Transport Committee on May 2nd, 2019

[The Chair (Hon. Judy A. Sgro (Humber River—Black Creek, Lib.)), Liberal, Judy Sgro]

I call to order this meeting of the Standing Committee on Transport, Infrastructure and Communities. Pursuant to Standing Order 108(2), we are studying the subject matter of clauses 225 to 279, part 4, divisions 11 and 12, of Bill C-97.

Welcome, committee members and all of our witnesses. My apologies for the forthcoming interruption of our meeting, but we'll try to get as much done as we possibly can in a shorter period of time.

By the way, we are not in camera. This meeting is public and will be recorded at the same time.

Before we go on to our witnesses, Mr. Badawey.

[Vance Badawey, Liberal, Niagara Centre, ON]

Thank you, Madam Chair. I'll be quick.

Members of the committee have received the motion that I had put forward, and I think it was put aside, because who knows if the bells are going to go again quickly. So we do have a motion before us:

That the motion of Tom Kmiec adopted on Thursday, April 9, 2019: “That the Committee undertake a study on allowing Canadians to bring their legally owned, U.S.-registered and plated passenger vehicles into Canada for a defined temporary period, in the same manner that U.S. citizens may do in Canada, without having to pay any taxes, duties or importation fees; that the Committee report its findings to the House no later than 90 sitting days following adoption of this motion; that the Committee make recommendations on actions the Government of Canada should undertake to adopt a border control system that allows for the temporary use of American-plated vehicles by Canadian citizens; that no less than a one-hour meeting be dedicated to this study; and that the Committee request that the Government table a comprehensive response to its report” be rescinded and replaced with the following motion:

That the Committee undertake a study on allowing Canadians to bring their legally owned, U.S.- registered and plated passenger vehicles into Canada for a defined temporary period, in the same manner that U.S. citizens may do in Canada, without having to pay any taxes, duties or importation fees, and that a one-hour meeting be dedicated to this study and that the Committee receive an update from the Government of Canada with respect to undertaking a system that allows for the temporary use of American-plated vehicles by Canadian citizens.”

It's self-explanatory. I think that for the most part, from the discussions that I've had with members of the Conservative Party, this is going to expedite the process, as is their desire, versus spending the time. Especially given the fact that we're coming up to the end of session, I think this would be prudent for us to do.

Thank you, Madam Chair.

[The Chair, Liberal, Judy Sgro]

Any questions or comments?

Ms. Block.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

As Mr. Badawey pointed out, I believe he probably had conversations with Mr. Kmiec, who sees this as a friendly amendment.

[The Chair, Liberal, Judy Sgro]

Is there any further discussion?

(Motion agreed to)

We now go to our witnesses. I took the liberty of asking all of them to come to the table at once. There will be five presentations. I know we limit it to five, but I'm going to ask if you could limit it to three, if possible, just so that members will have a chance to ask any questions that they have. Keep your remarks as to the point as possible of whatever it is you want to make sure that we understand fully on the issue.

We'll start with the Chamber of Marine Commerce, and Bruce Burrows, the president.

I turn the floor over to you, Mr. Burrows.

[Bruce Burrows, President, Chamber of Marine Commerce]

Good morning, everyone.

Thank you, Madam Chair, and thank you for the invitation to appear before the committee.

My name is Bruce Burrows. I'm the President of the new Chamber of Marine Commerce.

I'm joined today by Robert Turner, our Vice-President of Operations.

I'll launch right into our remarks, as I know you're all aware of the CMC and what we do.

The CMC represents over 130 marine industry members in Canada and the United States.

I can't stress how fundamentally important these reforms are to Canada's pilotage system. The Pilotage Act hasn't seen a major overhaul since the early seventies, and it shows, quite frankly. After 45 years, we're finally seeing changes in Bill C-97 that will set out a framework that will encourage greater objectivity, transparency and consistency. All of these are essential elements to good governance, which has been lacking in today's monopolized pilotage system.

The Pilotage Act will now have clear purpose and principles to guide decision-making, and pilotage services are to be provided in an efficient and cost-effective manner.

Use of evolving technology and sound risk management are also brought to the forefront.

[Robert Turner, Vice-President, Operations, Chamber of Marine Commerce]

In addition, it is important for us to note the following five critical changes in the bill: separating of regulatory authority from the delivery of pilotage services; transferring of responsibilities for regulating and issuing pilotage certificates from the pilotage authorities to Transport Canada; giving Transport Canada regulatory responsibility for risk assessments and for the establishment of compulsory pilotage areas; ensuring that service contracts can't be used to address regulatory matters, thereby circumventing the regulatory process; and finally, requiring that service contracts be made publicly available.

Each of these is key to ensuring objectivity in decision-making and avoiding areas of conflict, and to ensure that services are provided with efficiency and cost-effectiveness in mind.

To build on the cost-effectiveness aspect, we are keen to work with Transport Canada on the development of a national certification system that promotes on-board training and certification of a company's masters and officers to pilot their own vessels, similar to what we already have in place on the Great Lakes.

[Bruce Burrows]

This change alone would be a huge improvement to the out-of-date system that currently exists in other pilotage areas.

However, one issue that was not included for reform is one that we on the industry side believe is critical in giving pilotage authorities the full control of their service delivery. Authorities do not have the ability to choose the hiring model that meets their needs, often locking them into costly contracts with monopoly pilot corporations, instead of being able to hire employee pilots or contract with individual pilots.

This lack of flexibility will hamper pilotage authorities from being able to choose the service delivery model that is right for them, and will result in higher charges for their customers, while at the same time not providing any service improvements. This is a major concern. It was a recommendation in the review, but it has not carried through into the act recommendations.

I know that there will be a 10-year review of the Pilotage Act, should this pass, and we will continue to seek this reform in future reviews.

We're cautiously optimistic as this point. While a great suite of reforms has been proposed per this division in the budget implementation act, passing the bill is half the battle in reforming Canada’s pilotage system. The heavy lifting to reform the system will take place in the transition of the regulatory reform and the supporting policies and programs from the pilotage authorities to Transport Canada.

The updated system must take the clear direction provided by this bill, and that provided by the Pilotage Act review report, and apply it based on the new purpose and principles contained in the act.

Once again, thank you for the invitation to appear, and we'd be happy, of course, to answer any questions later.

[The Chair, Liberal, Judy Sgro]

Thank you both very much.

We'll go on to Mr. Lewis-Manning, President of the Chamber of Shipping of British Columbia.

[Robert Lewis-Manning, President, Chamber of Shipping of British Columbia]

Good morning, Madam Chair, and members of the committee. I'll try to be brief as possible and not repeat anything I've heard from our colleagues from the Chamber of Marine Commerce.

Overall, the proposed amendments to the Pilotage Act are supported and will provide a good basis for modernizing the pilotage framework in Canada, a framework that has largely gone untouched for decades.

Generally, Canada's ability to manage the evolution of risk from shipping has been admirable, and statistics support this assertion. While the number and size of commercial cargo and cruise ships has increased steadily, the rate of shipping accidents as reported by the Transportation Safety Board has remained static in the past years and has decreased over the longer-term.

Canada's marine safety network, which includes professional pilot corporations and employee pilots in compulsory pilotage areas, has served Canada and coastal communities well. However, in 48 years, a great deal has changed in safety management practices, available technology, trade and vessel traffic patterns, along with the knowledge of impacts from shipping and our capacity to mitigate those at impacts.

With increasing competitive pressures from the United States and internationally, Canada's marine supply chain must strive to be as competitive as possible while ensuring that it appropriately manages risk and protects our marine ecosystems. We are pleased to see that the proposed purpose and principle statements clearly aim to address these three requirements.

Shipping in Canada is facing new challenges that will potentially demand changes in the way ships operate as they transit to and from Canadian ports. One very topical challenge is addressing physical and acoustic impacts of shipping on species at risk.

Ships create an acoustical disturbance underwater that interrupts the ability of the endangered southern resident killer whale, one of many other species at risk, to locate its prey, chinook salmon. The marine industry, in partnership with the port of Vancouver, Department of Fisheries and Oceans, and Transport Canada, has been working collaboratively to identify and implement measures to reduce vessel noise, including developing the first ever conservation agreement for an aquatic species in Canada under the Species at Risk Act.

While reducing vessel speeds reduces underwater noise levels and the potential for ship strikes, this places additional demands for pilots in compulsory pilotage areas that will affect the costs of shipping and potentially the competitiveness of the Canadian supply chain.

The proposed amendments to the Pilotage Act set the stage for developing a more adaptive pilotage framework, and its success could be increased if the proposed amendments permit new approaches to the delivery of services.

The framework could include new ways of managing mandatory pilotage zones, exchanging pilots within these zones, and revenue models that more appropriately value the service in a sustainable and competitive manner.

The proposed amendments centralize many of the regulatory powers, as you have already heard. Overall, this is viewed as positive, especially as it relates to the standardization and the management of risk.

The evaluation of risk, risk tolerance and risk mitigation in Canadian waters is very asymmetrical between the current pilotage regions. While some of this is logical due to unique situations, much of it is not, and that results in significant disparities and anti-competitive policies.

The ownership and management of risk in Canadian waters is somewhat awkward, and it is often unclear which federal department is the lead. It is hoped that these amendments will solidify Transport Canada's role as the lead in managing risk in Canadian waters.

Once this legislation is implemented, it will be very important to ensure that Transport Canada is enabled to successfully manage the national framework. lt will need the resources and, most importantly, the technical expertise to transition the regulatory authority appropriately. lt will also need the active support of the four pilotage authorities, which have considerable experience in understanding the uniqueness of their individual regions.

ln conclusion, we support these amendments and thank the government for its bold approach to modernization. We encourage the committee to highlight the importance of building a more flexible, adaptable and competitive pilotage framework that will continue to protect our pristine coasts and waterways and facilitate trade.

Thank you very much.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We go now to the Shipping Federation of Canada. Michael Broad is president and Sonia Simard is the director of legislative and environmental affairs.

[Michael Broad, President, Shipping Federation of Canada]

Thank you, Madam Chair.

We are a national trade association. Our members are the owners, operators and agents of ships trading between Canada and overseas ports. Their vessels operate in all four pilotage authority areas in Canada from coast to coast. These ships, operating internationally, shoulder most of the pilotage costs in Canada.

The existing Pilotage Act has remained largely frozen in time since 1972 despite changes in navigational technology, ship design and communications. We strongly believe that Bill C-97 will provide a solid basis from which to continue the much-needed task of modernizing pilotage service in this country. We therefore urge members of this committee to ensure that these amendments are passed into law as soon as possible.

In Canada, pilotage authorities are mandatory, and delivered under a legislated monopoly with a for-profit component. More specifically, under the existing Pilotage Act, pilotage authorities are solely responsible for the administration of pilotage services, while pilots are responsible for delivering these services either as employees of the authorities or as for-profit corporations on a contractual basis.

Before going any further, we wish to note that the existing act has served as an excellent tool for ensuring safe navigation in Canadian waters, and the amendments proposed under this bill in no way detract from this essential value of the pilotage system. Unfortunately, the present pilotage model lacks accountability and transparency, in some cases is insufficiently responsive to user needs, and does little to foster a culture of continuous improvement or cost competitiveness. As a result, the uptake of new technology has been less than optimal and the system has been unable to control costs.

We are therefore pleased to note that the amendments to the Pilotage Act proposed under Bill C-97 will provide a number of important tools for addressing these concerns and modernizing the delivery of pilotage services in Canada. One of the key tools provided under the bill is the addition of an explicit “purpose and principles” clause that will directly shape how pilotage service is delivered and how legislative, administrative and judicial powers are exercised. Given the important role this clause will play in the way service is delivered and enforced, we have proposed a handful of amendments in the form of additional wording to strengthen the framework that Bill C-97 provides. Those amendments can be found in our written submission.

In order to further strengthen the implementation of the act, we also respectfully request that this committee consider making comments in its report on the need to ensure that Transport Canada continues to work towards greater transparency and accountability from pilot corporations, given their status as legally imposed monopoly service providers. In addition, in a context where the regulatory framework will be consolidated under Transport Canada, we urge the committee to stress the importance of providing Transport with the necessary resources to deliver in terms of regulatory development while also ensuring that pilotage authorities are provided with the necessary management tools to remain effective.

Finally, there is one element of division 11 that we object to, the transfer of the full costs of administering the legislation from Transport Canada to the private sector. We are unaware of any other activity-specific legislation that would allow the minister to pass on these costs to industry. In addition, it would seem that any cost recovery initiative should be subject to the Service Fees Act, which comes with its own set of guidelines, rules and standards. This proposal also fails to acknowledge the public good component involved in legislating pilotage services in Canada.

To summarize our asks, first, we strongly support the amended pilotage framework proposed under division 11 of Bill C-97, and ask the committee to ensure that it is passed into law as soon as possible. We ask you to consider one set of very targeted amendments to the purpose and principles clause, which will further strengthen the framework from a user's perspective. Finally, we ask the committee to consider the removal of the extraneous clause with respect to the transfer of Transport Canada's administration costs, which goes beyond mandatory pilotage and, in our opinion, differs from government-wide policies.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Broad.

I will need to move on now to the Atlantic Pilotage Authority, with Mr. Griffiths, Captain and Chief Executive Officer.

[Captain Sean Griffiths, Chief Executive Officer, Atlantic Pilotage Authority]

Good morning, Madam Chair and other members. Thanks for allowing us the opportunity to sit here this morning to talk briefly about what we do on the east coast and how the amendments could affect pilotage services in a positive way.

As you know, the APA provides licensed pilots to ships that enter our waters, to ensure that these ships travel within the pilotage area as safely and efficiently as possible. The operations of the authority are organized according to geographic location, and the APA has designated 17 areas requiring compulsory pilotage, with one further area currently in the regulatory process. Each of these 17 areas has its own licensed pilots; its own delivery model and arrangements; and unique customers, industries and tariff structure.

In the last five years, the APA has performed 42,397 assignments, including 16,400 tanker movements. We have 106 total employees. This includes both full-time and casual employment. Nearly all of the pilots licensed by the authority are employees. The APA has 50 employee pilots who provide services to the busiest pilotage areas. However, the authority also has 11 pilots who are entrepreneurs and contract with the authority for pilotage services in areas that have small volumes of traffic. The employee pilots do perform 90% of our assignments in the Atlantic.

Under the Pilotage Act, shipmasters who have the required experience and have passed a certificate examination are able to pilot their own vessels in their designated areas. The APA has approximately 79 masters operating with certificates in the Atlantic provinces today. There's a significant number of these movements in the ports of St. John's and Halifax. In 2018, there were a total of 2,800 movements done by certificated masters, an increase from 2,200 the year before. These movements by certificated masters saved the industry about $6.4 million in pilotage fees last year, and $4.8 million in 2017.

Safety is paramount to the authority, and we're pleased to report that the authority has maintained a safety record that is exemplary, with an incident-free rate of 99.94%. The few shipping incidents that have occurred have been without injuries, and no pollutants have been released into Canadian waters. With a focus on maintaining this outstanding record, the APA has now acquired an ISO 9001 quality management system.

As for amendments resulting in efficiencies for APA and the industry as a result of the changes in the act, tariff setting is one of them. The APA sets aside one month for consultations with industry, and once agreed to by industry, it can take as long eight months to get a tariff adjustment approved through the current regulatory process.

Recently, APA has resorted to posting tariff rates for a two-year period to eliminate lost revenue from these delays. This ensures the adjustments are in place each January 1, but accuracy of projected activity and inputs is compromised. This leads to more variance in financial results, where the APA has significant periods of losses or other stretches of time with greater amounts of profit than desired. The new procedure would allow these adjustments to be made more quickly and based on more current information and forecasts. This should reduce the length of time the APA suffers losses or the periods where the APA has more than required profits.

Due to the number of ports in Atlantic Canada, the APA uses pilotage risk management methodology, or PRMM, regularly to measure risk. Between 2010 and 2017, the authority conducted 22 preliminary scans of ports. In recent years, the authority has also conducted 12 full PRMM studies. These studies are used to determine the ports and the vessel classes that must be subject to compulsory pilotage. They take a significant amount of time, resources, personnel and finances, and the results are not often decisive. The APA, as the regulator and the service provider, has at times been seen by interested parties as in a conflict. The proposed amended act removes the APA as the regulator for these determinations and reduces the appearance of potential bias by increasing transparency.

In terms of investment vehicles, the Pilotage Act currently limits the authority's investments to include only instruments that are guaranteed by federal, provincial, or municipal governments. There are other low-risk instruments offered by major banks with higher rates. Having the ability to invest in vehicles with a higher return would result in greater savings for capital replacement without a significant increase in risk.

The progress of technology and advancements in risk evaluation are continuous. Although this is captured in the amendments, industry will continue to evolve. Thus, the 10-year review of the act will be important so that future changes can be incorporated into the delivery of pilotage services.

Since 1972, of course, the four authorities have made their own regulations to react to their own unique circumstances. With regulations being centralized in Ottawa, with Transport Canada as the regulator, there will be more opportunity to align some of the APA regulations with the others, becoming more efficient and easier to understand for industry and more transparent for all parties.

The APA and its pilots are keenly interested in ensuring that safety is not compromised when new facilities are built or when a change in stakeholders is expected in a particular port. The authority makes its pilots available to assist industry and communities with various marine projects. Since 2014, the APA has provided consultation services on over 22 projects that have stretched through all districts.

[The Chair, Liberal, Judy Sgro]

Thank you very much. I'm sorry, but I'm going to have to cut you off.

We'll go on to Simon Pelletier, President of the Canadian Marine Pilots' Association.

[Captain Simon Pelletier, President, Canadian Marine Pilots Association]

Thank you, Madam Chair. Good morning, members of the committee.

The CMPA is a professional body that represents Canada's licensed pilots from the Avalon Peninsula to Vancouver Island. With me today is Captain Rae, Vice-President for the Atlantic region, where 60% of the oil transported in Canadian waters transits every year. Also with me is Captain Michael Burgess, who is representing the pilots operating in the industrial heart of the continent, the Great Lakes region.

For my part, I am an active pilot on the St. Lawrence, and since 2014 I've been president of the International Maritime Pilots' Association, which represents pilots in over 50 countries.

Canada's pilotage system has been highly effective, and some 50,000 pilotage assignments are completed every year without incident because its foundation is rock solid. Safe navigation is recognized as a matter of paramount public interest, and it is delivered by rigorously trained pilots who are allowed to exercise their best judgment, independent of undue external influence, in a system that takes special account of unique local circumstances.

Twenty per cent of Canadian exports and imports are moved by water, which results in cargo worth over $210 billion yearly being transported by pilots to its destination. Through their work, pilots play an important role in bringing our natural resources to market in an environmentally responsible manner and in supporting the country's international trade. Not only does high-performance pilotage contribute to prevent accidents and avoid cleanup costs, but also it provides near certainty that access to critical marine infrastructure such as ports will not be compromised, thereby avoiding costly disruptions to supply chain operations.

The amendments to the Pilotage Act respect this strong foundation. By reaffirming the most fundamental principles of the system, such as the professional independence of pilots and high standards for their licensing, the legislation reflects the preoccupation of Canadians for environmentally responsible practices.

One outcome of the Pilotage Act review that is gratifying is the clear conclusion, reached in the independent studies commissioned by Transport Canada, that Canada's system performs remarkably well. I will quote from the study by the AIM group on “Economic and Competitive Considerations in the Provision of Marine Pilotage in Canada”, in particular the conclusion that “in the context of the national economy as a whole, pilotage costs do not negatively affect Canada's trade competitiveness for importers and exporters”. That is especially noteworthy.

At the same time, the legislation suggests important changes. For example, the 2019 Pilotage Act brings forward a new clarity of purpose by enunciating principles that all stakeholders can support, including the promotion of safe navigation in the public interest, a focus on efficiency and cost-effectiveness and a requirement that risk-management tools be used effectively and that evolving technologies be taken into consideration.

This statement of principles reflects accommodations made by all parties, with each party able to see their interests represented in the result. Moreover, it reflects not only great balance between the interests of various marine stakeholders, but remarkable balance between the interests of the marine transportation sector and the public interest.

The statement of purpose and principles is a great illustration of the amendments as a whole. They constitute a single package that cannot easily be changed without disrupting the remarkable equilibrium achieved through the process undertaken. Because of this, we are not suggesting changes to the proposed legislation. We think that other parties should also respect the integrity of the whole as put forward. The package before you was achieved through a long process of deliberation, and it is the right package.

In closing, let me underline a few more ways by which the legislation improves an already robust system. The provision dealing with compliance and enforcement has been brought up to par with other legislation. These measures are healthy and make application of the act more certain. The important role given to a specialized tribunal is a good example. The amendments also provide for transparency in the contracting of pilotage services by pilotage authorities, with contracts now available to all interested parties.

The act is also modernized, in that it allows the minister to administer and enforce it using electronic means.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Pelletier. I'm sorry to interrupt.

We can go on to the members' questioning.

Ms. Block, you have six minutes.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

I want to thank all of our witnesses for being here today and accommodating the shortened period of time that we have to ask you questions, notwithstanding the fact that all of these substantive changes have been included in a budget implementation act that, in and of itself, shortens the kind of scrutiny that we would be able to give to the changes in this act.

Having said that, I know there have been lengthy consultations in regard to this pilotage review, as have been referred to. I'm sure none of us want to even believe that the 1970s was 50 years ago and that it's been that length of time since there have been any changes to this act.

I take your point that it was time, and I do hear that you are cautiously optimistic about the act as it stands today and supportive of the amendments, albeit you do have some recommendations.

I'm sure you're all aware that we can take up those recommendations, and certainly it will be up to the governing party whether or not they go forward. If they do go forward, they will go forward to the finance committee, where that committee will determine whether or not those recommended amendments will be made to the budget implementation act.

My first question will be for you, Mr. Pelletier.

Reflecting on the second last paragraph of your April 24 letter to our committee, Chair, perhaps for the rest of the witnesses, I'll just quote what was in your letter. You said:

What is perhaps most gratifying about the proposed amendments is that the changes to the Pilotage Act will contribute to further Canada’s economic prosperity by optimizing our capacity to trade competitively and responsibly. In particular, the amendments enhance the safety of marine transportation to facilitate the movement of such dangerous cargo as petroleum products, while reflecting the preoccupations of the Canadian public for environmentally-responsible practices.

I know that I'm going to have an opportunity to ask this question of your colleagues from British Columbia, but first I want to ask you about Bill C-48, the government's oil tanker moratorium act, of you specifically as the president of the national association. How does the marine pilot industry view the concept of a moratorium on shipping?

[Capt Simon Pelletier]

First of all, we have to understand that our job, our expertise, is to pilot ships in compulsory pilotage areas. Our job is not to define which area ships should go or not go. With that understanding, when we are dispatched to pilot ships safely into an area with appropriate mitigation, that's what we do, but we need to be dispatched to such a zone.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Thank you.

I also appreciate the information that was shared with us that of 225,000 pilotage assignments in Canada, over 99.9% were incident-free. I would say that that's the same safety record of our pipelines here in Canada.

My next question would be for you, Mr. Griffiths.

Would you speculate on what impact an oil tanker moratorium would have on Canada's east coast and the commerce on the east coast?

[Capt Sean Griffiths]

Twelve of our 17 ports in Atlantic Canada ship large volumes of oil and petroleum products in and out of port. I can imagine it's a way of life back in the east, and it has been for quite some time. We move a lot of oil in and out of our ports. Placentia Bay alone, for instance, has 1,000 to 1,100 tanker movements every year on average, so a moratorium would, I'm sure, devastate the region.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Thank you for that, especially given the safety record of your operations.

My last question would be for any one of you who might want to comment on this.

[The Chair, Liberal, Judy Sgro]

You have one minute and eight seconds.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

As Conservatives, we support enhancing marine safety and we definitely understand that you would all agree that it's happening through the changes to this act.

Can you tell us more specifically how these changes to the Pilotage Act would increase marine safety?

[Robert Lewis-Manning]

Ms. Block, I'm happy to answer that.

Probably the first piece—and it's one of a few pieces—is that the centralization of the regulatory power within Transport Canada means there should be—though I won't say there will be—standardization across the entire marine system in Canada that looks at risk in a common approach. I think there are examples where that has not happened in the current framework.