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Scrutiny of Regulations, Issue 8, Evidence

Proceedings of the Standing Joint Committee on
Scrutiny of Regulations

Issue 8 - Evidence

OTTAWA, Thursday, May 29, 2003

The Standing Joint Committee of the Senate and the House of Commons for the Scrutiny of Regulations met this day at 8:35 a.m. for the review of Statutory Instruments and consideration of a draft report.

Mr. Gurmant Grewal (Joint Chairman) in the Chair.


The Joint Chairman (Mr. Grewal): Good morning. We will deal with the matter under Special Agenda Items first.

Later in the meeting, we have various witnesses from various departments.


Mr. Cummins: Mr. Chairman, you will recall that at the committee meeting of March 20, 2003, Mr. Farrah, the parliamentary secretary to the Minister of Fisheries and Oceans, made a number of promises to the committee. In fact, Mr. Lee asked Mr. Farrah if he could clarify the intentions of the department vis-à-vis consultations with this committee before amendments are crystallized and presented to House this spring.

We were talking at that time, Mr. Chairman, about amendments to the Fisheries Act. Essentially, a deal was struck with the committee where the committee would refrain from proceeding with disallowance because the department committed to consulting with the committee before it raised the issue of these changes to the bill in the House. That was the substance of Mr. Lee's questions.

Mr. Farrah went on to say that they would be introducing amendments in the House during the current session. He said that, as far as the timetable is concerned, the plan was to table the legislative amendments in the House of Commons at the earliest opportunity during the current session.

The Joint Chairman, Senator Hervieux-Payette, asked Mr. Farrah the following question:

Mr. Farrah, when you say ``the formal process this spring,'' by ``formal process'' do you mean a parliamentary committee will eventually be asked to examine the proposed amendments?

Mr. Farrah responded as follows: ``No, by `formal process' we mean the legislative process leading to the adoption of these legislative amendments.''

This is important, Mr. Chairman. He said:

Before any amendments are formally introduced in the House of Commons, the department is committed to meeting with your committee to discuss the various options. Is that clear?

Those were Mr. Farrah's words: ``Is that clear?'' That was Mr. Farrah speaking and not the member from Delta South Richmond speaking. Let me repeat that. Mr. Farrah said:

Before any amendments are formally introduced in the House of Commons, the department is committed to meeting with your committee to discuss the various options. Is that clear?

Mr. Farrah continued:

We want to ensure to meet the members of the committee before the minister presents the amendments in the House of Commons. Our objective is to ensure that we will have amendments introduced in the House of Commons before June.

Again, that was Mr. Farrah talking. He wants to meet; he commits to meeting. Mr. Lee said:

Let us signal to the department and the minister that we are ready to receive some form of consultation on the proposed options at an early date and as soon as they are ready.

I think it is very clear, Mr. Chairman, that a deal was struck between the minister and this committee to give this committee the opportunity to view any proposed changes to the Fisheries Act before they are presented in the House in the hopes that the concerns that the committee had addressed in its report would be met.

Now, Mr. Chairman, I believe it was the day before yesterday that amendments were tabled, or it was suggested in the orders that amendments to the Fisheries Act would be tabled. We were in conversation late yesterday afternoon with the minister's legislative assistant. He informed us that the amendments would not be tabled in Parliament on Thursday, that they would not be tabled this week, and that they did not know just when they would be tabled. That is the advice that we were given by the minister's office, yesterday.

It seems clear to me, and I think it is a legitimate assumption to make, that there is no intention to table proposed amendments to the Fisheries Act before we rise. I do not think they are written yet, Mr. Chairman. Furthermore, it seems doubtful that even if these proposed amendments were tabled quickly they would be through Parliament before Parliament rises for the election that we all seem to be expecting next spring.

The issue is that the government is operating illegally. This committee provided Parliament with a report last year that advised the minister that he had to change these regulations because these regulations were illegal; and we are still at that point. We are once again looking at another summer when the government will be acting illegally. Everyone knows it. Parliament knows it. Every fisherman on the West Coast knows it and most know it on the East Coast, where this is an issue. They understand that the government is acting illegally. I think there is an obligation on the part of government not to be seen to be acting fast and loose with the law when it deals with ordinary Canadians, let alone anyone else. That is the situation we have here now. I think it incumbent on this committee, if this committee is to have any credibility at all, to vote in support of moving this disallowance motion forward this morning.

The Joint Chairman (Mr. Grewal): Thank you. Just for the information of members, three days ago the matter was on the House of Common Order Paper, but the bill has not yet been introduced. It is on the Order Paper, however.

Mr. White: The deliberations on this particular file have gone on for years. I think it was about eight years ago that I brought this before the committee. It is very disappointing to reach this point yet again of having this disallowance report before us. I have not always been that popular with my colleague, Mr. Cummins, because I have tried to take a balanced approach with the committee by being patient and by giving everyone an opportunity —

Mr. Cummins: Are you suggesting that I am not balanced, Mr. White?

Mr. White: I am not suggesting for a moment that my colleague is not balanced.

I am 100 per cent with him on this. Simply because there is a notice on the Order Paper at this time does not mean it will happen. I have reached the end of my tether; in my opinion, this is another delaying tactic. We have to prove that we mean business. This is the end of the line.

The Joint Chairman (Mr. Grewal): Thank you. Mr. Farrah, please proceed.


Mr. Farrah: I always feel slightly ill at ease before this committee since I do not wish to be perceived as a spoilsport. In response to what Mr. Cummins said, let us look back a bit. Following the last meeting at which I was present, I had made the commitment, in the name of the minister, that members of the committee would be privately consulted.

In a letter addressed to the committee's joint chair on May 16, the minister has shown his interest in consulting you. He mentioned his intention of tabling a bill during this session ending in June.

The Order Paper clearly shows that a bill will be introduced shortly in the House of Commons. This bill will be introduced before the end of June, I promise you.

This makes good on commitments made some time ago. It seems inappropriate to vote on this report. It would be ill-timed. I am aware of the time that has gone by since this matter was first discussed several years ago — some eight years maybe — but I think we are seeing the end of it.

Committee members can be pleased for they are responsible for the changes being made. Possibly it took too long. However, the minister means to respect the committee's wishes, and the facts are there to prove it.

The commitment is that the report will be introduced during this session. I am making a formal commitment to that effect. It would therefore be premature to vote in favour of this report.


The Joint Chairman (Mr. Grewal): Thank you, Mr. Farrah. Are there any other comments?

Mr. Cummins: Mr. Chairman, I do not believe there is anything lost in the translation, but I quoted Mr. Farrah exactly as he was translated. I will repeat that. He said:

Before any amendments are formally introduced in the House of Commons, the department is committed to meeting with your committee to discuss the various options. Is that clear?

That does not mean to meet with individual members; it means meet with the committee. It is clear that he said meet with the committee. He also said by the end of June. You know, I know, everyone here knows that the legislative calendar is filled. There are matters that the government wants to get through before we rise in the third week in June. This thing will not get through Parliament in the next little while. It has not even met the scrutiny of the committee.

The committee moved the disallowance motion before Christmas. We asked counsel to prepare the disallowance motion before Christmas because the committee was concerned that, if they delayed, the department would not have time to move ahead with the necessary changes to get the matter moved before Parliament in time. That is why we moved the original disallowance before Christmas.

The department has had plenty of time. We can go back to 2002, when we wrote the report at this time last year and sent a report to Parliament because we did not want to cause an undue kerfuffle.

There has been delaying here. It brings the administration of government into disrepute when the government is seen to be continuing to act illegally, and yet uses the force of the law in the form of fisheries officers to apprehend people who are protesting an illegal act by government. That is what is happening here. People are actively protesting the government's illegal activity, and the government is asking fisheries officers to go out to arrest — and, at times, seize vessels and equipment — so that it can have its illegal way.

Is this Canada? Can we allow this to continue, to go on another year? I do not think so. I think that people of good conscience, sooner or later, have to draw the line; and I think the time is now to draw the line.

Mr. Lee: I am glad Mr. Farrah is here and has explained that a statute to correct the matters that the committee has been raising for the last while is about to be introduced into the House.

Mr. Cummins suggests that there has been some default here in the undertaking of the government or Mr. Farrah. I do not see it. I am told that the bill is to be introduced shortly. The notice on the Order Paper is evidence of that intention. The vagaries of the procedure within the Privy Council that produces a bill for the House of Commons involves more than just the Minister of Fisheries and Oceans. It should be clear to everyone that the bill is about to be introduced.

Regarding the procedure by which the minister or his officials will consult with this committee, it may be that Mr. Cummins is correct that the minister will not have a chance to consult with the committee as whole. However, the minister or his officials will have an opportunity to consult with the committee through counsel.

Most of you will appreciate that it is a fact of life around here that, prior to the introduction of a bill, the bill and its contents are confidential to the Privy Council. We have enough problems with that on a day-to-day basis around here, but that is a fact. The mechanism that will be used for consultation, I cannot say. It is probably doable but not at an open meeting of the committee.

The second point I want to make — and I realize there are witnesses here today and I do want to get to that — but this is perhaps a matter of privilege. I will invite Mr. Cummins, before he speaks in substance on this matter again, to disclose to this committee any personal interests he may have in the Fisheries Act, in the fisheries regulations, arising out of his own personal circumstances. I will invite him to do that; I will not say anything more on that. I hope he will do that.

I believe any of us here making decisions about legality or illegality should not be doing so where we have a personal interest. I have reason to believe Mr. Cummins may have one, but I cannot make a final conclusion until he speaks to it. This is probably not the time to speak to it.

Mr. Cummins: I think it is most important. I am happy to do that.

Mr. Lee: I will ask the chair to take note of that. We can defer discussion of this to the end of the meeting. I would prefer to hear the witnesses we have invited today.

Mr. Cummins: I should like to respond to that very quickly.

The Joint Chairman (Mr. Grewal): It is not necessary that you should disclose it now. If you would like to, however, you may.

Mr. Cummins: I am happy to do so, Mr. Chairman. It is no secret. The member opposite who asked the question knows the answer. I think everyone at this table, including the chair of the Fisheries Committee, knows the answer. It is no secret.

The fisheries ministers in the past have known of my interest. Currently, the only vessel that I have left is an Area E gillnetter, that is, an A licence gillnetter. I am a licensed commercial fisherman for salmon on the West Coast. That vessel is licensed to fish salmon. I have been involved in the industry for 30 years or more. There is no question that that is the case.

Just as a point of interest, my vessel has been on the market for a number of years. I have not had one potential buyer — not one — and it is listed at half the actual cost. Replacement cost of the vessel is $175,000. Those licences have been going, at times, for as much as $30,000. I have it listed at less than half that, and there are no buyers. That is the disarray that this fishery is in. No one wants it, and I do not have the time to use it.

I have one more point, Mr. Chairman, and then I am happy to go to the vote on this matter, and that is on the comment that legislation that goes to the Privy Council must be kept confidential. Certainly, one would have expected that if the minister provided this committee with a look at the proposed legislation that that meeting would have been held in camera. That pretty much goes without saying. I do not think that the secrecy issue is at all there. Furthermore, it is clear that that thought never crossed Mr. Farrah's mind when he raised the issue and suggested to committee that, in fact, he would bring this proposed legislation before the committee. It was not a consideration. My friend Mr. Lee never raised it at the time and said you cannot do that. He was happy to go along with this unusual procedure.

Mr. Chairman, at that same meeting, you talked about an in camera meeting on it. I believe that Senator Nolin also asked for an in camera meeting on it. There is no question of confidentiality. The committee was prepared to review that proposed legislation in the hopes that it would pass muster here. The government is acting illegally. They are using the good men and women of the enforcement branch of the fisheries department to enforce a law that is illegal. They are arresting people. They are seizing boats. They are seizing nets. They are doing it to permit the government to continue to act illegally, and that is unconscionable and it cannot continue.

Mr. White: I should like to follow up on something that Mr. Lee brought up when he was talking about how we would not be able to see this legislation because it is kept secret. That was not the commitment that Mr. Farrah made. I will come back to that. However, what Mr. Lee said was that the department would consult with our counsel. I should like to ask our counsel whether that has occurred. He is indicating there has been no communication at all.

With respect to comments that Mr. Farrah made when he was before the committee March 20, he said:

Before any amendments are formally introduced in the House of Commons, the department is committed to meeting with your committee to discuss the various options. Is that clear?

There has been no discussion with our counsel. There has been no meeting with our committee. Further on, in that same meeting on March 20, Mr. Farrah said:

I will be honest with you. I am not sure. We want to ensure to meet the members of the committee before the minister presents the amendments in the House of Commons.

I think there is adequate evidence that there are stalling tactics going on here. I agree with Mr. Cummins. I do not think the amendments have been written. No one has consulted with anybody. No one has come before this committee or spoken with our counsel. There is no reason for us to believe that this government has done anything to address this problem. We have to deal with it and we should deal with today, disallowance.

Senator Moore: Mr. Chairman, what is the next date of the meeting of this committee?

The Joint Chairman (Mr. Grewal): The committee will meet next on June 12.

Senator Moore: Let me ask Mr. Farrah this: Could we have an undertaking from you that the bill will be introduced in the House of Commons sometime before the next meeting of this committee?


Mr. Farrah: Well, naturally, I have no control over the House of Commons' agenda. Has a date been set for the next meeting?


The Joint Chairman (Mr. Grewal): The 12th of June.


Mr. Farrah: I have no control over the House of Commons' agenda.


The Joint Chairman (Mr. Grewal): That is not a point of parliamentary control. Parliament is independent. The minister can introduce the legislation any time. He does not have to wait for the item on the agenda; the minister can introduce the bill if he wants to before that time. I do not think there is any blockage in the form of the agenda. If you have any concrete information, you can go ahead.


Mr. Farrah: I repeat what I said earlier. The legislation will be introduced before the end of this session.


Senator Moore: I am trying to get some comfort level here for the committee members. I do not know when the House of Commons will rise. Comments about before the end of this session, before the end of June, do not make me feel good. I should like to hear Mr. Farrah tell us that it will happen before the House rises, not before the session ends, not before the end of June, but before the House of Commons rises and, preferably, before the next meeting. If he cannot say before the next meeting, I should like him to give us a firm date. We are all a bit frustrated by this and, as such, would like to get it brought to a head.

Mr. Farrah: I cannot say before the next meeting, but I can say before the end of the session.

Senator Moore: That does not do any good. Before the House of Commons rises?

Mr. Farrah: The end of the session for me is before the House of Commons rises.

Senator Moore: In June 2003?

Mr. Farrah: June 2003.

Mr. White: A point of order. While this discussion has been going on Mr. Chairman, I have been observing an observer who is sitting in the observers' seats and she has been indicating clearly to Mr. Farrah that it is not coming. I want to press Mr. Farrah for clarification on this. The indication was there would be no legislation. It is clear, let us have a date.

Mr. Farrah: It is my word. Before the session rises. Before the session rises.

Mr. Cummins: Could I ask a question —

The Joint Chairman (Mr. Grewal): I would ask the members to go through the chair.

Mr. Cummins: Mr. Chairman, would Mr. Farrah tell the committee whether the bill has been printed?

The Joint Chairman (Mr. Grewal): Mr. Farrah, as the parliamentary secretary to the minister, do you have any information on that?

Mr. Farrah: Yes.

The Joint Chairman (Mr. Grewal): Is it printed?

Mr. Cummins: Mr. Chairman, a nod does not show on the record.

Mr. Farrah: The government has already accepted —

The Joint Chairman (Mr. Grewal): Is your answer yes? Are you saying the bill is printed? I do not hear that? Drafted or printed?

Mr. Farrah: Drafted.

The Joint Chairman (Mr. Grewal): The bill is drafted.

Mr. Cummins: There is a long way between a draft and reality.


Mr. Farrah: That is small politics, Mr. Chairman.


Mr. Cummins: My point is that there is a long way between a draft and being printed.

The Joint Chairman (Mr. Grewal): We heard the arguments.


Mr. Farrah: In my view, given the delay, some would like to use this for small politics. We are all in agreement. Facts clearly establish that the will is there. Given all the elements, it would be totally inappropriate to make a decision before the end of the House of Commons' session. The notice given to the House clearly shows that a bill will be introduced.

I understand what Mr. Cummins is saying when he declares that we have been in an unlawful situation for a long time. If this has been going on for eight years, it is too long. The problem will be solved soon as the facts show. I have difficulty understanding today's discussion since the matter will be resolved within a few weeks, as agreed.


The Joint Chairman (Mr. Grewal): I agree that someone is playing politics. We are all politicians. That is the only game we play.

Mr. Cummins: Mr. Chairman, this notion of playing politics is a bit of a stretch. It is reckless to leave this issue that late, and it is impossible to get this matter through the House before the House rises. That means that the intention then is to continue to operate illegally.

The Joint Chairman (Mr. Grewal): Mr. Cummins, you said something; was it a motion? You said something about the report being adopted?

Mr. Cummins: Yes, I made a motion that this committee adopt the disallowance report and present it in Parliament today.

The Joint Chairman (Mr. Grewal): We try to build a consensus in this committee, but I do not see a consensus at present. We have a motion on the floor. Is there a seconder to the motion?

Mr. White: I second it.

The Joint Chairman (Mr. Grewal): Honourable members have heard the motion. We have had enough debate. Let us call the vote.

Mr. Lee: Mr. Chairman, I have a point of order, or a point of information. If we vote on this and it is adopted, that is one thing. If we vote on it and it is negatived, then the issue is history for us. In other words, is the business disposed of and we need not deal with it again until a future agenda? If we negative this today, may we deal with it at our next meeting as an item of business still in process?

The Joint Chairman (Mr. Grewal): As I understand it, the regulations are before the committee. The regulations cannot be sent back from the committee. Thus, they are before the committee. It is the mandate of the committee to dispose of them one way or the other. I hear your point.

There is a motion before us. Let us call for the vote.

Mr. François-R. Bernier, General Counsel to the Committee: Mr. Chairman, I believe Mr. Lee may be asking whether a decision of the committee on a motion to reject a disallowance report, a draft report, can be made at a later point in the same session of Parliament before the committee, the committee having pronounced itself on the matter. The question concerns not so much the regulation as a whole but a motion to adopt a report.

The clerk will probably provide advice on that.

The Joint Chairman (Mr. Grewal): The clerk can advise; however, circumstances can change. I do not think we can bear bringing the issue before the committee at any time. If legislation is tabled in the House, the circumstances will be changing.

Mr. Bernier: Mr. Chairman, I am not taking a position. I was trying to clarify what I believe is Mr. Lee's question.

The Joint Chairman (Mr. Grewal): Thank you. I appreciate that.

Mr. Till Heyde, Joint Clerk of the Committee: That is a hypothetical issue and a matter of order that the chair would rule on.

Once the committee has made a decision on something, it would not normally revisit its decision, if it were in an identical format on an identical issue.

Mr. Cummins: I ask for a recorded vote, Mr. Chairman.

The Joint Chairman (Mr. Grewal): Let us go to the vote.

The Joint Clerk (Mr. Heyde): I will call senators' names, and my colleague will call the names of members of the House of Commons.

Members can indicate yea, nay or abstain.

The Honourable Senator Biron.

Senator Biron: Against.

The Joint Clerk (Mr. Heyde): The Honourable Senator Kelleher.

Senator Kelleher: Yes.

The Joint Clerk (Mr. Heyde): The Honourable Senator Merchant.

Senator Merchant: No.

The Joint Clerk (Mr. Heyde): The Honourable Senator Moore.

Senator Moore: No.

Ms. Joann Garbig, Joint Clerk of the Committee: Mr. Farrah.

Mr. Farrah: Against.

The Joint Clerk (Ms. Garbig): Mr. Lee.

Mr. Lee: No.

The Joint Clerk (Ms. Garbig): Mr. Macklin.

Mr. Macklin: No.

The Joint Clerk (Ms. Garbig): Mr. Maloney.

Mr. Maloney: No.

The Joint Clerk (Ms. Garbig): Mr. Mackay.

Mr. Mackay: No.

The Joint Clerk (Ms. Garbig): Mr. Myers.

Mr. Myers: No.

The Joint Clerk (Ms. Garbig): Mr. Wappel.

Mr. Wappel: No.

The Joint Clerk (Ms. Garbig): Mr. Grewal.

The Joint Chairman (Mr. Grewal): Yes.

The Joint Clerk (Ms. Garbig): Mr. Cummins.

Mr. Cummins: Yes.

The Joint Clerk (Ms. Garbig): Mr. Burton.

Mr. Burton: Yes.

The Joint Clerk (Ms. Garbig): Mr. White.

Mr. White: Yes.

The Joint Clerk (Ms. Garbig): Mr. Sauvageau.

Mr. Sauvageau: Yes.

The Joint Clerk (Mr. Heyde): Yeas, 6; nays, 10; abstentions, nil.

The Joint Chairman (Mr. Grewal): The motion is defeated.




The Joint Chairman (Mr. Grewal): We will now move to the next part of the agenda.

I should like to welcome the witnesses who are appearing before our committee this morning. For your information, there were representations received by members of this committee with regard to fees levied under Part II of the Broadcasting Licensing Fee Regulations, 1997, and certain marine navigation services fees and fees charged for icebreaking services.

In the past, this committee had the privilege of hearing a presentation by officials of Treasury Board. They provided an overview of the general principles and policies applicable to the prescription of fees based on cost recovery. They clarified the distinction between fees and taxes. They have given an overview of the limits on the imposition of fees levied by various governmental authorities.

Today, we would like to get more information. We have witnesses from various departments. From Fisheries and Oceans Canada, we have with us Mr. Tim Meisner and Mr. Ted Wallace; from the Department of Canadian Heritage, Mr. René Bouchard, Mr. Larry Durr and Mr. Lepage; from the CRTC, Mr. Marc O'Sullivan, Ms. Diane Rhéaume and Mr. John Keogh; and from the Department of Industry, Mr. Earl Hoeg.

Each department will be given 10 minutes to make its presentation. We will then have questions and answers. We will listen to all presentations before going to questions, to avoid duplication of any questions. All of the questions will be put through the chair. I would urge the witnesses to take the time to answer the questions. Anyone may answer a question, unless a specific question is directed to a specific individual.

The first presentation will be made by the Department of Fisheries and Oceans. Please proceed.

Mr. Tim Meisner, Acting Director General, Policy and Legislation, Marine Programs, Fisheries and Oceans Canada: Mr. Chairman, my opening remarks will be brief. I will provide a brief overview of the Coast Guard and what we do and our marine service fee program.

The Canadian Coast Guard is an important national institution by which Canada exerts its influence over its water and its coast and delivers on public expectations of clean, safe, secure, healthy and productive waters and coastlines.

As a vital symbol of Canada's sovereignty as a maritime nation, the Coast Guard delivers services to Canada and Canadians on four equally important levels. We deliver Coast Guard programs, we support departmental programs, we support other government departments and we serve the broader Canadian interest.

The Coast Guard plays a vital role in maintaining a sustainable national maritime transportation system by providing mariners, both commercial and recreational, with national programs and services related to aids to navigation, navigable waters protection, marine communications and traffic services, marine search and rescue, pollution response, icebreaking, and waterways management.

The Coast Guard has approximately 4,400 employees and is supported by 5,100 auxiliary volunteers. It operates in five regions and has its headquarters in Ottawa.

The Coast Guard's legislative authority is derived from four principal pieces of legislation. The first is the Constitution Act, which provides the federal government with the power to legislate with respect to navigation and shipping. The Canada Shipping Act contains the Coast Guard's legislative and regulatory framework for most of its services. The Navigable Waters Protection Act provides the department with responsibility for protecting the public right to navigation and provides federal powers to approve works or remove obstructions. Finally, the Oceans Act establishes the Minister of Fisheries and Oceans as the minister responsible for the Canadian Coast Guard. The marine services fees are imposed under authority derived from the Oceans Act.

I should now like to move to a brief overview of the marine services fee. There are two fees that comprise the marine services fee. The first is the marine navigation services fee implemented in 1996 to recover a portion of the costs incurred by the Canadian Coast Guard to provide navigation services. These navigational services include navigational aides such as buoys, light stations and vessel traffic services, which is the marine version of the air traffic control system. The icebreaking services fee was implemented in 1998 to recover a portion of the cost of icebreaking services. Both these marine services fees are applicable to commercial vessels in Canadian waters south of 60 degrees. Government vessels, fishing vessels and pleasure craft are exempt.

Both these fees are vote netted to the department for $40 million annually. This means that the department's annual budget is advanced less the amount of revenue it is expected to generate from fees. These revenues can be greater than or less than the $40 million revenue level established for the fees.

Both marine services fees have an individual revenue target or level. The navigation service fee target is $26.7 million, and the icebreaking services fee target is $13.3 million.

Treasury Board's 1997 cost recovery and charging policy is the policy basis for both of their marine services fees. The fees comply fully with all the requirements of this policy. The benefits of the marine services fee clearly outweigh the costs of setting up and administering the program. The Coast Guard does have a legitimate and necessary role to provide icebreaking and navigational services. There is an identifiable recipient for the icebreaking and navigation services provided by the Coast Guard that is beyond those received or needed by the general public. The Coast Guard has undertaken meaningful and effective consultations with clients throughout the fee-setting process and has provided stakeholders with an effective voice in the design and delivery of the fee and program.

In the conduct of our work with industry, the Coast Guard has operated in an atmosphere that is open and flexible and has used reasonable means to contact stakeholders. We have conducted impact assessments to identify significant effects and have factored these effects and results into the fee-setting decisions.

The Coast Guard, via the Treasury Board Secretariat, has also worked with industry to assess the cumulative impact of multiple fees from all federal sources on this industry.

With regard to transparency, the Coast Guard has explained to stakeholders the nature of the services received, how charges were determined and how costs are being controlled. The Coast Guard has also provided feedback to our clients on concerns expressed and suggestions made. The Coast Guard has established a dispute-resolution process to address stakeholder complaints that have reached an impasse.

All Coast Guard pricing and costing practices fully comply with the Treasury Board's guide to the costing of outputs where prices should be based on costs.

With regard to the marine navigation services fee, there are regionally based rate structures for both domestic and foreign ships. These rates structures were designed with industry input. Further, each region has a revenue level assigned to it based on the share of Coast Guard services and resulting costs incurred by the industry in that region.

This upholds an industry principle that fees be regionally based to avoid cross-subsidization. There is a single icebreaking services fee because the icebreaking program is delivered in an integrated fashion to all Eastern Canada, and not regionally, as other navigation programs. The icebreaking fee recovers a portion of the costs incurred by the Coast Guard to ensure that icebreaking services are available throughout the season. That is, the fee applies whether or not an icebreaker provides direct route assistance.

The icebreaking capacity that is made available for this purpose by the Coast Guard is set out in an arrangement reached between the Coast Guard and industry. The icebreaking fee is $3,100 per transit; it is capped at eight transits per season, to recognize frequent traders; and there is a cap at three transits in a 30-day period. This rate structure was designed in consultation with industry, as well. The fee is payable when a commercial vessel enters an ice zone, and there is no differentiation between foreign and domestic vessels.

In closing, I should like to say a few words about how the Coast Guard works with the commercial shipping industry on the establishment of these fees. The main consultation forum is the marine advisory board. The Commissioner of the Coast Guard chairs the board, with membership comprised of key marine stakeholders from across the country.

I can assure you that every aspect of the current marine services fees have been discussed and developed in consultation with industry via the marine advisory board, regional advisory boards and associated working groups. I can also tell you that despite the continuing controversy over the fees, the working relationship between industry and the Coast Guard remains a good one.

Thank you for this opportunity to make some brief opening remarks.

Mr. René Bouchard, Director General, Broadcasting Policy and Innovation, Department of Canadian Heritage: Mr. Chairman, my remarks will be brief.

In examining the Part II broadcasting licence fees it is important to consider the overall regulatory framework for broadcasting and telecommunications and the three separate entities that form part of this framework — Canadian Heritage, Industry Canada and the Canadian Radio-television and Telecommunications Commission.

Canadian Heritage has overall responsibility for broadcasting policy and legislation, that is, the Broadcasting Act. The department advises the Minister of Canadian Heritage in this regard, including matters relating to the Canadian Broadcasting Corporation and the CRTC.

Canadian Heritage advises the minister and the government on responses to appeals of CRTC broadcast licensing decisions. Moreover, it is through the Minister of Canadian Heritage that the CRTC reports to Parliament.

Industry Canada has overall responsibility for telecommunication policy and legislation, that is, the Telecommunication Act. Industry Canada manages and licenses the use of radio frequency spectrum under the Radiocommunication Act. Industry Canada advises the government on CRTC policy matters in telecommunications, including advising the government on response to appeals of CRTC telecommunication decisions.

CRTC is responsible for the regulations of both broadcasting and telecommunications. Under the Broadcasting Act, the CRTC was established by Parliament as an autonomous body that operates independently of the government and is responsible for its own day-to-day operations and decisions.

The CRTC licenses, regulates and supervises all aspects of the Canadian broadcasting system, including making the broadcasting licence fee regulations. Part II broadcasting licence fees have been the subject of a great deal of attention over the last while, and a number of viewpoints have been expressed, including one suggestion that the fees be capped at a certain level.

Indeed, a number of parties expressed their views to the House of Commons Standing Committee on Canadian Heritage in the context of the comprehensive review of the broadcasting system and the Broadcasting Act. The Canadian Cable Television Association, Bell Canada Enterprises, Bell ExpressVu, the Canadian Association of Broadcasters and others all recommended that the Part II licence fees be eliminated to free up more money for the broadcasting system.

The cable industry believes that the money could be spent on issues such as fighting the black market, infrastructure or community programming.

Bell ExpressVu would like to see the money used to develop an efficient delivery system to keep pace with the rest of the world, that is, the rollout of digital, the receiving equipment across the country, high-definition television and innovative services.

The Canadian Association of Broadcasters would prefer that the broadcaster be allowed to elect on their own terms where the funds would be spent, for example, on local, regional or priority programming.

This theme of money for programming was echoed by Trina McQueen in a recent report, released on May 23, on Canadian English-language drama. The report was prepared for the CRTC and Telefilm Canada. Ms. McQueen suggested that a substantial part of the English-language television overpayment of fees to the CRTC should go to a new fund targeted at audience building.

The Canadian Heritage Committee report on Canadian broadcasting is expected to be issued in the next few weeks. It will likely include one or more recommendations concerning the Part II broadcasting licence fees.

The authority to levy these fees stems from section 11 of the Broadcasting Act. It gives the CRTC explicit authority to make regulations, with the approval of Treasury Board, establishing a schedule of fees to be paid by broadcasting licensees of any class. I know that representatives of the CRTC are here this morning and will be able to speak in more detail about the CRTC's broadcasting licensee regulations.

Mr. Marc O'Sullivan, Executive Director, Broadcasting, Canadian Radio-television and Telecommmunications Commission: We have been asked to provide information on the Part II licence fees and, in particular, how the level of the fees is set and how the fees fit into the general government framework of cost-recovery programs.

In order to understand how the fees are set, it would be useful to look at their history and how they have evolved. Ms. Rhéaume will take you through that.


Ms. Diane Rhéaume, Secretary General, Canadian Radio Television and Telecommunications: The CRTC was created in 1968. Through section 16 of the previous Broadcasting Act, it was granted powers to make regulations and set licence fees with the approval of the Treasury Board. Every licensee other than the CBC and the holder of a licence for a network operation had to pay an annual licence fee.

From the start, licence fees were calculated as a percentage of broadcasters' revenues. The percentages used to calculate the fees paid by licensees were developed and adjusted through a period of 30 years and have ranged from 1 per cent to 1.8 per cent to the current 1.365 per cent.

From the beginning, the CRTC has listened to licensees and adapted the licence fee regime and exemption levels to the varying needs of fee payers. In 1972, the Broadcasting Licence Fee Regulations were amended to exclude several types of broadcasting undertakings.

Thus, network operations, rebroadcasting transmitters, student broadcasters and the CBC were exempted. In 1977, a simpler, more efficient regime was put in place. Exemption levels were introduced to provide relief to small broadcasters. The Commission noted that licence fees that had been assessed on ``gross revenue'' would instead be assessed solely on broadcasting revenues.

In 1985, the Minister of Communications asked the Commission to revise its licence fee structure in order to recover an additional $5 million. This was to ensure that the government's overall cost with respect to the processing of applications and the licensing of broadcasting undertakings, including those of the CRTC and the Department of Communications, would be fully recovered. At that time, fee revenues were increased to 1.8 per cent of broadcasting revenue from 1.5 per cent. Exemption levels were also raised.

In 1994, the regulations were amended to further increase exemption levels for the radio sector.


In 1996, the CRTC was granted vote netting authority by the Treasury Board. Vote netting is a means of funding selected government programs or activities. Parliament allows a department or agency to apply revenues toward costs directly incurred for specific activities.

As a consequence of the vote netting authorization, the funding arrangements for the commission were changed and new regulations were needed. At the time of this revision, following consultations within the government, it was decided to develop a fee system that would generate the same level of revenues as the previous fee structure for a period of three years. Given these revenue parameters, a new model was developed that split the fee into two parts, a Part I and a Part II fee.

The Part I fee recovers the full cost of CRTC activities related to the broadcasting industry, providing the funds necessary for vote netting. The Part II fees were set at 1.365 per cent of revenue in excess of the applicable exemption limits. The figure was considered to be an appropriate proxy for the value associated with the privilege of holding a licence for commercial benefit and for the use of spectrum, a public resource.

The CRTC conducted a public consultation, following which the new regulations were approved by Treasury Board, taking effect on April 1, 1997. The 1997 regulation also expanded exemptions from licensing fees for native, community, campus and provincial educational broadcasters.

Mr. O'Sullivan: The committee has asked the CRTC to describe how the fees fit into the general governmental framework on cost-recovery programs.

First, the legislative framework is as follows. Section 3(1)(b) of the Broadcasting Act states that radio frequencies are public property. Section 11 of the act gives the commission the authority to make regulations providing for licence fees with the approval of the Treasury Board. Under the act, these regulations may provide for fees to be calculated by referring to any criteria the commission deems appropriate, including the revenues of the licensees.

Second, the Treasury Board's cost recovery and charging policy refers to charging clients or beneficiaries who benefit from services beyond those enjoyed by the general public. It also refers to earning a fair return for the Canadian public for access to or exploitation of publicly owned or controlled resources.

In accordance with the legislative and policy frameworks, the rationale for assessing the Part II licence fee is three- fold: to earn a fair return to the Canadian public for access to or exploitation of a publicly owned or controlled resources, in this case the broadcasters' use of the spectrum; to recover Industry Canada's cost associated with the management of the broadcasting spectrum; and to represent the privilege of holding a broadcasting licence for commercial benefit.

The regulations therefore comply with the statutory authority provided in the act, as well as with those provisions of the cost recovery and charging policy.


In August 1999, the CRTC held a roundtable discussion with broadcasting fee payers. During these consultations, they expressed a need to review the fee structure and the rationale for the Part II licensing fees. Those concerns were then relayed by the CRTC to central agencies.

In fiscal year 2000-2001, the CRTC conducted preliminary research required to initiate a review of the broadcasting licence fees, and conducted discussions with officials from Canadian Heritage, Industry Canada, the Department of Finance, and the Treasury Board Secretariat.

On May 10, 2001, the House of Commons Standing Committee on Canadian Heritage announced the launch of a study on the state of the Canadian broadcasting system. Rather than examining the licence fees in isolation, it was considered advisable to wait for the Heritage Committee to conduct its review and to issue a report with its findings and recommendations. The Heritage Committee is expected to deliver its report soon.

The government response to this report may provide an opportunity to consider the issue of the licence fees in the broader context of the future of the Canadian broadcasting system.


The Joint Chairman (Mr. Grewal): Thank you very much.

Mr. Earl Hoeg, Director, Spectrum Management Operations, Department of Industry: Thank you, Mr. Chair and honourable senators, for the invitation to give a presentation on Industry Canada's interest in this discussion.

My remarks will be very brief. I will provide an overview of why we were invited to attend this committee, which really covers two areas.

First, Industry Canada manages the radio frequency spectrum, a public resource that belongs to all Canadians, and this includes the management of the broadcast spectrum, as you have already heard. Imagine the broadcast spectrum. Industry Canada engages in a number of activities to protect the interests of the broadcast industry, such as establishing allotment plans, negotiating international agreements, establishing standards such as those for digital television and digital audio broadcast, and issuing the technical certificates that accompany the broadcast licences issued by the CRTC.

We also further ensure that the parameters of the technical certificates are respected, including such things as safety code 6, which is related to the health and safety aspects of radio frequency emissions. The costs associated with these activities are provided on an annual basis to the CRTC and, as you have already heard, are one component of the Part II fees. The amount of the cost-recovery components for the current year is $10.3 million.

The second reason Industry Canada has been invited to this committee is that it establishes fees for all other users of the radio frequency spectrum. In doing so, we apply the Treasury Board cost recovery and charging policy. It is important to note that the broadcasters are not charged radio communication fees under this regime. Those are covered under their Part II fees.

In establishing our fees for charging users of the radio frequency spectrum, we apply the principle that the radio frequency spectrum is a public resource belonging to all Canadians, and we want to ensure efficient use of that resource and that Canadian taxpayers are fairly compensated for the use of this public resource by individual firms. Essentially, the radio frequency spectrum, as Treasury Board outlined in their testimony, is a de facto input into the commercial business for a wireless and a broadcasting enterprise.

In establishing our fees, we appreciate that, in the absence of a functioning market, it is difficult to establish the market price for the use of that public resource, but we are doing our best to establish a fee that is appropriate for the users of the radio frequency spectrum. Given that the demand continues to exceed the available supply of that resource, we believe that the pricing we have established for our radio communication services is on track.

I would be available to answer any questions that the committee may have.

Mr. Wappel: Thank you, all, for appearing this morning. Sorry for the earlier delay. Unfortunately, that cuts in on the question time.

I should like to hone in on the marine services fees. I guess that is no surprise. Page 6 of your presentation, gentlemen, indicates that the purpose of the marine services fees is to establish fees for services provided. I believe those are your words. Is that correct?

Mr. Ted Wallace, Acting Director, Policy and Legislation, Marine Programs, Fisheries and Oceans Canada: Yes.

Mr. Wappel: The service provided under the rubric of marine navigation services is to provide navigation services, which you have outlined. The purpose of the icebreaking service fee is to recover a portion of the cost of icebreaking services. Is that right?

Mr. Meisner: Right.

Mr. Wappel: How much is the cost of icebreaking services in Eastern Canada in any given year?

Mr Wallace: The current fees are based on the 1996-97 costs; for that, icebreaking services in Eastern Canada would be $101 million.

Mr. Wappel: Of which you recover $13.3 million?

Mr Wallace: We are to recover $13.3 million, yes. To clarify, the allocated industry, on a demand methodology, of that $101 million, $75 million is the demand that industry represents of that amount. We would be recovering, in effect, or to recover, $13.2 million against the $75 million that industry draws in capacity from the Coast Guard.

Mr. Wappel: I am sorry. I do not follow that.

Mr Wallace: The $101 million represents the full cost of Canadian Coast Guard icebreaking on the East Coast of the country. For the purpose of the fees, to ensure that there is the benefit, we use the demand methodology to assess what portion of that demand is drawn by the commercial shipping industry; as such, $75 million of that is drawn by the commercial shipping industry.

Mr. Wappel: If commercial shipping stopped tomorrow, would 75 per cent of your icebreaking services stop?

Mr. Meisner: I think it is more complex. We provide icebreaking services for two components, basically. Using the St. Lawrence River as an example, one is for services for commercial shipping to get through in the winter. The other aspect is for flood control for people who live along the banks of the St. Lawrence. We allocate those costs between those two users. One icebreaker is obviously doing both services, so you cannot take it away completely and say it is 75 per cent.

Mr. Wappel: Why are government vessels, fishing vessels and pleasure craft exempt from a service they use or benefit from while commercial vessels are not?

Mr. Meisner: If you are talking about icebreaking, recreational vessels would use very little icebreaking, if at all, so there would be no user profile for them. Fishing vessels would use a little bit of it for harbour breakouts on the East Coast, if necessary, early in the season, and they are allocated a small portion of the cost. When the fees were implemented, they were not charged a fee on the basis that they were already paying a fee to the department, fish access fees. The impact on that particular industry at the time was such that it was deemed that they could not pay an additional fee for icebreaking.

Mr. Wappel: The determination was not based on whether or not they received or used the service; the determination was whether or not they could absorb the cost as compared with the commercial shipping industry.

Mr. Meisner: In that comparison, the first question you have to answer is whether they use or benefit from the service, and the answer is yes. The second aspect is economic impact and the ability to pay.

Mr. Wappel: Every commercial ship coming into the Great Lakes pays $3,100. Is that correct?

Mr. Meisner: Every ship that transits an ice zone — which is where we provide icebreaking services — either leaves or arrives through a port, pays a $3,100 fee.

Mr. Wappel: What about ships that only transit Lake Superior?

Mr. Meisner: If they do not stop at a port in an ice zone, they would not pay a fee. If they travel Lake Superior, which is in the ice zone, and they stop at a Canadian port in that ice zone, they would pay the fee.

Mr. Wappel: Have you had a chance to preview the report of the Commons' Standing Committee on Finance entitled ``Challenge for Change: A Study of Cost Recovery''?

Mr. Meisner: I have read it briefly. Mr. Wallace has read it in depth.

Mr. Wappel: Mr. Wallace, you will notice that they delve into the issue of icebreaking fees. They opine that it may be more than a fee. They suggest that a boat in Lake Superior must pay the fee even though there are no Canadian icebreakers operating in Lake Superior. Ports with no icebreaking needs must pay this fee. Is that an accurate statement?

Mr. Meisner: First, the statement that ports have to pay a fee is inaccurate. The fee is imposed on a vessel. It is not imposed on a vessel for using a port; it is imposed for transiting through the ice zone where icebreaking services are provided.

On the Great Lakes, we have entered into an agreement with the U.S. Coast Guard whereby we jointly provide the icebreaking services for efficiency and effectiveness. Ice breaking services on the Great Lakes is provided as one single entity with both Coast Guards providing icebreakers. There could be a situation where vessels are transiting and a U.S. icebreaker is available instead of a Canadian one because of this agreement.

Mr. Wappel: Are icebreaking services by Canadian vessels available throughout the Canadian portion of the Great Lakes at all times?

Mr. Meisner: I would have to verify that. We do not have an icebreaker at all places at all times.

Mr. Wappel: I know that. My information is that there are places that do not receive icebreaking services, and yet commercial vessels are paying for icebreaking services.

Mr. Meisner: You have to be specific on what areas to determine if they are getting services. However, the fee is being paid for the capacity that we are providing and for transiting through the ice and not necessarily for services provided to a port or a specific area.

Mr. Wappel: Thank you. I have a couple of questions if I may, without stepping on Mr. Lee. Part I fees recover full cost of CRTC activities. You said that, correct?

Ms. Rhéaume: Yes.

Mr. Wappel: The Part II fees have nothing to do with CRTC activities. They simply have to do with someone paying for the value associated with the privilege of holding a licence on a public resource, correct? What happens to the money that the CRTC collects from Part II fees if Part I fees pay for all your costs?

Ms. Rhéaume: There is an amount of approximately $10 million that covers the cost of spectrum management for Industry Canada as we discussed earlier, and the balance goes to CRF.

Mr. Wappel: You are basically a collection agency for Industry Canada and for the general pot on Part II fees, correct? It has nothing whatsoever to do with the CRTC?

Ms. Rhéaume: No.

Mr. Lee: I am indebted to Mr. Wappel for breaking the ice on the CRTC issue.

I will focus on the Part II tax. I will preface my remarks so that you will understand where I am coming from. CRTC was described as being statutorily autonomous. That may be true, but the CRTC is also accountable.

The CRTC may have the statutory ability to charge fees. It does not have the right to tax. It does not have the statutory ability to tax.

The focus here is not on the origin of the revenue or the purpose of the fee/tax, but whether the fees/tax is legally levied. That is the focus for our committee. The Heritage Committee in the House of Commons may well go into micro-detail about how the government and Heritage spends its money, but the focus here is if CRTC is legally raising its revenue through this Part II tax.

Mr. Wappel has opened the issue by asking you how you use the fees, and you have answered that. I will not ask it again.

I am correct in understanding that you collect the fees. You do not keep them. At least you do not keep very much of it. You turn it over to the consolidated revenue fund, and that is the last you see of these revenues that you raise.

Why do we not put a number on it? How much in Part II fees did CRTC collect in the most recent year for which you have record?

Ms. Rhéaume: We collected approximately $92 million in Part II.

Mr. Lee: I have been thinking that this fee looks a little bit like a tax, but, in any event, let us call it a fee. I understand that some of the broadcasters have paid those fees under protest. Are you aware of that? Can you confirm that?

Ms. Rhéaume: Yes, I can confirm that.

Mr. Lee: Do you know why they have paid them under protest? Do you have an understanding of that?

Mr. John H. Keogh, Senior General Counsel, Canadian Radio-television and Telecommunications Commission: Perhaps I can answer that question. The Canadian Association of Broadcasters, which is probably the group that we are most familiar with in terms of the reserve, had written to Ms. Robillard at the Treasury Board with respect to the Part II fees. They had indicated in that correspondence that they would be paying under reserve, with the wish that the Part II fees would be dispensed with and that, as such, they could be retroactively compensated for the money they had paid.

Certainly in the letters that we have received there has not been an explanation, but in the letter to the Treasury Board they indicated that as a reason for why they had done it under protest.

Mr. Lee: I missed the articulation of the reason.

Mr. Keogh: They had asked the Minister of the Treasury Board to do away with the fees and wished to have returned to them the monies they had paid under protest.

Mr. Lee: They were paying under protest because they would like not to be taxed and would like the money to be returned. Did they explain why?

Every taxpayer could do that. I could pay my taxes each year under protest and ask that my money be sent back. Customarily, one would give a reason for that. Have they indicated a reason?

Mr. Keogh: In the letters we have received, the ones I am familiar with at least, they indicated that they had a legal opinion to the effect that the Part II fees are not properly assessed under the Broadcasting Act.

Mr. Lee: It is getting like pulling teeth here. They think the fees are illegal? They think they are a tax, is that right? You do not have to speak for them.

Mr. Keogh: I think that is a fair characterization.

Mr. Lee: I realize that CRTC does not necessarily have the same view. I have more than once read the Ontario Superior Court decision in the Eurig Estate case, a leading case that tries to help us distinguish between a fee and a tax. I am using that template.

Keeping in mind that you do not keep the monies you raise, you do not have any idea for what these fees that you collect are being used because they are given into government general revenues. The Eurig Estate case says it is really a tax if it is enforceable by law.

Although one may think the law may be invalid, and that is the issue we are dealing with today, at least the CRTC collects these fees under law that is imposed under the authority of the legislature of Parliament. There is a statute on the basis of which these fees are charged. It is levied by a public body, which the CRTC is, and it is intended for a public purpose; we turn the money over to the Consolidated Revenue Fund, which is pretty public; and there is a lack of a connection between the quantum charged and the cost of the relevant service. Based on what you have told us today, there is no connection between the services that you render and the fees that you collect because you do not even keep that part of the fees, or at least not very much. On behalf of yourselves and the Crown, you turn the money over to the Consolidated Revenue Fund.

I should like your best legal counsel here today to comment. I read the Part II fee regulations. If I were to substitute the word ``tax'' for the word ``fee'' each time that it shows up in the regulations, as I read it, we have ourselves a tax. This smells like a tax; it sounds like a tax; and it looks like a tax, if you simply substitute the word ``tax'' where it says ``fee.'' You are just charging rent; you are taxing the broadcasters based on their revenue, just as income tax does. You even have exemption levels for the little guys. That is my impression.

Could I ask for a legal response to my perception that the Part II fee has evolved into a tax?

Mr. Keogh: Certainly, the Eurig Estate case is recent and it has brought to the forefront the question of whether these charges are fees or taxes. I will answer the question, but I think it is important to understand, from a legal point of view, the evolution of it.

The Eurig Estate case invokes these different questions as a framework for answering the question about whether a particular charge is a fee or a tax. The Eurig decision is not new law; in fact, it actually invokes a test that the Supreme Court articulated in 1931 in the Lawson case. It is not new.

Certainly over time, in a variety of cases, for example, La Presse and Aer Lingus, the courts have looked at statutory schemes in which fees were being charged so that they could determine whether the fees were appropriate. Parliament has used different ways of dealing with the question. With respect to broadcasting fees, they are charged under the Broadcasting Act, which does not, unlike some legislation such as the Telecommunications Act, limit the fees to a simple cost recovery.

The Broadcasting Act provides the commission with the authority to determine the most appropriate way to establish the amount of the fee or charge. If it wishes, it may use revenues as a basis for that fee or charge or it can use performance or other criteria that it wishes to use or that it feels are appropriate.

The courts have recognized that statutes can authorize fees to be paid that are in excess of costs. The position vis-à- vis the Part II fees, which as you have indicated and which we have conceded, are not to compensate the government or the commission for the costs of its regulation. They are, however, in place to compensate the government for the costs of Industry Canada and to recognize the access to the public resource for commercial benefit that broadcasters have by virtue of the broadcasting licence. Therefore, it is our view that one has to read the authority in the Broadcasting Act in the context of the act itself, which declares the airwaves to be a public resource and which does not, unlike other legislation, limit the fees to a simple cost recovery.

Therefore, in the case of the Part II fees, they are in recognition of the access and the ability to exploit the public resource and they also address the cost of Industry Canada.

Mr. Lee: That is a pretty good answer. What we have then is an evolution, apparently, of a new category of government money taking. Let us call it ``a rent.'' You are suggesting that the fee payable on the Part II tax/fee is really a rent for the use of the spectrum by the broadcasters. I can understand that concept. However, we, around this table, are parliamentarians and we represent —

Senator Moore: I thought the $10 million that went to Industry Canada was for that. I thought that was a rent.

Mr. Lee: Senator Moore has some other interesting questions. The rent concept is fine, except that, in Parliament, where we represent the taxpayer, we simply cannot afford to allow government, or any part of government, to reach into someone's pocket and take money that is a tax, unless it is authorized as a tax.

The concept of rent, perhaps, has not been well elaborated in the statutes or even in case law. That case may have to be made in the future. At this time, I am only able to use the binary language of whether it is a fee or a tax. This fee is, unfortunately, looking like a tax.

If it is being collected like a tax, I am not supposed to let government do that. The House is not supposed to let government do that and the Senate is not supposed to let government do that — I should say ``Parliament.'' If I may use the broader concept: What if the government were to say: ``We have all of these costs — $150 billion — each year that we have to recover from all of the people that use government services. So that we do not ever have to tax again, we will simply have cost recovery of that amount. We will never have to go to the House of Commons again to have a tax bill. We will do, under the Financial Administration Act, fees for every taxpayer, by the head. If the CRTC is right, then we do not have to connect the fee to the service; we will simply charge rents and for taxes we will have to take in $150 billion in cost recovery. We do not need the Income Tax Act any more because we will just have regulations so that we can charge fees — a head fee tax.''

I leave that with you for a response. I think we have a problem that needs fixing. Government or the House or the Senate or this committee or perhaps even the court will have to use a sharp knife here to fix it. That is my view. Do you have a response?

Mr. Keogh: I may come across as simply repeating what I have already said. However, I will make the point that, in dealing with the issue, Parliament has made a choice about how it would grant authority. In the instance of some legislation, Parliament has said that the fees shall be solely for the recovery of the cost of the entity's activities. In other instances, Parliament has not limited in that way. Even in the context of a single statute, such as the Financial Administration Act, Parliament has chosen both models. The courts as well have recognized that government has the ability through legislation to collect fees that are not for the sole purpose of cost recovery. As I say, in this instance, they are not simply, in terms of Part II, Industry Canada's cost for management of the radio spectrum but also a recognition of the access for commercial benefit to a public resource.

The Joint Chairman (Mr. Grewal): Thank you. We have about 18 minutes left. We have Mr. White, Senator Moore and Mr. Abbott.

Mr. White: Thank you, Mr. Chairman. My first questions are to Mr. Meisner. What is the definition of an ice zone? How do you determine what areas of shipping fall within an ice zone?

Mr. Meisner: We did that in consultation with the industry back in 1997-98 when we put in the fees. We divided Eastern Canada into areas where the icebreakers were delivering the services and they would be provided. There is one for Newfoundland, one for the Gulf and one in the Great Lakes. The reasons there are different zones is because of different seasons. They are not all provided at the same time. The ice will leave a certain season earlier than another one, so we split it up into the zones that way.

Mr. White: I am not sure you answered my question. How do you define an ice zone? Where do you decide this part of the ocean is within an ice zone and this part is not?

Mr. Wallace: We use historical ice information over a number of years. We determine where the ice is at certain times of the year, so we can develop a capacity to provide icebreaking services to the industry.

Mr. White: I still need an answer, which is where does the line get drawn? Is it drawn at the worst position that there has ever been ice over the last 100 years, or is it an average position of the ice?

Mr. Wallace: A typical year would be the best way to do it. With respect to the east coast of Newfoundland, the ice will come down; but in Conception Bay, there may not be ice some years whereas other years there would be. We try to do it typically, so we know that, generally speaking, icebreaking capacity has to be available in those areas.

Mr. White: Are you saying the ice zone varies from season to season, because you are still not telling me that a line has been drawn across the map that says this is where the ice zone starts?

Mr. Wallace: Geographically, we have set that up, and we have set it up again on the historic ice information. It is different ice at different times of the year.

Mr. White: I understand that, but I am still not clear. If I were to put a map in front of you and ask you to indicate where the ice zone begins, could you draw a line on the map and tell me that such and such a place is where the ice zone begins? If you can, how did you determine that that is where the line would be?

Mr. Meisner: We can, and the fee schedules, which I do not have in front of me, give the geographic coordinates describing the exact zone, from one point on a map to another. That is how it is defined.

It was based on 1994, which was what our icebreaking experts coined a typical year of the ice that was available within those geographic definitions. We did that in consultation with the industry, and said: ``In a typical year, here is the ice zone and here is where we need to provide icebreaking services.'' Yes, it will change from year to year; hence, in a given year, this zone may not be accurate. However, for simplicity, we said that these are the zones that will be in place for the fee until they are changed.

Mr. White: In other words, in some years, ice may not be present where you charge a fee, whereas in others you may not charge a fee where ice is present.

Mr. Meisner: Exactly. This year was a good example, where we had a tremendous amount of ice. The icebreaking zone did not cover where we had ice because of the amount that was out there — it was a very heavy ice year. Therefore, we had ships going into areas where there was ice and not paying fees.

Mr. White: A couple of times in your presentation you mentioned consultation with industry. You did it again. Also, on page 10 of your presentation, you mentioned that you have worked with industry to assess the cumulative impact of multiple fees from federal sources. At the bottom of the same page 10, you say that the Coast Guard has provided feedback to clients on concerns expressed and suggestions made.

Can you explain what you mean by ``provided feedback''? That sounds different than recognizing the problems and making adjustments. Providing feedback implies that you received the letters and wrote back, saying: ``Too bad, this is the way it works; nice to have received your letter but nothing is changing.''

Mr. Meisner: Feedback covers both areas. For consultation, we had an exchange of information and ideas. On those that we did not accept, the feedback provided the reasons why we did not accept them, as well as the answers to those issues and problems that we did accept and made changes to. Therefore, feedback covers both areas.

Mr. White: The Canadian Shipping Federation would disagree with your contention that the industry is relatively satisfied with what is going on here.

Mr. Meisner: I did not say they were satisfied.

Mr. White: Your implication was that the consultation with the industry made everything fine. Industry was happy with what is happening, but I do not think that is the case.

Mr. Meisner: I know that is not the case.

Mr. White: What is the single biggest concern expressed by the shipping industry with respect to these icebreaking fees?

Mr. Meisner: I think it is the economic impact it has on the state of the industry.

Mr. White: Do they not complain that the fee is charged where no services are provided?

Mr. Meisner: There is some of that, in some cases, but I do not think that is the biggest complaint.

Mr. White: Thank you. That is all I need from you folks right now. I would just like to ask a couple of questions of Mr. Bouchard.

You mentioned toward the end of your presentation that a report related to fees, including some proposals ``is expected'' — I believe those are the words you used — in the next few weeks. Are you in a position to change the word ``expected'' to ``will be available'' in the next few weeks? I assume there is a target date for completing a report. If so, can you not only change the word ``expected'' to ``will'' but also give us a date — so ``will be available'' by a specific date?

Mr. Bouchard: I think the report I was referring to is the standing committee report on broadcasting. I do not know the exact date, but we are expecting it within the next few weeks.

Mr. White: I misunderstood. I thought it was a report that you were supplying.

I think I have the same question for Mr. O'Sullivan, and this time it is a report that is coming from the CRTC. You also used the same words ``expected,'' and I wondered if you can tell us whether a report will be available by a specific target date?

Mr. O'Sullivan: We were referring to the same report, the standing committee's report.

Mr. White: I apologize for my confusion here. I misunderstood the presentations. Thank you, that is all my questions for now.

Senator Moore: I want to follow up on something, Mr. Chairman, which Mr. Lee was discussing with respect to the CRTC presentation and the Eurig Estate case. Based strictly on that case, are not the Part II fees a tax?

Mr. Keogh: My answer would be no, because an element of what I will call the Eurig test is that the money collected is unrelated, has no link to any regulatory scheme. What I have explained is that the Part II fees do have a link; it is not a direct cost link, but there is an element of it that is cost. In terms of the larger broadcasting system, it is regulated by the CRTC, but in terms of its utilization of the spectrum, it is regulated by Industry Canada, so there is an element of that. Also, the fees are in recognition of the broadcaster's utilization of the public resource for commercial gain in the context of their broadcasting activities. Therefore, that is another element that goes into the Part II fees.

In a subsequent case to Eurig of the Supreme Court, the Westbank First Nation, the court said if you answered yes to all the Eurig questions, even that would not, in and of itself, mean that it were a tax. In Westbank, it was indicated that generally it would, but it would not necessarily. It is always going to be a function based upon the jurisprudence as to whether or not Parliament has limited the authority to simple cost recovery or not.

Senator Moore: All of that may be true with respect to the $10.3 million that you collect for Industry Canada. I think the other part of the $92 million that you cited — the $81.7 million that goes to the Consolidated Revenue Fund — is clearly a tax.

I have a question with respect to the Coast Guard presentation. You mentioned each region has a revenue level assigned to it. What are the regions and what are the revenues assigned to them?

Mr. Meisner: We have the information. I want to clarify that that is for the navigation fee. We do not have a regional fee structure for icebreaking. On the navigation fee, we have a Pacific region, a Central and Arctic region, a Quebec region, a Maritimes region, and a Newfoundland region.

Senator Moore: Pacific, Central?

Mr. Meisner: Central and Arctic, which are the Great Lakes and north, the Quebec region, which is basically the St. Lawrence River, and the Maritimes region, which is the Gulf, and then Newfoundland, which is the water surrounding Newfoundland.

Senator Moore: What are the respective revenue targets for each of those regions?

Mr. Wallace: Pacific, $6 million, Central and Arctic, $6 million; Quebec, $7.3 million; Maritimes, $4.5 million, and Newfoundland, $3.7 million.

Senator Moore: Those are the revenue targets assigned, and you collect those each year, correct? More than those, or just those?

Mr. Wallace: That is what we were intended to collect, but we collect less than that. We have had shortfalls from the fees.

Senator Moore: How much? Is it close?

Mr. Wallace: Last year, nationally, we were shy about $1 million on the marine services fees. Cumulatively, over the course of all the fees, including icebreaking, it is $25 million to $30 million.

Senator Moore: With respect to the $3,100 fee, is that return passage, or one way?

Mr. Wallace: Each way. There is a cap that is in place, eight times over the season, three over a 30-day period.

Senator Moore: So it is each way?

Mr. Wallace: Yes, sir.

Mr. Abbott: As the deputy chair of the Standing Committee of Canadian Heritage, I have some understanding of the Part II fees. I noticed in the opening remarks, page 3, a comment regarding earning a fair return for public access to or exploitation of a publicly owned or controlled resource — broadcasters' use of the broadcasting spectrum.

I am going to ask a number of questions and then I would like a response in its entirety.

Why does the CRTC not recognize that the use of the broadcasting spectrum, which was a very valuable commodity in the analogue days, at this particular point, with all the new stations, including the community stations, with the repeaters, some of which are not being regulated properly by Industry Canada, with cable access and now the Internet, is declining? The value of the spectrum, for which the broadcast industry is being charged $92 million a year, is declining. At the same time, as a result of Bill C-32, the amendments to the Copyright Act, a brand new set of ways of gouging money out of the broadcast industry came about. Understandably and correctly, they had always paid copyright. Layered on top of that was another fee, that is, neighbouring rights, which is not going into the consolidated revenue fund but to artists through collectives. On top of that, there is a recording medium fee. Now, the broadcast industry has been hit retroactively with a $20 million fee for ephemeral recording, which will be ongoing with a $6 million to $7 million fee. Ephemeral recording which, as the CRTC will know, is simply a technical matter of transferring a piece of music that is now in a digital format from this medium to that medium. For the privilege of pressing a button, they are being charged $20 million retroactively, plus $6 million.

In addition to that, there are the Part II fees, which everyone around this room seems to believe is a tax — if walks like a duck, waddles like a duck and quacks like a duck, therefore, it must be a duck. Is there no end to the rapaciousness of people trying to gouge money out of the broadcast industry?

Senator Moore: No.

Mr. Abbott: With the mandate of the CRTC to be responsible for a healthy broadcast industry, I cannot be the only one in Parliament who is aware of the constant hacking, gouging and slashing of the broadcast industry. It is amazing that the industry is still continuing to survive.

In the hearings leading up to the report, which is supposed to be out June 9 or 10, Glenn O'Farrell of the CAB made the commitment, on the part of the broadcasters, to discuss repatriation of the $92 million for redistribution, with the cooperation of all the other interested parties in the industry. If the $92 million will be ripped off the broadcasters, keep it within the system and use it within the system for CTF, Telefilm, whatever medium is going to be the best.

What I am looking for as much as anything is a response from the CRTC that will give me some feeling of comfort that the CRTC recognizes that this goose is in hospice. This goose can no longer continue to be plucked and gouged the way it has been.

Let me ask this: Why, with the $92 million, in reference to Part II fees, could the CRTC not simply enter into a negotiation with the CAB and with the other interests to discuss redistribution, rather than it finding its way back into to general revenue. There is tremendous amount of support for that amongst my colleagues on all sides of the House.

Mr. O'Sullivan: Upon reception of the standing committee's report, we anticipate that of the major issues will be how the fees fit within the broader context of what is often referred to as the regulatory bargain, which is what is called upon from the broadcasters in return for holding a broadcasting licence.

The government's response to that report will provide an opportunity to engage in that debate and engage those issues. The CRTC requires the approval of the Treasury Board when it makes the regulation for the fees. Therefore, it is the government as a whole that has to agree to undertake this change. It is Treasury Board as a committee of cabinet that authorizes it. We cannot of our own volition undertake these changes. We can do so, but on the understanding that the government as whole is willing to have, for example, the fees redirected to the attainment of the objectives of the act, into programming funding. CCTA was recommending that it serve for purposes of investment in the transition to digital or other purposes. There is a long list of purposes it could serve.

We are aware of the frustration of the broadcasters. I cannot speak on behalf of the Copyright Board, on the rationale behind their decision. Whether the legislative amendments would be forthcoming to resolve the issue of ephemeral rights is a matter on which I cannot pronounce.

We understand the frustration of the broadcasters. We understand the current debate about the funding to help support English-language drama, about funding to help support drama. This $92 million is a tempting target for redirecting money into programming. Those things will all be on the table.

As part of the overall government's response to the committee report, there may be the opportunity to address that and have the impetus to make such changes.

Mr. Abbott: Can you understand the frustration of the broadcast industry? This started in 1996. It is seven years later. We are talking about this report coming out on June 10. We are talking about the government responding to that report eventually.

I have heard a rumour that there might be an election next spring, in which case it will not be dealt with then. The broadcast industry will continue to be gouged $92 million a year in addition to these additional fees.

Surely the CRTC must have some feeling of concern about that. Indeed, do you?

Mr. O'Sullivan: We do. We hear it all the time. We deal with the broadcasting industry on a daily basis. We are fully aware of all their frustrations on all the issues that you mentioned.

It is not a matter just for us, even though it is our regulation. It requires Treasury Board approval. It has to be a Government of Canada initiative to review the fees in the fundamental way that you are suggesting.

I wish we could resolve it immediately. It is a matter that has to be undertaken with the government as a whole. We cannot do it on our own volition.

The Joint Chairman (Mr. Grewal): Mr. Abbott, if you have some information on the retroactivity aspect, the committee would be interested in it.

Mr. Wappel: Let me ask a hypothetical question. The ship, Carpathia, comes from the Black Sea with a load of iron ore in July headed for Duluth. It pays $3,100 or it does not pay? When does it pay?

Mr. Wallace: It would pay during the winter months, but in each of the ice zones a date is attached to it. For instance, in Newfoundland, fees would be applied from January 15 to May 15. The dates for the Gulf of St. Lawrence would be December 21 to April 15. The dates for the Great Lakes would be December 21 to April 15. There are dates attached to those geographical areas.

Mr. Wappel: There are specific dates within which if you happen to be a ship in transit in those areas you pay the fee each way — regardless of whether there is ice; is that correct?

Mr. Wallace: Yes.

Mr. Wappel: Based on historical averages.

Mr. Wallace: Yes.

Mr. Bernier: I am interested in exploring further with Mr. Keogh the Part II fees. I am not sure I got a clear sense of whether you agreed that these Part II fees meet all the criteria set out by the Supreme Court in Eurig.

Mr. Keogh: When you say ``meets all the criteria,'' do you mean that it meets the criteria of being a tax? No.

Mr. Bernier: It does not?

Mr. Keogh: It does not in my view. The last test as it has been further articulated speaks of there being no relation to any regulatory initiative. I have forgotten the exact wording.

Mr. Bernier: Is there a nexus between the quantum charge and the cost of the relevant service?

Mr. Keogh: That is wording that appeared there, but I would refer you to the Westbank case. It is not related to any regulatory purpose as it has been rearticulated.

I made the point earlier that it is our submission that it is related to a regulatory purpose. First of all, it relates to recovery of the government's cost incurred for its management of the radio spectrum and the cost of Industry Canada.

Mr. Bernier: Ten million dollars.

Mr. Keogh: Yes. Also, it is recognition of the commercial benefit that the industry derives for utilization of a public resource.

Eurig is not the first time this test has been articulated. In 1931, the Supreme Court of Canada in the Lawson case spoke about it as well. When courts have looked at the issue, they have always looked at what the enabling statute speaks to in terms of the ability to charge.

If you look at, for example, the Aer Lingus case, the court recognized that Parliament, in amending the legislation, moved away from a pure cost-recovery scheme. The court recognized that the government's ability in charging the fee was not limited simply to cost recovery because in fact Parliament had not so limited the authority.

In choosing what authority to grant in the Broadcasting Act, Parliament chose not to do what it has done in some legislation, such as the Telecommunications Act, and limit it to pure cost recovery. Rather, it chose to allow the commission to set fees using any means it felt appropriate, including revenue.

Mr. Bernier: Mr. Chairman, no one would deny that a benefit is provided. Surely, the issue is the cost to the government of providing this benefit. That cost is probably the CRTC cost for spectrum management.

After that, leaving aside whether this statute, the Broadcasting Act, specifically refers to limits to cost recovery, what are the costs? It is a given that there is a benefit. What are the costs to the government providing that benefit?

Mr. Keogh: As has been indicated today, the cost has been identified; for Industry Canada, it is approximately $10 million.

It is not a question of the cost of providing the benefit or access to the spectrum; I am suggesting that it relates to the value that one attributes to the right to exploit. This is a public resource from which people are getting the benefit for commercial gain. The Part II fees are an attempt to ensure that the Canadian public, whose resource is being used by a particular party, receives some compensation for it.

It is difficult to quantify with precision the appropriate number. That had been indicated. It has been recognized over time that the airwaves are a public resource to which there is limited access. An obligation to provide some form of compensation for the privilege acquired for exploitation is incumbent on those granted access.

Mr. Bernier: This leads me to the last question. Why would the CRTC and government simply not recognize that Part II fees are a tax but a tax expressly authorized to be imposed by section 11 of the Broadcasting Act, which would be an altogether simpler, and possibly more accurate, approach to take? Would it not?

Mr. Keogh: I do not pretend to speak for all the government but jurisprudence does not take you there, in my opinion.

The Joint Chairman (Mr. Grewal): Thank you. I know these questions were important. Thank you to the witnesses. The presentations were useful. Information was generously shared with us. Thank you very much.

The Canadian Cable Television Association also wishes to appear and share information with us. If it agreeable to the members, we will invite them sometime in the future.

Mr. Wappel: It may be that the Canadian Shipping Federation would wish to appear to make some comments. I do not know that for a fact.

Mr. Lee: Can we discuss this at Steering Committee?

The Joint Chairman (Mr. Grewal): Thank you. The next meeting is on June 12.

The committee adjourned.