Vol. 151, No. 52 — December 30, 2017

Regulations Amending the Pacific Pilotage Tariff Regulations

Statutory authority

Pilotage Act

Sponsoring agency

Pacific Pilotage Authority

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Executive summary

Issues: The Pacific Pilotage Authority (the Authority) provides pilotage services in and around the province of British Columbia. Pilotage tariffs, set out in the Pacific Pilotage Tariff Regulations (the Regulations), have been established to allow the Authority to operate on a self-sustaining financial basis; however, the current tariffs will not cover increased costs associated with long-term contracts, collective agreements and general inflationary pressures.

Description: The proposed amendments would

  • Increase the pilotage unit fee, the hourly fee, travel and other fees by 3.75% for the 2018 fiscal year (effective April 1, 2018) and by an additional 3.05% for the 2019 fiscal year (effective January 1, 2019);
  • Increase the technology fee from $20 to $50 per assignment; and
  • Extend the $100 per assignment bridging fee from April 1, 2018, through December 31, 2019.

Cost-benefit statement: The proposed amendments would increase Authority revenue by $1.4 million in fiscal year 2018, $3.8 million in fiscal year 2019, and $32.8 million over 10 years, with a corresponding increase in pilotage costs for the shipping industry, and would enable the Authority to continue to provide safe, efficient and sustainable pilotage services to stakeholders.

“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: The proposed 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, a Crown corporation listed in Part I of Schedule III to the Financial Administration Act, was established in 1972 pursuant to the Pilotage Act (the Act). Its mission is to establish, operate, maintain and administer safe and efficient pilotage services within 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. The Authority is required by subsection 33(3) of the Act to fix pilotage charges at a level that permits the Authority to operate on a self-sustaining financial basis and is fair and reasonable.

Issues

The current tariffs will not cover increased costs associated with long-term contracts, collective agreements and general inflationary pressures.

Additional costs have been incurred under labour and service agreements for the years 2013 through 2017. The Authority has posted deficits through each of these years as a result of these increases in costs.

Objectives

The objective of the proposed amendments is to allow the Authority to continue to operate on a self-sustaining financial basis, with fair and reasonable tariffs that can support efficient pilotage services and ensure safe navigation.

Description

The Authority is proposing to increase its charges as follows:

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 in tariff rates is necessary to reflect the actual costs for the various pilotage services provided to industry. The proposed amendments will ensure that the Authority maintains its financial self-sufficiency.

The Authority consulted extensively with industry in 2017. At these meetings, the Authority took the audience through its advanced marine and manpower 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). The Authority’s model allowed users to take the following adjustable components into consideration:

As a result, the Authority emerged with five possible scenarios in its determination of the best final tariff amendment for 2018. The best final tariff amendment, which was one of the five scenarios presented, was the least costly to industry.

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, below 8% of annual revenues.

Benefits and costs

The proposed amendments would adjust Authority tariffs for 2018, 2019 and thereafter, by rates that allow the Authority to continue to operate as a going concern. This tariff development process was informed by industry’s expectations about future volumes. It is the intention of the Authority to bring forward a regulatory amendment to repeal section 6.1 pertaining to the bridging fee, if $2.3 million is generated before December 2019.

The Authority estimates that the proposed amendments would result in increased revenues, with associated costs for industry, of $1,384,199 in 2018 and $3,787,760 for 2019, increasing to $5,171,959 by 2027 due to expectations for increased volumes and other factors. Overall, the proposed amendments would result in incremental revenue for the Authority of $32,785,715 (present value) over 10 years. (see footnote 1) On an average invoice total of $6,502 per vessel, the 2018 increases will add $104 per trip. The 2019 increases will add an additional $284 per trip. Based on cost comparisons with the Authority’s closest competitors (Seattle and Tacoma, Washington), it is highly unlikely that the proposed tariff increases would cause traffic to divert to other ports.

Without the proposed fee increases, the Authority would run out of available cash to operate and 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. Overall, the Authority anticipates that the benefits of the proposal would exceed the costs.

Cost-benefit statement
 

Base Year:
2018

Final Year:
2027

Total (PV)

Annualized Average

A. Quantified impacts (in Can$, 2018 price level / constant dollars)

Benefits

By stakeholder

1,384,199

5,171,959

32,785,715

4,793,183

Costs

By stakeholder

(1,384,199)

(5,171,959)

(32,785,715)

(4,793,183)

Net benefits

   

B. Quantified impacts in non-$ (e.g. from a risk assessment)

Positive impacts

By stakeholder

 

Negative impacts

By stakeholder

 

C. Qualitative impacts

Shipping industry — Efficient and timely pilotage services in navigable waters with the jurisdiction of the Authority.

Pacific Pilotage Authority — Sustainability of the Authority.

Canadians — Safe shipping on the west coast of Canada. Sustainability of the 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.

“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 costs of the proposed amendments result entirely from increased fees for the provision of pilotage services. Under the small business lens, taxes, fees and other charges are not considered to be compliance or administrative costs. (see footnote 2) The proposed amendments would therefore not result in any applicable costs for small businesses, and the small business lens would therefore not apply. In addition, the majority of the stakeholders are not small businesses and the impact of the proposed increases relative to the overall cost of operating the business is considered very low.

Consultation

The Authority undertakes regular consultation with all four industry associations (Chamber of Shipping, Shipping Federation of Canada, International Ship-Owners Alliance of Canada, and Cruise Lines International Association), who represent the shipping community on the west coast of British Columbia, along with other shipping community members including agents, terminal operators and shipowners. These consultations cover all aspects of the Authority’s operation, including financial, operational and regulatory matters.

The Authority consulted extensively with industry in the summer of 2017, 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 and manpower 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 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).

The intention of this engagement was to ensure that all users gained insight into the Authority’s financial position and plans for the period from 2018 through 2022. As a result of this extensive consultation, the Authority received feedback from all industry associations that there would be no objection to the proposed amendments.

As required under section 34 of the Act, these amendments are to be published in the Canada Gazette, Part I, 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).

During the tariff negotiation process with industry, the Chamber of Shipping did note a concern regarding the funding of Portable Pilotage Units (advanced navigational technology on hand-held devices) through a temporary tariff and requested a further cost-benefit analysis be conducted as part of the review of the Act. The Authority acknowledges this concern, and to this extent, has begun to perform a cost-benefit analysis as well as seek ways to decrease the unit costs of these devices.

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 in 2013 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 would result in reduced service levels to industry. Additionally, they would compromise the Authority’s financial self-sufficiency and its ability to provide safe and efficient pilotage services.

The proposed fee increases for 2018 and 2019 would be used exclusively to fund the expense increases that have resulted in the Authority generating yearly losses. This increase would allow the Authority to turn these losses into marginal but positive annual cash flows.

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 1 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
Chief Financial Officer
Pacific Pilotage Authority
1130 West Pender Street, Suite 1000
Vancouver, British Columbia
V6E 4A4
Telephone: 604-666-6988
Fax: 604-666-1647
Email: swoloszyn@ppa.gc.ca

PROPOSED REGULATORY TEXT

Notice is given, pursuant to subsection 34(1) (see footnote a) of the Pilotage Act (see footnote b), that the Pacific Pilotage Authority, pursuant to subsection 33(1) of that Act, proposes to make the annexed Regulations Amending the Pacific 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 (see footnote c) of the Canada Transportation Act (see 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 Pacific Pilotage Authority in accordance with subsection 34(3) (see footnote e) of the Pilotage Act (see footnote f).

Vancouver, December 13, 2017

Kevin Obermeyer
Chief Executive Officer
Pacific Pilotage Authority

Regulations Amending the Pacific Pilotage Tariff Regulations

Amendments

1 (1) Paragraphs 6(2)(a) and (b) of the Pacific Pilotage Tariff Regulations (see footnote 3) are replaced by the following:

(2) Paragraphs 6(2)(a) and (b) of the Regulations are replaced by the following:

(3) Subsection 6(3) of the Regulations is replaced by the following:

(3) Subject to subsection (4), for an assignment to a tethered tanker ship with a deadweight tonnage (summer) that exceeds 39 999 metric tons, in any waters, the pilotage charge payable is $6.6600 multiplied by the pilotage unit.

(4) Subsection 6(3) of the Regulations is replaced by the following:

(3) Subject to subsection (4), for an assignment to a tethered tanker ship with a deadweight tonnage (summer) that exceeds 39 999 metric tons, in any waters, the pilotage charge payable is $6.8632 multiplied by the pilotage unit.

(5) Paragraphs 6(4)(a) and (b) of the Regulations are replaced by the following:

(6) Paragraphs 6(4)(a) and (b) of the Regulations are replaced by the following:

2 Section 6.1 of the Regulations is replaced by the following:

6.1 For an assignment that begins before January 1, 2020, a surcharge of $100 is payable on each pilotage charge payable under section 6.

3 (1) Section 8 of the Regulations is replaced by the following:

8 Despite sections 6 and 7, the total charges payable under those sections in respect of a ship shall not be less than $1,031.93.

(2) Section 8 of the Regulations is replaced by the following:

8 Despite sections 6 and 7, the total charges payable under those sections in respect of a ship shall not be less than $1,063.40.

4 (1) Subsections 10(2) and (3) of the Regulations are replaced by the following:

(2) If a pilot embarks on or disembarks from a ship at Anacortes, Bellingham, Cherry Point or Ferndale, in the State of Washington, a charge of $1,991.06 per pilot is payable in addition to any other charges.

(3) If a pilot embarks on or disembarks from a ship at an out-of-Region location that is not listed in subsection (2), a charge of $2,655.09 per pilot is payable in addition to any other charges.

(2) Subsections 10(2) and (3) of the Regulations are replaced by the following:

(2) If a pilot embarks on or disembarks from a ship at Anacortes, Bellingham, Cherry Point or Ferndale, in the State of Washington, a charge of $2,051.78 per pilot is payable in addition to any other charges.

(3) If a pilot embarks on or disembarks from a ship at an out-of-Region location that is not listed in subsection (2), a charge of $2,736.07 per pilot is payable in addition to any other charges.

5 (1) Section 15 of the Regulations is replaced by the following:

15 (1) On each occasion that a pilotage order is initiated during the period that begins at 06:00 and ends at 17:59 with less than 10 hours’ notice for local assignments and less than 12 hours’ notice for all other assignments, a charge of $891.44 is payable in addition to any other charges.

(2) On each occasion that a pilotage order is initiated during the period that begins at 18:00 and ends at 05:59 with less than 10 hours’ notice for local assignments and less than 12 hours’ notice for all other assignments, a charge of $1,782.87 is payable in addition to any other charges.

(2) Section 15 of the Regulations is replaced by the following:

15 (1) On each occasion that a pilotage order is initiated during the period that begins at 06:00 and ends at 17:59 with less than 10 hours’ notice for local assignments and less than 12 hours’ notice for all other assignments, a charge of $918.63 is payable in addition to any other charges.

(2) On each occasion that a pilotage order is initiated during the period that begins at 18:00 and ends at 05:59 with less than 10 hours’ notice for local assignments and less than 12 hours’ notice for all other assignments, a charge of $1,837.25 is payable in addition to any other charges.

6 (1) The portion of section 16 of the Regulations before paragraph (a) is replaced by the following:

16 A charge of $1,675.65 is payable in addition to any other charges on each occasion that

(2) The portion of section 16 of the Regulations before paragraph (a) is replaced by the following:

16 A charge of $1,726.75 is payable in addition to any other charges on each occasion that

7 (1) Section 17 of the Regulations is replaced by the following:

17 On each occasion that a pilotage order is initiated for any place other than a pilot boarding station, a charge of $5,374.24 per pilot is payable in addition to any other charges.

(2) Section 17 of the Regulations is replaced by the following:

17 On each occasion that a pilotage order is initiated for any place other than a pilot boarding station, a charge of $5,538.15 per pilot is payable in addition to any other charges.

8 Section 18 of the Regulations is replaced by the following:

18 For each assignment to a ship set out in column 1 of Schedule 2, in waters set out in column 2, a technology charge of $50 is payable in addition to any other charges.

9 (1) The portion of items 1 to 3 of Schedule 2 to the Regulations in column 3 is replaced by the following:

Item

Column 3

Amount ($)

1

4.4398

2

8.8795

3

4.4398

(2) The portion of items 1 to 3 of Schedule 2 to the Regulations in column 3 is replaced by the following:

Item

Column 3

Amount ($)

1

4.5752

2

9.1504

3

4.5752

10 (1) The portion of item 1 of Schedule 3 to the Regulations in column 2 is replaced by the following:

Item

Column 2

Time Charge ($)

1

222.86

(2) The portion of item 1 of Schedule 3 to the Regulations in column 2 is replaced by the following:

Item

Column 2

Time Charge ($)

1

229.65

11 (1) The portion of items 1 and 2 of Schedule 4 to the Regulations in column 2 is replaced by the following:

Item

Column 2

Cancellation Charge ($)

1

891.44

2

222.86

(2) The portion of items 1 and 2 of Schedule 4 to the Regulations in column 2 is replaced by the following:

Item

Column 2

Cancellation Charge ($)

1

918.63

2

229.65

12 (1) The portion of items 1 to 3 of Schedule 5 to the Regulations in column 2 is replaced by the following:

Item

Column 2

Charge ($) (per hour or part of an hour)

1

222.86

2

222.86

3

222.86

(2) The portion of items 1 to 3 of Schedule 5 to the Regulations in column 2 is replaced by the following:

Item

Column 2

Charge ($) (per hour or part of an hour)

1

229.65

2

229.65

3

229.65

13 (1) The portion of items 1 to 7 of Schedule 6 to the Regulations in column 2 is replaced by the following:

Item

Column 2

Transportation Charges ($)

1

170.81

2

164.41

3

1,694.26

4

535.93

5

535.93

6

170.81

7

5,356.09

(2) The portion of items 1 to 7 of Schedule 6 to the Regulations in column 2 is replaced by the following:

Item

Column 2

Transportation Charges ($)

1

176.02

2

169.43

3

1,745.93

4

552.28

5

552.28

6

176.02

7

5,519.45

14 (1) The portion of items 1 to 8 of Schedule 7 to the Regulations in column 2 is replaced by the following:

Item

Column 2

Charge ($)

1

431.84

2

1,728.46

3

2,242.45

4

6,758.44

5

4,159.34

6

870.34

7

603.91

8

1,023.54

(2) The portion of items 1 to 8 of Schedule 7 to the Regulations in column 2 is replaced by the following:

Item

Column 2

Charge ($)

1

445.01

2

1,781.18

3

2,310.85

4

6,964.57

5

4,286.20

6

896.88

7

622.33

8

1,054.75

Coming into Force

15 (1) Subject to subsection (2), these Regulations come into force on April 1, 2018, but if they are registered after that day, they come into force on the day on which they are registered.

(2) Subsections 1(2), (4) and (6), 3(2), 4(2), 5(2), 6(2), 7(2), 9(2), 10(2), 11(2), 12(2), 13(2) and 14(2) come into force on January 1, 2019.

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