By Alex Binkley
In the expectation of another traffic decline on the Seaway-Great Lakes during 2016, pressure is growing for governments to take the initiative in improving the waterway’s efficiency and lowering its costs.
While the United States has agreed to push back until the end of 2018 the introduction of ship ballast water rules that threatened the Canadian fleet, there remains the prospect of a 58 per cent increase in American pilotage costs. As well, the Seaway’s decision to raise rolls by 2 per cent this year, even though it’s offering plenty of incentive rates, is coming under scrutiny.
Stephen Brooks, President of the Chamber of Maritime Commerce, wants a clear focus on making the Seaway-Great Lakes “to be as modern, lean and efficient as possible. This is all part of the Chamber’s focus to seek lower user fees, cost-effective and harmonized regulations across jurisdictions, and government investments in system infrastructure.” Currently “marine shipping is sinking under the weight of escalating fees for all kinds of government-mandated services.”
The ballast stay is temporary and “the problem of unachievable ballast water regulations has not been resolved in the U.S. or Canada,” Brooks added. The Canadian government will soon have to come up with regulations to implement IMO’s ballast water convention. To avoid Canada ending up with “similar unachievable rules, we need the government to quickly find a solution that is practicable, fair and cost-effective. We also need Canada to work with U.S. authorities to harmonize regulatory standards or at least put in place a regime that respects each other’s standards.”
Pilotage costs are another vexatious issue for shipowners, especially the latest American proposal to raise pilotage rates. Canadian and American shipping and port groups have banded together to present a joint legal brief to the Coast Guard opposing the proposal because U.S. rates “have risen 114 per cent during the last 10 years,” he said. “Much of this increase has occurred in the last two navigation seasons. Pilotage is now one of the largest cost items for foreign-flag vessels that enter the Seaway-Great Lakes.”
The proposed increase “will erode the competitive position of the Seaway-Great Lakes and betray the U.S.C.G.’s goal of providing safe, reliable and efficient pilotage service.”
Shipowners don’t want to play “whack-a-mole every time another pilotage Authority unnecessarily raises costs that have to be recovered from industry,” Brooks added. “Rather, we need systematic reform of pilotage and all government-mandated services to determine where efficiencies can be wrought and whether new technologies or increased competition from other providers could help lower fees.”
Mike Broad, President of the Shipping Federation of Canada (SFC), says contrary to what pilotage Authorities claim, pilotage already costs more than charges for the daily operation of a ship. SFC is one of the partners in industry opposition to the proposed increase. U.S. pilotage rates now are higher than Canadian ones, he said.
On another subject, an October 2015 study by the U.S. Department of Homeland Security entitled The Perils of Efficiency: An analysis of an unexpected closure of the Poe lock and its impact predicts that a six-month failure of the Poe Lock would cause a North American economic recession and throw almost 11 million Americans out of work and shut down the equivalent of $1.1 trillion in economic activity in the U.S. “Approximately 75 per cent of U.S. integrated steel production would cease with 2-6 weeks of the Lock failing,” the study concluded. “Roughly 80 per cent percent of iron ore mining and nearly 100 per cent of North American production of automobiles, appliances, heavy equipment and railcars would then shut down. According to the report, almost 11 million people in the U.S. and millions more in Canada and Mexico would be unemployed and plunge the economy into a recession more severe than the recession of 2008-2009.”
The 47-year-old Poe Lock can handle the 1,000 foot U.S. ore boats and modern ocean-going freighters. “Last summer emergency repairs closed the 73-year-old MacArthur Lock, the smaller of the two functional locks at the Soo, for 20 days. Nearly 2 million tonnes of various cargos were delayed, but had the Poe Lock suffered a similar outage, the delays and cascading ramifications would have been much greater.”
A second Poe-sized lock to provide redundancy at the Soo has twice been authorized by Congress, the second time in 2007 at full federal expense, the study notes. However, funds for its construction have not been appropriated because of a flawed analysis of the project’s benefit/cost ratio, which is being re-evaluated by the U. S. Army Corps of Engineers. It’s not known when that study will be released and whether Congress would deal with it during an election year.
The Seaway has an ambitious infrastructure modernization program that it needs to finance. It’s also looking for ways to reduce costs without hurting stakeholders. “We think technology can play a much bigger role,” says Bruce Hodgson, Director of Marketing. “As a system, we’re positioned very well to compete for European and North American markets. The need to feed another 2.5 billion people globally by 2050 means our system will be needed in the future.”