Canada Gazette, Part I, Volume 149, Number 46: Regulations Amending the Atlantic Pilotage Tariff Regulations, 1996

November 14, 2015

Statutory authority

Pilotage Act

Sponsoring agency

Atlantic Pilotage Authority

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Issues

In accordance with recommendations from the Canadian Transportation Agency (the CTA) and its customers, the Atlantic Pilotage Authority (the Authority) strives to be financially self-sufficient on a port-by-port basis, as well as for the Authority as a whole. The Authority has absorbed losses throughout the region over the past two years which has left the organization with cash shortages as payments are made for loan repayments and other obligations.

After analyzing projections for coming years, and consulting with industry, the Authority has determined that 9 of the 17 compulsory ports would require tariff adjustments to remain financially self-sufficient on a port-by-port basis and provide the service levels required by industry, without cross-subsidization, and that a 36-month surcharge is required to recover losses and provide funding for obligations.

Background

The Authority is responsible for establishing, operating, maintaining and administering, in the interests of safety, an efficient pilotage service within the Canadian waters in and around the Atlantic Provinces. As required by the Pilotage Act, the Authority prescribes tariffs of pilotage charges that are fair, reasonable and consistent with providing revenues sufficient to permit the Authority to operate on a self-sustaining financial basis.

Objectives

The objective of this proposed regulatory amendment is to increase pilotage charges in compulsory areas in order to

Description

Compulsory Ports Regular Tariffs in the Atlantic Pilotage Tariff Regulations, 1996

This proposed tariff amendment would increase all of the charges related to one-way trips, trips through, and movages with the effective tariff increase being as follows for the ports below:

Effective January 1, 2016, or if it is later, on the day on which they are registered:

The overall increase in revenues from these 2016 tariff adjustments is estimated to be $687,000. Without the increases, the Authority anticipates a loss of $192,000 for the organization in 2016. The proposed increases would provide an estimated profit of $495,000, or approximately 2.1% of revenue, for 2016. This rate of return remains below the Authority's long-term targeted rates of return even though the Authority has invested significantly in new vessels and still carries debt for their construction. The Authority has also increased the number of pilots available in response to customer service concerns.

A 1.5% surcharge would also be applied to all pilotage charges in the following ports or areas:

Pilotage charges do not include amounts recovered for pilot expenses, pilot travel, and fuel charges. This surcharge will be effective for three years from the day on which the Regulations come into force. The Authority expects to have had accumulated operating losses of $1.182 million from 2012 to the end of 2015. This surcharge is meant to recover a portion of these losses by raising an estimated $972,000 over this three-year period.

Finally, the calculation of cancellation charges would be amended so that the cancellation charge cannot exceed the charge for a one-way trip. This has occurred in areas that do not have a basic charge.

“One-for-One” Rule

The “One-for-One” Rule does not apply to this proposal, as there is no change in administrative costs to business.

Small business lens

The small business lens does not apply to these amendments.

Consultation

Consultation in various forms has taken place with the parties affected by these proposed amendments. The parties consulted include the Shipping Federation of Canada, which represents foreign vessels and accounts for 77%–79% of the Authority's activities and revenues, and the Canadian Shipowners Association. Local committees representing stakeholders in Halifax, Saint John, St. John's, Placentia Bay, and Cape Breton were also consulted extensively, including presentations made by the Authority in May, August, and September 2015. The consultation took the form of meetings, as well as written, personal, and telephone communications with individuals and groups. Alternatives to tariff increases were presented, where applicable, and participation from the attendees was encouraged. For various ports and districts, an alternative to increased tariff rates would be a reduction in pilot strength. The parties affected have always expressed that their primary concerns are with service levels. They have requested that the number of pilots be increased in some areas, and maintained in others, so that pilot availability is not compromised. When meeting with customers, the Authority provided an analysis of the situation and solicited responses. Based on the consultation, the structure of the proposal has been amended in response to industry concerns. Every indication was given that the adjustments were accepted as fair and reasonable.

Rationale

The Authority continues to invest in additional pilots for several areas. This increased manpower is to address service levels and prepare for pending retirements. Even with this investment, the total expenses for the Authority are budgeted to increase by less than 1% in 2016. The negative trend that has affected the Authority recently is that the average vessel size in a number of ports has decreased. The majority of the Authority's revenues are derived by applying a unit charge to a measurement of the size of the vessel. As the average units per vessel have declined in several ports, the total amount paid per vessel for pilotage have declined against expectations. In 2015, the average pilotage revenue per assignment has increased 2.6% from 2014 in spite of a 5.3% tariff increase. This is due primarily to the decline in units on which the tariffs are applied. The proposed increases would avoid the anticipated loss of $192,000 that is projected without the increases. Again, the proposed increases would provide an estimated profit of 2.1% of revenue for 2016. The surcharge is expected to raise an additional $314,000 in 2016, $324,000 in 2017, and $334,000 in 2018.

Saint John

There are a number of business prospects for the port of Saint John. This business growth is expected to increase the demand for pilotage within the planning period. A pilot is scheduled to retire from the area early in 2016. In preparation for retirements, and the increased demand for service, the Authority is continuing to add to the pilot strength. The Authority has developed an operating budget for 2016 that includes an additional pilot to replace the pilot scheduled to retire.

Saint John is another port that has been negatively affected by a reduction in vessel size as smaller tankers are being utilized in the area. Pilotage units per trip declined by 11% in 2014 causing the Authority to have a large loss in the area that year. The units per vessel have not rebounded to date.

Based on this budget containing smaller vessels, the Authority is proposing a 5% increase. To achieve the 5% revenue increase, the Authority would be increasing the basic and minimum charges by 3% and the unit charge by 6.5%. This tariff structure was reached by agreement after consultation with customers in Saint John. Without these increases, the Authority anticipates a loss of $36,000 for the port in 2016. The proposed increase would provide an estimated profit of less than 3% in 2016. Again, this rate of return is below the Authority's long-term targeted rates of return for the area where the Authority has invested significantly in a new vessel and carries debt for its construction.

Eastern Newfoundland District

This district of Eastern Newfoundland comprises three compulsory ports: St. John's, Placentia Bay, and Holyrood. Like the other districts, they utilize a pool of pilots, each of whom is capable of providing service to any of the three ports. The individual ports take advantage of this structure as each of them can draw on resources from the pool to cover peak periods. An individual port that is not part of a district would have to carry more pilots to cover for these periods and at an increased cost to industry. As above, the pilots in a district are allocated to the individual ports based on the total time pilots spend working in each port.

Providing a quality service in this district is very challenging due to the length of pilotage in an area like Placentia Bay, the variance in the number of assignments from one day to the next, and the weather issues that can be faced in the area. When analyzing the service levels with the customers, and in response to their desire for a reduction in interruptions, it was decided that the Authority would target an increase in pilot numbers from 11 to 14 for the district. This increased staffing will be completed in 2016 with the addition of the final apprentice pilot planned at this time.

St. John's

For St. John's, the Authority is proposing a tariff that would increase pilotage revenue in the port by 5%. This increase is required as the number of assignments is declining as there has been an increase in certificated masters. The Authority would be increasing the basic, unit, and minimum charges by 5%. This increase is expected to move the port to a profit of 1% while covering their allocated portion of the increased pilot strength.

The traffic levels in St. John's have large fluctuations as traffic may spike for short periods and then subside. Business can come to the port on short-term contracts, while regular callers tend to apply for pilotage certificates. The Authority has to be able to provide service during these peak periods while minimizing financial losses during the down periods. The recent increases are intended to cover the additional costs of improved service and allow the Authority to offset projected losses during down years.

Placentia Bay

Placentia Bay is the port in the district with the most activity. The Authority was asked to address service concerns in the area and has responded by increasing pilot numbers in the district. In 2015, the Authority faces declining revenues in the area as the average size of vessel requiring pilotage has decreased by over 10%. With these smaller vessels, the current tariff will leave the Authority with a $135,000 loss in 2016. With a goal of earning an operating profit in the port to cover outstanding capital loans for pilot boats, the Authority is increasing the basic, unit, and minimum charges by 5% to leave the port with an estimated 2% profit margin.

Holyrood

The port in the district with the least activity is Holyrood. In recent years, the activity in the port has ranged from a high of 39 assignments to a low of 23 assignments. Due to the increase in pilots for the district, the Authority would be increasing the basic, unit, and minimum charges by 5%. This increase will leave the port with a profit while covering their allocated portion of the increased pilot strength.

Cape Breton District

This district contains three compulsory ports: the Strait of Canso, the Bras d'Or Lake, and the port of Sydney. The district utilizes a pool of pilots, each of whom is capable of providing service to any of the three ports. Operating as a district is advantageous to the individual ports as they can draw on resources from the pool to cover peak periods. An individual port that is not part of a district would have to carry more pilots to cover for these periods at an increased cost to industry. The total costs of the pilots in a district are allocated to the individual ports based on the total time pilots spend working in each port.

The traffic levels in the Strait of Canso have been volatile after losing a significant amount of business in 2011. The area has a transshipment terminal that supplies refineries along the eastern seaboard of the United States. With no new refineries being developed and demand for petroleum products declining, the transshipment terminal has been relying more and more on a few major customers.

After allowing the pilot strength in the area to be reduced by 30% from 2011 levels, the Authority realized that pilots would need to be added to maintain service levels to the satisfaction of our customers. The pilot strength was increased and service levels greatly improved.

Strait of Canso

For the compulsory pilotage area of the Strait of Canso, the Authority has had significant volatility in the area. This area has been negatively affected by a reduction in vessel size as there are fewer large tankers in the area and a coal transshipment operation has declined in the port. Due to this trend, the average pilotage revenue per vessel in 2015 was 1% less than in 2014 in spite of a tariff increase expected to pay for the increased staffing. The 2016 increase is to begin adjusting for the smaller vessels and increase the average revenues per assignment to where they were intended in previous budgets. The Authority is increasing the tariff charge by 10% and would be applied to the basic, unit, and minimum charges. This increase is expected to leave the area in a loss position, but the Authority is concerned about adding a larger increase on industry at this time.

Bras d'Or

The port in the district with the least activity is Bras d'Or. The activity in the port has declined as the primary business in this area is the shipment of gypsum from Little Narrows. This business has been impacted by the adoption of synthetic gypsum as an alternative to their core product. Assignments have decreased by over 20% from previous yearly averages. The Authority is proposing a 10% increase for the area that would be applied to the basic, unit, and minimum charges. Again, this increase is expected to leave the area in a loss position, but the Authority is concerned about adding a larger increase on industry at this time. The port is budgeted to provide less than 1% of the Authority's revenue in 2016.

Sydney

For Sydney, the Authority is proposing a tariff that would increase pilotage revenue in the port by 3%. This increase is required as the number of assignments in the area have declined from previous expectations. The Authority would be increasing the basic, unit, and minimum charges by 3%.

Central/Western Newfoundland District

Similar to the other districts, Central/Western Newfoundland encompasses three ports, Humber Arm, Bay of Exploits, and Stephenville, which share pilot resources. This district has had a dramatic decrease in assignments due to the decline of the paper industry over the years and activity has declined by 10% from 2014. The compulsory ports in this district are served by a complement of three pilots. Due to the large geographic area covered by the pilots (more than 400 km from one extremity to the other), it is impossible to reduce the number of pilots below the current level without significantly impacting service levels.

Humber Arm

For Humber Arm, the proposed change would increase pilotage revenue in the port by 10%. This increase would be meant to cover inflationary increases in expenses and the increased cost of a winter pilot boat. This increase is expected to leave the area in a loss position, but the Authority is concerned about adding a larger increase on industry at this time.

Bay of Exploits

For Bay of Exploits, the proposed change would increase pilotage revenue in the port by 3%. This increase would be meant to cover inflationary increases in expenses while the number of assignments in the area falls. This increase is projected to leave the port with a profit for 2016.

Summary

The following tables indicate the current charges for a one-way trip and the amendments in the compulsory tariffs:

Major ports
  Basic Charge Unit Charge Minimum Charge Cancellation Charge Estimated Fuel Charge
(see note 1)
(see note 2)
(see note 3)		 Cost for an Average Ship
(see note 4)
(see note 5)
(see note 6)
Strait of Canso, N.S. 2015 $1,048 $3.87 $1,436 $900 $241 $3,144
2016 $1,153 $4.26 $1,580 $900 $241 $3,434
Note 1 Fuel charge is based on the latest 2015 average fuel price of $0.832 and 290 L per trip.
Note 4 Based on a ship of 479 units for the Strait of Canso.
Placentia Bay, N.L. 2015 $2,205 $5.15 $2,922 $900 $470 $6,156
2016 $2,315 $5.41 $3,068 $900 $470 $6,440
Note 2 Fuel charge is based on the latest 2015 average fuel price of $0.783 and 600 L per trip.
Note 5 Based on a ship of 676 units for Placentia Bay.
Saint John, N.B. 2015 $833 $3.74 $1,488 $833 $100 $2,362
2016 $858 $3.98 $1,533 $858 $100 $2,480
Note 3 Fuel charge is based on the latest 2015 average fuel price of $1,004 and 100 L per trip.
Note 6 Based on a ship of 382 units for Saint John.
Other ports
  Basic Charge Unit Charge Minimum Charge Cancellation Charge Cost for an Average Ship (see note 7)
(see note 8)
(see note 9)
(see note 10)
(see note 11)
(see note 12)
Sydney, N.S. 2015 $1,071 $6.39 $2,197 $900 $3,039
2016 $1,103 $6.58 $2,263 $900 $3,130
Note 7 Based on a ship of 308 units for Sydney.
Bras d'Or, N.S. 2015 $1,711 $10.63 $2,401 $900 $4,687
2016 $1,882 $11.69 $2,641 $900 $5,156
Note 8 Based on a ship of 280 units for Bras d'Or.
St. John's, N.L. 2015 $639 $6.28 $1,982 $639 $1,982
2016 $671 $6.59 $2,081 $671 $2,081
Note 9 Based on a ship of 87 units for St. John's.
Holyrood, N.L. 2015 $639 $6.28 $1,982 $639 $2,755
2016 $671 $6.59 $2,081 $671 $2,893
Note 10 Based on a ship of 337 units for Holyrood.
Bay of Exploits, N.L. 2015 $982 $10.33 $2,014 $900 $2,315
2016 $1,011 $10.64 $2,074 $900 $2,384
Note 11 Based on a ship of 129 units for Bay of Exploits.
Humber Arm, N.L. 2015 $688 $9.33 $1,782 $688 $2,227
2016 $757 $10.26 $1,960 $757 $2,450
Note 12 Based on a ship of 165 units for Humber Arm.

The tables do not include the 1.5% surcharge.

Implementation, enforcement and service standards

Section 45 of the Pilotage Act provides an enforcement mechanism for these Regulations in that a Pilotage Authority can inform a customs officer at any port in Canada to withhold clearance from any ship for which pilotage charges are outstanding and unpaid. Section 48 of the Pilotage 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.

Contact

Captain Sean Griffiths
Chief Executive Officer
Atlantic Pilotage Authority
Cogswell Tower, Suite 910
2000 Barrington Street
Halifax, Nova Scotia
B3J 3K1
Telephone: 902-426-2550
Fax: 902-426-4004

PROPOSED REGULATORY TEXT

Notice is given, pursuant to subsection 34(1) (see footnote a) of the Pilotage Act (see footnote b), that the Atlantic Pilotage Authority, pursuant to subsection 33(1) of that Act, proposes to make the annexed Regulations Amending the Atlantic Pilotage Tariff Regulations, 1996.

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. The notice of objection must also be filed with the Minister of Transport and the Atlantic Pilotage Authority in accordance with subsection 34(3) (see footnote e) of the Pilotage Act (see footnote f).

Halifax, November 4, 2015

CAPTAIN SEAN GRIFFITHS
Chief Executive Officer
Atlantic Pilotage Authority

REGULATIONS AMENDING THE ATLANTIC PILOTAGE TARIFF REGULATIONS, 1996

AMENDMENTS

1. (1) The portion of section 25 of the English version of the Atlantic Pilotage Tariff Regulations, 1996 (see footnote 1) before paragraph (a) is replaced by the following:

25. If pilotage services are requested for a ship and the request is cancelled after a pilot reports for pilotage duty, the charge payable is the least of

(2) Section 25 of the Regulations is amended by striking out “and” at the end of paragraph (a) and by adding the following after paragraph (a):

2. The Regulations are amended by adding the following after section 27:

SURCHARGE

28. (1) For a period of three years that begins on the day on which this section comes into force, a surcharge of 1.5% is payable on each flat charge, minimum charge, unit charge, basic charge and cancellation charge payable under these Regulations for pilotage service provided in the following pilotage areas:

(2) For greater certainty, when the surcharge is payable on a cancellation charge, it is payable on the cancellation charge only and not on the basic charge, flat charge or minimum charge that is used to determine the amount of the cancellation charge under section 25.

3. The portion of items 3 to 7 of Schedule 2 to the Regulations in columns 2 to 4 is replaced by the following:
Item

Column 2

Minimum Charge ($)

Column 3

Unit Charge
($/pilotage unit)

Column 4

Basic Charge ($)
3. 2,074.00 10.64 1,011.00
4. 2,081.00 6.59 671.00
5. 1,960.00 10.26 757.00
6. 3,068.00 5.41 2,315.00
7. 2,081.00 6.59 671.00
4. The portion of items 9 to 11 of Schedule 2 to the Regulations in columns 2 to 4 is replaced by the following:
Item

Column 2

Minimum Charge ($)

Column 3

Unit Charge
($/pilotage unit)

Column 4

Basic Charge ($)
9. 2,263.00 6.58 1,103.00
10. 2,641.00 11.69 1,882.00
11. 1,580.00 4.26 1,153.00
5. The portion of item 1 of Schedule 3 to the Regulations in columns 4 and 5 is replaced by the following:
Item

Column 4

Unit Charge ($/pilotage unit)

Column 5

Basic Charge ($)
1. 9.64 1,551.00
6. The portion of item 2 of Schedule 3 to the Regulations in column 3 is replaced by the following:
Item

Column 3

Flat Charge, Pilot Boat Used ($)
2. 1,835.00
7. The portion of items 3 to 7 of Schedule 4 to the Regulations in columns 3 to 7 is replaced by the following:
Item

Column 3

Minimum Charge ($)

Column 4

Unit Charge, No Pilot Boat Used
($/pilotage unit)

Column 5

Basic Charge, No Pilot Boat Used ($)

Column 6

Unit Charge, Pilot Boat Used
($/pilotage unit)

Column 7

Basic Charge, Pilot Boat Used ($)
3. 1,867.00 8.51 810.00 9.58 911.00
4. 1,873.00 5.27 537.00 5.93 604.00
5. 1,764.00 8.21 605.00 9.24 681.00
6. (a) 1,534.00 2.71 1,158.00 n/a n/a
6. (b) 2,762.00 4.33 1,852.00 4.87 2,084.00
7. 1,873.00 5.27 537.00 5.93 604.00
8. The portion of items 9 to 11 of Schedule 4 to the Regulations in columns 3 to 7 is replaced by the following:
Item

Column 3

Minimum Charge ($)

Column 4

Unit Charge, No Pilot Boat Used
($/pilotage unit)

Column 5

Basic Charge, No Pilot Boat Used ($)

Column 6

Unit Charge, Pilot Boat Used
($/pilotage unit)

Column 7

Basic Charge, Pilot Boat Used ($)
9. 2,036.00 5.25 883.00 5.91 993.00
10. 2,377.00 9.35 1,506.00 10.53 1,694.00
11. 1,421.00 3.41 922.00 3.83 1,037.00
9. The portion of items 1 to 3 of Schedule 5 to the Regulations in columns 3 to 5 is replaced by the following:
Item

Column 3

Minimum Charge ($)

Column 4

Unit Charge
($/pilotage unit)

Column 5

Basic Charge ($)
1. 1,533.00 3.98 858.00
2. 1,379.00 3.59 773.00
3. 1,379.00 3.18 686.00
10. The portion of item 4 of Schedule 5 to the Regulations in column 2 is replaced by the following:
Item

Column 2

Flat Charge ($)
4. 1,156.00

COMING INTO FORCE

11. These Regulations come into force on the later of the day on which they are registered and January 1, 2016.

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