By Alex Binkley

It doesn’t take long for an interview about shipping on the Great Lakes Seaway system to turn to the cost of marine pilotage. Few address the topic as bluntly as Bart Peters of Amsterdam-based Spliethoff Group. “Pilots in the U.S. basically have the freedom to make decisions about their own salary. They are running a government-sanctioned monopoly, there is no restriction on continuously increasing their costs, so there is no incentive whatsoever to ever bring costs down. Also, no one is ever responsible if things go wrong.” Unless the United States and Canada get serious about pilotage costs, “the Great Lakes trade will not develop any further,” he said.

Echoing a frustration regularly heard among Canadian shipowners, Peters points out that all Spliethoff ships “have modern radar, sonar and GPS that could handle much of the navigation assistance provided by pilots. “For now, the pilotage issue kills jobs faster than we can create jobs so, for 2019, prospects do not look good. Shipowners like us have the freedom and the choice to send their ships elsewhere to find better business in Europe, Latin America, Africa, Asia, instead of going into the Great Lakes and pay these sky-high pilotage costs.”

Steve Fisher, Executive Director of the American Great Lakes Ports Association, said the 2017 and 2018 pilotage fees set by the U.S. Coast Guard are still before a Federal District Court and in the meantime, shipping lines are forced to pay them. Since 2015, the overall cost of pilotage has increased more than 40 percent and the pilots are in line for an eight per cent increase in2019.

Michael Broad, President of The Shipping Federation of Canada, said the increases in U.S. pilotage fees are substantial. “The pilots are trying to get as much money as they can out of the system.” They basically are paid double what Canadian pilots receive.”

Bruce Burrows, President of Chamber of Marine Commerce, said the latest demand by the U.S. pilots “is yet again another outrageous proposed increase of a costly government-mandated service. The system clearly needs reforming.” He said that “Canada and the U.S. need to work together to create pilotage services that both promote safety and are efficient, transparent and make the best use of proven technology.”

Meanwhile it’s been 10 months since Marc Gregoire presented the Trudeau government with 39 recommendations for bringing Canadian marine pilotage into the 21st century. Both ShipFed and CMC hope to see action on his report before the fall election campaign begins. Broad said the report’s recommendations were terrific and a good first step in Canada would be merging the Great Lakes and Laurentian pilotage Authorities.

Burrows said the marine industry wants action on the report’s proposals to modernize the role, governance model, labour structure, safety framework, and tariff setting process for the pilotage Authorities.

“Canada’s pilotage system has not been overhauled in more than 40 years and is inefficient, inflexible, out-of-date and desperately needs to be modernized,” Burrows says. The government should “introduce legislation that promotes safety and provides greater transparency and oversight of pilotage services while making the best use of proven and modern technology. The Gregoire report would “achieve these goals while still maintaining the highest levels of safety and reliability.”

“Pilotage costs have a long history of increasing at rates that far exceed the rate of inflation,” he said. “Just in the last five years, fees, salaries and benefits paid to licensed pilots have increased 3.4 times more than CPI. For example, on the St. Lawrence River, the hourly cost of pilotage exceeds the cost of the entire crew of a vessel, or more than double the cost of a vessel’s captain.” These out-of-control costs “are a significant barrier to the growth of marine transportation on the Great Lakes-St. Lawrence River Waterway,” Burrows said.

Broad told the Commons transport committee last fall there are problems with both the cost and the efficiency of pilotage services. While pilotage services in Canada have been very safe over the past 25 years, there are certainly areas for improvement, he said.

“Safety is the No. 1 thing because our ships are big, expensive machines. We appreciate the job that pilots do. I have always said that the pilots in Canada are some of the top pilots anywhere in the world, but there’s room for efficiency. “It is our view that the pilotage system is unable to control costs or consistently provide users with the level of service they require in a highly competitive marine transportation environment,” Broad said. “The system is outdated, inefficient, and costly. The Coast Guard’s annual rate-setting process fosters continual conflict and animosity between pilots and the shipping companies they serve.”

Meanwhile U.S. pilots operate under “an antiquated system that operates as a regulated monopoly and is long overdue for reform. Shipowners are required by federal law to employ pilots. Since there is only one pilotage company authorized in each geographic area, an effective monopoly exists.”

In the last decade, U.S. pilotage costs on the Great Lakes have increased 165 per cent, Broad said. Individual pilot compensation is set by the Coast Guard at US$332,000 a year, and far exceeds the compensation of similar mariners working in the Great Lakes. Today, the daily cost of a Great Lakes pilot of about $10,000 exceeds the daily cost of chartering the entire vessel and its crew. “Runaway costs threaten the competitiveness of international commerce on the Seaway system,” he said.