Posted on: March 12th, 2017
By Alex Binkley
Higher pilotage costs and ballast treatment uncertainties are among the unresolved issues that could mar any hopes for a Seaway-Great Lakes revival. Last year the Conference of Great Lakes Governors and Premiers issued a blueprint for boosting shipping in the region while the review of the Canada Transportation Act also pointed to the need to encourage short sea shipping in Canada, including the Great Lakes.
The Conference has yet to receive a response to its proposals from Washington and Ottawa while action on the CTA review is waiting for Transport Minister Marc Garneau to flesh out his Transport 2030 vision issued last fall. So far, he’s talked about building world-leading marine corridors and looking for ways to realize the full economic potential of our coasts and waterways “over the long term, including the Seaway-Great Lakes.”
Meanwhile, the industry is wondering whether the new Administration in Washington will pay more attention to problems facing the waterway and proceed with a trillion dollar infrastructure program promised during the presidential election campaign. And then there’s the future of the Seaway Management Corp.
However the pilotage issue will likely be the first up as a U.S. court is to hear a challenge this spring from American and Canadian shipping groups of a U.S. Coast Guard proposal to allow a 14 per cent increase in Great Lakes pilotage fees for 2017 on top of hefty hikes for the last few years. The fear is exorbitant pilotage costs could drive international traffic from the Lakes.
Steve Fisher, Executive Director of the American Great Lakes Ports Association (AGLPA), said the Coast Guard has done an awful job in administering pilotage. “It shows we need broader expertise in this matter,” he said.
By way of comparison of the difference in the rates charged by American and Canadian pilots, Fisher said a study shows using American pilots all the way from Montreal to Thunder Bay would cost twice as much as using Canadian pilots for the same voyage.” Canadian and American Great Lakes ships are mostly exempt from pilotage requirements, while ocean-going ships are required to use American pilots in U.S. waters and Canadian pilots in Canadian waters. While the court battle is the immediate priority, AGLPA plans to take the issue up the new Administration and Congress, he added.
Mike Broad, President of the Shipping Federation of Canada, said the proposed increase comes “on top of an increase of more than 30 per cent in 2016. In fact, prior to 2016, the U.S. Coast Guard has increased rates by 114 per cent for the previous 10 years.” Shipper and port groups have “put forth valid comments objecting to the 2016 rate increase, comments which were dismissed by the Coast Guard,” he said. “That is why we had no other choice but to file suit against the Coast Guard in the U.S. courts.”
The Agency has turned a deaf ear to industry and allowed “the private pilot companies that operate as monopolies, to drive up rate levels. The rates in the U.S. are already well above those of Canadian pilotage rates for the same service in the same area. One has to wonder where the money is going.”
The Chamber of Marine Commerce said the proposed increase adds to the need for “substantive reform of the system of marine pilotage to increase competition, make it less costly, more effective and responsive to the needs of its customers.” Minister Garneau is expected to conduct a pilotage review this year that will focus on coastal operations but will include the Great Lakes. Shipping lines will question the need for pilots with all the modern navigation tools they are required to carry.
The Great Lakes Seaway Partnership says pilotage “has become a runaway cost for Seaway shipping. Cynically citing foreign shipping conglomerates as the only impacted parties, the Coast Guard seems tone deaf to the legitimate concerns raised by ports and shippers.”
Included in the complaints are the Shipping Federation of Canada, the U.S. Great Lakes Shipping Association, along with shipowners Fednav International Ltd, Canfornav Inc., Polish Steamship Company, Spliethoff Transport, Brochart Shipping and Wagenborg Shipping.
Then there’s the dispute over ship ballast systems that doesn’t recognize the special circumstances of the Great Lakes. Meanwhile an international accord on ship ballast treatment comes into effect this fall with the U.S. continuing to go its own way creating expensive uncertainty in the shipping industry. While it has approved several treatment technologies, none are demonstrated to work in the cold fresh waters of the Great Lakes. In addition, the U.S. Coast Guard and the Environmental Protection Agency both are involved in setting ballast standards creating the likelihood of different discharge standards and enforcement approaches. Meanwhile Transport Canada is waiting to see what the U.S. does before setting Canadian standards.
The passage by Congress of the U.S. Vessel Incidental Discharge Act (VIDA) in 2016 seems the best hope for certainty on the issue, Fisher added. It retains the requirement to test in Montreal all ocean-going vessels entering the Great Lakes to ensure they flushed their ballast tanks with salt water before entering the St. Lawrence River. The testing has been in place since 2006 and has stopped the introduction of new aquatic pests to the Great Lakes. However VIDA was not enacted by the last Congress, meaning ship ballast water continues to be regulated by two federal agencies and 25 states. Hopefully the new Congress will act on the measure that would put the USCG in charge of ballast regulation, Fisher said.
Canadian Shipowners Association, prior to its merger with the Chamber of Maritime Commerce, dismissed an announcement by Rear Admiral Paul Thomas, Assistant Commandant for prevention policy at USCG on American ballast treatment requirements as “an answer lacking any credible direction for shipowners.”
Thomas had insisted the U.S. would go its own way and that its policy was comparable to the IMO policy that goes into effect in September. Ships with a ballast treatment system would be admitted to U.S. waters for five years until a compliance date for approved systems is set.
While it doesn’t attract the same attention as pilotage and ballast, renewal of The St. Lawrence Seaway Management Corp’s operating agreement with Transport Canada is another uncertainty. The 20-year agreement expires in 2018 and Terence Bowles, President and CEO of SLSMC, said he’s encouraged by the Department’s determination to get a new one in place. It will likely be for five years. He said the Seaway has a done a good job with its modernization plan and in controlling its costs.
Bowles praised last year’s report from the Conference of Great Lakes Governors and Premiers calling on the two federal governments to act on proposals to double trade on the Seaway-Great Lakes system to support the region’s industrial core. Its plan would also shrink the environmental footprint of the region’s transportation network, and support its industrial core. The states and provinces are still waiting for buy-in on the 10 year plan from Washington and Ottawa.
Their proposals include a second full sized Soo lock, complete dredging of Great Lakes ports and channels so ships can sail fully loaded, and Canada-U.S. agreement to co-operatively manage the system and harmonize regulations to improve the flow of goods and people throughout the region.
So far, virtually nothing has been said about the proposals in the Emerson report on the review of the Canada Transportation Act for boosting short sea shipping in Canada. The current location of inland warehousing and distribution capacity makes “conversion to short sea shipping that much more challenging,” the report said. “In short, the deck is stacked against short sea shipments for most merchandise.
But a growing number of countries are putting in place measures, including cost mitigation, to increase utilization of short sea shipping. “To bridge the cost gap, government’s role would have to be expanded beyond minor funding to substantially bring down costs, for example by eliminating fees and opening the waterways to international competition. Competing jurisdictions, such as the European Union, have already opened up the short sea shipping markets without any obvious downside,” the report noted.