FEDERAL REG

SOR/2016-312: Regulations Amending the Pacific Pilotage Tariff Regulations

REGISTRATION OF FEDERAL REGULATION - VIA OIC DATABASE, PRIOR TO PART II OF THE GAZETTE

Registered
December 9, 2016


REGULATORY IMPACT ANALYSIS STATEMENT (This statement is not part of the Regulations.) Issues The Pacific Pilotage Authority (the Authority) has continued on its planned rundown of the surplus that had been built up over the past several years. As a result of this planned rundown, the Authority has run deficits in fiscal 2013, 2014, 2015 and will run a deficit in 2016. This action was planned and ... (Click for more)


Published on December 9, 2016

Bill Summary

SOR/2016-312: Regulations Amending the Pacific Pilotage Tariff Regulations

REGULATORY IMPACT ANALYSIS STATEMENT (This statement is not part of the Regulations.) Issues The Pacific Pilotage Authority (the Authority) has continued on its planned rundown of the surplus that had been built up over the past several years. As a result of this planned rundown, the Authority has run deficits in fiscal 2013, 2014, 2015 and will run a deficit in 2016. This action was planned and agreed to in order to assist Authority customers. The marine industry that the Authority serves continues to struggle with the ongoing issue of overcapacity, limited cargo opportunities and low charter rates, as it has since the global economic downturn in 2008–2009. Without changes to the tariff, the Authority expects to incur substantial losses in fiscal 2017, which will bring the Authority into a deficit cash and liquidity position. Background The Authority is a financially autonomous Crown corporation listed in Schedule III of the Financial Administration Act whose role is to establish, operate, maintain and administer, in the interest of safety, an efficient and economical pilotage service within all coastal waters of the west coast of Canada, including the Fraser River. Section 33 of the Pilotage Act allows the Authority to prescribe tariffs of pilotage charges that are fair and reasonable to permit the Authority to operate on a self-sustaining financial basis. Objectives The Authority’s objective is to ensure that it continues to safely operate on a self-sustaining basis. In order to do so, the tariff charged to customers for assignments must be implemented such that it accounts for the declining cash balance. Description The Authority is implementing a temporary surcharge of $100 per assignment effective from January 1, 2017, to December 31, 2017. This surcharge is intended to provide temporary relief to the Authority, which is experiencing increasing losses and a decreasing cash position. It is expected that during this period, a longer term sustainable tariff plan will be put in place. “One-for-One” Rule The “One-for-One” Rule does not apply to this amendment, as there is no increase in administrative costs to business. The amendment is not a new regulation. Small business lens The small business lens does not apply to this amendment. Consultation The marine industry on the west coast of Canada is the key stakeholder impacted by this amendment. The Authority prepublished the proposed amendments to the Pacific Pilotage Tariff Regulations, in Part I of the Canada Gazette on January 9, 2016, followed by a 30-day comment period. As provided for in subsection 34(2) of the Pilotage Act, any interested person who had reason to believe that the proposed tariff of pilotage charges was prejudicial to the public interest could file an objection with the Canadian Transportation Agency (CTA), within 30 days after publication in the Canada Gazette. The Chamber of Shipping of British Columbia supported this tariff but the Shipping Federation of Canada (the Federation) opposed the tariff. On February 8, 2016, the Federation filed a formal notice of objection with the CTA. The Federation objected to the Authority’s proposal to implement a surcharge of $120 per pilotage assignment from July 1, 2016, to December 31, 2017. The Federation found the proposed surcharge neither fair nor reasonable. Following considerable discussion between the Federation and the Authority during February 2016 and September 2016, a compromise was reached to amend the originally proposed temporary surcharge to $100 per pilotage assignment, effective January 1, 2017, to December 31, 2017. As a result of this compromise, the Federation formally withdrew its notice of objection on September 9, 2016. A letter of support from the Federation for the amended tariff amount which included the joint agreement between the Federation and the Authority was received and dated September 9, 2016. A letter of support was also received from the Chamber of Shipping dated September 8, 2016. The formal objection withdrawal letter to the Federation, the Chamber of Shipping and the Authority was issued from the CTA dated September 9, 2016. Rationale The Authority has continued to run down surpluses that had been built up over the past several years. As a result of this planned rundown, the Authority has run a deficit in fiscal 2013 and 2014, and will run a deficit in 2015 and 2016. These deficits are the result of the Authority not matching industry tariff increases with increases it received from the British Columbia Coast Pilots (BCCP). Since 2012, the Authority has paid the BCCP an increase of 4% per year (in 2012, 2013, 2014 and 2015). Over the same period, the Authority has increased its tariff by 2.9%, 2.9%, 2.25% and 2.5%. The costs of the BCCP represent approximately 67% of the Authority’s total revenues. Choosing to not match contractual increases therefore results in a substantial effect on the Authority’s cash position. In order to bring cost relief to industry, the financial provisions of the existing contract between the Authority and the BCCP (a five-year contract from 2012–2016) were negotiated and opened, and the financial provisions and term of a new contract were negotiated. In the Authority’s view, a successfully negotiated contract would be one in which two prime objectives would be achieved. Firstly, the contract would reduce rates which were otherwise legally committed to in 2016, but not at the expense of rates through the remaining 2017–2020 plan years. Secondly, the contract length would be of a term sufficient to display a world-leading sense of stability on the west coast between the Authority, its pilots and its stakeholders, even in the current challenging economic environment. This was concluded successfully and bring some cost relief to the Authority for 2016. However, the cost relief does not eliminate the need for the $100 surcharge, instead it allows the Authority to lower its required tariff for fiscal 2017 onwards. This position is supported by industry. It was always intended that once the surplus cash was used up, the Authority would need to rebalance the tariff and charges in order to maintain its self-sustaining mandate. In 2015, several phenomena have increased the speed of the loss of cash of the Authority, namely higher callback costs to the BCCP due to lower pilot availability; lower industry volumes due to a downturn in coal and forestry; and a significantly delayed $60 pilot boat replacement fee that was budgeted to be effective January 1, 2015. As a result, the Authority requires the bridging fee to help slow the loss of cash, which is occurring at an elevated pace. This fee is supported by industry. Implementation The temporary tariff will come into effect on the later of the day on which the Regulations are registered and January 1, 2017. Contact Stefan Woloszyn Director Finance and Administration 1000–1130 West Pender Street Vancouver, British Columbia V6E 4A4 Telephone: 604-666-6988 Fax: 604-666-1647 Cellular: 604-365-8268 Email: [email protected] Website: www.ppa.gc.ca Footnote a S.C. 1998, c. 10, s. 150 Footnote b R.S., c. P-14 Footnote c S.C. 1996, c. 10, s. 251(2) Footnote d R.S., c. P-14 Footnote e R.S., c. P-14 Footnote f R.S., c. P-14 Footnote 1 SOR/85-583

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