is transferred, environmental assessments and reasonable repairs are done to ensure it is transferred in a safe and reasonable condition. Recipients are mainly municipalities, local non-profit organizations, First Nations or other federal departments. In the absence of a public body interested in acquiring the facilities, they are offered at market value to the general public. As a last resort, if there is neither public nor private interest in the facilities, they are demolished. The recreational harbour divestiture program is expected to continue for several more years.

Tables 8-3 to 8-5 summarize, by region, the status of the SCH recreational harbour divestiture program (Table 8-3), recipients of harbours divested (Table 8-4) and type of management of the harbour sites still in the SCH inventory (Table 8-5).

Source: Small Craft Harbours, Department of Fisheries and Oceans

1. Just over half of these properties were subject to provincial reversionary interests.
2. "Other" in the context of the divestiture of recreational harbours refers to sites that have been transferred to local non-profit organizations, First Nations or other federal departments, as appropriate.

Source: Small Craft Harbours, Department of Fisheries and Oceans

1. "Other" refers to a variety of management and non-management situations. Some construction works, such as shoreline reinforcement or breakwaters, are largely stable and do not require ongoing management. Some facilities are part of a larger development (i.e. a marina) and are managed as part of that development. In other cases, facilities no longer exist at the site and there is nothing to manage.
2. Remaining recreational harbours in small craft harbours inventory as of December 31, 2004.

Source: Small Craft Harbours, Department of Fisheries and Oceans

Major Events in 2004

Infrastructure

Marine Pilotage

Industry Structure

Passenger Transportation

Freight Transportation