2018PILOTAGE ACT REVIEW Marc Garneau, Minister of Transport and Marc Grégoire, Chairperson, Pilotage Act Review © Her Majesty the Queen in Right of Canada, represented by the Minister of Transport, 2018. Permission is granted by the Department of Transport, Canada, to copy and/or reproduce the contents of this publication in whole or in part provided that full acknowledgment is given to the Department of Transport, Canada, and that the material be accurately reproduced. While use of this material has been authorized, the Department of Transport, Canada, shall not be responsible for the manner in which the information is presented, nor for any interpretations thereof. The information in this copy of this publication may not be updated to reflect amendments made to original content. For up-to-date information contact the Department of Transport, Canada. T86-45/2018E-PDF 978-0-660-26190-4 15384E MESSAGE FROM THE CHAIR When I was first appointed as Chairperson, I was both honoured and excited to undertake this work. I knew that this would not be an easy task, as I was charged with reviewing and making recommendations to modernize legislation that is almost a half‑century old and trying to improve a system that is working fairly well. I also knew the tensions between the pilots and shipowners have always been there and would likely continue into the future. Marine pilotage is an important profession that is somewhat hidden from public view, due to its success. Although much of our international trade arrives by sea, many people are not aware that most vessels, once they enter most Canadian waters, are required to have a marine pilot or certificate holder on board to navigate it to its destination. These marine pilots have maintained a record in the order of 99.9% incident free assignments for all of their assignments over the course of many years. While marine pilotage may be not be at the forefront of the public eye, shipping incidents can have catastrophic consequences. In this way, safe and efficient pilotage services also help to maintain clean waters and coastlines. Over the course of the past several months, I have presided over many thoughtful, and at times lively, discussions on pilotage. Many people have given their time and advice freely to help shape and guide my thinking over the course of the Review. The overriding message from these discussions is that safety must be at the centre of the marine transportation system and there can be no compromises. Everyone has a role in supporting safe transportation including the pilots, industry, and regulators. I had a chance to meet with Indigenous people during the Pilotage Act Review. Coastal communities rely on clean waterways for food, social, economic, and cultural purposes, and safety will always be the most important issue. Indigenous people are seeking a larger role with respect to the waterways that border their communities. They are interested in more of a role in pilotage decision‑making bodies, and through training initiatives for young people. I encourage the Government of Canada to continue to explore how some of these needs may be met in the future under the scope of the Oceans Protection Plan or other initiatives. The report that follows is a summary of the research and advice I have heard along with some practical recommendations to strengthen the legislative and regulatory framework for marine pilotage in Canada. In closing, I would like to thank all of the people who contributed to this Review, and the work of the Pilotage Act Review Secretariat headed by Michèle Bergevin. I want to give special thanks to Christy Hitchcock and Vicki Kelly who went out of their way to facilitate my work. Respectfully submitted, Marc Grégoire i EXECUTIVE SUMMARY The Pilotage Act was enacted in 1972, following the Royal Commission on Pilotage chaired by the Honourable Justice Yves Bernier. The Pilotage Act provides the legislative framework for pilotage services in Canada and establishes the four Pilotage Authorities as Crown corporations: the Atlantic Pilotage Authority, the Great Lakes Pilotage Authority, the Laurentian Pilotage Authority, and the Pacific Pilotage Authority. Each of the Pilotage Authorities has a mandate to establish and operate safe and efficient pilotage services in their respective regions. The Pilotage Act has been reviewed several times since its inception, either as a stand‑alone subject or as part of a review of wider transportation issues. Although there have been several recommendations for reform, there was only one set of substantial amendments made in 1998. Otherwise, the majority of the Pilotage Act is largely unchanged. The primary purpose of the current Pilotage Act Review is to modernize the legislation to better align with the existing and future realities of the marine transportation system. Background Marine transportation is a key component of Canada’s economic prosperity, with more than $200 billion of Canada’s international trade carried on domestic waters. A safe, efficient, and environmentally responsible transportation system is crucial, and all stakeholders in the marine sector have a role in supporting such a transportation system. Canada’s marine pilotage system has an overall incident‑free safety record of over 99.9% — a record which has not gone below 99.7% in the last decade. Overall, the safety record demonstrates that the nation’s pilotage system is safe. Any proposed reforms to the Pilotage Act must maintain an environment for continuous improvement of safety. While acknowledging this exemplary safety record, concerns have been raised by some stakeholders that pilotage costs in Canada are too high. Pilotage fees represent approximately 20 to 25 percent of the marine fees that vessels pay as they enter Canada. Furthermore, the monopoly structure of pilotage service delivery has drawn criticism from industry users, especially since pilotage is mandatory and shippers are responsible for the costs of pilotage through tariffs. Throughout the Pilotage Act Review process, industry users expressed interest in increasing the overall cost‑effectiveness of Canada’s pilotage system by implementing changes to the current pilotage framework. Some considerations include amalgamating the four Pilotage Authorities into one entity, introducing more advanced technologies, and amending the existing labour model for pilots. Additional challenges have also been identified, such as the inconsistency of pilotage regulations across the country, the absence of robust oversight and enforcement mechanisms, and the rigidity of the tariff‑setting process. Some of these problems can only be addressed through legislative amendments. ii In considering how to best modernize the Pilotage Act, all aspects of the legislation were examined to provide a comprehensive set of recommendations. The report on the Pilotage Act Review, as well as its recommendations, are organized into the following themes: purpose and principles, governance, labour, safety, and tariffs and fees. Purpose and Principles Many federal statutes contain a preamble or purpose clause, or a general statement of public‑interest principles, to govern the provision of mandated services or the exercise of statutory powers created by the legislation. Apart from outlining the objects of the Pilotage Authorities in section 18 of the Pilotage Act, the legislation contains no direction on the public outcomes to be achieved. The absence of a statement of objectives and policy principles links to three broad concerns about the delivery of pilotage services in Canada. The first concern is a lack of national consistency – four autonomous Pilotage Authorities have created distinctive program arrangements that respond to local preferences. The second concern is the lack of a governing policy framework for the broad discretionary powers of regulation that the Pilotage Act creates. The third concern is that some stakeholders have suggested that a purpose clause or a statutory declaration of principles could address current irritants or concerns, mostly related to the cost of pilotage services delivered through a monopoly. An explicit purpose clause for the Pilotage Act that clarifies the mandate of the Board of Directors and management team with respect to fee‑setting would improve accountability and transparency and ensure that fees and tariffs fixed by the Pilotage Authorities are consistent with their purpose and objectives. These concerns can be addressed by amending the Pilotage Act to enhance policy clarity, predictability and national consistency through an expanded statement of legislative purpose and governing policy principles, which are consistent with the Canada Transportation Act’s National Transportation Policy. Governance The 2016 Canada Transportation Act Review report recommended the amalgamation of the four Pilotage Authorities into a single national entity. The purpose of exploring an amalgamated model was to determine whether there was potential to achieve cost savings and improvements in service delivery. Through the Pilotage Act Review process, a wider array of potential governance models were also identified and analyzed. Any changes to the current governance structure are expected to maintain or improve pilotage’s current high level of safety. The six models considered were to: 1. Retain the four Pilotage Authorities; 2. Amalgamate the Great Lakes Pilotage Authority and Laurentian Pilotage Authority, while retaining the Atlantic Pilotage Authority and the Pacific Pilotage Authority;