Canada’s biggest grain companies want sweeping changes to how the Port of Vancouver, Canada’s biggest port, including for grain, operates.
“We are trying to promote a solution that allows Canada to reach its targeted goal of $85 billion in (food and agricultural) exports by 2025,” Wade Sobkowich, executive director of the Western Grain Elevator Association (WGEA), said in an interview Feb. 17.
“But we don’t see a very strong vision from the Port Vancouver when it comes to the grain sector. That’s something everyone in the grain sector should be concerned about.”
The WGEA, which represents Canada’s major grain companies responsible for exporting more than 90 per cent of Canada’s grain, wants major changes in the Canada Marine Act to improve the Port of Vancouver’s governance and how it operates, including more transparency around infrastructure investments.
“One thing that is happening is we are seeing infrastructure setting priorities that are not necessarily lined up in the best interests of the bulk grain sector,” Sobkowich said. “There is a lack of transparency, but there is definitely a preference for those projects at T2 Roberts Bank — a container project… We have some concerns with that, especially since there isn’t a proponent. It’s the port itself making those decisions.”
While changes the WGEA seeks would affect all Canadian ports, its complaints are focused on Vancouver because it’s Canada’s biggest grain port, Sobkowich said.
Why it matters: Most of Western Canada’s grain is exported through the Port of Vancouver so western farmers want the port to reduce costs so they aren’t passed back to farmers.
The Port of Vancouver is a statutory monopoly lacking in checks and balances with no appeal or arbitration process for users, Sobkowich said.
Moreover, the port authority is acting both as a port developer and regulator, putting it into a conflict of interest, he said.
“The same party that is advancing a project… (is the) same entity regulating us — charging us rents, charging us infrastructure fees, making decisions on environmental permit applications, making decisions on land use, making decisions on leases that get renewed or don’t get renewed.”
Former federal minister David Emerson, chair of the Canada Transportation Act Review, raised similar concerns testifying before the Senate Standing Committee on Transportation in 2017.
“I think there is inadequate governance in relation to deployment of capital, there’s inadequate governance when it comes to making sure that there is a recourse to a regulator where there is abuse of monopoly power,” he said.
“Frankly I wouldn’t give them any more access to money until you clean that up.”
In 2019, 70 per cent of products exported from Vancouver were bulk commodities totalling 99.7 million tonnes — most of it from Western Canada.
Of that, 23.5 million tonnes or 24 per cent was grain.
Total exports through Vancouver hit 144 million tonnes. Bulk grain along with 7.5 million tonnes of containerized grain accounted for 31 million tonnes, or 22 per cent of total Vancouver exports.
Yet, the western provinces only get two seats on the port’s board — one for British Columbia and one for Manitoba, Saskatchewan and Alberta combined, Sobkowich said.
“Something doesn’t add up here from our perspective when you have a port that is so important to the western Canadian economy,” he said.
“The nominating committee process (for port directors) gets interfered with by port management. We’ve been trying to get someone on there with a grain background for years.”
The last nominee from the Prairie provinces was a former vice-president with Cargill.
“We couldn’t even get him an interview,” Sobkowich said.
Vancouver also doesn’t allow directors representing port users to be actively working in the industry.
“Vancouver is very unique in that sense because other ports across the world, not only allow but encourage their users to sit on the board of directors,” he said. “Rotterdam for example has five users on the board of directors.”
The WGEA is also concerned about what appears to be the port’s bias in favour of promoting a new container terminal, Sobkowich said.
“We believe those who stand to benefit should be the ones who should pay,” he said.
The WGEA also wants the way rent is calculated for land leased from the port examined.
“The last (rent) increase we saw was particularly pronounced on the North Shore, at 30 per cent in one year,” he said. “That was extreme.”
Instead of basing rent on local land prices, which are among the highest in the world, the WGEA wants it tied to inflation.
“We have a gateway for the betterment of the western Canadian economy but we have a very localized decision happening for rent,” Sobkowich said.
The WGEA also wants more clarity around land lease renewals. Grain terminals that have been at the port for decades, worth millions of dollars, might not get their leases renewed.
“There is real risk that their leases won’t be renewed if we have a port authority that acts as developer and a regulator and has a preference for containers,” he said.
“Some (WGEA members) have expressed to me that there is some concern out there that we could, at some point in the future, if we don’t get this worked out, could lose terminal capacity for grain.”
In addition to rent, port users pay a Gateway Infrastructure Fee, to help fund port infrastructure. Government and the port pay two-thirds and one-third of port infrastructure, respectively. But 90 per cent of the money from the port comes from port users, Sobkowich said.
The fee users pay is based on the area they are in. In 2022 grain terminals on the North Shore will see their fee double to 16 cents a tonne.
South Shore terminals will pay 42 cents a tonne — a 55 per cent jump.
Several others will see fees stay the same or increase just slightly.
“We’re not saying that we disagree with infrastructure projects,” Sobkowich said. “We’re saying those who benefit from them should be the ones who pay.”
The WGEA argues local residents have too much say in how the port operates.
As more people crowd around the port the more they complain about the noise and dust.
A review of port regulations began several years ago. In September 2019 Transport Canada released a document on what it heard from stakeholders.
“But it doesn’t look like it addressed the issues we have addressed here,” Sobkowich said.
Many of the complaints raised by the WGEA are required under the Canada Marine Act, the Port of Vancouver said in a statement Feb. 18.
“It’s a complex mandate that requires balancing many opposing interests of a broad range of stakeholders, ultimately having to make decisions in the best interests of Canadians generally,” the port said.
“Many of the issues raised by the WGEA — governance, board nominations, and having to consider the impacts of port operations on local communities — are dictated by the Canada Marine Act, and therefore beyond the control of the port authority.”
To fulfil its mandate the port must ensure infrastructure is in place to handle growing international trade, the port said. A lot of investment has gone into the port during the last 10 years benefiting all terminals, including for grain, resulting in record grain exports.
“Many of the current projects under way are specifically to build capacity for the grain sector, and others will address the increasing demand for container trade,” the port said. “Interestingly, containers are used to ship a significant amount of grain so those container capacity projects will benefit the agricultural sector. Any fees that we may charge terminal operators for common-use infrastructure improvements are subject to consultation with those operators.”
The port’s biggest challenge is the lack of industrial land, the port said.
“That may require difficult choices with respect to a current tenant, but overall the Port of Vancouver will remain Canada’s gateway for agricultural exports to the world.”
The WGEA seeks the following:
(1) Adequate recourse to user to challenge and appeal port authority decisions.
(2) Address conflicts of interest that arise in port management’s role as developer and regulator/administrator.
(3) Make director appointment rules accountable:
i) Overhaul nominating committee membership to reflect the users.
ii) Remove outside interference with nominating committee decision-making.
iii) Allow people who actively work in industry to sit on the board.
iv) Redesign appointments to adequately reflect provincial economies that rely on the port.
(4) Ensure port authorities are actively representing federal government jurisdiction
on regulatory issues.
See more on what the WGEA wants on this PDF on its website.