8 MARINE TRANSPORTATION

INFRASTRUCTURE

CANADA'S PORTS AND HARBOURS SYSTEM

Canada's ports and harbours play a crucial role in linking economic activities to markets that otherwise would not be accessible. As they are linked to both the rail and road networks, Canada's major ports are vital gateways in the national transportation system.

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

The National Marine Policy acknowledges 19 major Canadian ports as Canada Port Authorities. These independently managed ports are essential links to Canada's domestic and international trade. The 19 CPAs are 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. They include former Canada Ports Corporation's major divisional ports as well as former harbour commissions.

Regional/local ports make up the majority of Transport Canada-owned ports and are slated for transfer under the Port Divestiture Program. These ports range from those that sustain a high volume of regional and local traffic to smaller ports that support little or no commercial activity. In accordance with the Port Divestiture Program, the federal government's operational and ownership interests in regional/local ports are being terminated by transferring these ports to other federal departments, provincial governments or local interests, including municipal authorities, community organizations or private interests.

Transport Canada also continues to administer remote ports that serve as the primary transportation portals for isolated communities. These port facilities will remain under the control and administration of Transport Canada unless local stakeholders express a willingness to assume ownership of them.

PORT DIVESTITURE

The Port Divestiture that was originally scheduled to end on March 31, 2002, has been extended by Cabinet until March 31, 2006. Accordingly, Transport Canada will continue to transfer ownership and operations to regional/local ports. By giving local communities more control over port operations, the federal government is modernizing Canada's marine system by instilling commercial discipline and efficiency in the marine sector. This will ultimately contribute to the development of a more effective and efficient port system with local accountability. The greater autonomy afforded to ports will further allow a more effective application of business principles while promoting employment and economic growth. Once ports have been transferred, Transport Canada ends its operational role, which includes the direct enforcement of regulations, collection of user fees, and the monitoring of port operations.

Of the 549 public ports and port facilities originally under Transport Canada's control and administration before the National Marine Policy came into force, 450 have been transferred, deproclaimed or demolished, or have had Transport Canada's interests terminated. As of December 31, 2003, 99 regional/local and remote ports and port facilities remained under Transport Canada control. Also, there are 19 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, 2003.

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 2003 and a summary of the divestiture status of regional/local and remote ports on a regional basis.

N/A = Not available.

1. Includes 19 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 in June 1996 and March 1999.

Source: Transport Canada

As of December 31, 2003, 216 public ports and public port facilities had been transferred: 65 sites were transferred to other federal departments, 40 to provincial governments, 56 to municipal governments and 55 to private interests. In addition, 23 sites have either been demolished or have had Transport Canada's interest terminated (through lease or licence terminations).

Overall, 268 public ports have been deproclaimed, 30 of which were adjacent to port facilities already transferred. Archival research identified a further 26 harbours in addition to the original 549 port sites identified in the National Marine Policy.

While only four remote ports were divested in 2003, 30 remote ports have been divested since 1996. As a result, Transport Canada continues to administer just 30 remote ports nation-wide (10 in Quebec, two in Ontario, one in Manitoba and 17 in British Columbia).

FINANCIAL PERFORMANCE

Because audited financial statements of Canada Port Authorities for 2003 were not available for this report, results for 2002 were used. In addition, some 2001 figures have been restated to reflect changes in accounting policies as was reported in the 2002 audited financial statements. For detailed financial information, see Addendum tables A8-3 to A8-5.

In 2002, total operating revenues of CPAs were $279 million, a five per cent increase over the $266 million total of 2001. Vancouver and Montreal accounted for approximately 56 per cent of total revenues generated. Fifteen of the 19 CPAs reported an increase in revenues ranging from $0.01 million to $4.4 million, while seven reported decreases in expenditures ranging from $0.06 million to $1.5 million.

Vancouver and Sept-Îles reported the highest revenue increases, at $3.9 million (4.3 per cent) and $4.4 million (131 per cent), respectively. Sept-Îles had the largest percentage increase. Overall expenditures decreased $6.7 million, though 12 ports reported increases ranging from $0.04 million to $3.0 million.

The overall operating ratio for the CPAs was approximately 83 per cent in 2002, with individual ratios ranging from 38 to 128 per cent. The return on assets was five per cent. The highest return on assets was enjoyed by North Fraser (23.3 per cent), followed by Trois-Rivières (20.2 per cent) and Saguenay (14.9 per cent).

In 2002, overall net income for CPA ports decreased by $3.7 million. In contrast, 10 of the 19 ports reported increases ranging from $0.01 million to $2.6 million, for a combined increase of $5.8 million. The nine ports reporting decreases had a combined loss of $9.5 million, with ranges of $0.14 million to $4.5 million.

Tonnage for the CPAs was 215.1 million tonnes, down from 219.9 million tonnes in 2001. Five CPAs accounted for 67 per cent of total cargo by volume: Vancouver (29 per cent), Saint John (12 per cent), Sept-Îles (nine per cent), Montreal (nine per cent) and Quebec City (eight per cent). The revenue per tonne increased from $1.21 in 2001 to $1.30, while expenses per tonne increased from $0.98 to $1.03.

At public ports still under Transport Canada control, gross revenues in fiscal year 2002/03 were $13.1 million, while expenses were $19.4 million. The result was an operating revenue shortfall of $6.3 million and an operating ratio of 148 per cent. Capital expenditures in 2002/03 were $2.2 million, while $22.1 million was spent in grants and contributions for port divestiture transfers. Addendum Table A8-6 provides details.

PORT TRAFFIC

Based on preliminary data provided by Statistics Canada (available only up to 2002), Canada's ports handled 407 million tonnes of cargo in 2002, an increase of approximately 3.79 per cent from 2001.

Figure 8-1 shows traffic shares by port groups in 2002, based on port classification as of December 31, 2002.

The following data show the actual traffic (cargo handled) at some CPAs in 2002: Halifax, 12.9 million tonnes; Montreal, 18.3 million tonnes; Prince Rupert, 4.4 million tonnes; Quebec, 17.9 million tonnes; Saguenay, 0.434 million tonnes; Saint John, 25.2 million tonnes; Sept-Îles, 20.1 million tonnes; Thunder Bay, 8.2 million tonnes; Toronto, 1.6 million tonnes; Vancouver, 63.2 million tonnes; and Fraser River, 12.5 million tonnes.

FIGURE 8-1: TRAFFIC SHARES BY PORT GROUPS, 2002

¹ Includes the Department of Fisheries and Oceans, provincial and municipal governments, and private facilities.

Source: Transport Canada

In 2002, CPAs handled the largest amount of port traffic, accounting for 52.7 per cent of the total. The one port still classified as a Harbour Commission as of December 31, 2002, handled less than one per cent of the total traffic, while Transport Canada facilities moved 20 per cent of the total cargo. The remaining 27.1 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 (DFO) and provincial and municipal governments.

At those declared public ports where Transport Canada has no facilities and cargo is transported across private wharves, cargo shipments totalled 27 million tonnes, or 33 per cent of the total traffic handled by Transport Canada ports. "Other" ports handled approximately 110 million tonnes of cargo. In this category, Port Cartier, Quebec, with approximately 16.2 million tonnes, handled the most cargo, followed by Nanticoke, Ontario, which carried 14.6 million tonnes. The balance of cargo was carried by the remaining 192 ports that reported cargo tonnage to Statistics Canada. (See Addendum Table A8-7.)

SMALL CRAFT HARBOURS

The Department of Fisheries and Oceans currently owns 1,273 harbours across Canada. Of these, 1,023 are fishing harbours and 250 are recreational facilities. DFO's long-term objective is to retain only core active fishing harbours. About 750 are targetted to be kept in the regions. It will divest other harbours (i.e. all recreational and low-activity inactive fishing).

Fishing harbours

Since the late 1980s, a DFO program has supported the creation of local harbour authorities to manage the commercial fishing harbours in their communities. Harbour authorities are local, non-profit organizations, composed of fishers and other harbour users, that lease the harbour from DFO and that provide services, maintenance and harbour management. As of December 31, 2003, harbour authorities managed 670 sites across Canada, about 90 per cent of the DFO program target. Fishing harbours that do not generate enough community interest to form a harbour authority will be divested or, if necessary, demolished. Such harbours are usually low- or no-activity and have a negligible impact on the commercial fishing industry or the community at large. To date, 269 fishing harbours have been divested, while 86 are in the final stage of divestiture.

Table 8-2 reports the fishing harbours remaining in the DFO portfolio as of December 31, 2003, by region and type of management.

1. Totals include 47 mooring buoy sites in British Columbia.
2. There are no harbour authorities in the Northwest Territories, Nunavut or the Yukon. (In addition, there are no harbour authorities in Saskatchewan.)
3. Department of Fisheries and Oceans.

Source: Department of Fisheries and Oceans

Recreational Harbours

The goal of the DFO program is to divest all 845 recreational harbours in its inventory. Since 1994/95, DFO has divested 643 (or 76 per cent) of its harbours. The DFO 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. Prior to transfer, environmental assessments and reasonable repairs are completed to ensure that facilities are transferred in a safe and reasonable condition. Recipients are mainly municipalities, local non-profit organizations, First Nations or other federal departments. If no public body shows interest in acquiring the facilities, they are offered to the general public at market value. As a last resort, in the absence of public and private interest, the facilities 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 DFO recreational harbour divestiture program (Table 8-3), recipients of harbours divested (Table 8-4) and type of management of the remaining harbour sites in the DFO inventory (Table 8-5).

Source: Department of Fisheries and Oceans

1. Just over of half 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: 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 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, 2003.
3. Department of Fisheries and Oceans.

Source: Department of Fisheries and Oceans

MARINE PILOTAGE

In Canada, four regional pilotage authorities offer safe and efficient pilotage services: Atlantic (APA), Laurentian (LPA), Great Lakes (GLPA) and Pacific (PPA). These pilotage authorities direct and control the navigation and/or ship handling of a vessel through coastal and inland waterways. Each responds to the particular requirements of marine traffic and to the geographic and climatic conditions of the waterways in its region.

In 2003, three of the four pilotage authorities generated enough revenues to cover their expenses. These results represent a return toward a positive net income after the recent downward trend of 2000 and 2001. Table 8-6 shows the financial results for the four pilotage authorities in 2003.

Source: Pilotage Authorities’ Annual Reports (2003 preliminary)

The efficiency of pilotage services is commonly measured by the average number of assignments per pilot. Based on this measure, efficiency increased between 1996 and 1998 but declined afterward. The variations between the authorities and from year to year are related to traffic levels. Assignments in different regions and in different areas of the same region (e.g. the Atlantic region) require various times to complete and may be vastly different from one another. Overall, there were slightly more total assignments in 2003 than in 2002.

Table 8-7 shows the number of assignments for each pilotage authority and the total for all pilotage authorities in 2003. For information on other years, see Table A8-8 in the Addendum.

Source: Pilotage Authorities' 2003 draft annual reports

CANADIAN COAST GUARD

The Canadian Coast Guard (CCG) is an integral part of the Department of Fisheries and Oceans. The CCG's mission is to ensure the safe and environmentally responsible use of Canada's waters. It achieves this mission through five major activities: marine navigation services; marine communications and traffic services; icebreaking operations; rescue, safety and environmental response; and fleet management. The activities cover a range of marine programs, policies and services that deal with a broad cross-section of clients within the marine community. These clients include commercial shipping interests, recreational boaters, the fishing industry, and provincial, municipal and territorial governments, as well as other federal government departments and marine associations.

The Coast Guard also serves the general public through its role in preserving ecosystems, ensuring that water supplies remain unpolluted by oil and chemical spills, and protecting recreational resources.

The CCG's Marine Navigation Services (MNS) aim at providing safe, efficient and accessible waterways by operating and maintaining a system of navigation aids; ensuring safe and efficient use of shipping channels; ensuring the environmentally sustainable development of marine transportation; and protecting the public right to navigation.

All CCG functions associated with Marine Communications and Traffic Services (MCTS) are derived from a regulatory framework based primarily on the Canada Shipping Act and the Safety of Life at Sea Convention. MCTS provides distress and safety communications and coordination; 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. Along with ensuring safe marine navigation, MCTS also supports economic activities by optimizing traffic movements and port efficiency, and facilitating industry ship-shore communications.

Under its MCTS functions, the Coast Guard has developed installation strategies for an Automatic Identification System (AIS). This is a leading-edge marine navigation technology that allows increased surveillance of vessels with "near real-time" identification and tracking of vessels approaching and operating in Canadian waters. To improve its communications capability, MCTS implemented the Global Maritime Distress Safety System (GMDSS) on August 1, 2003, on the east and west coasts of Canada.

Following the events of September 11, 2001, as a means of enhancing public safety, security and the uninterrupted flow of commerce, the Canadian and U.S. coast guards established an advance notification requirement for vessels entering Canadian/American waters. Vessels over 300 gross tonnage inbound to Canadian waters must file an Offshore Advance Report with Canadian authorities 96 hours before entering Canadian waters from seaward.

Icebreaking Operations activities include 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 and for the general public. Under its icebreaking activities, the CCG provides a wide range of services with a more client-focused, demand-driven service under which commercial users pay a percentage of allocated costs in the form of an icebreaking service fee.

The Rescue Safety and Environmental Response (RSER) business line encompasses three major activities: maritime search and rescue (SAR); environmental response; and the office of boating safety, which regulates recreational boaters, recreational boats and recreational boating activities. Its main objective is to save lives and protect the marine environment.

In 2003, the Coast Guard moved forward with the implementation of major new regulating measures to improve boating safety. These cover mandatory operator competency; age-horsepower restrictions; modernization of small vessel regulations; and search and rescue prevention and boating safety programs to reduce the number and severity of maritime incidents.

The acquisition, maintenance and scheduling of DFO's fleet and equipment required to deliver core marine services to Canadians is also part of Coast Guard's functions. This includes dealing with matters such as fleet operational requirements and planning; vessel resource allocation; resource utilization and redeployment; fleet management support; related management information systems; vessel crewing; fleet performance management and costing systems; and management roles and accountabilities.

Over the past several years, the CCG has introduced three commercial user fees: the marine navigation service fee, in June 1996; the transit-based icebreaking services fee, in 1998; and the maintenance dredging services tonnage fee, in September 1997. For more information on the CCG functions, visit www.ccg-gcc.gc.ca.

FINANCIAL PROFILE

Table 8-8 shows the Coast Guard's financial results for the last four fiscal years. Results for 2003/04 reflect forecast expenditures to fiscal year-end and will not be finalized until the end of the fiscal year.

Source: Department of Fisheries and Oceans

In compliance with the Government of Canada's cost recovery policy, the Coast Guard has taken a number of measures to recover a portion of the costs it incurs in providing services to industry.

• In June 1996, the CCG introduced the Marine Navigation Services Fee, which is intended to collect $27.7 million annually, including administrative costs.
• In 1998, the CCG introduced a transit-based Icebreaking Services Fee, which is intended to collect $6.9 million annually, including administrative costs.
• The Maintenance Dredging Services Tonnage Fee, established in September 1997, was originally intended as an interim measure to cover the full costs that the CCG incurred in providing maintenance dredging services in the St. Lawrence Ship Channel. The Coast Guard continues to work with representatives from the commercial marine transportation industry to arrive at a long-term arrangement, inducing the transfer of responsibilities to industry for these dredging services

Table 8-9 breaks down the Coast Guard's revenues and expenditures by its five main business lines for fiscal year 2003/04. Both revenues and expenditures are forecasts only and will not be finalized until the end of the fiscal year.

Note: MNS: Marine Navigation Services; MCTS: Marine Communication and Traffic Services; ICE: Icebreaking Services; RSER: Rescue, Safety and Environmental Response; CCG: Canadian Coast Guard.

Source: Department of Fisheries and Oceans

ST. LAWRENCE SEAWAY

A unique inland waterway extending into the industrial heartland of North America, the St. Lawrence Seaway serves 15 major international ports and 50 regional ports on both sides of the Canada-U.S. border.

The Seaway is made up of two main sections, the Montreal-Lake Ontario (MLO) section and the Welland Canal section. The Welland Canal section joins Lake Ontario to Lake Erie via eight locks over 42 kilometres. The MLO section joins Montreal to Lake Ontario via seven locks over 300 kilometres, five in Canada and two in the United States.

Under a 20-year Management, Operation and Maintenance Agreement with the federal government, extending to March 31, 2018, responsibility for the operations and maintenance of the navigational aspects of the Canadian Seaway resides with the St. Lawrence Seaway Management Corporation (Seaway Corporation). The Seaway Corporation is constituted as a not-for-profit corporation by Seaway users and other interested parties. Detailed cost targets have been negotiated for each of the first two five-year periods of the 20-year agreement and form part of the agreement. During the first five years, ending March 31, 2003, no government funding was required, as deficits were covered from reserve funds.

The current five-year plan (began April 1, 2003) reflects the results of intensive negotiations between Transport Canada officials and senior Seaway Corporation officers. Transport Canada was supported by a two-stage due diligence process that included financial advisors and technical engineering experts. The final proposal agreed to by the federal government and the Seaway Corporation included an increase in the Asset Renewal Plan by 36 per cent to a five-year total of $170 million.

The Montreal-Lake Ontario section of the Seaway opened in 1959 while the Welland Canal section in 1932. The costs associated with maintaining the existing infrastructure are rising. Future investment in maintaining the Seaway infrastructure needs to be well planned to respond to market opportunities and to facilitate trade, including the maintenance of the two U.S. locks in New York State that are an integral part of the Seaway. On May 1, 2003, the Minister of Transport signed a Memorandum of Cooperation with the U.S. Secretary of Transportation, agreeing to participate with the U.S. Department of Transportation and the U.S. Army Corps of Engineers on a comprehensive set of studies over a 30-month period to assess the ongoing maintenance and capital requirements of sustaining and optimizing the Great Lakes/Seaway system and the existing marine infrastructure on which it depends.

During the 2003 season, estimated combined traffic on the two sections of the Seaway was approximately 40.85 million tonnes, 1.3 per cent lower than in 2002. Iron ore was the most prominent among commodity shipments, with 10.65 million tonnes, up 10.5 per cent. Grain continued its downward trend with a 7.8 per cent drop in volume carried. Other commodities associated with the steel industry and other bulk cargo declined by approximately five per cent. Tables 8-10 and 8-11 show cargo movements and traffic by commodities, respectively, for 2002 and 2003. For a longer time series, see tables A8-9 and A8-10 in the Addendum.

1 2003 figures are estimated.

Source: St. Lawrence Seaway Management Corporation

Note: Combined traffic in the two sections of the Seaway.
1 2003 figures are estimated.

Source: St. Lawrence Seaway Management Corporation

RATES AND TARIFFS

As part of the negotiated agreement with Transport Canada, the Seaway Corporation implemented a 2.23 per cent toll increase for the Canadian section of the Seaway in 2003, based on the annual average percentage change in the Consumer Price Index. However, as the Seaway Corporation's expenditures were lower than business plan targets and obligations for the fifth consecutive year, it was able to apply a one per cent toll reduction as per the agreement, bringing the net increase to 1.23 per cent.

FINANCIAL PROFILE

In fiscal year 2002/03, Seaway revenues from tolls and other sources stood at $66.8 million, compared with $65.7 million in 2001/02. Toll revenues rose slightly to $63.5 million but were still well below the $73.4 million collected in 2000/01. This reflects the continuing economic slowdown in the North American economy and strong competition from other modes and routes for Seaway traffic.

Operating expenses in 2002/03 totalled $58.4 million, up from $53.2 million the previous year. This was due largely to expenses associated with the difficult weather conditions prior to the opening of the Seaway. Salaries, wages and benefits accounted for the major part of this total. Expenditures for the asset renewal program stood at $24.2 million, compared with $24.5 million in the previous year.

Table 8-12 compares the financial performance of the St. Lawrence Seaway from 2000/01 to 2002/03.

1 April 1 to March 31.
2 Following contribution from Capital Trust Fund.

Source: St. Lawrence Seaway Authority/St. Lawrence Seaway Management Corporation

Major Events in 2003

Infrastructure

Industry Structure

Passenger Transportation

Freight Transportation