Canada Gazette, Part I, Volume 153, Number 51: Regulations Amending the Laurentian Pilotage Tariff Regulations

December 21, 2019

Statutory authority

Pilotage Act

Sponsoring agency

Laurentian Pilotage Authority

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Executive summary

Issues

The current tariff rates imposed by the Authority are not sufficient to cover rising pilotage expenses.

Background

The Authority is a Crown corporation listed in Part I of Schedule III to the Financial Administration Act. It was established in February 1972, pursuant to the Act. The Authority’s mandate is to establish, operate, maintain, and administer, in the interest of safety, an efficient pilotage service within the Canadian waters in and around the Province of Quebec.

Section 33 of the Act allows the Authority to make regulations prescribing tariffs that are fair and reasonable to permit the Authority to operate on a self-sustaining financial basis. The regulatory process ensures stakeholder consultation and transparency in tariff setting, and therefore the process is initiated many months before tariffs can come into force.

In 2019, following a review of the Act, amendments were tabled in Bill C-97 (Budget Implementation Act, 2019, No. 1) and received royal assent in June 2019. The coming into force of the amendments will occur over four Orders in Council, on dates set by the Governor in Council. In August 2019, the first of the amendments came into force, including section 37.1: “For the purpose of defraying the costs of the administration of this Act, including the development of regulations, and the enforcement of this Act, an Authority shall, on request, pay to the Minister an amount specified by the Minister in a time and manner specified by the Minister.”

Objective

The increase in tariff rates would allow the Authority to continue to provide efficient marine pilotage services and ensure navigation safety on a self-sustaining financial basis, as required under the Act.

Description

The proposed amendments seek to

1. increase tariffs by 2.70% effective April 1, 2020; and
2. introduce a per-assignment charge of $39.64 for the year 2020 to cover the charges anticipated, in accordance with section 37.1 of the Act, and expected to be paid within the first quarter of 2021.

Regulatory development

Consultation

Consultations took place in the spring and summer of 2019 with associations representing clients, i.e. the Shipping Federation of Canada, Chamber of Marine Commerce, and St. Lawrence Shipoperators. The Authority held various meetings to explain the proposed increases and its medium-term financial needs. Recognizing that they benefited from the rate freeze that was in place in 2016 and 2017, and the modest increases of 2018 and 2019, the clients stated that they are satisfied with the rationale for the proposed amendments.

It should be noted that, although the Authority has not been apprised of concerns regarding this proposal, the industry has voiced concerns to the other Authorities related to the introduction of a Pilotage Act administration charge. In light of the time it takes to adjust tariff rates through the regulatory process, the Authority has no choice but to move forward with the proposed surcharge, based on current estimates, in order to secure the revenue necessary to be able to pay the charges by the first quarter of 2021, as anticipated.

Modern treaty obligations and Indigenous engagement and consultation

In accordance with the Cabinet Directive on the Federal Approach to Modern Treaty Implementation, an analysis was undertaken to determine whether the proposed Regulations are likely to give rise to modern treaty obligations. This assessment examined the geographic scope and subject matter of the proposal in relation to modern treaties in effect and, after examination, no implications or impacts on modern treaties were identified.

Instrument choice

The Authority has chosen to propose tariff increases through regulatory changes because this was deemed the fairest and most reasonable option to provide the revenues necessary to address the increasing costs. Outlined below are the various options that the Authority considered and rejected.

a) Regulatory options

Increasing pilotage tariff rates by a higher rate than the current proposal rates would result in non-competitive pilotage tariff rates and a risk that traffic might divert to other ports in Canada and the United States. Lower pilotage tariff rate increases would compromise the Authority’s ability to be financially self-sufficient.

b) Status quo

Keeping pilotage tariff rates unchanged since January 1, 2019, would result in the financial situation of the Authority deteriorating because of continually increasing costs, and would compromise its financial self-sufficiency obligation under the Act.

c) Reduction of operating costs

While cost control is a constant management priority, developing cost reduction scenarios equal to the tariff rate increase would be very difficult, given that 80% of the Authority’s costs are fixed by way of long-term contracts negotiated with pilot corporations.

The Authority has already taken measures to control its variable costs as much as possible when negotiating new contracts or by controlling costs within its recurring expenses. No further significant reduction is possible without compromising pilotage services.

d) Sale of assets

The bulk of the Authority’s assets consists of pilot boats located at its Les Escoumins station. These boats are essential to pilotage services as they are used to transport pilots from shore to ship and they cannot be sold without affecting the Authority’s ability to provide efficient pilotage services. Furthermore, while the sale of assets might bring in a one-time payment, it does not resolve the ongoing need to increase revenues in order to offset increased costs.

Regulatory analysis

Benefits and costs

A cost-benefit analysis was conducted to determine the impact of the tariff rate increase. It covers a 10-year period starting in the first year of the increase (2020 to 2029). According to the analysis, the increase in the rates for pilotage services would generate additional revenues of $2.6 million (in constant 2020 dollars) over the next 10 years and a total equivalent cost for the industry. Traffic volumes have steadily increased over the past few years. Although continued growth is expected, the Authority estimates that traffic in the next year will not see a significant increase. As a result, this calculation is based on the assumption of no significant increase in traffic. Higher pilotage tariff rates would ensure the financial self-sustainability of the Authority, as well as the uninterrupted provision of efficient and timely pilotage services.

An increase in pilotage tariff rates would lead to higher operating costs for the shipping industry. It will have no significant effect on the competitiveness of the shipping industry, on vessel traffic or on vessel destinations.

Cost-benefit statement

A. Quantified impacts (in Canadian dollars, 2018 price levels / constant dollars)

Discount rate: 7%		Base Year 2019	2020	2021	Final Year 2029	Total (Present Value)	Average
Costs	Shipping industry	0	(2,624,180)	(2,624,180)	(2,624,180)	(18,431,142)	(2,624,180)
Net benefits						—	—

B. Qualitative impacts

Shipping industry	Safe, efficient and timely pilotage services in navigable waters within the Authority’s jurisdiction.
Laurentian Pilotage Authority	The Authority’s financial self-sufficiency, activities are maintained as well as sustainability of assets.
Canadians	Safe shipping in the Laurentian pilotage area. Sustainability of the Laurentian Pilotage Authority would prevent layoffs and the associated consequences of unemployment.
Canadian importers and exporters	Potential for the shipping industry to pass on the cost of the increased tariff rate to importers and exporters in the Laurentian pilotage area.

Small business lens

The majority of the Authority’s clientele (i.e. foreign shippers) are not small businesses. The small business lens does not apply, as there are no associated impacts on small businesses.

One-for-one rule

The one-for-one rule would not apply to the proposed amendments, as there is no change in administrative costs imposed on businesses.

Regulatory cooperation and alignment

The regulatory proposal has no impact on regulatory cooperation and alignment initiatives.

Strategic environmental assessment

In accordance with the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals, a preliminary scan concluded that a strategic environmental assessment is not required.

Gender-based analysis plus

No gender-based analysis plus (GBA+) impacts have been identified for this proposal.

Rationale

The Authority anticipates that the costs of providing efficient pilotage services to its clients will continue to increase in the coming years, largely because of contracts already in place with pilot corporations and to ensure the sustainability of its infrastructures without compromising the protection it has given itself against financial risks. The Authority must also negotiate new collective agreements with the Public Service Alliance of Canada and the Canadian Merchant Service Guild. These negotiations will have an impact on the Authority’s expenses in the coming years.

As noted above, the status quo, a further reduction in operating costs, and the selling of assets are not feasible options because they would all result in compromising the Authority’s financial self-sustainability and its ability to provide safe and efficient pilotage services. An increase in pilotage tariff rates is necessary to ensure that the Authority’s revenues offset its rising costs. The proposed tariff rate increases are expected to provide the Authority with adequate revenue to meet its objectives of maintaining self-sustainability, maintaining a financial reserve, sustaining its asset base and continuing to provide safe and efficient pilotage services.

The proposed tariff amendments include provisions to address anticipated costs associated with the implementation of section 37.1 of the Act. The Authority has received an estimate of the amounts anticipated to be charged under this provision for 2020. However, the timing and manner of the payment have not been finalized. Furthermore, it remains to be determined if the payment will be requested as scheduled. In light of the process required to adjust tariff rates, it is necessary to implement the surcharge by April 1, 2020, based on current estimates, in order to have sufficient revenue to pay the costs within the first quarter of 2021, as anticipated.

Implementation, compliance and enforcement, and service standards

Compliance and enforcement

Section 45 of the Act provides for a mechanism for the enforcement of the Regulations. The Authority may notify a customs officer in a Canadian port not to grant clearance to a ship when its pilotage charges are outstanding and unpaid. Section 48 of the Act stipulates that every person who fails to comply with the Act or its regulations is guilty of an offence and liable on summary conviction to a fine not exceeding $5,000.

Performance measurement and evaluation

The Authority’s financial self-sufficiency is a key performance indicator related to this regulatory change.

Contact

Fulvio Fracassi
Chief Executive Officer
Laurentian Pilotage Authority
999 De Maisonneuve Boulevard West, Suite 1410
Montréal, Quebec
H3A 3L4
Telephone: 514‑283‑6320, extension 204
Fax: 514‑496‑2409
Email: fulvio.fracassi@apl.gc.ca

PROPOSED REGULATORY TEXT

Notice is given, pursuant to subsection 34(1) ^{footnote a} of the Pilotage Act ^{footnote b}, that the Laurentian Pilotage Authority, pursuant to subsection 33(1) of that Act, proposes to make the annexed Regulations Amending the Laurentian Pilotage Tariff Regulations.

Interested persons who have reason to believe that any charge in the proposed Regulations is prejudicial to the public interest, including the public interest that is consistent with the national transportation policy set out in section 5 ^{footnote c} of the Canada Transportation Act ^{footnote d}, may file a notice of objection setting out the grounds for the objection with the Canadian Transportation Agency within 30 days after the date of publication of this notice. The notice of objection must cite the Canada Gazette, Part I, and the date of publication of this notice, and be sent to the Canadian Transportation Agency, Ottawa, Ontario K1A 0N9. The notice of objection must also be filed with the Minister of Transport and the Laurentian Pilotage Authority in accordance with subsection 34(3) ^{footnote e} of the Pilotage Act ^{footnote b}.

Montréal, December 3, 2019

Fulvio Fracassi
Chief Executive Officer
Laurentian Pilotage Authority

Regulations Amending the Laurentian Pilotage Tariff Regulations

Amendments

1 The Laurentian Pilotage Tariff Regulations ^{footnote 1} are amended by adding the following after section 2:

2.1 A charge of $39.64 is payable for each pilot assignment for the administration of the Pilotage Act.

2 Section 5 of the Regulations is replaced by the following:

5 (1) A pilotage charge of $263.53 is payable if a pilot is required to embark on or disembark from a ship at a place other than a pilot boarding station but within the compulsory pilotage area.

(2) If a pilot is required to embark on or disembark from a ship outside the compulsory pilotage area, travel and other expenses reasonably incurred by the pilot are payable as a pilotage charge.

3 Schedule 2 to the Regulations is replaced by the Schedule 2 set out in the schedule to these Regulations.

Coming into Force

4 These Regulations come into force on April 1, 2020, but if they are registered after that day, they come into force on the day on which they are registered.

SCHEDULE

(Section 3)

SCHEDULE 2

(Section 1, subsections 2(1) and (2) and section 9)

Pilotage Charges

Item	Column 1 Pilotage Service	Column 2 District	Column 3 Basic Charge ($)	Column 4 Charge per Unit ($)	Column 5 Charge per Time Factor ($)	Column 6 Charge per Hour or Part of an Hour ($)	Column 7 Minimum Charge ($)	Column 8 Maximum Charge ($)
1	Trip	1	N/A	47.12	23.19	N/A	2,411.09	N/A
		2	N/A	28.40	16.35	N/A	1,898.85	N/A
2	Movage	1	542.40	17.87	N/A	N/A	2,411.09	N/A
		1-1	499.09	16.43	N/A	N/A	2,218.60	N/A
		2	516.57	17.01	N/A	N/A	2,296.27	N/A
3	Anchorage during a trip or a movage	1	419.42	4.51	N/A	N/A	N/A	N/A
		1-1	385.92	4.16	N/A	N/A	N/A	N/A
		2	399.45	4.31	N/A	N/A	N/A	N/A
4	Docking of a ship at a wharf or pier at the end of a trip	1	321.03	3.32	N/A	N/A	N/A	624.17
		2	305.73	3.15	N/A	N/A	N/A	594.46
5	A docking or undocking performed at the request of a master, owner or agent of a ship, by a pilot designated by the Corporation.	1	516.57	11.68	N/A	N/A	1,898.85	N/A
		2	516.57	11.68	N/A	N/A	1,898.85	N/A
6	Detention of a pilot at a pilot boarding station or on board ship	1	N/A	N/A	N/A	0.00 for the first half-hour, 125.12 for the second half-hour and 250.23 for each subsequent hour	N/A	N/A
		1-1	N/A	N/A	N/A	0.00 for the first half-hour, 115.12 for the second half-hour and 230.23 for each subsequent hour	N/A	N/A
		2	N/A	N/A	N/A	0.00 for the first half-hour, 119.13 for the second half-hour and 238.26 for each subsequent hour	N/A	N/A
7	Compass adjustment by pilot	1	542.40	17.87	N/A	N/A	N/A	N/A
		1-1	499.09	16.43	N/A	N/A	N/A	N/A
		2	516.57	17.01	N/A	N/A	N/A	N/A
8	Cancellation of a request for pilotage services if the pilot reports for pilotage duty	1	672.89	N/A	N/A	0.00 for the first hour, 250.23 for the second hour and 125.12 for each subsequent hour table 3 note 1	N/A	N/A
		1-1	619.17	N/A	N/A	0.00 for the first hour, 230.23 for the second hour and 115.12 for each subsequent hour table 3 note 1	N/A	N/A
		2	640.83	N/A	N/A	0.00 for the first hour, 238.26 for the second hour and 119.13 for each subsequent hour table 3 note 1	N/A	N/A
9	Carrying a pilot on a ship beyond the district for which the pilot is licensed	1	N/A	N/A	N/A	125.12	N/A	N/A
		1-1	N/A	N/A	N/A	115.12	N/A	N/A
		2	N/A	N/A	N/A	119.13	N/A	N/A
10	Except in the case of a pilot having to be relieved after an accident, a movage or departure that occurs, at the request of a master, owner or agent of a ship, before that set out in the notice required by section 8 or 9 of the Laurentian Pilotage Authority Regulations	1	2,799.86	N/A	N/A	N/A	N/A	N/A
		1-1	2,576.33	N/A	N/A	N/A	N/A	N/A
		2	2,666.53	N/A	N/A	N/A	N/A	N/A
Table 3 note Table 3 note 1 The number of chargeable hours of service is calculated from the later of the time when the pilotage services are requested and the time the pilot reports for pilotage duty until the time of cancellation. Return to table 3 note 1 referrer