Canada Gazette, Part I, Volume 154, Number 2: Regulations Amending the Great Lakes Pilotage Tariff Regulations

January 11, 2020

Statutory authority

Pilotage Act

Sponsoring agency

Great Lakes Pilotage Authority

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Executive summary

Issues: The Great Lakes Pilotage Authority (the Authority) requires additional tariff and surcharge revenues to meet rising expenses associated with the delivery of pilotage services.

Description: The proposed amendments to the Great Lakes Pilotage Tariff Regulations (the Regulations) would increase general tariffs in all districts, introduce new charges to cover expenses that are not currently captured in the Regulations, and extend several pre-existing surcharges.

Rationale: The Authority is working towards eliminating its accumulated deficit in an effort to maintain financial self-sufficiency. Based on the forecasted increase in traffic volume and the operational demands placed on the Authority, the proposed amendments would allow the Authority to receive adequate revenues to offset its expenses, as well as eliminate its deficit by the end of 2020.

Issues

The current tariff rates imposed by the Authority are not sufficient for the Authority to be financially self-sustaining. In addition, the Office of the Auditor General of Canada has identified a need to amend the Regulations in order to formalize the long-standing industry-accepted practice of charging for pilot travel costs.

Background

The Authority is a Crown corporation whose mandate is to establish, operate, maintain, and administer a safe and efficient pilotage service in all Canadian waters subject to compulsory pilotage within the Great Lakes region. In accordance with the Pilotage Act (the Act), the Authority makes regulations prescribing fair and reasonable tariffs, at a level necessary for the Authority to be financially self-sustaining. The regulatory process ensures stakeholder consultation and transparency in tariff setting; therefore, the process is initiated many months before tariffs can come into force.

In its 2008 Special Examination Report, the Auditor General required the Authority to take measures to eliminate its accumulated deficit and to become financially self-sustaining within a reasonable time frame. The Authority has taken several measures to control its operating and administration costs, and to increase revenues. By the end of 2018, the Authority’s 2009 accumulated deficit level of $5.5 million had been reduced to $0.5 million. However, the Authority is anticipating a $1.6 million loss for 2019. The proposed tariff amendments would allow the Authority to eliminate its accumulated deficit by the end of 2020 and position the Authority to establish a reserve fund so that future losses can be addressed without affecting the Authority’s financial self-sufficiency.

In 2019, following a review of the Pilotage 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 37.1. The Authority has received an estimate of the amounts anticipated to be charged under this provision for 2020. However, the timing and manner of the 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 proposed amendments would allow the Authority to

Description

The following paragraphs describe the various amendments proposed for the Regulations.

Regulatory development

Consultation

The Authority’s principal stakeholder is the Shipping Federation of Canada (the Federation). The Federation represents the owners and operators of foreign-flagged ships that are required, by law, to enlist pilotage services from the Authority while transiting the Great Lakes system. The Federation represents approximately 80%–85% of the Authority’s clientele. The other principal stakeholder of the Authority is the Chamber of Marine Commerce (the Chamber), which represents the owners and operators of Canadian-flagged ships. While the majority of Canadian-flagged ships do not enlist pilotage services from the Authority (as they elect to enlist services from pilotage certificate holders instead), approximately 10 of the Chamber’s 70 domestic ships are Canadian tankers that request the use of a pilot. The Chamber represents approximately 15%–20% of the Authority’s clientele.

The Authority consulted with the Federation several times throughout 2019 as well as with the Chamber. All stakeholders are aware that the Authority must respect its objective to remain financially self-sufficient.

It is worth noting that the Federation has publicly stated that all proposed pilotage tariffs are too costly to industry. Further, the Federation believes that the Authority should extend its accumulated deficit elimination strategy over another five years (or more) and does not see or agree with the urgency for the Authority to be financially self-sufficient by the end of fiscal year 2020. Despite this view on tariffs, the Federation has also voiced extreme criticisms regarding the high level of vessel delays due to pilot shortages. Although consultation is continuing, the Federation does not appear to support the proposed tariff adjustments.

Nonetheless, the Authority has a duty to reassure the Canadian public that it is fiscally responsible and to be financially self-sufficient. Extending the accumulated deficit over the next five years would impede the Authority’s ability to be financially self-sufficient and to develop a financial reserve policy to weather future financial uncertainties.

In addition, stakeholders have voiced strong concerns with respect to the introduction of a Pilotage Act administration charge in 2020, in the amount of $25 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 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, an 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 address the long-standing deficit 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

All costs of the proposal would be borne by users of the Authority’s pilotage services (i.e. industry). The annualized average expected cost to industry would be $1.8 million. Expected benefits for the proposal (mainly increased safety and efficiency) are difficult to quantify and have therefore been expressed qualitatively. The expected benefits and costs of the proposal are as follows:

Cost-benefit statement

A. Quantified impacts to industry (in millions, Can$, 2018 price level)
 

2020 (Base Year)

2021

2022–2029

Total
(Present Value, 2020–2029)

Average

Benefits

Qualitative only (see part B)

Costs

Increase general tariffs in all districts

1.0

0.9

5.1

7.0

0.70

New pilot boat charge
(Cape Vincent)

0.4

0.4

1.6

2.4

0.24

New charge for pilots continuing a transit after the initial assignment

3.8

2.9

6.3

13.0

1.3

Standardization of docking/undocking rates

0.9

0.8

4.9

6.6

0.7

Increase charge for pilot change at locks

0.004

0.003

0.015

0.022

0.002

New Pilotage Act administration surcharge

0.2

0.2

1.2

1.6

0.2

Total

6.3

5.2

19.1

30.6

3.1

Net benefits

−30.6

−3.1

B. Qualified impacts (in non-$)

Positive impacts

Increase general tariffs in all districts

This allows for a greater number of pilots to properly service current demand, thus increasing safety by ensuring that pilots are able to comply with hours of rest requirements as set by Transport Canada.

Extend apprentice training surcharge

Revenue available to increase apprentice recruitment and training; more pilots available will minimize delays.

New pilot boat charge (Cape Vincent)

Vessel delays due to climate conditions are minimized (as the new boat would be better suited to work through ice) and the Authority is able to fulfill obligations with international partners.

New charge for pilots continuing a transit after the initial assignment

Vessel delays are minimized where pilots can be compensated for overtime when accepting a second consecutive assignment.

Standardization of docking/undocking rates

Only the customers directly affected pay charges instead of burdening all customers with higher general tariffs.

Increase charge for pilot change at locks

Increased revenues will improve pilot safety when pilot transfers are done at the locks by retaining the services currently necessary to transfer pilots at the locks.

Formalize recovery of pilot travel costs in the Regulations

Provide transparency around long-standing practice with the industry to recover pilot travel costs.

New Pilotage Act administration surcharge

Enabling the Authority to recover costs associated with administering the amendments to the Pilotage Act.

Notes:

1. Quantified impacts are calculated over a 10-year period (2020–2029) using a 7% discount rate.

2. Net benefits are estimated by running "before" and "after" scenarios, which compare the baseline against the proposed prices using average historic traffic data for each district. It is assumed that demand for pilotage services is inelastic; thus, it is assumed that traffic will not reduce in any significant manner after these tariff increases are implemented.

Small business lens

The small business lens does not apply as there are no associated impacts on small businesses. The majority of the Authority’s clientele (i.e. foreign shippers) are not small businesses, and the majority of shippers considered small businesses choose to hire pilotage certificate holders instead of pilots.

One-for-one rule

The proposal seeks to increase tariffs, fees, and charges for pilotage services. All administrative systems are already in place to execute these changes; thus, no incremental administrative burden would be imposed 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; however, the proposal is linked to international agreements and obligations with the United States through the MOU between the Authority and the U.S. Coast Guard. Given that the Authority conducts its operations in international waters, it works closely with its U.S. counterparts to align regulatory requirements, where possible and applicable.

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 available online on the Department of Justice website and would be published on the Authority’s website. The new Regulations would come into force on April 1, 2020.

Compliance and enforcement

The Pilotage Act provides enforcement mechanisms 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 change to these compliance and enforcement mechanisms.

Contact

Michèle Bergevin
Chief Executive Officer
Great Lakes Pilotage Authority
202 Pitt Street, 2nd Floor
P.O. Box 95
Cornwall, Ontario
K6H 5R9
Telephone: 613‑933‑2991, ext. 205
Fax: 613‑932‑3793

PROPOSED REGULATORY TEXT

Notice is given, pursuant to subsection 34(1) footnote a of the Pilotage Act 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 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 Great Lakes Pilotage Authority in accordance with subsection 34(3) footnote e of the Pilotage Act footnote f.

Cornwall, December 19, 2019

Michèle Bergevin
Chief Executive Officer
Great Lakes Pilotage Authority

Regulations Amending the Great Lakes Pilotage Tariff Regulations

Amendments

1 Paragraph 2(2)(a) of the English version of the Great Lakes Pilotage Tariff Regulations footnote 1 is replaced by the following:

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

4 A surcharge of 5% for apprentice pilot training is payable on each pilotage charge payable under section 3 in accordance with Schedule 1 or 2 for a pilotage service provided on or before December 31, 2021.

Additional Charge for Administration of the Act

5 An additional charge of $25 is payable for each pilot assignment for the administration of the Pilotage Act.

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

1 (1) Subject to subsection (2), the basic charge for a passage, other than a movage, through International District No. 1 or any part of it, and its contiguous waters, is $23.18 for each kilometre ($37.30 for each statute mile), plus $497 for each lock transited.

(2) The minimum and maximum basic charges for a through trip through International District No. 1 and its contiguous waters are $1,089 and $4,782, respectively.

(3) The basic charge for a movage in International District No. 1 and its contiguous waters is $1,643.

(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 $72.84 for each kilometre ($117.22 for each statute mile), plus $436 for each lock transited, with a minimum charge of $1,457.

(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)

2,688

  • (b)

2,688

2

2,874

3

1,697

4

4,999

5

2,874

6

2,080

7

5,795

8

3,732

9

2,874

10

1,697

11

3,762

12

3,762

13

2,920

14

1,697

15

2,080

(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

3,968

2

3,323

3

1,494

4

1,494

(4) Section 1 of Schedule 1 to the Regulations is amended by adding the following after subsection (7):

(7.1) An additional charge of $325 is payable for each embarkation or disembarkation of a licensed pilot at the Cape Vincent pilot boat.

(5) Section 1 of Schedule 1 to the Regulations is amended by adding the following after subsection (8):

(9) An additional charge of $2,750 is payable for each time a pilot is retained on board a ship beyond the boarding point at the end of their assignment, so as to continue the voyage with a second consecutive assignment.

4 (1) The portion of item 1 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)

1,264

  • (b)

1,106

  • (c)

797

(2) Item 2 of the table to subsection 2(1) of Schedule 1 to the Regulations is repealed.

(3) 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 $2,174.

(4) A basic charge of $1,200 is payable for each docking or undocking for the purpose of loading or unloading cargo, stores or bunker fuel or effecting repairs in a compulsory pilotage area in the Great Lakes region.

5 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 at the end of their assignment or during an interruption of the passage of the ship through designated waters or contiguous waters, an additional basic charge of $102 is payable for each hour or part of an hour, including the first hour, that the pilot is detained.

(2) The maximum basic charge payable under subsection (1) for any 24-hour period is $2,448.

6 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 $102 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 $2,448.

7 (1) Paragraphs 5(1)(a) and (b) of Schedule 1 to the Regulations are replaced by the following:

(2) Paragraph 5(2)(a) of Schedule 1 to the Regulations is replaced by the following:

8 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 designated 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 $607 is payable for each 24-hour period or part of a 24-hour period during which the pilot is away from the designated 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 $607 is payable for each 24-hour period or part of a 24-hour period before the pilot’s return to the designated disembarkation point.

9 Section 9 of Schedule 1 to the Regulations is replaced by the following:

9 If a request for pilotage services is made with less than 12 hours’ notice and those services are provided, an additional charge of $3,821 is payable.

Pilot Travel

10 (1) If a pilot is required to travel to embark on a ship at a location that is other than one of the designated boarding points at the extremities of a compulsory pilotage area to provide pilotage services,

(2) If a pilot is required to disembark from a ship at a location other than one of the designated disembarkation points at the extremities of a compulsory pilotage area after providing pilotage services,

10 (1) The portion of items 1 to 4 of the table to subsection 1(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

5,865

N/A

2

27.85 for each kilometre (44.82 for each statute mile), plus 750 for each lock transited

1,509

3

1,200

N/A

4

2,259

N/A

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

(2) An additional charge of $137 is payable for each change of pilot at the St. Lambert or Beauharnois Lock.

11 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 at the end of their assignment or during an interruption of the passage of the ship through the Cornwall District, an additional basic charge of $196 is payable for each hour or part of an hour, including the first hour, that the pilot is detained.

(2) The maximum basic charge payable under subsection (1) for any 24-hour period is $4,704.

12 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 $196 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 $4,704.

13 (1) Paragraphs 4(1)(a) and (b) of Schedule 2 to the Regulations are replaced by the following:

(2) Paragraph 4(2)(a) of Schedule 2 to the Regulations is replaced by the following:

14 Section 6 of Schedule 2 to the Regulations is replaced by the following:

6 If a request for pilotage services is made with less than 12 hours’ notice and those services are provided, an additional charge of $3,821 is payable.

Pilot Travel

7 (1) If a pilot is required to travel to embark on a ship at a location other than one of the designated boarding points at the extremities of the Cornwall District to provide pilotage services,

(2) If a pilot is required to disembark from a ship at a location other than one of the designated disembarkation points at the extremities of the Cornwall District after providing pilotage services,

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

2 (1) A basic charge of $1,310 is payable each time there is a cancelled order or cancelled sail.

Coming into Force

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