FEDERAL REG

SOR/2016-44: Regulations Amending the Atlantic Pilotage Tariff Regulations, 1996

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

Registered
March 11, 2016


REGULATORY IMPACT ANALYSIS STATEMENT (This statement is not part of the Regulations.) Issues In accordance with recommendations from the Canadian Transportation Agency (the CTA) and its customers, the Atlantic Pilotage Authority (the Authority) strives to be financially self-sufficient on a port-by-port basis, as well as for the Authority as a whole. The Authority has absorbed losses throughout t... (Click for more)


Published on March 11, 2016

Bill Summary

SOR/2016-44: Regulations Amending the Atlantic Pilotage Tariff Regulations, 1996

REGULATORY IMPACT ANALYSIS STATEMENT (This statement is not part of the Regulations.) Issues In accordance with recommendations from the Canadian Transportation Agency (the CTA) and its customers, the Atlantic Pilotage Authority (the Authority) strives to be financially self-sufficient on a port-by-port basis, as well as for the Authority as a whole. The Authority has absorbed losses throughout the region over the years 2014 and 2015 which has left the organization with cash shortages as payments are made for loan repayments and other obligations. After analyzing projections for coming years, and consulting with industry, the Authority has determined that 9 of the 17 compulsory pilotage ports will require tariff adjustments to remain financially self-sufficient on a port-by-port basis and provide the service levels required by industry, without cross-subsidization, and that a 36-month surcharge is required to recover losses and provide funding for obligations. Background The Authority is responsible for establishing, operating, maintaining and administering, in the interests of safety, an efficient pilotage service within the Canadian waters in and around the Atlantic Provinces. As required by the Pilotage Act, the Authority prescribes tariffs of pilotage charges that are fair, reasonable and consistent with providing revenues sufficient to permit the Authority to operate on a self-sustaining financial basis. Objectives The objective of this regulatory amendment is to increase pilotage charges in compulsory pilotage areas in order to — maintain the ability of the Authority to meet its mandate to operate, in the interest of safety, an efficient pilotage service within the Atlantic region; — help ensure the long-term financial self-sustainability of the Authority as a whole; — help ensure the long-term financial self-sustainability of each port individually; and — be mindful of the economic realities of the region by ensuring that the tariff increases are within the ability of the shipping industry to absorb, while allowing the ports to remain competitive. Description Compulsory Ports Regular Tariffs in the Atlantic Pilotage Tariff Regulations, 1996 This tariff amendment will increase all of the charges related to one-way trips, trips through, and movages with the effective tariff increase being as follows for the ports below: Effective January 1, 2016, or if it is later, on the day on which they are registered: Bras d’Or Lake 10.00% Strait of Canso 10.00% Humber Arm 10.00% Placentia Bay 5.00% St. John’s 5.00% Holyrood 5.00% Saint John 5.00% Sydney 3.00% Bay of Exploits 3.00% The overall increase in revenues from these 2016 tariff adjustments is estimated to be $687,000. Without the increases, the Authority anticipates a loss of $192,000 for the organization in 2016. The increases will provide an estimated profit of $495,000, or approximately 2.1% of revenue, for 2016. This rate of return remains below the Authority’s long-term targeted rates of return even though the Authority has invested significantly in new vessels and still carries debt for their construction. The Authority has also increased the number of pilots available in response to customer service concerns. A 1.5% surcharge will also be applied to all pilotage charges in the following ports or areas: Bay of Exploits Holyrood Humber Arm Placentia Bay St. John’s Stephenville Sydney Bras d’Or Lake Strait of Canso Halifax Saint John Pilotage charges do not include amounts recovered for pilot expenses, pilot travel, and fuel charges. This surcharge will be effective for three years from the day on which the Regulations come into force. The Authority expects to have had accumulated operating losses of $1.182 million from 2012 to the end of 2015. This surcharge is meant to recover a portion of these losses by raising an estimated $972,000 over this three-year period. Finally, the calculation of cancellation charges will be amended so that the cancellation charge cannot exceed the charge for a one-way trip. This has occurred in areas that do not have a basic charge. “One-for-One” Rule The “One-for-One” Rule does not apply to these amendments, as there is no change in administrative costs to business. Small business lens The small business lens does not apply to these amendments. Consultation Consultation in various forms has taken place with the parties affected by these amendments. The parties consulted include the Shipping Federation of Canada, which represents foreign vessels and accounts for 77%–79% of the Authority’s activities and revenues, and the Canadian Shipowners Association. Local committees representing stakeholders in Halifax, Saint John, St. John’s, Placentia Bay, and Cape Breton were also consulted extensively, including presentations made by the Authority in May, August, and September 2015. The consultation took the form of meetings, as well as written, personal, and telephone communications with individuals and groups. Alternatives to tariff increases were presented, where applicable, and participation from the attendees was encouraged. For various ports and districts, an alternative to increased tariff rates will be a reduction in pilot strength. The parties affected have always expressed that their primary concerns are with service levels. They have requested that the number of pilots be increased in some areas, and maintained in others, so that pilot availability is not compromised. When meeting with customers, the Authority provided an analysis of the situation and solicited responses. Based on the consultation, the structure of the Regulations has been amended in response to industry concerns. Every indication was given that the adjustments were accepted as fair and reasonable. Following the prepublication of the Authority’s proposed Tariff amendments in the Canada Gazette, Part I, on November 14, 2015, an interested person filed a notice of objection with the Canadian Transportation Agency (the Agency) on December 14, 2015. The objector is of the opinion that the tariff increases proposed by the Authority are prejudicial to the public interest because the increased costs will be passed on to consumers, who, he states, can least afford such increases. By way of a letter dated January 7, 2016, the Agency found, on a preliminary basis, that the notice of objection contained a “fundamental defect” pursuant to paragraph 42(1)(c) of the Canadian Transportation Agency Rules, as it did not disclose a reasonable cause of action. Despite an opportunity to show cause, by January 18, 2016, no response from the objector had been received. Given the importance of these Regulations in ensuring the long-term financial self-sufficiency of the Authority and the anticipated closing of this objection by the Agency, the Authority has chosen to advance these proposed Regulations even though the Agency’s final decision remains pending. Pursuant to subsection 34(4) of the Act, where a notice of objection is filed, the Agency shall make such investigation of the proposed charge, including the holding of public hearings, as in its opinion is necessary or desirable in the public interest. If, however, the Agency recommends a charge that is lower than that prescribed by the Authority, the Authority shall reimburse to any person who has paid the prescribed charge the difference between it and the recommended charge with interest in accordance with subsection 35(4) of the Act. By implementing the new tariff in a timely manner, the Authority will limit its financial losses and avoid the need to borrow. Rationale The Authority continues to invest in additional pilots for several areas. This increased manpower is to address service levels and prepare for pending retirements. Even with this investment, the total expenses for the Authority are budgeted to increase by less than 1% in 2016. The negative trend that has affected the Authority recently is that the average vessel size in a number of ports has decreased. The majority of the Authority’s revenues are derived by applying a unit charge to a measurement of the size of the vessel. As the average units per vessel have declined in several ports, the total amount paid per vessel for pilotage have declined against expectations. In 2015, the average pilotage revenue per assignment has increased 2.6% from 2014 in spite of a 5.3% tariff increase. This is due primarily to the decline in units on which the tariffs are applied. The increases will avoid the anticipated loss of $192,000 that is projected without the increases. Again, the increases will provide an estimated profit of 2.1% of revenue for 2016. The surcharge is expected to raise an additional $314,000 in 2016, $324,000 in 2017, and $334,000 in 2018. Saint John There are a number of business prospects for the port of Saint John. This business growth is expected to increase the demand for pilotage within the planning period. A pilot is scheduled to retire from the area early in 2016. In preparation for retirements, and the increased demand for service, the Authority is continuing to add to the pilot strength. The Authority has developed an operating budget for 2016 that includes an additional pilot to replace the pilot scheduled to retire. Saint John is another port that has been negatively affected by a reduction in vessel size as smaller tankers are being utilized in the area. Pilotage units per trip declined by 11% in 2014 causing the Authority to have a large loss in the area that year. The units per vessel have not rebounded to date. Based on this budget containing smaller vessels, the Authority is proposing a 5% increase. To achieve the 5% revenue increase, the Authority will be increasing the basic and minimum charges by 3% and the unit charge by 6.5%. This tariff structure was reached by agreement after consultation with customers in Saint John. Without these increases, the Authority anticipates a loss of $36,000 for the port in 2016. The increase will provide an estimated profit of less than 3% in 2016. Again, this rate of return is below the Authority’s long-term targeted rates of return for the area where the Authority has invested significantly in a new vessel and carries debt for its construction. Eastern Newfoundland district This district of Eastern Newfoundland comprises three compulsory ports: St. John’s, Placentia Bay, and Holyrood. Like the other districts, they utilize a pool of pilots, each of whom is capable of providing service to any of the three ports. The individual ports take advantage of this structure as each of them can draw on resources from the pool to cover peak periods. An individual port that is not part of a district will have to carry more pilots to cover for these periods and at an increased cost to industry. As above, the pilots in a district are allocated to the individual ports based on the total time pilots spend working in each port. Providing a quality service in this district is very challenging due to the length of pilotage in an area like Placentia Bay, the variance in the number of assignments from one day to the next, and the weather issues that can be faced in the area. When analyzing the service levels with the customers, and in response to their desire for a reduction in interruptions, it was decided that the Authority will target an increase in pilot numbers from 11 to 14 for the district. This increased staffing will be completed in 2016 with the addition of the final apprentice pilot planned at this time. St. John’s For St. John’s, the Authority is implementing a tariff that will increase pilotage revenue in the port by 5%. This increase is required as the number of assignments is declining as there has been an increase in certificated masters. The Authority will be increasing the basic, unit, and minimum charges by 5%. This increase is expected to move the port to a profit of 1% while covering their allocated portion of the increased pilot strength. The traffic levels in St. John’s have large fluctuations as traffic may spike for short periods and then subside. Business can come to the port on short-term contracts, while regular callers tend to apply for pilotage certificates. The Authority has to be able to provide service during these peak periods while minimizing financial losses during the down periods. The recent increases are intended to cover the additional costs of improved service and allow the Authority to offset projected losses during down years. Placentia Bay Placentia Bay is the port in the district with the most activity. The Authority was asked to address service concerns in the area and has responded by increasing pilot numbers in the district. In 2015, the Authority faces declining revenues in the area as the average size of vessel requiring pilotage has decreased by over 10%. With these smaller vessels, the current tariff will leave the Authority with a $135,000 loss in 2016. With a goal of earning an operating profit in the port to cover outstanding capital loans for pilot boats, the Authority is increasing the basic, unit, and minimum charges by 5% to leave the port with an estimated 2% profit margin. Holyrood The port in the district with the least activity is Holyrood. In recent years, the activity in the port has ranged from a high of 39 assignments to a low of 23 assignments. Due to the increase in pilots for the district, the Authority will be increasing the basic, unit, and minimum charges by 5%. This increase will leave the port with a profit while covering their allocated portion of the increased pilot strength. Cape Breton District This district contains three compulsory ports: the Strait of Canso, the Bras d’Or Lake, and the port of Sydney. The district utilizes a pool of pilots, each of whom is capable of providing service to any of the three ports. Operating as a district is advantageous to the individual ports as they can draw on resources from the pool to cover peak periods. An individual port that is not part of a district will have to carry more pilots to cover for these periods at an increased cost to industry. The total costs of the pilots in a district are allocated to the individual ports based on the total time pilots spend working in each port. The traffic levels in the Strait of Canso have been volatile after losing a significant amount of business in 2011. The area has a transshipment terminal that supplies refineries along the eastern seaboard of the United States. With no new refineries being developed and demand for petroleum products declining, the transshipment terminal has been relying more and more on a few major customers. After allowing the pilot strength in the area to be reduced by 30% from 2011 levels, the Authority realized that pilots will need to be added to maintain service levels to the satisfaction of our customers. The pilot strength was increased and service levels greatly improved. Strait of Canso For the compulsory pilotage area of the Strait of Canso, the Authority has had significant volatility in the area. This area has been negatively affected by a reduction in vessel size as there are fewer large tankers in the area and a coal transshipment operation has declined in the port. Due to this trend, the average pilotage revenue per vessel in 2015 was 1% less than in 2014 in spite of a tariff increase expected to pay for the increased staffing. The 2016 increase is to begin adjusting for the smaller vessels and increase the average revenues per assignment to where they were intended in previous budgets. The Authority is increasing the tariff charge by 10% and will be applied to the basic, unit, and minimum charges. This increase is expected to leave the area in a loss position, but the Authority is concerned about adding a larger increase on industry at this time. Bras d’Or The port in the district with the least activity is Bras d’Or. The activity in the port has declined as the primary business in this area is the shipment of gypsum from Little Narrows. This business has been impacted by the adoption of synthetic gypsum as an alternative to their core product. Assignments have decreased by over 20% from previous yearly averages. The Authority is proposing a 10% increase for the area that will be applied to the basic, unit, and minimum charges. Again, this increase is expected to leave the area in a loss position, but the Authority is concerned about adding a larger increase on industry at this time. The port is budgeted to provide less than 1% of the Authority’s revenue in 2016. Sydney For Sydney, the Authority is proposing a tariff that will increase pilotage revenue in the port by 3%. This increase is required as the number of assignments in the area have declined from previous expectations. The Authority will be increasing the basic, unit, and minimum charges by 3%. Central/Western Newfoundland District Similar to the other districts, Central/Western Newfoundland encompasses three ports, Humber Arm, Bay of Exploits, and Stephenville, which share pilot resources. This district has had a dramatic decrease in assignments due to the decline of the paper industry over the years and activity has declined by 10% from 2014. The compulsory ports in this district are served by a complement of three pilots. Due to the large geographic area covered by the pilots (more than 400 km from one extremity to the other), it is impossible to reduce the number of pilots below the current level without significantly impacting service levels. Humber Arm For Humber Arm, the change will increase pilotage revenue in the port by 10%. This increase will be meant to cover inflationary increases in expenses and the increased cost of a winter pilot boat. This increase is expected to leave the area in a loss position, but the Authority is concerned about adding a larger increase on industry at this time. Bay of Exploits For Bay of Exploits, the change will increase pilotage revenue in the port by 3%. This increase will be meant to cover inflationary increases in expenses while the number of assignments in the area falls. This increase is projected to leave the port with a profit for 2016. Summary The following tables indicate the current charges for a one-way trip and the amendments in the compulsory tariffs: Major ports This table indicates the current changes for a one-way trip and the amendments in the compulsory tariffs. Basic Charge Unit Charge Minimum Charge Cancellation Charge Estimated Fuel Charge (see note 1*) (see note 2*) (see note 3*) Cost for an Average Ship (see note 1**) (see note 2**) (see note 3**) Strait of Canso, N.S. 2015 $1,048 $3.87 $1,436 $900 $241 $3,144 Strait of Canso, N.S. 2016 $1,153 $4.26 $1,580 $900 $241 $3,434 Strait of Canso, N.S. Note 1* Fuel charge is based on the latest 2015 average fuel price of $0.832 and 290 L per trip. Note 1* Fuel charge is based on the latest 2015 average fuel price of $0.832 and 290 L per trip. Note 1* Fuel charge is based on the latest 2015 average fuel price of $0.832 and 290 L per trip. Note 1* Fuel charge is based on the latest 2015 average fuel price of $0.832 and 290 L per trip. Note 1* Fuel charge is based on the latest 2015 average fuel price of $0.832 and 290 L per trip. Note 1* Fuel charge is based on the latest 2015 average fuel price of $0.832 and 290 L per trip. Note 1* Fuel charge is based on the latest 2015 average fuel price of $0.832 and 290 L per trip. Strait of Canso, N.S. Note 1** Based on a ship of 479 units for the Strait of Canso. Note 1** Based on a ship of 479 units for the Strait of Canso. Note 1** Based on a ship of 479 units for the Strait of Canso. Note 1** Based on a ship of 479 units for the Strait of Canso. Note 1** Based on a ship of 479 units for the Strait of Canso. Note 1** Based on a ship of 479 units for the Strait of Canso. Note 1** Based on a ship of 479 units for the Strait of Canso. Placentia Bay, N.L. 2015 $2,205 $5.15 $2,922 $900 $470 $6,156 Placentia Bay, N.L. 2016 $2,315 $5.41 $3,068 $900 $470 $6,440 Placentia Bay, N.L. Note 2* Fuel charge is based on the latest 2015 average fuel price of $0.783 and 600 L per trip. Note 2* Fuel charge is based on the latest 2015 average fuel price of $0.783 and 600 L per trip. Note 2* Fuel charge is based on the latest 2015 average fuel price of $0.783 and 600 L per trip. Note 2* Fuel charge is based on the latest 2015 average fuel price of $0.783 and 600 L per trip. Note 2* Fuel charge is based on the latest 2015 average fuel price of $0.783 and 600 L per trip. Note 2* Fuel charge is based on the latest 2015 average fuel price of $0.783 and 600 L per trip. Note 2* Fuel charge is based on the latest 2015 average fuel price of $0.783 and 600 L per trip. Placentia Bay, N.L. Note 2** Based on a ship of 676 units for Placentia Bay. Note 2** Based on a ship of 676 units for Placentia Bay. Note 2** Based on a ship of 676 units for Placentia Bay. Note 2** Based on a ship of 676 units for Placentia Bay. Note 2** Based on a ship of 676 units for Placentia Bay. Note 2** Based on a ship of 676 units for Placentia Bay. Note 2** Based on a ship of 676 units for Placentia Bay. Saint John, N.B. 2015 $833 $3.74 $1,488 $833 $100 $2,362 Saint John, N.B. 2016 $858 $3.98 $1,533 $858 $100 $2,480 Saint John, N.B. Note 3* Fuel charge is based on the latest 2015 average fuel price of $1,004 and 100 L per trip. Note 3* Fuel charge is based on the latest 2015 average fuel price of $1,004 and 100 L per trip. Note 3* Fuel charge is based on the latest 2015 average fuel price of $1,004 and 100 L per trip. Note 3* Fuel charge is based on the latest 2015 average fuel price of $1,004 and 100 L per trip. Note 3* Fuel charge is based on the latest 2015 average fuel price of $1,004 and 100 L per trip. Note 3* Fuel charge is based on the latest 2015 average fuel price of $1,004 and 100 L per trip. Note 3* Fuel charge is based on the latest 2015 average fuel price of $1,004 and 100 L per trip. Saint John, N.B. Note 3** Based on a ship of 382 units for Saint John. Note 3** Based on a ship of 382 units for Saint John. Note 3** Based on a ship of 382 units for Saint John. Note 3** Based on a ship of 382 units for Saint John. Note 3** Based on a ship of 382 units for Saint John. Note 3** Based on a ship of 382 units for Saint John. Note 3** Based on a ship of 382 units for Saint John. Other ports This table indicates the current changes for a one-way trip and the amendments in the compulsory tariffs. Basic Charge Unit Charge Minimum Charge Cancellation Charge Cost for an Average Ship (see note 4*) (see note 5*) (see note 6*) (see note 7*) (see note 8*) (see note 9*) Sydney, N.S. 2015 $1,071 $6.39 $2,197 $900 $3,039 Sydney, N.S. 2016 $1,103 $6.58 $2,263 $900 $3,130 Sydney, N.S. Note 4* Based on a ship of 308 units for Sydney. Note 4* Based on a ship of 308 units for Sydney. Note 4* Based on a ship of 308 units for Sydney. Note 4* Based on a ship of 308 units for Sydney. Note 4* Based on a ship of 308 units for Sydney. Note 4* Based on a ship of 308 units for Sydney. Bras d’Or, N.S. 2015 $1,711 $10.63 $2,401 $900 $4,687 Bras d’Or, N.S. 2016 $1,882 $11.69 $2,641 $900 $5,156 Bras d’Or, N.S. Note 5* Based on a ship of 280 units for Bras d’Or. Note 5* Based on a ship of 280 units for Bras d’Or. Note 5* Based on a ship of 280 units for Bras d’Or. Note 5* Based on a ship of 280 units for Bras d’Or. Note 5* Based on a ship of 280 units for Bras d’Or. Note 5* Based on a ship of 280 units for Bras d’Or. St. John’s, N.L. 2015 $639 $6.28 $1,982 $639 $1,982 St. John’s, N.L. 2016 $671 $6.59 $2,081 $671 $2,081 St. John’s, N.L. Note 6* Based on a ship of 87 units for St. John’s. Note 6* Based on a ship of 87 units for St. John’s. Note 6* Based on a ship of 87 units for St. John’s. Note 6* Based on a ship of 87 units for St. John’s. Note 6* Based on a ship of 87 units for St. John’s. Note 6* Based on a ship of 87 units for St. John’s. Holyrood, N.L. 2015 $639 $6.28 $1,982 $639 $2,755 Holyrood, N.L. 2016 $671 $6.59 $2,081 $671 $2,893 Holyrood, N.L. Note 7* Based on a ship of 337 units for Holyrood. Note 7* Based on a ship of 337 units for Holyrood. Note 7* Based on a ship of 337 units for Holyrood. Note 7* Based on a ship of 337 units for Holyrood. Note 7* Based on a ship of 337 units for Holyrood. Note 7* Based on a ship of 337 units for Holyrood. Bay of Exploits, N.L. 2015 $982 $10.33 $2,014 $900 $2,315 Bay of Exploits, N.L. 2016 $1,011 $10.64 $2,074 $900 $2,384 Bay of Exploits, N.L. Note 8* Based on a ship of 129 units for Bay of Exploits. Note 8* Based on a ship of 129 units for Bay of Exploits. Note 8* Based on a ship of 129 units for Bay of Exploits. Note 8* Based on a ship of 129 units for Bay of Exploits. Note 8* Based on a ship of 129 units for Bay of Exploits. Note 8* Based on a ship of 129 units for Bay of Exploits. Humber Arm, N.L. 2015 $688 $9.33 $1,782 $688 $2,227 Humber Arm, N.L. 2016 $757 $10.26 $1,960 $757 $2,450 Humber Arm, N.L. Note 9* Based on a ship of 165 units for Humber Arm. Note 9* Based on a ship of 165 units for Humber Arm. Note 9* Based on a ship of 165 units for Humber Arm. Note 9* Based on a ship of 165 units for Humber Arm. Note 9* Based on a ship of 165 units for Humber Arm. Note 9* Based on a ship of 165 units for Humber Arm. The tables do not include the 1.5% surcharge. 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. Contact Captain Sean Griffiths 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 Footnote a S.C. 1998, c. 10, s. 150 Footnote b R.S., c. P-14 Footnote c R.S., c. P-14 Footnote d R.S., c. P-14 Footnote 1 SOR/95-586

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