Marine transportation faces more complex issues than ever before
Robert Lewis-Manning, President
Chamber of Shipping
This time last year, I cautioned that commercial marine transportation would face unprecedented pressure to adapt to a changing environment and that the complexity of operating in Canada would only accelerate and expand in scope over 2018. It would seem that this prediction hit the mark but who would have imagined such complexity would also include the Government of Canada buying the Trans Mountain pipeline just weeks before a Federal Court quashed the approval of the pipeline’s expansion, the imposition of punitive trade tariffs by the United States and increased unpredictability from a Super-Powers trade war, or game-changing legislative changes to the Canada Shipping Act and Marine Liability Act rushed through parliament in an omnibus budget bill. It was certainly a unique and politically-charged year and 2019 is likely to bring us a whole new set of challenges.
While it’s impossible to say exactly which drivers will affect the marine industry in British Columbia for 2019 [and beyond], we can make several educated assumptions. While policy geeks and political nerds may appreciate the extent of issues in this forecast, the reality is that ocean carriers and their service providers will continue to operate in a highly unpredictable marketplace while concurrently facing continued tough economic dynamics, technical pressures from new global regulations, and an increasingly complicated operating framework in Canada.
Canada’s supply chain
Marine shipping serving Canada’s West Coast has and will continue to buck global trends for many commodities. Strong export volumes for dry-bulk cargo are expected to continue. Despite Canada’s best effort to diversify and expand its trading partners through free trade agreements, slowing Asian growth may have a corresponding impact on Canadian trade. The cruise / tourism sector also continues to deliver economic benefit to B.C. as a destination of choice for an aging demographic of tourists that marvel at our beautiful cities and coastline, and of course, low dollar. Multi-modal volumes have recovered although ocean carriers continue to face unique challenges adapting to new operating relationships. Locally, the population continues to grow and with it the demand for consumer products, including energy, most of which is imported and moved regionally by ferries and tugs and barges.
Canada’s supply chain was in the spotlight again in 2018 which is expected to continue this year. In response to concerns about capacity and efficiency, the Class 1 railways invested heavily in additional capacity and will continue to do so in 2019. This approach is welcomed, but the future will potentially be subject to conflict as commodities compete for space on the rail network. Alberta has already expressed a desire to drastically increase the shipment of crude by rail as the province waits for additional capacity to move crude for export by pipeline.
Although the Government has recently been criticized for delays in rolling out funding for approved infrastructure projects, one should expect a renewed focus on infrastructure spending for transportation in 2019. The next round of funding under the National Transportation Corridors Fund began in January and proponents that are ready to move quickly will likely benefit from the Government’s generosity in an election year. As moving break-bulk cargo was so challenging in 2018, it is hoped that solutions will be forthcoming to avoid diverting cargo to the U.S.
There remains a considerable number of key draft legislation pieces flowing through Parliament, including the Tanker Moratorium, amendments to the Oceans Act and the controversial Impact Assessment Act. While it may have not been deliberate on the part of the Government, a delayed review of these bills by the Senate until now will likely result in considerably more debate about their intent and design, as two of them are viewed by some stakeholders as a deliberate attempt to restrict the export of Alberta’s energy.
The Tanker Moratorium has already had considerable debate with many coastal First Nations asserting that this is a key element of Reconciliation, while some other First Nations groups are claiming that the moratorium and the Government’s lack of consultation ahead of its implementation contravened their rights and potential economic opportunity. This precedent-setting legislation was never the product of good public policy and will add little in the way of practical protections for the North Coast — an unfortunate consequence of a political decision that did not consider the concerns of the many stakeholders. Although the Oceans Protection Plan aims to improve responsible shipping and build the confidence of coastal communities, this effort appears misplaced, misguided and completely ineffective.
The Impact Assessment Act will also receive its final scrutiny and should be of interest to maritime transport providers as it has the potential to impact future projects such as port terminals, mines, pipeline, etc. If enacted, this legislation would repeal the Environmental Assessment Act and potentially remove the responsibility of port authorities to conduct environmental assessments of certain projects.
The Government has also signalled its intent to table amendments to the Pilotage Act in 2019. After a lengthy review process and significant consultation, the Chair of the review issued a report making a series of recommendations which covered everything from governance and labour models to tariffs and safety. Some of the recommendations remain highly contentious amongst certain stakeholders and it remains to be seen which of the 38 recommendations will survive through to the tabling of formal legislative amendments. With only approximately 10 weeks of parliamentary time remaining before the summer recess and the 2019 election campaign, the only potential way that the Government could table amendments would be as part of the 2019 Budget bill.
Major energy projects
Last year was another tumultuous year for energy projects in Canada. It included the quashing of the approval of the Trans Mountain Expansion Project by a Federal Court followed by the National Energy Board kicking off of a focused reconsideration of the environmental impacts of project-related marine shipping. Fortunately, 2018 also included a positive financial investment decision by the five-partner companies of LNG Canada — a $40-billion infrastructure project that will bring the province’s natural gas to Kitimat for export to Asian markets starting in 2023-2025.
In 2019, the outcome of the reconsideration of the Trans Mountain Expansion Project could have ramifications for marine transportation beyond project-related vessels. There is little doubt that Canada is being evaluated on its ability to provide predictability in the regulatory process. It is also clear that the impacts of project-related shipping are no longer being viewed in isolation. The cumulative impacts of incremental increases or changes to marine transportation are now highly scrutinized by regulators, governments and the public. The reconsideration of this project has already focused on numerous key marine transportation topics, including governance, reconciliation, cumulative impacts, greenhouse gases, alternative fuels, species at risk, the management of marine traffic and anchorages and spill response — a lengthy shopping list of challenges that will dominate the marine transportation landscape for the next decade. Many of these challenges are multi-faceted and will go well beyond the responsibility and capability of a single project proponent to address.
Species at risk
The plight of the Southern Resident Killer Whale became highly politicized in 2018 after the world witnessed Tahlequah (J35) grieve by carrying her dead calf for 17 days in local waters. In Washington State, Governor Inslee implemented a Task Force that hurriedly developed a range of short and longer-term recommendations which was followed by a state budget that included $1.1 billion in SRKW-related investments. In Canada, the Federal Government, for the most part, remained focused on its long-term recovery strategy including the implementation of pragmatic voluntary measures by the commercial marine industry. This was largely due to the significant success of the industry’s trial measures in 2017 and implementing voluntary measures in 2018 through the Vancouver Fraser Port Authority’s Enhancing Cetacean Habitat and Observation (ECHO) Program.
This year will see an expansion of protective measures for Southern Resident Killer Whales. The marine sector and Federal Government have been progressing the development of a Conservation Agreement, which, if successful, will provide a five-year predictable commitment to implement protective measures, enhance scientific research and address operational and commercial impediments. If an agreement is struck, it would be the first such agreement under the Species at Risk Act in Canada for the coastal environment. The alternative to such an agreement would likely be a regulated path that would be less protective to the species, more punitive and less flexible to the sector and would discourage future innovation.
Protecting species at risk is here to stay for the marine sector and, as we increase our awareness of additional species, there will be greater pressure on the marine transportation system to adapt in order to mitigate negative effects from operations. While mariners have always been aware of endangered whales, the next year will likely bring new challenges that include certain breeds of marine birds (aka the Pink-Footed Shearwater) and aquatic species including endangered fish.
Reconciliation with First Nations
I have written previously about the necessity to better understand and support improved relationships with Indigenous Peoples and, most importantly, how this relationship has great potential to transcend all aspects of our industry’s operations in coastal waters in the future, especially in the Pacific North West. In 2018, the Government of Canada signed a Reconciliation Framework Agreement with 14 Northern Coastal First Nations in British Columbia that included guiding principles for their evolving relationship. Subsequently, we saw amendments to the Canada Shipping Act that included provisions for Indigenous groups (and provinces) to enter into agreements with Transport Canada to administer and enforce aspects of the same Act.
One of the tangible programs of the Oceans Protection Plan that embodies principles of reconciliation is Proactive Vessel Management. Officially, this program “aims to reduce conflicts between local waterway users and protect environmentally and culturally sensitive areas.” Practically, it is not yet clear how this will evolve into a pragmatic and collaborative relationship that is focused on non-regulatory solutions. If this program takes a traditional approach to consulting industry, then industry will most likely approach Proactive Vessel Management as it does any regulatory process. If it is to become a truly transformative forum for relationships, especially for coastal First Nations, then the Federal Government is going to need to signal its vision more clearly as it relates to evaluating, managing and mitigating risk from commercial shipping.
The Federal Government’s lack of clarity and direction on risk management is of significant concern and beginning to impact Canada’s competitiveness in unexpected ways. These impacts are manifesting in the numerous programs under the Oceans Protection Plan, in the evaluation of projects, in day-to-day vessel operations and more generally with coastal communities. Left unchecked, misperceptions can grow into public opinion and mistrust, potentially constraining Canada’s ability to expand trade globally.
The increasing list of complex drivers might seem daunting, but the marine industry continues to learn, adapt and innovate to address the many challenges. The upcoming Federal election is an opportunity for the marine sector to propose a renewed focus of priorities to the Government that balances and better integrates the programing under the Oceans Protection Plan with the necessity to improve Canada’s supply chain competitiveness. The Government of Canada needs to recognize that a supply chain that is optimized for efficiency and productivity will best support Canada’s objectives to address climate change and coastal protection. Ocean carriers, shippers, terminals and ports need a predictable and less bureaucratic business and operating environment in order to reach their full potential.