Vol. 139, No. 19 — September 21, 2005

Registration
SOR/2005-281 August 31, 2005

PILOTAGE ACT

Regulations Amending the Great Lakes Pilotage Tariff Regulations

P.C. 2005-1531 August 31, 2005

Whereas the Great Lakes Pilotage Authority, pursuant to subsection 34(1) (see footnote a) of the Pilotage Act, published in the Canada Gazette, Part I, on May 14, 2005, a copy of the proposed Regulations Amending the Great Lakes Pilotage Tariff Regulations, substantially in the form set out in the annexed Regulations;

And whereas more than 30 days have expired after the date of publication and no notices of objection to the proposed Regulations were filed with the Canadian Transportation Agency in accordance with subsection 34(2) (see footnote b) of the Act;

Therefore, Her Excellency the Governor General in Council, on the recommendation of the Minister of Transport, pursuant to subsection 33(1) of the Pilotage Act, hereby approves the annexed Regulations Amending the Great Lakes Pilotage Tariff Regulations, made on July 6, 2005 by the Great Lakes Pilotage Authority.

REGULATIONS AMENDING THE GREAT LAKES PILOTAGE TARIFF REGULATIONS

AMENDMENTS

1. (1) Paragraph 3(1)(c) of the Great Lakes Pilotage Tariff Regulations (see footnote 1) is replaced by the following:

(c) a compulsory pilotage area, other than the Welland Canal, the Cornwall District or the Port of Churchill, Manitoba, is

(2) Subsection 3(5) of the Regulations is repealed.

2. (1) Subsections 1(1) to (3) of Schedule I 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 thereof and its contiguous waters is $14.71 for each kilometre ($24.48 for each statute mile), plus $327 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 $715 and $3,139, respectively.

(3) The basic charge for a movage in International District No. 1 and its contiguous waters is $1,076.

(2) The portion of items 2 to 15 of the table to subsection 1(5) of Schedule I to the Regulations in column 2 is replaced by the following:

Item	Column 2 Basic Charge ($)
2.	1,743
3.	1,029
4.	3,032
5.	1,743
6.	1,262
7.	3,515
8.	2,263
9.	1,743
10.	1,029
11.	2,282
12.	2,282
13.	1,772
14.	1,029
15.	1,262

(3) The portion of items 1 to 4 of the table to subsection 1(6) of Schedule I to the Regulations in column 2 is replaced by the following:

Item	Column 2 Basic Charge ($)
1.	2,012
2.	1,685
3.	757
4.	757

3. (1) The portion of items 1 and 2 of the table to subsection 2(1) of Schedule I to the Regulations in column 2 is replaced by the following:

Item	Column 2 Basic Charge ($)
1.
(a)	674
(b)	671
(c)	405
2.
(a)	642
(b)	516
(c)	387

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

(3) The basic charge for pilotage services consisting of a lockage and a movage between Buffalo and any point on the Niagara River below the Black Rock Lock is $1,318.

COMING INTO FORCE

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

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Description

The Great Lakes Pilotage Authority (the Authority) is responsible for administering, in the interests of safety, an efficient pilotage service within Canadian waters in the province of Quebec, south of the northern entrance to St. Lambert Lock and in and around the provinces of Ontario and Manitoba.

Section 33 of the Pilotage Act (the Act) requires the Authority to prescribe the manner for determining pilotage charges before fixing such charges. These charges should be fair and reasonable and permit the Authority to operate on a self-sustaining financial basis. To support its efforts towards maintaining fiscal self-sufficiency, it is necessary to adjust the basic pilotage charges in four international districts and eliminate reference to the currency equalization factor (C.E.F.) set out in subsection 3(5) of the Great Lakes Pilotage Tariff Regulations (the Regulations).

In International Districts No. 1, 2 (other than the Welland Canal), 3 and Lake Ontario, pilotage services are jointly performed by Canadian and United States pilots in accordance with a Memorandum of Arrangements signed by both countries.

The basic charges for pilotage services in these international districts are paid to the Authority in Canadian currency based on the U.S. rate charged for similar services performed by U.S. pilots. Over the years, fluctuations in the exchange rate between the U.S./Canadian dollar have been minimal and have not substantially affected Canadian charges. This has not been the case in the past three years.

Due to the reduction in the value of the U.S. dollar during this period, Canadian ship owners have saved almost $2.2 million in their costs for pilotage services billed in U.S. funds rather than Canadian funds. This saving has created a shortfall of revenue which forced the Authority to deplete its accumulated surplus.

The Authority met with marine industry representatives in February 2005 to discuss the issue of the C.E.F. and declining revenues due to the depreciation of the U.S. dollar vis-à-vis the Canadian dollar. At the meeting, the Authority provided the participants with a paper published by the Canadian Transport Commission in 1986 outlining the relative advantages and disadvantages in using the C.E.F. for currency conversion purposes.

For example, in April, 2002, the exchange rate for the U.S. dollar was 1.5935 Canadian dollars. In December 2004, the exchange rate for the U.S. dollar was $1.3605, where the Canadian dollar equivalent was calculated using a 24-month average of the Canadian/U.S. exchange ratio. The following example illustrates the negative effect on the Authority's revenues due to the reduced value of the U.S. dollar.

colonne 1	Actual 2002	Actual 2004
Revenues earned in U.S. dollars (International waters)	$4,120,000	$4,120,000*
Exchange rate for U.S. dollar	$1.5935	$1.3605
Total revenues in Canadian dollars	$6,565,000	$5,605,000
Net loss due to reduced value of U.S. dollar caused by the exchange rate.		$ 960,000

^* (Neglecting tariff increases since 2002 and maintaining 2002 traffic level.)

The Authority and users of the pilotage service recognize that immediate action is necessary to address the issue of declining revenues caused by the exchange rate and the current C.E.F. system. Therefore, consideration is given for an overall increase in tariff charges to address the nearly $1.0 million revenue shortfall and to deal with the uncertainty associated with revenues being calculated using a volatile exchange rate. It is also important to end cross-subsidies between the international districts and the Canadian districts.

To avoid future tariff fluctuations, it was decided that the C.E.F. would be eliminated and that the Authority would restate its tariffs for pilotage services in the international districts using a fixed Canadian dollar tariff rate. Service users agreed that the Authority should readjust the tariffs for basic pilotage services within the international districts using the April 2002 exchange rate of $1.5935. This will have the effect of increasing the tariffs within these districts by approximately 17 percent and generate almost $1.0 million in additional revenue each year.

The Authority indicated that the tariff adjustment and the elimination of the C.E.F. would allow it to:

• achieve a break-even position in 2005;
• replenish the funds used to cover the 2004 operational loss;
• achieve parity with respect to Canadian/U.S. tariff charges within the international districts; and
• reduce uncertainty when forecasting revenues.

Alternatives

A retention of the status quo was not a feasible option, as the Authority's surplus funds are completely depleted.

The Authority could have implemented an overall increase in tariff charges and retain the C.E.F. to achieve a break-even position. This option, however, would not allow the Authority to easily forecast for the future and would leave it exposed to unwarranted risks.

The adjustment to the basic pilotage charges in the international districts and the cancellation of the C.E.F. will support the Authority's efforts to ensure financial self-sufficiency while providing a safe and efficient pilotage service, in accordance with the requirements of the Act.

Benefits and Costs

The tariff adjustment is consistent with the Authority's efforts to raise its charges to reflect the actual cost of providing pilotage services. It is anticipated that the amendment will generate an annual increase in revenue of approximately $1.0 million that should allow the Authority to reach a break-even position and replenish the funds withdrawn from its reserves set aside for employee retirements.

The tariff adjustment is beneficial in that it will ensure the continued efficiency of pilotage services while maintaining the present level of pilot numbers. In addition, this adjustment will enhance the Authority's ability to operate on a self-sustaining financial basis that is both fair and reasonable.

In accordance with the 1999 Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals and the Transport Canada Policy Statement on Strategic Environmental Assessment, a strategic environmental assessment (SEA) of this amendment was conducted, in the form of a preliminary scan. The SEA concluded that the amendment does not have any impact on the environment.

Consultation

The Authority met with the Shipping Federation of Canada (SFC) on January 31, 2005, and February 14, 2005, to present its financial position and discuss the issue of declining revenues due to the devaluation of the U.S. dollar vis-à-vis the Canadian dollar. The Authority also met with representatives from the Chamber of Maritime Commerce, the Canadian Shipowners Association and Petronav on February 1, 2005. In addition, the Authority sent letters to its stakeholders advising them of the tariff adjustment and elimination of the C.E.F. and invited their comments.

During the meetings with the SFC, the Authority elaborated on its current financial situation, particularly emphasizing the negative impact that the declining U.S. dollar has had upon its revenues. It stressed its need to break-even at the close of the 2005 navigational season and the urgency to remove the ambiguity when forecasting revenues. The SFC members recognized that the adjustment to the basic pilotage charges in the international districts and the elimination of the C.E.F. is fair and reasonable considering the Authority's financial position.

This amendment was pre-published in the Canada Gazette, Part I, on May 14, 2005, to seek comments of the public and allow interested persons to file a notice of objection. No notices of objection were filed with the Canadian Transportation Agency.

Following the pre-publication of this amendment, several stakeholders contacted the Authority to clarify the calculation of the tariff adjustments for International District No. 3.

In each of the international districts except for International District No. 3, pilotage services are administered by the Authority and pilotage charges are billed in Canadian dollars. In respect of these districts in which services are billed in Canadian currency, basic charges have been increased by a factor equivalent to the Canadian dollar to U.S. dollar exchange rate in April 2002, or 1.5935. This represents an increase of approximately 17% over previous charges after adjusting those charges by the C.E.F. for the month of December 2004 which, in accordance with subsection 3(5) in force at the time and now repealed under this amendment, was 1.3605.

In International District No. 3, however, pilotage services are administered by the Western Great Lakes Pilots' Association (U.S.) and consequently pilotage charges are billed in U.S. dollars. Therefore, to effect increases to the basic charges for International District No. 3 similar to the increases for the other international districts, the Authority is increasing basic charges for International District No. 3 by 17% rather than by the factor of 1.5935. When this amendment was pre-published in the Canada Gazette, Part I basic charges for International District No. 3 were increased by a factor of 1.5935. This method of calculation was inappropriate for that district given that charges are billed in U.S. dollars. The new method for establishing increases to the basic charges for International District No. 3 is necessary to avoid overcharges for pilotage services and to ensure that increases are similar across all international districts.

The Authority contacted the SFC and other organizations affected by these tariff adjustments and their members concurred with the clarification and the necessary adjustments for International District No. 3.

By implementing the adjustment to the basic pilotage charges in the international districts and the cancellation of the C.E.F., the Authority will limit its financial losses and avoid the need to borrow.

Compliance and Enforcement

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

Section 48 of the Pilotage Act stipulates that every person who fails to comply with the Act or regulations is guilty of an offence and liable on summary conviction to a fine not exceeding $5,000.

Contact

Mr. R.F. Lemire
Chief Executive Officer
Great Lakes Pilotage Authority
P.O. Box 95
Cornwall, Ontario
K6H 5R9
Telephone: (613) 933-2991
FAX: (613) 932-3793

Footnote a

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

Footnote b

S.C. 1996, c. 10, s. 251(2)

Footnote 1

SOR/84-253; SOR/96-409

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