FEDERAL REG

SOR/2017-83: Pacific Pilotage Tariff Regulations — Regulations Amending Pilotage Act

REGISTRATION OF FEDERAL REGULATION - VIA PART II OF THE GAZETTE

Registered
May 6, 2017


REGULATORY IMPACT ANALYSIS STATEMENT (This statement is not part of the Regulations.) Executive summary Issues: Due to increased costs in 2013, 2014, 2015 and 2016 resulting from long-term contracts, collective agreements and general inflationary pressures, the Pacific Pilotage Authority (the Authority) needs to amend the Pacific Pilotage Tariff Regulations (the Regulations) to ensure the revenue... (Click for more)


Published on May 20, 2017

Bill Summary

SOR/2017-83: Pacific Pilotage Tariff Regulations — Regulations Amending Pilotage Act

REGULATORY IMPACT ANALYSIS STATEMENT (This statement is not part of the Regulations.) Executive summary Issues: Due to increased costs in 2013, 2014, 2015 and 2016 resulting from long-term contracts, collective agreements and general inflationary pressures, the Pacific Pilotage Authority (the Authority) needs to amend the Pacific Pilotage Tariff Regulations (the Regulations) to ensure the revenue it receives from pilotage tariffs is sufficient to cover its costs of providing the pilotage services for its clients. Description: The following are amendments to the Regulations: Increase by 2.9% its general tariff for all charges (with the exception of the pilot boat and helicopter charge). Increase by 7% its pilot boat and helicopter charge (with the exception of Pine Island, which will remain the same). Modify the Regulations to add section 18 (after Remote Port Charges) for the implementation of a $20 per assignment technology fee (replacing Portable Pilotage Units [PPUs]). Cost-benefit statement: The cost-benefit analysis shows that the impact of the cost to the shipping industry would be approximately $2.1 million in 2017. This is equivalent to the value of the revenue that the Authority would receive. The main benefit of the amendments is that the Authority will be able to continue to provide sustainable service to industry as a result of the increased revenues these fees will bring. Without the fee increases, the Authority would run out of available cash to operate and thus would need to reduce service levels in response. These services are beneficial in that they provide stakeholders with a safe, efficient and timely pilotage service that ensures the protection of the public and its health, while taking into account environmental and social concerns, as well as weather conditions, currents, and traffic conditions. The service will also ensure the protection of recreational boating and fishing, and tourism interests. Based on cost comparisons with the Authority’s closest competitors (Seattle, Tacoma), it is highly unlikely that this tariff increase will cause traffic to divert. As a result, the value of the pilotage service is worth at least (at a minimum) the increased rates. “One-for-One” Rule and small business lens: The “One-for-One” Rule does not apply to this proposal, as there is no change in compliance or administrative costs to businesses. The small business lens does not apply to this proposal. Domestic and international coordination and cooperation: These amendments are not inconsistent, nor do they interfere with the actions planned by other government departments and agencies or another level of government. Background The Authority is responsible for maintaining and administering, in the interests of safety, an efficient pilotage service within all Canadian waters in and around the province of British Columbia. This area covers all waters between Washington State in the south to Alaska in the north, including Vancouver Island and the Fraser River. Issues Due to increased costs in 2013, 2014, 2015 and 2016 resulting from long-term contracts, collective agreements and general inflationary pressures, the Authority is seeking to match its anticipated cost pressures, thus preventing bank borrowings to fund these increasing operating costs, which would further result in interest charges and erode the financial position of the Administration. Objectives The objective of the amendments to the Regulations is to allow the Authority, a Crown corporation listed in Schedule III to the Financial Administration Act, to operate on a self-sustaining financial basis as required by section 33 of the Pilotage Act. The amendments are intended to ensure the Authority remains in a positive cash flow basis for 2017. The amendments will help to cover the costs of pilotage services to its clients while the Authority continues to provide a safe and efficient pilotage service in accordance with the Pilotage Act. Description The Authority is increasing its charges as follows: increase by 2.9% its general tariff for all charges (with the exception of the pilot boat and helicopter charge); increase by 7% its pilot boat and helicopter charge (with the exception of Pine Island, which will remain the same); and modify the Regulations to add section 18 (after Remote Port Charges) for the implementation of a $20 per assignment technology fee (replacing Portable Pilotage Units [PPUs]). These increases will fund expense increases that have been incurred under labour and service agreements for the years 2013, 2014, 2015 and 2016. The Authority has posted deficits through each of these years as a result of these increases in costs. In order to maintain its selfsufficiency mandate, the Authority requires the changes outlined above for 2017. The Authority has extensively consulted with industry in order to ensure there is a complete understanding for the need to adjust the tariff as proposed and has, as a result, received support from both the Chamber of Shipping and the Shipping Federation of Canada for these amendments to the tariff. Regulatory and non-regulatory options considered The retention of the existing tariff rates was considered as a possible option. However, the Authority rejected this status quo alternative since the increase of tariff rates is necessary to reflect the actual costs for the various pilotage services provided to the industry. These amendments will ensure that the Authority maintains its financial self-sufficiency. The Authority consulted extensively with industry in 2016. At these meetings, the Authority took the audience through its advanced marine forecasting tool and allowed the audience to make adjustments to and provide input into the model to see the effect of their input to the Authority’s financial position (i.e. how would a change to the number of new apprentice hires, to volume assumptions, to fees or to a specific launch station change the Authority’s ending cash position). As a result, the Authority emerged with 18 separate options and scenarios in its determination of the best final tariff amendment for 2017. The Authority’s model allowed users to take the following adjustable components into consideration: Changes in assignment mixes for any of 16 different industries for the years 2017–2021; Changes in the unit fee; Changes in the hourly fee; Changes in the travel fee; Changes in the launch and helicopter fee for each of Brotchie, Triple Island, Prince Rupert Anchorages 8 and 9, Prince Rupert Anchorages 10 to 31, Sand Heads and Pine Island; Changes to the launch replacement fee; Changes in the short-term temporary surcharge (both the fee and the term of the fee); Changes in assumptions about the helicopter program (whether to stop the program or not, the costs therein, the percentages of assignments catered to, the possibility of a separate helicopter fee); Changes to the investment balance and the speed of replenishing the balance; Changes in the number of new apprentices hired; Changes in the rate of attrition of existing pilots; and Changes in assumptions on the likelihood of a crude oil and/or liquefied natural gas (LNG) project moving ahead. Further material reductions in operating costs are not deemed to be an alternative since it could reduce the quality of service provided. Similar to prior years, approximately 90% of the Authority’s total annual expenditures are covered by either a service contract or collective agreements. The Authority has maintained its administrative expenses at the lowest possible level, in the range of 8% of annual revenues. Benefits and costs This table shows the Benefits and costs. Base Year: 2017 Final Year: 2026 Total (PV) Annualized Average A. Quantified impacts (in Can$, 2017 price level / constant dollars) A. Quantified impacts (in Can$, 2017 price level / constant dollars) A. Quantified impacts (in Can$, 2017 price level / constant dollars) A. Quantified impacts (in Can$, 2017 price level / constant dollars) A. Quantified impacts (in Can$, 2017 price level / constant dollars) A. Quantified impacts (in Can$, 2017 price level / constant dollars) Benefits By stakeholder 2,105,225 2,463,792 17,107,258 2,427,935 Costs By stakeholder (2,105,225) (2,463,792) (17,107,258) (2,427,935) Net benefits Net benefits — — B. Quantified impacts in non-$ (e.g. from a risk assessment) B. Quantified impacts in non-$ (e.g. from a risk assessment) B. Quantified impacts in non-$ (e.g. from a risk assessment) B. Quantified impacts in non-$ (e.g. from a risk assessment) B. Quantified impacts in non-$ (e.g. from a risk assessment) B. Quantified impacts in non-$ (e.g. from a risk assessment) Positive impacts By stakeholder — — — Negative impacts By stakeholder — — — C. Qualitative impacts C. Qualitative impacts C. Qualitative impacts C. Qualitative impacts C. Qualitative impacts C. Qualitative impacts Short list of qualitative impacts (positive and negative) by stakeholder. Short list of qualitative impacts (positive and negative) by stakeholder. Short list of qualitative impacts (positive and negative) by stakeholder. Short list of qualitative impacts (positive and negative) by stakeholder. Short list of qualitative impacts (positive and negative) by stakeholder. Short list of qualitative impacts (positive and negative) by stakeholder. Shipping industry — Efficient and timely pilotage services in navigable waters with the jurisdiction of the Pacific Pilotage Authority. Shipping industry — Efficient and timely pilotage services in navigable waters with the jurisdiction of the Pacific Pilotage Authority. Shipping industry — Efficient and timely pilotage services in navigable waters with the jurisdiction of the Pacific Pilotage Authority. Shipping industry — Efficient and timely pilotage services in navigable waters with the jurisdiction of the Pacific Pilotage Authority. Shipping industry — Efficient and timely pilotage services in navigable waters with the jurisdiction of the Pacific Pilotage Authority. Shipping industry — Efficient and timely pilotage services in navigable waters with the jurisdiction of the Pacific Pilotage Authority. Pacific Pilotage Authority — Sustainability of the Pacific Pilotage Authority. Pacific Pilotage Authority — Sustainability of the Pacific Pilotage Authority. Pacific Pilotage Authority — Sustainability of the Pacific Pilotage Authority. Pacific Pilotage Authority — Sustainability of the Pacific Pilotage Authority. Pacific Pilotage Authority — Sustainability of the Pacific Pilotage Authority. Pacific Pilotage Authority — Sustainability of the Pacific Pilotage Authority. Canadians — Safe shipping on the west coast of Canada. Sustainability of the Pacific Pilotage Authority will avoid layoffs and the associated consequences for unemployment. Canadians — Safe shipping on the west coast of Canada. Sustainability of the Pacific Pilotage Authority will avoid layoffs and the associated consequences for unemployment. Canadians — Safe shipping on the west coast of Canada. Sustainability of the Pacific Pilotage Authority will avoid layoffs and the associated consequences for unemployment. Canadians — Safe shipping on the west coast of Canada. Sustainability of the Pacific Pilotage Authority will avoid layoffs and the associated consequences for unemployment. Canadians — Safe shipping on the west coast of Canada. Sustainability of the Pacific Pilotage Authority will avoid layoffs and the associated consequences for unemployment. Canadians — Safe shipping on the west coast of Canada. Sustainability of the Pacific Pilotage Authority will avoid layoffs and the associated consequences for unemployment. Canadian importers and exporters — There is potential for the shipping industry to pass on the cost of the increased tariff to importers and exporters in the Pacific pilotage area. However, the increased costs represent an insignificant part of the industry’s total costs and the pass-through cost would be negligible. Canadian importers and exporters — There is potential for the shipping industry to pass on the cost of the increased tariff to importers and exporters in the Pacific pilotage area. However, the increased costs represent an insignificant part of the industry’s total costs and the pass-through cost would be negligible. Canadian importers and exporters — There is potential for the shipping industry to pass on the cost of the increased tariff to importers and exporters in the Pacific pilotage area. However, the increased costs represent an insignificant part of the industry’s total costs and the pass-through cost would be negligible. Canadian importers and exporters — There is potential for the shipping industry to pass on the cost of the increased tariff to importers and exporters in the Pacific pilotage area. However, the increased costs represent an insignificant part of the industry’s total costs and the pass-through cost would be negligible. Canadian importers and exporters — There is potential for the shipping industry to pass on the cost of the increased tariff to importers and exporters in the Pacific pilotage area. However, the increased costs represent an insignificant part of the industry’s total costs and the pass-through cost would be negligible. Canadian importers and exporters — There is potential for the shipping industry to pass on the cost of the increased tariff to importers and exporters in the Pacific pilotage area. However, the increased costs represent an insignificant part of the industry’s total costs and the pass-through cost would be negligible. The Authority is adjusting its tariff in 2017 by rates that only allow the Authority to continue to operate as a going concern. The Authority will therefore be reducing its investments in 2017 to below $500,000, determined to be just enough to pay for unanticipated engine failures. This way, the Authority has shown that it has released all available surpluses to industry in order to provide any and all financial support within this current weak economic climate. The cost assumptions shown in the table below are based on the Authority’s corporate plan traffic level projections for 2017. This table shows the cost assumptions. Incremental Impact on Annual Gross Revenues 2017 Registration date — April 1 2018 Pilotage assignment fees including pilotage unit, time charges, travel charges and other (but excluding the charges mentioned below) 2.90% $1,444,809 $1,801,013 Launch and helicopter charges 7.00% $415,702 $417,444 Technology charges $20 per assignment $244,714 $245,335 Total impact on annual gross revenues in the year noted $2,105,225 $2,463,792 Average cost increase per trip based on 2017 corporate plan traffic budget $172 $201 Total trips per annum 12 236 12 267 The Authority is forecasting an increase in revenues for 2017 of $2,105,225 as a result of this tariff amendment. On an average invoice total of $6,192 per vessel, the 2017 increases will add $172 per trip. “One-for-One” Rule The “One-for-One” Rule does not apply to this proposal, as there is no change in administrative costs to business. Small business lens The small business lens does not apply to this proposal. Consultation The Authority has committed to regular consultation with the Chamber of Shipping and the Shipping Federation of Canada, who represent the shipping community on the west coast of British Columbia, along with other shipping community members including the North West and Canada Cruise Association, agents, terminal operators and shipowners. This consultation covers all aspects of the Authority’s operation, including financial, operational and regulatory matters. The Authority consulted extensively with industry in 2016, including holding meetings with all the associations mentioned above, as well as holding an open house for all association members. At these meetings, the Authority took the audience through its advanced marine forecasting tool and allowed the audience to make adjustments to and provide input into the model to see the effect of their input on the Authority’s financial position (i.e. how a change to the number of new apprentice hires, or a change to volume assumptions, or a change to fees or a specific launch station would change the Authority’s ending cash position). The intention was to ensure that all users gained insight into the Authority’s financial position and plans for 2017 through 2021. As a result of this extensive consultation, the Authority received letters of support from both the Chamber of Shipping and the Shipping Federation of Canada for its 2017 tariff. As required under section 34 of the Pilotage Act, these amendments were published in the Canada Gazette, Part I, on February 18, 2017, followed by a 30-day comment period to provide interested persons with the opportunity to make comments or to file a notice of objection with the Canadian Transportation Agency (CTA). No comments were received and no notices of objection were filed. Rationale The Authority has experienced increased costs since 2013 mainly due to a long-term service agreement with contract pilots and collective agreements covering employee pilots and launch employees. The benefit of these long-term contracts is the stability and certainty provided to industry. However, the fees that the Authority has levied on industry have not kept pace with these actual cost increases. This was anticipated and driven by a Board-approved move by the Authority to levy lower tariff increases on industry in order to push the Authority into sustained cash losses until all available surpluses had been transferred from the Authority to industry without sacrificing the Authority’s position as a going concern. This has now run its course, and the Authority needs to bring its margins back into line. Under the status quo, a further reduction in operating costs and the selling of assets are not feasible options, as they will result in reduced service levels to industry. Additionally, they will compromise the Authority’s financial self-sufficiency and/or its ability to provide safe and efficient pilotage services. These increases for 2017 will be used exclusively to fund the expense increases that have been incurred already. Implementation, enforcement and service standards Section 45 of the Act provides an enforcement mechanism for the Pacific Pilotage Tariff 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 Act stipulates that every person who fails to comply with Part I of the Act (other than section 15.3) and some of its regulations is guilty of an offence and liable on summary conviction to a fine not exceeding $5,000. These existing mechanisms are expected to be sufficient for the implementation and enforcement of the amendments. Contact Stefan Woloszyn Director Finance and Administration Pacific Pilotage Authority 1130 West Pender Street, Suite 1000 Vancouver, British Columbia V6E 4A4 Telephone: 604-666-6988 Fax: 604-666-1647 Email: [email protected] 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/85-583

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