Proceedings of the Standing Senate Committee on
Transport and
Communications
Issue 16 - Evidence
OTTAWA, Tuesday, May 5, 1998
The Standing Senate Committee on Transport and Communications, to which was referred Bill C-9, for making the system of Canadian ports competitive, efficient and commercially oriented, providing for the establishing of port authorities and the divesting of certain harbours and ports, for the commercialization of the St. Lawrence Seaway and ferry services and other matters related to maritime trade and transport and amending the Pilotage Act and amending and repealing other Acts as a consequence, met this day at 10:05 a.m. to give consideration to the bill.
Senator Lise Bacon (Chairman) in the Chair.
[Translation]
The Chairman: Resuming consideration this morning of Bill C-9, An Act for making the system of Canadian ports competitive, efficient and commercially oriented, providing for the establishing of port authorities and the divesting of certain harbours and ports --
[English]
-- for the commercialization of the St. Lawrence Seaway and ferry services, and other matters related to maritime trade and transport, and amending the Pilotage Act, and amending and repealing other acts as a consequence.
Honourable senators, we will hear first from our Prince Rupert witnesses.
Mr. Jeff Burghardt, General Manager, Prince Rupert Grain Ltd.: Thank you for this opportunity. We hope that our presentation and suggested amendments will be worthy of your consideration.
Why are we here this morning, and what causes Prince Rupert Grain to speak to Bill C-9? The proposed legislation does contemplate greater local autonomy, less centralization, and the establishment of port operations based on commercial practices and objectives. I must say that Prince Rupert Grain is very supportive of these notions. However, we do believe that there is a need for the extension of the transitional provision, which would enable the goals of this bill to be met much more quickly.
The problem that we see in the bill right now is that it contemplates a regime where the ports are run on a competitive, commercial basis. The relationship between users and the port authorities will remain on arrangements made under the old regulated regime, however. Those relationships should be reviewed to ensure that competitive objectives can be met, but there is no opportunity to do so.
It is important to realize that this type of situation has been foreseen and addressed with respect to port fees and to port charges, but that it is not addressed in the specific context of lease arrangements. That is what we want to discuss with you today.
It is important to provide a little background about Prince Rupert Grain. We are a long way from Ottawa, and it is important to put to Prince Rupert's location, and its present economic drivers, into context.
Prince Rupert is on the north coast of British Columbia, approximately 800 kilometres north of Vancouver. We are really only 50 kilometres south of the most southerly part of the Alaskan Panhandle. Even though we are so far north, we enjoy an ice-free harbour. We have a very moderate and warm climate all year round.
The Port of Prince Rupert is served by CN, which has the exclusive railway rights into the port. From Edmonton, you come immediately west through Jasper, and then the rail line makes a choice of whether you go immediately west to Prince Rupert, or down into the southern corridor and the Port of Vancouver.
The prime advantage of the Port of Prince Rupert is its shorter sailing time to the Asian-Pacific markets, which translates into savings of about a day and a half in sailing time to those ports. If we capture that savings with faster turn-around times and more efficiencies, we can obviously better serve those customers.
Our distance from central prairie loading points, however, is 300 kilometres longer than the Port of Vancouver's. The relevance of that will become clear as we talk about some of the regulatory change which has taken place over the last four or five years.
The key to Prince Rupert's development was that, in the 1970s, industry and government recognized that there would be potential congestion problems if it continued to only service or support the lower mainland, and the Port of Vancouver. There would be ongoing congestion problems, and issues of urbanization versus the flow of bulk products. Therefore, there was an effort to establish a second viable port on the West Coast to serve those Asia-Pacific markets.
In the case of Prince Rupert Grain, the Canadian government certainly supported our project. It was a megaproject at the time; it was the most substantial construction project within Canada in the early 1980s. At one point, there were 1,200 temporary workers in Prince Rupert, working on site development, clearing, building the facility, and so on.
The Canadian government also supported this project by ensuring that there was port parity on rail freight rates. That allowed for equalized freight charges, whether a producer was shipping his product to the Port of Vancouver or to the Port of Prince Rupert. That was done so that the port could grow and prosper. It was felt that the developing new port should not be penalized with a higher freight cost.
When it comes to the specific lease, the Prince Rupert Grain lease was negotiated within that regulatory framework. Our lease was contemplated with a 60-year term. It was based on through-put rates which are today greatly in excess of the rates charged by our competitors in other ports.
We must now address the changes that have occurred in Canadian government policy. They affect the framework, and they also affect the underlying movements of grains in the prairies, and as they are exported out of the country.
The most significant change that we have faced is the repeal of the Western Grain Transportation Act. That was done several years ago. When it was repealed, we lost all of the port parity provisions. Losing that port parity provision increased the freight cost per tonne for any grain that ships to the Port of Prince Rupert by about $5. More substantially, all grain freight rate subsidies have been eliminated. We all know about the old Crow rate, which has been eliminated.
This is causing a fundamental change in grain marketing on the prairies today. We are seeing more and more domestic consumption of grain. We are seeing more value-added opportunities being created on the prairies. We are seeing more livestock production, and we are seeing more north-south flow of grain as people look to serve American millers of both wheat and durum products.
The Canadian Wheat Board is also under review. We see that grain producers will also be given a more active voice, as they perhaps should be, in how grain is marketed out of the country. All of those things mean that there is not an unlimited growth potential for West Coast exports of grain. Grain flow will move to areas that are the most competitive service corridors. It is not a given that the Prince Rupert Grain facility, or the northern corridor in B.C., will continue to grow with more grain. We must set the competitive terms so that we continue to utilize that corridor.
Bill C-9 will further change the structure under which we operate. The landlord of our facility at the port will now be a local body, which will be mandated for fiscal self-sufficiency. Under the old regime, the landlord was a national body, initially the National Harbour Board group, and then the CPC group. They had the responsibility of fulfilling national marine policy goals. We are now shifting to a more localized group, that may have the mandates of fiscal self-sufficiency ahead of national marine policy objectives.
Additionally, the federal government has taken steps to ensure that the local port group will be ready for the future, and will be able to meet these self-sufficiency goals. Last winter, the federal government wrote off $5 million worth of debt for the Port of Prince Rupert, and this was to prepare for the new regime that is coming into being.
Those are all very significant changes that have occurred over the last several years. The one thing that is missing is that there has been no attempt to change long-term leases, or to change lease structures which were designed under the old regime. They are not being looked at to see how they fit into the context of a new regime.
Our lease was signed 20 years ago, with very different rules. The lease conditions were not a significant factor at the time. However, the changes that I have just alluded to are such that the lease cost is now a significant determinant of our ability to be competitive.
Our main competition is the Port of Vancouver. Our lease costs are three times what a similar facility would be in the Port of Vancouver. This year, based on the volumes that we will put through our facility, our lease cost will be almost $1.8 million to the Port of Prince Rupert.
I do not believe that there is any commercial or economic basis for that rate to be so high. There are grain terminals in the Burrard Inlet, on some of the most expensive real estate in North America, and they have lease costs that are three times lower than ours are. There does not seem to be much commercial or economic reason for the size of the lease that we pay in the Port of Prince Rupert.
We do not believe that the port needs the money that they charge us. The annual report of this regulatory body, which was just released last week, shows that the port made a net profit of $12.7 million in the past fiscal year. It has a cash reserve in excess of $18 million. Why does it need this high cost lease?
In terms of services, we have been in that port now for 13 years. We are a mature company in that port. We do not receive any services from the port. We do not receive any value for that $1.8 million that is charged to us.
When you look at the long term and this type of distortion, the port is not going to be able to grow its tonnage, and sustain higher volumes through the northern corridor of B.C., unless these things are corrected. Given our location, our rural nature, and our population densities relative to Vancouver, we should be able to say that the real competitive advantages of Prince Rupert Grain lie in our land costs, the fact that we live in this non-congested area, and the fact that we are well-suited for bulk products. However, the regime, as it is now contemplated, ensures that shippers will be compelled to force their products through the Fraser Canyon, through the Lower Mainland, and add to the mixed uses of bulk products moving through a highly urbanized area.
Competition is certainly very important to Prince Rupert Grain. We believe that it is a goal of the proposed legislation. Competitiveness will not result, however, unless these types of onerous conditions are removed, and the port facilities, port-to-port, can compete on an equal footing.
We wish to specifically address why we believe these amendments are necessary, and how we envision them working. As we have stated, we believe that changes in government policy have created this situation. The Canadian government has removed subsidies, but, as our landlord, it has not addressed the arrangements that were made under the former regulatory structure.
In this bill, there is no provision that existing arrangements be reviewed so as to ensure consistency with the underlying policies of the proposed legislation.
Today, under the Canada Ports Corporation Act, there is very definitely a mechanism whereby directions can be given to a local port corporation by either the Canada Ports Corporation, or by the minister. In so doing, they can make a direction that the port meet the national objectives of the act. The national objectives of the act, which are key to us, talk about fair and equitable treatment, and reasonable cost for port users, both within a port, and compared port to port.
Bill C-9, as it is proposed today, has no such provision. It has no means of ensuring that national objectives, rather than local ones, will be considered. We are very concerned that, with the focus on local autonomy, port authorities will have strong incentives to preserve cash flows, perhaps at the expense of Canada's competitiveness and trade objectives. That phrase, "Canada's competitiveness and trade objectives" is maintained in the under clause 4(a).
As a company, we have spent five years trying to get the port corporation to address the issue of our lease. As a result of the fact that we have not been able to reach a successful conclusion, we do not feel that we can rely on the goodwill of the local port corporation to re-negotiate a lease in the context of the current conditions. We believe that it is necessary to provide a mechanism to set the initial relationship with the new port authorities on a proper commercial basis.
Under the proposed legislation, there is already a mechanism to deal with port fees and charges. Port fees and charges are definitely a significant part of the revenue structure of any port corporation. Generally, those fees and charges are reviewed with shippers, operators, and users of a port, and then they are put out on a published tariff basis. Lease costs and lease considerations are not much different.
Bill C-9 recognizes the need for a review of all existing port fees and user charges. In clause 49 it is quite clear that there shall be a review during what is characterized as a transitional period. What it suggests is that, for a six-month period after the bill becomes law, the port corporations must report back what their fee and user charges will be. During the six month period, there is an opportunity for consultation and review. In the event that users and the port administrators cannot agree as to what those charges should be, the matter can be referred to the Canadian Transportation Agency for some type of resolution. We believe that the same process ought to be used to review existing lease arrangements.
This type of arrangement would provide an opportunity to review real property arrangements, and to correct situations which are out of date, or inconsistent with the goals of competition and efficiency in product flows. It would provide an opportunity to achieve competitiveness and efficiency from day one, in our port as well as in others.
We are faced with a situation whereby, if we cannot find a way to resolve our differences over the lease, Prince Rupert Grain and the Port of Prince Rupert might need to wait 40 years before we have an opportunity to correct something which is not consistent with the new regime, nor with the objectives of the Canada Marine Act.
What we are proposing is reasonable, in the sense that the amendments would only apply to a transitional period. We are not asking for help in this area forever; we are saying let us find a way that we can conclude quickly what has been a five-year process of frustration. This will ensure that the new regime starts off on the right foot, and that the goals of competition and consistency are met immediately. It is consistent with the bill, in that it is only there for the transitional period. It will allow the overriding objectives of the autonomy of port corporations, and fair and reasonable treatment for users, to win out at the end of the day.
I would like to suggest once again that we do welcome the competition. We have a beautiful facility in Prince Rupert. It is the most modern grain facility in all of Canada, and in all of North America. It is well suited for an efficient flow of product, and we can live well under local autonomy. Existing port arrangements were created under a very different regulatory regime, however, and their preservation will artificially affect our ability to compete. It will distort the natural flow of product to the northern corridor, and it will very definitely create tensions amongst the local port groups and user. Our efforts would be better served by focusing on increasing tonnage through that northern corridor, and making more of it than what it is today.
The competition will ensure that we will not be effective in meeting the challenges of the Port of Vancouver. We will also see flow of product to the south, through the ports of Seattle, Portland, and even through the Gulf and the Mississippi River system.
The lease was negotiated in a regulated environment. Those regulated terms have been changed drastically. We believe that the leases should not be overlooked in the transition process. We are only asking for a transitional mechanism, one that will correct commercial inequities.
I speak fondly of our facility in Prince Rupert, and we are very proud to have the opportunity to run it. We are certainly a major supporter of the port. We are a major supporter of the economic issues along the northern corridor, and of seeing that the region from the Peace River through to the West Coast achieves a higher level of economic support. We participate very strongly in the federally created Northwest Transportation Corridor Development Corporation. We work very hard in B.C. with the premier's summit group on northern jobs and development. We have been active with the four Western provinces on all the transportation issues, in order to ensure that this corridor can develop into something more. We are in strong support of our community. I believe that we certainly do our fair share, and our very best to ensure that there is more than just grain moving on that corridor.
We believe in our port, and we look forward to the future of our business. We ask you not to leave our hands tied to the old regime; allow us to move forward, and to place our efforts on increasing export tonnage off the West Coast.
Senator Spivak: I come from Manitoba, and this illustrates the way in which part of a policy can affect a whole economy. I know, for example, that boats that were left waiting cost farmers $60 million to $70 million last year.
You said that your lease costs three times more. I cannot quite understand that. That was not the case under the regulatory system. Could you go into more detail as to why that is the case?
Mr. Burghardt: Our lease, as it was structured in early 1980s, was based on through-put charges. Under our lease, whether we put through one tonne of grain or five million tonnes of grain, we pay the same per-tonnage rate. For every tonne we pay so much to the port; that figure grows with the tonnage. In a year when we might put through 3.5 million tonnes, we would have a lease cost of $1.2 million, for example. If we put through another 1.5 million tonnes, our lease cost grows to $1.8 million.
Competing grain facilities in the Port of Vancouver are all based on a commercial land value premise. They do an evaluation of the property that the grain terminal sits on, and an annual rental fee is charged out on the basis of a percentage of the value of that land. That is what allows for the difference in the charges.
Part of our original lease had the structure that, as tariffs grew on the West Coast, the through-put charge or the lease cost would also grow. As we have had that increase over the years, our lease cost continues to grow, whereas our competitors have a flat cost based on commercial land value.
Senator Spivak: What amount of grain that could go through?
As you said, it is 300 kilometres further to go through your port, so the cost to the farmer or the shipper would obviously be higher than it would if they went through Vancouver, even though Vancouver may be terribly congested, and you are not. Will the lease cost arrangement in this bill allow a more level playing field?
Obviously, if one port is under-utilized, and another is over-utilized, it is good to direct traffic to the under-utilized one. That is a national policy which is in the interests of the economy. It may not be strictly according to the rules of competition, even though you obviously have a handicap in the lease arrangement. How do you see that whole picture?
In Manitoba, transportation costs have gone up 139 per cent. That is ridiculous. When a shipper ships two cars of grain down from Swan River, for example, one car will be for transportation cost alone. What will that mean in the future? How many hogs can you feed? People still need grain in Asia. I do not understand this. I think this shows that we do not have a holistic transportation policy.
Back to my original question: Apart from this, how else can we ensure that ports are utilized when they should be utilized?
Mr. Burghardt: I will follow up on what you said about the Manitoba context. Prior to the changes in the subsidies and the rail freight cost, about 6 to 7 per cent of our through-put was Manitoba-based. This year, it will probably be about 1.5 per cent. That is the type of effect it has had for us.
When you talk about capacities, I know that my learned friend Captain Stark, who is presenting to you later, also has views on that. Let me state it this way: When I look at the northern corridor, I see a beautiful rail line, one that has received huge amounts of money in capital investment from CN over the years, and one that has some of the best track in all of North America. It is the lowest gradient cross through the Prairies. It operates with fewer crew changes. It has lots of additional capacity.
These days, perhaps seven or eight trains a day serve the grain and coal needs in the Port of Prince Rupert. In the lower mainland, through the southern corridor, CN puts 27 or 28 one-way trains through a day. That does not even include all the traffic that is inbound through the Port of Vancouver, and out through the corridor.
There is all kinds of capacity on that northern corridor, and it is waiting to be utilized. Our facility today is operating at about two-thirds of its full capacity. We operate on a two-shift, seven-day-a-week basis. We have almost one-third more capacity waiting there to be used, if the grain flows are more sufficient.
We are very concerned about the differential freight rates that exist. We do have good working relationships with Canadian National, and with the Canadian Wheat Board, which is still the shipper of record for the majority of grains that go through our facility. Independent of getting the right competitive terms put in place for a lease, we have had to seek a three-way agreement to offset the $5 differential freight charge between the Port of Vancouver and the Port of Prince Rupert. Today, our company is not performing as well financially as it was prior to this freight rate differential. If we do not participate in supporting or finding a way to offset that freight rate differential, our tonnage goes to zero.
We know that any relief that we put in place with a lease structure will definitely be passed back to producers to help them with a lower freight cost to the west coast.
Senator Spivak: Have you given a presentation to the Estey commission?
Mr. Burghardt: Yes, gave a detailed presentation there. In fact, the Honourable Judge Estey came to Prince Rupert, and we showed him extensively what our facilities can do.
Senator Roberge: Have you made any attempt to renegotiate the lease?
Mr. Burghardt: Yes. For the last five years, we have had ongoing discussions with the port. At times, we felt that we were close to agreements, but we have never been able to finalize anything. We certainly have an active dialogue. I met with the port last week, and I will meet with the port again next week, or perhaps even later this week. As yet, we have not been able to come to a term that brings the lease closer to the objectives around commercial land values, as opposed to flat through-put charges.
Senator Roberge: You just mentioned that your financial capacities have been reduced since the Western Grain Transportation Act. Could you give us a brief outline of that?
Mr. Burghardt: Let me try to put it in this context: Two years ago, grain supplies were short, as they could be again this summer, and we did not have an unlimited supply to move off the west coast. We closed our facility entirely for a four-and-a-half month period, from June to October, 1996. This was due to the very limited grain supply that was available for shipment. It was all forced through the Port of Vancouver because of the higher freight cost. That resulted in the lay-off of 110 employees in our facility, and also in the lay-off of railway workers along the northern line.
We are owned by the six major grain companies on the prairies; the three pools, the United Grain Growers, Cargill Limited, and James Richardson International. As an owner-invested facility, there are other choices to which limited product flow-through can be directed. Our ownership is definitely able to determine that better earnings opportunities are to be had in placing it through facilities that are not handicapped with higher cost structures, such as the lease cost.
Senator Roberge: Have you done any projections as to what will happen to your corporation and to the port if the relief you ask for is not granted?
Mr. Burghardt: Yes we have. The question is, will our west coast grain exports grow, or will we see a continued mix of new ideas on the Prairies about how grain should be consumed?
As long as grain exports do not go past 15 or 16 million tonnes off the west coast, our facility will continue to be used residually to the Port of Vancouver. In the short term, we do not see those tonnages growing significantly.
We now need significant improvement in the genetics of wheat, so that we can bring substantially more product to the world market. Then, while we will continue with our increased domestic consumption, there will be more grain to move off to markets in the Asia-Pacific. That will bring us into a longer cycle. However, we are probably still five to seven years away from substantially improved, genetically grown wheat, that will bring about higher yields.
Senator Roberge: Would you be prepared to make those projections available to the committee?
Mr. Burghardt: Yes, we can do that. I did not bring those with me this morning, but I can certainly provide them.
The Chairman: Please provide them to the clerk, and they will be distributed the members of the committee.
Senator Forrestall: You have great difficulties with the inability of this bill to deal with leases, or to correct anomalies. I think that we all understand the difficulty that you are in.
You refer to competition between ports. Is there a competition for the sale of grain that might be affected by the continuance of this differential?
Mr. Burghardt: When you say "competition", do you mean selling it offshore?
Senator Forrestall: Yes.
Mr. Burghardt: There certainly are issues that will affect the final price obtained by producers for product.
With respect to wheat and barley exports, which make up 80 per cent of the total export market, all of those funds are pooled, and returned to producers at the end of the marketing year.
To the extent that we continue to force product down a more congested rail line, which then brings about higher demurrage costs, and higher service costs for producers, the final net return to producers at the end of the year will be lower.
At our facility, we always earn the opposite of demurrage expenses, which is dispatch for farmers and producers. Our loading is efficient, and much faster than Vancouver facilities. Add to that the fact that we are only dealing with one berth. That is, one berth receives a full shipment of grain, as opposed to shifting to three or four berths in other ports. There are associated costs that go with making that happen. If you continue to force the product to that corridor as opposed to the other, you will leave money on the table. That money will go to shipping lines and not to producers, who are ultimately responsible for the product that we are marketing.
Senator Forrestall: Some of us find it quite appalling that the Port of Prince Rupert will be without anyone to guarantee its loans, or to raise funds for significant capital expansion.
Is there anything else in this abomination of a bill?
Senator Perrault: Now, now.
Senator Forrestall: Madam Chairman, do you want the litany of criticisms as of last night at ten o'clock? I have four pages of criticisms of this bill, made by serious people.
The Chairman: I heard them.
Senator Forrestall: So did I. Do you want me to list them again? This bill is a mess.
The Chairman: That is not the way we work here. We listen to people, and we make decisions.
Senator Forrestall: You make your decision, and I will make mine.
The Chairman: I am in your hands, senator.
Senator Forrestall: Do other parts of the bill give you discomfort? I am just asking.
If you do not want me to ask, Madam Chairman, you can cut me off any time you wish.
The Chairman: That is not the way we work here, senator.
Senator Forrestall: Cut me off, then.
The Chairman: No.
Senator Forrestall: Why not?
The Chairman: Ask your question of the witness. Let us give a better image of the Senate than we give now.
Senator Forrestall: Are there any other areas?
I started to say that the ports will be cut off. They will have to go out and raise the money themselves. They cannot take the assets of federal lands to the bank.
The fact of the matter is that the ports are without any financial lifeline. For example, as a major user, you are not allowed to sit on the board of directors of the new port structure. Does that bother you very much?
Mr. Burghardt: Our primary concern is with respect to lease arrangements. When you look at the methods contemplated for how a user successfully gains representation on the board, we view that as a difficult process. It will be difficult to ensure that someone learned or skilled in the areas of transportation or shipping will stand the scrutiny test of getting to the directors' table. We are concerned that it might not be as smooth as what is being promoted by Transport Canada officials.
Senator Forrestall: In the year 2000, given transparency and communications, it seems unlikely that much credence should be put in the suggestion that officers or directors of principal users should serve on the board. I am thinking here of a potential conflict of interest. That might have been so over the last 60 or 70 years, but I do not believe that it is so today. What is in the best interests of the port is bound to be in the best interests of its users, and thereby the municipal structure that surrounds it. It is an idea and a policy, but I think that it has been brought forth for the wrong reasons.
Mr. Burghardt: In terms of the smaller ports, I would agree with that. The Port of Prince Rupert will be a CPA port. In a sparsely populated, northern corridor, however, finding motivated people who truly want to see economic growth along that corridor, and facilitating that through directorship on a local board such as the Port of Prince Rupert, may be difficult. One will be hard pressed to find people who will have that impact. Making the terms of reference for a director too narrow could exclude an awful lot of good candidates.
Senator Perrault: Both Mr. Burghardt and Captain Norman Stark are very highly regarded on the West Coast, and their views should be given great weight.
I have a question on competition. Prince Rupert Grain's brief states that it generally supports the bill, but that it believes that, if the goals of the bill are to be achieved from the outset, it needs an extension of the transitional provisions. It goes on to hint that there is a danger of competition from other ports on the West Coast, and that the farmer now has the option to ship in any way he wants.
Is there a real danger of Canadian grain going out of the Port of Portland, for example, or Tacoma or Seattle? Is there evidence of a defection of the Canadian agricultural sector from British Columbian ports?
Mr. Burghardt: In the past crop year, the industry experimented with movements through the Illinois Central and the Gulf of Mississippi, with product going through the Port of New Orleans. There are very active projects, particularly in Portland, for the attraction of Canadian grain.
Senator Perrault: Have these experiments been generally successful? Has the shipper been happy with the way that the Americans handled the situation?
Mr. Burghardt: The results have been mixed. I do not think there has been universal acceptance of it.
Senator Perrault: Of course we want to maximize employment on the West Coast of Canada, do we not?
Mr. Burghardt: Absolutely.
Senator Perrault: I understand that some grain is shipped down the Mississippi. There must be a subsidy involved in that.
Mr. Burghardt: It is difficult to understand that directly. On the face of it, I do not know that you can point to an exact subsidized amount.
Senator Perrault: They would deny it, of course.
Mr. Burghardt: Absolutely.
Senator Perrault: The American ports are very interested in getting some of our grain shipments, however. What is the most effective way to fight this challenge? You have suggested that, given the much higher real estate values in Vancouver, there is no commercial or economic basis for the rate to be so high. I suppose that, if the cost of handling grain on the West Coast is priced realistically, there is no danger posed.
Mr. Burghardt: This is what we are hopeful of. As I mentioned earlier, we are already having to do things to offset a higher freight cost. Our plan and objective is definitely to attain the best service provider costs that we can; whether it be the Port of Prince Rupert, whether it be the city tax structures, or whether it be the rail costs of moving along that corridor. Our intention is to put any reduction directly to our tariff and through-put charges. We know of the impending competition in the U.S., and we know that port facilities and elevators in the U.S. do charge less to put grain through their facilities than do Canadian facilities.
Senator Perrault: Even with the differential in the dollar?
Mr. Burghardt: Absolutely. We know that we must meet that charge. It has been stated very clearly to us by producers and provincial transportation officials that they are looking very hard at which north-south corridors could work. They have more work to do to understand that fully, but they are certainly looking at it in detail.
Traditionally, we clean and process the grain at the export position. We are doing less of that now. Owing to the higher transportation costs, the grain is being cleaned as close to the source as possible, and rightly so, so that they are shipping a better product. That has resulted in a substantial reduction in our revenue base.
We will again be told that our charges will have to be lower. They cannot be lower, however, unless some people with whom we are associated assist us in providing a competitive charge for the very limited service that they provide to us.
Senator Perrault: To make your position more competitive, you would prefer the real estate value base that is enjoyed in Vancouver?
Mr. Burghardt: Absolutely.
Senator Bryden: Under the land base value as a basis for rent, do you know what the lease would be for a comparable facility in Vancouver?
Mr. Burghardt: There are five grain facilities in Vancouver. To the best of my knowledge, their leases average between $300,000 and $500,000 annually.
Senator Bryden: Your contract was entered into 20 years ago, and it still has 40 years to run. It is a bit unusual for you to ask Parliament to reopen that contract because you now find it onerous, which is exactly what you would be doing.
You have indicated that you have been negotiating to reopen the lease, and that you have been unsuccessful. Are you asking for too much of a reduction, or is the other side just being recalcitrant? That is the way that contracting parties normally resolve their problems. If they have entered into a bad deal, short of suing the lawyer who allowed them to do that, they try to achieve a meeting of the minds, and move forward.
Are you far apart in these negotiations?
Mr. Burghardt: I believe that we are still far apart. I understand your concerns. In a straight commercial sense, two parties should be able to overcome their differences. The terms are substantially different than they were in 1980. As I mentioned earlier, this was a megaproject. This was an attempt to open up a second port. The grain companies were all asked by both the Province of Alberta and the federal government to come on board, and to support the construction of this facility. Hence, the six major grain companies are involved with it even today. I believe that they are glad to be participants.
We have a local port group with a limited revenue stream, however. This group has the definite objective of wanting its port to handle more than just grain and coal. They consider our financial wherewithal to be a large contributor to their self-sufficiency, and to their future financing needs.
With regard to moving out of the country, grain has gone through a tremendously complicated process. Many of those complications have been stripped away, and we believe that we need assistance to remove the last of them.
Three years ago, when this bill was first contemplated, we were asked whether we were supported it. We said that we did, that we believed this to be a step in the right direction, and that perhaps the Port of Prince Rupert would prosper as a result. Three years later, however, we are still frustrated, and even more concerned that we have been unable to make progress in what should be an easy discussion.
The chairman of the port corporation lives three doors away from me. You would think, when we have to greet each over every single day on our way to work, that we would eventually work this thing out, but we do not seem to be able to.
You ask if we are asking for too great a reduction. When we look towards the commercial land value premises, that certainly brings about a value. We need the local port group to at least acknowledge that that is one way of determining fair lease values. We cannot even get that determination from them. We are asking that you at least create an environment that puts a conclusion to these discussions. I am afraid that, if we do not address this issue, the port corporation will always find a way to put this off. We will always be involved in a carrot-and-stick situation, where we will believe that we are close, and we are told that we are getting close, but the high lease coast continues. We need to have a sunset to this.
When you talk about it being unusual for Parliament to be involved, I say that we are only asking for involvement through the transitional period, a six-month period. Put a sunset date to it, and refer it to someone who has some sort of arbitrary method of dealing with it. Then the parties can go on their way.
Senator Bryden: It might be a six-month period to resolve the issue, but the hope would be that the resolution would last for the next 40 years.
Mr. Burghardt: I would think so, yes.
Senator Bryden: It usually takes two sides to reach an agreement. In my experience, it has never been the case that only side is being inflexible.
There may be those who would say that, under the regulatory regime, the subsidies and some of the other things that were provided to Prince Rupert may have given it some sort of an advantage over other places that would ship grain. I say that because you have already indicated that you are closer to the market in the east than Vancouver is, by boat. You have opened excellent rail lines running there. The Port of Vancouver is full of trains and cars, so you already have a huge advantage. Up until now, you have had a $4.25 per-tonne or per-car subsidy over what was available to Vancouver. Some would say that what is happening now is that you are being forced to deal with the real world.
Mr. Burghardt: We could get into a lengthy discussion about the appropriateness of characterizing the $4.25 differential as a subsidy. That leads us directly to distance-related charges, and to whether that is the appropriate structure for rail charges. In the unregulated side -- forest products, coal products, and petrochemical products -- the railway finds that it is able to maintain a parity rate between West Coast ports. The differential only exists in grain. I do not view that as having been a subsidy. I view it as an opportunity to increase West Coast exports, and to attain higher returns for producers than previously possible.
When you ask about the other advantages -- we know that those advantages can be there. We also know that it is very difficult for us always to attain the advantage of a day-and-a-half shorter shipping period. The manner in which the Canadian Wheat Board conducts its business is towards inventoried positions on the West Coast, rather than to port-specific sales. It does that because of its lack of confidence in the grain transportation system to have grain in place at to the right port on the day that it is promised.
It becomes difficult to extract the shipping advantage, and the shorter sailing times as a bottom-line return for producers.
I know that those things seem as though they should be natural advantages. They do not always turn out to be so, particularly in terms of how grain is marketed today.
Senator Bryden: I was looking for the actual quote. The reason I used the world "subsidy" is because it was used a couple of times in your brief.
Senator Spivak: I wondered about the other products. You said that the differential will only be high with grain.
In terms of competitiveness, the Government of Canada has a responsibility, and has always assumed a responsibility, for economic development, and for development in northern parts of the country. Transportation is vital to our country, because the resources are so far from the ports.
The Americans subsidize their ports, so what do you see for the future in terms of your particular advantage, which is a day and-a-half? How are the cost advantages of that going to stack up against continued subsidies in the United States, and the complete change that will take place in the western economy? Are you confident that this will grow, given the requirements of the Asian countries?
Mr. Burghardt: In the long term, we are confident. I like to look forward 25 years from now, and try to create a vision of what West Coast ports should be like. Twenty-five years from now, our competition will not just come from the Port of Vancouver. It will come from the entire western seaboard, and the American ports. There should be lots of opportunity for both the Port of Vancouver and the Port of Prince Rupert to grow and prosper.
I am primarily focused on the export of a raw grain product, but the real long-term potential for the Port of Prince Rupert is to get on with a two-way flow of product, so that imports are equally as important in the 25-year window as exports. I want to see value-added agricultural product move from the Prairies, in the form of containers. In the long term, there will still be bulk exports, but the real growth opportunity is fresh, shelf-ready beef, pork, chicken, and so on.
They can be shipped fresh to the Port of Prince Rupert, and we can send them to Kobe, Japan. We can capture a three-day advantage on shipping cycles -- it might be a two-day advantage over Vancouver, but it is a three-day advantage over the Port of San Francisco or the Port of Los Angeles -- and we will really have a tremendous advantage. These products have a 30-day shelf life, and we can add three days to their marketability at the consumer end, which is a huge advantage.
We want to focus our efforts on infrastructure needs and the right port facilities, which will ensure that the right type of product growth occurs in the country. We do not want to spend our time worrying about a lease structure from an older regulatory regime. We ask you to help us find a way to get past this.
The Chairman: We thank you both.
Our next witnesses are from the Vancouver Port Corporation. Welcome and please proceed.
Captain Norman Stark, President and Chief Executive Officer, Vancouver Port Corporation: The Vancouver Port Corporation welcomes the opportunity to speak to you about the proposed Canada marine legislation.
The Vancouver Port Corporation supports Bill C-9. We feel that this proposed legislation will strengthen our ability to compete in the global marketplace, an essential element to protecting our future viability. I would like to thank the minister and the Transport Canada staff for their work in the development of the draft operating regulations, and also the model and the letters patent.
The letters patent will support the port's capacity to do business, by providing for the ability to negotiate longer leases, defining core and non-core activities for port business, and outlining a governance model.
As you know, the Port of Vancouver is Canada's largest port, and the most diversified port in North America. Last year we handled a record tonnage, and a record number of Alaska cruise passengers: 73 million tonnes of cargo, and 815,000 passengers. After listening to my friend from Prince Rupert, I would like to indicate that our port is not congested.
We deal with coal, grains, chemicals, containers, and cruises. We handle products moving to and from over 90 countries. Some 60 per cent of our exports come from the landlocked provinces of Alberta and Saskatchewan. We operate as a port for Saskatoon and Grande Prairie as much as we do for Vancouver. We are also the western Canadian container port for the provinces of Ontario and Quebec.
In assessing this legislation, our fundamental task is to determine what it does for the port's competitive position vis-à-vis the challenges we face from our subsidized rivals in the U.S. Pacific northwest, namely; Seattle, Tacoma, Portland and Longview. Meeting that challenge from the American ports is a tough assignment. It is a challenge that must be met, however, and it must be met competitively and energetically.
We face similar challenges from other trading economies such as Australia, where coal and grain sell for less due to its proximity to Asian markets, or from emerging suppliers and nations such as Indonesia with coal, and Russia with potash and forest products. We must be ready to compete in order to protect Canadian industry and jobs.
Port initiatives are certainly part of the answer. However, we also need an integrated policy regime which makes the competitive position of the national ports a federal priority so that our capacity to be economic generators is enhanced, and not eroded. The Port of Vancouver creates 10,800 jobs annually, with over $710 million in payroll, and $500 million in taxes to all levels of government.
Bill C-9 has many merits in our view. We particularly like the fuller vesting of authority in the board of directors, the streamlining of decision-making, the elimination of special draw downs, and the abolition of the Canada Ports Corporation.
The users of the port provide the cargo, many of the facilities, and the infrastructure. The new governance model gives them input into board selection and decision-making.
It is crucial that Canada's marine legislation empower national ports to compete effectively and innovatively, with less bureaucracy, and with more autonomy vested locally. Bill C-9 achieves this. National ports are part of Canada's infrastructure, and are key to our international trade objectives. Moreover, national ports should and will continue to be owned and regulated by the federal government under Bill C-9. They will continue to be trustees for the federal government in administering port lands.
Our U.S. competitors enjoy many benefits which we do not, such as tax-exempt bonds for capital projects, and the ability to raise taxes from local property owners. This gives the U.S. ports a substantial advantage over the Canadian ports. Last year, for example, the Port of Seattle raised over $35 million U.S. from local residents through taxation. On average, $300 from the property taxes on a home in Seattle go to the port.
We have recently learned that, under the IST program, over $100 million will be used by the U.S. federal government for improvements at the Port of Seattle. Therefore, the few advantages in Canada that we have, such as federal agent status, should and will be preserved in Bill C-9.
Realistically, we do not expect the federal, provincial and municipal governments to provide us with the same advantages which favour the American ports and other international counterparts. It is crucial, therefore, that Canadian port authorities do not lose the advantages that they already possess. We believe that Bill C-9 will protect these competitive advantages.
It is understandable that the federal government wishes to restrict port authorities from creating obligations and liabilities -- directly or indirectly -- on the federal treasury. We agree with that restriction, and believe that the government is also protected through special examinations, annual general meetings, and other accountability checks which are required under Bill C-9.
If Parliament wishes major Canadian parts to be competitive, and to have extensive delegated authority, it should give national ports the flexibility to be innovative and entrepreneurial. It should rely upon the directors to act responsibly within their mandate, and to be accountable for their actions. Bill C-9 achieves this.
We are not asking for carte blanche. In grey areas, Bill C-9 should and will allow the minister to amend each port's letters patent from time to time, and to grant additional powers where appropriate, in order to meet unforeseen and exceptional circumstances.
We believe that good legislation, like a long range plan, should be robust and responsive, not inflexible or unyielding to changing and unexpected circumstances. Again, we believe that Bill C-9 achieves this.
As you know, in the normal course of action it is neither easy not quick to amend legislation. Accordingly, it is important that the proposed legislation have plenty of scope for ministerial or cabinet discretion to allow ports to perform their mandate as an economic generator in a responsible and progressive manner. Again, we believe that Bill C-9 achieves this.
In conclusion, we recommend the committee urge passage of the bill through the Senate. The process of adopting a new marine policy for Canadian ports has continued for some three years now. Further delays, we believe, will only serve to erode Canada's competitive position vis-à-vis the U.S. and other economies.
The Chairman: Some ports people, mostly from the Eastern provinces, have expressed concerns about not being access government funding if the legislation is passed. How do you feel about that?
Mr. Stark: We run our projects on a commercial basis. We believe very much that, if the banks or lending institutions will not lend us money, a project should not proceed. We do not believe that there should be government funding for projects. We are not in favour of government funding or subsidies for any projects. Projects are done on a commercial basis. If we cannot get a loan from the bank, under the proposed legislation, then that project should not proceed.
Senator Bryden: What size projects are you talking about, and over what period of time are you able to access private sector funding?
Mr. Stark: Last year we completed the building of a new container terminal at a total cost of $230 million. The Vancouver Port Corporation invested $180 million of that. The other $50 million was invested by the terminal operator, the private sector, Canadian Pacific, and Canadian National. We borrowed $139 million from the Export Development Corporation, at a rate of 7.75 per cent.
Since borrowing that money, our loan, to date, is reduced to $127 million. We have also set up a debt-retirement fund of $45 million. We continue to hope that we can renegotiate that level of debt, and pay it down, because today's interest rates are lower.
Senator Bryden: What type of security, if any, was the lender looking for?
Mr. Stark: There was no security on that loan other than the Port Corporation. We dealt with EDC. At that time, there was basically an implicit guarantee as a Crown corporation. Under the new legislation, there would be no guarantee, but it would be based on cash flow. In our discussions with banks, we know we could get refinancing if we needed it.
Senator Bryden: You must have a significant history of base cash flow which a lender can examine, and on which you can project?
Mr. Stark: That is correct.
Senator Bryden: Can you tell us approximately what that is? I am not referring to discretionary stuff.
Mr. Stark: On a cash flow basis, we have had net income at times as high as $30 million. We had several draw-downs between 1985 and 1991-92, however. We have contributed $150 million back to the federal government $150 million, but we are generally somewhere between $20 million and $30 million.
Our net income is lower today because our interest payments are at about $12 million. Last year, before depreciation of about $17 million, we had a cash income of $23 million.
Senator Bryden: Is that a stable level of cash flow at the Vancouver port?
Mr. Stark: Yes.
Senator Bryden: You can pretty well count on a continuing cash flow of about $125 million?
Mr. Stark: It depends on our business. We have some basic leases with fixed rents, but others are variable. For instance, our cruise ship business brings in so much per passenger. Our container business brings in so much per container. There are guaranteed minimums. There is some fluctuation depending on business.
Senator Bryden: Would there be a comfortable range that you could give, a range with which a lender would feel comfortable? Can you say that your cash flow will not go below this number, and may go as high as this number?
Mr. Stark: The banks will be looking at cash flow to decide on a loan, and they will want projections. In all our ports, we do five-year business plans and 20-year long range plans. Based on five-year plans, we can look at our cash flow basis, and at our forecasting on commodities.
Senator Bryden: It would average at somewhere around $25 million.
Mr. Stark: That is before depreciation.
Senator Spivak: I want to address clauses 47, 73 and 101 in Bill C-9, regarding allowing the ports to escape environmental assessments on their activities.
I want to ask you why you think that the ports ought to be exempted from this, when no other industry is exempted. This is a federal law. The federal government does have a responsibility. It does not seem logical to me that one should be one's own policeman. This is not just a matter of environmental protection. Around the world, we have seen how much self-policing costs a company. I am speaking of the recent Spanish episode.
What is your rationale for suggesting that you should be your own environmental assessor? We know that you should be an environmental steward. There is no question about that; you have to be, but I want to ask you about the assessment.
Mr. Stark: Senator, we did provide you with a supplementary package.
Senator Spivak: I have read it.
Mr. Stark: As you can see, one of our key values is our environment.
Senator Spivak: Absolutely. I appreciate that.
Mr. Stark: We would point to our history, and to how we have conducted ourselves in the port. On our staff we have a doctor of oceanography, a biologist, and a chemist. We are part of an organization called the Burrard Inlet Environmental Action Program, which also the DFO, Environment Canada, the provincial department, and the Greater Vancouver Regional District.
In terms of our processes, we believe we have very credible processes which stood up a number of times when we did our Delta project. In that process, we had an independent panel with nominations from both the provincial government and the Delta municipality. Obviously, by putting people into the same process that we followed, they found it to be very credible as well.
Senator Spivak: Perhaps I should sharpen my question. My question is not about whether you are a good environmental steward. I am sure that you are. I am sure the port has a wonderful record. That is not the issue. The issue is why the ports should be exempted from federal legislation which applies to all industries?
What is the rationale for that? If you are a wonderful environmental steward, you should have no fear of any provisions in federal legislation. It is that narrow point I am examining. I have no doubt that the Port of Vancouver is a terrific, environmentally sound corporate citizen.
Mr. Stark: One of the key points is timing. On average, it takes 440 days to go through the Canadian Environmental Assessment Agency process. That is a long time when you are competing for a project. In our container business, we are competing with Seattle-Tacoma. In terms of competitiveness, taking 440 days for that process is unacceptable.
Mr. Warren McCrimmon, Corporate Secretary, Vancouver Port Corporation: I just add to that the timing issue, which is very important to our customers. Right now we are in what is called a harmonization program with regards to the First Narrows Bridge in Vancouver. This would be operated under the CEAA process and, through harmonization, be conducted by the Province of B.C. That process will take, in the best estimate and their optimistic target, 18 to 24 months. We operate that same process in four to six months. There is an enormous difference in the time that it takes to get through our process.
I read the testimony that was given to you by the environmental group that appeared. The complaint seemed to be that Bill C-9 would remove the application of the Navigable Waters Protection Act, and that the ports were not regulated now. That seemed to be a problem for them. The Navigable Waters Protection Act does not presently apply to the port corporations, however. It only applies to the third-party users of the port. The CEAA legislation itself does not apply to all industry. It only applies to those industries which are conducting activities on federal lands.
In the ports, the Navigable Waters Protection Act is effectively conducted by the ports right now. In Vancouver, we used to have conduct of that legislation, or its predecessors. We do a Navigable Waters Protection Act review internally in the ports now. To have the Coast Guard do it would be a duplication, and there would be no added benefit.
All prospective ports have effective environmental policies and procedures in place. There is no identified environmental problem at the ports which would require regulation. The government's policy says that regulations should not be the primary resort; they should essentially be the last resort. We should take a look at other alternatives that are cost effective, and go with those. We have a very cost effective policy and procedure in place, not only in Vancouver, but in all of the local port corporations of Ports Canada. The harbour commissions which are prospective port authorities also have practices or procedures in place.
The process is very transparent; it involves the public and it is enforceable, which is the other concern that seemed to be expressed before you.
Senator Spivak: With all due respect, if it is working so well, why do you want them to remove these clauses? I understand that there has been devolvement of responsibility in terms of harmonization, et cetera. However, the removal of this is an important legislative principle.
I realize that timing is a competitive cost to you, but the courts do not recognize timing or costs when they assess what is the legal and right thing to do.
If you are happy with the way that things are working, I do not understand why you now feel that it is necessary to eliminate these clauses from the bill.
Mr. McCrimmon: There is a misunderstanding. We have not asked for the removal of those clauses. We have endorsed those clauses.
Senator Spivak: You have?
Mr. McCrimmon: Yes. In addition, the federal court recently reviewed our process and found it to be a good process.
Senator Spivak: You have made my case, thank you.
Mr. Stark: I am sorry for the confusion. We did not ask for the clauses to be removed. We are happy with the bill as it stands.
Senator Roberge: You mentioned that the port is not congested. How many acres do you have left to develop, and what percentage of your total acreage is that?
Mr. Stark: There is actually very little land left in the port to develop without in-filling more. Environmentally, that is always a challenge.
One of our key goals for the future is to obtain better utilization from the existing assets. The container terminal at Delta, for instance, which was just completed, has an estimated capacity of 600,000 TEUs. There is a similar terminal in Hong Kong, which has about twice the acreage. It is handling 6,000,000 TEUs.
Rather than adding more and more infrastructure, our goal it to utilize our assets better, to achieve better productivity, and to have better equipment.
To answer your question, there is not a significant amount of good land left. It would require in-fill. When I refer to congestion, however, I am referring to such things as road and rail infrastructure. We do not believe that the port is congested. We do handle 14,000 miles of rail cars every year, but we do it efficiently.
Senator Roberge: In your five or 10-year plan, have you projected some usage for that acreage?
Mr. Stark: Yes. However, we have doubled our assets in the last five years. We have gone from $250 million in assets to $540 million. We just finished a major infrastructure program. We do not see a need to add terminals in the next five years. However, if new business comes along, we are always prepared to work with those businesses. Our philosophy has been that we do not put all of the money into the assets today; we go in with partners. We have a $20 million project which is almost completed -- 50 per cent was built from private sector funds and 50 per cent from the port authority.
Senator Roberge: I see that you are very favourable to the bill in its present state. If, however, this committee, in its wisdom, makes some recommendations for modifications and amendments to this bill, are there any recommendations that you would make which would improve the bill?
Mr. Stark: I believe that we have resolved all of the issues that we raised earlier. We now feel that this bill is a good bill, and we would recommend that the Senate approve it. Our customers in Vancouver are happy with the proposed legislation, and we would like to proceed with it the way it is. Hindsight is 20/20, but we are happy with what we have, and we would like to get down to business.
Senator Perrault: The mayor of Hamilton visited us a few days ago. He was grumbling a bit. He felt there was an inordinate Vancouver influence on the views that have emerged from the government on this bill. You have had input. You are doing a marvellous job with the port out there, but he did express that belief.
Mr. Stark: We have voiced our opinions on the bill, the letters patent and the regulations. Every other port has had the same opportunity.
Senator Perrault: I share your view.
On the subject of competition, you suggest that our neighbours to the south are finding ways in which to attract Canadian business. Do they lower taxes or fees? How is that done?
Mr. Stark: The Port of Seattle is a taxing authority, and 4.5 per cent of the tax mil rate goes to the port. They raised $35 million U.S., and that is for their operating costs, not for infrastructure. However, our biggest competition with Seattle is in the area of containers. At one time, 150,000 -- or about 45 per cent -- of the Canadian inbound containers were going through Seattle. As a result of our increased competitiveness through better and lower rates in the last few years, we have moved that down to less than 20 per cent. Less than 20 per cent of the Canadian containers go through Seattle. We are gaining all the time, and we are competitive.
The new Delta Port Container Terminal is averaging 27 or 28 containers an hour, which is better than Seattle. We have had occasions where we have had over 30 containers an hour. At this time, we are competitive with Seattle.
Senator Perrault: In the brief, you say that the port corporation intends to establish the Port of Vancouver as the port of choice on the West Coast of North America, effectively overcoming the international challenges of ports in the Americas, the South Pacific and the Orient. That is quite a challenge.
Mr. Stark: We believe that we are up to it. The labour force that we have and the management of the terminals are a great asset.
Senator Perrault: Is your relationship with the longshoremen and the grain handlers positive?
Mr. Stark: There has been a perception in years gone by that there were labour troubles. Today management and labour understand the issues, and they work together to resolve them. Negotiations are always tough, but that is what you expect of negotiations.
Our labour charge out rates are $37 Canadian an hour. When you go down to Seattle the charge out rates, in Canadian dollars, are $65 an hour. They have had huge increases over the years. When people look at competitiveness, we are competitive on labour rates; Seattle has some advantages on the taxing authority. The Port of Vancouver pays $40 million in taxes to municipalities. However, when you balance it all out, at the end of the day, we are charging less per container than the Port of Seattle is.
Senator Perrault: There were some discussions last year about the attempt in Washington to modify, change, or get out of the Jones Act. That would allow them to get more out of the cruise ship business. How are we doing there? Are we winning that fight? Is there still a threat of having some of that business move south?
Mr. Stark: You are referring to the Passenger Act; the Jones Act addresses cargo.
We are focusing our efforts on Canadian legislation, and on becoming more competitive. There is not much that we can do about U.S. legislation. Our goal is to keep our eye on the ball -- to service our customers, and give them first-class services. If the legislation goes through, we will not lose the business.
Senator Perrault: The Jones Act deals with cargo. There is some incentive at the present time for cruise ships to come to Vancouver, however.
Mr. Stark: Yes, the Passenger Act in the United States is the reason that we had the business. We are a day closer to Alaska, and it is hard to do a seven-day cruise out of Seattle. You can do it out of Vancouver, though.
Senator Perrault: We have some natural advantages there, then.
Mr. Stark: People like to start off their vacations in Vancouver. We give our customers good service at competitive prices.
Senator Perrault: You are saying that it may have some defects, which may be corrected over time, but you generally support the bill.
Mr. Stark: We are fully supportive of the bill. There is a review in five years, and I feel that everything should be dealt with then.
Senator Forrestall: I would like to return to the subject of the environment. Triggers to activate environmental laws, assessments, and reviews exist in a variety of federal statutes. You are arguing that the three clauses which exempt the Navigable Waters Act from the provisions of the bill should remain. The environmental people are arguing that, by leaving them there, you are removing an effective trigger, and that, when an environmental issue comes up, it will be up to the port to respond to it by itself.
That is fine for the Port of Vancouver. It might be all right, to a lesser extent, for the Port of Montreal, and even to a lesser extent to the Port of Halifax. Some of these other ports, however, have no capacity to mount environmental protection plans. You cannot simply adopt principles, and apply them to Port Alberni and Sheet Harbour. The characteristics of those ports are too different. If Senator Spivak were to argue that the trigger should remain in place, you would want these three clauses to be removed.
You said something that appeals to me very much; that the minister must always have a sufficient authority to move in and, in his best judgment, make decisions. He or she must always have that, with respect to the size of the federal lands that these are on. At the same time, the fight for the protection of the environment in this country has been going on for 50 years, and it is just now beginning to see some daylight. All of a sudden we are opening up enormous vulnerabilities in the massive port structures in Canada.
Senator Spivak: My understanding was that you were not advocating the removal of the triggers, but that you felt that it was perfectly all right to take these clauses, out and leave the navigable water triggers in. That is what I understood from your answer to me. Is that a correct assumption?
Mr. McCrimmon: No, that is not a correct assumption. I was saying that we did not want any changes to the bill.
With respect to the triggers though, I believe that the environmental folks gave you a very narrow focus on that issue. There are a number of triggers out there, most of which are not through the Navigable Waters Protection Act, but through places like Environment Canada, which must give approvals on ocean dumping, for example. There are also DFO triggers; every time you do something in the water, you affect the habitat, and that will have a trigger available to it. In our experience, the triggers really reside in Fisheries and Oceans, and those triggers are not being done away with.
Senator Spivak: I was asking you about the principle. The principle is that the federal government ought to retain every responsibility it has now, and not diminish that. It does not make sense for people to police themselves. I thought that you had agreed with that, but it appears that I was mistaken. That was the whole thrust of my question.
Senator Forrestall: I emphasize again the abilities of the Port of Vancouver. You probably are far and away the best people to look after your own environmental concerns, but the Port of Saint John might not have the wherewithal. It probably does not have an environmental review and assessment program in place that has been run by the province, run by the federal authorities, or, particularly, a program that is within their means to implement. What they do with dredging on the Fraser River may have an effect 100 miles up the river on salmon spawning. That is the fishery in that sense. There is no trigger in the Fisheries Act that would cover the port of Halifax.
You have this enormous dichotomy. On the one hand, you have a capacity, but on the other, some ports do not, because of the size of cash flow. Other ports do not have an environmentalist on staff, and they do not have engineers dedicated to doing things the right way environmentally. Knowing your background and where you came from, I am very happy with the Port of Vancouver.
Mr. McCrimmon: The CEAA itself has said that it does not presently have the manpower to supervise the program that it is proposing. In a paper on its proposal, it also acknowledged that the proposal will undercut our competitiveness.
Senator Spivak: What paper?
Mr. McCrimmon: The CEAA agency presented a paper to its RAC committee, in which it laid out the proposed regulation process. We can provide a copy.
Senator Bryden: I believe that you said that the Navigable Waters Protection Act does not currently apply to your port. Did you say that?
Mr. McCrimmon: It does not apply to the port authority. Within the port, it applies to all third party lessees, et cetera. If we do construction in the harbour, the Navigable Waters Protection Act does not apply to us. We do an NWPA process ourselves internally. It is the nature of the harbour master's function to do that.
Senator Bryden: Under this bill, would the situation change for the users of the facility?
Mr. McCrimmon: As the bill sits right now, no. The only change to their situation would come through some sort of regulatory change.
Senator Bryden: The Navigable Waters Protection Act, which applies to them now, would continue to apply to them after the passage of the bill, in your opinion?
Mr. McCrimmon: Yes.
Senator Bryden: A representative from Canso told us that the Port of Vancouver is the only port in Canada that is really ready to go into the next century of water traffic. It is quite a compliment.
Some of us, including myself, have been concerned about certain aspects of the bill. That does not contradict what you have said. For you, it is a good bill. You said that you have had a lot of input and discussion -- not only in the formulation of the bill, but also in the draft letters patent and so on. It is very satisfactory for you. The bill is also very satisfactory for the St. Lawrence Seaway. Part of the reason for that is because you are both big. If it is not satisfactory to the Port of Vancouver and the seaway, this is not a good bill.
It was of great concern to my government to make sure that they drafted a bill with which you are comfortable. The concern of some members of this committee is that perhaps the same care and the same consideration has not been given to smaller ports in different situations.
I wished to ask about the competitiveness of labour rates. You said you are $37 Canadian an hour, versus $65 Canadian. In calculating that rate, are you including costs for things such as Workers Compensation and health costs?
Mr. Stark: That is the total. The longshoremen do not get $37 an hour, although I am sure that they would like to. That is all-in costs, including a margin of profit for the terminal operators.
Senator Bryden: If you look on the basis of the amount of cash that is paid, we might be even, or possibly at a bit of a disadvantage. When you add in the ancillary cost of WCB and medical insurance in the U.S., however, we become much more competitive in Canada.
Mr. Stark: That is comparing apples and apples, in terms of all-in cost in both Canada and the U.S.
The Chairman: Thank you, Captain Stark and Mr. McCrimmon, for your presentation, and for your answers.
The committee adjourned.