With just two months to go before funding was to have run out, last November 30 the federal government announced a 38-month extension to a funding agreement for the Princess of Acadia ferry service between Digby, Nova Scotia and Saint John, New...
With just two months to go before funding was to have run out, last November 30 the federal government announced a 38-month extension to a funding agreement for the Princess of Acadia ferry service between Digby, Nova Scotia and Saint John, New Brunswick; dollar figures were not revealed.
Unfortunately, politicians did not go beyond the words, “Transport Canada is committed to working with the provinces and local communities on a long-term approach …” on the subject of whether the service would be funded beyond March 31, 2014.
Whether the funding would be extended beyond the January 31, 2011 expiry date must have been a cliff hanger for the provinces and businesses that rely on the ferry. After having gradually becoming a money-losing operation, the ferry service received subsidies to the tune of $23.1 million between 2006 and January 31, 2011. It seemed unthinkable that governments would let the service sink, but after watching them scuttle the CAT ferry between Yarmouth and Maine in 2009, another sinking was obviously possible.
Yet it is not as though the marine route is that different a burden for the public to bear than a highway. “The cost of maintaining the infrastructure is about the same as maintaining an equal stretch of highway. We’ve got really solid numbers,” says Mike Gushue, managing director, Annapolis Digby Economic Development Association.
The biggest loser, had the ferry been lost, would have been the fishing industry, Gushue says. “The whole fishing industry in South West Nova Scotia is based on fresh fish. The only way to get it to the Eastern Seaboard is by the ferry. We put a 5-10% price tag on the value lost to the fishing industry if fish is not delivered “just-in-time” in its freshest state. Some say it is 30-40% or even more if the only option is the highway. It is twice the distance of the ferry [and includes] the additional cost to truckers of an extra driver, fuel and maintenance.”
For years Northumberland Ferries profitably ran the CAT and Princess of Acadia, after taking over the money-losing operation from Marine Atlantic in 1997, according to Don Cormier, vice president operations and safety management, Northumberland Ferries Limited / Bay Ferries Limited. “We reduced fuel consumption by 25% and labour costs by 40%. We are innovative and creative with our marketing.”
But then the tide turned against Bay Ferries, largely due to the collapse of the forestry industry and a drop in truck traffic from an historic high of 26,000 to just 10,000 tractor-trailer operations in 2009.
Still, says Cormier, “Despite a huge spike in the cost of energy, we [were] within the reference amounts of the contribution agreement to fulfill our obligations. The money from the governments included $1 million for the 2010 Atlantic Canada Opportunities Agency (ACOA) study [of the transportation system and economy of South West Nova Scotia] at least $1.5 million in terminal infrastructure and $3 million in Princess of Acadia ship upgrade project alone. The service now requires some infusion of public funds to sustain it, but the investment today is still quite a bit less prior to our taking it over.
“Currently the company and service is meeting expectations in a very different business climate. There is a recognition from governments that this service requires public monies to operate. We don’t want handouts. We are proud of our accomplishments. It is not how we want to do our business [take handouts]. But from a matter of public policy, if a private company cannot sustain this route, it is a good public policy to support ferry infrastructure. They are public highways, they are lifelines to communities the same way as asphalt highways.”
Carriers that use the ferry heartily agree. “I think it is a vital piece of transportation in this area which we do not want to lose. There is a lot of product going back and forth,” says Brent Chamberlain, manager of Acadian Wipers in Digby.
The Nova Scotia fishing industry is worth $300 million or more a year. Many companies depend on the ferry to get their catch to US markets without delay. “We bring in boats in the morning and process and pack the fish. It is ready to ship by four o’clock. It is on the New England market by five-thirty the next morning,” says Denny Morrow, executive director of the Nova Scotia Fish Packers Association, which has 59 member companies. “The Princess of Acadia is part of our business plan. We put $200 million worth of seafood a year on the ferry.”
Had the ferry ceased operations, trucks would have been forced to drive around the Bay of Fundy. That, however, takes six to eight hours extra travel time and requires either a rest stop or an extra driver. This is no way to bring fragile produce to markets that demand freshness. “Once lobster is out of the water it is on life support,” Morrow says.
It is about 69 kilometres from Digby to Saint John as the crow flies. It is unthinkable that Transport Canada would shut down a 69-kilometre section of the Trans Canada or any other highway for failing to survive some cost-benefit analysis -not that highways are ever subjected to such life or death analyses – but this very attitude, in the absence of a long-term funding commitment, threatens the Princess of Acadia and other ferry services in Eastern Canada. Still, notes Cormier, “I think governments recognise, to some extent, that analogy,” that ferries, like all highways, need public support, regardless of any particular stretch’s profitability.
Governments did expend plenty of effort and funds trying to figure out what to do. In 2007 Transport Canada issued a Request for Expression of Interest (REI) to see who might be interested in running the service. Seven companies, including Bay Ferries, responded. “The REI was a process by which the government could answer the question whether anyone has a credible business plan to offer this ferry service without public funding. None of the other participants in the REI had a privately-funded, viable business plan with a positive bottom line,” Cormier says.
There was talk of returning the service to public ownership, but would that have been wise? In the last fiscal year that Marine Atlantic operated the Princess of Acadia, it lost $7 million, according to Cormier. “The only logic to contemplating that is if public ownership was required to access a different source of funding. We believe the private sector-driven model is the preferred one.”
With the ACOA study in government hands, Motor Truck asked Transport Canada last October whether it would keep or scuttle the ferry. The reply: “The federal government understands the importance of the Saint John/Digby ferry service to the local communities and economy. The [ACOA] study will be one of a number of inputs to a broader assessment of the regional transportation system and economy for Transport Canada’s consideration. No decision has been made yet on the next steps regarding the Saint John/Digby ferry service.”
Well, a decision was made and the boat continues to float. Now the question is whether federal politicians plan to put everyone through the wringer again in the run up to the expiry of this funding extension in 2014.
Ferry Service a Net Benefit
A detailed analysis of the transportation system and requirements in South West Nova Scotia (SWNS) prepared for Atlantic Canada Opportunities Agency (ACOA) concludes that the Yarmouth-Maine and Digby-Saint John ferries provide a large net benefit to the local economy.
(In 2009 the Yarmouth-Maine high-speed CAT ferry discontinued service after governments declined to continue funding it. By 2008 passenger-related vehicle traffic had declined by 70% from its historic high of over 300,000 in 2001.)
“The consultants found that despite declining demand over the past number of years, local communities and industries feel that the ferry services are an integral part of the regional transportation network and economy,” the report, made public this summer, reads.
The 223-page South West Nova Scotia Transportation Study, prepared for ACOA by CPCS Transcom Limited in association with Opus International Consultants (Canada) Limited, examines what comprises the region’s economy and the supporting highway and marine transportation systems. The main concern of the study, however, was the effect on the economy of shutting down either ferry.
Since there never was any commercial truck traffic to speak of on the CAT, the importance to SWSN industries supported by commercial trucking – forestry, fishing, agriculture and general freight – centres on the operation of the Digby-Saint John ferry, currently the Princess of Acadia. Of all the elements of the economy, including tourism, commercial trucking stands the most to lose between 2010 and 2019 – $54.5 million – if there are no ferries, according to the report.
The Digby-Saint John ferry is a shortcut to New Brunswick and the United States. Without it, trucks must add 570 kilometres for the drive around the Bay of Fundy to reach US destinations. This extra driving time would have big impact on the quality of fresh seafood that is delivered to US markets. The study explains: “It is critical to the $600-million commercial fishery, which is increasingly a “fresh fishery” and requires quick and reliable transportation to reach early morning markets in Boston. Of all sectors in the SWNS economy, seafood has the most extensive backward linkages into the regional economy, i.e., boat building, fishing gear, fuel sales, trucking, provisioning, etc. It is also increasingly interlinked with the (estimated) $100-million mink industry, which provides backhaul cargo to seafood shippers (via the ferry service).”
The study noted that, “In the case of the fishery, depending on the commodity carried and the time of year, it is not uncommon to have 8-10 truckloads of fresh seafood onboard the Princess of Acadia, representing upwards of $2 million worth of product on one sailing.”
The problem is that demand for the ferry service has declined in the past decade. It gradually became a money-losing commercial operation for Northumberland Ferries Limited / Bay Ferries Limited, which took over operation of the service from Marine Atlantic in 1997.
Since 2006 the Nova Scotia, New Brunswick and federal governments have subsidised the Princess of Acadia: Money already given and money pledged, $23.1 million in all, kept the ferry running until January 31, 2011.
Passenger related vehicles peaked in 1999 at 54,337, and declined by 39% to about 33,000 in 2008. Commercial-related vehicles peaked in 2000 at 28,945 units, but tailed off by 57% to just over 10,000 in 2008. Most of this decline was due to the collapse of the forest industry, but the fisheries industry also lost a lot of ground: Total fish harvested in SWNS dropped from a peak of about 190,000 tonnes in 2003 to around 140,000 tonnes in 2008.
Between October 2008 and September 2009, 74% of the Digby-Saint John commercial traffic was generated by the fisheries, 20% by general freight and 6% by forest products.
The study looked at the possibility of recovery in traffic volumes and their potential effect on a ferry operation’s balance sheets: Fisheries growth is considered to be limited beyond 2011; the forest products sector will only rebound to one-third of historic levels and is unlikely to be a large driver of transportation demand in SWNS in the future; tourism will recover only slightly in the next 10 years. Upgrades planned for the NB Southern Railway will provide shippers with an intermodal rail alternative and a stimulus for drop trailer traffic for the ferry. Truck traffic is expected to peak at 14,500 in 2019.
The study calculated the cost, and net benefit to the economy, of a number of capital investment & operating scenarios for continuing the two ferry services from 2010 to 2019. Looking at the Digby-Saint John service, one scenario puts the cost of operating the service, including the purchase of a used ropax (roll on/roll off passenger vessel) at $91 million dollars. Buying a new ropax would increase the 10-year cost to $116 million. The net economic benefit to the region runs between $141 and $160 million, depending on the operating scenario.