By Alex Binkley

Transport Minister Marc Garneau surprised the Hamilton and Oshawa Port Authorities by proposing they be amalgamated into a new entity. “This action is being taken to improve port efficiencies and planning in the region,” Garneau said in a statement. “This amalgamation represents an opportunity to take advantage of emerging business opportunities and to increase economic growth and develop the supply chain in this densely populated region. The integration of port activities in the two cities “is expected to enhance investment and trade opportunities, and contribute to Canada’s global competitiveness,” he said.

The Port Authorities were informed of the move shortly before his department issued a short news release about it. No detailed reasons or explanation were provided. Donna Taylor, President and CEO of Oshawa Port Authority and Chair of the Association of Canadian Port Authorities (ACPA), called the Garneau announcement “very surprising.” She was awaiting further details before commenting further.

The February 9 Canada Gazette contained a certificate of intent to amalgamate Oshawa and Hamilton, Garneau said, which kicked off a Transport Canada consultation on the proposal, which is to run until March 11.

Skeptics could justifiably question the motivation behind the proposed amalgamation. FarmTech Energy Corporation, after having expressed an interest in building a massive ethanol plant on Oshawa Port property as early as 2007, received Port approval to do just that in August of 2012. However, strong opposition to the plans was launched by Oshawa City Council, and a number of environmental and citizen groups. The plant would reportedly have used as feedstock about ten per cent of all of the corn produced in Canada, to produce some 210 million liters of ethanol annually, and was slated for completion by 2014. However, things proceeded slowly because, among other things, the plant depended on continuation of federal and provincial subsidy programmes, and it appeared that such programmes would come to an end. Although few details were provided at the time, the Port announced in June of 2016 that the FarmTech Energy project had been cancelled, and that the parties were engaged in arbitration proceedings to determine the amount of damages, if any, the Port was responsible for.

Deloitte, the Port’s auditor, added the following statement to the Port’s financial statements for the year ended December 31, 2016:

“Without qualifying our opinion, we draw attention to Note 3 in the financial statements which indicates that the Port Authority incurred a net loss of $4,431,458 during the year ended December 31, 2016 and, as of that date, the Port Authority’s current liabilities exceeded its current assets by $5,910,599. These conditions, along with other matters as set forth in Note 3, indicate the existence of a material uncertainty that may cast significant doubt about the Port Authority’s ability to continue as a going concern.”

It was later determined that the Port was obliged to pay FarmTech almost $4.2 million as a result of the arbitration proceedings, which was substantially beyond the Port’s cash resources and beyond its ability to borrow. Ottawa had long held that its eighteen Port Authorities were “self-sustaining”, and presumably was not prepared to write a cheque to cover the arbitration award. In search of a way out of the mess, an amalgamation with another federal Port probably looked like an elegant solution to a political problem. Hamilton is a very well-financed Port that has the cash and other resources to deal with Oshawa’s debt.

Increased port efficiency may or may not have been the principal reason for the proposed amalgamation. However, if it is, it may behoove Transport Canada to consider regional port amalgamation on a much wider scale.