Pilotage Act Review Governance Roundtable – Ottawa, Ontario

January 10, 2018 – 9:00 am – 5:00 pm

Context

The group reviewed a series of governance and operating models for the delivery of marine pilotage services in Canada; discussed options for the composition of the Board of Directors for each of the models; and discussed the creation of a National Advisory Committee for pilotage. A full list of participants is available at Annex A.

The governance and operating models discussed by the group included:

OPTION 1: Status Quo: Four Crown Corporation Pilotage Authorities – Continue to provide marine pilotage services through four separate Crown Corporations: the Atlantic Pilotage Authority; the Laurentian Pilotage Authority; the Great Lakes Pilotage Authority; and the Pacific Pilotage Authority. The Crown corporations would continue to be listed in Schedule III of the Financial Administration Act.

OPTION 2: Three Crown Corporation Pilotage Authorities – This model assumes a Crown corporation structure for three Pilotage Authorities, after the merger of the Great Lakes Pilotage Authority and the Laurentian Pilotage Authority into a single Crown corporation to deliver end-to-end pilotage services for customers of that region.

OPTION 3: Two Crown Corporation Pilotage Authorities – This model assumes a Crown Corporation structure for two Pilotage Authorities with the merger of the Great Lakes Pilotage Authority, the Laurentian Pilotage Authority and the Atlantic Pilotage Authority into a single Crown corporation. The Pacific Pilotage Authority would remain as a separate Crown corporation.

OPTION 4: One Crown Corporation Pilotage Authority – This model assumes a Crown corporation structure for a single Pilotage Authority after merging all four current authorities into one. The consolidated Crown corporation would oversee the management of pilotage activities in each of the four regions, as well as any current and future activities in the Arctic.

OPTION 5: A not-for-profit body modelled after the St. Lawrence Seaway Management Corporation (SLSMC) – The St. Lawrence Seaway was commercialized under the Canada Marine Act to enhance competitiveness and to promote a commercial approach to its operation, including the management of its significant portfolio of capital assets.  Responsibility for management and operations was transferred from the St. Lawrence Seaway Authority, a Crown corporation, to the SLSMC, established by major users of the Seaway. The SLSMC is a not-for-profit corporation under Part II of the Canada Not for Profit Corporations Act and is not subject to the Financial Administration Act. Using this model, a “Pilotage CorporationFootnote 1” would be established with a mandate to provide safe and efficient pilotage services as a non-profit entity, potentially using a framework agreement or similar tool, outlining service standards and responsibilities.

OPTION 6:  A not-for-profit body modelled after Nav Canada – Nav Canada is a private, not-for-profit, non-share capital, corporation incorporated under the Canada Not-for-profit Corporations Act. Nav Canada operates pursuant to powers granted by the Civil Air Navigation Services Commercialization Act and is solely responsible for setting fees. Nav Canada’s governance structure is composed of Members, which are analogous to shareholders at a for-profit, share capital corporation, and a Board of Directors. The Members ‘are the corporation’, but do not own it in a way that shareholders do in a for-profit corporation. These Members each elect a specified number of directors to sit on Nav Canada’s Board. Using this model, a “MarPilot CanadaFootnote 1” would be established with a mandate to provide safe and efficient pilotage services as a privatized, non-profit, entity.

Other governance issues discussed by the group included:

OTHER GOVERNANCE: Board of Directors – Currently, each Pilotage Authority has a Board comprised of seven Directors. Historically, two pilot representatives, two shipping industry representatives, two public representatives, and a Chairperson were recommended for appointment by the Minister. In keeping with the Government’s new appointments approach of 2016, all Directors of the Authorities are to be appointed following an open, transparent and merit based selection process.  As such the conventional appointments, as described above, are no longer followed. Board composition options were discussed, including more Directors and representatives from different sectors or regions.

OTHER GOVERNANCE: National Advisory Committee – Nav Canada has an Advisory Committee comprised of 20 members, representing a broad spectrum of organizations, which conducts activities on behalf of the Board of Directors on matters related to the Air Navigation Services. A National Advisory Committee for pilotage could be formed in order to provide advice to the Minister of Transport or Board(s) of Directors with regard to the provision of marine pilotage services. This Committee could be chaired by Transport Canada representatives and include the Chief Executive Officers from the Pilotage Authorities, other Federal Departments  (e.g., Canadian Coast Guard), as well as, representatives from the pilots and shipping industry. It could also be possible to expand the Advisory Committee to include representatives from other sectors such as the Ports.

Summary of Roundtable Considerations Identified by Stakeholders (“flipchart notes”)

OPTION 1: Status Quo: Four Crown Corporation Pilotage Authorities

Considerations if the four separate Pilotage Authorities are maintained:

  • Specify the mandate and objectives in the Pilotage Act (the Act)
  • Expand key performance indicators
  • Who should be in charge of regulations and have regulation-making powers?
    • National standardized regulations from Transport Canada and more localized, regional regulatory powers to Pilotage Authorities (the Authorities)
    • Delegate all regulatory authority to the Minister of Transport, with possibility to sub-delegate regional regulations to the Authorities
    • Difficult to get regulations though, don’t expect that Transport Canada will be able to effectively take over the role due to a lack of knowledge and capacity
    • Crown corporations are constrained in making safety regulations because they are outside of the larger safety framework (i.e., Canada Shipping Act, 2001)
  • Regional regulations meet local needs and conditions
  • General regulations can be written to incorporate regional concerns
  • What are the opportunities and vulnerabilities of using Crown corporations?
    • Maintain safety and performance levels
    • Financially self-sufficient
    • Subject to the Financial Administration Act
    • Subject to audits from the Office of the Auditor General
    • Subject to government directives
    • Reporting and transparency requirements similar to government
    • Question of flexibility and reactiveness to change
    • Minister can direct Crown corporations
  • On-board management of risk by pilots is currently done well
  • Social license and public perception of access to and interaction with the Authorities; better able to address local concerns and needs
  • Less likely to achieve cost reductions compared to a private model
  • Least disruptive option and the fastest way to achieve end goals

OPTION 2: Three Crown Corporation Pilotage Authorities

Considerations if the Great Lakes and Laurentian Pilotage Authorities are merged:

  • Pressure to raise salaries to highest denominator
  • Some administrative cost savings
  • Consistency increased by having only one Board of Directors and one management team in the Great Lakes-Laurentian region
    • Able to standardize the certification process between the two Authorities
    • Cost of merging IT and processes, though Great Lakes Pilotage Authority and Laurentian Pilotage Authority already use the same dispatch services
    • Question of how much can be standardized
    • Great Lakes Pilotage Authority is unique in its relations with the United States
    • Laurentian Pilotage Authority is unique in its French language requirements
  • Shared expertise, possible increase in innovation and efficiencies
  • Need regional expertise on Board and in management
  • Possible positive or negative impacts to safety
  • Pilots to remain in specific districts; no cross-use of pilots
  • Can be used as a pilot project for further consolidation of the Authorities in the future

OPTION 3: Two Crown Corporation Pilotage Authorities

Considerations if the Great Lakes, Laurentian and Atlantic Pilotage Authorities are merged:

  • Atlantic Canada will have concerns about loss of local relationships
  • Perception of compromised regional relations and lack of access to Authorities
  • Regional offices and oversight should be established
  • Potential cost saving efficiencies, possible synergies
  • Difficult to convince the Minister that only the Pacific Pilotage Authority should be separate from the other Authorities
  • Pressure to raise salaries to highest denominator
  • Possible positive or negative impacts to safety
    • Safety level maintained since safety is based on qualified, licensed pilots
    • Reduction in safety by reducing regional expertise and management capacity

OPTION 4: One Crown Corporation Pilotage Authority

Considerations if the four Authorities are merged into one Crown corporation:

  • Cost increases leading to a washout of expected savings
    • Increased size of Board
    • Increased Board travel to regions
    • Salary increases for Chief Executive Officer (CEO), any Vice Presidents (VP)
  • Continue regional representation and presence
  • Possible reduction in costs
  • Potential savings in acquisitions
  • Possibility of higher quality candidates to apply for Board and management positions
  • Efficient and focused management team
  • Introduction of best practices
  • Board would be more fair if it did not include any active pilots or shipowners (or anyone else involved in the business)
  • National voice on pilotage issues
  • Standardizes regulations
  • Pressure to raise salaries to highest denominator
    • Eliminate regional rates of pay: common employer principle
    • Employees may take labour action regarding compensation
    • Labour and service model uncertainty
  • No change to pilotage service delivery but possible change to cost of delivery
  • Possible positive or negative impacts to safety
  • No trigger for change; can likely achieve many of these things with Option 1
  • Disruption to people

OPTION 5: St. Lawrence Seaway Management Corporation (SLSMC)

Considerations if the Pilotage Authorities were converted into a SLSMC model:

  • Government owns assets, funds their maintenance
  • Pilotage has few assets

OPTION 6:  Nav Canada

Considerations if the Pilotage Authorities were converted into a Nav Canada model:

  • Not-for-profit commercial company, private regulated monopoly
  • Members represent shareholders and are responsible for
    • Letters of patent
    • Board of Director appointments (15 positions)
    • By-law changes, which require Minister’s approval
  • CEO is a voting member of the Board of Directors
  • Government only appoints three Directors
  • Conflict of interest requirements placed on the Directors leads to greater objectivity
  • Fully regulated by Transport Canada
  • Nav Canada organizes testing and issues licenses
  • Risk analysis required for any service changes
  • Need to legislate transparency requirements
  • Advisory Council with shipowners and pilots
  • Long-term cost savings for users
  • Government doesn’t own assets – initial debt taken on by the company
    • Would the transition costs be taken on by government or industry?
  • How would fees be set and would this process be transparent?
  • Disruptive and lengthier process to transition; more difficult to implement
  • Employee transition and disruption
  • Trigger for the creation of Nav Canada doesn’t exist for pilotage
  • Unclear if same benefits realized in Nav Canada would be similar if this model was used for pilotage

OTHER GOVERNANCE: Board of Directors

Considerations:

  • Chair and CEO positions should be separate
  • Should the Chair have management duties?
    • Need solid line between Board and staff
    • Boards should not be involved in management
  • Should CEOs be members of the Board?
    • Does this depend on the governance model in place?
    • CEO may be appointed by Board depending on the model used
    • Non-voting CEO: 8 members on Board with only 7 voting
    • Consensus: Allow ex-officio CEOs on Boards
  • Balance of Board with members from pilots, industry, and public
    • How to achieve balance through appointments process?
  • Active pilots and shipowners should be excluded from Board membership
    • Perceived conflict of interest having Board members involved in the business
    • Pilots and shipowners could be involved in nominating Directors
  • Most Board members should have a marine background, need to understand operations
  • Boards need lawyers, people knowledgeable about human resources, accountants, etc.
  • Concern regarding “group think” if everyone comes from the same background
  • Need independent Boards to be truly independent, not influenced by politics of the day
  • Indigenous Board Member(s)
  • Port Authority appointment model

OTHER GOVERNANCE: National Advisory Committee

Considerations:

  • Embed Committee into Act, specify requirements
  • Representative Advisory Committee reporting to Minister on a national level
    • Advice to Minister and the Board(s) on national strategies and issues
  • Requires a clear terms of reference
  • What is the value added?
    • Permanent national conversation on pilotage; can consult and hold assembly
    • Encourage consistency, forum to exchange knowledge around differences
    • Fills pilotage knowledge gap
    • If Transport Canada takes on a larger regulatory role, the Committee will act as a vehicle for regulatory-making, allow a greater voice for pilotage issues, and will balance regional pilotage voices and interactions
    • Cohesive opinion through a single forum
  • Appointing bodies will appoint 10-15 Committee members based on stakeholder groups
  • Chair from Transport Canada, possible for industry Co-Chair
  • Question of effectiveness of Committee interacting with four separate Authorities
    • More effective if regulations under Transport Canada only
    • More effective if reporting to only one Board instead of four
  • May be ineffective if just another layer of Board oversight to current system in place
  • Where and how does cost control get addressed?
  • Committee could support regular reviews of the Act and pilotage system in the future

Annex A

Participants List

  • Marc Grégoire, Chair of the Pilotage Act Review
  • Jane Weldon, Transport Canada
  • Michèle Bergevin, Transport Canada
  • Christy Hitchcock, Transport Canada
  • Angela Pati, Transport Canada
  • Luc Brisebois, Transport Canada (Observer)
  • Ivo Krupka, Consultant for Transport Canada (Observer)
  • Tim Meisner, Consultant for Transport Canada (Observer)
  • Sean Griffiths, Atlantic Pilotage Authority
  • Kevin Obermeyer, Pacific Pilotage Authority
  • Fulvio Fracassi, Laurentian Pilotage Authority
  • Ricky Fontaine, Laurentian Pilotage Authority
  • Robert Lemire, Great Lakes Pilotage Authority
  • Danièle Dion, Great Lakes Pilotage Authority
  • Stéphane Bissonnette, Great Lakes Pilotage Authority (Observer)
  • Michael Broad, Shipping Federation of Canada
  • Chad Allen, Shipping Federation of Canada
  • Alain Arsenault, Corporation of Mid St Lawrence Pilots
  • Patrice Vaillancourt, Corporation of Mid St Lawrence Pilots
  • Carl Robitaille, Corporation of Lower St. Lawrence Pilots
  • Jean D’Aquila, Corporation of Lower St. Lawrence Pilots
  • Martin Fournier, St. Lawrence Shipoperators
  • Tristan Laflamme, Canadian Marine Pilots Association
  • Mike Burgess, Canadian Marine Pilots Association
  • Andrew Rae, Canadian Marine Pilots Association
  • Bruce Burrows, Chamber of Marine Commerce
  • Rob Turner, Chamber of Marine Commerce
  • Robert Lewis-Manning, Chamber of Shipping of BC
  • Mark Boucher, Canadian Merchant Service Guild
  • Chris Hearn, Fisheries and Marine Institute of Memorial University of Newfoundland
  • Debbie Murray, Association of Canadian Port Authorities
  • Greg Wirtz, Cruise Lines International
  • Donna Spalding, Cruise Lines International
  • Robin Stewart, BC Coast Pilots Ltd.
  • Paul DeVries, BC Coast Pilots Ltd.
  • Roy Haakonson, BC Coast Pilots Ltd.
  • Brian Keegan, OOCL Canada
  • Marc Gagnon, FedNav
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