ARCHIVED — Vol. 146, No. 13 — June 20, 2012

Registration

SOR/2012-120 June 8, 2012

PILOTAGE ACT

Regulations Amending the Great Lakes Pilotage Tariff Regulations

P.C. 2012-765 June 7, 2012

RESOLUTION

Whereas the Great Lakes Pilotage Authority, pursuant to subsection 34(1) (see footnote a) of the Pilotage Act (see footnote b), published a copy of the proposed Regulations Amending the Great Lakes Pilotage Tariff Regulations, in the annexed form, in the Canada Gazette, Part Ⅰ, on March 10, 2012;

Therefore, the Great Lakes Pilotage Authority, pursuant to subsection 33(1) of the Pilotage Act (see footnote c), hereby makes the annexed Regulations Amending the Great Lakes Pilotage Tariff Regulations.

Cornwall, April 16, 2012

ROBERT F. LEMIRE
Chief Executive Officer
Great Lakes Pilotage Authority

His Excellency the Governor General in Council, on the recommendation of the Minister of Transport, pursuant to subsection 33(1) of the Pilotage Act (see footnote d), hereby approves the annexed Regulations Amending the Great Lakes Pilotage Tariff Regulations, made by the 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
(b) 805
(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.

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 (PPUs) with a fully integrated software/hardware and state-of-the-art system. The Authority is amending 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 is amending 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 is maintaining 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 amendments are beneficial in that they will 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 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 amendments will 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. These amendments will not increase the administrative burden on stakeholders.

Domestic and international coordination and cooperation: These 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 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 on 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 expired on December 31, 2011. The Authority decided 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 (PPUs) with a fully integrated software/hardware and state-of-the-art system.

Objectives

The objective of the amendments to the Great Lakes Pilotage Tariff Regulations (the Regulations) is to allow the Authority to operate on a self-sustaining financial basis. The amendments are intended to help ensure that the Authority realizes for 2012 an operating surplus and positive cash-flow that will 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 amendments address the Authority’s objective to reduce or eliminate cross-subsidization between the Authority’s pilotage districts.

Description

The amendments to the Regulations include

  • 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 will 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 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 will 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 amendments will be beneficial in that it will 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 amendments will 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 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. The pilotage charge in 2012 will 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 will decrease as the 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 amendments, it is estimated that its total pilotage costs will 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.

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 tariff amendment will ensure that its ships will continue to receive a safe, efficient and timely pilotage service that will 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 PPUs 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 PPUs are designed to function as a situational awareness and decision support tool for marine pilots operating in high-risk marine navigation environments. The PPUs 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 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 tariff increases and support the Authority’s objective to eliminate its accumulated deficit by 2014.

These amendments were prepublished in the CanadaGazette, Part Ⅰ, on March 10, 2012, to provide interested persons with the opportunity to make comments or to file a notice of objection with the Canadian Transportation Agency (CTA) as allowed by subsection 34(2) of the Pilotage Act. No comments were received and no notices of objection were filed.

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 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

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

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

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

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

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