INSIDE: TANKER SAFETY EXPERT PANEL REPORT
BC SHIPPING Commercial Marine News for Canada’s West Coast.
Volume 4 Issue 1
NEWS
www.bcshippingnews.com
February 2014
Transportation Survey Economic and business outlook brightens for 2014
Marine Surveying
Industry Insight
Peter Lahay International Transport Workers Federation
Science, opinion and art: Draft surveys on ocean-going vessels
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Plus: The year ahead for the shipping industry
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BC SHIPPING
Contents
NEWS
Cover Story
24
February 2014 Volume 4 Issue 1
30 Containers
Container liner companies By Syd Heal
33 36
39
5
Guest editorial
18
6
In brief
20 Terminals
10
Industry insight
The entire supply chain under one roof By Robin Silvester Industry traffic and news briefs Standing up for seafarers Peter Lahay, National Co-ordinator, International Transport Workers Federation Dedicated, passionate and always on the watch for unfair treatment, Peter is nothing short of a hero when it comes to improving the lives of seafarers.
10
History lesson
The McBarge: A unique history and hopeful future By Lea Edgar
Huge projects mooted but do they help Vancouver Port? By Ray Dykes
23
Distribution hubs Boundary Bay Industrial Park anchors Delta’s new distribution hub By Paul Tilbury
24
Transportation survey
26
The year ahead
Surface Transportation Annual Review results: Economic and business outlook brightens for 2014 By Darryl Anderson and Phil Davies
The year ahead for the shipping industry By Captain Stephen Brown
42 46 48
Cargo logistics
Local logistics serve global opportunities By Darryl Anderson
International shipping Market insight: A sense of optimism in a volatile market By Kaity Arsoniadis-Stein
Liquid Natural Gas
NIBC hosts LNG seminar: B.C.’s new “Gold Rush”? By Nigel Greenwood
Tanker safety
Tanker Safety Expert Panel: Insight into setting the course for the future
Legal affairs
Fraudelent conveyances By W.Gary Wharton
Marine surveying
Science, opinion and art: Draft surveying and ocean-going vessels — a practical example By Tim Ellis
52 Ferries
Point Hope Maritime, BC Ferries breathe new life into the MV Tachek
48
On the cover: d’Amico Dry Ltd.’s CD San Francisco. Photo by Dave Roels (www.daveroels.com) This page: (Top) Centerm Terminal. Photo by Dave Roels; (Bottom left) Peter Lahay. Photo by Dave Roels; (Bottom right) The Jian Qiang. Photo by Tim Ellis. February 2014 BC Shipping News 3
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February 2014 Volume 4/Issue 1 Publisher McIvor Communications Inc. President & Editor Jane McIvor Contributing Writers Darryl Anderson Kaity Arsoniadis-Stein Captain Stephen Brown Phil Davies Ray Dykes Lea Edgar Tim Ellis Nigel Greenwood Syd Heal Peter Lahay Robin Silvester Paul Tilbury W.Gary Wharton Advertising and Subscriptions Jane McIvor Phone: 604-893-8800 / Email: jane@bcshippingnews.com Lesley McIvor (Advertising only) Phone: 604-893-8800 / Email: lesleymcivor@shaw.ca ANNUAL SUBSCRIPTION Canada Three Years $108.95 Cdn* Two Years $75.95 Cdn* One Year $40.95 Cdn* USA One Year $65.00 Cdn Other Countries One Year $82.00 Cdn Single copies *Canadian rates add 5% GST
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GUEST EDITORIAL
The entire supply chain under one roof Robin Silvester
President & CEO, Port Metro Vancouver
O
n behalf of the Board of Directors, as well as the entire team at Port Metro Vancouver, I would like to warmly welcome all attendees of the inaugural Cargo Logistics Canada Expo & Conference to our spectacular port city. We are truly excited to have the largest and most diverse gathering of stakeholders from across Canada’s supply chain that has ever assembled here in Vancouver. Over the past year, the scale of activity seen at the Port has reached unprecedented levels, with throughput volumes consistently exceeding forecasts and numerous major infrastructure improvement projects delivering a generational change in the Vancouver Gateway. The economic effects of this burgeoning trade were measured in the 2012 Port Metro Vancouver Economic Impact Study, released in June 2013. The study shows that more than CAD$475 million worth of cargo passes through the Port every day, generating more than 98,800 jobs nationwide — with 38,200 of those here in British Columbia. Most striking is the finding that 19 per cent of Canada’s trade in goods (by value) is shipped through this gateway. Since 2005, an unprecedented CAD$22 billion of public and private sector funds have been invested in our region to deliver public infrastructure projects designed to move people and goods faster and more efficiently. CAD$9 billion has been spent
in the Vancouver Gateway alone. These investments have a direct and positive impact on your ability to improve your supply chain logistics and grow your business. Let me put this in context. Everyone marvels at the size of the Panama Canal expansion. Yet, as the head of one of the world’s largest shipping lines reminded me recently, the Panama Canal expansion may be big, but the investment in Vancouver is even bigger: 50 per cent more is being spent in the Vancouver Gateway than on the Panama Canal expansion. And the results are tangible: increased trade with fast-growing economies like China, Japan and South Korea; new records in container and bulk cargo volumes; and shipping lines making Port Metro Vancouver their gateway of choice to North America.
Of course, new challenges and new realities will emerge: the Panama Canal has great potential to change supply chain dynamics; new competitors might materialize to the south or to the north; and environmental complexities will continue to be an increasingly important focus for all of our businesses. Nonetheless, I am certain that, by working together as strategic partners, we can achieve continued supply chain improvement and fulfill our tremendous potential. I hope that you enjoy your time in Vancouver, make new friends, gain some insights that are relevant to your business, and take pride in knowing that you are a key part of Canada’s success in the global economy. — Robin Silvester
Local traffic...
Thanks to Tracey John Hittel with Gateway Shipping & Transport who spotted the M.J.Green up in Grenville Channel helping out with oil recovery from the Second World War U.S. Army transport vessel, the Brigadier General M.G. Zalinski. The M.J.Green is the newest spill response vessel acquired by the Western Canada Marine Response Corporation. It is 13.69 metres in length with a beam of 4.88 metres and a depth of 1.98 metres. The M.J.Green is capable of skimming 32.8 tonnes per hour with a 10-tonne capacity.
Member of:
International Sailor’s Society Canada
Got a great photo? Send it to jane@bcshippingnews.com to be included in our feature on ships visiting our local waters.
February 2014 BC Shipping News 5
INDUSTRY TRAFFIC Heading to the U.S? Better get Canada Metal’s anodes.
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ince December 19, 2013, the U.S. Environmental Protection Agency expects vessel owners and operators with craft included under the Vessel General Permit (VGP) to comply with regulations regarding discharges. VGP directives cover non-military commercial vessels longer than 79 feet. VGP requirements for cathodic protection can be easily met with environmentally-friendly Martyr brand cadmium-free aluminum and magnesium anodes from Canada Metal (Pacific) Ltd. Provisions in the 2013 VGP seek to protect U.S. water quality and inhibit the spread of invasive marine species.
Commercial anodes. Specifically in regard to cathodic protection, the VGP calls for owners to select devices “with metals that are less toxic to the extent technologically feasible and economically practicable and achievable”.
Caldwell & Co. Maritime Law
• • • • •
Vessel Transfers & Mortgages Insurance Claims General Litigation Arrest & Seizure of Vessels Shipbuilding Contracts
604-689-8894 / bcaldwell@admiraltylaw.com 401 - 815 Hornby Street, Vancouver, B.C. V6Z 2E6
Brad Caldwell
www.admiraltylaw.com/caldwell/cv.pdf
Nigel S. Greenwood
MA, BSc, Master Mariner, FRIN, MNI Rear-Admiral, RCN (Ret’d)
www.greenwoodmaritime.com nsg@greenwoodmaritime.com / 250-507-8445
6 BC Shipping News February 2014
Traditional zinc anodes contain percentages of highly toxic cadmium, a heavy metal whose use and disposal are becoming increasingly restricted and regulated. The VGP outlines that for vessels largely operating in fresh water, the owner/operator using aluminum or zinc must document why magnesium is not appropriate. Likewise, any owner/operator who chooses zinc rather than aluminum for a vessel that spends the majority of its time in salt water, must document reasons for this choice. As part of its corporate commitment to environmental preservation, CMP makes its Martyr brand aluminum and magnesium anodes with no traces of toxic cadmium. Besides helping to protect the marine ecology, Martyr cadmium-free anodes weigh far less than comparable zinc anodes, so vessel owners gain fuel savings as well as peace of mind. Cadmium-free anodes also offer excellent performance and efficiency, lasting longer than their traditional counterparts. Vessels require fewer such anodes, and can operate with longer intervals between anode replacements. Currently, CMP stands as the only company on the market to offer cadmium-free cathodic protection for all three water types. Martyr II aluminum anodes, effective in salt or brackish waters, employ only a fraction of the zinc used in making a regular zinc anode. The other Martyr II components, aluminum and indium, present no toxicity to marine life. Martyr III magnesium anodes provide eco-friendly cathodic protection for vessels in fresh water. Pressure die cast and manufactured to the strictest ISO 9001 quality standards, Martyr brand anodes have steel inserts to ensure a tight fit and complete contact for the life of the product. Premium features like hex head machine screws and boltretaining washers make them a top choice for installers. Commercial vessel owners can find a wide range of Martyr brand hull anodes in a variety of mountings, available in both aluminum and magnesium. Additionally, the Martyr cadmium-free line includes Olympic drive, heat exchanger, heat transfer, platform/standoff, cable, ballast tank, condenser, crab trap, prop nut and plate anodes made of aluminum. For more information, please visit: www.canmet.com.
NEWS BRIEFS The New Wave Marine Engineering Conference
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ancouver Island and the Pacific Northwest is home to a vibrant marine technology and ocean engineering industry. To celebrate this, The New Wave Marine Engineering Conference scheduled for 12-13 June, 2014 at the Delta Victoria Ocean Pointe Resort will encompass exhibits and conduct numerous presentations on cutting-edge developments in the oceanographic and marine renewable technology industry. For example, did you know that new oceanographic sensors are used for getting a better understanding of the variety and change in behaviour of the ocean from the surface to the seabed and that it will affect all marine industries? Also, the nascent marine renewable energy industry is producing novel technologies for generating useful energy and electricity from river current, tidal current and ocean waves. Learn about this fascinating technology at The New Wave. The New Wave will be a place to find out how our local marine industries could have some role in engineering, building and operating these technologies in the future. There is a very special optional event planned for the evening of the first day of the conference. A dinner social will be held at the Maritime Museum of British Columbia. The historic displays of the museum visit will provide a pleasant perspective to the topics of the conference. For continous updates on speakers and presentations, please visit www. thenewwave.ca. Attendees are encouraged to register early for both the conference and the hotel (www.deltahotels.com).
DNV GL launches new global brand
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he merger of DNV and GL in September 2013, led to the creation of DNV GL, a world leading ship and offshore classification society, a leading independent service provider in the oil and gas sector, a powerhouse in energy and renewables and one of the world’s top three certification bodies. “Businesses are facing increasing technological, regulatory, social and operational challenges, in a world that is becoming ever more complex. While at the same time, stakeholders are demanding greater accountability and transparency. To be confident they are making the right choices, both businesses and governments need an independent partner they can trust to empower their decisions,” says DNV GL Group President & CEO Henrik O. Madsen. As a foundation for this, DNV GL is making a significant and continuous investment in strategic research and development. Innovative projects are taking technology and standards to new, advanced levels in collaboration with our customers.
“It was from this broader view that our new brand strategy of our expansive, expert services and customer enablement was created. The new visual identity with the three extended lines was created to symbolize our working context of sea, land and sky,” explains Stefan Nerpin, Group Chief Communications Officer of DNV GL. Created from two highly respected companies whose parallel histories span almost 150 years, Nerpin is confident that the new DNV GL will “much-needed benefits in terms of technical insight, risk management and knowledge transfer,” he says, adding, “With our combined capabilities, more than 16,000 professionals are bridging technological and operational expertise to the greater goal of creating a safer and more sustainable society.”
Presented by the Vancouver Island Branch of the Canadian Institute of Marine Engineering (CIMarE)
February 2014 BC Shipping News 7
INDUSTRY TRAFFIC ClassNK releases world’s first harmonized CSR-compliant ship design support software
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eading classification society ClassNK (Chairman and President: Noboru Ueda) has announced the release of a new version of its PrimeShipHULL (HCSR) ship design support software that is fully compliant with the new IACS Common Structural Rules (harmonized CSR) for oil tankers and bulk carriers. The new ship design support software is the first in the world to fully support the new Common Structural Rules which were adopted by IACS in December 2013. As part of its work to support the development of safer ships, ClassNK is providing the software free of charge to its customers such as shipyards and designers around the world. The new IACS CSR not only unify and harmonize the technical requirements of the existing Common Structural Rules (CSR) for tankers and bulk carriers, but also incorporate new requirements for more comprehensive structural analysis at the design stage, including FEM analyses covering the entire range of cargo hold structures as well as new formulae for buckling, fatigue and residual strength criteria to enhance safety and reliability. The new rules will be applied to all bulk carriers over 90m and all oil tankers over 150m contracted on and after 1 July 2015. Although the harmonized CSR represents a major step forward for ship safety, they also present a number of new challenges for shipyards and designers. It was in order to address those challenges and reduce the manpower and cost burdens on yards and designers that ClassNK
8 BC Shipping News February 2014
began development of its new design support software. “While the new rules will mean safer ships, shipyards and designers will have to invest new resources to meet new design criteria and bring their designs into compliance with the new rules,” said Dr. Takuya Yoneya, ClassNK Executive Vice President and head of development for PrimeShip-HULL (HCSR). “With PrimeShip-HULL (HCSR), our goal has been to develop a comprehensive and powerful design support tool that rationalizes the design process and greatly reduces the man-hours needed to create ship designs that are compliant with the new rules.” The result of more than four years of comprehensive development work, PrimeShip-HULL (HCSR) builds on the core of ClassNK’s existing PrimeShipHULL-CSR software, combining rule calculation and FE Model-based direct strength calculation software with completely new systems designed to interface directly with commercial CAD and rule calculation software, as well as automate parts of the basic design process. These guidelines are available free of charge via the ClassNK website for those who have registered for the ClassNK “My Page” service. To register for the “My Page” service free of charge, go to ClassNK’s website and click on the “My Page Login” button: www.classnk.com ClassNK has also released Guidelines for Gas Fuelled Ships Version 2 (Safety Measures for the Use of Natural Gas as
Ship Fuel). This updated version reflects the requirements for the design of natural gas-fuelled ships based on the outcome of discussions held at IMO regarding the International Code of Safety for ships using gases or other low flash-point fuels (IGF Code). These guidelines are also available free of charge via the ClassNK website.
Pushbutton Propulsion Order Telegraph
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rime Movers Control Inc. has introduced their next generation compact pushbutton style engine order telegraph, the Series 8202-4000. The telegraph unit (7.5 inches high by 5.7 inches wide) features nine propulsion order buttons per shaft. Other few features include isolated output connection to the ship’s VDR, redundant communication networks and setup/ alarm viewing via LCD display.
NEWS BRIEFS Edoc now Helm Operations
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doc Systems Group, developers of Helm software in Victoria, B.C., are changing their company name to Helm Operations. “In the marine industry we are more readily recognized as Helm, our product name,” says CEO Ron deBruyne. “This name change will bring about further clarity on who we are as a company.” The name change coincides with the release of their new product: Helm CONNECT, an app-based, workflowbased, web-based software application designed by crew and shore-based teams for singular workflows, ensuring greater engagement through smaller, simpler, but powerful applications that are designed for specific tasks.
www.helmoperations.com
3GA Marine gets a new office
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GA Marine, a growing naval architecture and marine engineering firm, opened a new office located in View Royal, a suburb of Victoria, B.C. The company provides inspection, survey, design engineering, project management support and environmental stewardship to the marine sector worldwide through the subject matter and hands-on expertise of its team in these areas. Additionally, there is also in-depth knowledge of domestic and international regulatory regimens. Company founder and president David Stocks is a naval architect with over 40 years’ experience leading teams of experts in maritime and offshore vessel projects. He established 3GA Marine in 2012 in response to a need from the commercial marine sector in Canada and across the Pacific Rim for high-quality, responsive consulting services. Partners David Mietla and Ray Moon joined the company in May 2013. Mietla’s
expertise lies in ship system design and engineering, refit and maintenance with experience in Heating Ventilation and Air Condition systems and hydraulic and vessel propulsion systems. Ray Moon brings over 40 years’ experience in ship design, construction and shipyard operations. Daniel McIntyre, intermediate marine engineer and David Jack, intermediate technologist in naval architecture, round out the core staff. 3GA’s subject matter expert associates all hold senior-level certifications in naval architecture, marine engineering and environmental disciplines and have been involved in a variety of high-level projects locally, nationally and internationally. For more details, please visit www.3gamarine.com
February 2014 BC Shipping News 9
INDUSTRY INSIGHT
Standing up for seafarers Peter Lahay Canadian National Co-ordinator, International Transport Workers Federation
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or 20 years, in ports across Canada, in regulatory meetings in Ottawa and in lectures and rallies around the world, there is one phrase that Peter Lahay has used repeatedly to describe the foreign seafarers he represents. They are, he says, “among the world’s most marginalized and isolated workers”. It’s an attitude that Lahay, a Vancouver inspector with the International Transport Workers Federation, takes up every gangway as part of the ITF’s Flag of Convenience (FOC) campaign. His job is to ensure respect, fair treatment and decent working conditions for the men and women who crew the world’s commercial fleet at a time of labour shortages, over-capacity and cutthroat competition. His other mission? To push for the partnerships, transparency and equity that he believes will rehabilitate a shipping industry and a national trading agenda increasingly under fire from the public. BCSN: Peter, can you start with a bit of background on your labour federation and the campaign you represent?
10 BC Shipping News February 2014
Photo by Dave Roels (www.daveroels.com)
...there is one phrase that Peter Lahay has used repeatedly to describe the foreign seafarers he represents. They are, he says, “among the world’s most marginalized and isolated workers”. PL: The campaign currently employs about 145 men and women as ship inspectors. We board vessels daily around the world and, through our inspections, maintain and improve seafarers’ living and working conditions. We encourage the signing of ITF collective bargaining agreements and ensure adherence to their terms. We investigate complaints about lack of food, clean water, medical attention and abuse; we deal with injuries, death claims, crew abandonment and generally poor onboard conditions. Our work is part of a central database held by the ITF that contains a record of all ships we encounter and any offences found. We make a lot of our database info available to ship brokering and chartering companies to ensure vessels they represent are
compliant with current Maritime Labour Convention requirements. In Canada, we have inspectors in Halifax, Montreal and Vancouver. They’re drawn from the ITF’s Canadian affiliates — Unifor, the International Longshore and Warehouse Union and the Seafarers International Union. I’m the local inspector and our national co-ordinator. In B.C., we’ve been running the Flag of Convenience campaign since the 1970s. Vancouver has long had an international reputation among seafarers and trade unions as a port where problems are solved. Prior to 2000, we saw our share of substandard shipping — poor living conditions on board, abused and cheated seafarers. It was standard to set and meet
INDUSTRY INSIGHT Photo credit: Tom Bowen
an annual goal of collecting a million dollars in back pay for seafarers who had been cheated. Since Canada ratified the Paris MOU on port state control in 1994, both Transport Canada and the ITF have successfully worked to eradicate some of the worst examples of substandard shipping that has entered our ports. Though conditions are much, much better now, by no means has the industry completely cleaned up its act. So we’re still here. BCSN: Could you describe an average day for an inspector? PL: Every day looks different. For example, there are all kinds of discharging and loading operations in Canada and one of the more dangerous is loading logs. There have been several recent cases of foreign crew injured during one stage or another of loading operations. Recently, we had a seafarer on the West Coast of Vancouver Island who lost his leg. In such a case, my day might mean that I get the information from the local dockworkers’ union; pick up a copy of the incident report; immediately get in touch with the ship owner or operator no matter which country operations are located; make contact with the worker’s family; make sure the owner meets all of his obligations to give full care. I will work with affiliate trade unions in the labour-supply country and the beneficial ownership country. The most important thing in such a case is to ensure the crewman receives his full entitlements and is not cheated by insurance companies, lawyers or shady operators. We might also be in contact with Transport Canada and the Transportation Safety Board, depending on particulars of the accident. Unfortunately, shipping is still an industry where the cost of personal injury is far outweighed by the expediency of ship operations. It’s very important that accidents aren’t repeated and we have a role in ensuring they aren’t. Other days, work involves feeding data to the political arms of the ITF so that we have the information necessary to support our arguments at international forums like the International Labour Organization or the IMO. For example, there’s much discussion in the industry right now about setting up an insurance fund to cover crew wages and repatriations during abandonments. We’re often asked to forward information which will help P&I clubs, the International
Aboard Tymac Launch on his way to meet with abandoned crew of the MV Zoodotis (1999). Shipping Federation, the ILO and the ITF come to an agreement. In the same way, we often liaise with dockworkers on things like container issues. We see a lot of accidents due to over-weight containers and our information feeds into international solutions. I’m very pleased to note that Al Le Monnier, retired Third Vice-President of ILWU Canada, is presently working on behalf of the ITF at the IMO on container weight issues. We’re very proud of his work. Some of the work is regulatory. For example, one of our big projects in Canada recently has been amendments to Maritime Transportation Security Regulations. We wanted to ensure that seafarers’ labour representatives and seafarers’ welfare organizations have full access to crew on vessels in marine terminals. It was critical to get that access and it was a successful endeavour that involved massive consultations Canada-wide with industry, labour and government. Other work? We need to ensure seafarers have access to shore leave without having to pay fees or hire taxis just to get in and out of terminals. And since about 2006, I’ve been working with TC on amendments to the Canada Shipping Act and other legislation and regulations to ensure Canada’s compliance with the Maritime Labour Convention 2006, which is now in force. The consultations were exhaustive but productive — we’re proud to report that, through the efforts of all involved, Canada became the 11th country in the
world to ratify this critical convention. We should all be proud of that. On August 22, 2013, Canada executed its very first convention detention — only two days after it came into force. The Panama-flagged Hydra Warrior was detained in Sept-Iles, Quebec over illegal wages and an illegal seafarers’ employment agreement. The vessel was covered by a collective agreement but the company was not paying the crew according to its terms and even the employment contracts were completed at wage levels lower than the collective agreements on board the vessel. The successful detention resulted in full back pay of $41,000 USD to workers. That detention in Quebec was stickhandled by me from Vancouver. Transport Canada inspectors are not yet experts in maritime labour conditions; we are. BCSN: Which part of the job do you like best? PL: One of the things I enjoy the most is sharing my experience with new inspectors. In 1997, I become involved in training and development of new ITF inspectors. We had grown from 40 worldwide to about 140 and that increase meant we needed a training and development program to refine the professionalism of the inspectorate. In 1998, I moved to London as the training and development co-ordinator. New inspectors were taught how to plan and conduct an ITF labour inspection, verify crew wage claims, complete ITF documentation, negotiate the signing of ITF agreements and network February 2014 BC Shipping News 11
Photo courtesy of Peter Lahay
INDUSTRY INSIGHT
Celebrating sale in Federal Court with the crew of the abandoned Atlantis Two.
We have to trust each other. It’s a small port and nobody is going anywhere... And we all want to make sure crew are treated fairly...So I guess that’s my point about port relations — mutual trust is imperative. with regulatory agencies, affiliate unions and shipping entities. When I first started in London, we had one ITF inspector in Mumbai, India — that has since expanded to include all major ports in India. Among many others, we also added an ITF inspector in Ireland and it has since become a very strong country in the ITF sphere. The worldwide expansion means that when an inspector goes up the gangway, the ship owners, the crew and the captain all know that he or she is part of a global force of ITF inspectors promoting and enforcing trade union rights and decent terms and conditions for crew…who are among the most isolated and marginalized workers in the world. BCSN: What are your relationships like in the port here? PL: Early in my career here, I had a pretty nasty dispute on a ship involving horrible conditions and horrible treatment of crew. I went aboard to find a solution and calculate the wage claim which came out to about $80,000 or $90,000 USD. I contacted the ship owner in Greece and he promised to start 12 BC Shipping News February 2014
improving conditions the next day. The local agent also came aboard. I remember him to this day: Brock Crystal, great guy. After the owner agreed to our calculations and to improve onboard conditions, the agent asked if they could resume loading. I said no, not until conditions had started to improve and the money had arrived. He told me that I had his word that he would have money aboard the next day. He said ‘it’s a small port, we’re going to deal with each other again, we have to trust each other’. After consulting with a more experienced dockworker colleague, I eventually agreed. That agent was true to his word and brought the money the next morning. It was a fantastic lesson for me in building trust with local agents in this port. We work very closely with each other and they should be acknowledged. Even today, 20 years later, when I meet a new agent and I’m dealing with a problem, I tell him that story. We have to trust each other. It’s a small port and nobody is going anywhere. Our jobs are to keep the ship moving, get the cargo loaded or discharged and get it on its way. And we all want to make sure crew are treated fairly.
Nobody wants to see abuse on ships. So I guess that’s my point about port relations — mutual trust is imperative. BCSN: Let’s talk about trends. What are you seeing in labour supply? PL: For the past 50 years, ship owners have tended to source the cheapest labour available — from countries within the former East Bloc and developing countries like the Philippines, Sri Lanka, Indonesia, Pakistan, Bangladesh and so on. Most times, crew from junior officers on down were hired from those countries, while senior officers and engineering personnel might come from traditional maritime labour countries. Before 2001, you’d also find plenty of crew from Muslim countries. Now, likely because of post9/11 concerns about entry into the U.S. and other western ports, ship owners have abandoned Muslim crews in favour of the Philippines, India, Ukraine and Russia. In the 1990s, Indonesia made up a large portion of crew coming to Vancouver. They were always found on the poorest ships — no soap, infestations of cockroaches, poor wages, many of them unpaid — but those crew would never complain. They came from a country that, at that time, had no normal democratic protections. At around the time the Suharto government was about to fall and we heard news of protests in Jakarta, all of a sudden Indonesian crews became highly vocal about the abhorrent conditions. We began to handle hundreds of cases of poorly treated Indonesian seafarers. Once they found their voice, we worked together to clean up the mess. It’s the same story with Ukrainian and Russian crew. At one time, they were only found on state-owned vessels but after Glasnost, there was a flood of Eastern European crew into the labour market. Crew from Russia did quite well but crew from Ukraine fared very poorly. I suspect that’s because seafarers’ unions in these countries developed at different paces. Our affiliate, the Seafarers Union of Russia, was quick off the mark to establish proper, coherent relations with the ITF and to set up the alliances necessary to ensure that Russian crew landed on the best vessels possible, those by and large covered by ITF-acceptable agreements. In Ukraine, the opposite was true. Ukrainian unions fought over the spoils; they were caught up in games with crewing agents in Odessa and so seafarers tended to end up on the poorest
ships. It has remained that way ever since. Recently however, Ukrainian unions have been getting their act together and inspiring confidence among Ukrainian seafarers. We are increasingly seeing ships crewed with Ukrainian seafarers beginning to normalize. The Philippines remains the largest labour-supply country in the world, with some 400,000 registered Filipino seafarers. There are a lot of reasons for this — crew speak good English, the international language of shipping; they are, for the most part, well trained; and they provide for a consistent labour supply. Burma is an interesting case. In the 1990s, the ITF brought a complaint to the ILO about the repressive and abusive Burmese regime and its treatment of seafarers and the ILO upheld it. Now, Myanmar wishes to continue to supply shipboard personnel but in order to do so, it had to ratify the Maritime Labour Convention. The MLC requires Myanmar to allow bona fide trade unions and to regulate crewing agencies. The regulations prevent crewing agencies from charging seafarers for jobs or requiring them to sign over their houses (or their parents’ houses) should they complain to a foreign labour organization. So when we look at trends in labour supply, there’s a common theme. A significant portion of the industry sources labour where they have quality crew and good relations with the labour supply country. But still, even with those we would consider to be good owners, we’ll find portions of their fleet to be crewed in ways that are questionable and where labour practices see crew blatantly cheated. And that was the reason for the Maritime Labour Convention. The MLC didn’t come about because the ITF whined and complained about inhumane labour practices. In fact, the MLC was agreed to, in my opinion, for two very important reasons: One was to address the poor public perception of shipping; and the second reason, probably more significant, was that quality ship owners were becoming weary of unfair competition from their brethren. The Organization for Economic Co-operation and Development was commissioned by shipping organizations to do a quantitative analysis of what constitutes substandard shipping. They looked at different ship types — bulk carriers, February 2014 BC Shipping News 13
INDUSTRY INSIGHT container ships, ro-ro vessels — and different tonnages and sizes and did an analysis of how much money a ship owner can save per year by sailing his vessels in a substandard manner. They looked at things like paying crew sub-industry wages, cheating crew on wages, not adhering to maintenance schedules, not rectifying shipboard deficiencies, denying medical attention to crew, providing late repatriation of crew and they came up with a dollar figure that ship owners would save. They found that substandard shipping constituted unfair shipping, a distortion of commerce in the shipping market. The MLC will hopefully be a tool that will allow quality operators to compete on a more even level. BCSN: Could you move on to trends in labour relations, and then I want to ask about wages. PL: The ITF has a council that governs all aspects of the FOC campaign; it’s known as the Fair Practices Committee (FPC). The FPC has historically set the terms of ITF-acceptable agreements. In fact, the term “flag of convenience” was coined by the ITF. At the beginning of the FOC campaign — a campaign to drive ships back to their national flags — the ITF had only one collective bargaining agreement, known as the Standard Agreement. This agreement was a weighted average of all seafarers unions’ national wage scales from developed Western countries. So it was a high-cost agreement and was usually imposed through industrial action.
In the early 1980s, Asian affiliates developed what was known as the Asian agreement, later recognized by the ITF as the “total crew cost” agreement, or TCC Agreement. The argument presented to the ITF by our Asian affiliates was that traditionally, vessels trading in Asia had higher crew numbers. For example, you might find Indian-crewed vessels that would have 40 to 50 crew aboard and the notion was that its total crew cost was about equal to a European-crewed vessel of 23. Thus, the agreement became a “total crew cost” agreement. But of course, over time, even those highly manned vessels have gone down to normal industry standards. You would never see a crew of 40 now — 19 to 23 seafarers is the norm. So this agreement became less onerous on the ship owner than the standard ITF agreement. From the ITF’s perspective, the TCC Agreement became the carrot the owner would voluntarily sign up to, and the Standard Agreement would become the stick that they would sign only through industrial action. These agreements would be unilaterally increased from time to time by the ITF Fair Practices Committee and then imposed on ship owners. Over the last 15 years, we’ve seen markets go up and down. There was a downturn around 1998 that was going to coincide with another increase in the ITF Standard and TCC agreements — an unpopular proposal for ship owners. It was during this time that a number
of the larger ship-management companies formed a bargaining association under the auspices of the International Maritime Employers Council. The IMEC and the ITF launched negotiations for the purpose of collective bargaining on FOC ships. This became known as the International Bargaining Forum, established in 2003 as a mechanism through which maritime employers and the ITF can engage in collective bargaining. The approach has been extremely successful and productive for responsible ship owners who demand certainty, and for the ITF and its affiliated unions who seek improvements for the world’s seafarers. Since 2003, we have concluded a global collective bargaining agreement that allows for local flexibility and local negotiations between labour-supply unions, traditional beneficial ownership unions and maritime employers. From the employer’s perspective, they have made gains as well. They have made inroads into how the ITF Welfare Fund is distributed, in addition to lower entrance fees. They won a training allowance paid for out of crew wages and have slowly shifted money from ratings to more expensive officers. There’s another aspect of labour relations that’s important. As I said earlier, one of the biggest problems with shipping is its poor public perception — which is critical here in B.C. when we talk about port expansion, the Asia-Pacific Gateway, tankers, coal, etc. The public demands
Located at Vancouver Waterfront and Roberts Bank
www.flyingangel.ca 14 BC Shipping News February 2014
INDUSTRY INSIGHT that shipping be conducted safely, with care for the environment and for the human element. They want to know that crew are well-trained, well-rested and well-treated. Quality shipping allows for the proper representation of crew, so we have to get past our provincial, parochial prejudices about labour unions. If you speak to the leadership of the IMEC, or the leadership of the ITF, or to leading ship mangers, you’ll get a sense of the pride that all of these parties have that they are engaged in comprehensive social dialogue to improve conditions for workers in our industry. BCSN: We’ve hit the million-dollar question — what do crew get paid, what is the average salary these days? PL: Well, 20 years ago, it was $800 USD for a 276-hour working month. That’s for an AB (an “able bodied seaman”). Today, under an ITF-IBF agreement, it’s $1,300 for an AB for the same hours, with improved provisions for injury, disability and death, improved onboard conditions, improved repatriation requirements, improved grievance procedures — and a willingness from ship owners to actually honour the agreement, not simply sign it. But since we’re talking about a maritime industry where a major component is water, we all know water will find its lowest level. We’re starting to see more ship owners moving ships into what are known as “national flags”. There are two or three major national flags where, under ITF policy, they are allowed to pay something known as “ILO minimum plus $50”. An AB in this situation is paid $1,040 USD a month for 312 hours. This is starting to cause a lot of concern among members of the ITF family. Though the ITF agrees with the notion that some major maritime registries truly are national flags, it doesn’t agree that any foreign-owned vessel that might be taken into the registry should automatically fall under national flag conditions. Those vessels can still be deemed to be FOC under ITF policy. Inspectors are noticing more and more of this; it’s becoming a problem. There are some pretty major and well-known companies hiding in national registers right now and it’s an unacceptable situation. Another thing ITF inspectors are on the lookout for are vessels that are covered by the MLC but not covered by ITF agreements,
Though the ITF agrees with the notion that some major maritime registries truly are national flags, it doesn’t agree that any foreign-owned vessel [in] the registry should automatically fall under national flag conditions. where the ship owners are simply paying ILO minimum wages. ILO minimum is not an acceptable standard of salary. It’s never been accepted by the ITF and its affiliates and certainly is not accepted by the worldwide inspectorate. I think a lot of ship owners will try us on with this, but $1,028 USD a month for 312 hours of work per month is hardly a fair exchange. That equals $3.29 an hour. It’s not a fair wage anywhere, especially not for ships engaged in international trade and carrying Canada’s natural resources to Asia. The 312 hours in a month under those terms equals 10.5 hours per day, every day of the month, without a day off. Those terms and conditions will never be accepted by the ITF, and not by Canadians who expect something more from an already controversial shipping industry and controversial resource extraction industry. BCSN: Let’s talk about other issues you track. Start with crew recruitment, development and retention. PL: Since the global downturn in 2008, overall tonnage continues to increase. Ships are coming out of drydocks and not enough ships are going to breakers, so we have too many vessels competing for too little cargo and that’s putting pressure not only on the economics of shipping, but also on competent crewing of vessels. Simply put, the industry demand for seafarers has outstripped the labour supply and competent education and training. We’re starting to see some of the more progressive ship owners work to encourage retention. The first shipping company that came to my attention that actually took retention seriously was TeeKay Shipping. A seafarer wrote to me one time asking about a deduction and a promise of contributions to a retirement fund
February 2014 BC Shipping News 15
Photo courtesy of Peter Lahay
INDUSTRY INSIGHT
ITF and port workers supporting an eight-month lockout of IKEA workers (December 2013).
We are extremely concerned about the impact of criminalization without the right to be presumed innocent also in place. This unfair treatment of seafarers has a tremendous impact on the industry as a whole and asked me if it was legitimate. When I investigated, I found that the ship owner — TeeKay, here in Vancouver — had actually launched a proper employee company pension plan with joint contributions to ensure that the seafarers’ futures were taken care of — much as we expect for ourselves and other Canadian workers. We’re seeing other companies follow this example. We’re also seeing some companies pay re-signing bonuses and now we’re even seeing some companies operate fleets of identical or similar vessels that retained crew can man with minimal orientation. Unfortunately, this doesn’t yet describe the majority of the industry. Shipping companies continue to plunder one another’s resources and not invest enough in crew training nor provide enough berths for cadets. With the increase in tonnage, we’re starting to see extremely rapid promotion of seafarers. This year, I was aboard a ship where the third officer had started off as cadet, was promoted to ordinary seaman and then to third officer, all in one ninemonth contract period. Captains and chief officers are younger and younger. Many of these senior officers do not yet possess all of the desirable life experiences that go into properly managing, maintaining and sailing these vessels from port to port. That’s resulting in an increasing number of injuries, accidents and collisions and sometimes it is affecting discipline aboard the vessels. 16 BC Shipping News February 2014
It’s something that industry is going to have to come to address. I think the only way to resolve this is to provide these crew, who we put under such extreme pressure, with better support and training. We shouldn’t expect that within five years of graduating a maritime academy they will be captains. It’s not safe. It’s not responsible shipping and it doesn’t instill confidence in the public that this industry is well-managed and well-governed. BCSN: I know you have concerns about criminalization. PL: We do. In 2005, the Government of Canada implemented legislation that provides for criminal strict liability for pollution. The regime is contrary to the international conventions to which Canada is party and is contrary to the constitutionally protected right that individuals are presumed innocent until proven guilty. We are extremely concerned about the impact of criminalization without the right to be presumed innocent also in place. This unfair treatment of seafarers has a tremendous impact on the industry as a whole — and in particular, the recruitment of seafarers and possibly the attraction for shipping companies to relocate to Vancouver. The ITF and the International ShipOwners Alliance of Canada have been working hard to amend this regime. We appeared together before the Senate
in 2005 and 2009 and in the House of Commons in 2009. By working together on this issue, the ITF and ISAC have built a bond of trust and have subsequently worked on other issues such as marine pollution, seafarers’ rights and regressive shipping legislation. We recognize common causes when we see them. BCSN: Can you talk about the ITF’s top priorities right now? PL: The priority issue for us is a thorough and proper implementation of the MLC 2006. We’re still in the first year of the convention and still in the process of welcoming new countries into the MLC — countries like Belgium, for example. We’re also looking forward to the successful completion of ongoing talks of the International Bargaining Forum where they are currently negotiating the latest IBF agreement. And we’re hoping for a better understanding in the maritime industry here of the importance of the human element and quality shipping and how they fit together. Every day, we find stories in the media about why we should say no to the various Gateway projects. The public has a clear lack of confidence in the shipping industry and until we recognize and deal with that genuine public concern, we will continue to lose the arguments for further development and for international trade and commerce through the Asia-Pacific Gateway. That hurts everyone. BCSN: Peter, the Asia-Pacific Gateway is still a work in progress. Can you talk more about that? PL: There are two aspects to consider that would alleviate some of the public’s concerns. First, they want to know, rightly, what’s in it for Canadians — why so few jobs seem to be involved. If we’re shipping out raw commodities, we should favour shipping companies that have established a corporate base in Vancouver because they’re providing jobs here and they have roots in the community. In addition, Canada’s marine officers’ union, the Canadian Merchant Service Guild, has called for some Canadian jobs for officers on vessels that are trading our oil and gas to Asia and, dare I say it, consideration of an international second register. More broadly, the Guild, the SIU and ILWU 400 are calling for increased manning on escort vessels. The industry argues that two persons on board an escort tug is sufficient. That may have been true when
INDUSTRY INSIGHT a berthing tug was no longer than 12 metres but these vessels are now in excess of 30 metres, 450 tonnes with three decks and sophisticated machinery. The Canadian public will have a hard time believing the two-man argument. So there are things that we still need to do, issues on which we still need to reach agreement. The only way we can do that is if industry, government and labour are partners in the Gateway. To leave one partner behind is foolhardy. To achieve a so-called social licence, this has to be a wealth creator for the public. There’s no sense doing this if it’s just about corporate profits. If that’s it, shut it down. We’re not interested. All boats need to float on the rising tide of prosperity, all of them. BCSN: Finally, what about abandonments? PL: Abandonment is still a problem around the world. We’re hoping all of the social partners in shipping will support the move under way to fund an insurance policy for cases of abandonment. The new MLC requires owners to have insurance coverage for abandonment but this only covers repatriation costs, not unpaid wages — and there are always wages owing. We’re in an intense dialogue with the International Chamber of Shipping and others about MLC amendments on that. Seafarers have to be paid. It’s critical. I’ll give you a recent example from our waters. The Lyubov Orlova, a Russian-owned cruise ship, sailed into the port of St. John’s, Newfoundland in September 2010 and was arrested by the charterer, Cruise North Expeditions, out of Nunavut. Fortyeight crew contacted us, mostly Russians. They hadn’t been paid for a few months. Unpaid wages were $300,000 USD. After
About Peter Lahay
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eter Lahay grew up dreaming of working at sea. But by the time he was old enough to sail, Canada’s merchant marine “had been sold off for 10 cents on the dollar,” he says, so he joined B.C.’s fishing industry instead, heading out on the Vaimari, “the prettiest West Coast trawler to ever fish the coast”. A few years later, he joined the towboat industry, working at Rivtow and Canadian Tug, which was eventually purchased by Seaspan and where he still holds seniority. During the mid-1980s, Peter began his labour career as an executive member and later vice-president of ILWU Local 400. In 1993, Peter became an ITF inspector in the Port of Vancouver, marking 20 years on the job in December. Peter served at ITF headquarters in London as the first Inspectors Training and Development instructor, playing a key role in developing new regions of ITF activity, trade union development, and campaigning. On his return to Vancouver, he was appointed by the ITF and its Canadian affiliates to the position of Canadian national co-ordinator. He is also the secretary of Canada’s ITF National Maritime Co-ordinating Committee, which meets twice yearly in Ottawa preceding National CMAC.
plodding through negotiations with the Russian owners and the hope that the vessel might be sold to cover outstanding debts and wages, it finally all fell through. It was left to the good people of St. John’s to scrape up food and money for the crew. For months, we had dozens of Russian men and women wandering St. John’s penniless. Finally, the Russian government flew most of the crew home; we kept a skeleton crew aboard, hoping for a federal court order to seize and sell her. Unfortunately, the vessel was no longer in class and at least four ship brokers told us there was no guaranteed commercial value, which left the vessel virtually unsellable. It was worth nothing. The only real interested party left was the port, which stepped up nine months after the last crew flew home and sold the vessel for $275,000. That didn’t even cover port dues owing. The port took all of the proceeds and the crew got nothing. No one else, not suppliers, not crew short their $300,000, not anyone, got a penny. It got worse. That saga ended with the vessel being towed out of St. John’s harbour into a storm by an undersized tug. The tow line parted, leaving the vessel adrift in the North Atlantic, heading towards Hibernia. No one stepped up to the plate to retrieve the vessel, not even as it passed the Hibernia oil platform. To this day, the vessel remains adrift in the Atlantic, its only inhabitants are rats. It’s disgraceful and it’s a black eye on the industry. At a time when we are trying to promote pipelines and exports and shipping as a great job field, what is the public to think? Why would they have faith in an industry that looks like that? Crew, the people we hire to safely man the ships that transport our goods, are too often the very last consideration when decisions are made. I wonder sometimes how very different the industry would look to the world, and how much easier their relations might be, if they put their employees first. Imagine what that world would look like. BCSN
About the ITF
T
he International Transport Workers Federation represents workers in air, rail, road and marine unions. It includes some 700 affiliates in 150 countries, with a combined membership of 4.5 million people. The ITF represents its affiliates at international bodies including the International Maritime Organization, the International Labour Organization and the International Civil Aviation Organization. It is best known for its Flag of Convenience campaign, active for more than 60 years. The campaign aims to drive ship owners back to their national flags and prevent them from avoiding regulations in their home countries. In the meantime, the campaign represents seafarers on FOC vessels, bargaining for and protecting their wages and working conditions. For more information, please visit: www.itfglobal.org
February 2014 BC Shipping News 17
HISTORY LESSON
Photo credit: Dave Roels (www.daveroels.com)
The McBarge: A unique history and a hopeful future By Lea Edgar Librarian/Archivist, Vancouver Maritime Museum
E
xpo 86 was one of the most exciting events in Vancouver’s history. Nobody was calling Vancouver the “no fun city” that year. Expo still lives on in many local residents’ memories and some monuments from the fair are still recognizable around the city today, such as the Inukshuk, the China Gate, and Engine 374. However, many have forgotten a substantial marine structure that survives from the event — Friendship 500, or more commonly known as the “McBarge”. I live on the North Shore and have often seen the structure glumly floating across the water near Burnaby, but I never knew what the structure was. After recently learning its significance, I was intrigued and wanted to share the story of this small piece of Vancouver’s maritime history. In the 1980s, there was a shift in attitude in the food industry. Diner-style eateries were out and trendy bistros and boutique restaurants were in. McDonald’s was losing some of its younger customers
to these bistro-type restaurants, so the company attempted to create something new in the form of the vessel Friendship 500, which McDonald’s called the “Friendship Restaurant”. Many reports fail to mention that it was actually locally designed and built. The architects were Waisman Dewar Grout Carter Inc.; the structural/mechanical engineers were Bush, Bohlman & Partners; the builder of the pontoon was Cefer Designs Ltd.; and the naval architectural firm was Robert Allan Ltd. The vessel was conceived specifically for Expo 86, however McDonald’s also hoped to secure a more permanent location for the floating restaurant after the fair concluded. McDonald’s described it as “affordable elegance”. The Friendship Restaurant was the company’s flagship eatery at Expo 86 and offered outstanding views of the fair. A unique feature was the hidden kitchen. Customers would receive their order via a conveyor belt that delivered the food to the front counter. Also, if trash from customers
ended up in the water, the “Tidy Tug” would scoop it up. Overall, McDonald’s spent $12 million constructing all five locations at Expo, including Friendship 500. The McBarge was very successful and was one of the busiest McDonald’s locations during the event. Despite its success, the McBarge became an unwanted eyesore for the False Creek community, City Council, and Mayor Mike Harcourt in particular. McDonald’s fought to keep it there, however the City of Vancouver sold the Expo land to Concord Pacific who wanted the barge gone. By 1991, after five years of inactivity for the restaurant and approximately $150,000 per year in maintenance, security and insurance fees, McDonald’s gave up the fight to re-open in False Creek and moved the structure to the Goodwin Johnson deepsea dock in Burnaby. In July 1991, McDonald’s offered the McBarge to the Coast Guard as a replacement for the Kitsilano base which was destroyed by fire that year. That idea, like many others
Courtesy of Robert Allan.
Courtesy of Ron Richings.
The past: Advertisement for the McDonald’s Friendship Restaurant. 18 BC Shipping News February 2014
The present: State of the McBarge in 2012.
VANCOUVER MARITIME MUSEUM
Marine paintings, special commissions, talks, reproductions and books...
John M. Horton, Marine Artist
Courtesy of Howard Meakin.
concerning the barge, never came about. By 1995, McDonald’s was in a legal battle with the Province over the whole affair. The company sued the government for reneging on its agreement to find a permanent home for the McBarge. However, McDonald’s did not apply to the City of Vancouver for the required permits and also did not pay its rent and, therefore, lost the suit. The company filed an appeal in 1996, but lost again. By 1998, Port Moody was planning on redeveloping its waterfront and wanted to include the McBarge. In fact, the plans included a maritime centre with a museum, which was to be a satellite of the Vancouver Maritime Museum and had the support of the Director at the time, Jim Delgado. Delgado stated: “We’re very excited about partnering with Port Moody to establish not just a satellite of the Maritime Museum, but a full discovery centre with interactive exhibits and opportunities for learning through technology.” Unfortunately for both the Maritime Museum and the McBarge, Port Moody rejected the plan in October 1998. In 1999, Howard Meakin, a well-known local developer of Gastown and supporter of built heritage preservation, purchased the barge. In 2005, Meakin began making some minor repairs with the intention of incorporating the vessel into a new development. From 2011 to the present, Meakin has been in serious talks with the District of Mission to include the barge in a development called Sturgeon’s on the Fraser. This new waterfront complex will renovate the barge into a combination restaurant, tap house, and float plane terminal, creating a much needed transportation hub for the District of Mission. In
The future: Drawing for Sturgeon’s on the Fraser, the new home of the McBarge. January 2012, the plan successfully passed a third reading by the Mission Council and today, Meakin still plans on moving ahead with the development. Although the McBarge can still be seen dolefully anchored in the Burrard Inlet, there is hope for its revival. Meakin is unique among developers in that he has a strong sense of the value of built heritage. For years he has been fighting to preserve Friendship 500, which he renamed Seaborne II, and give it renewed life in an up-and-coming location. With luck, we will soon see the McBarge back in top form as a shining white beacon for planes and people alike, to float in B.C. waters for many more years to come.
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)
“The Big Push” (24”x36”); oil on board. Contact us re availability. This deep sea is being turned at the entrance to Vancouver Harbour by the then Cates tugs, a clear demonstration of the power of small docking tugs.
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 2014 BC Shipping News 19
2/7/2013 1:14:42 PM
TERMINALS Huge projects mooted but do they help Vancouver’s Port? By Ray Dykes
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wo massive out-of-town projects have been aired recently to help Port Metro Vancouver relieve looming container congestion and improve the overall cargo efficiency of the much-touted Asia-Pacific Gateway. The Ashcroft Terminal — a container shuffling hub right on the main lines of CP Rail and Canadian National — is going ahead with a multi-million dollar rail track expansion and other work. And following a federally funded $225,000 study, the Port Alberni Port Authority is championing its $1 billion transit hub project which is now in the serious stages of a feasibility study. The idea is to use the Vancouver Island port to funnel containers to and from deepsea vessels to warehouses and other facilities up the Fraser River (such as the Hudson Bay warehouse facility) and even as far afield as Tacoma and Seattle. Port Alberni Port Authority CEO Zoran Knezevic has been quoted as saying the transshipment hub could save shippers three-and-a-half days on each shipment.
Two massive out-of-town projects have been aired recently to help Port Metro Vancouver relieve looming container congestion and improve the overall cargo efficiency of the much-touted Asia-Pacific Gateway. For its part, the response to these “helpful hands” by Port Metro Vancouver could be called guarded. Do either of these projects help in any way or even fit into the grand scheme of things for Canada’s busiest and most important trading port?
Real answer
The real answer might be: “Not at the moment, but they could in the future.” Peter Xotta, Port Metro Vancouver’s Vice President Planning & Operations, is familiar with both the Ashcroft Terminal and Port Alberni’s transshipment hub ideas. He notes a degree of optimism in the market and says “it’s good that we are looking at ways to continue to serve Canada’s trade needs”. Xotta appreciates that federal and provincial monies and leadership are helping
the private sector spur on both projects. “These are exciting times where there is ample opportunity to explore these kinds of projects.” But, while the port is supportive and keenly watching the progress of Ashcroft and Port Alberni, Xotta cautions that PMV is “busy moving ahead with those projects that serve us best while also looking at other ways to meet capacity needs”. Port Metro is building an overpass at Deltaport at the seaward end of the causeway which will speed container truck movements — currently, the departing trucks daily get held up by incoming train marshalling, long a bug bear for neighbouring Westshore Terminal’s business traffic and employees who get stalled for up to 10 or 15 minutes by the same
Ashcroft Terminal — adding 6,000 metres of track will triple its capacity and full development will make it the largest container facility in B.C. 20 BC Shipping News February 2014
TERMINALS rail movements. Xotta says the completed overpass project, while modest in scale, will mean “substantial additional capacity for Deltaport”. And then there’s the completely new container facility now mooted for 2022-2023 start up and known simply as Terminal 2 at Roberts Bank. Now amid its environmental assessment stage, Terminal 2 would add another 2.4 million TEUs (20-foot equivalent units) to the Port of Vancouver.
No need?
Critics of the need for any further port container growth say the yearly increase has fallen away and a big new terminal might not be needed at all. Xotta has heard that argument many times and agrees that Western Canada container growth has been slower in recent years than it was up to 2007. For 15 years or more until then it was rocketing along at a compound growth of almost 10 per cent a year. “The growth is now about five per cent a year but that is on a much larger base of business than 15 years ago.” Ways to increase capacity still need to be found for the future. Which brings us back to the Ashcroft and Port Alberni projects and has Xotta adding somewhat cautiously: “From a port perspective, if these projects can enhance capacity we are watching them. We don’t know if and when that capacity boost will materialize and make economic sense for shippers and the railways which need to be the catalyst for them.” He adds that Ashcroft Terminal, some 350 kilometres from Vancouver, needs to test its theory that shippers and the rail, which currently want to travel further east before stopping, want such an inland facility. “What then will be the impact on Vancouver? We feel it will not diminish the need for greater capacity, but just provide an alternative way. We have known of Ashcroft for many years and have had many meetings with them over the years. We won’t pass judgment on that project but we need to concentrate on our projects in hand,” says Xotta.
Pushing on
Meanwhile, Ashcroft Terminal backers are pushing ahead. The principals have been involved in various resource-based businesses throughout British Columbia since 1970. Because of its strategic location, they have chosen to expand the 320-acre Ashcroft facility so that it is probably the only one in Canada that has CN and CP Rail running right through it with capacity to divert full trains onto sidings for staging, custom loading and warehousing. When fully developed it will be the largest container facility in B.C. Kleo Landucci, Vice President Projects & Development for Ashcroft Terminal (also known as 611216 BC Ltd.), says the effect of this is that Ashcroft is the last point going west and the first point going east at which both major railroads can stop and service clients by planning direct shipments to the various docks in the Lower Mainland. Ashcroft Terminal is not new and has been around since the 1980s with rail siding services since the early 1990s. It was incorporated in 2001 and purchased by its current owners in 2004. The Village of Ashcroft is all abuzz about the prospects of an expanded terminal and the jobs and spending it will mean. By February 2014, Ashcroft Terminal will have installed over 6,000 metres of track, tripling its capacity thanks to Asia-Pacific
...Ashcroft is the last point going west and the first point going east at which both major railroads can stop and service clients by planning direct shipments to the various docks in the Lower Mainland. Gateway and other funding. That’s only 15 per cent of its potential footprint and the Master Plan calls for more improvements to mainline access with hook and haul as well as first and last mile capabilities on over 40 km of internal tracks.
Benefits
Landucci says the facility allows the rail to plan a seven-hour haul to directly hit a waiting ship in Vancouver and lists the following among various other benefits: • Efficient accessibility to hold and service full trains without disrupting the mainlines. • The ability to build facilities to meet customer specifications whether it be for smoother staging into the Lower Mainland, custom loading or warehousing services. • Ample room for a new bulk rail car repair facility if desired. • Improved provincial rail and road efficiency. Port Alberni is labelling its multi-faceted project as “Canada Starts Here”. There are actually two other prongs to future development — a long-touted aggregates terminal shipping to
REQUEST FOR EXPRESSIONS OF INTEREST Pacific Pilotage Authority Canada
PILOT BOAT SERVICE IN CAPE BEALE (PORT ALBERNI) The Pacific Pilotage Authority (“PPA”) is inviting expressions of interest from parties interested in providing a pilot boat service in the Cape Beale (Port Alberni) area. Parties wishing to find out more about this opportunity are asked to contact PPA by telephone at 604-666-8575 to obtain the background documentation. Expressions of interest must be received via e-mail at info@ppa.gc.ca no later than Friday, January 31st at 4:00 p.m. PST.
February 2014 BC Shipping News 21
TERMINALS terminal.” The feasibility study is expected to be completed by mid-March to early April and the port says it already has interest from potential global investors. “We have also established a protocol with the local Huu-ay-aht First Nation,” McCormick adds. “They have a treaty (signed in 2007 with the B.C. Government) and traditional territories where potential sites are being explored.”
Image courtesy of Cargo Velocity
World class
Artist’s rendering of a possible design for PATH, the Port Alberni Transshipment Hub project. California and a possible LNG facility. There’s also the prospect of a coal export facility if Compliance Energy ever gets through the current environmental phases of its development. But PATH, the Port Alberni Transshipment Hub project, is the major focus of attention now as it goes through its feasibility stages. The port authority has assembled what David McCormick,
22 BC Shipping News February 2014
its Director of Public Relations & Business Development, calls a “dream team” of consultants and other experts to guide it on its way including global terminal specialists Hatch Mott MacDonald and with SNC Lavalin doing the general environmental overview. “We are looking at adding efficiencies,” says McCormick. “We aren’t looking to compete with any existing or proposed
At the end of the day, Port Alberni plans to become a world-class deepsea port and jumped at the opportunity to go on a trade mission last November to Asia with B.C. Premier Christy Clark. In its delegation were CEO Knezevic, board member Darren De Luca, Huu-ay-aht representative John Jack and consultant Stockwell Day. “A tremendous amount of contacts were made and there was a high awareness of Port Alberni,” says McCormick. “We have been exceptionally busy building relationships since then.” Port Alberni sees a new marine highway from its transshipment hub as “an alternative worth exploring” and has won unanimous support from Metro Vancouver. Currently, little or no containers are barged on the Fraser River, but Port Alberni is convinced it could barge containers there — up to 500,000 TEUs a year — and bring benefits that could: • Maximize the use of existing port infrastructure • Reduce traffic congestion • Bring demonstrable environmental benefits • Provide a non-competitive alternative And that’s not to mention the huge economic driver for the Alberni Valley and Vancouver Island where jobs and wealth-creating projects have always been a struggle. But, first for both Ashcroft and Port Alberni, investors are needed, plus buyin from the railways and shippers. The numbers have to make sense to all if either project is to realize the potential the proponents currently see. And then there might be a bit more excitement from one potential beneficiary, Port Metro Vancouver. 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.
DISTRIBUTION HUBS
Boundary Bay Industrial Park anchors Delta’s new distribution hub By Paul Tilbury
Chief Operating Officer, The Dayhu Group
C
ommercial real estate near Deltaport, Canada’s largest container terminal, is about to see a complete transformation with the opening of the new billion-dollar highway known as the South Fraser Perimeter Road. Along with rising port volumes and the expansion of the nearby airport, the new highway has experts touting the area as the next big distribution hub for sizable businesses both from Canada and the U.S. A key part of that new distribution hub is The Dayhu Group’s Boundary Bay Industrial Park — the area’s largest new industrial project. Construction has been underway since the summer, and this fall, the first tenant was secured with a 100,000 square-feet lease to Apps Express, a fullservice national transportation company providing warehousing, receiving and distribution for offshore goods and intraB.C. and Alberta trucking. “We needed proximity to the port,” says Apps Express president Rob McDonald. “It was difficult for our trucks to get out of Richmond (the previous facility) or back in, but the new highway gives us more than one way to get into and out of Vancouver.” McDonald’s company works with major Canadian retailers like Canadian Tire and Toys ‘R Us and he believes projects like the new Boundary Bay
Industrial Park will pave the way for more large-scale retailers and their distributors to locate in Delta’s new industrial hub, rather than in Alberta where there are more choices for large industrial space. Making the trip from the port over the Rocky Mountains and back to Vancouver again because the only options for large warehouse space are in Alberta is not costeffective and has stalled the growth of the B.C. economy. Boundary Bay will be complete in May 2014 and will offer a well-built, welllocated space for large companies. It is just minutes away from Deltaport, the largest container terminal in Canada, handling more than 70 per cent of the region’s inbound container shipment volume. The project also offers excellent access to the South Fraser Perimeter Road, a new, billion-dollar, four-lane expressway that connects the port with Highway 1. Boundary Bay’s location is ideal as it provides unparalleled access to the port and the highway, proximity to the Canada/U.S. border and to Metro Vancouver’s rail network — resulting in huge savings in transportation and logistical costs for companies. The benefit of direct, efficient connectivity between Deltaport and the new highway system is now set to set to
establish Delta as a key industrial, warehousing and distribution hub. The new highway, in addition to the expansion of the port, makes Delta more attractive to industrial property investors. But there are few opportunities to develop industrial real estate projects of this size. Tier one industrial distribution space in the Vancouver market is very difficult to find. The Boundary Bay Industrial Park is effectively the only option under construction that can offer contiguous space of this magnitude — up to 900,000 square feet. The Boundary Bay project also features two large buildings of 440,000 square feet each as well as 156 loading docks and 200 trailer parking spaces. Another unique feature of Dayhu’s distribution facility is its 36-foot ceilings, allowing for significantly more cubic storage. The new ceiling heights allow for a smaller building footprint and to build up rather than out, increasing storage capacity at a time when light industrial storage space is limited. Paul Tilbury is COO of The Dayhu Group, a privately-held, family-owned business. With the completion of Boundary Bay Industrial Park, the company will own and manage 4.5 million square feet of industrial and commercial property in B.C. and Alberta.
Artist’s renditions of the Boundary Bay Industrial Park, scheduled for completion in May 2014 February 2014 BC Shipping News 23
TRANSPORTATION SURVEY Surface Transportation Annual Review results
Economic and business outlook brightens for 2014 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 undertake the first Surface Transportation Annual Review (STAR) survey. Respondents were asked for their opinion on three topics: • General economic outlook and business confidence. • Logistics performance perceptions and assessment of British Columbia-based ports and transportation system. • Management priorities in regard to logistics, transportation and sustainability initiatives. This article highlights the STAR survey findings regarding the general economic outlook and logistics management priorities for 2014.
Economic context
Canada’s and British Columbia’s economic performance in 2013 was lackluster. The Royal Bank of Canada called the economic expansion “spotty” and reported real GDP growth of 1.5 per cent in B.C., down from 1.8 per cent and 2.8 per cent in 2012 and 2011 respectively. The Bank of Canada’s Business Outlook Survey stated that “businesses reported slower or negative sales growth over the past 12 months” when it was released in October 2013. Yet, by early December 2013, BMO Capital Markets Economics
Exporters of goods were decidedly more upbeat about their economic expectations than those involved in either just the import or domestic sectors of the economy. reported that the real GDP growth in Canada had reached 1.7 per cent, the same as the previous year. Logistics and transportation professionals no doubt felt the gyrations in economic activity last year. BMO Capital Markets Economics reported that export growth increased sharply in the first two quarters of 2013 before diving into negative territory in the third quarter and sustaining a positive rise by year’s end. Canada’s pattern of import performance mirrored the quarterly cycle of the export sector but at a significantly lower level of growth.
Exporters will lead the way in 2014
Expectations about Canada’s 2014 economic and business performance continue to brighten. The STAR survey revealed that: • Over 58 per cent expect Canada’s economy to be somewhat, or significantly improved in 2014. This sentiment was strongest from those involved in providing custom-tailored logistics
solutions, the warehouse and container sectors. • Exporters of goods were decidedly more upbeat about their economic expectations than those involved in either just the import or domestic sectors of the economy. Figures from Export Development Canada’s (EDC) Merchandise Export Forecast Overview 2014 would support the optimism found in the STAR survey. Growth expectations for important export commodities shipped through Canada’s Asia-Pacific Gateway were strongly positive for most commodities except fertilizers. For example, the growth forecast for forestry, consumer goods and metal, ores and other industrial products were 11 per cent, eight per cent and five per cent respectively. The export outlook for fertilizers expected a drop by five per cent in 2014.
Price stability expected in 2014
With the economy gaining momentum, the STAR survey asked firms about their
Port A l b e rni Po rt Au tho ri t y
Canada’s Inlet Port on the Pacific Port Alberni Port Authority 2750 Harbour Road, Port Alberni, BC 250-723-5312 www.portalberniportauthority.ca
24 BC Shipping News February 2014
TRANSPORTATION SURVEY expectations for revenue growth and price inflation. The responses indicate that revenue growth expectations are markedly higher for firms involved in exporting products through B.C. ports compared to those involved only in the import, or domestic logistics and transport sectors. Survey respondents expressed a narrow range of opinions about the possibility of price increases. The table below summarizes those logistics services where STAR survey respondents expected the highest and lowest expected price increases in 2014. Note however, that the results were expressed in the category that corresponded to “about the same” as last year, thus supporting the survey’s earlier finding that revenue growth is also expected to be moderate in 2014. Highest expected price increases • Pilotage • Port Authorities • Long-haul Truckers • Import Distribution Centres • Harbour Tug Assist Lowest expected price increases • Shipping Agents • 3PLs • Trade & Transportation Ass. • Transload Operators • Tug & Barge Services
Controlling/reducing costs top logistics management priority
STAR survey respondents indicated a number of positive developments for international trade. The factors with the highest-ranking positive influence in 2014 were: • Fast growing economies becoming more important; • Economic growth in China; and • Increasing North American energy production. The Fall 2013 EDC Trade Confidence Index report found that firms were continuing to diversify their markets. The most significant new market destinations reported by companies included China, the U.S., Australia, the U.K., Mexico, India and Brazil. STAR Survey respondents ranked their most important logistics and transportation challenges in 2014 as those related to market and business conditions as well as those related to regulatory, safety, security and environmental issues. With economic and business confidence rising, it is encouraging that those involved and
With economic and business confidence rising, it is encouraging that those involved and using Canada’s Asia-Pacific Gateway are embarking on initiatives to control costs and access new markets. using Canada’s Asia-Pacific Gateway are embarking on initiatives to control costs and access new markets. Market-related ranking • Controlling reducing costs • Accessing new markets • Increasing sales/orders Regulatory-related ranking • Safety • Environmental compliance • Compliance for customs or security reasons Corporate safety and environmental compliance are also a focus of 2014 management priorities for those using B.C.’s ports. Yet, it is somewhat disconcerting to find that some STAR survey respondents are being forced to deal with the availability of low sulphur marine fuel in 2014 as well as negative impacts of environmental regulations.
Full release of findings
BC Shipping News subscribers will receive electronic access to the final report in February 2014 so please ensure that Jane McIvor has your current e-mail address. In the STAR survey special supplement, readers will no doubt be interested in the results involving service and
infrastructure quality. While the overall response to the topic of service quality was “market perform”, respondents raised a number of cautionary flags as they pertain to marine terminals, port authorities and rail carriers. The response to the infrastructure quality question raises the important issue of whether the challenges will prevail and thus impede our future growth. The poor quality of local trucking routes was the most acute infrastructure challenge on the immediate horizon. Thanks to all who have participated in the first Surface Transportation Annual Review survey. Your participation has been fantastic. We look forward to your letters to the editor and e-mails. An in-depth look at some specific STAR survey findings will no doubt appear in future articles. 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.
February 2014 BC Shipping News 25
THE YEAR AHEAD
The year ahead for the shipping industry By Captain Stephen Brown President, Chamber of Shipping of British Columbia
O
ne hundred years ago, 1914 was a milestone year for the international marine industry with the opening of the Panama Canal. The aging French crane boat Alexandre La Valley crossed the canal from the Atlantic in stages during construction, finally reaching the Pacific on January 7 that year. The first official transit took place on August 15 when the U.S. flag steamer SS Ancon made a full transit as part of the project’s formal opening ceremonies. A second event to make a lasting impact on the marine industry was the outbreak of the First World War in July 1914. During the course of the war, some 5,000 allied merchant ships were sunk and some 15,000 merchant seafarers lost. Looking back at my article this time last year, we contemplated the following developments for 2013: 1. The European economies will continue to struggle under the threat of continued recession and the need for financial bail outs.
On a local level, the more extreme environmental and self-interest groups will step up their campaign of misinformation designed to discredit our industry... 2. The pace of recovery of North and South American economies will gather steam and this will be reflected in steadily improved trading prospects. 3. The primary global driver will be China, the slowing of whose economy in 2012 was managed to ensure a “soft landing” rather than a bust. I would predict that the economies of China and the Asian tigers will regain steam in 2013 and that the Pacific will be the preferred place to do business. 4. There has to be another round of consolidation in the container industry. Years of minimal or no returns on investment are unsustainable and building ever bigger ships without a stable freight rate mechanism to support them is not a solution
– it is, in fact, compounding the problem. 5. Piracy will continue to be the scourge of the marine industry both off Somalia and Nigeria. Half-starved and often mentally deranged seafarers, after suffering many months of mistreatment at the hands of their captors, remains a blight on our industry and the governments that sit on their hands whilst it happens. Commenting on the first three predictions, I believe we were pretty much spot on with the notable exception of the U.K. economy which has turned the corner. On the fourth point, the emergence of the proposed P3 Alliance comprising Maersk, MSC and CMA CGM should not have been a surprise and the timely response of the so called G6 Alliance
Photo source: www.vancouverairportfuel.ca/
Photo courtesy of TransMountain
Conceptual image of the new VAFFC terminal. 26 BC Shipping News February 2014
Artist’s rendering of the redeveloped TransMountain terminal.
THE YEAR AHEAD Projects to expand export coal capacity at Westshore, Neptune and Ridley Terminals...will complete in 2014 and anything other than approval of the Fraser Surrey Docks project for a new coal export facility is unthinkable. comprising NYK, Hapag-Lloyd, OOCL, APL, HMM and MOL was entirely predictable. More recently, we have learned of a prospective tie up between HapagLloyd and CSAV. On the fifth point, ships continue to be attacked in the Gulf of Aden off Somalia but in 2013, none were taken for ransom. On the other hand, the situation has deteriorated off West Africa with there being multiple successful attacks on ships and oil platforms leading to crew kidnappings and/or stealing of cargo. That some West African governments are complicit in this problem is beyond doubt and those same governments have also denied ship owners the right to employ onboard armed guards. We are therefore pessimistic of any improvements in the regional security situation in 2014. We also spoke last year of the likely ramifications from the Costa Concordia disaster, environmental progress in reducing vessel emissions, treatment of ballast water and the various development projects along the B.C. Coast designed to handle major expansions of commodity exports. So what’s in store for us in 2014?
(VAFFC) project to build an aviation fuel-receiving terminal on the Fraser River to provide YVR with a longterm sustainable solution to increased demand for fuel. The irrational opposition mounted to this project resulted in unnecessary delays but we must hope that this is now behind us. However, the filing in December of a Facilities Application by the Trans Mountain (Kinder Morgan) project to almost triple the volume of oil to be exported from Westridge Terminal in Burnaby is certain to generate a concerted campaign by opponents of all persuasions. Whilst it is not our responsibility to argue for oil exports, it is our job to defend our industry against exaggeration and outright misinformation when it comes to safety and we will continue to do so. Likewise, the campaign against coal exports will continue for a while yet. That 41 per cent of world energy is generated by coal-fired power plants seems not to register with anti-coal campaigners and that figure is unlikely to decline any time soon. Projects to expand export coal capacity at Westshore, Neptune and Ridley
Terminals (soon to be sold by the federal government) will complete in 2014 and anything other than approval of the Fraser Surrey Docks project for a new coal export facility is unthinkable. On the LNG front, 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 • Proposed B.C. government royalty taxes • First Nations demands for project equity • Uncertain LNG sales price • Strong overseas competition for market share We may also see the beginnings of consolidation between LNG projects. For certain, only a handful of the 15 or so projects so far announced will move forward despite seven export licences having being issued to date. Given the provincial government’s enthusiasm for LNG to make a dent in our $58 billion (and climbing) provincial debt, the stakes are high, but so too are the challenges to be overcome.
Tanker panel report
Related to maintaining progress on project developments is the need to enhance
Energy projects
On a local level, the more extreme environmental and self-interest groups will step up their campaign of misinformation designed to discredit our industry for the role we play in facilitating Canada’s export resource development. This is inevitable following the recommendation in December by the Joint Review Panel for the Northern Gateway Project that the government approve the project. The Panel stated: “Based on a scientific and precautionary approach to this complex review, the project, if built and operated in compliance with the conditions set out in its report, would be in the public interest.” The Panel found: “After weighing all the oral and written evidence, that Canada and Canadians would be better off with the Enbridge Northern Gateway Project than without it.” Similarly in December, both the B.C. Government and Port Metro Vancouver gave the green light to the Vancouver Airport Fuel Facility Consortium February 2014 BC Shipping News 27
THE YEAR AHEAD Also of significance to the grain industry, June 2013 saw the passage of Bill C-52 — The Fair Rail Freight Service Act — which confirms in law the right of rail shippers to a service agreement; provides for an arbitration process to obtain a service agreement if one can’t be directly negotiated; and provides for fines of up to $100,000 per incident against the railways for breaches of service agreements.
The fourth quarter of 2013 saw the first shoots of spring for shipping markets after five years of almost unbroken misery. our social licence. The report of the Tanker Safety Expert Panel on “Canada’s Oil Spill Preparedness and Response Regime”, released on December 3, is an important milestone in this process but we now need to convert recommendations to reality. We therefore look forward to working with government in achieving exactly that.
Container handling
How to manage the steady if not spectacular growth in container throughput is exercising many people’s minds. For the past three years, the problems have been primarily focused on the various gate reservation systems and access to those reservations, the interface between trucks, railways and terminals, the disproportionate percentage of one way moves and overall productivity. The use of GPS, which is now fitted to around 1,000 of the 2,000 trucks regularly servicing the port, has been invaluable in gaining a more accurate understanding of truck movements and associated delays, an integral part of the process in developing meaningful solutions. In 2014, we will begin to see important changes.
Grain handling
The industry is finding its feet in adjusting to the demise of the Canadian Wheat Board’s role in providing co-ordination to grain exports. The shipping delays experienced in 2013 are still a fact of life but Richardson International is an example of a terminal taking the lead by investing in much needed new handling and storage capacity. The 2013/14 crop year has the prospect of being a record for Vancouver and indeed the whole West Coast so far as grain exports are concerned so it is important for us to come to grips with the new situation.
Proposed Southern Georgia Strait, National Marine Conservation Area
After a considerable lobbying effort towards both the federal and provincial governments, we are hopeful that, in 2014, there will be reconsideration of this initiative. Push back has also included the forestry, industrial, fishing and recreational sectors doing business within the proposed NMCA on the simple basis that no case has been made to impose such a zone along with all the potential constraints on marine-related activity that might follow.
International issues
The fourth quarter of 2013 saw the first shoots of spring for shipping markets after five years of almost unbroken misery. Capesize bulk carriers, VLCCs and product tankers were all trading at much improved levels. In contrast, the container industry continues to struggle with chronic over-capacity as lines build ever bigger fuel-efficient vessels in an attempt to reduce unit costs. The prospects for sustainable market improvements are being compromised by work-hungry shipyards continuing to offer newbuilds at very attractive prices and the willingness of Chinese banks to provide financing in support of that country’s excess of yards. 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. For the cruise industry, the return to some semblance of health of the U.S. and European economies will have a really positive impact on passenger load factors and revenues.
Photo source: Parks Canada
Environment
The Proposed National Marine Conservation Area in the Southern Georgia Strait. 28 BC Shipping News February 2014
We predict that the IMO’s 2004 International Convention for the Control and Management of Ships’ Ballast Water and Sediments will finally be ratified in 2014 now that a more flexible implementation schedule has been agreed. On the other hand, the refusal of the U.S. to support the international convention in favour of its domestic legislation is really unfortunate from a consistency perspective and will result in a stand-off. It is, at best, unhelpful for the U.S. to continue to enact ballast water treatment
THE YEAR AHEAD standards which nobody, including themselves, can meet. Also likely to be a hot topic for 2014 is the fact that, effective January 1, 2015, vessels calling at California ports will be subject to new rules to curb hull bio-fouling. As with ballast water treatment systems, the objective is to curb the spread of invasive aquatic species. Draft California rules not only state the percentage of bio-fouling permitted on the underwater parts of the ship’s hull, but also places focus on other areas where bio-fouling can accumulate. We can also anticipate that as 2014 progresses, minds will be focused on the stricter Emissions Control Area (ECA) fuel standards which take effect on January 1, 2015. Questions of supply and price are once again certain to dominate the discussion and also incentivize more owners to explore scrubber technology and, in short sea trades, the LNG fuel option. The Alaska cruise trade is very vulnerable to these pressures. Meanwhile, efforts to achieve GHG emissions reductions are moving into what is being termed as a Monitor, Record and Verify (MRV) phase. This is designed to
...2014 will, in our view, be a truly pivotal year as the conversations surrounding resource development and First Nations Treaty and Land Rights claims take centre stage. move the discussion along whilst avoiding the heavy political fall-out that accompanied proposals for a variety of Market Based Measures (MBM). The European Union (EU) has been trying once again to set the pace on this issue with unilateral proposals which are predictably generating push back in favour of an IMO-driven process. However, at the end of the day, there does seem to be a growing recognition that it is a combination of speed reductions and improvements in engine technology that will generate meaningful GHG reductions.
resource development and First Nations Treaty and Land Rights claims take centre stage. For our part as the marine industry, we will continue to demonstrate to the vast majority of fair-minded British Columbians the seriousness with which we treat our responsibility towards the entire Asia-Pacific Gateway without compromise to our stewardship of B.C.’s coastline. In so doing, our objective must be to harness recognition for the importance of every sector of our industry to the lives of millions of Canadians. 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.
Conclusions
Many challenges were met in 2013 but even more lie ahead in 2014 if the “promise of projects” is to be converted to “delivery of projects”. For this reason, 2014 will, in our view, be a truly pivotal year as the conversations surrounding
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February 2014 BC Shipping News 29
CONTAINERS
Container liner companies By Syd Heal
T
It’s something of an unwinnable game. When Maersk makes a move to capture more market share with even bigger ships, it immediately triggers a chain reaction... with the big three being from Denmark, Switzerland and France (Maersk, MSC, and CMA-CGM ) plus Germany with at least three world-scale liner companies (Hapag Lloyd, Hamburg-Sud, Rickmers and others), and the Far East with strong companies based in China, Taiwan, Japan, South Korea, the Philippines and Malaysia. Traditional maritime countries such as Britain, the United States, Holland, Italy, Sweden and Norway, have dealt themselves out of the big leagues among the liner companies mostly as a result of successive takeovers and regroupings. Chile, Israel
Photo by Dave Roels (www.daveroels.com)
o date, I have commented on the container shipping industry almost entirely from the viewpoint of the leasing companies led by Seaspan, Costamare, Danaos and some of their smaller brethren, all of whom, by virtue of their stock market affiliations, are listed in New York or on the NASDAQ. In this issue, I want to look at the liner companies, i.e. the owners and operators of comprehensive transportation systems which represent huge fleets with equally huge inventories of containers and all the appurtenances in the way of offices around the world, international staff, massive computerization and organizational facilities. The list to folow gives some idea of the conglomeration of the liner companies that serve the B.C. market. The two main regions where these liner companies hail from are Western Europe,
Keeping the flow of containers moving is a challenge that B.C. ports and terminals meet every day. 30 BC Shipping News February 2014
and the Emirates are also home to significant container liner companies that are, for the most part, state-sponsored and are outside of the above main groupings. The way that world shipping has changed is illustrated by the Maersk fleet. Something like 15 all-powerful British liner companies and several Dutch lines that dominated liner shipping until containers took over are embedded in the historic structure of Maersk alone and there are other examples such as the Furness Withy group within Orient Overseas of Hong Kong. Table 1 lists the companies that call at our West Coast ports. Most of their fleets are a mix of owned vessels or long-leased ships from the container ship leasing companies or composite companies with a broad range of vessels in their fleets with leased-out container ships being just one of several categories. The way the industry moves sees the liner companies either spearheading further growth with those that are the market leaders making the moves that the lesser companies generally are forced to follow if they wish to maintain market share — if there is any one company that tops the bill in this regard, it is clearly Maersk who has driven up vessel sizes like none other. It’s something of an unwinnable game. When Maersk makes a move to capture more market share with even bigger ships, it immediately triggers a chain reaction that sees the other liner companies responding with their replies. When the dust settles, the industry goes through severe over
CONTAINERS tonnaging which can take years to adjust with marginal rates, accelerated scrapping and a shorter economic life. It reminds one of the battleship races between the major naval powers before the First World War that continued until the aircraft carrier was recognized as the capital ship of the future. Then it was all to do with firepower, but now it seems to be a race to the bottom, driving the rates down, and the victor being the one who is still in business after all others have been vanquished. Many of the outside public who take an interest in the container shipping industry are investors who follow the affairs of Seaspan and the other leasing companies as their activities are fairly easy to follow, but getting one’s head around a detailed understanding of the liner companies is a much more extensive task. For example, as the market leader, Maersk operates about 587 owned and leased container ships including the largest fleet of ultralarge container ships in the world. It functions with a staff ashore and afloat of some 108,000 and claims to use a fleet of 1.9 million containers of all types. This is about 700,000 short of its total shipborn capacity so when all the extras that are at various stages ashore are factored in, the total committed to Maersk services is probably over three million teu. By comparison, MSC, the second largest liner company, claims only 29,000 employees but states that its container inventory numbers are even more than Maersk with a count of 2.3 million containers which is actually about equal to its ship-born capacity. One can only guess at its total requirement when taking into account its inventory of additional containers. It seems obvious that there is no uniformity in reporting the make-up of each company and container inventories and the degree between which it identifies owned and leased container units. Indeed, just as there has been a huge growth in the fleets of those companies providing ships for long lease to the liner companies, so also are a considerable portion of container inventories leased from specialist leasing companies. There are four such leasing companies that have gone public on the NYSE with their owned inventories of containers accounted for as 20 foot equivalent units (teu). • Textainer Group (Reg. in Bermuda) with 3.0 million units • TAL International (Reg. in New York) with 1.6 million units
Table 1: List of container liner companies calling at B.C. ports
Full Name A.P. Moller - Maersk A/S China Ocean Shipping (Group) Compnay China Shipping Container Line Ltd. CMA CGM S.A. Evergreen Marine Corp (Taiwan) Ltd. Hamburg Sud-Amerikanische Dampschifffahrts Hanjin Shipping Company, Ltd. Hapag-Lloyd, AG Hyundai Merchant Marine Company Ltd. Kawasaki Kisen Kaisha Ltd. Mediterranean Shipping Company S.A. Mitsui O.S.K. Neptune Orient Lines (APL ) NYK Container Line Ltd. Orient Overseas Container Line Ltd. Pacific International Lines (Pte) Ltd. United Arab Shipping Agencies Co. Westwood Shipping Lines, Inc.1 Yang Ming Marine Transport Corp. Zim Integrated Shipping Ltd.
Domicile Short Name Denmark Maersk China COSCO China CSCL France CMA CGM Philippines Evergreen Germany Hamburg Sud S. Korea Hanjin Germany Hapag-Lloyd S. Korea HMM Japan K Line Switzerland MSC Japan MOL Singapore APL Japan NYK Hong Kong OOCL Singapore PIL Emirates UASC Japan Westwood Taiwan YML Israel ZIM
Westwood was until 2013 a Weyerhaeuser Subsidiary until sold to a Japanese group headed by Sumitomo Warehouses. Information supplied courtesy of Port Metro Vancouver
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CONTAINERS One of the biggest challenges for the liner companies is keeping a flow of containers moving so that full ones can reach their consignees efficiently and in a timely fashion... • Sea Cube Leasing (Reg. in New Jersey) with .8 million units • CAI International (Reg. In San Francisco), number of units not released An interesting feature of the container leasing business is that the Ontario Teachers’ Pension Plan acquired the entire share capital of Sea Cube Leasing in April 2013. OTPP confirmed to its
32 BC Shipping News February 2014
membership that the long-term guaranteed-growth prospects, combined with a steady income stream, were the big attraction. Also CAI International, with the smallest inventory of containers, has a big investment in the specially designed and leased-out flat cars used for rail transport of containers on North American rail lines.
It is also interesting to note that while the U.S. has only two small domestic Jones Act carriers (Horizon and Matson) operating container shipping lines, the Americans have a major stake in the container leasing sector that is probably only exceeded by the German companies which own a big slice of the ship leasing business as well as the leasing out of containers by companies specializing in leasing or financing capital assets. With 5.4 million containers owned and leased out by the first three companies named above, and given that there is additional leasing capacity from capital resources in Europe, East Asia and the Gulf Emirates, it should surprise no one that there is a huge industry growing rapidly as more operating companies turn to leasing as a means of renting someone else’s capital, particularly in an era when bank capital is very restricted. One of the biggest challenges for the liner companies is keeping a flow of containers moving so that full ones can reach their consignees efficiently and in a timely fashion and serious bottlenecks are minimized as empty containers build up awaiting return to their paying customers. I have not been a witness to the workings of a container liner company, but it takes little to imagine the complexities of keeping the containers moving. Traffic managers and dispatchers and their computers must have a full-time job tracking boxes wherever they might be in the system and having a predetermined quantity of empties available at dock side for reloading into empty slots as the ship discharges full containers. Many empty containers are temporarily stored in compounds well away from the dockside terminals where they take up a lot of space. That situation must have improved in the last decade or so, as they are not seen in the volumes once highly visible as stored inventories were out of the traffic stream for lengthy periods. The situation was so critical in the 1990s that a small container ship operated a service collecting empty containers all along the Pacific Coast to points were they could be assembled for return to the loading point in China or elsewhere. With improved facilities, that service no longer seems to be in use. Syd Heal, a veteran of the marine industry and a prolific writer and publisher of marine books, can be contacted at: richbook@shaw.ca.
CARGO LOGISTICS
Local logistics serve global opportunities By Darryl Anderson
Managing Director, Wave Point Consulting
P
ort Metro Vancouver has been successful in maintaining their lead as Canada’s predominate container gateway. The economic impact from this form of international trade is substantial. The 2012 Port Metro Vancouver Economic Study estimated that container traffic generates more than 10,000 person years of direct employment and nearly 22,500 person years of total employment. Expectations about rising container traffic volumes and increasing trade with Asia have resulted in substantial investment in import distribution centres, new and increased use of transload facilities and employment in the drayage sector. This article will explore the local logistics opportunities and issues that accompany growth in port container traffic.
Import distribution sector
Capital investment in new import distribution centres (DC) has been in direct response to PMV’s success. Industry
Expectations about rising container traffic volumes and increasing trade with Asia have resulted in substantial investment in import distribution centres, new and increased use of transload facilities and employment in the drayage sector. Canada partnered with the Canadian Manufacturers and Exporters and the Supply Chain & Logistics Association Canada to produce Global Business Strategy and Innovation: A Canadian Logistics Perspective. The 2009 report revealed: • Growth in British Columbia (79 per cent) was due to major investments in container deconsolidation facilities; • Not only large firms but small and medium-sized firms were investing in DCs to better respond to customer mandates and to integrate further into global value chains. Avison Young, in their fall 2013 Metro Vancouver Industrial Overview, reported:
“Metro Vancouver’s industrial inventory has continued to expand rapidly since spring 2013 with almost 1.4 million square feet (msf) of new product added in the past six months and nearly 1.8 msf currently under construction. Richmond’s industrial market has seen the greatest increase with more than 560,000 sf added to the 36.8-msf market. Delta has also recorded a significant increase with an additional 220,000 sf added to its growing 20.8-msf industrial market. More than 150,000 sf was also added to Surrey’s 27.9 msf of industrial product during the past six months. Delta currently has the most new industrial product under construction (~680,000 sf) due primarily to Phase
Distribution centres will soon be seeing the benefits of the new South Fraser Perimeter Road which creates much better access to Deltaport. Photo credit: BC Shipping News
February 2014 BC Shipping News 33
CARGO LOGISTICS I of Dayhu’s Boundary Bay Industrial Park and Grosvenor’s Millennium VI development on Annacis Island.” Richard Wozny, Principal of Site Economics Ltd., commented that “much of the new investment is speculative construction that is being driven by the undeniable fact that the completion of the new South Fraser Perimeter Road (SFPR) will shape the local logistics landscape for years to come. The main areas to benefit are the Tsawwassen First Nation Industrial Lands, the Boundary Bay Airport Lands and the extensive underutilized industrial lands between the river and SFPR.”
Photo courtesy of Harbour Linx Services
Transload sector
Container traffic generates more than 10,000 person years of direct employment.
The West Coast’s Newest Old Shipyard!
There are numerous companies in the Lower Mainland logistics marketplace that provide transload facilities. These companies primarily serve the export needs of Western Canadian forest product, mining and agricultural producers. The larger firms (Euro Asia Transloading Inc., Coast 2000 Terminals Ltd. and Westran Intermodal Ltd.) have a diversified product mix handling lumber, pulp, OSB and other products such as steel/coils and pipes. Catalyst’s Surrey Distribution Centre’s transloading activities support both the firm’s own and other third party paper export requirements. Firms such as RayMont Logistics and Global Agriculture Trans-Loading Inc. specialize in transloading bulk agricultural commodities from the Canadian Prairies for export. When Morley Strachan, President of Coast 2000, spoke at the Port Metro Vancouver Logistics Interface conference, he made a number of important observations about the transload sector. Perhaps, contrary to public perception, the transload industry is vital to local sustainability and liveability initiatives because they have the potential to “minimize empty truck moves by linking imports with our export cargo: optimizing triangulation opportunities. Consolidating export products and empty containers on the same site minimize the need to truck to several locations, reducing truck footprint and impact on residential streets.” Yet Strachan cited the “lack of available land for further expansion” as a challenge going forward in light of the positive long-term outlook for containerized exports to Asia. For 2014, Morley indicated that the business outlook for the transload sector remains strong; yet those facilities that handle lumber export to Asia may see their volume decline in the coming year if the U.S. economy and housing market strengthens.
Drayage sector
9311 River Drive Richmond, B.C.
Phone: 604-270-2775
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34 BC Shipping News February 2014
The Asia-Pacific Skills Gateway Table-initiated report Drayage Owner-Operators noted that PMV handled 2.7 million 20-foot equivalent units (teu) of import and export containers shipped to and from a wide range of domestic and international locations. Lead author, David Colledge estimated that there were about two million truck-trip legs required to handle this volume of container traffic moving through the gateway. The drayage sector is vital to the Pacific Gateway’s ongoing reputation for supply chain reliability since 37 per cent of import container traffic leaves PMV’s marine terminal by truck according to Transport Canada data contained in their presentation called Canada Supply Chain Performance Monitoring. However, this segment of the local logistic industry is not without its challenges, noted the recent report Labour Force Profile: Port Drayage Drivers in Metro Vancouver. Phil Davies, lead author for this Asia-Pacific Skills Gateway Table initiative, wrote that “based Photo credit: BC Shipping News
CARGO LOGISTICS upon a comparison between the 2007 study and this study…there appears to have been a decline in drayage efficiency”. Commenting on the issue of drayage efficiency, Gordon Payne, Chairman of Harbour Link Container Services Inc., remarked that “80 per cent of the trucks that visit the port today complete one-way container trips. A lot has to do with the challenges being encountered by terminal operators being able to adjust their operations to the changes in the traffic flows that evolve daily from the transit of containers between ships at berth, the rail intermodal yard and between trucks to/ from the gates.” In late October 2013, the long festering issue of efficiency in PMV’s drayage industry was once again in the news. Frustration with the present system became public when some truck drivers from the non-unionized segment of the local industry established the United Truckers Association (UTA) and voted to stage a peaceful port trucker protest. PMV’s President and CEO responded to the UTA in an open letter published on the Authority’s web site. Robin Silvestor’s letter stated: “PMV agrees that a turnaround time of one hour represents an appropriate target” for container terminal fluidity for drayage drivers. “Four years ago, the average turn at this port was 35 minutes per container. That is the target Vancouver needs to re-achieve,” observed Mr. Payne. As 2014 unfolds, all eyes in the local drayage industry will be on PMV officials as they contemplate expanding the implementation of GPS units from their pilot project to the full fleet of container trucks. PMV wants to ensure that all stakeholders have more complete data on routing, performance and bottlenecks to aid in performance monitoring.
Conclusions
This brief article attempts to illustrate the important role that import distribution centres, transload facilities and the drayage sector play in supporting maritime commerce, local employment and investment in the Lower Mainland. Given the size and relative importance of the container logistic sector, there is no shortage of pundits offering their insights into challenges. Perhaps two of the more thought provoking observers are local academics. Simon Fraser University’s Peter V. Hall asserts in his paper, Global Logistics Local Dilemmas, that “public support for seaport
As 2014 unfolds, all eyes in the local drayage industry will be on PMV officials as they contemplate expanding the implementation of GPS units from their pilot project to the full fleet of container trucks. gateways have declined because the relationship between seaports and port cities has been profoundly altered by the process of containerization and the rise of global logistics”. He cites a number of arguments for what he calls the infrastructure legitimacy problem. The primary reason, cited by Hall, is the spatial impacts caused by the concentration of local logistics activities that support global commerce. In contrast, professor emeritus Trevor Heaver from UBC, in Co-ordination in multi-actor logistics operations: challenges at the port interface, observes that PMV has been effective in getting participation of “local” actors (terminal companies, inland carriers and freight forwarders) in initiatives impacting the performance of the gateway community. It is this author’s hope that this article will help span the divide between two
such disparate perspectives. We all rely on the local logistics industry to meet our daily needs, yet there are challenges that impact our gateway’s effectiveness and our region’s sustainability. This article will perhaps stimulate further dialogue since Metro Vancouver will be contemplating a goods movement strategy in 2014 and Port Metro Vancouver will be considering changes to the drayage truck licensing system. Both decisions are likely to have impacts for the people who work and invest in the local logistics sector and the neighbourhoods and communities where port-related business is conducted. 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
SAFER, SMARTER, GREENER
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www.dnvgl.com February 2014 BC Shipping News 35
INTERNATIONAL SHIPPING Market insight:
A sense of optimism in a volatile market By Kaity Arsoniadis-Stein LLB, LLM President & Secretary-General, International Ship-Owners Alliance of Canada
T
his article was written at the end of December 2013 when every market prognosticator was available to forecast the year ahead. The economic forecast for 2014 is generally carefully optimistic, shipping markets included. The economies of the U.S. and Japan show positive signs of growth, Europe appears to be coming out of the recession and the Chinese seem to be able to prevent a serious downturn. According to the international accounting firm, Moore Stephens, the overall confidence levels in the shipping industry rose to their highest level in the last three years and a recent survey expressed encouraging news on freight rates and evidenced an increased willingness to invest, with the usual concerns regarding over-tonnage, operating costs and the cost of regulations. Some brief essentials are provided below.
...the overall confidence levels in the shipping industry rose to their highest level in the last three years and a recent survey expressed encouraging news on freight rates and evidenced an increased willingness to invest... deliveries of new tankers in 2015 are set to be the lowest since 1997. The low fleet growth is expected to support a moderate cyclical market recovery over the next two years.
Dry bulk market
The dry bulk market has strengthened over the last three years with the Baltic Exchange Dry Index closing at 2,247 points as of December 30. Platou Markets expects to see further improvements over the next year which should result in
higher average earnings for all vessel sizes. This is based on a fleet growth of around four per cent and an assumed demand growth of six to seven per cent per year. It is expected that U.S. coal exports will remain elevated in 2014 due to exports to Europe and Asia. According to EIA, coal exports are expected to increase in 2014. Higher iron ore prices and cargo volumes appear to reflect an increase in China’s economic activity and a resurgence of the Capesize market. There is, however, a tendency to build
Tanker market
After three years of losses regarding freight rates, 2013 is believed to be the low point for the tanker market with slow correction expected for 2014. The big threat to the tanker market is the strongly increasing U.S. oil production and the resulting reduced oil imports. According to the International Energy Agency, global oil demand is expected to advance by 1.2 mb/d in 2014, to reach 92.4 mb/d. The predominant oil demand is in Asia and in regions that are self-sufficient with oil such as the Middle East, Russia, Africa and Latin America. Shipbroker RS Platou Markets predicts that crude tanker fleet growth should come to a near-complete halt in 2015 after having averaged six per cent p.a. since 2009. The tanker fleet may still increase marginally in 2014, but 36 BC Shipping News February 2014
Dr. Martin Stopford (standing with Kaity) predicts a challenging year for shipbuilders.
INTERNATIONAL SHIPPING inventory during the end of the year. According to Rio Tinto CEO Sam Walsh, iron ore demand will continue to increase in China and other Asian economies in 2014. Despite expected slower Chinese GDP growth in 2014, commodity imports could very well stay strong which will subsequently continue to support the bulk carrier sector.
Container market
Platou predicts little change in the overall container fleet utilization. They expect little change in box rates but a small improvement in charter rates. Low demand growth, combined with overcapacity, generated a too-high fleet growth in 2013 and operators were forced to put more ships into idle position. However, net fleet growth is expected to slow from six per cent in 2013 and 2014 to five per cent in 2015, which, combined with an expected upswing in the world economy, should result in some correction in the latter part of 2014.
New builds, sales and purchase (SnP), demolition
The newbuilding sector continues to be active, with contracts of more than 870 bulkers, 527 tankers, 161 gas carriers and 243 containers. According to Dr. Martin Stopford, 2014 will be a challenging year for shipbuilders, given that newbuilds and existing capacity have outpaced orders. Data from Clarksons Research indicates that more than 500 shipyards have closed down since 2009. Dr. Stopford considered this as a positive development as the “under achievers” were eliminated and, even
W
with fewer shipyards, “we still have more shipyards competing for business than there are orders to go around”. According to Intermodal, 2013 was a remarkable year for SnP, with more than 1,500 deals being concluded. With asset values close to historical lows, this also indicates that the shipping market is slowly heading towards recovery. Despite an 18 per cent decrease in demolition activity compared to 2012, Intermodal reports that demo bids continued at high levels, with more than 50 million tons of DWT carrying capacity being removed from the global active fleet in 2013.
Conclusion
In closing, according to a number of reports, there is a cyclical upturn in the shipping markets as well as a mood of optimism due to a slow growth trend in the global economy. However, as we all know, shipping has expanded tremendously because of globalization and predicting shipping is to a great extent to predict international politics and the global economy. Will Abenomics help Japan out of deflation and stagnation? Will the Chinese command economy continue to grow? Will the positive U.S. economic development continue without quantitative easing? Will Europe manage to create sustained growth despite the sovereign debt crisis of the southern countries? Will the positive development in some African countries continue? Will the BRICs get back on track? What about the tense situation in the Middle East and Syria? One thing is certain and that is that many regional and global factors play a role in understanding the direction that shipping markets will take.
Re-investing in the future
estshore Terminals has just completed one of the biggest equipment upgrades in its history. This five-year, $110 million work has lifted capacity from 23.5 to 33 million tonnes a year; streamlined the way we handle coal; improved our carbon footprint; and greatly enhanced efficiency. Now we are preparing for a $230 million, four-year Terminal Infrastructure Re-Investment Project to replace three of our major coal moving machines, as well as a shiploader and relocate our administration, workshops and warehouse into one complex at the northern end of our site. This will give us a strong future and bring wealth and opportunity for our community and our country.
www.westshore.com
Investing to better serve our customers February 2014 BC Shipping News 37
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June 10, 11 & 12
InformatIon and regIstratIon www.green-marine.org/annual-conference 418 649-6004 38 BC Shipping News February 2014
LIQUID NATURAL GAS Nautical Institute of BC Hosts LNG Seminar
B.C.’s new “Gold Rush”? By Nigel Greenwood
Vice-Chair, Nautical Institute of BC
H
ardly a day goes by now that there is not some mention of Liquid Natural Gas in one or more of the mainstream newspapers in British Columbia. In popular reporting, “LNG” is quickly becoming shorthand for a combination of Eldorado-like expectations, high finance, corporate struggles and environmental concerns. For nautical professionals, however, LNG elicits greater interest regarding the technical and operational challenges of safely shipping this valuable cargo. Given that this is a new business for Pacific Northwest mariners, any offer of detailed information about the proposed LNG trade was bound to draw a robust crowd. This was indeed the case recently when the BC Branch of the Nautical Institute held an impromptu seminar on November 12 to explore this issue. Responding to the call were 47 members of the Nautical Institute, the Company of Master Mariners of Canada, the Society of Naval Architects and Marine Engineers, the Royal Institute of Naval Architects, and also the Canadian Institute of Marine Engineers. With this forenoon event taking place at the Naval Officers Training Centre VENTURE, in Victoria, the gathering was also enhanced by the presence of interested engineers, watch-keepers and instructors of the Royal Canadian Navy.
Voices of experience
The NIBC was graciously supported in this endeavor by the generous offer to speak of three well-qualified mariners: Captain Gary Paulson, a former Naval Captain and graduate of the MBA program at Royal Roads University, has, since retiring from the RCN about seven
From purpose and planning to practice, the seminar enabled a welldovetailed discussion of the opportunities, imperatives and impediments of maritime trade development particular to LNG. years ago, been the VP Operations and Harbour Master of the Port of Prince Rupert. He tracked the spectacular rise of Prince Rupert Port Authority’s fortunes since 2005 and PRPA’s vision of further growth until 2020, and he outlined how closely the port’s purpose dovetails with prosperity, not just for Prince Rupert and B.C., but also for Canada. Captain David Kyle, our next speaker, was also a Naval Captain and, coincidentally, a former Commander of VENTURE. He earned his certificate as Master Mariner upon retiring from the RCN and has employed it since in work with BC Ferries and also the Pacific Pilotage Authority. This nautical background, together with his MBA from the University of Western Ontario, has made him invaluable as the marine advisor to Pacific Northwest LNG, one of the two proponents for gas terminals in Prince Rupert. Captain Kyle spoke of the global LNG trade and how the ownership of PNW LNG by Petronas, one of the world’s pre-eminent producers and shippers of LNG, promises to import to B.C. the highest safety standards in the maritime industry. Our third speaker, Captain Tom Wood, brought to the session his extensive involvement in the marine oil and gas industry. Since first apprenticed to British Petroleum’s Shipping arm, BP Tanker Company, at the age of 15, he has amassed almost 50 years of experience afloat and
ashore in shipping, marine operations and marine projects. As a Master Mariner, his successful sea-going career culminated in his appointment as Fleet General Manager for Teekay Shipping. Founder of Wood Marine in 2002, he has since been extensively employed as an Independent Marine Consultant, participating globally in several major oil and gas construction projects. He was thus able to speak to attendees about the practical issues encountered in mega-project engineering at the coastal interface.
Purpose and planning…to practice
The three speakers in this seminar were well qualified and ordered to cover the time-sequence of maritime energy trade development. From purpose and planning to practice, the seminar enabled a well-dovetailed discussion of the opportunities, imperatives and impediments of maritime trade development particular to LNG. The competitive advantages of the Port of Prince Rupert have been well-mooted for many years now. The B.C. government’s “Pacific Gateway” celebrates the AsiaPacific connection, while PRPA growth exemplifies this. In the last eight years, the tonnage throughput of Prince Rupert has increased five times. While much of this is in container traffic, leveraging very short dwell-times and expeditious rail connections to the U.S. mid-west, increasingly the opportunities are leaning toward bulk February 2014 BC Shipping News 39
LNG SEMINAR principally China. In this case, the value of Canadian natural gas available for export is about to be overtaken by events. The U.S. is expected to become self-sufficient in energy by 2035, and the International Energy Agency expects the U.S. to overtake Saudi Arabia as the world’s largest oil producer by 2015. Already, growing U.S. production of shale gas is prompting some Gulf operators to reverse the flow in their LNG import terminals. This establishes a window of opportunity to market Canada’s commodity before it is overcome by other sources, a point emphasized by two of the speakers. There is already a well-established industry in Canada for the production of natural gas. By partnering with experienced conveyors, this valuable cargo can be brought to foreign markets in a competitive and safe manner. The marine LNG shipping industry, of which Petronas is an exemplar, has a record of 150,000 voyages without loss of cargo containment. It is this safety record that the PNW LNG proponent aims to leverage in their combined maritime and marketing partnership. Of course, there are some challenges and impediments to be overcome. The speakers at the NIBC seminar did not avoid dealing with the issues of social licence, environmental assessments and assurances, as well as demands for a workforce of advanced skills. Nor are these the only hurdles; practical attainment of the vision requires the greatest innovation to deliver major industrial components across the beach to a new site while dealing with the effects of weather, misfortune or modifications to plan. And all of this must be done in accordance with the driving imperative of the market and competitive timelines. In the case of Prince Rupert and LNG, NIBC heard that this is a race to load the first cargo by the end of the decade.
[Prince Rupert’s] strategic plan will ensure that all of the port-available property is fully developed and tenanted in 2020, leading to a tripling of ship-visits by that date. cargoes. This is apparent further south in the novel approaches being developed to get energy resources to market…for example: Wyoming coal to Asia by way of Texada Island! PRPA is alert to the opportunities and also to the competitive imperatives associated with growing bulk exports: in the next seven years they see the investment of up to $21 billion in
increasing their capacity for a wide range of bulk cargoes. Their strategic plan will ensure that all of the port-available property is fully developed and tenanted in 2020, leading to a tripling of ship-visits by that date. Leading the charge in export growth is an emerging global race to service the growing energy demands of Asia,
Photo credit: David Kyle
Conclusion
A pot of gold ahead on BC’s north coast? 40 BC Shipping News February 2014
The NIBC seminar attendees took away from this event a clear message about the opportunities for stimulation of the economy and the wider marine industry on the West Coast. Not only will the proposed projects have to adopt and institute the highest industrial and environmental safety standards in order to proceed, but the resulting improvements to navigation
LNG SEMINAR Photo courtesy Prince Rupert Port Authority
aids, pilotage, spill response and community growth will have a lasting positive impact on all users of the coast. This brief seminar ended with the attendees availing themselves of the hospitality of VENTURE’s Gunroom bar for a lunch-time social. The interaction of NIBC members with their professional colleagues from CMMC, RINA, SNAME and CIMarE allowed the morning’s theme to be pursued in a less formal setting with a spectacular view over the inner harbour of Victoria. In fact, the view straight up the busy commercial/ recreational harbour and water aerodrome to the B.C. Legislature was a salient reminder that building the province’s prosperity through best use of its waterways will require the co-operation of a large number of interested parties. NIBC hopes that this kind of event will be an attractive model for addressing issues of collective interest to professional mariners on the west coast, and looks forward to the next opportunity to gather fellow institute members. Nigel Greenwood retired from the Royal Canadian Navy in 2012 with the rank of Rear-Admiral. As a Master Mariner, and principal consultant for Greenwood Maritime Solutions Ltd, he has since been active in security/risk assessments and maritime training. He is a Member of the Nautical Institute and currently the Vice-Chair of NIBC, a Fellow of the Royal Institute of Navigation, and also a member of the Board of Governors for Royal Roads University. He holds a BSc in Physics and Oceanography (RRMC) as well as an MA in International Studies (KCL). Occasionally BCSN allows him to indulge his passion for writing.
Prince Rupert: a deep-water port with significant growth potential.
February 2014 BC Shipping News 41
TANKER SAFETY Tanker Safety Expert Panel:
Insight into setting the course for the future
O
ver the past year, three studies have been released that investigate tanker safety and oil spill response preparedness: • Study of the Safe Transport of Hydrocarbons by Pipelines, Tankers and Railcars in Canada; • West Coast Spill Response Study; and • Review of Canada’s Ship-Source Oil Spill Preparedness and Response Regime. Each study has been drafted with a different mandate and for a different master yet even with varying instructions, conclusions reached about tanker safety and Canada’s oil spill response regime are consistent: incidents of major ship-source oil spills have been rare over the past 25 years and, while current methods of prevention and response preparedness have so far proven sufficient, improvements would serve to strengthen the current regime to be able to meet the needs of Canada’s growing role as an exporter of oil. For the purpose of this article, we focus on the federal government’s Tanker Safety Expert Panel review. It is this report and its recommendations that will provide the basis of change for Transport Canada, Environment Canada and the Canadian Coast Guard. To gain insight into the Panel’s recommendations, BC Shipping News was pleased to meet with its Chair, Captain Gordon Houston.
Each study has been drafted with a different mandate and for a different master yet even with varying instructions, conclusions reached about tanker safety and Canada’s oil spill response regime are consistent... The Review of Canada’s Ship-Source Oil Spill Preparedness and Response Regime was commissioned by Transport Canada and authored by the three-member Panel — Captain Gordon Houston (former President and CEO, Vancouver Fraser Port Authority), Richard Gadreau (maritime lawyer from Quebec) and Dr. Michael Mackay Sinclair (former Director of the Bedford Institute of Oceanography in Dartmouth, Nova Scotia). The Panel spent eight months reviewing Canada’s current spill response regime, studying the regimes of other countries, consulting with industry stakeholders and interested parties, visiting facilities and terminals across Canada before drafting the report which they submitted in mid-November 2013. The report lists numerous organizations that submitted position papers or met with the panel to provide input and engage in detailed discussions. When asked about the consultations, Houston noted that there was much more interest from the West Coast versus the East
The Tanker Safety Expert Panel: Captain Gordon Houston, Richard Gadreau and Dr. Michael Mackay Sinclair. 42 BC Shipping News February 2014
Coast but, more interestingly, was surprised by the lack of input from environmental organizations and others known to oppose the expansion of natural resources projects — for example, the City of Vancouver. “They never approached us,” he said when asked about Vancouver Council. “We put out the invitation to everyone and we got very good feedback from a number of stakeholders. I don’t know why they didn’t respond — invitations for input were well publicized.” Houston made specific mention of the submission from Western Canada Marine Response Corporation: “While most of the Response Organizations’ submissions were very well done, that was probably the best put-together response we had from our lines of enquiry. [President] Kevin Gardiner did an amazing job.” The review process also included studying the regimes of eight other countries, including the U.K., Norway, Australia, New Zealand, France and the U.S. The comparisons afforded the panel an opportunity to consider proven best practices
TANKER SAFETY that might serve the Canadian system. For example, recommendations that relate to inter-governmental collaboration, Area Response Planning models and the development of databases and asset inventories have all worked very well in Australia; the development of a National Plan or Framework, the use of alternative response techniques and regular reviews of the regime are features of the U.K. regime; the establishment of research and development programs has been a strong part of the Norwegian system; and the U.S. has a healthy liability and compensation emergency account that allows for quick access to funds when they’re needed. The comparisons also allowed for insights into methods to be avoided. For example, one of the issues Houston found in the U.S. system of tracking equipment was the danger of “ghost” equipment, i.e., equipment from cascading resources that were double-counted as part of the inventories of multiple response organizations. Difficulty also arises from the sheer number of private organizations involved: “In the U.S., the Coast Guard are the on-scene commander — everything else is done by the private industry and they have thousands of response organizations. The problem they have is trying to keep track of it all,” said Houston. The review contains 45 recommendations covering the areas of preparedness and response; strengthening the polluter pay principle; leadership and stewardship; communication and engagement; and continuous improvement. First and foremost, the Panel concludes that “the overall preparedness and response regime is fundamentally sound”. However, noting that the last comprehensive review of Canada’s spill response regime was about 20 years ago with the BranderSmith Report; that resource extraction, port activity and shipping traffic volumes have increased; and that new technologies and best practices in the field of oil spill response have been developed in other areas of the world, the review would serve to strengthen the regime and “set Canada on a course of continuous improvement”. Almost half of the recommendations found within the report deal with preparedness and response. In addition to addressing capacity and response times, a number of the recommendations deal with moving Canada to an Area Response Planning model as opposed to the current
...a number of the recommendations deal with moving Canada to an Area Response Planning model as opposed to the current “one-size-fits-all” standard in place across the country. “one-size-fits-all” standard in place across the country. A quick look at the average annual volume of oil transported as cargo reveals that 283 million tonnes move through areas east of Ontario compared to 43 million tonnes (37 of which is U.S. traffic transiting through Canadian waters) on the West Coast. Breaking that down further, risk assessments would be done to identify areas where traffic is
greater or that have unique environmental sensitivities, allowing resources and assets to be logically located. When asked for his opinion on how close Canada was to having enough capacity to be able to respond to a “worst-case scenario spill”, Captain Houston felt confident that, with cascading resources, the equipment was already available. “The last thing we wanted to do was inflict
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February 2014 BC Shipping News 43
TANKER SAFETY Throughout the recommendations, there is a clear message that greater transparency and access to information as well as education are needed. on the industry hundreds of millions of dollars of equipment that would probably never get used,” he said. Another key recommendation addressing preparedness and response is that which deals with alternative response techniques — for example, in situ burning, the use of coagulants or dispersants, or simply allowing the spill to dissipate on its own if it poses no threat to the shoreline. To implement this recommendation, legislative changes will be required. “Environment Canada, the Oceans Act and even some provincial regulations prohibit the use of deleterious materials,” noted Houston. “But if you have four or five different ways to deal with an issue, choose the one with the least deleterious effect, or go the U.K. route and don’t touch it. If it’s not going to touch the shore, leave it alone.” Houston agreed that public perception of the “do-nothing” alternative would
be negative and would require education (another recommendation contained within the review). “Leaving the spill to the forces of nature, if it’s not threatening the coast, is a very acceptable way of dealing with a spill. Look at the offshore industry — how would you deal with an oil spill in the middle of the Atlantic in November? Education is key.” Throughout the recommendations, there is a clear message that greater transparency and access to information as well as education are needed. This led to one of the more controversial recommendations (and one of the few that is contrary to other reports) that calls for disbanding Regional Advisory Councils. The RACs have a mandate to educate the public as well as to provide advice to government on issues affecting oil spill response. But Houston noted that without funding, the RACs were left with a very complicated task. “How could an organization that
has no budget, made up of well-intentioned, but lay people, ever educate the public? That should be the government’s job.” While Houston was hopeful that the government would take on the role of education, he acknowledged a backlash from some in the public that could consider this material to be unduly biased. While the recommendations call for action from a number of government departments, none would be more affected than the Canadian Coast Guard. This has led to the recommendation to provide additional resources to the CCG that would allow them to play more of a leadership role. “The CCG have a very difficult problem on their hands,” said Houston. “Systematically, over the last 10 years, they’ve had their budgets reduced. The question comes: will further cuts reduce their efficiency?” He further noted that the response regime requires strong leadership from within government. “There are so many departments involved that unintended consequences arise from decisions that have nothing to do with oil spill response, for example, cutting CCG’s budget over the
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44 BC Shipping News February 2014
TANKER SAFETY years has threatened their ability to play a leadership role. We decided that a senior level inter-departmental committee was needed, such that if something was going to be decided in one department that was going to impact on the regime, someone within the inter-governmental committee would know about it.” Just as important as what’s contained within the report is what’s not. Falling outside of the mandate of the panel’s review: • Prevention — “One of things we kept saying around the table was the best response you can have is prevention. The way the marine world has ramped up prevention — either because of international legislation or economics Publication — there hasNews been a tremendous drop in BC Shipping the number of spills. We mention preIssuevention but only to make the point that the best2014 preparation is in prevention.” February • Salvage — “We had a long debate Size about it,” said Houston. “Quite a few people have said we should have salvage Island (half page vertical) vessels waiting in strategic areas, but in Canada today, you don’t spend $15 Deadline to $20 January 8,million 2014on a boat and hope it’s going to get used one per cent of its life. The whole thing came down to vessels Features of opportunity for salvage.” • Ships other than tankers — bulk carEDITORIAL FOCUS: riers, cruise ships and container vessels International Shipping would create just as significant a probŸ Industry Insight – Peter lem if–there was a Transport spill of their bunker Lahay Int’l fuel. “We discussed this at our very Workers Union first meeting — why were we called the Ÿ Captain Stephen Brown’s tanker panel when there is a significant Annual Industry Update amount of oil carried around as bunker Ÿ Transload – import as opposed to cargo. Also, tankers have distribution at Port double hulls but fuel oil isn’t necessarily Metro Vancouver (by our mandate held the same way. While Darryl Anderson) was to focus on tankers, we needed to Ÿ Container line companies be aware of that.” (by Syd • The roleHeal) and the inclusion of the Ÿ Boundary Industrial resources Bay of the Royal Canadian Park Navy — “We discussed this,” said Ÿ Nautical Institute: recap Houston, “but they said they look after of their LNGown Seminar (by Nigel spills and that’s the way it will Greenwood) stay. Whether their assets are included Ÿ Marine surveying: as cascading resources is a good quesScience, andwould art assist tion. I haveopinion no doubt they (bywith Tim Ellis) a spill if asked but we sensed a Ÿ Technology: WhaleusShark reluctance to provide with informain-water hull cleaning tion about their capabilities.” Now that Phase I of the review has EXTRA beenDISTRIBUTION: submitted to Transport Canada, the Ÿ Cargo Tanker Logistics Safety Expert Canada Panel was beginConference and ning immediately on Trade Phase II,Show looking at oil spill preparedness and response for the ‘North of 60o’ as well as a regime for
hazardous and noxious materials. “The big problem we foresee with the hazardous materials part is that there are about 6,500 items defined as hazardous, so we will limit our research and recommendations to these cargoes that are carried in bulk,” said Houston. “We can’t possibly have one organization to cover it all of it. Each ship owner has their own plan in place but there is no external organization presently to rely on for help.” The Panel is expected to spend the better part of 2014 going through the
same process they undertook for Phase I. By early January, lines of inquiry were being established “to make sure we’re asking the right questions” and resource material was being collected for an early review before seeking industry and public input. A final report is to be submitted to Transport Canada by September 2014. Given that Phase II is essentially double in scope to Phase I but deliverable within the same time frame, the Panel has their work cut out for them. BCSN
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LEGAL AFFAIRS
Fraudulent conveyances By W. Gary Wharton
A Vancouver Lawyer with Bernard LLP
I
t is intuitively wrong but has also been part of the law of England since 1571 that a debtor who transfers their assets to others with the intent of putting such assets beyond the reach of their creditors or hindering or delaying such creditors should be held liable. These principles have made their way into the fraudulent conveyance Acts of the various provinces. That the evil identified by Elizabethan lawmakers remains with us is evident from the fact that at least five provinces have maintained that ancient statute and others have merely updated the language of the concepts to make them more readily understandable to a modern ear. The intent of the Acts remain constant and are directed to those who would “judgment-proof” themselves by ensuring that by the time current creditors and potentially future creditors come knocking, they need not deal with the substance of the claim but only give the practical response that “I have nothing”. Individuals who would seek to dispose of their assets to the detriment of creditors go beyond mere transfers of these assets but employ a number of mechanisms such as granting liens, mortgages and corporate re-organizations to effect the goal of placing their wealth beyond a creditor’s reach. The creativity of those seeking to defeat creditors is in full flight in a world with increasingly complex tax and corporate structures. Two relatively recent cases in British Columbia, Mawdsley v. Meshen, 2012 BCCA 91 and Abakhan & Associates Inc. v. Braydon Investments Ltd., 2009 BCCA 521, have dealt with the two primary issues involved in the enforcement of the fraudulent conveyance acts, namely: what creditors or future creditors can avail themselves of the relief under the Acts 46 BC Shipping News February 2014
The creativity of those seeking to defeat creditors is in full flight in a world with increasingly complex tax and corporate structures. and, secondly, what transactions by an individual or corporation will constitute an offending transaction under the Acts as being made with an intent to “delay, hinder or defraud”. With respect to the first consideration, it seems easy to understand that transfers made while the person transferring assets is already currently indebted to another should be caught by the legislation. The question becomes somewhat more complex in considering whether the Acts have application to debt which arises after the transaction has been completed. For example, while an individual may have no current creditors, assets are transferred prior to entering into a business venture which, if things do not go well, could create a situation of unsatisfied debt. Such a creditor for an immediate business venture would be foreseeable at the time of the transfer of the assets. Such transactions are caught by the Act and the transfer voided, unless the person receiving the assets did so for good consideration and without knowledge of the fraudulent intent. However, simply applying the statute universally to all future creditors would create great uncertainty and restrict what otherwise might be valid transactions for fear of being reviewed in the future. In order to deal with the issue, the courts have drawn a distinguishing feature between future creditors based on those who were or should have been foreseeable by the person transferring assets and those who are not considered to be foreseeable as they only arise as a result of circumstances which could not reasonably
have been foreseen by the person at the time of the transfer. As the unforeseeable future creditors only gain their status as creditors as a result of events which could not be foreseen at the time of the transfer, the person effecting the transfer lacks the necessary intent to delay, hinder or defraud which is the essential element of the fraudulent conveyance statutes. Having said that, the question of whether a creditor falls into the foreseeable or unforeseeable category will come down to a factual determination. As the facts surrounding the transaction will be subject to an after-the-event assessment, a proportion of future creditors attempting to avail themselves of the protections of the fraudulent conveyance Acts will not know whether they are protected creditors until a judge says so. Equally so, even an honest person transferring assets for wholly proper reasons cannot know for certain whether such transfer will be perceived by a court at some future date as being detrimental to someone who should have been foreseeable to them at the time of the transfer. Aside from the question of which future creditors might have standing to challenge a past transaction involving the transfer of assets by the debtor, the second significant issue: what transfers offend the statute, must be considered. The fact that the statute only affects transfers made with the “intent” to defeat, hinder or delay the creditor, one might think that proof of dishonest intent would be a necessary element in order to establish an entitlement to relief under the statute.
LEGAL AFFAIRS This is not so. Numerous courts have held that, since individuals are taken to intend the natural consequences of their acts, if the natural consequence of the transfer is to defeat future creditors, the conclusion is that such intent must have been present. Other courts have taken a softer approach and held that, where a transfer has the effect of defeating creditors, such only gives rise to an inference that the intent was to defeat, hinder or delay. Such inference can be rebutted by evidence that the transfer was for a completely legitimate purpose, without any intent to defeat foreseeable creditors. If successfully rebutted, the transaction can stand. In the Mawdsley v. Meshen case, the Court of Appeal of British Columbia dealt with a situation where a common law spouse claimed against his partner on the basis that her transfer of assets through an inter vivos trust to her children and brother-in-law constituted a fraudulent conveyance. In upholding the trial judge’s decision, the Court looked to the surrounding facts: primarily the nature of the relationship; the way in which the two parties dealt with their assets during the relationship; and, the transferring spouse’s professed intention to leave the assets to her children and brother-in-law (which was never objected to by the offended spouse until after the fact). The Court of Appeal determined that the facts did not give rise to an inference that the transferring spouse intended to defeat, hinder or delay her common law spouse in respect of any particular claim and the transactions were deemed valid. In coming to its conclusion, the Court referred to the previous decision of the British Columbia Court of Appeal in Abakhan & Associates Inc. v. Braydon Investments Ltd., which confirmed that, at law, a claimant under the Fraudulent Conveyance Act need no longer show a “dishonest” or “morally blameworthy” intent on the part of the transferor. All that is required is an intention to “place the assets out of the reach of a creditor or other.” Such intent can be determined by direct evidence (relatively rare as those intending to defeat creditors rarely admit to such) or, more commonly, by inference from the factual matrix surrounding the transaction. As the Court of Appeal stated in Mawdsley: “In some cases, of course, that intention [the intention to defeat, hinder or delay] may be inferred from the effect
Aside from the often rather obvious attempts of individuals to thwart creditors by putting their assets out of reach, the Fraudulent Conveyance Act does have implications for those who believe they are acting honestly... of the transaction, and indeed a presumption may arise in some circumstances from that effect. If there is no credible evidence to the contrary, the Fraudulent Conveyance Act may be satisfied: but there is no rule of law that in every case, an intention to defeat creditors must be inferred from the effect of the impugned transaction.” In Abakhan, the transferor, prior to entering into a partnership involving a somewhat risky business venture, decided to re-organize his affairs with the objective of protecting his wife and children should things not go as well as planned. The transactions involved a complex transfer between corporate entities controlled by the individual, further supported by professional advice that the transaction was “a prudent and legitimate business strategy” taking advantage of both tax deferral opportunities and capital gains. Unlike the Court in Mawdsley, the Court in Abakhan did not have to rely on inference to determine whether or not the transferor had the required intent to defeat, hinder or delay a creditor as the transferor freely conceded, during the discovery process, that the overall purpose of the transaction was to protect his assets for the benefit of his family. In this respect, the transferor viewed his actions as being entirely honest and based on professional advice. While the trial Court
and the appeal Court accepted that the transferor was acting honestly at the time of the transfers, such transfers were still intended to protect those he chose to protect by prejudicing other expected creditors. As such, the transactions in Abakhan were deemed to be void and the creditor was able to access the assets. While the Court in Abakhan had the benefit of some rather damning admissions from the discovery process, most cases will need to be reviewed without such direct evidence. It is difficult to ascertain in any particular case whether, absent such direct evidence, the inference created by the transaction which has the effect of defeating, hindering or delaying creditors can be rebutted at some future date. Aside from the often rather obvious attempts of individuals to thwart creditors by putting their assets out of reach, the Fraudulent Conveyance Act does have implications for those who believe they are acting honestly but may be creating a situation that could give rise to claims by future creditors. A consideration of the effect on future creditors must be an essential element of tax/estate planning or any corporation reorganization/asset distribution. W.Gary Wharton is a maritime lawyer and partner with Bernard & Partners in Vancouver, B.C. and can be reached at wharton@bernardllp.ca.
February 2014 BC Shipping News 47
MARINE SURVEYING Science, opinion and art
Part I: Draft surveying and ocean-going vessels — a practical example By Tim Ellis
JT Ellis & Associates
D
It would be nice to be able to state categorically that all draft surveys are easily proven according to scientific means, but...that implies a state of perfection that simply does not exist in the marine environment. this is too glib as it implies a state of perfection that simply does not exist in the marine environment. The easiest way to illustrate the subtleties and complexities of draft surveying is to follow a surveyor on board a vessel about to discharge a cargo of dry bulk... The ship is all fast and the pilot has left the bridge. The agent huddles with the master and the immigration officer in murmured conversation. The officer nods, the agent heaves a sigh of relief as he calls the draft surveyor to say that he can have the chief mate and read the drafts. Alas, many encounters with immigration or customs officers do not end with a sigh of relief.
The longshoremen are surly with impatience, fully mobilized, pent-up energy barely controlled, waiting for immigration procedures to complete and the signal for them to board the vessel, take over the deck, and commence the discharge in their inimitably efficient ways. Any delay costs time, and time costs money and the person costing them time and money is the draft surveyor whose measuring and calculating rarely needs less than 90 minutes and sometimes longer. The draft surveyor’s first obligation is to identify himself to the vessel’s mate, usually in the ship’s deck office. There, one may find the surveyor festooned with gear; which must be portable: hard hat,
Photos courtesy Tim Ellis
ynamic weighing systems, such as belt scales, weigh-bridges or balances, have removed a lot of uncertainty from the quantity of cargo loaded or discharged by vessels. Nevertheless, these measurements may have the appearance of being weighted in favour of the vendor or the purchaser through inaccuracy or doubt, requiring the determination of the weight of a ship and its cargo by draft surveying for the purposes of releasing bills of lading, fulfilling contracts and paying invoices by calculating the cargo quantity aboard. This applies mainly to bulk cargoes, as container vessels and specialist carriers have developed other methodologies to better fit their needs. There may also be issues relevant to the stability and capacity of a vessel; which are addressed by a draft survey. It would be nice to be able to state categorically that all draft surveys are easily proven according to scientific means, but
The MV Federal Sumida, fully laden, just prior to the commencement of discharge. Note the welling-up around the hull: the difference between the true water line and the observed waterline is about five centimetres. 48 BC Shipping News February 2014
The MV Glory Moon — note that the forward draft marks are affected by the current and extra care will be required to obtain good readings
MARINE SURVEYING Surveyors in general, and draft surveyors in particular, bring peculiar gifts to their profession: acute vision, the ability to climb a Jacob’s Ladder and function for long periods without sleep to name but three. steel-toed boots, waterproofs topped with hi-viz vest, gloves, a certified flashlight, hydrometer, water sampling bucket with a long line attached, sounding tape in metres and feet, sounding pipe extension, water paste, Manometer, water finding paste, notebook and pencil, calculator or laptop, a device to sample ballast water, binoculars, camera, telephone (to call the agent with the results) and lifejacket. Every draft survey requires the rules be restated: “ballast tanks full or empty, vessel upright and trimmed within one per cent of vessels length overall, ballast not to be moved, cranes immobilized, hatches open or closed, no taking on fuel or fresh water, tugs not pushing, mooring lines fixed”. The draft surveyor’s race against time is on: read drafts from fixed and floating platforms; measure specific gravity and temperature at 50 per cent of the depth of the immersed draft (although temperature corrections are almost never made); take the chief engineer’s totals for fuel oils, diesel and lubes unless reading them oneself; sound all ballast and fresh water tanks; receive the ship’s constant from the mate; and then, taking these into account and using the ship’s data manuals, calculate the displacement and confirm a cargo figure — made a bit easier with a laptop and dedicated software...until a deficiency emerges. Double check figures, maybe draft a dubious ballast tank a second time, or reconfirm the constant, check the math and finally deliver a figure, usually one that agrees with the mate’s own calculation, but not always. Wise surveyors always double-check the first draft they have taken before returning to the ship’s office — if it has changed then one may assume that the vessel is ballasting or engaging in some other business incompatible with the draft survey. Then, and only then, can the discharge begin. Now sometimes, and more often in today’s world of real- time management, the draft surveyor will get the drafts but the rest of the measurements must be taken whilst the vessel is preparing for discharge: discharging sequence discussed, hatches opened, equipment and personnel mobilized, all making room for errors that cannot be easily discerned or corrected.
“Math” you say! Sounds like easy work in Excel but it is not, and for a variety of reasons. Surveyors in general, and draft surveyors in particular, bring peculiar gifts to their profession: acute vision, the ability to climb a Jacob’s Ladder and function for long periods without sleep to name but three. Others are a good facility with figures and clear understanding of the forces brought to bear on the vessel viz-a-viz the viability of the survey figure. This knowledge can be gained from study, but in the reality of the marine environment, study is not a substitute for experience. Accuracy is key. Archimede’s Principal is that a floating object displaces its own weight of the liquid in which it floats. The essence of a survey comprises two sets of measurements: 1) those prepared by the builder and annotated by the ship’s officers which allow one to calculate exactly what the
vessel displaces at any given ballast or cargo condition, no matter what trim or list from the perpendicular in any plane, hog or sag, salt or fresh water; and 2) the measurements taken at the time of the survey by the surveyor and sometimes by the mate. Mates always used to accompany the surveyor, not for companionship but to compile their own survey measurements for the vessel’s record and as a yardstick for errors. These days are behind us as modern vessels rely more and more on measuring apparatus for calculation by onboard computing systems, and with manning pared to the bone, the mate may not be available or, worse yet, he or she may lack the necessary skills and experience. The survey itself begins in the ship’s office with the ship’s particulars followed by a reading of the drafts by boat and from fixed structures, often using both methods: two forward, two mid-ship and two aft. These measurements must take into account variations due to wind, current and tidal flow and waves. Wind can cause water to pile up against one side of a vessel, leaving a low-pressure zone on the other; current and tidal flows cause
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MARINE SURVEYING wakes and bow waves further confusing drafts; and wave action requires intense scrutiny of draft marks to divine averages suitable for use in calculations. From outside the vessel, the surveyor then returns aboard and, utilizing his hydrometer and thermometer (often contained in custom built equipment), measures the water temperature and specific gravity, sometimes at several depths and locations, but usually at 50 per cent of the mean draft. Equipment such as the thermometer and hydrometer are certified accurate but the draft readings rely on experience. When extremes prevent draft measurements, long reels of tubing may be employed to provide a Manometer or a wave damping tube may be employed to resolve the draft measurements. With the measurements in hand, the surveyor then moves to the bow and, starting at the fore peak, measures the level of salt and fresh water in each ballast or storage tank. Modern vessels tend to be economical with tanks and require less soundings, perhaps 15 on a handy-max of 50,000MT, but older vessels may have more tanks — and more tankage means more complexity as the shape of tanks could be anything from tall and squaresectioned tubes to complex rhomboids. The vessel’s builder is responsible for producing tables to calculate the ullage of any given tank, but these are only as reliable as the builder’s attention to detail and can be tenuous at extremes of trim and list. The vessel itself provides a figure for stores, called the “constant”, and this figure will often include the weight of repairs and additions, equipment on board that is not part of the light-ship calculation, for example barrels of cleaning fluids carried on deck and whether or not the ship’s plunge pool is full or empty.
At last, the surveyor can sit down and begin his calculations. Around him are the ship’s stability book with displacement, TPc, Lcf, Mctc, Light Ship, Deadweight, LBP, Fd, Ad (see notes) and the hydrostatic pages. The surveyor corrects the drafts, adjusts for hull deformation caused by hog or sag using the maths of the parabola or by a deflection calculation, corrects for trim and density and applies the list correction, takes the constant into account and adds the figures provided by the Chief Engineer (if these were not taken by the surveyor during drafting, for ballast, fresh water, fuel and others). Presto! The cargo figure emerges — smiles all around if it fits and curses and more work if it does not. Keep in mind that all this is done whilst frozen stiff or bathed in sweat, constantly interrupted, and battling language, competing measuring systems, brilliant sunshine, rain, nighttime and wind, the receiver and his impatient stevedore, and a client who will argue about every dollar charged even if the survey takes five hours instead of 90 minutes through no fault of the surveyor. The surveyor will do this again when the vessel is completely discharged. This to double check the first calculation; which is itself a double-check of the survey performed at the loading port. The second article in this series will bring you in close proximity with other kinds of surveys — watch for “Marine Surveying — a layman’s guide” in the March issue. JT Ellis opened a surveying practice in Taipei in 1977, after a brief career with a UK shipping & forwarding company and postings in London, Vienna and Hong Kong, and has lived and worked in Vancouver since 1993. He can be reached at timothy.ellis@ icloud.com
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BC FERRIES Point Hope Maritime, BC Ferries breathe new life into MV Tachek
N
ew engines, new propellers, a new hybrid battery system, a full upgrade of accommodations and a complete paint renewal are just a few items on the list of tasks that extended the life of the 44-year-old MV Tachek by another 15 years. The $19-million project not only extends the life of the MV Tachek but makes it one of the most innovative and environmentally friendly vessels in the fleet. “In addition to the hybrid battery system which is a first for the BC Ferries’ fleet,” said Mark Wilson, Vice President of Engineering, “the new heat recovery system that routes the jacket water of the main engines through a heat exchanger which is then used to heat the passenger accommodation areas, provides for greater efficiencies and fuel savings.” Paul Rolland, Project Manager for BC Ferries, reiterated the uniqueness of the battery system: “Techsol Marine was the winning bidder for the electrical integration segment of the project,” said Rolland. “It is a 54-battery, 800-volt battery bank. Each
The $19-million project not only extends the life of the MV Tachek but makes it one of the most innovative and environmentally friendly vessels in the fleet. battery is 13.2 volts with 160 amp hours and are lithium iron phosphate-based batteries which are safer and more chemically stable.” The battery system will be used as the main source of power for operating the bow thruster and will be used to limit use of the auxiliary generators. Another fuel-saving and environmentally friendly feature was the paint renewal using International Paint’s Intersleek line which, with its low friction attributes, provides as much as up to five per cent in fuel savings. Between BC Ferries’ Fleet Maintenance Unit in Richmond and Point Hope Maritime in Victoria, the project took close to one year to complete. “The vessel arrived as basically an empty hull,” said Point Hope General Manager Hank Bekkering. “Most of the machinery had been stripped out and the asbestos
abatement was about 95 per cent complete when we received it.” Bekkering outlined the process undertaken at Point Hope which reached 140 workers at the peak of the project, including staff from sub-contractors like Emery Electric, Gregg’s Marine, Westcoast Insulation and Clark & Pattison. “Once we removed the remaining items as well as the wheelhouse, the vessel was sandblasted top to bottom, interior and exterior, and then we added a holding primer coat. While that was going on, we fabricated the new wheelhouse and foundations for the engines, generators, etc.” Over the next eight months, Bekkering and his team installed: • A new wheelhouse structure (larger and higher than the old one) • A new navigation suite
Photos courtesy BC Ferries
Images around the MV Tachek (clockwise): New navigation suite in a new wheelhouse; new paint; new passenger accommodations and new engines. The $19 million life extension project took almost one year to complete and extends the life of the Tachek by 15 years.
52 BC Shipping News February 2014
BC FERRIES • New propellers and shaft lines • New engines (Mitsubishi), gearboxes and emergency generator • New shaft generators • A new alarm, public address and CCTV system • New state-of-the-art lifesaving appliances • A new heating and ventilation system • A new fire detection/protection system • New thermal and fire insulation • A new bulbous bow and vessel doors • A Hi-Fog, water mist, fire suppression system • A new bow thruster unit • LED lighting • New electrical cabling systems In addition to the complete rebuild of the ferry’s propulsion and mechanical systems, a full upgrade was done on all accommodation areas for the 30-car, 140-passenger ferry. “It’s been a complete refresh of the passenger areas,” said Wilson. “We’ve brought it up to what I like to call a ‘fleet standard’ which is more modern and comfortable.” The heat recovery and cooling systems that that were installed and now re-route
heat to passenger areas is another efficiency that, while seen on some of BC Ferries’ larger vessels, is a new feature for the smaller vessels and will likely pave the way for greater use as more vessels go through a life-extension exercise. “We haven’t just extended the life of the Tachek,” continued Wilson, “we’ve significantly improved its overall safety, operational reliability and customer experience.” With the Tachek going back into service on the Quadra Island-Cortes Island route, Wilson noted that the corporation now needs to decide whether the Tenaka, the vessel used while the Tachek was out of service, will be replaced or undergo a life extension. “We still have to decide whether we extend its life or replace it,” said Wilson. “The North Island Princess also needs to be replaced so it’s a question of whether the Tenaka will be used or we build new. And we have the cable ferry project as well that, pending approval from the BC Ferries Commissioner, will get going in February 2014.” BC Ferries spends between $70 and $120 million per year on maintenance,
refit and major capital projects. Wilson reviewed the upcoming schedule of work: • Three-quarter-life upgrades for the Queen of Oak Bay and the Queen of Surrey. Work on the Oak Bay will start in the fall of 2014 followed by the Surrey in the fall of 2015. Each will take about four to five months to complete. • The two Spirit-class vessels — Vancouver Island and British Columbia — are scheduled to follow. “The Spirit of Vancouver Island execution phase will start in September 2016 and then the Spirit of British Columbia follows in the fall of 2017,” said Wilson, estimating that each project will take nine months. • The Queen of Capilano will be undergoing a mid-life upgrade as well and will take about four months to complete. These projects are in addition to the three new intermediate-size LNG vessels to be built. A Request for Proposal has been issued to five shipyards (one local and four international) and an announcement of the winning bid is expected by the spring of 2014. Stay tuned for more updates on BC Ferries fleet maintenance. BCSN
February 2014 BC Shipping News 53
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Seabridge Marine Services 604.925.2601 www.seabridgemarine.com
54 BC Shipping News February 2014
ABS Americas................................................................................................13 Adonis...........................................................................................................BC AMIX Group...................................................................................................50 ATP Instone Marine Travel.............................................................................31 Bernard LLP...................................................................................................22 Bracewell Marine Group..................................................................................6 Caldwell & Co. Maritime Law...........................................................................6 Canada’s Pacific Gateways (Prince Rupert Port Authority).............................19 Chamber of Shipping of British Columbia......................................................27 ClassNK...........................................................................................................9 CMC Electronics.............................................................................................32 Corix Water Products.....................................................................................49 Dave Roels Photography...............................................................................43 DNV GL..........................................................................................................35 Fraser Surrey Docks......................................................................................IBC Gateway Shipping and Transport..................................................................43 Green Marine — GreenTech 2014.................................................................38 Greenwood Maritime Solutions Ltd.................................................................6 IMS Marine Surveyors & Analytical Laboratories Ltd.....................................25 Industrial Plastics & Paints............................................................................44 InnerCity Community Christmas Dinner........................................................54 International Sailors Society Canada.............................................................14 Jastram Technologies Ltd..............................................................................53 John Horton, Marine Artist............................................................................19 Lloyd’s Register.............................................................................................41 MAN Engines & Components — RDI Marine ..................................................7 Mercy Ships...................................................................................................47 Meridian Marine...........................................................................................34 Mission to Seafarers......................................................................................14 Nanaimo Port Authority................................................................................15 New Wave Marine Engineering Conference...................................................51 Pacific Pilotage Authority..............................................................................21 Port Alberni Port Authority...........................................................................24 Prince Rupert Port Authority........................................................................ IFC Redden Net & Rope.......................................................................................50 Robert Allan Ltd............................................................................................45 Tervita...........................................................................................................43 Tymac Launch Service Ltd.............................................................................44 Vancouver Maritime Museum.........................................................................8 W&O Supply..................................................................................................29 Westshore Terminals.....................................................................................37
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