No Navigational Aids in Sydney Harbour? No Ship.

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I was very interested to hear the “news” on CBC on Tuesday that the deeper channel dredged in Sydney Harbour six years ago is not being used because the necessary navigational aids have never been put in place.

The gist of the story is that there was not enough money for navigational aids left over when the dredge was completed. Port of Sydney CEO Marlene Usher explained how very disappointed the Port is that the Coast Guard, which is responsible for navigational aids, has failed in its duties in this respect.

But as someone who has been “bird-dogging” (Tim Bousquet’s word, but I find it accurate) this story since 2016, I was surprised that the lack of navigational aids had suddenly become news. And I was puzzled by Usher’s version of the story.

Because, as I’ve recounted before, when the leftover dredge money — about $2.5 million — was placed in a trust fund under the supervision of the Sydney Ports Corporation (SPC) in 2014, the “Assumption Agreement,” drafted by Breton Law’s Jim Gogan, clearly outlined the purposes for which that money was to be used:

Source: ECBC-SPC Assumption Agreement

Source: ECBC-SPC Assumption Agreement

 

ACOA and the Canadian Coast Guard (CCG) signed a memorandum of understanding (MOU) on the aids in 2014 which stated:

SPC shall have complete control and responsibility for the delivery of the Project. CCG may, upon request, provide advice, guidance or support to SPC.

As late as February 2015, former CBRM CAO Michael Merritt was writing (in a letter to ACOA VP for Nova Scotia Paul Hogan):

As you are aware funds have been set aside from the remaining monies leftover [sic] after the Sydney Harbour was dredged. This money, approximately $1.6 million, resides with the Sydney Port [sic] Corporation in trust for the specific purpose of installing navigational aids in Sydney Harbour. [emphasis mine]

And as late as December 2016, Stephen Bornais, a spokesperson for Fisheries and Oceans, was explaining to me in an email:

As to the new system that will be installed to complement the  dredging project, under a Memorandum of Understanding the Canadian Coast Guard signed in July 2014 regarding the construction and operation/maintenance of a new Aids to Navigation system in Sydney Harbour, Coast Guard undertook to operate/maintain the system once it was completed and commissioned.

Coast Guard remains committed to the MOU.

And yet, after the Port of Sydney Development Corporation took over from the SPC in April 2015, Usher — who had been seconded from ACOA to head the new corporation — began saying that the price for the navigational aids was so high (she estimated it at $3.4 million) that the Port had decided to spend some of the Assumption Fund money on “business development” instead.

It took me a long time to find out how the Port decided it would be okay to spend the money this way even though the purposes spelled out in the Assumption Agreement had not been achieved. I finally discovered the answer in the minutes for the 1 March 2017 meeting of the Port of Sydney Development Corporation interim board. During the meeting, Usher:

…commented on the negative impact existing due to not having the navigational aids placed in the harbour following the dredge. Clarification was provided to Deputy Mayor Eldon MacDonald that contrary to his understanding, it is not mandatory for left over funding from the dredge transferred from ECBC in trust to the PSDC, be used for the placement of the navigational aids but rather funds may be used for port projects.

Chairman, [sic] Michael Merritt went on to explain that a legal opinion was acquired to confirm it is the Federal Government and the Canadian Coast Guard which have this responsibility. Ms. Usher advised that the approximate cost to placing the navigational aids in the harbour, was $3.4 million. Pressure for the Coast Guard to put the navigational aids in place continues from the Province with letters of support from Nova Scotia Power and the Kline Group (Donkin Mine.)

Usher confirmed for me later that the “legal opinion” came from Jim Gogan (who has, to date, been paid $149,040 from the fund). I was not permitted to see the legal opinion because, as she informed me in an email, “Legal opinions are privileged information…”

But the “legal opinion” that permitted this spending by determining that the “Federal Government and the Canadian Coast Guard” have responsibility for the navigational aids seems to fly in the face of the MOU of understanding between ACOA and the Coast Guard.

You can read all of this — including the full text of the Assumption Agreement and the full text of the ACOA-Coast Guard MOU — in this earlier article. For now, I’d like to concentrate on what Usher told the CBC about the way the leftover dredge funds have been spent.

 

Nav aids

Usher told the CBC that the Port has spent “a million” from the Assumption Fund to date:

[S]ome of that’s been on long-term care and maintenance for the confined disposal facility. Some of it’s been on a research study for fish habitat and other monies have been spent on research studies related to the harbor and the container terminal.

Now, according to the Assumption Agreement, the fish habitat study was to cost $120,000. As for the costs associated with the long-term care and maintenance of the confined disposal facility (CDF), otherwise known as the greenfield site, in a 24 February 2015 briefing note to Peter Hogan (ACOA vice president for Nova Scotia), Joe Cashin (ACOA director of enterprise development), spelled them out this way:

As a requirement of its environmental approval, the confined disposal facility requires a 10-year construction maintenance and monitoring program. According to estimates provided by CBCL Engineering, the cost of maintaining the monitoring program is approximately $800,000.

According to information I received from Usher earlier this month, as of 31 March 2018, the Port of Sydney had put $30,000 into the fish habitat study and $125,953 into CDF monitoring and maintenance.

If the earlier figures were correct, that means the Port must put an additional $90,000 into the fish habitat study and an additional $674,047 into CDF monitoring and maintenance, for a total of $764,047.

(I will add one caveat here: I don’t know how much money the SPC put into the fish habitat study or CDF monitoring but I do know, from records that I received from the Port last year, that between 14 May 2014 and 14 April 2015, the SPC received $134,061.55 from the fund. If all of that went to the fish habitat study and CDF monitoring, the funds still owing remain a considerable $629,985.45.)

And yet, Usher also told the CBC that the Coast Guard has apparently agreed to come up with part of the funding for the navigational aids provided the Port of Sydney provides its share, which she put at $800,000. She said the Port’s share could come out of the $1.1 million left in the Assumption Fund.

But if the Port still has obligations in terms of fish habitat and CDF monitoring worth over $600,000, that leaves only about $500,000 in the Assumption Fund for navigational aids.

Conversely, if the Port puts $800,000 into nav aids, that leaves just $300,000 to meet its fish habitat study and CDF monitoring obligations — monitoring obligations that were “a requirement of its environmental approval.”

Can the Port afford to cut corners on CDF monitoring and maintenance given that, as Usher told me earlier this month, the site is “eroding” and needed $68,990 worth of repairs in 2018?

(And I realize, we’re talking shortfalls of “only” $300,000, but that’s a lot of money for the Port of Sydney, which owes the CBRM hundreds of thousands of dollars in rent.)

Bottom line, should the Port of Sydney really have spent that $1 million on “research studies related to the harbor and container terminal?” Speaking of which…

 

“Capital projects”

As I just mentioned, Usher told the CBC that some of that $1 million was spent on “research studies related to the harbor and the container terminal.”

But let’s take a closer look at that. Here’s an accounting, as of 31 December 2018, of all spending from the Assumption Fund:

Company03/31/1603/31/1703/31/18TOTALDetails
TOTAL567,231348,345210,8671,126,443
Bechtel 188,2094,697192,906engineering firm, provided technical information for meetings with stakeholders, attended stakeholder meetings and prepared initial feasability [sic] study
Industream134,109134,109prepared several reports tailored to target audience, provided research information on shipping patterns from Asia and europe [sic] to North America, attended China meetings
Breton Law56,35287,1195,569149,040ongoing legal work regarding all aspects of the project including exclusivity agreement and further legal documents as well as other port work such as harbor divestiture issues and FOIPOP
Cadence/National75,00075,000communications plan, digital strategy and government and media relations by National Communications
Harker & Associates18,29218,292strategy on China sister city trip and attendance at some of the events as well as advocacy for the port in China
Novastream2,3602,360streaming port presentation at CBU
Dentons Law38,57112,70951,280advice and introduction to China stakeholders including sister City, translation of all materials including Port Prospectus, attandence [sic] at meetings in China and follow up support with Quad C, office support in China
Consulting Mongeau1,4501,450research and preparation for meetings and research regarding competative [sic] issues and strategy in Atlantic Canada
Vibe Communications6,3016,301Power point creative design for several tailored presentations
Hackett1,4111,411logistics expert providing information on container terminal
Judy Hou Consulting3,9823,982attendance at all China meetings and provided translation services
Transcontinental3,3993,399Port advertising
city printers [sic]1,7271,727Port prospectus booklets
arachnia [sic]600600retractable banner
china delagation [sic]11,6272,01013,637car rental, gifts for Chinese delagates [sic], meals and hotel forChinese delagates [sic]
JC Evans Consulting28,10228,102rail expert to assist the port in meetings with rail companies and other shipping lines, attandance at rail meetings and key note at Ports Day 2016
Genasee&Wyoming [sic]120,000120,000participation in rail strategy for Port
Drewery [sic]14,94914,949study for specific European line on North American transit
darius group [sic]28,03625,97454,010consulting assignment to assist port on transport canada [sic] file regarding cabatoge [sic] and to appeal for level playing field for all ports under CETA and attend senate hearings in Ottawa and provide briefings
Ports America visit4,0904,090Ports America visit to site in Sydney and presentations to stakeholders
Hatch Engineering80,30080,300Cost analysis of rail including bridges and required infrastructure improvements
Universal Rail7,0007,000cost analysis of rail study from Donkin to Sydney Port
travel6,5456,54510 flight passes , plus trip to Montreal for Marlene Usher and business dinner in Sydney for stakholders [sic] on container terminal
549,935301,712118,843970,490
CBU30,00030,000CBU research on fish habitat post dredge
CDF monitoring CBCL17,29616,63392,024125,953Confined Disposal Facility monitoring

 

As you can see, the money was spent on many items that do not qualify as “research studies” — visits by Chinese delegations, visits by Ports America reps, trips to Montreal, a keynote Port Days speaker, legal fees, etc. I calculate actual “research studies” account for $429,264 of the $1 million spent.

But what’s clear is that meeting the obligations spelled out in the Assumption Agreement accounted for very little of that spending — $155,953 all in or 15%.

And yet, Usher assured the CBC the Port was free to use the remaining money in the fund for navigational aids:

Well, put it this way, if we didn’t have to contribute anything then we would, you know, obviously there’s lots of projects, including capital projects that we could do at the Port. But, having said that, if that’s the requirement that they’re making and that they are putting in the remainder of the funds, we feel that that is a good use of those funds if we can leverage that $800,000 to get a three-and-a-half million or more project to update the nav aids.

(Interesting that “capital projects” weren’t on the shopping list when the Port spent that first $1 million.)

On the one hand, if we do get $3.4 million worth of navigational aids for $800,000, that’s quite a bargain (although, presumably, there was some cost attached to having no aids in the harbor for six years).

On the other hand, if we are unable to fund the monitoring and maintenance of the site on which we hope to build a mega-hub for ultra-large container vessels, that could be a problem.

Please, somebody, do the math.

 

 

 

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