Decision No. 468-W-2012

INTRODUCTION

Application

[1] Global Marine Systems Limited (GMSL) applied, through its Canadian representative, for a licence to use the “WAVE VENTURE” to repair and maintain the American 1 Fibre Optic Cable System (American 1 System), on an as required basis, in the western Canadian waters of Juan de Fuca Strait, Haro Strait, Boundary Pass and the Strait of Georgia, commencing August 31, 2012 and ending August 30, 2013.

Notice and offer

[2] On August 17, 2012, Canadian Transportation Agency (Agency) staff gave notice of the application to the Canadian marine industry.

[3] On August 29, 2012, ITB Marine Projects LLP (ITB) offered the “ITB 45”, a Canadian ship, to perform the activity.

Conclusion

[4] For the reasons set out below, the Agency finds, based on the evidence, that there is a suitable Canadian ship available to perform the activity.

ISSUE

[5] Is there a suitable Canadian ship available to perform the activity?

LEGLISATIVE CONTEXT

[6] Paragraph 4(1)(a) of the Coasting Trade Act provides the following:

4(1) Subject to section 7, on application therefor by a person resident in Canada acting on behalf of a foreign ship, the Minister of Public Safety and Emergency Preparedness shall issue a licence in respect of the foreign ship, where the Minister is satisfied that:

(a) the Agency has determined that no Canadian ship or non-duty paid ship is suitable and available to provide the service or perform the activity described in the application.

[7] Subsection 8(1) of the Coasting Trade Act provides that:

In relation to an application for a licence, the Agency shall make the determinations referred to in paragraphs 4(1)(a) and (b) and 5(a) and (b).

[8] The intent of the Coasting Trade Act is to allow foreign ships to be used in Canadian waters when there is no suitable Canadian ship available for a proposed activity. The Agency, based on the evidence before it, must make a determination as to whether, on a balance of probabilities, a Canadian ship is suitable and available to perform the proposed activity. The burden of proof rests with the applicant, in this case GMSL, to demonstrate that the offered ship is not suitable and available to provide the proposed service or perform the activity. The onus is also on the applicant to show that any additional requirements described in the application are necessary to perform the required activities.

TECHNICAL AND OPERATIONAL SUITABILITY

[9] ITB offered the “ITB 45” in response to the application, and submits that the Canadian waters section of the American 1 System is located in protected near coastal waters, and that the “ITB 45” is perfectly suited for work in those waters.

[10] ITB indicates that a one-year blanket flag waiver cannot be issued for work that is not specified and in all likelihood could be carried out by the “ITB 45” which has been designed, built, and deployed for subsea cable retrieval and repair.

[11] GMSL submits that ITB has no accommodation on board the “ITB 45”, and given that cable repairs would typically be five days in duration (conducted on a 24 hours a day basis), there would need to be personnel transfers at least twice a day in order for ITB to be able to undertake this type of work. GMSL argues that this would result in risky transfers to an accommodation ship, possibly in the dark and in unfavourable weather conditions, and claims that if conditions meant that such a transfer was not possible, it would have severe implications for the safety of the crew left stranded on the working platform.

[12] ITB states that the “ITB 45” can carry out the repairs and safely transfer workers according to international standards, and that there are certain near shore sections where the “WAVE VENTURE” cannot undertake the necessary repairs due to draft restrictions.

[13] GMSL maintains that it has skilled and highly trained personnel on board and available at all times should there be a call out for an emergency repair. In contrast, GMSL claims that ITB would need to source personnel, particularly with regards to the fibre optic jointing and testing of the cable.

[14] GMSL submits that ITB acknowledges that it does not have key equipment needed for the activity and claims that it would not be possible for ITB to source this type of equipment at short notice. GMSL requests that evidence be provided to demonstrate where this equipment could be obtained in a timely and cost effective manner.

[15] According to GMSL, ITB’s remotely operated vehicle (ROV), the “Oceanic Explorer”, does not have the capabilities to fulfill the requirements to facilitate a cable repair in the type of conditions that would be expected, and that ITB’s apparent assertion that other ROVs could be sourced is misleading, as this type of equipment is not ready “off the shelf” in a small but global industry, is not readily available for hire, and would be prohibitively expensive to provide a competitive tender for the work. GMSL submits that even if it were possible to obtain another ROV, it is likely that it would also not be up to the specifications of the ST200 which is mobilized on the “WAVE VENTURE”. Further, GMSL is of the opinion that it is unlikely that ITB could deliver this type of equipment to its ship within a 24-hour notice.

[16] ITB submits that it can and will source the equipment and workers required to efficiently and safely carry out repairs when needed, and notes that the “ITB 45” has worked successfully on complex subsea cable projects in the waters where the American 1 System is positioned. ITB adds that it does not feel it is appropriate to respond to the technical specification requests made by GMSL, as the majority of those specifications are for open ocean cable repairs while the American 1 System is in protected coastal near shore waters where the ship requirements are much different and well within the capability of the “ITB 45”. Additionally, ITB submits that the “ITB 45” is designed to working in near coastal waters, and it is completely inappropriate to compare a DP2 cable ship like the “ITB 45” with a deep sea long duration cable ship.

[17] GMSL maintains that the “ITB 45” has no track record of fibre optic cable repair based upon the information provided by ITB, and as the ship is not solely dedicated to fibre-optic cable maintenance, this means that ITB does not hold the required cable testing or jointing equipment or the highly skilled personnel necessary to repair the American 1 System.

[18] ITB submits that it has been laying, retrieving, repairing and inspecting submarine cables from Alaska to Washington State since 1965, and that the “ITB 45” has worked successfully on complex subsea cable projects in the near coastal waters where the American 1 System is positioned.

Analysis and findings

[19] When determining whether a Canadian ship is suitable to perform an activity, the Agency assesses the suitability in relation to the technical and operational requirements of the activity and whether the Canadian ship is capable of performing the activity.

[20] With respect to GMSL’s claim that the “ITB 45” is not capable of meeting the requirements to perform the maintenance and repair of the American 1 System, as required, the Agency takes into account a determination made in Decision No. 148-W-2012, where GMSL requested a coasting trade licence to use the “WAVE VENTURE” for repairs and maintenance on an “as needed” basis respecting one of the activities proposed in the application. Paragraph 25 of Decision No. 148-W-2012 states:

Furthermore, the Agency notes that there is no actual need identified in respect of any subsequent repair and maintenance on the NEPTUNE and, therefore, GMSL has not provided supporting arguments or evidence of specific additional requirements applicable to this activity. The Agency, therefore, finds that a Canadian ship is technically suitable for any subsequent repair and maintenance, as needed, to the NEPTUNE within Canadian waters.

[21] Based on the evidence provided, the Agency is of the opinion that while ITB has not provided complete information on how the “ITB 45” would meet the extensive technical requirements specified by GMSL, there is no actual need identified at this time and no evidence has been provided in support of GMSL’s specific requirements.

[22] The Agency therefore finds that GMSL has not met its burden to demonstrate that, on a balance of probabilities, the “ITB 45” is not suitable to repair and maintain the American 1 System on an as required basis and there is a Canadian ship technically suitable for the proposed activity.

COMMERCIAL AND ECONOMIC SUITABILITY

[23] GMSL states that the intent of the application is to provide emergency repair and related maintenance services as part of the North America Zone Maintenance Agreement (NAZ Agreement).

[24] According to ITB, the NAZ Agreement is a commercial maintenance agreement that covers certain subsea telecommunication cables from the North Pacific to the Equator, it cannot supersede the Coasting Trade Act, and it is irrelevant to this application.

[25] GMSL counters that the NAZ Agreement does not in any way supersede the Coasting Trade Act, and that it is simply the most economic and technically suitable maintenance solution available. GMSL argues that the NAZ Agreement is required not just for the economies of scale, but it allows for maintenance on a particular cable to be carried out under a single agreement, therefore streamlining the process.

[26] ITB submits that under the NAZ agreement, the “WAVE VENTURE” is paid a very large standby rate to remain mobilized to provide service on a 24-hour basis.

[27] GMSL maintains that, on the contrary, the standby charge to which ITB refers is minimal in order to ensure that cable maintenance is a viable option to Canadian operators. GMSL adds that ITB does not have a suitable cable ship solely dedicated to cable repair and that the amount of planning, mobilization of equipment, and personnel, would create a situation where repair costs would become unviable.

[28] ITB states that the “ITB 45” can and will be made available for such a call out provided appropriate standby fees are paid and that it has identified a need for a DP2 cable ship to service Canadian west coast waters and built the “ITB 45” to be ready to respond to the requirements on the west coast.

[29] GMSL submits that details of the cost and duration of a repair on the American 1 System were not provided by ITB, and requests that ITB provide evidence of internationally approved suppliers of equipment and personnel and the timelines within which it would expect to source the equipment it claims to have access to.

Analysis and findings

[30] The Agency Guidelines Respecting Coasting Trade Licence Applications indicate that the onus is on the applicant to produce evidence that clearly demonstrates that the use of a Canadian ship would render the activity economically and commercially unviable. 450-W-2009">Decision No. 450-W-2009 states:

With respect to the issue of additional costs, the Agency has previously ruled that “to claim that the cost of using a Canadian ship would be higher is not sufficient to show that a Canadian ship is not suitable; rather, the onus is on the applicant to demonstrate that the project would be uneconomic or commercially unviable using the Canadian ship” (352-W-2005">Decision No. 352-W-2005). In the same Decision, the Agency referred to 427-W-2003">Decision No. 427-W-2003, in which the Agency ruled that “[...] where the applicant is arguing that the use of the Canadian vessel offered would impose an unacceptable financial burden on it, it is up to the applicant to provide the financial information that would prove these allegations.

[31] Regarding GMSL’s submission that ITB does not have a suitable cable ship solely dedicated to cable repair and that the amount of planning, mobilization of equipment, and personnel, would create a situation where repair costs would become unviable, the Agency is of the opinion that, given that there is no work actually specified, GMSL has not demonstrated that the project would be uneconomic or commercially unviable using the Canadian ship.

[32] Furthermore, the Agency notes that requiring ITB to provide details of the cost and duration of a theoretical repair of the American 1 System would be unreasonable, and that GMSL has not provided appropriate financial information to prove its allegations.

[33] With respect to the NAZ Agreement, the Agency takes note of paragraph 31 of Decision No. 148-W-2012, where the Agency found that the requirement for permanent standby is based on the NAZ Agreement and is not a necessary requirement for the proposed activity.

[34] Based on the evidence submitted, the Agency is of the opinion that it is not enough for GMSL to simply claim that if the “ITB 45” was instructed to undertake the repair, the costs would become unviable; GMSL must provide financial information that would support the allegations.

[35] Therefore, the Agency finds that GMSL has not demonstrated that the use of the “ITB 45” would render the activity commercially unviable.

AVAILABILITY

[36] ITB submits that given that there are no specific details on the type and nature of the repair work actually planned or expected to be performed, and that the issuance of a blanket flag waiver for a period of one year without specific details on the type of work does not seem reasonable or in keeping with the governing regulations. ITB adds that should a temporary admission of foreign ship be required, an application should be submitted for a specific repair or piece of maintenance work at that time.

[37] GMSL indicates that although there may be no actual repair at the time of application, it is necessary for the temporary admission to be in place to be able to meet the 24-hour response criteria which is essential to Canadian infrastructure. GMSL adds that any Canadian ship would need to prove that it were capable of meeting this requirement on a year-round basis. Furthermore, GMSL argues that applying for temporary admission for each repair would create potential delays which could threaten the integrity of the Canadian fibre optic network.

[38] ITB submits that the “ITB 45” is readily available to carry out this work and notes that if the “WAVE VENTURE” is on a service call out, the 24-hour response requirement for other NAZ Agreement customers is nullified.

[39] GMSL counters the “ITB 45” is not dedicated to cable maintenance, and is only available when not performing work on other contracts.

Analysis and findings

[40] On the issue of availability, the Agency refers to paragraphs 39 and 40 of Decision No. 148‑W‑2012, which state:

[...] the onus is on GMSL to provide information as to when the Canadian ship would be required to be available to perform the activity. While the Agency recognizes the importance of timely repairs, should the need arise, no date for the work has been identified at this time. Therefore, the Agency finds that the “ITB 45” is available to perform the activity.

Should the need for emergency repairs arise within Canadian waters and GMSL considers it necessary to use a non-Canadian ship, it can apply to the Agency with details of the required work at that time.

[41] As noted above, the Agency is of the opinion that the onus is on GMSL to provide information as to when a Canadian ship would be required to be available to perform the activity. Given that no date has been identified, the Agency finds that the “ITB 45” would be available to perform the proposed activity.

[42] Therefore, based on the evidence, the Agency is satisfied, on a balance of probabilities, that the “ITB 45” is available to perform the proposed activity.

DETERMINATION

[43] Based on the above findings, the Agency determines, pursuant to subsection 8(1) of the Coasting Trade Act, that there is a suitable Canadian ship available to perform the activity.

[44] The Agency is providing this determination to the Minister of Public Safety and Emergency Preparedness.