Public Accounts Committee on Oct. 7th, 2009

[The Chair, Liberal, Shawn Murphy]

Order, please.

I want to welcome everyone here today. Bienvenue à tous.

I have a few preliminary remarks, and I also want to deal with the minutes of the steering committee before we get into the main orders of the day.

Before we do anything, I want to extend, on behalf of all members of the committee, a very special welcome to three additional members of the Mali delegation. We had five here the other day and we were very pleased to see them. Back with us today are three additional members of that delegation: Mr. Moumouni Guindo, Mr. Ismaël Diawara, and Madam Aissata N'diaye. Welcome to the committee. We are certainly pleased that you are here with us today.

Next, before I introduce our witnesses, I want to deal with the minutes of yesterday's steering committee. They have been circulated. I don't think there's anything contentious. They basically outline chapters that we are going to deal with. There is one item I'd like to add and I'll add it after paragraph 1. I'll just read it:

That pursuant to Standing Order 108(3)(g), the Committee undertake a study of Revenue Canada “Interest on Advanced Deposits from Corporate Taxpayers, Canada Revenue Agency;

The steering committee may come back and not do it, but as you will recall, this involves a loophole. Large companies were taking advantage of a situation by paying deposits and getting interest rates that were larger than normal. Of course, they knew the taxes. There was some indication that it was cleaned up, but our most recent information is that it was not. So we'd like to add that to the steering committee as a possible chapter.

Mr. Kramp.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

On number 3, we have:

That, pursuant to Standing Order 108(3)(g), the Committee undertake a study of the implementation of its recommendations made in the 2nd Session of the 39th Parliament, and report to the House thereon;

I was under the impression that we were to ask the analysts to evaluate all the recommendations. Then, based on that analysis, they would report to the next steering committee. Did I misunderstand?

[The Chair, Liberal, Shawn Murphy]

My understanding was that we had a lengthy discussion in which we talked about advanced deposits from corporate taxpayers. Then we settled on the first choice of everyone at the meeting.

I'm sorry, Mr. Kramp, I went to the wrong chapter. Perhaps I'll get Alex to respond.

[Alex Smith, Committee Researcher]

Thank you, Mr. Chair.

This is based on an analysis that has already been done. So the discussion at the steering committee is whether or not a report of the committee would be presented to the House based on the analysis that had been done.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

I suggest that it come back to the committee before we make that judgment and it goes to the House.

[The Chair, Liberal, Shawn Murphy]

Any other discussion? All in favour of the minutes as circulated?

[Some hon. members]

Agreed.

[The Chair, Liberal, Shawn Murphy]

Now we're going to go to the orders of the day.

We're breaking this meeting down, colleagues, into two one-hour sessions. The first hour we're going to hear from the Great Lakes Pilotage Authority, and we have Sheila Fraser representing the Office of the Auditor General of Canada. She's accompanied by Nancy Cheng. From the crown corporation, the Great Lakes Pilotage Authority, we have the chief executive officer and of course the accounting officer, Robert Lemire. He is accompanied by the secretary treasurer, Réjean Ménard, and Douglas Smith, the chair of the board of directors.

Before I ask for opening comments from the Auditor General, I just want to point out to the members of the committee that special examinations have been ongoing in Canada for many years now on our crown corporations. They were always done every five years by the Auditor General, and the mandate is set out in the report. Up until about five years ago they were generally used as a tool for management. They were reported to the board of directors on a confidential basis. In about 2004 or 2005, the decision was made to place them on the corporation's website, and this is the first occasion where the public accounts committee has actually had hearings on a special examination. I view this as a positive development. There are at least 50 crown corporations. They employ approximately 100,000 people, they have $185 billion in assets, and they are a very large part of the apparatus of the Government of Canada. So I do believe that warrants a dialogue with the public accounts committee.

So I'm very pleased to have representatives from the Great Lakes Pilotage Authority here today.

Having made those opening remarks, I'm going to turn the floor over to you, Madam Fraser, for your opening comments.

[Sheila Fraser, Auditor General of Canada, Office of the Auditor General of Canada]

Thank you, Mr. Chair. We are very pleased to be here today to discuss our chapter on special examinations of crown corporations, particularly the examination of the Great Lakes Pilotage Authority. As you mentioned, I'm accompanied by Nancy Cheng, assistant auditor general.

Crown corporations report to Parliament through the minister responsible. Under part 10 of the Financial Administration Act, we conduct periodic special examinations of crown corporations. A special examination provides an independent opinion to determine if the corporation has reasonable assurance that its systems and practices allow it to safeguard and control its assets, manage its financial, human, and physical resources economically and efficiently, and carry out its operations effectively.

We note as a significant deficiency any weakness in the systems and practices of the corporation that could prevent it from reaching its objectives. Our special examination reports are thus a source of important information that parliamentarians can use to hold crown corporations to account.

For the first time, our May 2008 report included a chapter that, among other things, summarized eight special examination reports and gave an account of the progress of our special examinations of 46 crown corporations. We continued the practice this year and presented the main findings of our reports on eight other crown corporations. We are very pleased that the committee is interested in these reports.

Of the eight special examination reports summarized this year, five did not find any significant deficiency. We noted one or more significant deficiencies in our reports on three crown corporations: the Federal Bridge Corporation Limited, the Great Lakes Pilotage Authority and Via Rail Inc. In each of these three cases, we brought our report to the attention of the responsible minister.

I will now highlight the findings of our special examination of the Great Lakes Pilotage Authority, one of the two entities of particular interest to your committee today. This federal crown corporation reports to Parliament through the Minister of Transport, Infrastructure and Communities.

We conducted our special examination from February 2007 to January 2008. We found a significant deficiency in the current system of exempting Canadian ships from compulsory pilotage. The Authority does not have an effective mechanism for determining whether Canadian masters and deck watch officers have the competencies and qualifications needed to pilot their ships safely without the help of Authority pilots in compulsory pilotage areas. The Authority issues exemptions on the basis of annual declarations by shipping companies, stating that their officers meet the requirements set out in the Great Lakes Pilotage Regulations.

Pilotage contributes to the public safety by minimizing the risk of accidents and environmental damage. More than 60% of ships navigating on the Great Lakes are Canadian vessels exempted from compulsory pilotage. The Authority therefore needs to have assurance that Canadian masters and deck watch officers are competent. The current system of exemption dates from 1972. It was intended to be temporary but has remained in force despite many studies and recommendations calling for greater stringency.

In our special examination we have noted good practices, for example, the authority's regular discussions with various stakeholders from the shipping industry to ensure its service meets users' needs. We have also identified opportunities for improvement in other areas, notably the tariff-setting process.

I am pleased that the authority has accepted all of our recommendations.

Concerning the exemption system, the authority expected that amendments to the regulations would be published in 2008. I would note for the committee that we have not audited the measures taken by the authority since the end of our special examination in January 2008. The authority has informed us that it expects the Great Lakes pilotage regulations to be amended, and that once they are, a process for pilot certification will be fully operational within three years.

The committee may wish to request details from the authority on the measures taken since our special examination, including information on the interim measures put in place to ensure safe navigation.

Mr. Chair, this completes our opening statement. We would be pleased to respond to any questions that committee members may have.

Thank you.

[The Chair, Liberal, Shawn Murphy]

Thank you very much, Ms. Fraser.

Mr. Lemire.

[Robert Lemire, Chief Executive Officer, Great Lakes Pilotage Authority]

Merci, monsieur le président.

Good afternoon, Mr. Chair, committee members, as well as my friends from the Auditor General and Transport Canada.

My name is Robert Lemire. I am the CEO of the Great Lakes Pilotage Authority. I have been with the authority for the last 24 years, 11 years as CEO. Yes, that's a long time.

With me today are Mr. Doug Smith, our chairman of the board, and Mr. Réjean Ménard, our secretary-treasurer. We are here today to answer questions from the committee on the recent Auditor General of Canada report, chapter 7, “Special Examination of Crown Corporations”.

In its 2008 report to the board, the auditor’s main observation was that the authority’s current system for exempting Canadian ships from pilotage needed to be strengthened.

The authority’s response concurs that a more stringent exemption or certification system would strengthen the authority’s ability to ensure the future safety and efficiency of the navigation system. The authority continues to work with Transport Canada and the major stakeholders to address this deficiency.

The authority is a very small crown corporation, with fewer than 100 employees, answering to the Minister of Transport through our board and chair, who are seven GIC appointments. The corporation is listed in schedule III, part I, of the Financial Administration Act and operates and conducts all of its activities out of one location in Cornwall, Ontario.

The authority is responsible for administering the pilotage system in the Great Lakes. The system stretches 2,200 kilometres from Montreal to Thunder Bay. It covers the five Great Lakes, including all of the commercial Canadian and American ports on Lakes Erie, Michigan, Ontario, Huron, and Superior. The authority works in cooperation with the U.S. Coast Guard to share facilities and services on the Great Lakes to avoid duplication of services.

The authority was set up in 1972 with the creation of the current Pilotage Act, at the same time as the Pacific, Laurentian, and Atlantic authorities were. Pilotage authorities are mandated to be financially self-sustainable and do not rely on any government subsidy or transfers.

Marine pilotage is a service provided to ships that navigate in waters where navigation officers have little or no knowledge. These waters include canals, rivers, and lakes that have difficult navigation characteristics such as currents, wind, and low water conditions that can yield dangerous navigation scenarios.

In the Canadian and American waters of the Great Lakes, all vessels over 1,500 tonnes--those are vessels of about 200 feet or longer--must be guided by an experienced licensed pilot, unless the vessel is navigated by officers who are familiar with the system. Foreign vessels always avail themselves of pilots, whereas Canadian ships take advantage of the current exemption system permitted them to sail the Great Lakes.

The authority has been working with the major stakeholders and Transport Canada to change the existing system so that it meets the requirements of the Pilotage Act and the economic realities of the operators while maintaining the highest safety standards required for protecting Canadian navigable waters.

The proposed regulatory amendments will see, after due verification of credentials, existing officers now on the exemption list issued pilotage certificates for the Great Lakes. This will allow them to continue the current practice of operating Canadian vessels in the Great Lakes without the requirements of authority pilots. It is proposed that all officers requiring a pilotage certificate after the transition period will be subject to the Great Lakes pilotage regulations requirement of an examination.

The authority is now in the drafting stage with Transport Canada for amending the Great Lakes pilotage regulations. The proposed changes will allow the authority more assurance that the Canadian deck watch officers and masters have the required knowledge to navigate our waters. Under the proposed new system, Canadian officers who are members of the complement of a vessel will be required to hold a valid pilotage certificate issued by the authority.

Mr. Chairman, this completes my opening statement. Our chairman, Mr. Smith, would like to address the committee briefly.

Thank you.

[The Chair, Liberal, Shawn Murphy]

Mr. Smith.

[Douglas Smith, Chair, Board of Directors, Great Lakes Pilotage Authority]

Thank you, Mr. Chairman and members of the committee. Thank you for allowing us to be here today.

I just want to add a few comments. I won't take too long.

To put it in perspective, I was appointed to the board of the Great Lakes Pilotage Authority in March 2007, so I've been there for about two and a half years. That's a short time compared to how long this issue has been before the marine community.

When I joined the board, I immediately saw that this issue had to be a priority for me. To get resolution, I was greeted with a file of letters from a number of transport ministers admonishing my predecessor for not getting the issue resolved. My background is a marine background, and I had a relationship with a number of the players on this issue, including the members of the Canadian Shipowners Association. My perception of where the situation had gotten to was that there was a lack of trust, a significant lack of trust, between the industry, the pilotage authority, and the Canadian pilots, who are another group that is not here today. I felt that because of my relationship with these people I could bridge that trust issue and help resolve the issue.

So immediately, within about a month, when I had my feet on the ground and was briefed on the file a little more, Robert and I initiated a process to try to get the matters resolved, but we have been unsuccessful. But as Robert has pointed out, we are close to a resolution of the issue as we stand now.

[The Chair, Liberal, Shawn Murphy]

Thank you, Mr. Smith.

That concludes the opening remarks, and I'm going to go to the first round. What I propose to do, colleagues, is just to follow the normal course and go as far as we can. We have about 38 minutes on this, and then we'll hear from VIA Rail and do the same thing again. I think that's probably as fair as we can be.

Mr. Lee, seven minutes.

[Derek Lee, Liberal, Scarborough—Rouge River, ON]

Thank you, Mr. Chairman.

I just want to clarify, again, the proposed implementation dates for the time when all masters or officers in charge of a ship will have an appropriate certification.

Number two, will these new procedures impose a material new cost on the ship owners?

[Robert Lemire]

A good question.

Mr. Chair, as far as the timing of the amendments and when they take place is concerned, we are proposing a three-year window where the current navigation officers will be able to avail themselves of a certificate without fee. Once we complete the three-year period on January 1, 2013, all new applicants will be able to come to the authority and write an examination, and if successful they will be issued a pilotage certificate.

As for the total cost, presently we have 400 individuals in the Great Lakes navigating with an exemption. They would be issued certificates without a cost to the industry. We are told today that about 30 to 40 new applicants will come through the system every year. Once that process is over, that is all the cost the industry will have to bear--to sit down for an examination.

[Derek Lee, Liberal, Scarborough—Rouge River, ON]

Most of us can understand how the system evolved, where it came from historically, because there was a time when there wouldn't be a crew on the Great Lakes that wouldn't trust their captain, but in these days there's a lot more occupational mobility--at least I think there is--and the cargoes perhaps have changed from being wheat and iron ore and coal, and things like that, to perhaps other dangerous cargoes.

Where a lot of people missed this in the past, I guess the Auditor General spotted it. There's no backup mechanism to assure quality of those ships' masters. I was a deckhand on a ship for a couple of summers and it never occurred to me that there might be a problem, that my master wouldn't know the waters. These are inland waters, there are no tides, there are a few currents, rivers. There are a few tough spots in bad weather, but it's not a difficult system to navigate. The pilots were then seen as having a great gig. They had a great game. They could board the ship and snooze right through. I'm not saying they all did, but if you weren't sure how they did it, you could always check on the Laurentian side and see how they were doing.

Do you have any comment about whether at the end of this process you think there'll be a reasonable accommodation in the interests of safety? Do you think the ships' insurers will approve of this? Are they happy with it? And the ships' owners, the shipping industry, are they going to be comfortable with this?

Thank you, Mr. Chairman.

[Robert Lemire]

We're certainly hoping they're comfortable with what is being proposed. Trying to change any practice that's been in place for over 100 years is probably difficult for whomever the system is being changed for.

As far as assurance that the existing ships going into our waters are being operated by properly qualified and experienced captains, we watch these ships come through every day and we know who the captains are. We don't have a concern about safety for now. Let's put that to rest right now: there is no safety issue for the Canadian public.

We're not following the letter of the Pilotage Act when it comes to the Canadian ships because of this exemption. With respect to how will it change in the future, the authority will have more power to examine specific cases where we do have concerns. Presently when we have concerns we do not have the benefit of the law on our side to ask any further questions. We will do it, but we do not have the law on our side. With the future amendments we'll have the law on our side, and we will take the proper mechanisms to address any deficiencies, if they are there.

[Derek Lee, Liberal, Scarborough—Rouge River, ON]

Good answer.

Thank you, Mr. Chair.

[The Chair, Liberal, Shawn Murphy]

Thank you very much, Mr. Lee.

Madame Faille, sept minutes.

[Meili Faille, Bloc, Vaudreuil—Soulanges, QC]

Thank you, Mr. Chair.

I live in a riding on the shore of the St. Lawrence River. So I am aware of the difficulties that arise from time to time, be it ships passing through canals such as the Beauharnois Canal, or problems with the Saint-Louis Bridge, which has been hit twice by ships in the past decade.

I believe you have statistics on the incidents that occurred on the St. Lawrence River. Could you tell us whether these ships were under this exemption and whether the problem had to do with the fact that the individuals were not certified?

[Robert Lemire]

You are probably referring to the incident involving the Saint-Louis Bridge that happened two years ago. The bridge was struck by a Canadian vessel that was pilot-exempted. In that particular case, even if the ship had had three pilots, it would not have made a difference. When the motor gives out, neither the pilot nor the master can do anything about it. That is what happened. As for statistics, Transport Canada has just sent us some information, and I have it here. I will have it sent to Joann at the end of the day. I would not want to give you statistics that were not accurate.

[Meili Faille, Bloc, Vaudreuil—Soulanges, QC]

Thank you. That would be greatly appreciated. It will help us assess the extent of the problem.

You mentioned regulations. From what I understand, this is not the first time that you are recommending amendments. The problem goes back a number of years. Could you tell us what is stopping these regulations from being reviewed and amendments from being implemented?

[Robert Lemire]

In the past 10 or 20 years, the biggest barrier to regulation change has been that the proposed amendments would result in higher operating costs for Canadian shipowners. We took part in consultations, but we could not support the recommendations in that they would lead to higher operating costs for Canadian shipowners. We have yet to find the silver-bullet solution. We are working on something now that may prove effective. We have never had any safety concerns. That was not an issue for Canadian ships. That is probably why attempts to fix the problem have taken so long.

[Meili Faille, Bloc, Vaudreuil—Soulanges, QC]

Are you subject to the new policy that Treasury Board wants to implement with respect to determining the costs that you invoice?