Mr. Speaker, I am pleased to respond to the motion by the NDP member for concurrence in the third report of the Standing Committee on Fisheries and Oceans. I thank him for his work on this issue and on many others.
Canada's new government shares the committee's regard and concern for this country's citizens of the north. We fully appreciate the unique socio-economic conditions facing this part of our vast country. However, this motion as it stands now ignores much of the work already completed and currently under way on the question of federal marine services fees and their application north of the 60th parallel. It also ignores the realities of maritime transport in keeping our waters safe and accessible for those who sail them. In the few minutes that I have, I want to develop these themes.
The motion calls for an immediate exemption of marine service fees on vessels that transit to and from waters north of 60. It also calls for a further review of the Canadian Coast Guard's cost recovery policy with respect to northern Canada. As well, it accuses the Coast Guard of being inconsistent with existing exemptions for the north in applying fees on sea lift services to the eastern Arctic.
Let me remind this House of the facts on marine services fees and what Canada's new government is doing to work with industry and the government of Nunavut on this matter.
Marine services fees were initiated in 1996 on commercial shipping in Canadian waters. They apply to commercial ships that derive a direct benefit from the navigational and icebreaking services provided by the Coast Guard. They exist to recover a portion of the costs incurred by the Coast Guard in providing these services.
I should note that the Arctic is not subject to the icebreaking fees. I will come back to this shortly.
Therefore, the fees in question are those charged by the Coast Guard for marine navigation services. These include maintaining aids to navigation such as fixed beacons, lights and floating markers, as well as vessel traffic services.
As part of a national program, these navigation service fees are applied to all commercial cargo vessels, including those that traverse the 60th parallel. Most of this traffic is of course generated by ships delivering goods north, as there is very little north to south commercial traffic. The fees are charged to individual vessels in waters subject to cost recovery and are paid to the Coast Guard. In the case of the eastern Arctic sea lift, the fee is applicable only on the portion of the trip south of 60.
From the outset when the marine services fee program was established, the Department of Fisheries and Oceans and the Canadian Coast Guard recognized the fragile economic conditions and unique challenges facing the north. The program recognized that without additional analysis of the northern situation it would have been premature to apply cost recovery for these services north of 60. The program also excluded cost recovery from transit between remote ports designated by Transport Canada's national marine policy.
In 1998, the marine services fee policy was extended somewhat by replacing Transport Canada's definition of remote ports with places in prescribed zones as designated by the Income Tax Act. These places are typically in areas that rely primarily on marine transport for resupply but whose ports are not economically viable on their own. The ports are usually owned and operated by the federal government.
In taking this step, the Coast Guard accepted the finance department's view that areas in the north deserve special consideration, as they did in the Income Tax Act, based on their economic situation. So it switched from Transport Canada's listing of remote ports to the finance department's listing of places in these prescribed northern zones. The Coast Guard believed this to be a fairer and more representative listing of locations that merit exemption from marine services fees, which is where we are today in regard to marine services fees.
At present there are two exceptions to this national policy that deal with northern and remote areas: commercial ships operating in waters exclusively north of 60, or those that sail between the places in prescribed zones listed in the Income Tax Act. Those are the two exemptions.
All other commercial vessel traffic is subject to the fees as part of the Coast Guard's partial cost recovery. When I say partial cost recovery, I mean just that. The cost for providing these navigational services to Canada's commercial shipping industry south of 60 is in the neighbourhood of $66 million annually. For navigational services exclusively north of 60, the figure is an additional $17.6 million, but as I said, it is not subject to cost recovery.
The total revenue generated from marine navigation services fees last year was about $31 million. Of that, about $100,000 a year comes from the fees levied on ships crossing the 60th parallel, only $100,000 a year. That equates to adding about $1 to the $300 cost of shipping a snowmobile, for example, from Montreal to Iqaluit, or $8 on a $2,000 shipping charge for sending a pickup truck along that same route.
This of course raises some concerns from the government of Nunavut and the shipping industry. Naturally, shipping companies would prefer to see no fees at all.
In terms of added value, I hasten to add that fees for icebreaking services, from which the north receives some benefit, are not applicable north of 60. In fact, last year the cost for icebreaking services provided by the Coast Guard in these waters was about $41 million.
We do not charge for these services because we see icebreaking in the north as an essential service for the public good. It means that northern residents and commercial interests can access safer waterways and access them earlier in the year. It means open harbours and greater opportunities for the people of the north, who maintain Canada's Arctic sovereignty on our behalf.
Moreover, even though most vessels engaged in the sealift begin their journey south of 60, they pay no icebreaking fees there either. This is because the Arctic sealift typically operates from July to October, before the start of icebreaking season.
As well, the Coast Guard provides a number of other services to Canada's north. These services benefit the eastern Arctic resupply, commercial shippers and northern residents to varying degrees, but they are services to which no cost recovery is applied.
In addition to icebreaking, these services include search and rescue, marine communications, environmental response, and direct funding from DFO to maintain 37 remote resupply landing areas.
There is yet another service that the Canadian Coast Guard continues to provide the industry and the residents of Nunavut, despite differing opinions on official responsibility: the Iqaluit beachmaster-harbourmaster program. With no commercial port facilities in Iqaluit, the Coast Guard supplies personnel and equipment to coordinate the arrival, safe mooring and unloading and departure of commercial cargo ships conducting the sealift. The Coast Guard also directs vessel traffic and places mooring buoys in the harbour.
This program is not an official duty of the Coast Guard. As part of the sealift, it should rest with the government of Nunavut. This has been a topic of discussion between previous federal governments and Nunavut for years. In fact, the debate continues today.
However, we continue to provide this service, one that directly benefits the industry and the people of Nunavut. It costs the Coast Guard somewhere between $150,000 to $175,000 to do so. This alone outpaces the $100,000 a year I mentioned a moment ago that is collected from ships transiting to and from north of 60.
In 2005, the Nunavut government asked the previous minister of fisheries and oceans to review marine services fees. Nunavut's Minister of Economic Development and Transportation expressed his government's view that no such fees should be applied because of the already high cost of shipping to the Arctic. This review was completed in June of this year. Shortly thereafter, we shared its findings with the current Nunavut minister and the president of the Chamber of Maritime Commerce.
The review, which has been made public by the Canadian Coast Guard, focused on ships conducting the Arctic sealift. For the sake of clarity, I should add that the sealift is primarily composed of well-established marine companies that provide these resupply services to Nunavut for part of the operating year. It is not an Arctic fleet operating solely north of 60, which would make it exempt from marine services fees.
The review looked into assertions that marine navigation services fees are an unfair burden on Nunavut. It examined the assumption that the fees are a major cost component of transportation and that the policy on these fees is applied incorrectly.
The review found no immediate or compelling reasons to eliminate these fees on commercial ships sailing between south and north of 60. It found that the fee is not a significant contributor to the cost of transportation, citing the figures I stated previously. Generally, the fee adds less than 1% to the cost of shipping to north of 60. In other words, if the marine navigation services fees were to be eliminated, it would not reduce the cost of shipping to the people of Nunavut in any meaningful way.
The review also found that application of this fee was consistent with the exemptions established previously, which I have already discussed. These exemptions were never intended to be permanent. The government of the day implemented them with the understanding that the policy would be reviewed periodically. Adjustments to the new policy could be made as a clearer picture of the northern shipping situation emerged. In effect, that happened in 1998, when the program was only two years old, and it is happening now as the entire marine services fees program is being looked at. This is being done by industry and government together.
I stress, again, that the marine services fees are part of a national cost recovery program that covers part of the expenses incurred by the coast guard in providing safe and accessible waters. As such, there was never any plan by previous governments to extend exemptions perpetually. Periodic reviews of the program allow governments the opportunity to work with industry to bring policies in line with current shipping conditions.
However, the government does share some common ground with the motion before us today. We agree that the Coast Guard's costs recovery policy for the north does merit further consideration as part of a national discussion. At this time we are engaged in discussions with the marine industry to develop a future approach to marine services fees. The goal is to develop a long term arrangement that addresses some of the outstanding issues on this matter between government and industry.
For the shipping industry, we are striving to bring greater stability and predictability to the marine services fees program. For government, or more specifically for the Coast Guard, a renewed approach to marine services fees could better reflect the current realities of commercial shipping. It could also serve to resolve an issue that is impacting the Coast Guard's relationship with the major client group.
These discussions are moving well. Both sides seem to agree that a comprehensive national framework on marine services fees is best for all concerned. Admittedly, the structure of marine navigation service fees is pretty complex. It is made up of an interwoven web of regional rates and applications to reflect commercial shipping patterns in different parts of the country.
Substantive one-off fee adjustments in particular regions could inadvertently and negatively impact the industry in other areas. That is why we have agreed that any changes to the fee should be undertaken at the same time on a national level and in a transparent manner. This, of course, would include fees applied during the Arctic sea lift.
The government does see the value in further discussing this matter with industry in a national context, and we recognize that there could be some benefit to exploring the possibility of a single rate for the Arctic. We will have more to say on the future approach to marine services fees in the coming months. We look forward to discussing our progress with the standing committee at that time and with the members of the House.
I was particularly disappointed, as we discussed this in committee, that this approach was not applied. Why we would proceed on this while there was a national discussion taking place was confusing and disappointing to me.
The government is sensitive to the fact that Canada's north faces unique environmental and socio-economic conditions. We recognize that a high cost of living and the distinct means of resupply are among the challenges of living north of 60.
Governments have tried to provide some relief through tax deductions for northern residents. This appears to me a more appropriate measure to addressing socio-economic imbalances than eliminating fees that go toward much needed navigational services. These services help ensure the safety and timely delivery of the eastern Arctic's critical resupply and they help provide mariners safe passage through often hazardous northern waters. Marine operators there often face high tidal ranges, ice infested waterways and limited port infrastructure.
In our view, these navigational services are as much a necessity to the safe operation of vessels as are the cost of adequate fuel, crew or vessel maintenance, among other expenses. However, as I stated, the cost of these navigational services is small compared to other shipping expenses and the return is very great.
In fact, as the review also noted, increased economic activity in the Arctic will bring greater demand and opportunity for shipping companies operating in the north. The government of Nunavut estimated a 32% increase in the number of scheduled stops as part of the sealift arrangement with suppliers. This in turn places greater demand for Coast Guard services. Eliminating the modest cost recovery associated with marine services fees does not appear to be a feasible option at this time.
The government does not concur with the motion before the House today. What we do agree with is continuing our efforts, in partnership with the industry, to find reasonable options in regard to marine services fees.
The Canadian Coast Guard is an indispensable part of our country's marine transportation network. Ask any mariner who has faced treacherous waters or trouble at sea. The talented and dedicated people behind this unique organization are committed to providing safe passage to all those who ply our waters, but they need the right tools and the right support to do their jobs properly.
We in government are tasked with making the right decisions that balance service to the public with sound fiscal stewardship of public resources. Marine services fees are part of this responsibility in ensuring the Coast Guard can continue its key role in marine safety.
We are committed to the best interest of our northern citizens. For the Department of Fisheries and Oceans, these interests are best served by providing safe and accessible waterways, vital to the well-being of Canadians north of 60.