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Canada Reviews Pilotage Act

Marc Garneau, Minister of Transport and Marc Grégoire, Chairperson, Pilotage Act Review
Marc Garneau, Minister of Transport and Marc Grégoire, Chairperson, Pilotage Act Review

By MarEx 2018-05-22 19:44:41

The Government of Canada, under its Oceans Protection Plan, has reviewed the Pilotage Act, and the final report recommends changes to labor models and considers the impact of amalgamating the nation's four pilotage authorities. These pilotage authorities conduct more than 50,000 pilotage assignments each year, with a 99.9 percent safety record. 

The Review was led by Marc Grégoire and delivered to Marc Garneau, Minister of Transport this week. It's recommendations include:

Amalgamation

The 2016 Canada Transportation Act Review report recommended the amalgamation of the four Pilotage Authorities into a single national entity. The review explored a number of options to determine whether there was potential to achieve cost-savings and improvements in service delivery. 

Six models were considered:

•  Retain the four Pilotage Authorities;
•  Amalgamate the Great Lakes Pilotage Authority and Laurentian Pilotage Authority, while retaining the Atlantic Pilotage Authority and the Pacific Pilotage Authority;
•  Amalgamate the Atlantic Pilotage Authority, Great Lakes Pilotage Authority and Laurentian Pilotage Authority, while retaining the Pacific Pilotage Authority;
•  Amalgamate the four Pilotage Authorities into one single Pilotage Authority;
•  Create a single, not-for-profit pilotage corporation modeled after the St. Lawrence Seaway Management Corporation; or
•  Create a single, not-for-profit pilotage corporation modeled after NavCanada.

Research on the different governance structures indicated that the predominant method for delivering pilotage services worldwide is through regulated monopolies. In principle, the greater the degree of consolidation, the greater the likelihood of achieving efficiencies. There may also be other advantages, such as an increased national consistency for service delivery, the potential to harness more expertise to assist with risk management, and facilitating a more standardized adoption of technology. 

However, the Review states that the extent of these gains is uncertain since they could be counterbalanced by cost increases in other categories. Furthermore, there is the potential for the loss of local responsiveness with amalgamation.

Undertaking full amalgamation or creating a not-for-profit pilotage corporation may carry greater implementation challenges than undergoing partial amalgamation. Depending on how the model is implemented, there is the potential for transitional costs that could increase the overall costs of providing pilotage services over the medium or long term. Notably, a not-for-profit model may be guided by greater cost-minimizing incentives than a Crown corporation model.

While there are benefits to amalgamating the four Pilotage Authorities, there is a lack of stakeholder support due to the potential cost increases associated with the transition and the risk that local responsiveness may decrease. The majority of stakeholders, as indicated within their written submissions and participation within the Pilotage Act Review Roundtables, are in support of retaining the four Crown corporations. 

Most Pilotage Authorities and pilot representatives also favor the status quo, while some industry representatives have demonstrated a level of interest in alternative options, such as amalgamating the Pilotage Authorities or transitioning to a not-for-profit NavCanada model. Throughout the Review, partial amalgamation into one eastern and one western Pilotage Authority received little stakeholder support, as did the creation of a single not-for-profit corporation modeled after the St. Lawrence Seaway Management Corporation.

However, given the contiguous waterway and existing working relationship between the Great Lakes Pilotage Authority and Laurentian Pilotage Authority, the amalgamation of these two Pilotage Authorities could be undertaken with the view to reduce costs, increase efficiency and provide a basis for assessing the feasibility and desirability of further amalgamation in the future.

The development of a National Advisory Committee as a national forum to discuss pilotage issues may help drive effective management, achieve national consistencies and promote inclusiveness of a broader cross-section of expertise.

Labor

Advantages and disadvantages have been identified with the current labor structure for delivering pilotage services. The rising cost of pilotage fees has been central to the discussion, as labor costs are a significant proportion of the Pilotage Authorities’ costs. Differences between employee and contract pilots have also resulted in calls to reform the labor structure of pilotage.

For example, while the Pilotage Authorities have management and oversight capabilities over employee pilots, they are unable to exercise a similar level of influence over their contract pilots. Aside from the conditions negotiated in the service contracts with pilot corporations, the Pilotage Authorities have few levers to provide and enforce direction to contract pilots and do not have options to engage with alternative service providers.

Furthermore, the Pilotage Authorities are only able to hire or contract with one group of pilots in each region, making them the exclusive service provider for that area. However, the inability to hire employee and contract pilots simultaneously means that the Pilotage Authorities must rely solely on pilot corporations for advice and recommendations. As a result, in areas served exclusively by contract arrangements, the Pilotage Authorities cannot develop in-house expertise on pilotage matters. This creates opportunities for conflicts of interest, leaves some Pilotage Authorities in disadvantageous positions and points to a need for greater flexibility in the system.

These difficulties can be minimized by amending the Pilotage Act to allow the Pilotage Authorities to use the workforce configuration – whether employee pilots, contract pilots, or both – that best meets their needs. This would be managed through a fair and effective dispatching system so that the safety of the pilotage system is maintained.

The final offer selection arbitration model, used between the Pilotage Authorities and pilot corporations for outstanding issues in contract negotiations, has resulted in some contentious selections. Since the arbitrator must select one offer in its entirety and does not consider other relevant information pertaining to the Pilotage Authority or pilot corporation, the offer selected may not fully reflect the cost or operational implications.

The Pilotage Authority’s financial self-sufficiency may be jeopardized if the selected offer is not financially viable or if a corresponding tariff increase to meet these needs is rejected. The Pilotage Act should be amended such that the arbitrator must consider the purpose and principles of the legislation when making arbitration rulings.

There are also concerns that service contracts between the Pilotage Authorities and pilot corporations may include provisions which overlap with the Pilotage Authority’s Regulations. This circumvents the regulatory process and creates uncertainty around pilotage requirements. Therefore, it must be clear that the Pilotage Act and its regulations have primacy over pilotage service contracts.

As private entities, pilot corporations are not subject to financial disclosure or reporting requirements. Industry users raised concerns about the lack of transparency and accountability placed on pilot corporations. Given the delivery of pilotage services is a compulsory requirement and a federally-regulated monopoly lead to higher expectations for transparency and public scrutiny. All pilot corporations should be made subject to greater levels of transparency and accountability, including the publication of financial statements and service contracts.