INSIDE: COAL TERMINAL UPDATE
BC SHIPPING Commercial Marine News for Canada’s West Coast.
Volume 5 Issue 1
NEWS
www.bcshippingnews.com
February 2015
Cargo Logistics Surface Transportation Annual Review Results
Industry Insight Captain Stephen Brown: The Year Ahead
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A Retrospect on Bulk Carriers and Tankers
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Securing a bright future Westshore Terminals – North
America’s busiest coal export terminal – is amid a five-year, $270 million project to make it even better. As we work to secure a bright future over the next few years we will: a new office, workshop • Build and employee complex three of our four • Replace stacker-reclaimers which either stockpile or reclaim coal on our site our largest shiploader • Replace at Berth 1 additional dust • Install suppression systems For our customers it will mean they can plan for the future with confidence. We will have new equipment and increased coal stockpile capacity without increasing our site footprint. Every tonne of coal from train to vessel will be handled more efficiently and with improved environmental safeguards. The changes will not come without challenges as we are a busy terminal. However, the results will prove worthwhile for Westshore and its unitholders; to our customers; and to Canada in increasing coal export revenues, and productive jobs.
www.westshore.com
We’re taking time to do it right
THE PORT OF PRINCE RUPERT
Growing fast. Going strong. Prince Rupert is connecting Canada’s industries and communities to fast-growing Asian economies. As a North American leader in security, marine safety and environmental sustainability, we’re proud to uphold the highest standards while moving the world’s goods and resources through British Columbia’s northern trade corridor.
@rupertport | www.rupertport.com February 2015 BC Shipping News 3
4 BC Shipping News February 2015
BC SHIPPING
Contents
NEWS
February 2015 Volume 5 Issue 1
Cover Story 37
20 7 8 12
Guest editor
Robin Silvester welcomes CLC delegates
18
History lesson
20
Coal terminals
In brief
News briefs and letters
Industry insight
The year ahead Captain Stephen Brown, President, Chamber of Shipping of British Columbia In what has quickly become one of our most anticipated annual traditions, Captain Brown summarizes the issues to watch in 2015.
17 Events
Conference tackles rewards and risks of commodity transport By Martin Crilly and Xu Wu
24 Shipping
Big news for international shipping: New income tax rules By Kaity Arsoniadis-Stein
27 Shipping
A retrospect on bulk carriers and tankers By Syd Heal
30
32
12
Good neighbours in trade go beyond NAFTA By Peter Hurme
38
Cargo logistics
40
Cargo logistics
42
Legal affairs
The Matson Line: Cargo/ passenger service starts Hawaiian cruising By Lea Edgar
Coal going through the wringer...yet again By Ray Dykes
Energy transport
Maritime energy transport: Today and tomorrow in the Pacific Northwest Gateway By RAdm Nigel Greenwood, RCN (Ret’d), Vice-Chair, NIBC
Cargo logistics
2015 trends: Trade developments provide opportunities beyond North America By Candace Sider Hazardous chemicals: Implementation of new global labelling system not without its challenges By Colin Laughlan Terminal liability for crew injuries By H. Peter Swanson
44 Shipyards
Anatomy of a modern shipyard
47 Shipyards
Meridian Marine to build innovative self-floating power plant
50 Training/labour
IMTARC’s Aboriginal graduates start work at Meridian Marine
51 Training
Holding your breath doesn’t work By John Lewis, FNI, CRSP
44
Transportation survey STAR results: Optimism with a side of caution By Darryl Anderson and Phil Davies.
On the cover: A CN Rail train with Port of Prince Rupert’s Fairview Terminal in the background (photo: Lonnie Wishart — www.lonniewishart.com); above: Westshore Terminals (photo: Dave Roels — www.daveroels.com); right: Seaspan’s Vancouver Shipyards (photo courtesy Seaspan ULC); left: Captain Stephen Brown, President, Chamber of Shipping of British Columbia.
February 2015 BC Shipping News 5
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6 BC Shipping News February 2015
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GUEST EDITOR Welcome to the CLC
Robin Silvester, President and CEO Photos by Dave Roels, www.daveroels.com
Port Metro Vancouver
O
n behalf of Port Metro Vancouver, I extend a warm welcome to all attendees of the Cargo Logistics Canada Expo & Conference. We are excited to have such a large and diverse gathering of stakeholders from across Canada’s supply chain assembled here in our spectacular port city. Port Metro Vancouver is at the heart of one of the most important economic corridors on the continent. Every year, $184 billion in goods — or $500 million a day — travel through the port. That figure accounts for 20 per cent of Canada’s total trade in goods, and generates nearly 100,000 jobs in the nation-wide supply chain — 76,800 of those right here in B.C.
Over the past year, the scale of port activity has surpassed expectations. Once our 2014 results are finalized in coming weeks, we will likely see record volumes in several business sectors, contributing to another record year overall, and reconfirming Port Metro Vancouver as the largest export port on the continent. The movement of goods is at the heart of our business. To secure our future, we have spent the past decade enhancing critical connections to overseas markets for export products, improving rail, port and trucking operations, and, in turn, easing congestion in our communities. Along with the leadership of the federal and provincial governments, and working together with the port and our supplychain partners and customers, the last 10 years have been a time of extraordinary progress for B.C.’s gateway. Since 2005, an unprecedented $22 billion of public and private-sector funds have been committed in our region to support projects designed to move people and cargo faster and more efficiently, with $9 billion spent in the Vancouver gateway alone.
As Prime Minister Harper recently stated to a Canadian trade delegation in Asia, these projects have been instrumental in creating “a new Silk Road” through Canada’s West Coast. Perhaps more importantly for you, these investments have a direct and positive impact on your ability to improve your supply chain logistics and grow your businesses. The success of the port is a collaboration of many players and thanks are due to our terminal operators, workers, customers, all levels of government and all our other partners for their continued support. I am certain that, by working together as strategic partners, we can achieve continued supply chain excellence and fulfill the gateway’s tremendous potential. I hope you enjoy your time in Vancouver, build upon old friendships, create new connections, gain some insights relevant to your business, and take pride in knowing you are an integral part of Canada’s success in the global economy. — Robin Silvester
February 2015 BC Shipping News 7
LETTERS TO THE EDITOR
More to the story... Re: Update on the Wood Pellet Industry by Syd Heal, December 2014 issue In your article Update On The Wood Pellet Industry you noted: “Rentech is now reported to be in discussions with the Newfoundland government to possibly take over and operate a plant built by Holsom Forest Products. This fell into the realm of misbegotten projects, having been built with much government assistance, only to find that additional challenges had been overlooked. These were dry storage at the plant and inadequate port infrastructure at Botwood, which if a deal is to be negotiated, will probably involve much additional taxpayer outlay.” Botwood has been associated with the forest industry for over 150 years. The proximity of our deep-water port to the U.K. makes it an ideal location for export focused operations. In 2011, the Town of Botwood acquired all of the former AbitibiBowater assets in our town including a very large marginal wharf and storage facility. In its present configuration, the storage facility is able to accommodate in excess of 42,000 tonnes of wood pellets. There is approximately 40 feet of water at the dock face and vessels in excess of 700 feet can be
accommodated. Approximately 100-150 feet off of this dock the water depth is between 9-10 fathoms meaning that the site could potentially accommodate significantly larger vessels. Rentech, GNL, and the Town of Botwood have had ongoing discussions about the best configuration of the site including the possible development of new dedicated dome type storage facilities similar to those built for Rentech at the Port of Quebec — a need which will largely be driven by the end user of the pellets. With regards to the project, the Rentech proposal is to construct a new pellet plant in Botwood to produce a minimum of 200,000 dry tonnes of premium white pellets from slow growth forests. The cost of the plant is estimated to be in excess of $55 million — to the best of my knowledge, for balance sheet purposes and future company structure, the company has not asked either level of government for direct investment. Government investments for required infrastructure may be part of the mix. This project will generate in excess of 4,000 person years of employment over the next decade and contribute (directly, indirectly,
Nigel S. Greenwood
MA, BSc, Master Mariner, FRIN, MNI Rear-Admiral, RCN (Ret’d)
www.greenwoodmaritime.com nsg@greenwoodmaritime.com / 250-507-8445
8 BC Shipping News February 2015
and through spinoffs) in excess of $400,000,000 to the Canadian economy over that period. With this level of increased economic activity the payback period for modest government investments will be three to four years. The fiber for this project is from part of the TAC formerly utilized by AbitibiBowater at the GFW mill. The GNL issued an EOI for this resource in the early 2013. I believe a large U.K. utility flagged this project for Rentech; the company is negotiating with a number of potential buyers for the pellets. If you assume the fiber can be harvested economically, this project appears to be very solid — a project that will bring a significant forestry operation back to Central Newfoundland and generate real benefits for the residents of our region. Holson Forest Products (not Holsom) is not directly connected to this project. Holson is located on the Great Northern Peninsula in the community of Roddickton-Bide Arm some 600kms by road from Botwood. Holson operates an integrated sawmill with a pellet plant capable of producing between 50,000-60,000 tonnes of pellets annually. I believe the operation presently lacks a bag line and significant storage facility, the nearest suitable port for bulk shipping is St. Anthony approximately 1.5 hours away by road. I understand that Rentech has made a commitment to the GNL to explore options for the Holson plant; given the scale and location of this plant it may be a good fit for a bagged product line to be distributed by New England Wood Pellet or through other distribution outlets in Europe. Here are the facts on this project from my perspective — we have a legitimate proponent with significant expertise and resources, there is adequate and affordable fiber to meet minimum output requirements, given our distance to Europe and existing port infrastructure — shipping and storage costs are quite favourable, there is significant long-term European and international demand (industrial and domestic) for premium white pellets made from slow growing black spruce, relatively modest indirect investment required of government. Respectfully, Stephen Jerrett, BSc, BA(Hons), MA(Economics) Manager, Town of Botwood
LETTERS TO THE EDITOR
Update on CLI’s Steveston Lifeboat Report from the Canadian Lifeboat Institution: It is with great regret that the Canadian Lifeboat Institution (CLI) reports that its Steveston Lifeboat suffered a major accident while conducting a training exercise in the Fraser Estuary on Thursday, December 11, 2014. The lifeboat stranded on the Albion Jetty and was holed in two places causing major flooding. When it quickly became evident from damage control assessment that she would not refloat, a call to the Canadian Coast Guard requesting assistance was made and resources were dispatched to the scene. The CLI’s Fraser Lifeboat was on scene in seven minutes and transfer of crew commenced using the Steveston Lifeboat RHIB. The CCG hovercraft was next on scene followed by the RCM-SAR RHIB which came alongside the Steveston Lifeboat, taking off the remaining crew. By this time the lifeboat was pushed over to an angle of 50 degrees by the five-knot ebb, making movement on the vessel very difficult. A slip by one crew
member resulted in a slight back injury from which, thankfully, he has fully recovered. The hovercraft assisted the CLI RHIB and cox’n into Steveston. Crew training and teamwork clicked into place and everybody performed to the highest order. Senior hands ensured that all crew members were accounted for and all possible gear on the boat was secured before departing. All crew members were safely landed in Steveston without getting their feet wet. Grateful thanks are given to the crews of the CLI’s Fraser Lifeboat, the Canadian Coast Guard hovercraft and RMC-SAR for their assistance. CLI also is grateful for the successful salvage by Valley Towing and the safe landing of our lifeboat which will now enter a period of repair and refit. If anything, this accident has brought our wonderful team of men and women even closer together, and we feel blessed to have each and every one of them. We are so grateful for all the kind messages received from around the world
following the accident. It is obvious that many people feel a special love and connection with this iconic vessel. To those who have made donations or offers of help towards her restoration, CLI sends its warmest thanks. We are grateful to Shelter Island Marina, Prodigy Yachts, Commodore Boats, Heppel Paints and Cullen Diesel for their ongoing assistance. The Steveston Lifeboat’s record of 861 rescues demonstrates a commitment of service to others — with assistance she will again help to save “those in peril on the sea.” Editor’s note: We were all very relieved to hear that serious injuries were avoided during what must have been a very anxious experience for CLI crew. However, the same can’t be said for the Steveston Lifeboat. We encourage you to make a donation to the CLI to assist in getting this iconic vessel back to work. Please visit www.canadianlifeboatinstitution.org for details on how to make a donation.
Over 50 years of global gas leadership In 2014, shipping celebrates over 50 years of commercial LNG carrier operations. Whether you are talking gas carriers, LNG as a marine fuel, or LNG bunkering, our expertise and leadership in gas operations can help you make the best decisions based on the best, independent, technical insight. Future performance depends on today’s decisions.
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Working together for a safer world Lloyd’s Register and variants of it are trading names of Lloyd’s Register Group Limited, its subsidiaries and affiliates. Copyright © Lloyd’s Register Group Limited 2014. A member of the Lloyd’s Register group. LR_BCShipping_lifeboat_778x5716.indd 1
06/03/2014 19:26:33
February 2015 BC Shipping News 9
INDUSTRY TRAFFIC
ATPI Group acquires Griffen Travel Green Marine
T
he ATPI Group — a leading global travel management and events business — has announced the purchase of international travel company Griffin. The acquisition is the second major purchase for the ATPI Group in less than 12 months. In January 2014 the Group bought Australia’s largest independent travel management company, Voyager Travel. The purchase of Griffin, which has an international operation of wholly owned offices in 13 countries and joint ventures in a further nine, increases the ATPI Group’s global office footprint to over 100 locations around the world. Graham Ramsey, Chief Executive Officer of the ATPI Group noted that “In 2013 the ATPI Group business delivered gross sales of over US$1.2 billion. With the acquisition of Griffin, coupled with our significant business growth, in 2014 this will reach in excess of US$2 billion. This deal is a major step forward in our plan to increase our global operation, and enhances the unrivalled service that clients of the business already enjoy. The clients of Griffin will benefit from ATPI’s bespoke technology, purchasing power and seamless service around the world.” Simon Morse, Chairman, Griffin, said “The sale of Griffin provides great
oppor t unit ies for our people and clients. We are proud that our network of 33 offices are highly attractive to the business activities and strategic objectives of the ATPI Group. We look forward to the e x c i t i n g Louise Kawaler, Director, Canada oppor t unit ies that this deal brings for our collective organizations.” The ATPI Group, led by Louise Kawaler for Canadian operations, is one the world’s fastest growing international travel management companies, and since 2011 the ATPI Group has increased its global gross sales by over 35 per cent and employs over 1,500 people around the world. Following the purchase of Griffin, the ATPI Group services over 5,000 different clients around the world meeting their travel and event needs, and has a work force of over 6,300 people including those operating as network partners or franchises of the Group.
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announces new program manager for the West Coast
G
reen Marine is pleased to announce that Eleanor Kirtley has joined the growing organization as their new program manager for the West Coast and will be based in Seattle, WA. Eleanor holds a PhD in Naval Architecture and Marine Engineering (University of Michigan) and is a professional engineer in Washington State. Prior to joining Green Marine, she had been with The Glosten Associates since 2008. Eleanor’s primary role will be to support Green Marine’s West Coast participants in implementing the Green Marine environmental program and coordinating Green Marine’s West Coast advisory committee and other working groups. Membership has steadily grown on the West Coast and now includes just over 20 ports, terminal operators, shipyards and ship operators. The newest members in the region are Port of Longview and BC Ferries, who just joined the environmental program in 2015. The industry will get a chance to meet Eleanor at GreenTech 2015, scheduled for May 27 to 29, 2015 in Seattle. This will be the first conference on the U.S. West Coast. For more information on how to participate (sponsorships, exhibits and agenda topics), please visit: www.greenmarine.org/greentech. If you’d like to contact Eleanor directly, she can be reached at 206-409-3943 or by email: eleanor.kirtley@green-marine.org.
Please visit our website for more information
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10 BC Shipping News February 2015
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NEWS BRIEFS ClassNK releases updates guidelines for container stowage and securing arrangements
L
eading classification society ClassNK (Chairman and President: Noboru Ueda) has released the second edition of its Guidelines for Container Stowage and Securing Arrangements. The update comes in response to recent industry changes as the amount and size of container carriers increases more than ever before. Last year, the average size newly delivered containership was over 7,000TEU and various new securing technologies have been developed to enhance the efficiency of loading containers on board these ever-growing vessels. Consequently, it has become increasingly important to evaluate the adequacy of such container stowage and securing arrangements. Taking into consideration ISO standards, the growing diversity of actual stowage and securing methods on container vessels and loads acting on containers due to ship motions, ClassNK has developed strength evaluation
methods for safer stowage and securing arrangements. The second edition of the guidelines includes amendments to evaluation methods to allow for the consideration of the effect of sea routes on stowage and securing. For those vessels installed with lashing calculation programs capable of evaluating container lashing strength, a new class notation can be affixed. In addition, procedures related to affixing class notations for ships in compliance with the IMO regulations on providing safe working conditions for securing of containers on deck in CSS Code (Code of Safe Practice for Cargo Stowage and Securing) Annex 14 have also been included in the updated guidelines. Although this is a nonmandatory code, a number of states have been requiring that container ships calling at their ports comply with the CSS Code, and the ClassNK guidelines now include an audit of ships to ascertain that they comply with the CSS Code Annex 14.
The Guidelines for Container Stowage and Securing Arrangements (Second Edition) is available for download on the ClassNK website for ClassNK “My Page” users. Registration for ClassNK’s “My Page” service is easy and free. Simply go to ClassNK’s website at www.classnk. com and click on “My Page Login”. ClassNK has also released the third version of its Guidelines for Gas Fuelled Ships. The updated version provides comprehensive, up-to-date information on key design features relating to bunkering, hull structure, fire safety, and explosion prevention measures. As restrictions on sulfur emissions within ECAs tightened to 0.1% on January 1, 2015, attention has turned to the potential of natural gas as a sulfurfree, cleaner alternative to liquid fuel oil. These guidelines are also available for download on the ClassNK website for “My Page” users.
February 2015 BC Shipping News 11
INDUSTRY INSIGHT
The year ahead By Captain Stephen Brown
President, Chamber of Shipping of British Columbia
A
s 2015 is now in full swing, it is becoming a tradition that at this time of the year BCSN provides me an opportunity to share some thoughts on what lies ahead for the next 12 months. Looking back 100 years to January 1915, Canada was gearing up to play its part in the 20th century’s first European war with the dispatch of Princess Patricia’s Light Infantry to the trenches in France. By the end of February they were in action and in April took the full force of the first chemical weapon attack of that truly dreadful conflict. On a more positive note, also in January 1915, the Canadian Northern Railway Line was completed between Quebec City and Vancouver via Ottawa, Winnipeg and Edmonton. This led to the formation in 1910 of the Canadian Northern Steamship Company which, until the outbreak of the First World War, operated between Montreal and the U.K. under the name Royal Line. Under immense financial pressure, the entire company was merged into Canadian Pacific in 1923.
>>> The opportunity before Canada to make a real difference in the world as consuming countries seek to diversify into LNG as a primary source of energy is more than generational – it is once in a lifetime. comprises an existing LNG import pipeline, the project is shaping up to face similar levels of opposition to that of our own Northern Gateway and Kinder Morgan projects with many of the same forms of managed misinformation clouding an objective assessment of the project. It is also truly alarming that the Governments of Ontario and Quebec are playing provincial politics with this project. Likewise with British Columbia’s LNG export project proposals. The misconceptions and demands on the projects are alarming. The opportunity before
Canada to make a real difference in the world as consuming countries seek to diversify into LNG as a primary source of energy is more than generational — it is once in a lifetime. Speaking to this topic one year ago, our comments were as follows: 2014 will be witness to continued hesitation by LNG export project proponents to make “Final Investment Decisions.” The reasons for this are complex but may best be summarized as: • A complex and ill-defined regulatory regime
Energy projects
The past year has seen a number of highs and lows for the development of new projects in the marine sector and there will be more in 2015. However, the headline of my 2014 look ahead was: On a local level, the more extreme environmental and self-interest groups will step up their campaign of misinformation designed to discredit our industry. They have not disappointed but it has also been interesting to witness the growth in opposition to the Energy East Pipeline project, the proposed 4,600-kilometre pipeline to carry 1.1 million barrels of crude oil per day from Alberta and Saskatchewan to refineries in Eastern Canada. Even though 3,000 kilometres
12 BC Shipping News February 2015
Capacity shares of four Mega-Alliances in Asia-West Coast North America trade.
INDUSTRY INSIGHT
The proposed Roberts Bank Terminal 2 — essential if the port of Vancouver aspires to be a major container handler for the long term given the trend toward larger vessels.
• • • •
Proposed B.C. government royalty taxes First Nations demands for project equity Uncertain LNG sales price Strong overseas competition for market share Unfortunately, this was all too prophetic, and while others are getting on with it we continue to dither. I will however stick my neck out and predict that at least two projects, one of them major, will make a positive final investment decision (FID) in 2015. Also as we predicted, the Fraser Surrey Docks coal export project received final approval from Port Metro Vancouver after jumping through more than a few hoops.
has taken a seat at the CKYH table, (COSCO, K Line, Yang Ming and Hanjin) to form CKYHE and is also now in the forefront of building mega-capacity ships. That leaves the third major consortium, the G6 Alliance comprising APL, Hapag-Lloyd, Hyundai, Mitsui O.S.K., NYK and OOCL, formed in 2011 from the merger of the Grand Alliance with the New World Alliance. At the same
Source: Port Metro Vancouver
time, both Hapag-Lloyd and Hamburg Sud were busy in 2014 after their own merger failed with each of them absorbing the container assets of a Chilean carrier. Hapag-Lloyd merged with CSAV and Hamburg Sud bought CCNI, effectively ending the presence of Chilean carriers on the world intermodal stage. The single major carrier not in a formal alliance is now Zim Line.
Container sector
One year ago, we also spoke of “the need for another round of consolidation in the container industry.” At the time, the P3 Alliance comprising Maersk, MSC and CMA CGM was under regulatory review, only to be scuttled by China in June of 2014. However, the need for consolidation did not go away and we now have the 2M Alliance, a marriage of convenience between Maersk and MSC comprising approximately 185 vessels and over two million TEU of carrying capacity (average vessel size 14,800 TEU), awaiting consummation in early 2015. Not to be outdone, CMA CGM has teamed up with United Arab Shipping Company and China Shipping to form “Ocean Three” with an average vessel size of 13,200 TEU. Not to miss the party, the normally staunchly independent Evergreen Line
February 2015 BC Shipping News 13
INDUSTRY INSIGHT with reduced penalties on the railways for non-compliance. Against the express wishes of the railways, the quotas have since been extended through to March 2015 and seem likely to be further extended if there is any level of fall-down in rail service over the winter. In the longer term, supply chain reliability, improved terminal efficiency and increased capacity are the three key components to securing Canada’s reputation as a preferred supplier of agricultural products. Changes are underway but we can expect them to be expanded and accelerated with new initiatives and important announcements in 2015.
the major challenge restricting growth not only in Canada’s West Coast container ports, but ports across the globe and is why it will be so essential to build Roberts Bank Container Terminal 2 if the Port of Vancouver aspires to be a major container handler for the long term.
Closer to home, 2014 was a difficult year for the container sector. Severe winter weather across much of Canada impacted rail service levels for the first three months, this then being further compounded by the 28-day trucking disruption in March. Just when things were beginning to get straightened out, a tsunami of additional volume hit Canadian West Coast ports over the summer months due to the uncertainty generated by USWC contract bargaining. On top of all this, most container ocean carriers have been losing money throughout the year, Maersk Line being one of the few exceptions on account of aggressive cost cutting and creative vessel optimization. So what for 2015? The fate of P3 has demonstrated that bigger alliances are not on the cards anytime soon but I would predict that we have not yet seen the peak in ship sizes. Some years ago, I was shown by a shipyard their concept for a 22,000 TEU container ship and would predict that this will materialize in 2015 as carriers desperately seek to reduce the unit cost of doing business. The challenge is not technical, the ships can be built, but can ports handle them? This is now
Grain sector
The previously mentioned challenges of winter rail service in the early months of 2014 were especially felt by the grain sector when trying to move the export component of a record 76 million tons grain crop, being 50 per cent higher than the Canadian average. This resulted in ships waiting for up to two months to load and even then undertaking multiple berthing and unberthing operations on account of inconsistent rail service, storage constraints and a need to keep the terminals fluid. The federal government announced in March an Order in Council requiring both CN and CP to move a minimum of 500,000 tons of grain per week, or face a penalty of up to $100,000 per day for failure to comply. This ultimately resulted in the Fair Rail for Grain Farmers Act which passed into law in July, albeit
Infrastructure development
We attended the November 2014 meeting in Regina of the New West Partnership led by Premiers Christy Clark for British Columbia, Jim Prentice for Alberta, and Brad Wall for Saskatchewan. This was an important re-set for the relationship between western leaders but also for a restructured Pacific Gateway Alliance. The primary outcome was a commitment to establish a co-ordinated approach to
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working with the federal government in financing much-needed infrastructure investment. So this allows me to flow into my next topic — how do we set in motion and pay for the next round of long overdue infrastructure development? Anyone who travels overseas will be aware that by comparison, much of our infrastructure is approaching little better than developing country status. Primary examples are the Massey Tunnel, Portello, Lions Gate, Granville and Oak Street bridges all of which spend many hours per day operating at well beyond design capacity resulting in long delays to traffic, untreated levels of pollution and additional costs to business as we struggle to move goods around the Lower Mainland. Make no mistake, Alberta and Saskatchewan are deeply worried by these and other B.C. infrastructure constraints as they are also a serious drag on the ability of those provinces to access the coast and grow their economies. Bike lanes do not cut it but there is good reason to believe that those in power are starting to heed the warnings. Indeed, the Canada Transportation Act review, chaired by the Honourable David Emerson and which is due to complete its work by the end of 2015, threatens to be a wholesale demand for infrastructure investment before we reach gridlock on many of our main national arteries. Even so, it is unrealistic for the provinces to expect the federal government to bear the brunt of this challenge, as Ontario is currently demanding, or as our Vancouver Mayor is demanding in relation to rail transit out to UBC.
World-class tanker safety and environmental leadership
Regretfully, much of the federal energy (excuse the pun) will this year be expended on the general election and therefore much of the real work of government will be on hold. Even so, we anticipate the pace of world-class tanker safety implementation to gather steam as the initial Area Response Planning workshops get underway and other recommendations of the 2013 review take effect. We anticipate thereafter that the TransMountain (Kinder Morgan) expansion project will gain regulatory approval subject to a number of tough but achievable operational and environmental conditions. As President Obama, in his fourth quarter as U.S. president, seeks to leave a lasting legacy, it is pretty clear by now that he will not approve Keystone XL but
February 2015 BC Shipping News 15
CO2 emissions of China and the U.S. China has noted it will peak its emissions by 2030; the U.S. has promised to cut its emissions 17 per cent by 2020 and 28 per cent by 2025.
will rather build on the global climate change pact signed with China at the APEC conference in Beijing in November 2014. There will consequently be pressure on Canada, both in support of oil sands development and for purely political reasons, to make a commitment in 2015 on climate change mitigation. This may be a carbon tax of sorts but either way, look out for a subtle change in policy emphasis. In this context, the decision of both BC Ferries, Seaspan Marine and Washington State Ferries to place orders for LNG-hybrid propulsion vessels is a good news story for our industry. We will also be challenged by other environmental initiatives such as the B.C. Government / First Nations-driven Marine Planning Partnership (MaPP) wherein First Nations groups are clearly seeking to achieve a level of jurisdiction over our industry; the Port Metro Vancouver-led Enhanced Cetacean Habitat and Observation (ECHO) program related to the impacts of noise on the endangered Southern Resident Killer Whale and the likely ratification of the IMO’s International Convention for the Control and Management of Ships Ballast Water & Sediments 2004 which, following modifications to the convention in October last year, is now supported by the International Chamber of Shipping. However, implementation of typeapproved ballast water treatment systems at up to $2 million per vessel does not come cheap.
Source: Energy Information Administration (International Energy Outlook 2013).
INDUSTRY INSIGHT We also cannot afford to let ourselves get too carried away by the fall in bunker prices over the past six months as underlined by the bankruptcy of OW Bunker, a major industry supplier. The cost of implementation of the 2015 Emission Control Standard of 0.1 per cent maximum sulphur content (essentially distillate fuel) is high for vessels trading to the ports of North America and is especially challenging for those making coastal voyages within the ECA boundary — not to mention a strain on tank capacity. The differential fuel price of distillate in Vancouver versus IFO 380 is hovering around $500 per ton and seems unlikely to fall. For these reasons, another prediction for 2015 is that we will see a flood of orders in the container industry following the example of UASC in ordering LNG-hybrid propulsion-capable vessels and the first orders for similar in the cruise industry, despite the already major commitment by some cruise lines to exhaust gas cleaning systems.
Shipping markets
Our prediction for 2014 read as follows: We envisage continued market improvements in the dry bulk and tanker sectors in 2014 but not in the container sector unless the major ocean carriers trim capacity with widespread layups or scrapping of unwanted vessels. We were pretty accurate with the exception of the dry bulk sector where the over-supply of ships has nullified any prospects for improved rates. Indeed, at the end of 2014, Capsize rates were back to the miserable loss-making levels six years ago at the height of the 2008/09 recession. On the other hand, tanker rates have reflected the appetite for oil at today’s unexpectedly low prices and as the year closed, rates for VLCC voyages from the Middle East to Asia were in excess of $90,000/day. Perhaps the light at the end of the tunnel for our industry is that lower oil prices will normally spur economic growth over time, just as several years of high prices contributed to the 2008/09 recession. We therefore envisage that U.S. economic growth will maintain strong momentum and European economic growth will finally take off and reach two to three per cent providing a much needed boost to the world’s largest container trade. Growth in Asia will also regain momentum giving a lift to commodity prices and freight markets.
The final word
The geopolitical instability generated by an adventurous Russia and North Korea prepared to take risks and call bluffs is perhaps the greatest challenge to the world order in several years. As the Russian economy goes down the tube, the potential for a nothing to lose but everything to gain, risk averse, mindset is very troubling. Likewise, the horrors perpetuated on civilians amongst the general instability of much of the Middle East, including an unresolved face-off with Iran on suspected nuclear weapon development, are all issues that will require a great deal of time and effort to address. Against this background, the world will soldier on but the marine industry will need to remain vigilant to the potential for major instability and sudden policy reverses as trading sanctions increasingly become the weapon of choice. Stephen Brown joined the Chamber of Shipping of British Columbia in September 2008. He currently sits on several committees and boards representing the interests of the B.C. shipping community. He can be reached at stephen@cosbc.ca. For more information on the Chamber, please visit: www.cosbc.ca.
16 BC Shipping News February 2015
EVENTS Conference tackles rewards and risks of commodity transport By Martin Crilly and Xu Wu
Chartered Institute of Logistics and Transport in North America
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n the closing weeks of 2014, protesters on B.C.’s Burnaby Mountain, who were fighting Kinder Morgan’s proposed oil pipeline expansion from Alberta to tidewater, intensified the ongoing public debate on the rewards and risks of western resource trade. Canada’s natural resource endowment certainly promises profits, tax revenues and jobs. With strong prospects for demand growth overseas, exporters call for expansion of transport and handling capacity. But new hurdles have arisen for the commodity trade: the June 2014 landmark decision by Canada’s supreme court recognized First Nations rights over wide swaths of unceded terrain in B.C. Industry must now work harder to earn First Nations’ consent for new resource development and passage for export. Also, some residents and municipalities close to transport corridors are evidently reluctant to see more industrial activity, and are anxious about dangerous commodity spills. Yet another source of contention is the emission of more greenhouse gases during extraction, processing, movement and end-use of commodities, especially of energy products. Underlying the public debate are difficult questions about society’s decision-making process. Are there enough agreed facts for a well-informed, true debate? How can widely divergent views on resource development be reconciled? Who has veto power? Is a hard collision of interests and values unavoidable and if so what will be its fall-out? How can society find an optimum policy and reach an agreement on what rewards to pursue, and what risks are acceptable? In a well-attended conference held last fall, the local chapter of Chartered Institute of Logistics and Transport in North America (CILTNA.com) assembled people representing a range of viewpoints on these questions. The Institute is a professional body for Supply Chain, Logistics and Transportation with a long pedigree stretching back to the year 1919. At the conference, many student members from BCIT, Capilano University
>>> With CILTNA as a non-partisan forum, participants reviewed the current state of the resource development debate...to move towards a meeting of minds on how to answer the difficult questions. and UBC joined invited guests from the media, First Nations, all orders of government, consultancies and NGOs advocating greater environmental protection and conservation. With CILTNA as a non-partisan forum, participants reviewed the current state of the resource development debate. They aimed to educate and inform each other, and to move towards a meeting of minds on how to answer the difficult questions. In the opening keynote, Christopher Harvey, Q.C., acknowledged B.C.’s “truly unique” ecosystem and aboriginal communities, which industrial developments cannot ignore out of both legal and moral obligations. Unfortunately, historic cases of misconception and miscommunications between business, governments and local communities has delayed or destroyed projects before a discussion of facts. A panel moderated by UBC’s Dr. David Gillen followed in which Ian Anderson of Kinder Morgan and Dr. Judith Sayers of Hupacasath First Nation offered industry and aboriginal perspectives. Stressing the economic significance of pipeline infrastructures, Mr. Anderson urged use of a risk-based evaluation for accurate understanding and proper weighing of the costs and benefits of pipeline developments. Dr. Sayers, on the other hand, emphasized the importance of aboriginal title and rights: to gain solid support from First Nations communities, any development must incorporate aboriginal project ownership, training and capacity building, revenue sharing and protection of resources. Mediating the differing perspectives, Dr. Tom Gunton of Simon Fraser University spoke of the crucial need for discussion and decision-making based
on facts. Dr. Gunton proposed a process that allows direct conversation and joint fact-finding by people who are “opposed, support, or unsure.” A joint research and review process improves the level of collaboration between opposing parties and could, in practice, alleviate the lack of trust and disagreement on facts. During question period, Dr. Gillen added that the government would be a perfect mediator to set up such a process. A structured discussion followed during which representatives from businesses and community including Port Metro Vancouver, the Corporation of Delta and the Dogwood Initiative discussed the issue from their own perspectives. In the lunch keynote, Andy Calitz of LNG Canada surveyed the global natural gas market, pointing to an unprecedented opportunity for Canada to supply Asia. He flagged the challenges: oppositions to pipelines, labour supply, tax, aboriginal relations, cost structure and local attitude towards foreign investments. In trying to find a meeting of minds, the Conference did not claim to close the debate on the Canadian resource trade. Some elements of consensus emerged from the day: we are at a historical decision point when action is required; the natural and cultural heritage of British Columbia must be valued and preserved; future dialogues should be based on facts or the effort towards fact-finding. Although small steps, these common grounds offer a foundation on which further consensus can be reached in the future. For a copy of the proceedings of the conference, please visit http://ciltna. com/files/CILTNA_Pacific_Sept_17_Conf_ Proceedings_Final.pdf.
February 2015 BC Shipping News 17
HISTORY LESSON Photo credit: Dave Roels (www.daveroels.com)
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t’s that time of year when many of us daydream about being somewhere a little bit sunnier and a great deal warmer. Perhaps the tropical islands of Hawaii? Who wouldn’t want to take a nice long cruise to exotic beaches and lush tropical rain forests? Hawaiian cruises have a long and compelling history. So just sit back and imagine your toes in warm sand, the breeze in your hair, and a cold drink in your hand! Transpacific steamship service to the Hawaiian Islands began in 1867. In 1883, the new steamship Mariposa of the Oceanic Steamship Company arrived in Hawaii from San Francisco, thus beginning a regularly scheduled, semi-monthly run of cargo and passengers. At that time, there were no truly dedicated passenger vessels that resembled the modern cruise ships with all the amenities that we have today. The P&O Company is often recognized as the first pleasure cruise company, which began its cruises in 1844. Other vessels were used for pleasure cruises before this time, however they were reserved for the European aristocracy. It wasn’t until 1900 that the SS Prinzessin Victoria Luise was built by the American-Hamburg Company, becoming the first ship specifically designed for luxury cruises. It was also about this time
The Matsonia in San Pedro, June 1958. VMM neg. 1684.
18 BC Shipping News February 2015
The Matson Line:
Cargo/passenger service starts Hawaiian cruising By Lea Edgar
Librarian/Archivist, Vancouver Maritime Museum
>>>In 1883, the new steamship Mariposa of the Oceanic Steamship Company arrived in Hawaii from San Francisco, thus beginning a regularly scheduled, semi-monthly run of cargo and passengers. that some entrepreneurial gentlemen started developing Hawaiian tourism. On May 14, 1902, W.C. Weedon convinced a group of Honolulu businessmen to pay him to advertise the Territory of Hawaii on the mainland of the United States. Before this instance, in 1892, the Hawaii Bureau of Information did try to promote tourism, however that attempt never gained traction. It was only when Hawaii became a territory in 1898 that it started to genuinely attract adventurous travellers. In 1902, the Merchants Association proposed the creation of a permanent tourism promotion bureau, and in 1903, they managed to secure funding. The funding came from a share of the voluntary tonnage tax shippers had to pay after the plague of 1899-1900 to eliminate rats at the Honolulu docks. With the new burgeoning interest in Hawaii as a travel destination, the Matson Lines evolved to become one of the first
companies to promote Hawaiian cruises and to help develop the tourism industry. Captain William Matson arrived in Hilo, Hawaii in 1882 and began with a shipping line, eventually incorporated as the Matson Navigation Company in 1901. The first real Matson vessel to carry passengers was the Ehrenfels. It was considered by many to be an old and subpar vessel and it was a bold move for Matson to turn away from sailing vessels. However, steam vessels made the trip from San Francisco to Honolulu in seven days, rather than about 10 days. The Ehrenfels, whose name was changed to Enterprise, was a combination passenger and freight vessel with accommodation for 22 passengers. Matson had his first steamer, Lurline (the second vessel of that name), specially designed by Albert C. Diericx and it allowed for both freight and 51 passengers. It was not a luxury ocean liner but it was still quite comfortable. On May 20, 1908, the Lurline began her maiden voyage from San Francisco to Honolulu. Demand for passenger space eventually became overwhelming, so another combination passenger-cargo vessel, Wilhelmina, was requested, and this time the emphasis was on passenger comfort. The Wilhelmina began its run in 1910 and had 151 cabins with well-appointed lounges, an extensive dining room and electric lights. Many rooms also had baths and showers. This was truly the beginning of tourist travel to Hawaii and Matson took advantage of the
VANCOUVER MARITIME MUSEUM new craze. He was sure to advertise all the new luxurious amenities of the Wilhelmina and soon there was a greater demand for even more passenger vessels. Matson decided to branch out and chartered other companies’ vessels, such as the AmericanHawaiian Steamship Company’s Nevadan and Honoluluan. By 1914, Matson had four ships (all combination passenger-freight) running a weekly service to Honolulu. In the same year, the new vessel Matsonia began her service between San Francisco and Honolulu and the Manoa began providing inter-island service. When Captain Matson died in 1917, his fleet consisted of 14 of the fastest, largest and most modern ships transporting freight and passengers in the Pacific. It wasn’t until the 1920s that the Matson Navigation Company started to see some real competition. In 1921, the Los Angeles Steamship Company (LASSCO) began offering cruises from Los Angeles to Hawaii. By 1927, the LASSCO vessels could actually accommodate more passengers than the Matson vessels. After losing some ships and the worsening of the economy in the United States, the Matson Lines bought out LASSCO in 1931
S.S. Lurline, queen of the Hawaiian seas, off Diamond Head. Hawaii Color Card, Mike Roberts, c. 1960. LM2007.1000.4473.
but continued to operate it as a subsidiary until 1937. Matson also bought out the Oceanic Steamship Company (which became a subsidiary as well) in 1926. The Matson Lines, as well as some competing lines, continued to offer luxury cruises to Hawaii into the 1950s. It was with the development of the airline industry that most passenger liners ceased to exist. Matson began to shift its focus in 1959 — with the sale of all its non-shipping assets — to container service. In 1970 it finally sold its passenger vessels and now operates as a successful
Marine paintings, special commissions, talks, reproductions and books...
John M. Horton, Marine Artist
shipping line. There was a steady decline in the cruising industry in the 1960s and 1970s, but the 1980s saw a resurgence in popularity as cruise ships were being redesigned into the “megaships” we have today. Although the golden age of ocean liners is gone, cruising culture lives on, enabling us to still take that exotic cruise to Hawaii today. Lea Edgar started her position as Librarian/Archivist for the Vancouver Maritime Museum in July 2013. She can be contacted at archives@vancouvermaritimemuseum.com.
Canada’s Pacific Gateways A new book by Dr. W.B.M. Hick Canada’s Pacific Gateways is a lavishly-illustrated chronicle of trade and development on the West Coast. It is a history of dreams and vision, of political will and, at times, political expediency. Dr. W.B.M. Hick delivers a lively account of the people — the visionaries, financiers, and workers — who built the ports at Vancouver and Prince Rupert and the vital transcontinental rail corridors that serve them. Order online at www.canadaspacificgateways.com | $39.99 (CAD)
“Ready to RAS” (featuring HMCS Protecteur) (20”x30”); oil on board. Contact us re availability. I produced this painting after enjoying 5 weeks aboard HMCS Protecteur during a RIMPAC exercise. Unfortunately she was damaged recently and is being retired. She was a very good ship and I made many long lasting friends on her. Farewell Protecteur.
Art is an investment. Call or email us to obtain that special painting. (604) 943-4399 / john@johnhorton.ca www.johnhorton.ca
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February 2015 BC Shipping News 19
2/7/2013 1:14:42 PM
COAL TERMINALS
Photo by Dave Roels, www.daveroels.com
Coal going through the wringer...yet again By Ray Dykes
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oal is going through one of its most tumultuous periods of the past decade…but despite current low market prices, an oversupply of coal on the market, and heightened environmental opposition, you don’t get rid of the Canadian coal industry that easily. For starters, coal is the largest single commodity handled by Port Metro Vancouver at about 40 million tonnes a year (with likely another record total tonnage in 2014), and brings in billions of dollars in revenues for Canada. The industry has started to seriously clean up its act by reducing emissions and incidents of coal dusting, and over 40 per cent of the world (that’s a few billion people by
>>>Despite all of these gyrations in what has always been a highly cyclical industry, coal in Canada is remarkably healthy and won’t be disappearing anytime soon. the way) rely on this type of coal for their electricity generation. That’s not to consider the billion people who would love to have electricity of any sort to help to overcome their current energy poverty and despair. And last time I looked, steelmaking coal, which makes up the bulk of Vancouver shipments, is still in demand for the likes of vehicles, construction,
appliances, and even those save-theplanet steel wind turbines. Prices for both steelmaking (metallurgical) and energy coal (thermal) hit multiyear lows in 2014 and the experts say there’ll be more flat-lining of coal prices in 2015 before a hoped-for recovery, likely “still a few years out.” Growth by China, one of the major buyers, is expected to be slower and that’s not encouraging news
Photo: Dave Roels (www.daveroels.com)
A bird’s eye-view of Westshore Terminals, Canada’s busiest export coal terminal.
20 BC Shipping News February 2015
COAL TERMINALS
Photos courtesy Westshore Terminals
for the industry, although India is likely to step up its demand. The depressed prices have been enough to discourage the opening or shut down production at some northeast British Columbia coal mines for the time being, at least, as well as similar reported curtailments in Australia and elsewhere. Despite all of these gyrations in what has always been a highly cyclical industry, coal in Canada is remarkably healthy and won’t be disappearing anytime soon.
Record years
In fact, two of the major shippers of coal in Canada — Westshore Terminals and Neptune Bulk Terminals, both in Port Metro Vancouver — have had back-toback record years, which some might find hard to fathom given the above world conditions. Canadian industry leader Westshore Terminals shipped about 30.6 million tonnes in 2014 — up 500,000 tonnes on its record of 2013 — and is going through a major equipment upgrade worth $270 million over the next four years on top of hundreds of millions of dollars in upgrades already completed in the past decade. There’s also a change at the top. Vice President & General Manager Denis Horgan, who has held the reins for the past decade, retired December 31, 2014, making way for Glenn Dudar, former Production Manager. Denis has been in the coal industry for 40 years or so, both at the mines and at Westshore. He is a respected entity in an industry that has been subject to many attacks from planet-saving types bent on ABC — anything but coal — because of its climate change issues.
Denis Horgan (left), Vice President and General Manager of Westshore Terminals for the past 10 years, has now retired. Glenn Dudar (right), former Production Manager, is now in charge.
Manager in 2004 and has seen Westshore through some of its biggest capital projects and challenging crises in its 45-year history. When he said goodbye on December 31, 2014, Westshore had shipped over 760 million tonnes of coal to more than 20 countries since opening day in June 1970. For the past seven years, he has been at the reins of what is the busiest coal export facility in all of North America
with Westshore operating at or near capacity and turning away business. In fact, United States buyers such as Cloud Peak Energy are keen to get their hands on any unused capacity at Westshore and recently acquired extra tonnage once held for Sherritt Coal.
Terminal upgrade
Today, the terminal is amid another fiveyear, $270-million equipment upgrade and
The best of times
Denis can look back on four decades of safe coal handling. However, he’ll admit the heavily cyclical industry experience has, for him, been “the best of times, the worst of times,” borrowing from Charles Dickens and his 1859 Tale of Two Cities. Not that Denis has been around for that long, but he certainly has a handle on the world scene, having travelled widely in his Westshore role and for organizations such as the Coal Export Terminal Operators Association. “This too will pass,” he adds, looking at the current difficulties besetting one of Canada’s traditional industries. An Irish-born accountant, Denis took over as Vice President & General
maritime and commercial law on canada’s west coast Nevin Fishman Mark W. Hilton Katherine A. Arnold James Vander Woude
W. Gary Wharton David K. Jones Connie Risi Joanna R. Dawson
Peter Swanson Catherine A. Hofmann David S. Jarrett Megan Nicholls
Thomas S. Hawkins Tom Beasley Russell Robertson
associate counsel: Lorna Pawluk tel: 604.681.1700 fax: 604.681.1788 emergency response: 604.681.1700 address: 1500–570 Granville Street, Vancouver, BC, Canada, V6C 3P1 web: www.bernardllp.ca
February 2015 BC Shipping News 21
Photo: Lonnie Wishart (www.lonniewishart.com)
COAL TERMINALS
Photo: Dave Roels (www.daveroels.com)
Neptune Terminals
Fraser Surrey Docks
much more, including the construction of a new complex with office, maintenance, workshop, and employee facilities at the northern end of the site. The impressive new building should be open by the fall of this year, clearing the way for the demolition of the existing office, warehouse and workshop buildings situated in the middle of the site. Once the old buildings are gone, there will be another 100,000 tonnes of stockpile space available for Westshore customers. But, that’s not all. The project includes replacing four of the largest and busiest coal handling machines on site — the shiploader at Berth 1 and three older stacker-reclaimers, the huge machines that stockpile or reclaim coal from the stockyard for loading onto ships. The first to be replaced will be Shiploader 1 and Stacker-Reclaimer 43 by April 2016. That will give new boss Glenn Dudar some added challenges as he tries to keep the terminal running efficiently while key equipment is replaced. Aged 44, Glenn was promoted from Production Manager to his new post as Vice President & General Manager. He joined the terminal in July 2005 after previously working in both salt and gold mines and has a degree in Electrical Engineering from the University of British Columbia. Glenn is excited about Westshore’s future. “We will have a fresh, new team and fresh, new equipment for what will be a bold new future shipping potentially about 36 million tonnes per year,” he adds.
Photo: Lonnie Wishart (www.lonniewishart.com)
Neptune Bulk Terminals
Ridley Terminals
22 BC Shipping News February 2015
Coal and potash are the major items shipped by Neptune, which is situated in the Inner Harbour of Port Metro Vancouver. And a record year at Westshore and Neptune means a busy year for coal and its major shipper Teck Coal. Neptune shipped a record 7.5 million tonnes of coal in 2013 and slightly more to set a new mark in 2014. Overall, the facility shipped a total of over 16 million tonnes last year thanks to a strong performance by potash. With the completion of Phase 1 of a facility upgrade, which included a new stacker-reclaimer built in Sidney, British Columbia, coal-handling capacity is now at 12.5 million tonnes. Phase 2, to construct another rail
COAL TERMINALS car dumper on the North Vancouver site, has been approved by Port Metro Vancouver and is amid the permitting process. No decision to go ahead with this upgrade has been made and the current market conditions and low coal prices probably haven’t helped. Phase 2 is still an active project, however, and a decision is expected within the next year. If it goes ahead it will mean Neptune will be able to handle another coal train a day and lift its capacity to 18.5 million tonnes.
Fraser Surrey Docks
million tonnes compared to a record 11.3 million tonnes in 2013. Current capacity is 18 million tonnes per year and Ridley is committed to complete a Capacity Realization Project which began in 2011 and could see it able to handle up to 25 million tonnes a year if it goes ahead as planned, when and if market conditions and customer demand improve. But, don’t hold your breath for news of the impending sale of the terminal announced by the owners, the Federal
Government, back in December 2012. There has been considerable interest among would-be buyers since then, but no call for actual bids. In fact, the whole idea of selling the facility seems to have dropped completely off the radar and one company among those interested in owning the terminal feels it may simply have been taken off the market. Ray Dykes is a journalist who has worked his way around the world as a writer / photographer. Ray can be reached at prplus@shaw.ca.
After a 26-month-long permitting process ended in Port Metro Vancouver approval last August, Fraser Surrey Docks (FSD) is now expecting to handle its first coal shipments in early 2016. It’s been a long, hard grind for the company’s President & CEO Jeff Scott who says: “We worked hard to prove the analysis, we listened carefully to stakeholders, and we changed and enhanced the project after listening to their concerns.” The $15-million project entails receiving coal trains from the Powder River Basin in the United States at a rate of about four million tonnes per year. The coal will be bottom-dumped and loaded onto barges for a down-the-river tow by tug to the Strait of Georgia facility of Texada Quarrying Ltd., a Lafarge company. From there, it will be transshipped onto deep-sea vessels for Asian customers. Last year, the Provincial Government gave Texada Quarrying, which has been successfully shipping coal for over 20 years, approval to stockpile up to 800,000 tonnes of coal at its Texada Island facility. Meanwhile, FSD is working through judicial reviews as opponents to the project try to delay or quash it in the courts. The Fraser River facility remains “committed to the project” and has been heartened by continuing Corporation of Delta studies of rail dusting which so far have found no incidents outside allowable provincial levels.
Ridley Terminals Inc.
This Port of Prince Rupert facility has taken a beating from prevailing conditions in the coal industry, which have persuaded some of its coal mine customers in the northeast to scale back or shut down for the time being. Coal shipments were down dramatically in 2014 and were expected to total about seven
February 2015 BC Shipping News 23
SHIPPING Big news for international shipping:
New income tax rules By Kaity Arsoniadis-Stein LLB, LLM, President & Secretary-General
International Ship-Owners Alliance of Canada
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t is with great pleasure that I can report on a spectacular development for our industry. On December 16, 2014, Bill C-43, Economic Action Plan 2014 Act, No.2, a second Act to implement certain provisions of the budget tabled in Parliament on February 11, 2014 and other measures received Royal Assent and is now law. This new law updates the tax rules for international shipping which include amendments that determine the residence of international shipping corporations and reduces the current threshold allowing the entity to qualify as a shipping company from 100 per cent to 25 per cent. The changes made by the federal government have modernized Canada’s shipping tax legislation and will assist in repositioning Canada as a world leader in the international shipping community.
Background
The actual policy that was designed to attract the central control and management of international shipping companies to Canada was enacted back in the early 1990s. However, since that time, the nature of the international shipping industry has experienced many changes, becoming more complex and more competitive. Unlike other jurisdictions, Canada’s tax legislation had lagged behind its global counterparts and was missing the opportunity to grow an important and strategic industry sector. The legislation restricted Canada’s ability to attract head offices and placed international shipping companies, with Canadian operational headquarters, at a competitive disadvantage. If the policy that was put in place in the 1990s was to
24 BC Shipping News February 2015
>>>The changes made by the federal government have modernized Canada’s shipping tax legislation and will assist in repositioning Canada as a world leader in the international shipping community. remain effective, updates were required in order to maintain the purposive approach of the legislation that was developed.
The new tax rules
This modernization to the Income Tax Act allows Canada to play catch up with the commercial reality regarding international shipping companies. The new changes will restore Canada’s competitive edge to retain and attract new international shipping companies to base their operations in Canada, and promote economic and employment growth with spin-off benefits including additional maritime service enterprises such as ship brokering, marine insurance, shipping finance, legal services, technology, education, etc. The new rules will apply for tax years that begin after July 12, 2013, the date the Department of Finance Canada issued the draft legislation. The relevant provisions are at Sections 18, 71 and 74 and can be summarized as follows: 1. Section 18 is a technical amendment that allows the new definition of international shipping to apply to the existing exemptions under Section 81(1)(c) of the Income Tax Act; 2. Section 71 addresses vagueness in the current rules by specifically defining
international shipping, thus providing certainty and clarity to the industry; and, 3. Section 74 addresses several problems under the current rules which limit the acceptable investments of a shipping group to equity investments in 100 per cent-owned corporate subsidiaries and severely limits the ability of shipping groups to provide ancillary services to the group. Changes brought about by section 74 will now expand the ability for shipping companies to invest in equity, debt, investments in shipping partnerships, investments in shipping trusts and allow certain corporate ancillary service companies to qualify. Furthermore, the current threshold allowing the entity to qualify as a shipping company will drop from 100 per cent to 25 per cent.
Optimizing on Gateway and port infrastructure costs and investments
These changes can now be used to optimize and diversify on our Trade Corridor, Gateway and port infrastructure investments and “sunk” costs. The time is ripe to consider a strategy that focuses on capturing new markets that offer the highest value-added returns, create
SHIPPING Graph courtesy International Ship-Owners Alliance of Canada
high-value knowledge jobs that are longterm and sustainable, while ensuring to grow a highly skilled and educated work force. Currently, Canada’s maritime industry revolves around the port, which is only one part of the maritime cluster and which involves the spending of billions on the high capital costs of infrastructure investments. Canada should swim upstream and start to realize the corporate benefits that are associated with Canada’s trade. As shown in Graph 1, the port sector belongs to the downstream industry with the lowest value-added, while maritime services belong to the upper-stream industry with the highest value-added. The new tax changes have the ability to bring to Canada the corporate activity of international trade and the potential to strengthen Canada as an international shipping hub. The changes can create local, regional and national jobs and benefits by encouraging the international shipping community to consider Canadian ports as ideal locations for their corporate activities. This will allow Canada to engage in the upper stream, high value-added segments of the industry.
Graph 1: Value pyramid of a maritime cluster
Whilst the shipping industry supports strong laws to safeguard the marine and coastal environments and the need to convict and punish polluters, if a prison term is possible, then the Crown should be required to prove the offence beyond a reasonable doubt, consistent with Canada’s criminal law standards. Workers should not be offered
less constitutional protections than, for example, murderers. It is important to note that since implementation in 2005, this legislation has never been used, despite environmental disasters such as the Lac-Mégantic rail disaster of 2013. It is humbly suggested that after a decade, it is reasonable to review the application of a law that has never
Further changes needed to attract high value-added services
With a globally competitive new tax regime in place, it now makes sense to review certain items that require attention, should Canada wish to engage in the corporate activity associated with world trade. The key items are briefly set out as follows:
Tweaking adverse legislation: Criminal strict liability In 2005, former Bill C-15 introduced criminal strict liability for acts of pollution by individuals from any industry, whether trucking, rail, forestry, oil and gas, mining, and including shipping. Other industries may not be aware of this because the legislation is targeted at a vessel’s master, officers as well as the vessel’s owners, directors and officers; however, it is vague enough to capture all industries. The law allows for the conviction of persons merely because they fail to prove their own due diligence, without the Crown having to prove anything against them at all, such as the accused’s intent to commit the offence. Such a law breaches a basic, constitutionally protected human right.
February 2015 BC Shipping News 25
SHIPPING been used and that presents a barrier to economic growth while creating a real quandary for all industries alike: from the workers on the ground to all the directors across Canada in corporate board rooms. It will be difficult to attract corporate headquarters to Canada with this legislation in place. Ironically, the kind of companies that we would love to invite to Canada, the sophisticated “blue chip” companies that adhere to social corporate responsibilities, are the ones that will conduct their risk assessment analysis to determine headquarter re-location. As a matter of sound business practice, Canada will be sidestepped, and justly so. In fact, we know of numerous cases where this has already occurred. Refreshing the International Maritime Centre: Jobs and growth Shipping moves about 90 per cent of global trade and one in five jobs in Canada depends on trade. It is predicted that the volume of seaborne trade will grow from nine billion tonnes per year to between 19-24 billion tonnes per year by 2030, the giant drivers of global trade being China
Georgia Papadimitriou and Kaity Arsoniadis-Stein recently met with the Honourable Joe Oliver, Canada’s Minister of Finance.
and India (Lloyd’s Global Marine Trends 2030). Canada is well positioned to create opportunities and benefits concomitant with such growth. The new tax updates have improved Canada’s competitive position as a destination for international shipping company head offices. Canada can develop into an
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international shipping hub by attracting upstream industries with the highest value-added jobs. If we can manage to amend the criminal strict liability provisions set out above, we can work on reinvigorating the International Maritime Centre as a vehicle to attract, retain and support international shipping companies in Canada. We will need to establish a centre that is not only tasked with marketing to attract this industry to Canada, but that can proactively support the needs of the industry and ensure that Canada maintains its global competitive status.
Conclusion
We are pleased that the Government of Canada recognized the economic benefit of amending the Income Tax Act with respect to international shipping. Canada has incredible resource wealth, the highest energy reserves in the world, three of the world’s longest coastlines (the Pacific, the Arctic and the Atlantic), yet an unduly limited global market presence regarding the shipping sector. With these important new tax changes in place, it makes good sense to refresh the International Maritime Centre and revive the 1990’s initiative to attract international shipping companies to Canada. International shipping activities are mobile and can be operated from any nation that offers a supportive infrastructure, competitive tax laws, simple rules and political stability. Once we reinstate the presumption of innocence for criminal charges, a constitutional standard enjoyed by all western democracies, we can focus on re-branding and re-marketing this new globally competitive tax position Canada now enjoys.
SHIPPING
A retrospect on bulk carriers and tankers By Syd Heal
I
n the last century, London was the world’s leading stock exchange for shipping issues while New York listed only prominent American lines of that era. However, as the British merchant fleet declined in lock step with Britain’s withdrawal from Empire, the London listings for shipping securities followed suit. With the establishment of a major offshore registry in the Marshall Islands that is American-managed, world shipping has flocked to it so that it now ranks as one of the big three along with Panama and Liberia. Parallel with this development came Marshall Islands corporation law, based on American lines but without its onerous taxation burden. American banks, investment companies, law firms and major brokers provided the needed infrastructure and their influence was a factor in driving foreign owners to float their companies on the New York and NASDAQ Stock Exchanges, contributing hugely to helping New York become the centre of world shipping corporate finance. London, Oslo, Copenhagen, Hamburg, Paris, Tokyo, Shanghai, Hong Kong, Singapore, Mumbai and Pireaus et al are important in varying degree, but New York outshines them all when raising shipping finance and creating the vehicles to handle it and, without doubt, the Marshall Islands has become a big factor in American success in this field. A feature of modern offshore shipping corporations under international ownerships is the single vessel owning companies that theoretically spread the risk. Technical and operating management might be let out to independent managers among the small fleets, or with larger fleets the management is handled internally by a company that owns none of the vessels in its own name, but because in the practice of ship registration, the one
>>> With the establishment of a major offshore registry in the Marshall Islands that is American-managed, world shipping has flocked to it so that it now ranks as one of the big three along with Panama and Liberia. vessel company is shown as the registered owner along with the named legal manager. Where ship registration does not necessarily give a clue is to who the beneficial owner is standing behind the entire edifice. In the financial and marine insurance markets, where the capital is arranged and insured, the most important name is that of the beneficial corporate owner as this usually governs the character and policies of the powerful personages who set the style of the controlling owning group. Where the beneficial owner is a quoted company, it usually becomes well known and its
name usually establishes the brand name of the entire group. Two well-regarded such groups are Safe Bulkers, a publicly quoted Marshall Island company with 32 large bulkers in the water, owned by 32 separate subsidiaries and managed by Greek incorporated and domiciled Safety Management; and the four major Marshall Islands companies (plus one private company) that make up the Navios Group headed by the indomitable Angeliki Frangou, who has just brought her fourth publicly financed entity to the market with the flotation of Navios Maritime Midstream Partners, a
February 2015 BC Shipping News 27
SHIPPING Perhaps the biggest surprise was the bankruptcy of Overseas Shipholding Group, a large American tanker company... limited partnership for tankers. Almost all Safe Bulkers ships were built to order in Japan when new building prices were favourable, whereas a significant part of the Navios fleet was purchased opportunistically as recently built, sometimes distressed second-hand tankers, bulkers and now container ships. An example of the financial challenges faced by shipping concerns Safe Bulkers again. Its IPO came out in 2007, just before the market slid into recession and its stock slid from $19 to $6. Thanks to experienced management and a sound chartering policy, it recovered its status and consistently made the top five out of about 80 international shipping companies in Marine Money magazine. It also grew its fleet from 13 to 32 in the water. Late 2014 and early 2015 will see the expiry of a substantial number of lucrative contracts. Replacement time charters are rated starting with the spot rates indicated on the Baltic Dry index and if this key index is down, the chances of negotiating new profitable time charters are similarly down. It looks like a period of negative numbers for Safe Bulkers until the Baltic Dry recovers in a sustained way. Individual ships owned by large companies like these must create problems of identity, particularly when ships chartered out long term will probably wear the colours of the charterers on the funnel and hull and will only have limited identification if any through ship’s names. Safe Bulkers falls into this category while Navios is far more helpful in maintaining its own prefix names of either, Nave or Navios on its long-term chartered-out vessels with just a few exceptions.
The year 2014 saw many developments among Western bulk carrier and tanker fleets. Some made great sense in view of the devastation suffered by the ship-owning industry since the long-lived recession of 2008 with several major companies emerging from Chapter 11 bankruptcies while others are still working through the process under American bankruptcy laws. Perhaps the biggest surprise was the bankruptcy of Overseas Shipholding Group, a large American tanker company and something of an icon to strength and success since its founding in the 1970s with large fleets of tankers in two groups, an American flag fleet operating under the highly protective Jones Act in American inter-coastal trade and, a foreign-flag fleet operating in the international trades. OSG came through that experience successfully and is now back in the market place, restructured with new top management and most of its fleet intact. The problem was a common one among the tanker fleets with rates too low to service debt, high fuel and other expenses and, for a while, adding additional debt had a short life with the bankers who all too easily read the writing on the wall. It was not long before the weaker sisters were in deep difficulties from which some never recovered. Several, like Britannia Bulk and Omega Navigation, have soldiered on, trading their shares at a fraction of a penny in over-the-counter markets with virtually no hope of recovering their former glory. Among other bigger and better established companies that have been in and out of bankruptcy have been bulk shippers Genco, Eagle Bulk Shipping and Excel Maritime Carriers. All three are now controlled by Oaktree Capital of San Francisco. It has created a powerful position for itself in cleaning up bankrupt shipping fleets, particularly as it also now holds a majority position in A/S Torm, a Danish, mostly tanker company that has been badly troubled as it has struggled with survival issues since 2008. Oaktree, probably attracted by the strong management team at Greek controlled Star Bulk Shipping at that time the owner of a relatively small bulker fleet of about fifteen vessels has reorganized Excel into Star Bulk with control of the combination held by Oaktree. It reminds one of the snake that has devoured prey a good deal bigger than itself but Star had already been pumped up by Oaktree to enable the launch of a major new building program. Whether Star will next absorb any of Eagle, Genco or Torm has not been announced but the relative numbers of ships involved are set out here:
On Dwt Operational order Total Tonnage Star Bulk/Excel 56 34 90 10,642,000 Eagle Bulk 45 n/a 45 2,451,260 Genco S & T 53 n/a 53 3.812,000
28 BC Shipping News February 2015
The second phase is wholly speculative at this point, but it seems logical that Oaktree will be working on rationalization leading to a new management structure, at least for the fleets of Excel, Eagle and Genco that have now come out of bankruptcy (Eagle with an astonishing 80 per cent debt reduction). If A/S Torm, with its huge owned plus managed tanker fleet, adding up to an additional 160 mainly product tankers, comes under the same umbrella remains to be seen, but it does seem unlikely as tanker and dry bulk companies operate in distinctly separate markets. More likely, they will reorganize Torm and develop a new management entity and philosophy after current management must have been under continuous stress with their backs to the wall for at least six years which includes a tearing away of its most experienced operating group into Hafnia of Denmark
SHIPPING who took over part of Torm’s managed fleet. Another possibility is that Oaktree, with a large equity holding in General Maritime Corporation, may bring about some form of rationalization between General Maritime and Torm. General Maritime is a tanker owner with a fleet of some 35 vessels which also has come through bankruptcy. It originally spun off Genco when it wanted to get into the dry bulk business, in further testimony that mixed tanker and dry bulk fleets are best kept separate. One conclusion that is clearly established is the private capital groups like Oaktree, Carlyle, and York have to a large extent replaced the banks in shipping reorganizations and that Oaktree is now a very powerful group that cannot be ignored. With the weakness in dry bulk rates during the latter part of this year, now being evident for all to see and despite the predictions of owners, market analysts and a variety of crystal ball gazers, the anticipated boom in dry cargo rates has not materialized and some of the over-ordering managers must now be nursing big fat headaches. It’s sometimes difficult to figure out what drives some owners who, in spite of dire warnings and having gone through the process of being mangled by the markets before, seem always ready to repeat the process. Certainly, one motivation must be pure greed — e.g. ‘shipbuilding prices are low so let’s all dive in’ with massive ordering on a scale never seen before. Any recovery in the market is in danger of collapsing when these huge order books are hanging over everyone’s head. I think there must also be a big element of gambling that the competition can be smothered as they look at the over ordering and think with some wisdom that this is a race to the bottom that no one can win. Among the heavy order makers have been Scorpio Tankers and its offshoot Scorpio Bulkers with again a separation of tanker and bulker fleets. Scorpio is a rare bird originating in Italy with the Lauro family, one of the great names of the past. It placed orders for a mixed fleet of some 130 tankers and bulkers when shipbuilding prices were at a low ebb and then separated Scorpio into individual companies appropriate to each vessel type. Quite a few have been placed in service and some additional distressed assets have been picked up. Another gambler has been John Fredriksen, the Norwegian-born Cypriot
>>> With the weakness in dry bulk rates...the anticipated boom in dry cargo rates has not materialized and some of the overordering managers must now be nursing big fat headaches. who at one time was acclaimed as the biggest tanker owner in the world, although whether he can still claim that dubious honour is uncertain. Certainly he has spawned around 20 public companies which represent some sort of record. The tanker company Frontline has been his flagship company since he started by buying up small European companies, in particular Greek-controlled London & Overseas Freighters of London headed by Basil Mavroleon, a great shipping tycoon himself following the Second World War and up to about 1975. Frontline has a very large debt to deal with this coming April, but it has given notice that it may become a defaulter and the popular feeling is that Frontline might be facing bankruptcy. One expectation is that Mr. Fredriksen will bail out his company using his personal fortune as
part of a bankruptcy proposal. Another possibility is that Frontline (2012), a private company, held by Fredriksen with a large order book for more tankers, stands ready to pick up the pieces of Frontline in a pre-arranged bail-out that will be presented in bankruptcy court with every expectation that it will succeed. When things have settled down, Fredriksen will then go back to the market with Frontline (2012) and thus recover his personal investment and probably a good deal more through control of assets. However, the current upward trend in tanker prospects with huge inventory-buying by China might have saved Mr. Fredriksen’s bacon! Syd Heal, a veteran of the marine industry and a prolific writer and publisher of marine books, can be contacted at richbook@telus.net
February 2015 BC Shipping News 29
ENERGY TRANSPORT Maritime energy transport
Today and tomorrow in the Pacific Northwest Gateway By RAdm Nigel Greenwood, RCN (Ret’d), Vice-Chair Nautical Institute BC Branch
>>> Each of the three streams being considered — coal, oil and LNG —requires dedicated and special expertise to
Fish…or cut bait?
(hopefully) lengthy record of safe and profitable trade.
Coal, LNG, and oil transport — the NIBC Conference provides an excellent opportunity for education, discussion and networking.
30 BC Shipping News February 2015
against a background of volatile profit margins. The myriad private, corporate and governmental calculations take place in limited forums, while the public debate is stretched thin between the poles of economic benefit (tax revenues, jobs, economic stimulation) and risks (largely environmental and social/human). The deliberate, sometimes apparently glacial, progress of the export licensing, environmental assessment and approval, engineering design and public consultation process seems to belie any haste in this endeavour. Yet there are those who insist that this is a fleeting opportunity and the window of opportunity will soon close: for them it is time to “fish or cut bait.” But is this really correct? Or, even if the market is forgiving of prudent delays, will it support the number of proponents who are lining up to ship LNG from B.C.? And what do developments in the established
Alberta/B.C. gas seeks a route to market which is not limited by pipeline distance or neighbourly opposition. The corresponding demand continues to grow in Asia as populations and economies expand and modernize. China’s gradual weaning from coal-fired electricity threatens the coal trade, while steel production still calls for prodigious quantities of this commodity. B.C.’s market opportunity, however, is not a sure thing. Energy interests in South-east Asian and Australia are competing to be first to this growing market, with some industry analysts suggesting that the LNG market particularly could soon become saturated. The massive investment required to initiate shipments requires the careful co-ordination of many related interests in a firmly connected stream from wellhead to end-user. Solid business relations and tight contracts have to be negotiated
Photo: Dave Roels (www.daveroels.com)
For many proponents of the energy trade through BC ports, it is a matter of matching supply to demand. The abundant availability of Alberta oil, and
address every issue from initial concept and through to a
Photo courtesy Pacific Northwest LNG
T
here are many ways to describe B.C. The coast is variously “west”, “wet” or “left”, referring to supposed geographic, climatological and political leanings, none of these being a good consistent descriptor of the province as a whole. A further impression of B.C. is as a “Gateway” to the Pacific world. What was true in the 19th/early 20th centuries with Canadian Pacific “Empress” ships and Trans-Pacific cable connections is still true today with a majority of Canada’s maritime trade flowing through B.C. ports, and our immigration being substantially fed from Asian points of origin. Recently, however, the term “Gateway” has been linked more particularly to the promise of great benefits for B.C. through the shipment of energy commodities from our shores. This expectation provides an imminently debatable set of topics for the NIBC’s upcoming conference in May.
Photo courtesy Kinder Morgan Canada
ENERGY TRANSPORT industries of coal and oil exports mean as these activities are diversified in B.C.’s coastal areas? These will be key questions for the NIBC’s opening conference panels.
Great expectations…real challenges
The transport of energy by sea, however, is not all about great expectations. There are real technical and operational challenges to be confronted and overcome. Each of the three streams being considered — coal, oil and LNG —requires dedicated and special expertise to address every issue from initial concept and through to a (hopefully) lengthy record of safe and profitable trade. A number of innovations will be called for, both in established trades and new streams. Plans to trans-ship coal through Texada Island seek to avoid the bottlenecks of Vancouver Harbour and utilize available Fraser River waterfront. Efforts of Kinder Morgan to twin their Trans-Mountain pipeline require not only imaginative engineering solutions on land but also advanced tug escort techniques to maximize the loads of ships transitting the Second Narrows. Similar approaches may be needed in Douglas Channel for potential oil shipments out of Kitimat. And the variety of LNG proposals for the coast demonstrates the full range of possible solutions, from large multi-train shoreside terminals to floating LNG re-liquefaction plants of various sizes. In the former case, some shore-side terminals will call for advanced ocean engineering techniques, both to land large prefabricated modules on green-field sites, and also to situate ship berths for minimum disturbance of sensitive environmental areas. In the latter, proponents seek to leverage a higher level of foreign construction and assembly to achieve shorter decisionto-operation timelines. The increases in the numbers, types and sizes of ships on the B.C. coast has implications for many aspects of the marine services sector in B.C. There will be increased requirements for marine pilots and for escort tugs. More ship agents and chandlers could be required to meet the enlarged volume of shipping. And technical services from surveyors to naval architects and shiprepair services will likely respond to increased demands. In this way the old adage, “a rising tide lifts all ships” represents the collective expectation of the marine industry. The NIBC conference will explore some of these ideas also.
Opposition and response
It would be a mistake, however, to believe that all such lauded progress is universally welcomed. The history of energy transport by sea is full of too many awful examples to take the risks lightly. Accordingly, there are many initiatives underway to acknowledge concerns, and to recognize and mitigate the identifiable hazards. Efforts to mitigate navigational risks include initiatives of the Pacific Pilotage Authority to identify means and locations for more assured and distant pilot boarding, particularly for energy ships. The techniques of tethered tug escort continue to be refined, and potentially extended to additional routes/areas. Increased traffic will require augmented marine traffic advisory services in some locations, possibly including separation schemes for de-confliction of arriving and departing traffic. And larger ships on new routes may potentially require enhanced hydrographic surveys and augmented navigational aids. Of course, shipping is in no way a “zero-risk” enterprise. Prudent risk management therefore will have to include measures both to prevent the occurrence of accidents as well as to mitigate the consequences, so that the net risk is as low as reasonably achievable.
The mandated Environmental Assessments and TERMPOL studies required of the oil and gas proponents drive much of this effort. Transport Canada’s “world-class tanker safety” program will contribute to this by requiring the highest standards of ship maintenance and operation, with matching excellence in navigational aids, and enhanced spill response in coastal waters. Will there remain some who insist that no resultant risk is low enough for the preservation of B.C.’s coastal beauty and the livelihoods of those dependent on oceanic living resources? Undoubtedly. But, at least within the limitations of a two-day conference, NIBC hopes to give a fair and balanced airing of the range of issues, concerns and responses raised by the topic of maritime energy transport in B.C. waters.
Invitation to discussion
The BC Branch of the Nautical Institute hopes to address the theme of maritime energy transport with a conference that is both informative and open to debate, welcoming all seafarers, shipping executives and agents, engineers, naval architects, economic planners, members of nautical professional societies, and also interested members of the public. NIBC will thus fulfill its mandate to work for improvement of the marine industry through stimulation of engaged professional debate, and mentorship of young people seeking to enter the profession of the sea. The NIBC 2015 Conference takes place in Victoria, BC, 7-8 May. The conference website is www.nibcconference2015.com RAdm Nigel Greenwood, RCN (Ret’d) is a Master Mariner, Fellow of the Nautical Institute and Vice-Chair of the NIBC. He consults in maritime risk and operational assessments, and general security matters, under the banner Greenwood Maritime Solutions Ltd.
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February 2015 BC Shipping News 31
TRANSPORTATION SURVEY Surface Transportation Annual Review results
Optimism with a side of caution By Darryl Anderson, Managing Director, Wave Point Consulting & Phil Davies, Davies Transportation Consulting Inc.
B
C Shipping News teamed up with Wave Point Consulting to conduct the second Surface Transportation Annual Review (STAR) Survey. The results of this timely and informative survey capture the industry’s mood with respect to the economic and business outlook for 2015. More importantly, the survey results provide objective industry insights into the performance and challenges of the transportation and logistics sectors that serve Canada’s Pacific Gateway and British Columbia’s ports.
Shifting momentum impacts economic outlook
Strengthening U.S. economy enhances 2015 business prospects By the close of 2014, Nik Nanos, Ottawabased chairman of Nanos Research Group, was quoted in a Globe and Mail article as saying, “a drop in the price of oil, a lower Canadian dollar and a softening view on the value of real estate, were creating an emerging environment that could lead to a tumultuous 2015.” Clearly, rapidly shifting economic momentum will impact the volume of trade through British Columbia’s ports
>>> While increasing economic and business confidence is a source of good news...we would need to remain vigilant in terms of improving system performance if we are to reap the full rewards of increased trade over the longer term. and the Asia-Pacific Gateway. STAR survey respondents indicated a number of positive developments for international trade. Fort-five percent of STAR survey respondents expected the Canadian economy to perform at the same level as 2014 in the upcoming year, however 35 per cent believed that growth would be somewhat more robust. The key drivers of economic optimism were the performance of the U.S. economy which was cited by 63 per cent of the survey respondents, echoing the sentiments of the Conference Board. Canada’s robust free trade agenda in the Asia-Pacific region, while still a work in progress, nevertheless remains important. Half of the respondents expected the fastest growing economies to become a more important driver in global trade, resulting in a positive economic impact
Photo: Dave Roels (www.daveroels.com)
The harbour tug assist sector received top marks for both service quality and price satisfaction in this year’s Surface Transportation Annual Review.
32 BC Shipping News February 2015
for Canada. STAR survey respondents had a decidedly mixed opinion on China’s impact on the Canadian economy. While 54 per cent viewed China’s economic trajectory as being positive for the Canadian economy, 30 per cent believed it would have a negative impact. Survey respondents’ expectations for revenue growth in 2015 revealed a cautious optimism. The STAR survey revealed that 42 per cent believe their firm’s revenue will be somewhat, or significantly improved in 2015.
Gateway logistics and transport system performance
A peer performance rating for service quality The STAR Survey asked respondents to answer questions related to service
Photo: Lonnie Wishart (www.lonniewishart.com)
TRANSPORTATION SURVEY quality; frequency of major interruptions; and their experience with the border clearance processes. Strong trade volumes and at or near-record container traffic flows have placed pressure on service quality. Based on the STAR Survey responses, a peer performance rating is a most suitable descriptor for the overall Service Quality results. A peer performance rating is a neutral assessment of performance and is neither strongly positive or negative. Yet within this overall service quality ranking, a number of logistics and transportation service providers from the following sectors stood above their peers: • Harbour tug assist, • Professional, legal and insurance, • Trade and transportation associations, • Tug and barge service, • Pilotage. Most notable amongst the group of leading performers was the harbour tug assist sector, which remained in top place in terms of service quality. While there were some minor changes in ranking compared to 2014 survey findings, the leading performers in the industry continued to remain out front.
>>> Clearly, rapidly shifting economic momentum will impact the volume of trade through British Columbia’s ports and the Asia-Pacific Gateway. Logistics and transportation service providers from the following sectors received a neutral to somewhat satisfied with the service quality ranking from STAR survey respondents: • Shipping agents, • Custom brokers, • Freight forwarders, • Import distribution centres • Long-haul truckers, • 3PLs. Most prominent from this middle group of performers was the fact that the quality of service received from the import distribution centres improved significantly from the previous year. While the overall response to the topic of service quality was “peer perform,” respondents raised a number of cautionary flags. The logistics and transportation service providers with relatively low service quality ranking were from the
following sectors: • Transload operators, • Marine terminal operators, • Port authorities. As we move forward into 2015, STAR survey respondents will be carefully watching the service quality performance of both the rail and drayage sectors to see if the issues that dogged these sectors will continue in the coming year. While these two sectors are vital to the overall fluidity and logistics performance of the Asia-Pacific gateway, they once again received the lowest relative rankings from survey respondents in terms of service quality with only a somewhat satisfied rating. STAR survey respondents also expressed some real concerns with the rail and drayage sector in terms of price satisfaction and price inflation expectations.
February 2015 BC Shipping News 33
TRANSPORTATION SURVEY Logistics and transportation service providers — frequency of major interruptions Percentage of respondents citing often and nearly always
Export ranking
Import ranking
Security (five per cent), Ocean Shipping (13 per cent), Trucking (15 per cent) Marine Terminals (23 per cent), Rail (33 per cent)
Security (seven per cent), Trucking (nine per cent), Ocean Shipping (16 per cent), Marine Terminals (21 per cent), Rail (23 per cent).
Table 1 — frequency of major interruptions.
Frequency of major interruptions STAR Survey respondents provided a variety of responses to questions related to the frequency of major interruptions. While there was little difference in their experience regarding ranking of interruptions between exports and imports, there was some notable differences between the sources of the interruption for the respective directions of trade. Table 1 shows that STAR survey respondents indicated that export freight experienced a much higher reported frequency of delay due to trucking than import cargo. However, for both exports and imports, the frequency of major interruptions related to rail and marine terminal issues were the major causes of supply chain delay. As the largest B.C. port serving the Asia-Pacific Gateway, all eyes will be on PMV’s Vancouver Gateway Intermodal Integrated
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34 BC Shipping News February 2015
Winter Plan 2014/2015. Shippers will no doubt want to know whether the plan will be sufficient to not only overcome the challenges of the previous year’s winter, but will also result in systemic improvements in supply chain fluidity throughout the year. Commodity shippers that rely on B.C.’s ports will be looking forward to seeing if the rail industry plans to bulk up winter service to deliver the much-needed supply improvements. Failure of the plan to fully address shippers’ needs for service quality will place additional pressure on the Canada Transport Review Panel to develop policy recommendations to address concerns, most notably in the rail and container terminal sectors.
A market performance rating for price satisfaction The STAR Survey responses on price satisfaction can be most appropriately thought of as a market performance rating. A market performance rating is a neutral assessment of performance and is neither strongly positive or negative. They provided the highest rankings for price satisfaction from logistics and transportation service providers from the following sectors: • Harbour tug assist, • Trade and transportation associations, • Shipping agents, • Long-haul truckers, • Custom brokers. A notable achievement amongst the group with the highest rankings in terms of price satisfaction was the harbour tug assist segment of the market. Combined with their top service quality ranking, this segment of the Asia-Pacific Gateway logistic sector stands out as the undisputed leader among STAR survey respondents. STAR survey respondents rated the logistics and transportation service providers from the following sectors with the lowest level of relative price satisfaction: • Import distribution centres, • Port authorities, • Marine terminal operators, • Drayage companies, • Rail carriers. The lingering impact arsing from the PMV drayage sector work stoppage and the resulting steps to address the issues has resulted in a very significant drop in price satisfaction. While in 2014 the drayage sector was amongst the group of top performers, it has dropped to the bottom group of performers in 2015. Both shippers and truckers remain frustrated with the solutions put forward in the drayage sector. The results of the STAR survey indicate that the Asia-Pacific Gateway may not have arrived at a lasting resolution and all participants will be under continued pressure in 2015 to make the system work for all participants.
Infrastructure quality showing signs of stress The World Economic Forum’s Global Competitiveness Report 2014-2015 assessed 144 economies, providing insight into the drivers of their productivity and prosperity. Notably, in terms of quality of road infrastructure, Canada ranked 23rd, port infrastructure 21st, and railroad infrastructure 18th. Thus, it is not surprising that STAR Survey respondents generally gave a below-average overall ranking to the infrastructure quality question as it relates to the Asia-Pacific Gateway and B.C.’s ports. STAR survey respondents expressed strong reservations about the quality of the local trucking routes serving B.C.’s ports. The poor quality of local trucking routes was identified as the most acute infrastructure challenge on the immediate
Heavy Lift Mobile Harbour Crane Improves Capacities for Canada’s West Coast horizon. While completion of the South Fraser Perimeter Road has no doubt alleviated some congestion for highway freight destined for Deltaport, overall, the quality of highway infrastructure serving Asia-Pacific Gateway freight interests was of concern to STAR survey respondents. On a brighter note, capital investment in new warehouse and distribution facilities was having an impact. The sector received an above-average ranking in terms of infrastructure quality. Richard Wozny, Principal Site Economics Ltd., observed, “Metro Vancouver’s industrial inventory has continued to expand rapidly since 2013 with Richmond, Delta and Surrey being the primary areas where significant new capacity is being built. The South Fraser Perimeter Road has improved the location of large industrial areas on the south side of the river.” He further commented, “rapid growth in logistics-related industrial real estate is expected as approximately 100 acres of new industrial lands are required each year just to serve growth at PMV. This demand will expand to 150 acres per year based on status quo growth and over 200 acres per year with T2.”
Controlling costs and safety top logistics priorities
As the economy grows and the pace of trade growth quickens, the marketrelated logistics and transportation priorities for 2015 have both familiar and new priorities. The rankings indicate that supply chain participants continue to place emphasis on controlling and reducing costs and supporting efforts to access new markets. However, STAR survey respondents indicated that, amongst their top five priorities, was the need to improve labour productivity along with increasing sales/orders and improving quality of logistics and transportation services. The public, and policy makers, should take heart that safety, environmental, and trade compliance remain the cornerstones of the Asia-Pacific Gateway’s supply chain priorities.
Conclusions
While increasing economic and business confidence is a source of good news, the STAR Survey respondents indicated that we would need to remain vigilant in terms of improving system performance if we are to reap the full rewards of increased trade over the longer term.
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February 2015 BC Shipping News 35
TRANSPORTATION SURVEY Strong trade volumes at or near record container traffic flows have placed downward pressure on service quality and price satisfaction, while increasing expectations of higher prices in key logistics service that support trade growth point toward tightening service and infrastructure capacity. The following tables summarize the 2015 results.
Green lights and warning indicators for Gateway logistics and transport service providers In terms of the performance of the logistics and transportation system serving Canada’s Asia-Pacific Gateway and B.C.’s ports, a number of positive indicators emerged (Table 2). STAR survey respondents generally provided a neutral assessment of logistics and transportation system performance that was neither strongly positive nor negative for many of the sectors that support maritime commerce through B.C.’s ports (Table 3). A number of cautionary indicators emerged as a result of the analysis of the STAR survey responses. Respondents anticipated an increase in business activity in 2015 and are watching closely to see if the service levels are able keep pace with their requirements (Table 4). The Canada West Foundation report, Building on Advantage: Improving Canada’s trade infrastructure, noted, “without the ability to move goods efficiently to and from foreign markets we will suffer. This is not a distant worry. Canada’s system for moving goods to market is under strain and may be inadequate to meet growing future global demand.” The results of the STAR survey strongly suggest that concerns about transportation infrastructure quality extend well beyond the “grain-by-rail” crises of 2014 and the missed energy export market opportunities that appear on the immediate horizon as we enter 2015. Darryl Anderson is a strategy, trade development, logistics and transportation consultant. His blog, Shipping Matters, focuses exclusively on maritime transportation and policy issues (http://wavepointconsulting.ca/shipping-matters). Phil Davies is a transportation economist who has 30 years of experience in market research, freight planning and intercity passenger transportation. He is Principal of Davies Transportation Consulting Inc. in Vancouver.
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POSITIVE INDICATORS Service Quality Satisfaction • Harbour tug assist • Professional, legal and insurance • Trade and transportation ass’ns • Tug and barge Service • Pilotage
Price Satisfaction
Price Inflation Expectations
Major Interruptions
Infrastructure Quality
• Harbour tug assist • Trade and transportation ass’ns • Shipping agents • Long-haul truckers • Custom brokers
• 3PLs • Shipping agents • Tug and barge service • Custom brokers • Trade and transportation ass’ns
• Export:
• Warehouse and distribution facilities
• Security • Import: • Security
Note: lower inflation expectation level ranked highest. Table 2 — Positive indicators.
NEUTRAL INDICATORS Service Quality Satisfaction • Shipping agents • Custom brokers • Freight forwarders • Import distribution centres • Long-haul truckers • 3PLs
Price Satisfaction • Professional, legal and insurance • Tug and barge service • 3PLs • Pilotage • Transload operators • Freight forwarders
Price Inflation Expectations
Major Interruptions
Infrastructure Quality
• Freight forwarders • Pilotage • Transload operators • Harbour tug assist • Import distribution centres
• Export: • Ocean shipping • Trucking • Import: • Ocean shipping • Trucking
• Port and marine terminal • Rail
Note: price inflation expectations ranked highest to lowest. Table 3 — Neutral indicators.
CAUTIONARY INDICATORS Service Quality Satisfaction • Transload operators • Marine terminal operators • Port authorities • Rail carriers • Drayage companies
Price Satisfaction
Price Inflation Expectations
Major Interruptions
Infrastructure Quality
• Import distribution centres • Port authorities • Marine terminal operators • Drayage companies • Rail carriers
• Long-haul truckers • Port authorities • Marine terminal operators • Rail carriers • Drayage companies
• Export: • Marine terminals • Rail • Import: • Marine terminals • Rail
• Highway • Local trucking routes
Note: price inflation expectations ranked highest to lowest. Table 4 — Cautionary indicators.
CARGO LOGISTICS Good neighbours in trade go beyond NAFTA By Peter Hurme, Show Director and Editor Cargo Logistics America Expo & Conference
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anada and the United States are not just major trading partners; they’re the largest trade partners in the world with C$782 billion in goods and services 2013. Moreover, since the passage of the North American Free Trade Agreement in 1993, trade between the two neighbours has increased 200 per cent. However, the U.S. and Canada have gone beyond NAFTA with their own unique series of Beyond the Border initiatives aimed at streamlining the flow of freight, including the Trusted Trader pilot program, Authorized Economic Operator programs, and the pre-inspection pilot programs in Blaine, Washington, Vancouver, B.C., and Buffalo, New York. The pre-inspection pilot’s aim is to inspect cargo in Canada in order to expedite on the U.S. side, with the mantra of “inspect once, clear twice,” such as containerized cargo arriving at the Western Canadian port of Prince Rupert that is loaded onto Canadian National intermodal trains destined for the U.S. A U.S. project that could bode well for Canada-U.S. border trade, the International Trade Data System (ITDS) ─ planned for the end of 2016 ─ promises a paperless “single window” access point, per an executive order that President Obama signed earlier this year. The ITDS would connect international traders with U.S. Customs and 47 different U.S. government agencies, greatly speeding up processing and regulatory approval. Currently, to clear imported or exported goods, users must submit a variety of mostly paper documents to a number of federal agencies, often taking days as opposed to what could, ostensibly, become minutes with the new system. “This change will be particularly meaningful to our smalland medium-sized customers that depend on global trade to grow their businesses and reach the 95 per cent of consumers that live outside U.S. borders,” said Scott Davis, chairman and CEO of UPS.
>>> A U.S. project that could bode well for Canada-U.S. border trade, the International Trade Data System (ITDS)...promises a paperless “single window” access point... The steady, and growing trade between the U.S., Canada, and the rest of the trading world, plus the many important supply chains that form the backbone of commerce, is the inspiration behind Informa Canada’s Cargo Logistics Expos and Conferences. Cargo Logistics Canada (www.cargologisticscanada.com) will address NAFTA in particular when that big event returns to the Vancouver Convention Centre, January 28-29, and similar themes will be addressed at the sister Cargo Logistics America Expo and Conference that debuts at the San Diego Convention Centre, December 2-3, 2015 (www.cargologisticsamerica.com). There’s still work to be done as developing good trading relationships requires working through the obstacles and seeing the bigger picture. At a NAFTA event in Chicago earlier this year, Canada’s ambassador to the U.S., Gary Doer, told the audience that various interNAFTA issues create impediments to what could be the bigger picture for NAFTA’s future as a more significant global trading bloc. “We have the strongest trading relationship of any trading bloc in the world…that’s why we’ve got to solve these small problems… and other small issues…we’ve got to have a can-do attitude.” Peter Hurme is Show Director & Editor for the Cargo Logistics America Expo & Conference and is involved with Cargo Logistics Canada, January 29+30, 2014 at the Vancouver Convention Centre West.
February 2015 BC Shipping News 37
CARGO LOGISTICS 2015 trends
Trade developments provide opportunities beyond North America By Candace Sider, Vice President, Regulatory Affairs Canada Livingston International
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n 2015, a dynamic trade landscape means companies that import and export goods to and from Canada will likely see new growth opportunities. The federal government continues to solidify new agreements and implement regulations aimed to simplify the trade process. These developments in trade agreements and regulations provide an unprecedented opportunity for small and mediumsize companies in particular to expand their business beyond the border.
Updates to current regulations and initiatives
Major initiatives such as eManifest, Canadian Food Inspection Agency (CFIA) regulations and the Canada Border Services Agency (CBSA) Assessment and Revenue Management (CARM) initiative continue to evolve in 2015, furthering the changes in the way importers, exporters and customs brokers conduct business. All of these updates are part of an overall effort to streamline the trade process and encourage companies to expand their business beyond the border. The CBSA is expected to announce part two of the proposed regulatory changes in support of full eManifest implementation in 2015. It will likely include five regulations made under the Customs Act. These are: the Reporting of Imported Goods Regulations; the Customs Sufferance Warehouses Regulations; the Designated Provisions Regulations; the Transportation of Goods Regulations; and the Presentation of Persons Regulations. The CFIA’s Safe Food for Canadians Act came into effect in January 2015. The modernization program, designed to improve safety of food and food products for Canadians, affects importers, exporters, manufacturers and processors of food in Canada — both those that conduct
38 BC Shipping News February 2015
>>> Canada’s effort to aggressively seek trade agreements presents opportunities for companies to explore new and emerging markets. trade internationally and those that trade inter-provincially within Canada. Under the modernization act, CFIA will implement consistent practices, from planning to licensing to recordkeeping for all food commodities and will feature new inspection regulations across the industry. The accounts receivable ledger component to CARM — a government initiative to modernize the Agency’s revenue management programs and systems, as well as automate the current manual processes to collect, assess, manage and report on these revenues — is now targeted for implementation in 2015. It is intended to lower business costs for commercial clients through the use of electronic payment options and retrieval of statements through a secure website.
Trade agreements
Canada’s effort to aggressively seek trade agreements presents opportunities for companies to explore new and emerging markets. This is made possible through several trade agreements on the horizon in 2015. The first is the Canada-Korea Free Trade Agreement (CKFTA) that was implemented on January 1, 2015. The CKFTA is a significant milestone for Canadian trade policy because it opens the gateway to Asia for Canadian workers and businesses and is Canada’s first agreement with an Asia-Pacific market. The agreement essentially eliminates the customs duties on all imports from Korea, either
immediately upon implementation of the agreement or through a tariff phase-out. However, there are a few exceptions for agricultural goods. A preferential tariff treatment has also been introduced as the Korea Tariff. To claim the tariff treatment provided under the CKFTA, importers must have in their possession the Canada– Korea Certificate of Origin completed by the exporter in Korea. Trade in Asian markets may expand even more as negotiations continue between Canada and Japan. If it is finalized and ratified, the Canada-Japan Economic Partnership Agreement (EPA) would strengthen bilateral trade and investment opportunities in all sectors of the economy, including food products, forestry and wood, fish and seafood, manufacturing, natural resources, and the financial services industry. Japan is the fourth-largest merchandise export market overall and the second-largest in Asia. Last year, bilateral merchandise trade was valued at over $24 billion, and approximately $11 billion in Canadian exports were sent to Japan. Markets in Asia are not the only ones poised to open trade possibilities for Canadian businesses. The Canada and European Union (EU) Comprehensive Economic and Trade Agreement (CETA) is expected to be approved this year and implemented in 2016. Referred to as Canada’s most ambitious trade initiative, CETA would eliminate tariffs for Canadian goods entering the EU market and provide Canadian service suppliers secure preferential market access. This
CARGO LOGISTICS expands trade to the EU, the world’s largest integrated economy. The completion of CETA could also help the negotiations taking place between the U.S.-EU Transatlantic Trade and Investment Partnership (TTIP) agreement. Many of the items proving challenging in the TTIP could now be resolved with the completion of CETA, as the TTIP negotiators have the option to follow the wording in the CETA agreement.
Global trade opportunities for small to medium-size companies
All of these agreements plant the seed for companies, especially small to medium-size businesses, to evaluate trade potential from a global scale rather than from just a North American perspective. Current and upcoming trade agreements and regulatory updates are aimed at making it simpler for businesses to export goods by reducing cost, barriers and regulatory requirements. In short, these efforts by the CBSA were created to encourage businesses to increase trade. These efforts to streamline the trade process and open borders are not exclusive
>>> On a global scale, we’re seeing efforts in many other countries to standardize policies and guidelines to open trade to new and emerging markets. to Canada. On a global scale, we’re seeing efforts in many other countries to standardize policies and guidelines to open trade to new and emerging markets. While keeping up to date with these regulations and new agreements can seem daunting, a customs broker can be a company’s trusted advisor and help navigate the trade landscape. Companies looking to expand their business should take advantage of these unprecedented developments by conducting a comparative analysis of their business to evaluate its potential for trade in these emerging markets and how their current business could be affected by new agreements and regulations. Having this accurate picture will allow companies, with the help of a customs broker, develop a comprehensive global strategy for trade.
With the rapidly changing trade landscape and increased growth potential for companies, it has never been more important for companies to keep up to date with trade news and really understand how it impacts their business. With the continued emphasis on global trade, a partnership with a trusted customs broker is an important component to a company’s trade strategy. Candace Sider is Vice President, Regulatory Affairs, Canada at Livingston International. Sider is a board member of the International Federation of Customs Brokers Associations (IFCBA), Certified Customs Specialist and Certified Trade Compliance Specialist and a recipient of the 2014 Trade Compliance Leadership CATIE Award for her commitment and innovation in policy and international trade.
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CARGO LOGISTICS Hazardous chemicals:
Implementation of new global labelling system not without its challenges By Colin Laughlan
Director of Communications, Logico Carbon Solutions Inc.
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s the world strives to implement the United Nations’ Globally Harmonized System of Classification and Labelling of Chemicals, many issues that could impact its effectiveness on hazardous cargo management remain outstanding. The GHS, as it is known, is a plan launched by the UN in 2003 to improve how information on hazardous chemicals is classified and communicated through internationally standardized labels and safety data sheets. Here in Canada, aligned implementation with the United States is scheduled to take effect by June 1, 2015 under a joint action plan of the Regulatory Cooperation Council (RCC) announced in 2011. While the Canada-U.S. alignment promises to deliver significant benefits to industry in both countries, the much needed worldwide harmonization is facing major challenges — and one Canadian scientist is leading the charge to fix some big problems at the global level. “We’re supposed to have harmonization and we don’t have it,” Dr. Jacques Cerf told BC Shipping News. Cerf is one of world’s leading experts on the GHS. A pioneer in its development at the UN in the 1990s, the Canadian scientist is now a GHS/WHMIS (Workplace Hazardous Materials Information System) consultant to the Chemistry Industry Association of Canada (CIAC). He is also CIAC’s representative on the Current Issues Committee for the GHS implementation managed here by Health Canada. In a mid-December 2014 missive to his colleagues involved in the bilateral implementation, Cerf exhorted them to “demonstrate leadership in promoting harmonized implementation of the GHS globally.” That would include, he added, “facilitating global implementation of the GHS through guidance documents and recommendations as well as monitoring implementation in the various countries
40 BC Shipping News February 2015
>>> While the Canada-U.S. alignment promises to deliver significant benefits...the much needed world-wide harmonization is facing major challenges... to ensure that harmonization does take place.” Cerf would have his peers work through the UN’s Sub-Committee of Experts on the GHS and other international fora. “There are already major differences between countries in the way the GHS is being implemented,” he advised. “If we want a truly globally harmonized system, we probably need to have in place a process similar to that developed by the RCC but at the global level,”
Background
In 2009, the Organization of Economic Cooperation and Development (OECD) conducted a review of GHS classifications that showed a large number of discrepancies across countries or regions. The review was carried out on a sample of pesticides and industrial chemicals banned for health or environmental reasons under the UN’s Rotterdam Convention. The study concluded that the main reason for the diverging classifications was differences in the datasets. However, other noted reasons included different interpretations of the data, differing applications of classification criteria, as well as questions concerning the judgment of the classifier. “The trouble is you have different people making different interpretations and in general you have fairly strict criteria,” said Cerf. “For example, for carcinogens you can also use your judgment if a chemical or substance is a carcinogen or not — a toxicologist who has a strong personality may decide it’s the way to see things, so you end up with inconsistent classifications for some products.
“What is more of a problem is the inconsistent implementation of the GHS worldwide,” said Cerf. “In certain countries, because they don’t want to reduce the level of protection of the users, they keep in their updated legislation some elements of the old one, and you end up with inconsistent regulations worldwide. For example, between China and Canada or the U.S., between Europe and the U.S., there are differences in the end result — which is the safety data sheet and the label,” said Cerf. On the global scene, he pointed to other political alignments that have already formed. “We’ve ended up with three blocs really, with differences within blocs themselves: the Asian Bloc; the American Bloc which includes South America, Central America, and North America; and the European Bloc which includes, probably, Africa — that is, African countries implementing the GHS will probably take the European model,” Cerf said. Canada’s aligned implementation, as announced by the federal government in 2011, “delivers on an important Canada-United States Regulatory Cooperation Council commitment.” The alignment was heralded as a means of reducing trade barriers while enhancing the competiveness of suppliers in workplace chemicals, with a net benefit to Canadians of more than $400 million in increased productivity, and decreased health and safety costs over a 20-year period. Additional “non-quantifiable” benefits from the reduction in trade barriers were also cited.
CARGO LOGISTICS A look at some of the GHS discrepancies around the globe suggests the Canadian chemist and his colleagues will be facing some major challenges, not only in chemistry but in personalities and politics as well.
Cultural differences affect GHS
If varying scientific interpretations of the GHS were not enough to contend with, cultural differences and language in some countries also pose challenges to a successful global scheme. A 2008 academic paper in Japan, the first country to adopt the GHS, observed that a recognition test of GHS pictographic labels revealed some respondents had difficulty in understanding the meanings of the GHS pictograms, possibly because the earlier Japanese system did not require pictographic labels. In a subsequent paper from the region, it was further noted that language came into play. Countries that use English as their national language had no need to translate the GHS document, but in Malaysia it was thought important to translate technical terms and terminology into the Bahasa Malaysia language, as well as adapting training manuals used in Japan. Indeed, it was recommended that general awareness GHS training courses in both countries be developed for industry workers and government technical officers, and that GHS elements such as pictograms be incorporated into the curricula of primary and secondary schools, and universities.
Environmental hazards omitted
One of the outcomes of the CanadaU.S. alignment is that the Environment Hazard Class has been omitted from the GHS implementation. Health Canada’s explanation: “The Workplace Hazardous Materials Information System is limited to chemical hazards for Canadian workplaces. As environmental hazards are not considered workplace hazards, the adoption of the GHS environmental hazards classes is not being proposed in Canada.” It`s not a decision that sits well with British Columbia marine life authority Dr. Peter Ross, Director of the Ocean Pollution Research Program at the Vancouver Aquarium. Shortly after a pregnant Orca was found dead off the BC coast in December 2014, Ross told BCSN, “A lot of what we see in marine mammals or Killer Whales tends to be chemicals that end up in the environment because of general dissemination.”
Some of the new GHS pictograms (top row) compared with the old WHMIS symbols (bottom row). For some symbols — like the new GHS symbol for “Explosives” — the meaning partially overlaps with the old WHMIS symbol referring to “Dangerously Reactive Materials”. Additional changes can be found in the labelling format and Safety Data Sheet (SDS) information.
As one example of a workplace chemical that is hazardous to the aquatic environment, Ross pointed to the common blue fire-retardant insulation containing Hexabromocyclododecane (HBCDD) used as cladding on many buildings under construction. “Most of our supplies come from the U.S. It’s an aquatic hazard, it’s endocrine disrupting, it’s persistent,” he said. “Disposal is an issue since landfill leachate and sewage effluent can carry the chemicals to marine life. Killer Whales have large habitat needs, live very high in the food chain, so this makes them very vulnerable to toxins in the food chain.” Cerf concurs with Ross that Environmental Hazards should be included in Canada’s GHS and will be striving to complete the implementation. “It may as well be there as required by the GHS — and there with criteria — so it’s consistent one country to another,” Cerf said. “Actually we [CIAC] have officially requested that they try to do it because the U.S. and Canada are working at the level of the RCC — that would be a good project for them, to look at the environmental criteria and try to come up with a solution to get that into the picture as well.”
A harmonized system is needed
Despite its challenges, the GHS is a much-needed system in Canada. “Ultimately, the system, even with its problems, is dramatically improved over what came before,” Dr. George Astrakianakis, associate professor in UBC’s School of Population and Public Health, told BCSN. “My focus is on occupational health,” he said, explaining the problems encountered when employed at the Occupational Health and Safety Agency for Health Care in British Columbia. “We had to manage all the chemicals and hazardous products
used in health care facilities in B.C. There was so much variability on the manufacturers’ data sheets, it was an enormous problem because you put the administrators in the position of being toxicologists. We saw the GHS, at least from an administrator’s perspective, as a god-send.”
Industry costs and benefits
In Canada, the new GHS symbols, signal words, and hazard statements will replace those of the Workplace Hazardous Materials Information System (WHMIS), a familiar industry standard for the last 25 years. The federal government estimates that Canadian industry will incur one-time costs totalling $268.3 million for personnel training, GHS classification of chemicals, development of Safety Data Sheets and compliant labels, and incremental costs of $3.1-million annually for colour printing starting in 2016. Cost savings to industry are not expected until 2019 when $3.4 million in annual savings from streamlined updates would be delivered to industry.
GHS training and software
The Canadian Centre for Occupational Health and Safety provides, in French and English, GHS/WHMIS fact sheets, e-learning courses, and software for GHS labels and Safety Data Sheets: ccohs.ca/ products/courses/whmis_ghs_intro/ Several private sector companies can also be found online for GHS compliance training, some with software to manage comprehensively the new international classifications under the GHS. Colin Laughlan is Director of Communications for Logico Carbon Solutions Inc., a Delta B.C.-based company that develops technology solutions for optimizing freight transportation. Colin can be reached at colin.laughlan@gologico.com.
February 2015 BC Shipping News 41
LEGAL AFFAIRS
Terminal liability for crew injuries By H. Peter Swanson
A Partner in the Vancouver Law Firm of Bernard LLP
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n a somewhat unusual case, the Supreme Court of British Columbia recently concluded a terminal was responsible for the injury to a seaman who fell from a terminal-supplied gangway while returning to his ship. The case was decided by Madame Justice Dillon who comments extensively on a terminal owner’s responsibility for those invited to their premises. By way of background, the case arose from an incident that occurred in October 2009. Specifically, the M/V Iran Mazandaran was berthed at a terminal operated by Prince Rupert Grain Ltd. (“PRG”) in Prince Rupert, B.C. Due to local conditions the terminal had an automatic gangway designed and installed for general use by ships calling at PRG. Consequently, ships were not required (and generally did not use) their own gangway. People boarding or disembarking a vessel while at the terminal generally did so by use of the terminalsupplied automatic gangway. The automatic gangway had some unique design features. It had a short step-type ladder at the ship end of the gangway. The step-type ladder was attached to the gangway by way of a gimbled joint. The gangway, upon arrival of a ship, was lowered by terminal workers to the ship’s deck. Once in place on the deck of a ship, the gangway, within limits, would freely rise and lower with the ship while remaining in contact with the deck of the ship. Additionally, the gangway would move, within limits, fore and aft with ship’s movement. Significantly, if the limits were exceeded for fore and aft movement the gangway would automatically rise off the deck of the vessel after the completion of an alarm sequence. The alarm sequence consisted of a horn sounding for 20 seconds followed by five seconds of silence. Importantly, there was no visual
42 BC Shipping News February 2015
>>> In deciding the case, the court had to address whether the gangway was a hazard and if so, whether the terminal took sufficient steps to alert those attending at the terminal of the associated risks. alarm such as a flashing light. There were, however, signs at each end of the gangway with a written warning. While there were minor differences in the wording used, the sign on the ship-side of the gangway said: WARNING AUTOMATIC HOIST CLEAR STAIRS IMMEDIATELY WHEN HORN SOUNDING In this particular case, the vessel arrived and the port security officer (a terminal employee) attended onboard to meet with the vessel’s chief mate. While it was initially alleged by the terminal that a verbal warning was given by the port security officer during this initial visit with the vessel’s chief mate, that evidence was later retracted during crossexamination at trial. As a result, it was clear no verbal warning regarding the operation of the automatic gangway had been given by the terminal to the ship’s crew. Consequently the court concluded no express warning either in writing or verbally (other than the warning signs) was provided by the terminal to the ship to alert the crew to the unique nature of the gangway. In deciding the case, the court had to address whether the gangway was a hazard and if so, whether the terminal took sufficient steps to alert those attending at the terminal of the associated risks. While it was strenuously argued by the terminal that the warning signs were adequate, the crew member and
the ship owner suggested otherwise. Significantly, the crew member, who was Iranian with limited English language skills, testified that when disembarking the ship he did not notice the signs and in any event could not fully read and understand the signs at the time of the accident. He further testified that, on leaving the terminal, nobody alerted him or warned him about any risks associated with the terminal gangway. The crew member left the ship with a fellow crew mate via the automatic gangway without incident and spent the evening shopping in Prince Rupert. The crew member and his mate returned to the terminal later that night to board the ship. On returning to the terminal and climbing up to the gangway, the crew member again indicated that he did not see, and did not recall there being, any warning sign. He emphasised that in any event he could not read and understand English very well. He then began crossing the gangway with his crewmate and at some point the alarm horn began to sound. He testified that he did not know the horn related to the gangway. He was unsure why the horn was sounding. As mentioned, there was no visual signal to suggest the alarm related to the gangway (although the initial design documents suggest a visual signal was contemplated). As the crew member approached the ship side of the gangway and began climbing down the gimbled step-type ladder, the gangway rose causing him ultimately to fall to the deck of the ship.
LEGAL AFFAIRS As a result of the fall, the crew member broke his hip and was taken to hospital and treated.He did not return to the ship and successfully sought refugee status in Canada. He had a complicated recovery and has not been able to work since leaving the ship. He claimed damages for pain and suffering, past wage loss, future wages loss and related items. On the issue of liability, the terminal conceded it owed a duty of care to individuals such as seamen and others using the gangway but denied it failed to fulfil that duty. The judge, in addressing the scope of the duty, noted that an occupier (the terminal) is obliged to take “reasonable care that the premises are safe from an unusual danger of which the occupier knows for those using the premises in an ordinary and customary manner and with reasonable care for his own safety.” The judge went on to note that an “unusual danger” has been described as “one that is not usually found in carrying out the task or fulfilling the function which the [user] has in hand.” The judge had no real difficulty in concluding that the gangway in question was unusual. There was ample evidence to satisfy her that an automated gangway was not something normally used at terminals and certainly was not something normally experienced by crew members attending at terminals around the world. The judge went on to note that the occupier (the terminal in this case) has a duty to either eradicate the risk or provide adequate warnings in order to fulfil its duty. Whether a warning is adequate will turn on whether it conveys an understanding of the full extent of the danger and how to actually avoid the danger. In looking at the nature of the signs used by the terminal the judge concluded they were not adequate in this case. As a result, the judge concluded the terminal failed to meet its legal duty. Given the presence of the signs, both the ship owner and the terminal argued that the crew member was either fully or partially responsible for his own injury. It was noted and acknowledged by the crew member during the course of trial that he understood the word “warning” and that he understood the word “automatic.” It was further argued that the crew member left and returned to the ship with his crew mate who was said to be fully conversant in English and therefore able to read and understand the signs. The judge rejected these arguments and concluded that the terminal was 100 per cent at
>>> While this case is quite fact-specific it does illustrate the importance for terminals and others when dealing with foreign crew to take active steps to alert them to unique features or dangers at their facilities. fault for the crew member’s injuries and awarded judgment against the terminal. Although the crew member argued for a significant damage award, the judge concluded that the loss attributable to the accident was relatively minor. The judge did not accept that any past or future income loss was attributable to the accident. She also found that the crewmember had failed to minimize (mitigate) his loss and reduced the damage award by 15 per cent. Consequently, his award was limited to damages for pain and suffering and for cost of future care.
While this case is quite fact-specific it does illustrate the importance for terminals and others when dealing with foreign crew to take active steps to alert them to unique features or dangers at their facilities. Peter Swanson is a partner with Bernard LLP. His practice includes maritime cases relating to the carriage of goods, marine insurance, collision, salvage, ship source pollution, charter party disputes, immigration, regulatory issues and commercial matters. Peter can be reached at Swanson@bernardllp.ca.
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www.flyingangel.ca
February 2015 BC Shipping News 43
SHIPYARDS
Anatomy of a modern shipyard
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afe, efficient, and state-of-the-art are the best adjectives that describe the results of Seaspan’s Vancouver Shipyards Modernization Project. The $170-million upgrade (ahead of schedule and under budget) to the North Vancouver shipyard has transformed the site into the most modern yard in North America. And thanks to William Clewes, Director of Operations for Vancouver Shipyards, BC Shipping News got a first-hand look at what is essentially a new shipyard. Taking the route that best demonstrates the progressive steps a new build will take through the yard, Clewes started us in the north-east corner of the site. Sub Assembly Shop — The closest 1 building to where steel is delivered, the Sub Assembly Shop houses the most modern, state-of-the-art equipment available for shaping flat steel. In addition to a 40-foot ESAB plasma cutting/marking/bevelling machine which covers two work stations to provide for a continuous flow of work (steel can be loaded and cut on one while another is prepped), the 52,000-square-foot building contains five additional stations for
>>>The $170-million upgrade (on time and under budget) to the North Vancouver shipyard has transformed the site into the most modern yard in North America. cutting angled steel and other shapes including a HGG 3-D profiling machine. Before leaving the Sub Assembly Shop, steel is assembled with accompanying pieces into a pre-set “kit” which will move to the next stage of construction. Panel Shop — Efficiency is the 2 operative word for this step in the process. A three-headed, sub-arc PEMA welding/Panel Line joins sections of steel up to 12-square metres in size. “The unit will weld two plates together on one side in one pass,” said Clewes. “Anything over 18 mm will require a second pass.” Clewes estimated the process was about four times quicker than the old method which also required more manpower for tasks like turning the panels. In addition, the PEMA Panel Line is “super accurate” when it comes to cutting the holes required for piping, cable, etc.
Following the steel down the conveyor belt, angle bars are fastened — again, with greater efficiency and accuracy as six automated welding helds work at a time. By the time the panel reaches the end of the line, it’s ready to be moved using self-propelled modular transporters (SPMTs) to the next step, the Block Assembly Shop. Forming Shop — In between the 2a Panel Shop and the Block Assembly Shop sits the Forming Shop which boasts one of the most technologically advanced pieces of machinery in shipbuilding today — the Nieland hydraulic plate press. The Nieland is a cold-forming press (i.e., no heating the steel to shape it) that can shape steel of up to two and a half inches. Once the steel is formed, it will move to a section within the Block Assembly Shop that consists of steel “pins” to allow pieces to be welded
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2a 6
Photo courtesy Seaspan Shipyards
44 BC Shipping News February 2015
SHIPYARDS Photos courtesy Seaspan Shipyards
The Panel Shop — the PEMA automated welder allows for greater efficiency and more accurate results.
Photo: BC Shipping News
The Sub Assembly Shop — the ESAB CNC-controlled cutting machine.
Underneath the latest chip barge to be built, the self-propelled modular transporters (SPMTs) can be seen. Up to 32 axels are available for use and capable of holding up to 40 tonnes per axel.
Photo courtesy Seaspan Shipyards
together. Clewes pointed out the welding machine was suspended from the cranes, noting that this enhanced safety meant welders no longer had to lay down the welding machine while idle or worry about cables trailing on the floor or blocks. Block Assembly Shop — Bringing the welded blocks 3 together, the vessel is starting to take a recognizable shape. The steel panels that entered the Sub Assembly Shop have now been welded, formed and brought together in 20 to 40-tonne pieces which are assembled here before taking one of two routes — either directly to the paint shop or, more typically, to the Pre-Outfit Shop. Pre-Outfit Shop — Each of the five bays in the Pre-Outfit 4 Shop are ready for installing engines, pipes, cables, HVAC and any other required equipment. The building also houses a 600-seat lunchroom on the second floor along with operations offices, training facilities and even showers! Paint and Blast Shops — There are two paint shops, one 5 roughly double the size of the first. Both were built to the highest environmental standards, meaning they are fully ventilated and have filter systems that capture particulate matter and other debris. Pre-Erection/Final Assembly — Blocks are now assem6 bled into one piece and can now weigh upwards of 150 to 200 tonnes. Big Blue (or Hiyí Skwáyel in the language of the Squamish First Nations) — the 300-tonne crane — is used to bring the blocks together. Removable canopies are in place to provide sheltered workspace. “Once the blocks are put together as one large section, we’ll roll the canopy away and the crane
Big Blue — the largest gantry crane in Canada — stands over the Pre-Erection/Final Assembly Area.
February 2015 BC Shipping News 45
SHIPYARDS
46 BC Shipping News February 2015
Photo: Dave Roels (www.daveroels.com)
will lift the block onto the erection berth,” Clewes explained. From there, the SPMTs will bring the vessel forward to a floating drydock before being floated into Vancouver Harbour and then towed to Victoria Shipyards (which has also undergone an approximately $15 million upgrade) for final testing and trials. In celebrating the completion of the shipyard, Seaspan held a ceremony, complete with fireworks, in early November to share the milestone with staff, industry, government and First Nations representatives. Speaking at the event, Brian Carter, President of Seaspan Shipyards, highlighted the opportunities brought about by the federal government’s National Shipbuilding Procurement Strategy: “We estimate the new vessel construction work we will do for the Canadian Coast Guard and Royal Canadian Navy will result in the creation of 5,000 direct, indirect and induced jobs over the next 20 years, produce almost $500 million per year in gross domestic product for B.C.’s economy, and mean thousands of people will get the opportunity for an exciting career in shipbuilding.”
What a difference 50 years and $170 million makes — staff and guests at the completion ceremony stand in front of “then and now” images.
And that work has already started with construction on the first block for the Offshore Fisheries Science Vessel (OFSV), the first of up to 17 vessels worth $7.3 billion to be built for the federal government. Seaspan is also busy
finishing up an order of nine chip barges and are well into the throes of building the 50-vehicle, 150-passenger Denman Island cable ferry for BC Ferries which is expected to be complete in the spring of 2015. BCSN
SHIPYARDS
Meridian Marine to build innovative self-floating power plant
Background
With over 40 years in the power plant industry and run of river projects, CEO Marek Sredzki, trained as a Mechanical Engineer, teamed up with CTO Lodewyk Botha, an Electrical Engineer — himself with vast experience in the disciplines of engineering, production and management — to create Water Wall Turbine. Joined by Grace Sredzki, AM, Engineer in the Environment field, and Russell Baker, VP, Strategic Business Development, the team at WWT has developed a commercially viable system of power extraction from large, fast moving water currents for conversion into electricity. Sredzki and Botha recognized the potential for the future of renewable energies over 10 years ago and set about to produce a power generation plant that, by using water currents and tidal energy, would be robust enough to last many years, simple enough to be cost effective,
Images provided by Water Wall Turbine Inc.
H
ull #001 will be a memorable one for Meridian Marine — one which will make the company’s 20th anniversary in 2015 even more of a milestone. While business has been brisk with refits and repairs since launching a large yard in mid-2013, the first newbuild for the company — a 17-by-28-metre barge — will be the first of its kind in the world — and one which could potentially launch a new alternative method of low-cost, clean and renewable power generation for small coastal communities worldwide. The barge, part of the Dent Island Tidal Power Generation project, is the brainchild of Water Wall Turbine Inc. (WWT), a locally based company focused on developing renewable energy generation technology from marine and fresh water currents. After eight years of research and development, company co-founders Marek Sredzki and Lodewyk Botha are ready to build the first full-scale, selffloating power plant that will be capable of generating up to one megawatt of electricity — about the amount needed for a small community of 500 houses. Dent Island Lodge, just north of Campbell River and with a peak use of 200 kW of electricity in the summer season, will be the site of trials for the final stage of the project.
Design of WWT’s Turbine Tidal Power Generation vessel.
and reliable enough be commercially viable. Small-scale testing began in 2004 — initial tests showed that it was possible to extract large energies from currents if the correct design is applied. From the success of those initial tests, Sredzki and Botha set about securing patents, conducting proto tests and, finally, building a definitive scaled turbine model for ocean testing that verified the efficiency of the energy harvesting method. With assistance from the Natural Resources Canada and the ecoEnergy Innovation Initiative and Clean Energy Fund, WWT’s team has worked for the last two years, from concept design to construction, on building a large-scale model and now, they are in the final stage of building the full-scale power plant.
costs that are less than other alternative energies and, most certainly, diesel. “Current oil prices are temporary and even at these prices, producing energy out of diesel is still excessive compared to other production methods,” said Sredzki when asked for cost comparisons. “The current power for remote communities, private lodges and resorts can be in excess of 65-cents-per-kilowat range whereas the WWT’s Turbine power plant, including energy storage, is predicted to be closer to 20 cents.” Sredzki also noted that, given the worldwide goal of replacing diesel with environmentally friendlier energies, tidal power can be
The technology
The technology behind WWT’s Turbine Tidal Power Generation Project is one that introduces a series of new and significant technological milestones for the effective harvesting of the potential and kinetic energy in water currents. By installing rotating turbine components within a specially built barge, the self-floating power plant can operate in shallow waters — a minimum of a fourto-five-metre draft — with tidal or river currents in remote areas to generate up to five MW of electricity at competitive
February 2015 BC Shipping News 47
SHIPYARDS Images provided by Water Wall Turbine Inc.
The WWT Turbine is a self-floating power plant capable of supplying enough electricity for a small community of 500 houses.
The barge — “more like a catamaran similar in design to the Translink Seabus” — requires a great deal of stability to optimize flotation for turbine efficiency.
more predictable and efficient than solar or wind. WWT’s technology uses new battery technology to store the energy to allow for consistent delivery of power. For the first fullscale model, WWT is contracting with Tesla for batteries, but Sredzki noted that the battery supply market is still in its early stages and the use of other suppliers has not been ruled out as the cost will decrease dramatically over the next five years. Another key feature of the technology is the elimination of the need to permanently anchor the unit to the sea floor. Competitors — Sredzki noted four in Europe developing similar technologies – are mostly centred on open-ocean installations and operate below the water surface, increasing both capital and operating costs significantly.
A self-floating power plant
In speaking with naval architect Ivan Erdevicki, President, ER Yacht Design, the key — and biggest challenge — to the barge design was to ensure a high degree of stability. Erdevicki — who also designed the Falkins II, Royal Canadian Marine Search and Rescue’s highly efficient, self-righting rescue vessels (classed by Lloyd’s) — describes a 17-by-28-metre catamaran-type barge with multiple tanks that allow the vessel to meet the requirement for minimal movement despite constantly changing flow and velocity. “Ballast tanks in each hull provide balance and optimize flotation for turbine efficiency,” said Erdevicki. The power plant will be built with a turbine designed for one MW but will produce 500kW — much more than the 200 kW
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required by Dent Island. “It’s our prototype so we’re overbuilding to be able to do a lot of testing and from there we can adjust it for other operations,” said Sredzki. With a successful bid that matched WWT’s expectations for expertise, capabilities and cost, Meridian Marine’s President, Jim McFadden, was excited to be involved in the project, which should take about three months to complete. “We’ve just ordered the steel and will start on the flat panels as soon as it arrives. Once the flat panels are produced and erected, they will be put together into modules, then moved to Meridian’s drydock where more welding, painting and other preparations will be made before the vessel is floated for testing. Compared to a typical barge, there is much more shape to it,” said McFadden. In fact, McFadden noted, the design is closer to the Translink SeaBus than a barge. “It’s very much like a catamaran with a high section in the middle to house the controls.” The life expectancy of the plant is anywhere from 25 to 40 years, depending on maintenance of the mechanical components. The Switch, a Finnish company that is a pioneer in advanced power conversion technology focused on renewable energy industrial solutions, will supply the one-MW full-power converter; and Brevini Gear Systems has designed and developed totally integrated mechanical and electrical drivetrain including cooling and lubricating systems. In addition to federal government funding, a key partner in the project is the Nordstrom family who own Dent Island Lodge and who have provided the test location. If successful, they will reap the benefit of the lower power costs.
The future
Given that extensive testing has already produced successful results on smaller-scale models, the prospects of success for the full-scale power plant are very good. And this is just the start. Two additional projects are pending once the Dent Island project has been established but Sredzki and his team see the potential for worldwide use: “The massive energy extraction capacity, coupled with low energy production cost, construction and installation simplicity, low installation and maintenance costs plus the absolute eco and bio-friendliness should make the WWT System one of the most innovative and superior systems available.” BCSN
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www.aarc-west.com/www.awcoatings.com February 2015 BC Shipping News 49
TRAINING/LABOUR IMTARC’s Aboriginal graduates start work at Meridian Marine
Meridian Marine’s Jim McFadden and Jerry Pedneault (both top row, right), stand with the graduates of IMTARC’s “Passport to Shipbuilding and Repair” course, a joint initiative with the First Nations Employment Society.
Marine Fire and Safety Training and Consulting • Safety and risk management • Safety audits • Offering courses in Marina and Small Craft Harbours Fire Fighting; Confined Spaces Entry and Rescue; Waterfront Hazmat; Initial Emergency Response to Incidents for Terminal and Port Operators; Spill Response; and Basic Fire Fighting
SeaFire Training Ltd John F. Lewis, FNI CRSP Tel: 604 951 0061 Cel: 604 318 0985 Email: seafire@shaw.ca 50 BC Shipping News February 2015
www.seafire.org
T
he Industrial Marine Training and Applied Research Centre (IMTARC), B.C.’s key shipbuilding and repair industry workforce development integrator, announced that seven of 13 graduates from the First Nations Employment Society (FNES) “Passport to Shipbuilding and Repair” course will immediately begin work at Vancouver-based Meridian Marine Industries Inc. This is in addition to the earlier graduates from IMTARC coursing who are already employed by Meridian Marine. The eight-week course, which was held at the Musqueam First Nation in Vancouver, began on October 20 and ended Friday, December 12, 2014. The curriculum was designed and developed by IMTARC for FNES. The 13 participants were given an overview of the shipbuilding and repair industry and also had the opportunity to tour local shipyards and take part in hands-on job experience at Meridian Marine. During the training, the students dramatically improved their math and English assessment scores, and worked effectively during their work practicum at Meridian Marine. “The success of these programs relies heavily on employer support,” said Michelle Traoré, IMTARC’s Manager of Operations and course instructor. “We are very lucky to have an employer like Meridian Marine, as they went above and beyond in providing these quality opportunities for our aboriginal students.” Commenting on the new hires, Jerry Pedneault, Operations Manager for Meridian Marine said, “It was exciting to see the exuberance these young graduates demonstrated, combined with their desire and drive to gain more knowledge of the marine industry. We look forward to working with this group and others, as they become an integral part of the future of the marine industry on the West Coast.”
TRAINING
Holding your breath doesn’t work By John Lewis, FNI, CRSP Seafire Training Ltd.
>>> Providing firefighters with a supply of fresh air has
M
Photo courtesy Nations Attic
any vessels carry breathing apparatus for firefighting. It is often the least practised piece of equipment, either from fear, or from difficulty in refilling air bottles. This short article presents an approach to using any Self Contained Breathing Apparatus (SCBA), sometimes called Compressed Air Breathing Apparatus (CABA). We will also refer to the use of Supplied Air Breathing Apparatus (SABA) — that’s the one with the 300-foot-long hose. Oxygen sets and re-breathers — such as used in mine rescue — are outside the scope of this article. (Readers may be familiar with the term SCUBA — Self Contained
Cumberson and uncomfortable — firefighters eschewed early designs of smoke helmets.
been a goal for many years. Underwater Breathing Apparatus.) We will focus on the donning and wearing and not on technical specifications. Many years ago, while instructing at the fire school, I encountered a firefighter who was reluctant to use the SCBA available. “I’m not trained on this make and model,” he said. I asked, “what type of car do you drive? Is it automatic or standard?” He replied and then I asked, “is that the only make and model you drive?” He stared at me, then grinned, said “I get it” and we resumed our training. So, just as we look at a car and drive, whether standard or automatic, column shift, floor stick shift or other, we should look at SCBA. The dangers of smoke have been known for centuries. Our understanding of the exact composition of smoke is still growing; among the many hazards are carbon monoxide and hydrogen cyanide, both toxic. A smouldering sofa cushion is an instrument of death as we see over and over. Providing firefighters with a supply of fresh air has been a goal for many years. Most of the early smoke helmets were produced around 1870, but were not widely used for many years. The cumbersome leather hoods and hose, with air supplied by bellows are not easy or comfortable to use. SCBA, although available for many years, has become mandatory for fire fighters only within the last three to four decades. Lay your SCBA — any make or model — on a table. There are four main parts: a tank (generally referred to as a bottle) which contains compressed air; a regulator, which reduces the air pressure to a comfortable pressure which will not blow the mask off your face; a facemask, which enables you to breath the air; and
a harness or backpack which allows you to carry all the parts strapped to your body. Air tank: previously manufactured with steel (heavy) but now are generally aluminum or fibreglass. Check for any obvious damage such as gouges or dents. Check the pressure. In North America, air bottles have a gauge attached which is useful as we don’t need to connect the bottle to check the pressure. Air bottles are usually 2,216 psi (“30 minutes”) or 4,500 psi (“60 minutes” — we’ll discuss actual use duration later). Fit the tank to the backpack. This usually involves some form of strap and/or clip — easy enough to work it out. Check the O-ring on the hose (see Figure 1) and connect the hose to the tank. Regulator: this may be belt-mounted or may be part of the facemask. All regulators have a by-pass or emergency valve. This is used to ensure the wearer can access the air in the tank even if the regulator malfunctions. Facemask or face piece: check to make sure the straps are fully open. Have wipes available to clean the inside of the facemask after use. Ensure the face piece or lens is clear, not scratched or fogged. Harness: ensure the straps are fully open. All sets have shoulder and waist straps. Many have a chest strap also. There is a gauge on the set, generally on one shoulder. It shows from FULL to EMPTY, with a red sector indicating the reserve. Turn on the air tank. Note that both gauges show a full tank. Turn off the air at the tank. Using the by-pass valve, slowly bleed down the air. When the gauge needle reaches the red zone, the low-air alarm should sound. This may be a bell, whistle or a “clatter” depending on
February 2015 BC Shipping News 51
TRAINING the make. Regardless, when this sounds, you and your partner should leave the fire scene. The reserve generally gives five to 10 minutes of breathing time (the amount depends on the wearer). Don the set: there are two common methods. If using the “over coat” method, place the set on a table, tank valve close to you, tank down, harness uppermost. Grasp one shoulder strap and don as you would a coat. If using the “over the head” method, place the set on a table, tank valve away from you, tank down, harness uppermost. Grasp the tank with both hands and lift it above your head. The shoulder straps will fall over your arms. Lower the set onto your back. Using either method, you now have the set on your back. Tighten the shoulder straps by “walking the set up your back
Photos courtesy Seafire Training Ltd.
Checking the O-ring before connecting the hose to the tank.
Donning the set using the “over the head” method.
52 BC Shipping News February 2015
— do not jump, as the air tank may strike you on the back of your head. Fasten the waist belt. Now loosen the shoulder straps until the weight of the SCBA is on your hips. This enables movement of the shoulders, and reduces fatigue. Fasten the chest strap if there is one. Ensure you can read the gauge. (Some sets now have a Heads Up Display [HUD] which shows air remaining on a display inside the face piece. This is a useful development however I recommend using the gauge as it usually shows in more detail how much air remains.) Now you have the set on, put on the face mask. Inhale. The mask should seat to your face. (To enable a seal, wearers are required to be clean shaven where the mask touches the face. This is required by the Canadian Coast Guard, by Canadian Standards Association and by WorkSafeBC. This means clean shaven at the start of each shift.) Turn on the air. Breath. You should hear a “click” and feel air on your face. Breathe normally. All SCBA are now positive pressure and release some air into the mask even when you are not breathing. This is to ensure no contaminants enter the facemask. Any more air required by the wearer is supplied on demand; you breathe, air flows. Fit testing: all SCBA wearers must be fit tested annually. This is generally done using banana oil or Bitrex or other scent. It is easily done and must be recorded for each user. However, the procedure is outside the scope of this article. Emergency breathing: should your regulator malfunction while in a hazardous atmosphere, you may still get air. Use the by-pass or emergency valve on your regulator. Open the valve briefly, breath, close the valve. Develop a rhythm, such as “open, breath, close, 2 and 3 and 4 and 5 and 6 and open, breath, close, 2 and etc.” Use whatever timing suits you as you head for safety, while remembering that the more you use the valve the less air time you will have. Air reserve: ideally, you should leave the scene and return to safety before your low-air alarm sounds. Over time, you can assess your average use of air while working and estimate a duration of working time. This varies greatly among wearers, depending on the individual and the amount of exertion and their emotional state. Generally, a 30-minute bottle is estimated to give 20 minutes of working time. Forty-five-minute bottles are gradually replacing 30s. Sixty minutes is
not necessarily the answer as that’s a lot of working time and fatigue may prevent using it to advantage and put the wearer at risk. There are techniques such as the Reilly Escape Breathing Technique (REBT) which enable the wearer to better manage their air supply. These are advanced techniques which we won’t cover here. Supplied Air Breathing Apparatus (SABA): this is where the user has a facemask, regulator, harness, escape air bottle (small, for escape only), and the air is supplied either from normal SCBA bottles mounted on a trolley, or from an air compressor, through a hose which may be up to 300 feet long. These are useful working sets but are not advised for firefighting. The hose may become entangled. When you have used up the air, the bottle may be changed without removing the set. Take off your mask, close the air bottle. Lean forward, hands on your knees or on a table, head down. Have your helper disconnect and remove the air tank and fit a new tank. When connected, the wearer opens the air valve and checks the operation of the set then returns to work. When you are finished using the set, take off the mask, close the tank valve. Take off the set, ensuring all straps on both harness and facemask are fully extended. Clean the inside of the facemask with antiseptic wipes. If you leave the set with air bottle attached, so it is ready for use (recommended) then ensure the bottle is full. Practice regularly. Use the air in the bottles. Some vessels may not have a compressor and may have to send bottles out for re-fill. Dive shops and others offer this service. The air bottles should be emptied and refilled every three months so the air does not become stale. There is more to be said on the use of breathing apparatus. These notes should help you get started, regardless of which make or model you have. Become familiar with your sets. Wear them, exercise in them. Know their limitations. Work with a partner — go in together, come out together. Properly used, SCBA will help keep you safe and healthy by limiting your exposure to deadly gases and carcinogens. John Lewis is a safety and risk management consultant. He has taught marine firefighting for land-based firefighters to many departments in Canada, Ireland and the U.S. and is a Master Mariner with a chemical tanker background. John can be reached at seafire@shaw.ca.
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