Transport Committee on May 16th, 2006

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

I think the difficulty, Mr. Chair, is that some people consider this to be a new motion, and other people in the room who discussed this when Mr. Julian was present and very angry with the situation that had arisen as a result of this particular motion....

Most of us feel it's a clarification of a mistake that was made in the blues, or at least a mistake or misrepresentation of what was discussed and what we believed we voted on. That's the situation. This is not a new motion. This is a situation where we're trying to clarify what took place and what was incorrectly followed on the last meeting.

[The Chair, Conservative, Merv Tweed]

Mr. Hubbard.

[Charles Hubbard, Liberal, Miramichi, NB]

Thanks, Mr. Chair.

We have witnesses here this morning. It's a five-minute thing we're arguing about--five minutes today or whatever.

The second point is that this document that was circulated to us is only in English. In fairness, I think we have to make sure....

Probably it's best to proceed with our witnesses this morning and to table Mr. Jean's motion until Thursday, when it will be dealt with. That way we can proceed with our agenda.

[The Chair, Conservative, Merv Tweed]

Mr. Bell.

[Don Bell, Liberal, North Vancouver, BC]

Are we actually meeting Thursday?

[The Chair, Conservative, Merv Tweed]

That's something we have to discuss at the end of this meeting, too, with the visit of the Prime Minister of Australia.

Just for clarification, this was something I asked the clerk to prepare, just so that we could actually see it. Whether it's part of the motion or not....

[Charles Hubbard, Liberal, Miramichi, NB]

The only point, Mr. Chair, is that I think we have to establish that any piece of information circulated at this table must be in both official languages.

[The Chair, Conservative, Merv Tweed]

Good point.

[Charles Hubbard, Liberal, Miramichi, NB]

If we start the other way, we're just going to get ourselves into...très difficile here. It's not a very good way to start.

[The Chair, Conservative, Merv Tweed]

Mr. Bell.

[Don Bell, Liberal, North Vancouver, BC]

I'm sympathetic to the points raised by Mr. Jean, but I would say that what we're talking about for today--and we've got witnesses to get going here--is an extra seven minutes, because that's all it would be for the second round. It isn't round and round.

In the interests of getting going, I would suggest--changing my attitude previously--that we put this off until the next meeting and resolve it then. We can circulate everything to meet the requirements so that we don't get hung up on technicalities.

I agree with the intention that I had understood we dealt with, and how the motion was relayed is not what I thought. This represents what I thought we would be doing. Procedurally, though, I say we get on with today and bring this back so that we can deal with it appropriately.

[The Chair, Conservative, Merv Tweed]

Agreed?

[Some hon. members]

Agreed.

[The Chair, Conservative, Merv Tweed]

Thank you.

We'll now move on to orders of the day, Bill C-3, an act respecting international bridges and tunnels and making a consequential amendment to another act.

I would like to welcome our witnesses. I would ask that you introduce yourself and proceed.

[Thomas Garlock, President, Bridge & Tunnel Operators Association]

Thank you, Mr. Chairman.

My name is Tom Garlock. I'm the general manager of the Niagara Falls Bridge Commission, and I'm also the president of the Bridge and Tunnel Operators Association.

With me today is Mr. Ron Rienas, the general manager of the Buffalo and Fort Erie Public Bridge Authority, and one of my associates from the Niagara Falls Bridge Commission, Mr. Ted Gibson.

I'm sorry, but I do not speak French.

Members of the standing committee, thank you for your courtesy in permitting me to address you on behalf of the Bridge and Tunnel Operators Association concerning the provisions of Bill C-3, a legislative initiative that is important to the interests of Canada.

The Bridge and Tunnel Operators Association, comprised of the 10 entities responsible for 11 of the international crossings between the province of Ontario and the states of Michigan and New York, works diligently to support the efficient movement of people and commerce over the Canada-United States border. The BTOA, as we are known, is acutely aware of the importance of an efficient border to Canada's competitive economic position in the world.

We have carefully followed the development of the legislation before you since it first appeared in a previous Parliament as Bill C-44. While I am appearing today on behalf of the members of the BTOA, I advise you that individual operators may offer testimony or comments independently that will reflect their particular view or circumstance. However, the issues I raise today are of consequence to all the members of the association. They have asked me to bring them to your attention, as well as specific language recommendations for the bill that would cure what we are advised will be unintended consequences of the present language.

On at least three occasions over the past 18 months or so, Canadian officials have generally advised us of the intended legislative provisions together with their reasoning and expected outcomes of the legislation. While we appreciate the information, there are two areas within the legislation that we have explained would be injurious to crossing operators in a way that is not intended by the legislation.

The first and most significant issue deals with the intent to approve the setting of tolls, fees, and charges. The majority of the BTOA members are financially independent and fund their operations and capital improvements from toll revenue. It is that revenue that is pledged to bond holders to raise capital for significant projects.

As I am certain you can appreciate, bond holders require that issuers have the ability, means, and flexibility to manage their revenue sources in such a way that debt obligations are repaid according to contractually agreed terms. In the event that financial markets sense an issuer may be constrained in managing its funding streams, there is a direct negative impact upon the issuer's rating that could have the effect of dramatically increasing future borrowing costs. I can also assure you that this language may be troubling to present bond holders as well.

We brought those concerns to the attention of officials concerned with drafting Bills C-44 and C-3. Last year, we also arranged to have officials briefed directly with bond counsels by teleconference. At this time, in response to Bill C-3, we have written statements from two bond counsels, a financial adviser, and a rating agency that have acted on behalf of four of our members.

At the moment, all communications are available in their original language only, but we will be pleased to provide translations as soon as possible.

Permit me to give you the details of the contents of these communications. Standard and Poor's rating service has advised the Blue Water Bridge Authority as follows:

The BWBA's current toll-setting autonomy is one of the authority's more important credit-supporting features. The draft legislation, as currently published, would not actually impose any constraints on the BWBA’s toll setting autonomy, but simply specify that the government had the power to do so. Rating action of any kind would be unlikely, unless the BWBA were to receive official notice of the government’s intent to disallow or limit the magnitude of a toll increase proposed by the BWBA or force a reduction to existing tolls without any mitigating policy initiatives and we were to judge that such a constraint stood a reasonable chance of materially affecting the BWBA’s debt service coverage ratios. Given the BWBA’s status as a federal non-guaranteed Crown corporation, we do not expect the government to take any action which would diminish the rights of the BWBA’s creditors without concurrent and offsetting policy adjustments.

Roosevelt & Cross Incorporated, financial advisers for the Niagara Falls Bridge Commission, has commented on the impact of clause 15 of the bill. They say that the resolutions authorizing the issuance of the commission's bonds specifically require that the commission at all times charge and collect tolls sufficient to generate net revenues equal to at least 130% of maximum current or annual debt service and 100% of any deficiency in the reserve account. Bill C-3 conveys very broad powers regarding fees and tolls to the government and provides no assurance of any kind that the commission's ability to charge sufficient tolls will not be impaired in the future by a decision of the government. Credit analysts for the rating agencies and for purchasers of any future bond issues that the commission may choose to issue to finance capital outlays will definitely take a negative view of the impact of Bill C-3 on the credit of the commission. This, in turn, will increase the cost of capital for the commission and possibly limit its access to the capital markets. The market for outstanding bonds of the commission could be damaged by the uncertainties created by the bill, possibly creating financial penalties for the holders.

I am aware that the committee has heard directly in writing from the Buffalo and Fort Erie Public Bridge Authority on the matter of bond market impacts. Again, we have copies of correspondence for your review.

You will note common threads among the written advice that we have received, and I would add that other members of the BTOA have expressed similar concerns. You will also note that we have indeed had conversations with our financial experts.

Paragraph 15(b) of Bill C-3 stipulates that the Governor in Council may, on the recommendation of the minster, make regulations respecting the tolls, fees, and other charges that may be imposed by owners or operators of international bridges or tunnels for their use to ensure the efficient flow of traffic. While we understand the government's interest in prohibiting activity in this area that could be deemed predatory and contrary to the goal of efficient movement of traffic, we are most concerned that bond holders and rating agencies would regard this language, as written, with alarm. In light of that, the BTOA submits additional language in that clause for your consideration.

Clause 15 of Bill C-3 would be amended so that clause 15 in its entirety would become clause 15.1. A new clause would be added immediately following paragraph 15.1(e), which would be 15.2. It would read as follows:

Notwithstanding all other provisions of this section, no action by the Governor in Council, on the recommendation of the Minister, shall be taken under this legislation or in ensuing regulation that will adversely affect the commercial or financial viability of owners and operators of international bridges and tunnels in the operation, use, tolls, fees and charges for which they have legal jurisdiction and liability. Any such action shall only be taken in the interest of addressing existing, demonstrated negative impact upon the efficient flow of traffic over the border.

We belive that this addition will preserve the government's ability to address the matters with which it is concerned while clarifying that owners and operators will be able to continue managing their financial affairs in the most efficient manner in accordance with their legal obligations.

The second area of the bill that we believe can be improved without diminishing the government's interest is clause 4, which deals with the relation of the act to other regulations now in place. The BTOA understands the interest of the government in regard to maintenance, security, and safety of international bridges and tunnels, and the members of the BTOA are equally committed to exemplary performance into those areas.

The members historically have followed the safety standards of the province or state in which they make landfall, adapting the more stringent of the two. This has also been the case with security, particularly in the wake of the events of 2001, and we willingly comply with the requirements of a wide range of agencies, including, but not limited to, Transport Canada, RCMP, OPP, the United States Coast Guard, the Canada Border Services Agency, and the United States Department of Homeland Security.

We believe that in most cases the interests of Bill C-3 are already being served through any number of agencies, and respectfully request that the statute provide for the recognition of existing requirements by including language that will do so.

The BTOA recommends that clause 4 of Bill C-3 be amended by adding a new subclause (5), to read as follows:

Prior to the creation of any regulations made under this Act establishing standards regarding maintenance, repair, security and safety of international bridges and tunnels, the Minister shall examine Provincial and other agency requirements for the purpose of acceptance of such existing standards and/or regulations as being sufficient to fulfill the intent of the Act.

This language in no way limits the minister's authority, but does cause a review to avoid the reinvention of the wheel, so to speak.

Finally, it is most important that I assure the members of the committee and all of your parliamentary colleagues that the members of the BTOA clearly understand their unique obligation to the people of Canada and the people of the United States to maintain an efficient border between these two great countries. As you know, in many instances our members operate in close geographic proximity to one another, working together to offer our travellers greatest efficiency, rather than an adversarial competitive environment that considers only self-serving goals.

We can assure you that we will continue to work carefully with the Government of Canada to ensure an open, efficient, and safe border.

Thank you, Mr. Chairman. At this time, I would be pleased to respond to any questions the members might have or to receive their comments regarding my testimony.

[The Chair, Conservative, Merv Tweed]

Thank you for your presentation.

I'll ask for questions.

Mr. Bell, go ahead, please.

[Don Bell, Liberal, North Vancouver, BC]

Sir, I would like to ask what the differences are between the U.S. code and the Canadian code. You talk about dealing with the more stringent areas in the landfall of your facilities. What are the significant differences that you fear?

I know you're concerned about the open-endedness, as I understand it, of the phraseology that's included in the bill, and the worry is not so much what is in the bill as what could come out of an interpretation, if you want to call it, in the future. Is that correct?

[Thomas Garlock]

That is correct, Mr. Bell. We're looking for parliamentary direction in this area to make it part of policy.

As far as the requirements go, Mr. Rienas, at the Buffalo and Fort Erie Public Bridge Authority, and I, at the Niagara Falls Bridge Commission, presently work with Ontario's and New York's safety standards. They are similar in many respects, but in any instance when one is more stringent than the other, we automatically adopt the more stringent standard. This goes for things such as bridge inspection. We have to give our inspection teams specific guidelines to follow in inspecting the structures to make sure that they are safe.

I might add, too, that usually the provincial and the state standards would be for “every other year” inspection. I can tell you, at least in our case, and I think in the case of a number of other operators, we do annual inspection.

Our point here is that we would encourage the minister to look at the language of existing regulation out there, rather than to immediately proceed to create new federal regulation that could be redundant. If there's a compelling interest on the part of the Government of Canada, clearly that has to be addressed, but we're just asking that we take a look at what is existing.

[Don Bell, Liberal, North Vancouver, BC]

From your reading into the proposed legislation, what are the differences you see between existing regulation in Canada and the regulation at present on the U.S. side—I forget the phraseology—the presidential permit process? It was supposed to be faster. Have you actually found the U.S. process to be sped up?

[Thomas Garlock]

In this instance, looking at what is envisioned in the bill and at the procedure under the presidential permit process, I think a great deal of parity has been achieved. A lot of the same issues dealing with new construction or with significant alteration to a span or to a tunnel will be looked at from the perspective of each of the two countries. So on that level there is consistency, and we really don't have a serious argument with that particular part of the language. In the area of security and safety inspections of the span, we have some concern that we could see a new layer of regulation appear that conceivably would be redundant considering the regulation that we're already complying with.

The permit process and the process for improving a new span or a significantly expanded span are very similar now to that described in this bill and to what the United States has done historically.

[Don Bell, Liberal, North Vancouver, BC]

You mean for a new span?

[Thomas Garlock]

Precisely.

[Don Bell, Liberal, North Vancouver, BC]

Regarding maintenance on the existing span--just so I understand--is it indeed in the middle of the bridge where the U.S. regulations take over? Is it physically at the boundary line? How does that work? Left span, right side, left span—you know, starboard and port?

[Thomas Garlock]

Technically that's correct, but practically it's not. Maintenance has traditionally been a purview of the provincial and state governments. We receive very little, if any, direction from the United States Federal Highway Administration there. Technically, the standard on the bridge stops at the border, but to ensure maximum safety and efficiency we adapt the most stringent standard and apply that to the entire span. So if in this case Ontario's requirement is stronger than New York's, New York is more than satisfied that we've followed the Ontario provisions because they certainly satisfy their interest.

[Don Bell, Liberal, North Vancouver, BC]

Your biggest problem is not any specific wording, other than the open-endedness that appears to be in their legislation.