ARCHIVED — Vol. 146, No. 10 — March 10, 2012

Regulations Amending the Great Lakes Pilotage Tariff Regulations

Statutory authority

Pilotage Act

Sponsoring agency

Great Lakes Pilotage Authority

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Executive summary


Issue: The Great Lakes Pilotage Authority (the Authority), a Crown Corporation listed in Schedule III to the Financial Administration Act, is required by the Pilotage Act (the Act) to set tariffs at a level that allows it to operate on a self-sustaining financial basis. As of December 31, 2011, the Authority has an accumulated deficit of $2.7 million. The Office of the Auditor General in its Special Examination Report of April 2008 required the Authority to take measures to be financially self-sufficient and eliminate its accumulated deficit. The Authority has taken many steps since 2008 to control costs and increase revenues. A tariff amendment is necessary in 2012 to cover operating expenses increases that the Authority is planning to incur in 2012. Included in its 2012 operating costs is the cost of replacement of the Authority’s current pilots’ portable units (PPU) with a fully integrated software hardware and state of the art system. The Authority is proposing to amend the Great Lakes Pilotage Tariff Regulations (the Regulations) to ensure that the revenue it receives is sufficient to cover its costs of providing the pilotage services for its clients and to meet the Authority’s objective as stated in its 2012–2016 corporate plan to eliminate the accumulated deficit by the end of 2014.

Description: The Authority proposes amendments to the Regulations with an equivalent overall increase of 2% on all of its pilotage charges. Tariffs will be increased in the following pilotage districts: Cornwall district, Lake Ontario district, International district No. 2, International district No. 3 and the Port of Churchill. Also, the Authority proposes to maintain the temporary tariff surcharge at 12%, the same percentage as in 2011. This temporary tariff surcharge will be in effect until December 31, 2012.

Cost-benefit statement: These proposed amendments are beneficial in that they would allow the Authority to continue to provide its stakeholders with a safe, efficient and timely pilotage service that ensures protection of the public and its health, environmental and social concerns while taking into account weather conditions, currents, traffic conditions, protection of recreational boating and tourism interests. Based on 2012 traffic projections, the proposed tariff amendment of 2% will generate $350,000 in revenue and the 12% temporary tariff surcharge will generate $2,000,000 of revenue to the Authority.

Business and consumer impacts: The proposed amendments would increase the costs to the shipping industry and have no observable impact on the Canadian consumer. The Authority has consulted its users on numerous occasions regarding this tariff amendment. The Authority’s users are the members of the Shipping Federation of Canada, the Canadian Shipowners Association and the ports that the Authority serves in the Great Lakes. The Authority did not consult with Canadian consumers. This proposal would not increase the administrative burden on stakeholders.

Domestic and international coordination and cooperation: These proposed amendments are not inconsistent, nor do they interfere with the action(s) planned by other government departments/agencies or another level of government. The Authority and its counterpart in the United States consult on a regular basis to coordinate on the delivery of pilotage services and rates within the Great Lakes and no issues have been raised as a result of these proposed amendments.

Issue

The Great Lakes Pilotage Authority (the Authority) is responsible for administering, in the interests of safety, an efficient pilotage service within Canadian waters in the province of Quebec, south of the northern entrance of Saint-Lambert Lock and in and around the provinces of Ontario and Manitoba. The Pilotage Act requires that the Authority set tariffs at a level that permits it to operate on a self-sustaining financial basis. In addition, the Office of the Auditor General, in its Special Examination Report of April 2008, recommended to the Authority to take appropriate measures to become financially self-sufficient and to eliminate its accumulated deficit.

During the latter months of 2008 and early 2009, there was a significant decline in shipping traffic levels due to the worldwide economic recession. In those years, the Authority’s traffic decreased by 42%. The 2009 traffic was the lowest traffic in the Authority’s history. As the North American economy recovered, the traffic trend was reversed in 2010 as traffic increased by 36% from 2009 and the forecasted traffic for 2011 is expected to be 6% more than 2010. The forecasted 2011 traffic increase combined with the cost reduction measures implemented in 2009 and the 3% general tariff increase implemented in 2011 has resulted in the Authority forecasting an operating surplus of $761,000 in 2011 thus reducing its accumulated deficit to $2.7 million at December 31, 2011. The Authority is planning on eliminating its accumulated deficit by the end of 2014 as indicated in its 2012–2016 corporate plan. In 2011, the temporary tariff surcharge was reduced from 15% to 12% and is set to expire at December 31, 2011. The Authority plans to maintain up to December 31, 2012, the temporary tariff surcharge at 12%. The Authority will not be able to eliminate its accumulated deficit by 2014 without the revenue generated by the temporary tariff surcharge.

The Authority has taken many steps since 2008 to control costs and increase revenues. A tariff amendment is necessary in 2012 to cover operating expenses increases that the Authority is planning to incur in 2012 in order to meet the Authority’s objective to eliminate the accumulated deficit by the end of 2014 and to help ensure that the Authority operates on a self-sustaining financial basis. Included in its 2012 operating costs is the cost of replacement of the Authority’s current pilots’ portable units (PPU) with a fully integrated software hardware and state of the art system.

Objectives

The objective of the proposed amendments to the Great Lakes Pilotage Tariff Regulations (the Regulations) is to allow the Authority to operate on a self-sustaining financial basis. The proposed amendments are intended to help ensure that the Authority realizes for 2012 an operating surplus and positive cash-flow that would fully cover the costs of pilotage services to its clients and provide sufficient funding to reduce its accumulated deficit of $2.7 million while continuing to provide a safe and efficient pilotage service in accordance with the Pilotage Act. Also, the proposed amendments address the Authority’s objective to reduce or eliminate cross-subsidization between the Authority’s pilotage districts.

Description

The Authority is proposing

  • the equivalent of a 2% general increase in its pilotage charges by adjusting tariffs in its pilotage districts in the following manner:

    Cornwall district: 4% increase

    Lake Ontario district: 2% increase

    International district No. 1: no increase

    International district No. 2: 3% increase

    International district No. 3: 3% increase

    Port of Churchill: 2% increase

    This general increase is expected to generate $350,000 of revenue to the Authority.

  • the retention, for 2012, of the temporary tariff surcharge at 12%, which is the same percentage as 2011. This temporary tariff surcharge would be in effect until December 31, 2012, and is expected to generate $2 million of revenue. The Authority will not be able to eliminate its accumulated deficit by 2014 without the revenue generated by the temporary tariff surcharge.

Regulatory and non-regulatory options considered

The retention of the existing tariff rates was considered as a possible option. The Authority, however, rejected this status quo position since it forecasted an accumulated deficit of $2.7 million at the end of 2011 and must take measures to ensure its financial self-sufficiency and reduce its accumulated deficit. The proposed increase of tariff rates is necessary to reflect the actual costs for the various pilotage services provided to the industry. Also, in accordance with the Special Examination Report of April 2008, the Authority is required to be financially self-sufficient and eliminate its accumulated deficit.

A second option is to have further reductions in operating costs. However, this option is not deemed to be an alternative since it could reduce the quality of service provided. Approximately 85% of the Authority’s annual revenues are used to pay for pilot salaries, benefits, travel, pilot boat and other operational expenses. The remaining margin covers administrative overhead expenses. The Authority has maintained its administrative expenses at the lowest possible level, in the range of 7% of annual revenues.

The third and recommended option considered is to adjust revenues by implementing an overall tariff increase and maintain the current temporary tariff surcharge. These amendments would help enable the Authority to provide a safe and efficient pilotage service in accordance with the Pilotage Act, operate on a self-sustaining financial basis and reduce its current accumulated deficit. The Authority held numerous meetings with its users and this option was discussed. The Authority’s users are the members of the Shipping Federation of Canada (the Federation) and of the Canadian Shipowners Association (the Association) and the ports that the Authority serves in the Great Lakes. All users were supportive of this option.

Benefits and costs

The revenue generated from the proposed amendments would be beneficial in that it would enhance the Authority’s ability to operate on a self-sustaining financial basis that is both fair and reasonable, while reducing its accumulated deficit in accordance with the Office of the Auditor General’s Special Examination Report of April 2008. These proposed amendments would also be beneficial in that the Authority could continue to provide a safe and efficient pilotage service in accordance with the requirements of the Pilotage Act. Based on 2012 traffic projections, the proposed tariff amendment of 2% should generate $350,000 in revenue and the 12% temporary tariff surcharge should generate $2 million of revenue to the Authority.

For an average-sized ship transiting the Seaway between Montréal and Thunder Bay, the pilotage charge in 2011 was $43,500 for a one-way trip. Should these proposed amendments be approved, the pilotage charge in 2012 would be $44,400 (approximately $2.00 a ton) for a one-way trip. For a round trip, the above charges are doubled. In future years, this tariff amount would decrease as the proposed temporary surcharge will expire on December 31, 2012.

There are presently fewer than 20 companies operating foreign-flag ships within the Great Lakes that must employ Authority pilots. For a foreign-flag ship transiting these waters, its pilotage costs represent approximately 3.5% of its total operating costs. With the adjustment in pilotage costs attributed to the two proposed amendments, it is estimated that its total pilotage costs would remain at approximately 3.5% of the ship’s total operating costs.

In certain districts within the Authority’s jurisdiction, pilotage is shared equally between Canadian and U.S. pilots on a rotational basis. The Authority and its U.S. counterpart regularly exchange information concerning pilotage rates. In 2012, the U.S. pilotage authority intends to increase its tariff rates by an overall 2% and if this occurs, the U.S. rates would be similar to those in Canada, based on parity of the dollar. The U.S. Authority 2012 tariff structure has not yet been finalized.

Rationale

In addressing its current accumulated deficit, the Authority evaluated the impact of a tariff increase and the continuance of the temporary tariff surcharge. This had to be done in a way that will enable the Authority to provide a safe and efficient pilotage service in accordance with the Pilotage Act, operate on a self-sustaining financial basis and reduce its current accumulated deficit. This proposed tariff amendment would ensure that its ships would continue to receive a safe, efficient and timely pilotage service that would protect the public and address environmental and social concerns, both now and in future years.

This tariff amendment will generate $350,000 of extra revenue and the temporary tariff surcharge will generate $2 million of extra revenue and will be used to cover the Authority’s operating expenses and to generate an operating surplus in 2012 in order to reduce the accumulated deficit. The Authority will not be able to eliminate its accumulated deficit by 2014 without the revenue generated by the temporary tariff surcharge which was set at 12%.

The Authority plans to replace its current PPU’s with a fully integrated software hardware and state of the art system at a cost of $250,000 per year. This cost is part of the Authority’s operating expenses. These new PPU’s are designed to function as a situational awareness and decision support tool for marine pilots operating in high-risk marine navigation environments. The PPU’s will require significant ongoing technical support, system maintenance and training as well as periodic software architecture upgrades to support the integration of the latest advances in e-navigation functionality and navigation chart formats. They will also increase efficiency and safety for all users, therefore reducing operating costs.

With respect to international cooperation and coordination, it should be noted that the Authority regularly exchanges information concerning pilotage rates and other matters with its U.S. pilotage counterpart since pilotage is shared on an equal basis in certain districts within the Authority’s jurisdiction. The U.S. tariffs are comparable to the Canadian tariffs.

The proposed tariff amendment is consistent with the directive from the Treasury Board and the recommendation of the Auditor General as contained in its Special Examination Report of April 2008. This requires the Authority to take appropriate measures to become financially self-sufficient and eliminate its deficit.

Consultation

The Authority’s major stakeholder is the Federation, which represents the owners/operators of foreign-flag ships that operate within the Great Lakes system and are required to use the services of Authority pilots while transiting these waters. These foreign-flag ships represent 85% of the Authority’s business and the remaining 15% pertains to the Canadian domestic fleet represented by the Association. The Association represents approximately 70 Canadian-flag ships and most of these ships do not use the services of Authority pilots. Approximately 10 ships within the domestic fleet, however, are Canadian tankers that employ the services of a pilot when transiting certain districts within the Authority’s jurisdiction or when the ship/cargo charterers require the ship to utilize the services of a pilot.

The Authority met with representatives from the Federation on August 30, 2011, and on November 24, 2011, with the Association on October 20, 2011, and with the various port authorities and key stakeholders to discuss current and future traffic levels within the Great Lakes and to present its current financial position. The Authority indicated that during 2008 and 2009, traffic levels have been seriously affected, decreasing by 42% over the two-year period, due to the worldwide economic recession. However, the Authority saw traffic increase by 36% in 2010 and forecasted a 6% increase in 2011 due to the economic recovery in North America. The Authority generated an operating surplus of $761,000 for 2011 which permitted to reduce its accumulated deficit to $2.7 million as of December 31, 2011.

Based on the active participation and input throughout the consultative process with the Federation, the Association and the various ports, the stakeholders were involved in determining appropriate proposed tariff increases and support the Authority’s objective to eliminate its accumulated deficit by 2014.

Implementation, enforcement and service standards

Section 45 of the Act provides an enforcement mechanism for these Regulations in that no customs officer at any port in Canada shall grant a clearance to a ship if the officer is informed by an Authority that pilotage charges in respect of the ship are outstanding and unpaid. Section 48 of the Act stipulates that every person who fails to comply with the Act or Regulations is guilty of an offence and liable on summary conviction to a fine not exceeding $5,000. This existing mechanism is expected to be sufficient for the implementation and enforcement of the proposed amendments.

Contact

Mr. R. F. Lemire
Chief Executive Officer
Great Lakes Pilotage Authority
P.O. Box 95
Cornwall, Ontario
K6H 5R9
Telephone: 613-933-2991
Fax: 613-932-3793

PROPOSED REGULATORY TEXT

Notice is hereby given, pursuant to subsection 34(1) (see footnote a) of the Pilotage Act (see footnote b), that the Great Lakes Pilotage Authority, pursuant to subsection 33(1) of that Act, proposes to make the annexed Regulations Amending the Great Lakes Pilotage Tariff Regulations.

Interested persons who have reason to believe that any charge in the proposed Regulations is prejudicial to the public interest, including the public interest that is consistent with the national transportation policy set out in section 5 (see footnote c) of the Canada Transportation Act (see footnote d), may file a notice of objection setting out the grounds for the objection with the Canadian Transportation Agency within 30 days after the date of publication of this notice. The notice of objection must cite the Canada Gazette, Part Ⅰ, and the date of publication of this notice, and be sent to the Canadian Transportation Agency, Ottawa, Ontario K1A 0N9.

Cornwall, March 2, 2012

ROBERT F. LEMIRE
Chief Executive Officer
Great Lakes Pilotage Authority

REGULATIONS AMENDING THE GREAT LAKES PILOTAGE TARIFF REGULATIONS

AMENDMENTS

1. Section 4 of the Great Lakes Pilotage Tariff Regulations (see footnote 1) is replaced by the following:

4. A surcharge of 12% is payable until December 31, 2012 on each pilotage charge payable under section 3 for a pilotage service provided in accordance with any of Schedules 1 to 3.

2. (1) Subsection 1(4) of Schedule 1 to the Regulations is replaced by the following:

(4) If a ship, during its passage through the Welland Canal, docks or undocks for any reason other than instructions given by The St. Lawrence Seaway Management Corporation, the basic charge is $52 for each kilometre ($85.35 for each statute mile), plus $318 for each lock transited, with a minimum charge of $1,062.

(2) The portion of items 1 to 15 of the table to subsection 1(5) of Schedule 1 to the Regulations in column 2 is replaced by the following:

Item

Column 2

Basic Charge ($)

1.

(a) 1,957

(b) 1,957

2.

2,093

3.

1,235

4.

3,640

5.

2,093

6.

1,515

7.

4,219

8.

2,717

9.

2,093

10.

1,235

11.

2,738

12.

2,738

13.

2,126

14.

1,235

15.

1,515

(3) The portion of items 1 to 4 of the table to subsection 1(6) of Schedule 1 to the Regulations in column 2 is replaced by the following:

Item

Column 2

Basic Charge ($)

1.

2,794

2.

2,340

3.

1,052

4.

1,052

3. (1) The portion of items 1 and 2 of the table to subsection 2(1) of Schedule 1 to the Regulations in column 2 is replaced by the following:

Item

Column 2

Basic Charge ($)

1.

(a) 924

(c) 562

2.

(a) 880

(b) 620

(c) 538

(2) Subsection 2(3) of Schedule 1 to the Regulations is replaced by the following:

(3) The basic charge for pilotage services consisting of a lockage and a movage between Buffalo and any point on the Niagara River below the Black Rock Lock is $1,583.

4. Subsections 3(1) and (2) of Schedule 1 to the Regulations are replaced by the following:

3. (1) Subject to subsections (2) and (3), if a pilot is detained for the convenience of a ship after the end of the pilot’s assignment or during an interruption of the passage of the ship through designated waters or contiguous waters, an additional basic charge of $74 is payable for each hour or part of an hour that the pilot is detained.

(2) The maximum basic charge payable under subsection (1) for any 24-hour period is $1,776.

5. Section 4 of Schedule 1 to the Regulations is replaced by the following:

4. (1) Subject to subsection (2), if the departure or movage of a ship to which a pilot has been assigned is delayed for the convenience of the ship for more than one hour after the pilot reports for duty at the designated boarding point, a basic charge of $74 is payable for each hour or part of an hour of that delay, including the first hour.

(2) The maximum basic charge payable under subsection (1) for any 24-hour period is $1,776.

6. Subsections 5(1) to (3) of Schedule 1 to the Regulations are replaced by the following:

5. (1) If a request for pilotage services is cancelled after the pilot reports for duty at the designated boarding point, a basic charge of $1,545 is payable.

(2) Subject to subsection (3), if a request for pilotage services is cancelled more than one hour after the pilot reports for duty at the designated boarding point, in addition to the basic charge set out in subsection (1), a basic charge of $74 is payable for each hour or part of an hour, including the first hour, between the time that the pilot reports for duty and the time of cancellation.

(3) The maximum basic charge payable under subsection (2) for any 24-hour period is $1,776.

7. Subsections 8(1) and (2) of Schedule 1 to the Regulations are replaced by the following:

8. (1) If a pilot is unable to board a ship at the normal boarding point and must, in order to board it, travel beyond the area for which the pilot’s services are requested, a basic charge of $445 is payable for each 24-hour period or part of a 24-hour period during which the pilot is away from the normal boarding point.

(2) If a pilot is carried on a ship beyond the area for which the pilot’s services are requested, a basic charge of $445 is payable for each 24-hour period or part of a 24-hour period before the pilot’s return to the place where the pilot normally would have disembarked.

8. The portion of items 1 to 4 of the table to section 1 of Schedule 2 to the Regulations in columns 2 and 3 is replaced by the following:

Item

Column 2


Basic Charge ($)

Column 3

Minimum Basic Charge ($)

1.

4,209

N/A

2.

19.32 for each kilometre (32.16 for each statute mile), plus 537 for each lock transited

1,083

3.

754

N/A

4.

1,620

N/A

9. Subsections 2(1) and (2) of Schedule 2 to the Regulations are replaced by the following:

2. (1) Subject to subsections (2) and (3), if a pilot is detained for the convenience of a ship after the end of the pilot’s assignment or during an interruption of the passage of the ship through the Cornwall District, an additional basic charge of $141 is payable for each hour or part of an hour that the pilot is detained.

(2) The maximum basic charge payable under subsection (1) for any 24-hour period is $3,384.

10. Section 3 of Schedule 2 to the Regulations is replaced by the following:

3. (1) Subject to subsection (2), if the departure or movage of a ship to which a pilot has been assigned is delayed for the convenience of the ship for more than one hour after the pilot reports for duty at the designated boarding point, a basic charge of $141 is payable for each hour or part of an hour of that delay, including the first hour.

(2) The maximum basic charge payable under subsection (1) for any 24-hour period is $3,384.

11. Subsections 4(1) to (3) of Schedule 2 to the Regulations are replaced by the following:

4. (1) If a request for pilotage services is cancelled after the pilot reports for duty at the designated boarding point, a basic charge of $1,605 is payable.

(2) Subject to subsection (3), if a request for pilotage services is cancelled more than one hour after the pilot reports for duty at the designated boarding point, in addition to the basic charge set out in subsection (1), a basic charge of $141 is payable for each hour or part of an hour, including the first hour, between the time that the pilot reports for duty and the time of the cancellation.

(3) The maximum basic charge payable under subsection (2) for any 24-hour period is $3,384.

12. The portion of items 1 and 2 of the table to section 1 of Schedule 3 to the Regulations in column 2 is replaced by the following:

Item

Column 2

Basic Charge ($)

1.

1,507

2.

1,053

COMING INTO FORCE

13. These Regulations come into force on the day on which they are registered.

[10-1-o]

Footnote a
S.C. 1998, c. 10, s. 150

Footnote b
R.S., c. P-14

Footnote c
S.C. 2007, c. 19, s. 2

Footnote d
S.C. 1996, c. 10

Footnote 1
SOR/84-253; SOR/96-409