Vol. 142, No. 23 — June 7, 2008

Regulations Amending the Atlantic Pilotage Tariff Regulations, 1996

Statutory authority

Pilotage Act

Sponsoring agency

Atlantic Pilotage Authority

(This statement is not part of the Regulations.)

Issue

The Atlantic Pilotage Authority (the Authority) owns pilot boats that are aging, and that are nearing the end of their useful life. Further delay in replacing the boats would seriously compromise the Authority’s ability to provide the service. Funding is required for the initial stages of construction of new pilot boats, thereby maintaining safe, reliable, and efficient pilot boat service in the future.

Objectives

The Authority is responsible for administering, in the interests of safety, an efficient pilotage service within the Canadian waters in and around the Atlantic Provinces. The Authority prescribes tariffs of pilotage charges that are fair and reasonable and consistent with providing revenues sufficient to permit the Authority to operate on a self-sustaining financial basis. In accordance with recommendations from the Canadian Transportation Agency and its customers, the Authority strives to be self-sufficient on a port-by-port basis, as well as for the Authority as a whole.

Description

This proposal is amending the Atlantic Pilotage Tariff Regulations, 1996 to increase the pilotage tariff in two compulsory pilotage areas: Saint John, New Brunswick ($100 per assignment) and Halifax, Nova Scotia ($67 per assignment). These increases will take the form of a pilot boat replacement surcharge for a maximum period of three years. All other tariff charges in the remaining compulsory pilotage areas will remain unchanged at this time.

The Authority is operating pilot boats in Halifax and Saint John that are in their fourth decade of service. The cost of maintaining the existing pilot boats is increasing, and the reliability of the vessels is decreasing as they age. Pilot boats with a more modern hull design are capable of operating safely in a greater range of weather conditions and are inherently safer for crews and pilots. The Authority must replace these pilot boats in order to continue to provide a reliable pilotage service.

The Authority continues to consult widely with its customers in various ports, and to address concerns expressed by the customers. During 2007 the Authority sponsored 16 meetings with users in various locations, and has attended many additional meetings sponsored by other parties. In Saint John and Halifax, the Authority has reached an agreement with its customers regarding this rate.

Regulatory and non-regulatory options considered

Several alternatives were considered in determining tariff charges required by the Authority.

The Authority could have maintained tariffs at the status quo in both compulsory ports. This alternative may have resulted in the Authority being unable to replace the existing pilot boats in the near future, which could jeopardize service in both ports. The Authority rejected this alternative because the pilot boat replacement surcharge is required to provide funding for the initial stages of construction of new pilot boats to maintain a safe, reliable, and efficient pilot boat service in the future.

The Authority could have utilized funds contributed by other ports to begin the pilot boat replacement program. However, this alternative would have meant cross-subsidization of the operations in these two ports by other ports, and would not have followed the principle of port-by-port self-sufficiency to which the Authority has attempted to adhere. Therefore, the Authority rejected this alternative.

The Authority could have continued to pay increased maintenance costs on their existing pilot boats, reduce speed to extend service life of the existing pilot boats, or contract the service to a private contractor. The Authority-owned pilot boats are aging, and are nearing the end of their useful life. Further delay in replacing the pilot boats would seriously compromise the Authority’s ability to provide the service. These pilot boats are already operating at a speed that is a bare minimum to adequately provide the service, and a slower speed would lead to delays for vessels traveling in these waters. While the Authority utilizes several contractors in many of its ports, most of these are minor ports in which pilot boats do not need to be as robust and sophisticated as required in Halifax and Saint John. On two previous occasions the Authority has requested invitations to offer service from private concerns for provision of boat services in major ports. In each case the offers that were received were much higher than the Authority would expend to provide the service. These alternatives would reduce the quality of service and/or increase the cost of the service provided by the Authority and could impact on the safety and reliability of the pilot boat service. Therefore, these alternatives would be unacceptable to both the Authority and its clients.

The Authority has attempted to keep costs at a minimum. Approximately 50% of the Authority’s expenses are pilot salaries, 30% are pilot boat expenses, 10% are for direct operating expenses, and 10% are spent on administrative overhead.

Benefits and costs

Modern, efficient pilot boats will enhance the service offered to the Authority’s customers and will provide a safer work platform for its pilots and boat crews. Customers in other areas will find comfort that they are not subsidizing this program to provide pilot boat service to these two ports. The three-year surcharge will require a modest increase in costs for assignments for which a pilot boat is used in Halifax and Saint John. However, while less repair costs would be incurred when these new vessels are put into operation, in the long term, there would be an increase in costs attributed to maintaining them. Annual costs can fluctuate significantly, but during the five-year period from 1997 to 2001 inclusive, the Authority spent an average of $218,000 on pilot boat repair. Between 2002 and 2006 repair costs averaged $566,000. Future repair costs are difficult to quantify, but it would be very unlikely for them to decline, and they would probably increase significantly. If they do increase, the cost of the repairs will have to be covered by increased tariffs.

Halifax

The port of Halifax has been operating with pilot boats that were built in the mid-1970s. In order to continue to provide a reliable service, the port requires a new vessel in the near future. The proposed pilot boat replacement surcharge is for $67 per assignment for which a pilot boat is required. The current tariff rates in Halifax are the lowest in the Authority, and probably the lowest in eastern North America. Some ports in Atlantic Canada pay as much as three times the tariff that Halifax does, and some ports on the United States eastern seaboard pay as much as eight times the Halifax rates.

Saint John

The perspectives in Saint John look better than they have in several years. The new CANAPORT Liquefied Natural Gas Terminal plant nears completion, with other projects a few years down the road. In order to provide service for this new business, it will be necessary to upgrade the pilot boat capabilities in the port in the near future. The proposed amendments are intended to provide the required revenue to support this improvement in service. The proposed pilot boat replacement surcharge is for $100 per assignment for which a pilot boat is required.

The proposed tariff rates will increase the cost of a pilotage assignment by the amounts indicated below in Halifax and Saint John when a pilot boat is used.

Revenues derived from this surcharge will be used to design the new pilot boats for the two ports, and contribute to the initial construction costs of the vessels. The design for the two boats, based on our previous experience, could cost $500,000 in total. The remaining construction cost of the pilot boats will have to be borrowed from a bank, with the interest cost of the loan being charged to the pilotage area in internal accounting. Depending upon the final cost of the boats, the loan required could be between 3 and 4 million dollars.

In accordance with the 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 proposal was conducted, in the form of a Preliminary Scan. The SEA concluded that the proposal is not likely to have important environmental effects.

Consultation

Consultations in various forms have taken place with the parties affected by these proposed amendments. The parties consulted include the Shipping Federation of Canada, the Canadian Shipowners Association, the Halifax Pilotage Committee, the Saint John Pilotage Committee, the Strait of Canso Pilotage Committee, the St. John’s Pilotage Committee, the Restigouche Pilotage Committee, shipping lines, port authorities, and local port agents and users. The consultation took the form of numerous meetings, as well as written, personal, and telephone communications with individuals. Alternatives to tariff increases were presented, where applicable, and participation from the attendees was encouraged. When meeting with customers, the Authority provided an analysis of the situation and solicited responses.

In consultation with the Shipping Federation of Canada, it was agreed, to accommodate their concern about the increased cost, that the surcharge in Halifax would be reduced from $100 (as originally published in our RIAS in Canada Gazette, Part I, on October 20, 2007) to $67, and the maximum term of the surcharge would be increased from two years to three years. The Shipping Federation has withdrawn their objection to our initial publication, and has indicated that they will have no objection to the surcharge tariff as contained herein.

Implementation, enforcement and service standards

Section 45 of the Pilotage Act provides an enforcement mechanism for these Regulations in that a Pilotage Authority can inform a customs officer at any port in Canada to withhold clearance from any ship for which pilotage charges are outstanding and unpaid. Section 48 of the Pilotage Act stipulates that every person who fails to comply with the Act or Regulations is guilty of an offence and liable on summary conviction to a fine not exceeding $5,000.

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