Canada Gazette, Part I, Volume 154, Number 1: Regulations Amending the Pacific Pilotage Tariff Regulations

January 4, 2020

Statutory authority

Pilotage Act

Sponsoring agency

Pacific Pilotage Authority

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Executive summary

Issues

The current tariff rates imposed by the Authority are not sufficient to cover rising pilotage expenses. As well, current wording related to delay charges is not clear and could give rise to misinterpretation.

Background

The Authority is a financially autonomous Crown corporation, listed in Schedule III of the Financial Administration Act, whose role is to establish, operate, maintain and administer, in the interest of safety, an efficient and economical pilotage service within all coastal waters of the west coast of Canada, including the Fraser River.

Section 33 of the Pilotage Act allows the Authority to make regulations prescribing tariffs that are fair and reasonable to permit the Authority to operate on a self-sustaining financial basis. The regulatory process ensures stakeholder consultation and transparency in tariff setting. Therefore, the process is initiated many months before tariffs can come into force.

The Authority has developed a sophisticated forecasting and modelling tool that is used by the Authority and its stakeholders to determine future tariffs. The tool allows stakeholders to apply business scenarios to the Authority (e.g. if the Trans Mountain Expansion [TMX] project was to move ahead in fiscal year 2023, what would the pilot hiring requirement need to be in fiscal year 2020 to minimize callbacks in 2024, and what would the resulting tariff need to be to pay for the training and apprenticeship costs of the pilots). This process is extensive and allows the Authority to work collaboratively with stakeholders to determine minimum tariff needs in order to continue to operate on a financially self-sufficient basis.

In 2019, following a review of the Act, amendments were tabled in Bill C-97 (Budget Implementation Act, 2019, No. 1) and received royal assent in June 2019. The coming into force of the amendments will occur over four Orders in Council, on dates set by the Governor in Council. In August 2019, the first of the amendments came into force, including section 37.1: “For the purpose of defraying the costs of the administration of this Act, including the development of regulations, and the enforcement of this Act, an Authority shall, on request, pay to the Minister an amount specified by the Minister in a time and manner specified by the Minister”.

The proposed tariff amendments include provisions to address anticipated costs associated with the implementation of section 37.1 of the Act. The Authority has received an estimate of the amounts anticipated to be charged under this provision for 2020. However, the timing and manner of payment has not been finalized. Furthermore, it remains to be determined if the payment will be requested as scheduled. In light of the process required to adjust tariff rates, it is necessary to implement the surcharge by April 1, 2020, in order to have sufficient revenue to pay the costs within the first quarter of 2021, as anticipated.

Objective

The Authority’s objective is to ensure that it continues to deliver pilotage and related services that are safe, efficient, and reliable, all while operating on a self-sustaining basis. The proposed amendments would allow the Authority to

• 1. Maintain tariffs that are fair and reasonable that permit the Authority to operate on a financially self-sustaining basis;
• 2. Ensure adequate revenue to pay for a new pilot launch as part of the Authority’s launch replacement program. The new launch is expected to be completed in 2020 and will replace an older launch currently in service. The Authority does not maintain a contingency for launches, and normally bills users when launches are built. Therefore, the costs of this vessel will need to be recovered through an increase in the launch replacement fee; and
• 3. Clarify in the Regulations when a delay charge applies so that the wording aligns with the Authority’s intent, as well as with the industry’s current practices.

Description

The Authority is proposing to implement the following changes effective April 1, 2020:

• 1. Increase tariffs by 2.25% (excluding fuel charges) effective April 1, 2020;
• 2. Introduce a Pilotage Act administration charge of $57 per assignment. The Authority estimates that this surcharge will allow it to recuperate enough revenue to cover the charges anticipated in accordance with section 37.1 of the Act, and expected to be paid within the first quarter of 2021;
• 3. Increase the launch replacement fee from $60 per assignment to $100 per assignment to account for a new launch build;
• 4. Decrease the fuel surcharge at Pine Island by 50%; and
• 5. Clarify the language around when a delay charge applies so that it is clearer to the reader.

Regulatory development

Consultation

The key stakeholders impacted by these amendments comprise four large organizations and represent multiple customers:

• The Chamber of Shipping
• The Shipping Federation of Canada
• The International Shipowners’ Association
• The Cruise Lines International Association

In 2019, the Authority undertook consultations with its stakeholders on August 12 and again on August 19 and emerged with a proposed tariff for fiscal year 2020 based on a collaborative effort through the Authority’s modelling tool. Following these meetings, the Authority sent out summaries of the suggested outcomes asking for feedback from the industry associations once they had had a chance to discuss with their respective memberships. Feedback was received by all affected associations and, with one exception, the Authority believes that there is a low likelihood of an objection to the proposed tariff rates for 2020.

Stakeholders voiced strong concerns with respect to the introduction of a Pilotage Act administration charge in 2020, in the amount of $57 per assignment. While the Authority acknowledges the concerns of the industry, section 37.1 of the Act obliges the Authority to pay the charges determined necessary by the Minister for the purpose of administering the changes to the Act. In light of the time it takes to adjust tariff rates through the regulatory process, the Authority has no choice but to move forward with the proposed surcharge based on current estimates, in order to secure the revenue necessary to be able to pay the charges by the first quarter of 2021 as anticipated.

Modern treaty obligations and Indigenous engagement and consultation

In accordance with the Cabinet Directive on the Federal Approach to Modern Treaty Implementation, analysis was undertaken to determine whether the proposed Regulations are likely to give rise to modern treaty obligations. This assessment examined the geographic scope and subject matter of the proposal in relation to modern treaties in effect and after examination, no implications or impacts on modern treaties were identified.

Instrument choice

The Authority considered a number of regulatory and non-regulatory options before proposing the present tariff amendments. A priority for the Authority is to remain financially self-sufficient through a combination of cost management and pilotage charges that are fair and reasonable. However, the Authority does not have a means of fixing pilotage charges through non-regulatory instruments, nor does it receive appropriations from Parliament that would allow it to cover its expenses. Therefore, the proposed amendments to the Regulations were deemed to be the most appropriate instrument choice to recover the revenues necessary to deliver pilotage services on a financially self-sufficient basis.

Regulatory analysis

Benefits and costs

Cost-benefit statement

A. Quantified impacts (in Canadian dollars, 2019 price level / constant dollars)

Discount rate: 7%		Base Year 2020	2021	2022	Final Year 2029	Total (PV)	Average
Costs	Shipping industry	$2,658,104	$3,115,485	$3,119,927	$3,487,228	$23,093,428	$3,330,411
Net benefits						—	—

B. Qualitative impacts

Increase in the launch replacement fee	Improved reliability: The new vessel will reduce the likelihood of launch delays due to equipment issues.

The discount rate used is 7% and the time period used is 10 years.

As can be seen below, the Authority has broken out the effects of each of the cost changes so that the magnitude of each can be seen.

Detailed breakdown of the adjustments

Year	Total Revenue Base ($)	Effect of Tariff ($)	Pilotage Act Administration Charge ($)	Launch ($)	Fuel Decrease ($)	Effect of all Adjustments ($)
2020	98,730,804	1,864,305	593,054	363,385	(162,640)	2,658,104
2021	98,515,444	2,141,083	773,660	363,382	(162,640)	3,115,485
2022	98,493,680	2,145,525	773,660	363,382	(162,640)	3,119,927
2023	109,815,674	2,393,868	859,160	396,840	(162,640)	3,487,228
2024	109,810,226	2,393,868	859,160	396,840	(162,640)	3,487,228
2025	109,807,505	2,393,868	859,160	396,840	(162,640)	3,487,228
2026	109,806,145	2,393,868	859,160	396,840	(162,640)	3,487,228
2027	109,805,465	2,393,868	859,160	396,840	(162,640)	3,487,228
2028	109,805,125	2,393,868	859,160	396,840	(162,640)	3,487,228
2029	109,804,955	2,393,868	859,160	396,840	(162,640)	3,487,228

The data source used for the purposes of calculating the effects of this set of amendments is the Authority’s forecasting tool. The Authority’s tool allows the user to see the impacts of each change to the Authority’s revenues, expenses and cash flows (looking forward 15 years) from changes to assumptions. Assumptions that can be manipulated include

• Unit, hourly and travel rates
• Years in which the rates apply
• Launch rates by station
• Launch replacement fees
• Administration fees
• Union increases
• CPI assumptions
• Project expenses
• Interest rates
• Fuel rates at the pump
• Investment account draws/withdrawals
• Technology fees
• Pilot hires, attrition for full-time, seasonal and half-time pilots

A cost-benefit analysis is done in real time with stakeholders, using the Authority’s model, in order to work out what tariff changes are acceptable by keeping cash within reasonable limits (maintaining the self-sufficiency mandate).

Small business lens

The small business lens does not apply, as there are no associated impacts on small businesses. The majority of commercial vessels are owned by large companies ($100 million plus). Smaller pleasure vessels are generally owned by high net worth individuals and typically apply for a waiver from compulsory pilotage, which would exempt them from pilotage charges.

One-for-one rule

The proposal seeks to increase tariffs and adjust charges for pilotage services. All administrative systems are already in place to execute these changes; thus, no incremental administrative burden would be borne on industry, and the one-for-one rule would not apply.

Regulatory cooperation and alignment

The proposal is not part of a formal regulatory cooperation initiative.

Strategic environmental assessment

In accordance with the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals, a preliminary scan concluded that a strategic environmental assessment is not required.

Gender-based analysis plus

No gender-based analysis plus (GBA+) impacts have been identified for this proposal. The proposed amendments put forward tariffs that are considered to be fair and reasonable for the purpose of delivering safe and efficient pilotage services.

Implementation, compliance and enforcement

Implementation

The proposed tariffs, if approved, would be published in the Pacific Pilotage Tariff Regulations, and on the Authority’s website. The new Regulations would come into force on April 1, 2020.

Compliance and enforcement

The Pilotage Act provides an enforcement mechanism for all regulations made by pilotage authorities. Pilotage authorities can inform a customs officer at any port in Canada to withhold clearance from any ship for which pilotage charges are outstanding and unpaid. Any 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 proposal is expected to produce no changes to these compliance and enforcement mechanisms.

Contact

Stefan Woloszyn
Chief Financial Officer
Pacific Pilotage Authority
1000–1130 West Pender Street
Vancouver, British Columbia
V6E 4A4
Telephone: 604‑666‑6988
Fax: 604‑666‑1647
Email: swoloszyn@ppa.gc.ca
Website: www.ppa.gc.ca

PROPOSED REGULATORY TEXT

Notice is given, pursuant to subsection 34(1) ^{footnote a} of the Pilotage Act ^{footnote b}, that the Pacific Pilotage Authority, pursuant to subsection 33(1) of that Act, proposes to make the annexed Regulations Amending the Pacific 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 ^{footnote c} of the Canada Transportation Act ^{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 Pacific Pilotage Authority in accordance with subsection 34(3) ^{footnote e} of the Pilotage Act ^{footnote b}.

Vancouver, December 18, 2019

Kevin Obermeyer
Chief Executive Officer
Pacific Pilotage Authority

Regulations Amending the Pacific Pilotage Tariff Regulations

Amendments

1 The long title of the Pacific Pilotage Tariff Regulations ^{footnote 1} is replaced by the following:

Pacific Pilotage Tariff Regulations

2 Section 1 of the Regulations and the heading before it are repealed.

3 (1) Paragraphs 6(2)(a) and (b) of the Regulations are replaced by the following:

• (a) $4.0822 multiplied by the pilotage unit; and
• (b) $0.01192 multiplied by the gross tonnage of the ship.

(2) Subsection 6(3) of the Regulations is replaced by the following:

(3) Subject to subsection (4), for an assignment to a tethered tanker ship with a deadweight tonnage (summer) that exceeds 39 999 metric tons, in any waters, the pilotage charge payable is $7.0176 multiplied by the pilotage unit.

(3) Paragraphs 6(4)(a) and (b) of the Regulations are replaced by the following:

• (a) $6.1235 multiplied by the pilotage unit; and
• (b) $0.0179 multiplied by the gross tonnage of the ship.

(4) Subsection 6(5) of the Regulations is replaced by the following:

(5) For an assignment that begins or ends on December 25, a charge of double the pilotage charge under subsections (1) to (4) is payable.

(6) A surcharge of $57 is payable on each pilotage charge payable under this section for the administration of the Pilotage Act.

4 Section 8 of the Regulations is replaced by the following:

8 Despite sections 6 and 7, the total charges payable under those sections in respect of a ship shall not be less than $1,087.33.

5 Subsections 10(2) and (3) of the Regulations are replaced by the following:

(2) If a pilot embarks on or disembarks from a ship at Anacortes, Bellingham, Cherry Point or Ferndale, in the State of Washington, a charge of $2,097.95 per pilot is payable in addition to any other charges.

(3) If a pilot embarks on or disembarks from a ship at an out-of-Region location that is not listed in subsection (2), a charge of $2,797.63 per pilot is payable in addition to any other charges.

6 Section 14 of the Regulations is replaced by the following:

14 If a pilot reports to a ship for an assignment and, for reasons unrelated to any act or omission of the owner, master or agent of the ship, does not commence the assignment at the time for which the pilot was ordered, a charge of double the time charge set out in item 1, column 2, of Schedule 3 is payable for each hour or part of an hour for the period that begins at the later of the time for which the pilot was ordered and the time the pilot reports and ends when the ship sails. No delay charge is payable if the delay period is less than 40 minutes.

7 Section 15 of the Regulations is replaced by the following:

15 (1) On each occasion that a pilotage order is initiated during the period that begins at 06:00 and ends at 17:59 with less than 10 hours’ notice for local assignments and less than 12 hours’ notice for all other assignments, a charge of $939.30 is payable in addition to any other charges.

(2) On each occasion that a pilotage order is initiated during the period that begins at 18:00 and ends at 05:59 with less than 10 hours’ notice for local assignments and less than 12 hours’ notice for all other assignments, a charge of $1,878.59 is payable in addition to any other charges.

8 The portion of section 16 of the Regulations before paragraph (a) is replaced by the following:

16 A charge of $1,765.60 is payable in addition to any other charges on each occasion that

9 Section 17 of the Regulations is replaced by the following:

17 On each occasion that a pilotage order is initiated for any place other than a pilot boarding station, a charge of $5,662.76 per pilot is payable in addition to any other charges.

10 The portion of items 1 to 3 of Schedule 2 to the Regulations in column 3 is replaced by the following:

Item	Column 3 Amount ($)
1	4.6781
2	9.3563
3	4.6781

11 The portion of item 1 of Schedule 3 to the Regulations in column 2 is replaced by the following:

Item	Column 2 Time Charge ($)
1	234.82

12 The portion of items 1 and 2 of Schedule 4 to the Regulations in column 2 is replaced by the following:

Item	Column 2 Cancellation Charge ($)
1	939.30
2	234.82

13 The portion of items 1 to 3 of Schedule 5 to the Regulations in column 2 is replaced by the following:

Item	Column 2 Charge ($) (per hour or part of an hour)
1	234.82
2	234.82
3	234.82

14 The portion of items 1 to 7 of Schedule 6 to the Regulations in column 2 is replaced by the following:

Item	Column 2 Transportation Charges ($)
1	179.98
2	173.24
3	1,785.21
4	564.71
5	564.71
6	179.98
7	5,643.64

15 The portion of items 1 to 8 of Schedule 7 to the Regulations in columns 2 and 3 is replaced by the following:

Item	Column 2 Charge ($)	Column 3 Pilot Boat Charge ($)
1	455.02	100
2	1,821.26	100
3	2,362.84	100
4	7,121.27	100
5	4,382.64	100
6	917.06	100
7	636.33	100
8	1,078.48	100

16 The portion of items 1 to 18 of Schedule 8 to the Regulations in column 5 is replaced by the following:

Item	Column 5 Pine Island Charge ($)
1	248
2	281
3	315
4	348
5	381
6	415
7	448
8	482
9	515
10	549
11	582
12	616
13	649
14	682
15	716
16	749
17	783
18	816

Coming into Force

17 These Regulations come into force on April 1, 2020, but if they are registered after that day, they come into force on the day on which they are registered.