By R. Bruce Striegler

At the 59th annual conference of the Association of Canadian Port Authorities in Vancouver this year, Rear Admiral Art McDonald, Commander Maritime Forces Pacific, told delegates, “This is a new oceanic age, and not since the great era of exploration in the 16th century have oceans played such an important role in global affairs as they do today. Unprecedented levels of commerce move across the world’s oceans, great power politics are being played out once again at sea, and oceans are central to the health of the planet in an age of profound climate change.” Once seen as a barrier, he said, the seas have now become a global highway, as maritime activities continue to increase on the water. “The role of the world’s oceans is connecting Canadians to the world and to each other, with three expansive oceans,” he says. Rear Admiral McDonald points out that Canada is the 11th largest exporter and 10th largest importer in the world. “More than $200 billion worth of goods are transported via seaborne trade to and from Canadian ports each year.”

Focussing on trade infrastructure financing and export commerce

Prefacing a panel discussion on economic prosperity, Carlo Dade, Director of the Trade and Investment Centre, Canada West Foundation says, “For many years, I spoke of why infrastructure in general should be considered important, and these days, it’s hard not to find a politician who doesn’t immediately understand the importance of trade infrastructure. Indeed, with the current government and its infrastructure bank, we’ve seen probably the highest manifestation of this.” He credits persistence for the profile, “The work that collectively we have done, that ports have done day in, day out, through the media, with MP’s and provincial MLA’s and with community groups.” The second factor he cites is facts and evidence. “We haven’t gone making ‘asks’ for local pork, for money to be spent on narrow self-interest, and this has shifted the debate. We’ve been able to make the case based upon regional priorities, on things like gateways and multiple provinces, as a national and natural priority. This larger public good argument is what has moved trade infrastructure to a national priority. Bit, it still requires more work.” He notes that a few Canadian companies have taken steps to advance the cause of trade infrastructure, highlighting Canpotex, CN, and Ports of Vancouver and Prince Rupert, as leaders of such efforts.

Mark Hodgson, partner, Deloitte Vancouver used the financing of Roberts Bank Terminal 2 as a case study. “We’re in the active phase of terminal operator procurement, as well as in the federal environmental review of the project,” he says. The Roberts Bank Terminal 2 Project is proposed as a new three-berth container terminal at Roberts Bank in Delta, B.C. The project would provide an additional capacity of 2.4 million TEUs (twenty-foot equivalent units), and is needed to meet the Port’s forecasted demand for trade of goods in containers. A 2016 study for the Port conducted by Ocean Shipping Consultants Haskoning DHVUK Ltd projects that by 2025, the port’s terminals will be handling over 4.8 million TEUs annually. The port of Vancouver currently handles nearly 3.1 million TEUs.

The project has a capital budget in the range of $2 billion, and once all the necessary approvals have been received, will take nearly six years to build. Currently, the Roberts Bank location contains two existing terminals, Westshore Terminals which handles coal shipments, and the 85-hectare (210-acre) GCT Intermodal Container Terminal, with its 1,100-metre (3,609-foot) contiguous berth. In downtown Vancouver, at the Port’s Centerm Terminal, initial work is underway to expand that terminal’s capacity from 900,000 TEUs to 1.5 million TEUs. “In terms of objectives of the project, the Port wants this terminal to be complete to meet market demand, or as we call it, the “Goldilocks Objective”, to be built not too early but not too late, but just in time to meet the demand. It wanted a commercial arrangement that would limit risk to the Port Authority and its need to maintain flexibility, not wanting this project to dwarf its capital structure, and consume all the capacity to continue expansion of the infrastructure base.” Another key objective was to utilize system capacity, wanting a commercial arrangement to incentivize high utilization of this new terminal, but not at the detriment of existing terminal operators in the port. Finally, he says, the Port is looking for a return on its investment.

Mr. Hodgson outlined research the port did in looking for options to deliver the terminal, which included conducting an extensive jurisdictional scan looking at similar projects around the world to see how they were delivered, and also conducted a very extensive program of market sounding, talking to terminal operators and infrastructure developers around the world to come to a short list of options. “One of them was the more traditional model where a landlord (the port) finances and delivers the infrastructure and then the terminal operator pays concessions to run the new facility.” He explained the second option was the BOT model; Build, Operate, Transfer, where the whole project is all under one transaction. Finally, the third, “was really one that was crafted based on the dynamic market we have in Canada for public-private partnerships; DBFM: Design, Build, Finance and Maintain.”

Vancouver Fraser Port Authority has chosen to undertake separate procurements for the terminal operator and the infrastructure developer, first selecting a terminal operator, and then selecting an infrastructure developer. For a period of up to 40 years, the terminal operator will be responsible for terminal facilities, equipment and ongoing container handling operations. The infrastructure developer will be responsible for designing, building, financing and maintaining the terminal land base and related infrastructure, including the berth structure. “Back in 2015, the process to select the terminal operators was begun, which was pared down to a short list and a Request For Proposals (RFP) was issued in the fall of 2016, and we expect a conclusion of that process in 2017.” The Port expects to issue infrastructure development procurement RFP’s in 2018.

The new Canadian Infrastructure Bank and its role in financing transportation infrastructure

The Canada Infrastructure Bank is a new tool advanced by the Government of Canada to build more infrastructure in communities across Canada. Bruce McCuaig, advisor to the Bank, says, “There’s an unprecedented amount of federal investment over the next 12 years that’s going forward to infrastructure in all forms around Canada and will focus on land-based transport, trade and transportation corridors, energy and clean energy infrastructure, social infrastructure and other areas.” He notes that over the next twelve years the Bank expects to invest about $15 billion out of the overall $186 billion that’s going to be spent on infrastructure, and says, “The Bank itself is a relatively small portion of the overall federal spend on infrastructure and it’s also voluntary. Hopefully you can see the benefit in particular projects where the Bank and different equity and debt instruments can help deliver the infrastructure.”

McCuaig says that the Bank’s mandate is to invest in revenue-generating projects, “For a project to be a bankable one, it needs to have a revenue stream associated with it, if for no other reason than private counterparties needing a return on their investment. Projects also have to be in the public interest, since it’s not only the Bank that will be determining public interest, but rather the public agencies that own the infrastructure, the governance agencies that are responsible for making their various investments. So, the Bank is undertaking a commercial evaluation, but it’s also the responsibility of government and other public agencies to determine that the project is in the public interest.”

The expectation on the part of the Infrastructure Bank is that there will be two basic kinds of private counterparties which would include entities such as pension plans, which typically have a threshold of about $500 million before they’re interested in a project. “However, there are also smaller private institutional investors, such as insurance companies who are making investments in the one to two to three hundred million dollar range.” McCuaig says that once a project is below the $100 million threshold, it probably becomes less and less viable.” He emphasizes that the Bank is intended to be more independent and commercially driven than a Crown Corporation, and will have considerable latitude to make commercial choices on the principles and merits of the particular cases in front of them. He says that the Bank will be operational by the end of 2017. “Additional projects the Bank invests in will contribute to our long-term economic growth and support the creation of good, well-paying jobs for the middle class. These investments will also help us achieve our goals of lowering GHG emissions and building communities that are socially inclusive.”

Sustainability, the environment; elements of prosperity

Peter Ellis, Executive Director of Vancouver-based Clear Seas Centre for Responsible Marine Shipping, says the organization’s mandate is to be the leading source of impartial evidence-based research to inform public policy and to inform the public and industry about marine shipping in Canada. Funded by Transport Canada, Alberta Energy and the Canadian Association of Petroleum Producers, the organization focuses on the risks, mitigation measures, best practices and the values and benefits that Canadians derive from responsible shipping. “The communications aspect of our work is increasing as we move on. We want to establish fact-informed discussions and debate and to counter what is out there as incorrect, incomplete or misleading information.” Ellis says that ports are hubs, cornerstones and vital links in the supply chain and the shipping sphere who play a key leadership role within this sector. “The contribution that shipping makes touches every Canadian, every sector of the community, every region of country and all of the economy. It is especially important to isolated and coastal communities for whom shipping is a lifeline.”

The organization’s research focuses on the human, environmental and economic impacts of marine shipping. That includes practices for safe handling of bulk commodities at marine terminals, impacts of oil and liquid natural gas shipping, spill prevention and response, impacts on coastal and Indigenous communities, and much more. “There are sensitive areas in all three of Canada’s oceans and internal waters, and while there is much in common, there is no ‘cookie cutter’ solution to many of the problems we face. Key conflict or risks in the marine environment arise when shipping lanes overlap or abut sensitive areas, which highlights the need for marine spatial planning and that has to be based on a detailed understanding of local factors. I suggest that ports are very well situated to think of the entire supply chain as an integral system. You understand the upstream effects, the downstream effects.”

Mr. Ellis used the example of MV Marathassa, which in 2015 had 2,700 litres of bunker fuel leak into Vancouver’s English Bay, and took response and recovery operators sixteen days to clean up. A Coast Guard-commissioned review into the spill found that Marathassa’s owners slowed the reaction time to the emergency because they refused to admit the vessel was the source of the spill. “From Clear Seas’ perspective, the whole shipping system and its parts are essential elements of Canada’s prosperity and conducting their activities in a responsible and sustainable manner is vital. We must exercise the stewardship of the environment in order to ensure the continued acceptance of the activity.”

The conference concluded with presentations from Transport Canada, outlining Transport 2030, the federal government’s plan to create a safe, secure, green, innovative and integrated transportation system that supports trade and economic growth, and a presentation by the Canadian Cyber Threat Exchange (CCTX). Following the conference, ACPA recognized the late Captain Norman Stark (individual) and Seaspan (company) with the ACPA Medal of Merit Award, which recognizes outstanding works or service on a national platform by an individual, institution, or organization in the port, shipping or maritime fields. The Medal of Merit has been awarded annually since 1975. Next year’s conference will be held in St. John, New Brunswick.