By R. Bruce Striegler
At the end of April, Transport Canada announced a “new” federal program to facilitate the transfer of 50 Transport Canada-owned port facilities to local interests, and has been designated the Ports Asset Transfer Program (PATP). Not surprisingly, across the country, Transport Canada owns and manages a diverse collection of maritime assets that include ports, wharves, docks, breakwaters as well as upland and submerged real property, whose ownership by the Crown dates back to the days of Confederation. Transport Canada currently owns 61 port sites as well as 24 harbour beds.
Since the adoption of the 1995 National Marine Policy, Transport Canada has been working to transfer some of these assets to other federal departments, provincial governments and local communities. Originally called the Port Divestiture Program (PDP), the plan was implemented to transfer 549 regional/local ports from government ownership. As an incentive and an enabler, the program offered the new owner financial contributions based on a ‘Crown-no-worse-off’ model that considered the value of the property and an estimate of what it would cost Transport Canada to operate the facility for 25 years. The government claims since the program inception, 499 ports have been “divested”, resulting in savings to the taxpayer of over $470 million.
Considered by government planners a valuable cost-cutting tool, this program was extended a year, and then extended a further three years, until March 2006. The plan was put on hold for four months, then extended again until March 31, 2012, this time under a “flexible approach” that pursued divestiture where success was likely, but also allowed closing or demolishing sites that pose liabilities to the government.
As time goes on, divestiture becomes increasingly difficult
This new version of the divestiture plan, Ports Asset Transfer Program (PATP) includes engagement, sale and divestiture phases. If a port facility does not sell, the program will offer the port facility for divestiture. According to Transport Canada’s announcement, the program will offer specific timelines for negotiations and transactions with interested parties during the sales and divestiture phases. Broader criteria allow new port operators to expand or improve ports, maintain flexibility for continued operations or find alternate uses, as well as allowing Canadian Port Authorities to acquire ports.
The government’s own evaluation of the program, published in 2012, states that Transport Canada’s remaining ports and harbour beds are not a governmental or departmental priority. The regional/local ports are surplus to the Department’s requirements, and have been available for divestiture, sale or demolition since 1996. The remote ports and harbour beds are managed as legacy commitments, and their operation is peripheral to Transport Canada’s strategic objectives.
The review goes on to say that, at the time, negotiations were ongoing for eight facilities, and that program staff indicated that they received additional expressions of interest that they couldn’t pursue because funding was not available to conclude additional agreements. The evaluation report says that for a number of reasons it is becoming increasingly difficult to divest ports, noting that many of the most attractive sites were sold early, and divestiture of many of the remaining sites is complicated by legal, land claim, environmental or maintenance issues.
The review also noted that all of Transport Canada’s Quebec ports, and all ports and harbour beds in Newfoundland, with the exception of Fortune, are subject to reversionary clauses, and cannot be divested without provincial approval. Both provinces have indicated that they would prefer the costs and liabilities associated with these facilities to remain with the federal government. The review also said that many of the remaining sites require significant capital investment if they are to continue functioning as commercial wharves.
Finally, it says, some small communities do not have the financial or non-financial resources to operate and maintain a commercial port or wharf. While the National Marine Policy did not discuss what Transport Canada should do with regional/local ports that it failed to divest, recent strategic documents have acknowledged that some ports may never be divested. The reasons for this vary but the most common reasons are a lack of local interest, a lack of commercial activity and, in some cases, federal-provincial agreements that preclude or encumber the transfer of specific ports.
The government’s 2012 review says that while divestiture has undoubtedly reduced Transport Canada’s costs over the long-term, it is difficult to quantify these savings. However, the National Marine Policy indicated that Transport Canada’s regional/local ports would be divested by 2001-02 at a cost of $125 million. As of 2010-11, this timetable had been exceeded by nine years, and the budget has been exceeded by $333 million. Over the next five years, the program is expected to cost an average of $36 million per year if all necessary capital repairs are undertaken. Many of Transport Canada’s regional, local and remote ports require significant investment, and most will operate at a loss over the next five years.
Continuing to operate facilities in remote areas
Under Canadian National Maritime Policy, some specific ports have been designated as “remote” if water transport is the primary mode of transportation for at least some portion of the year, if there is a dependence on the existing Transport Canada wharf and the community is not connected by road to another site with docks, of if the community is not connected to a major centre by year-round surface transport or regular air service.
Transport Canada continues to operate docks or wharves in 26 of the remote communities specified in the National Marine Policy. These facilities are legacy commitments, and while the National Marine Policy commits not to force the closure of these sites against a community’s wishes, they are available for divestiture, and 35 of the original 61 sites have been transferred or demolished. Only 0.003 per cent of Canada’s maritime cargo was shipped through these 26 ports in 2009. The department has no ports north of the 60th Parallel, and is committed only to maintaining its existing facilities rather that providing service to all remote communities in Canada.
Between 2005-06 and 2009-10, Transport Canada’s remote ports cost an average of $6.4 million per year ($1.3 million operations and maintenance, $5.1 million capital), plus not inconsiderable Department overhead costs to “manage” and monitor these assets and operations. While TC has agreed to maintain these facilities, they are still available for divestiture, and from an operational perspective, remote port have thus far been treated no differently than regional/local ports. If the program were to adopt a more aggressive strategy for terminating federal ownership, the designation ‘remote” would make it more difficult or impossible for Transport Canada to sell or close an asset.
Transfer of port facilities not always an easy sell
Parrish & Heimbecker, a Canadian agri-business company ended its talks with Transport Canada in late 2014 to take on the Owen Sound Harbour. In news reports, the company said that non-disclosure agreements prohibit it from releasing information on why the talks failed or the firm’s concerns about the port. The company’s Business Development Manager said, “We withdrew from the negotiations and it’s because we just couldn’t reach a commercial deal with Transport Canada.”
According to the Sun Times news report, Transport Canada will continue to operate the port, which is still available for divestiture, even though there are several unknowns about the Owen Sound Harbour. Those issues appear to include the environmental condition of the port bottom. P & H received environmental, technical and financial information in the early stages of negotiations, but could not comment on those reports. The spokesperson did say the company wanted the Owen Sound Harbour dredged, but Transport Canada’s position was that it wouldn’t commit to dredging until the facility was divested.
In the news story, P&H’s spokesperson added, “We’re trying to stay in business in Owen Sound. We’re trying to keep the grain elevators there and the jobs there. We don’t need the port divestiture. We need the port dredged. That’s what it takes to get ships in and out of that harbour. And Transport Canada wanted to bundle the dredging with the divestiture.” In his quoted remarks, he noted that only about 2 per cent of the great Lakes fleet is able to come into Owen Sound, and, “None of them can come in loaded, not even the smallest of the lakers. So we pay a lot of dead freight to use that harbour.”
In another case reported in the Hamilton Public Record newspaper, the government divestment plan is seen as an ultimatum; take the Burlington Canal Lift Bridge or it will be sold. The paper’s report reads that if Hamilton and Burlington decide to not purchase the bridge (or the province for them), Transport Canada will offer the bridge for sale to Hamilton Port Authority and the private sector. The story continued, saying that communications were ongoing, and that both City Managers were awaiting additional financial information from the federal government before providing recommendations to the respective City Councils.
On May 7th, “Inside Halton.com” reported that Transport Canada had to clarify reports from the Hamilton Spectator, dealing with the local municipalities concerns that the Burlington lift bridge and the Burlington Canal were for sale. The reports fueled uncertainty amongst local officials, since a year earlier the Minister of Public Works and Government Services, Diane Finley, wrote to local municipalities suggesting they take over the lift bridge.
According to the stories, Transport Canada declined at the time, to clarify the claims. But a week later, Transport Canada told the Burlington Post it’s only the twin concrete piers forming the canal, and not the bridge, being sold as part of the divestment process starting later this summer. A City of Burlington Councillor said Ottawa’s interest in selling the piers was news to members of Burlington and Hamilton’s joint Greater Bay Area Committee. “This issue has been raised over the past couple of years and the discussion has always been about the bridge, not the pier,” he said. The draft Burlington Beach Regional Waterfront Master Plan includes steps to improve the aesthetics of the piers to make them more attractive for tourists. The Councillor explained that work could be done even with the federal ownership. He questioned why anyone would be interested in purchasing the piers.
Canadian Sailings contacted two remote coastal B.C. First Nations, villages with government docks on the list of facilities it is planning on divesting. Neither had heard about the divestment program, nor had they been contacted by Transport Canada. Transport Canada declined an interview request from Canadian Sailings, and only offered generic boiler-plate talking points that had nothing to do with our questions about the program and about the subject ports.