In-Sights: Ferry innovation? Wazzat?

The Havyard shipyard announced that it received a contract to build seven battery-powered ferries for Fjord1, Norwegian transport conglomerate. The news comes after the operators of the first all-electric ferry in Norway, the ‘Ampere’, reported some impressive statistics after operating the ship for over 2 years. They claim that the

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In-Sights: Ingrates, eh?

Transcript from Vaughn Palmer’s Voice of BC, May 2012

Topic: Extra Funding for Ferries

Vaughn Palmer:

This week…. We’ll start with a parochial Vancouver Island guy who lives in Victoria question. You managed to find $80 million for the ferries this week. Did Kevin Falcon turn over the couch cushions or something, and find some money? Where did this money come from?

Blair Lekstrom (Transportation Minister):

…It’s spread over four years, so it breaks down to about $46 million, then another $10.5 million, $11 million, $11.5 million for a total of $79.5 million is what we get to. It is a significant amount of money in these tight fiscal times that we’re in — but we had to do something. There’s no one easy answer to the solution with BC Ferries, that’s for sure.

Vaughn Palmer:

What does this lift the annual subsidy from the two levels of government, too, for the ferries? It must be getting close to $200 million.

Blair Lekstrom:

…The actual service-fee lift will be $10 million this year, $10.5 next year, $11 million, and then $11.5 million…

Vaughn Palmer:

In spite of that, I heard a tremendous amount of whining today — and if you’re watching this live, it’s Thursday — from ferry users that it’s still not enough money.

Blair Lekstrom:

Well, it was interesting. I don’t know if there’s [inaudible].

Vaughn Palmer:

You’re not going to call them a bunch of ingrates?

The reality:

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In-Sights: Ingrates, eh?

Transcript from Vaughn Palmer’s Voice of BC, May 2012 Topic: Extra Funding for Ferries Vaughn Palmer: This week…. We’ll start with a parochial Vancouver Island guy who lives in Victoria question. You managed to find $80 million for the ferries this week. Did Kevin Falcon turn over the couch cushions

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In-Sights: Essential service – ferries or moviemaking?

In 2012, Premier Christy Clark declared that coastal ferry subsidies would not grow under her government:

“That is not a sustainable amount of money from taxpayers across the province. It’s just not. You can’t run a ferry system with that kind of level of subsidy forever.”

Although inaccurate, her words were prophetic. When Premier Clark spoke, the province provided BC Ferries with 24¢ of each revenue dollar. Now it is 20¢, although inland ferries continue to be fully funded by the government of BC.

BC Liberals have other priorities. One of them is providing film and video producers with subsidies. Those have tripled to $491 million since the Premier spoke about ferry supports being unsustainable.

Seeing the rapid rise of tax expenditures flowing to picture producers during the past three years is surprising. The BC industry made huge gains from the declining Canadian dollar, which meant other supports were less needed to pull work from Hollywood South. Perhaps someone in Victoria turned a dollar exchange graph upside down and concluded higher, rather than lower, subsidies were appropriate.

In BC’s Pay-to-Play politics, political contributions influence policy. While Liberals gain valuable support from beneficiaries of film & video tax credits; they gain little from people travelling regularly on ferry routes scattered from Victoria to Prince Rupert. Good Liberals cross above the waters, not on top of them.

There is another important political factor affecting ferry operations on the coast, not one that any recent provincial government has made a priority. Last year, Stephen Hume reported:

Atlantic Canada’s ferry passengers get 350 times the federal subsidies that ferry passengers in B.C. receive, a study prepared for the Union of B.C. Municipalities finds.

Federal funding for West Coast ferries relative to East Coast ferries shows that Marine Atlantic is subsidized $493 per passenger. BC Ferries’ federal subsidy is $1.41 per passenger, the analysis notes. Ferry travellers here get about 0.2 per cent of the federal financial support counterparts on the Atlantic get, although ferry use here is 20 times greater.

I won’t attempt a calculation but imagine the relative value of coastal ferry operations, with 27 million annual vehicle and passenger movements, compared to movie making. If both came to a halt, which would be considered the essential service?

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In-Sights: Dots that may connect – UPDATED

When first published on March 26, my article referred to “maintenance costing five times what refitting the same ships cost in BC ten years ago.” That was based on press reports that BC Ferries would spend $140 million for work on its two largest ships. However, North Van’s Grumps of Blog Borg Collective uncovered a confidential order issued by the British Columbia Ferries Commissioner, one of about 20 patronage appointees who “oversees” the ferry corporations’ management.

In October 2015, the Commissioner approved $173 million for the project but, as evidenced by the confidential order three months later, increased the approved amount by $46 million to $219 million. Instead of five times cost of the last refits, the 2016 multiplier is eight.

So, whether it is $140, $173, $219 millions or an even higher cost subsequently revealed, whether the contract is completed by 2018, 2019 or later, I predict the refits will be advertised as completed on-time, on-budget. That tag is applied to all BC Liberal projects, no matter how many times the budget or completion date must be altered.
* * * * * * * * * *The following was first published March 26, 2016:

When BC Ferries added a newly built ferry to its fleet in the 20th century, the vessel was constructed in BC shipyards. During the mid-nineties, two Spirit Class ships, currently the company’s finest, largest and most efficient per unit of traffic, were built in lower mainland and Vancouver Island yards for about $134 million each. In 2005 and 2006, $27 million was spent on refits and upgrades of the two ferries, with the work also done in BC.

With proven and efficient designs in hand, the BC Government surprised observers when it decided that three large ferries were to be built in Europe. The vessels cost about $190 million each but have fewer amenities and almost 25% less passenger and vehicle capacity than Spirit Class. Ferry corporation VP Mike Corrigan, its current CEO, claimed in 2004 that BC shipyards were only qualified to build small open-deck boats for short routes. That claim had already been proven false by Spirit Class vessels and by the subsequent federal decision to award BC shipbuilders an $8-billion contract for seven non-combat ships, an average of $1.15 billion each.

Critics argued that ferry construction in BC, even if contracted at higher prices, would have provided net benefits to the local economy. Economists credit the multiplier effect, which says:

An injection of extra income leads to more spending, which creates more income, and so on. The multiplier effect refers to the increase in final income arising from any new injection of spending.

The shipbuilding industry has a significant multiplier. A European economic study reports:

Shipbuilding is labor intensive and therefore provides jobs for a large number of people. …Moreover, it is technologically demanding and …also employs a large number of other industries and therefore results in many spillovers…

When contracts for the Super-C ferries were awarded to an overseas builder, people in the labour movement blamed the anti-union attitude held by the Campbell government and its appointees. However, my own conclusion about the motivation remained uncertain. The move seemed to make no sense, particularly since BC Ferries would have a continuing demand because its entire fleet needed renewal. Washington State, where the ferry system has slightly less traffic, has long required that all government-owned ferries be built in-state because of “the benefits to the state of a stable shipyard work force and economic benefits of in-state jobs.”

So, capability of building large ferries was not at issue, and benefits of domestic construction to the broad provincial economy were clear. So, why did Liberals decide to go abroad? They spent $700 million (in today’s dollars) on Super-C ferries, another $170 million for intermediate ferries built by Poland’s Remontowa Shipbuilding and now will spend yet more millions at the same yard for maintenance costing five times what refitting the same ships cost in BC ten years ago.

B.C. ferries will head to Poland for refits, Andrew Duffy, Victoria Times Colonist, March 25, 2016

A Polish shipyard has won a $140-million contract from B.C. Ferries to conduct the mid-life upgrades of the two Spirit-class vessels.

Gdansk-based Remontowa, the largest ship-repair yard in Poland, won the contract…

B.C. Ferries spokeswoman Deborah Marshall confirmed it is the first time the corporation has sent a vessel offshore for refit.

My audit training many years ago taught that if a situation cannot be explained by the ordinary, you must consider the extraordinary. As with BC Hydro, LNG and gas producer deals, I am left with gnawing suspicions; concerns not allayed by news that broke today.

Polish Remontowa shipbuilder management promised €1.2 million bribe, The Baltic Course, March 25, 2016

Polish shipbuilding company Remontowa Shipbuilding president Andrzej Wojtkiewicz and board member Jan Paszkowski transferred about 800,000 euros to the former management of the Estonian state-owned port company Port of Tallinn, while the total bribe was supposed to be 1.2 million euros… ($1.8 million CAN)

“Two people in management positions with the Polish shipbuilding company have been declared suspects in bribe-giving on a large scale. At the end of October employees of a Polish law enforcement agency questioned the men as suspects at the request of the Estonian Prosecutor General’s Office, an official of the Estonian Internal Security Service was present during the conduct of procedural acts,” Public Prosecutor Laura Feldmanis told BNS on Tuesday.

There are troubling patterns of BC government agencies contracting with companies outside the province that have ethical deficits, subjects even of accusations that bribery gained contracts. SNC-Lavalin is one, Kiewit and Malaysian Government owned Petronas are others. Ethical questions have been raised also about Site C contractors.

When BC Liberals destroy communications and fail to document government business, they are either involved in or setting the stage for illegal activities. Christy Clark runs a government that lacks moral principle.

ADDENDUM:

This is an extract from the application to the British Columbia Ferries Commissioner for Spirit Class Vessels Mid-Life Upgrades. It demonstrates the degree of transparency that keeps Liberals comfortable.

About four years ago, before the last election, Premier Clark was touting the capabilities of BC shipyards, shaking hands of workers and taking credit for promised federal contracts. However, it was photo-op time so her words were not meant to be believed.

That was then, this is now.

ADDENDUM

Prosecutor expands Port of Tallinn inquiry to cover purchase of icebreaker, The Baltic Course Magazine, March 3, 2016
“Hence the Internal Security Service and the prosecutor’s office are checking over the circumstances related to the purchase of the icebreaker Botnica in the framework of the already ongoing criminal procedure,” he added….

Officers of the Internal Security Service (ISS) detained Port of Tallinn CEO Ain Kaljurand and board member Allan Kiil as suspects in bribe-taking on Aug. 26 last year. They were released at the beginning of January and placed under electronic surveillance.

The former Port of Tallinn top executives are suspected of accepting bribes on a large scale over a period of several years at least since 2009. The Public Prosecutor’s Office has said the placement of orders for the construction of two new ferries at a shipyard in Gdansk, Poland is a central point of the investigation.

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In-Sights: Can BC Ferry Services be trusted? UPDATED

Coastal communities have reasons to distrust the provincial ferry service and its political masters. One issue is discrimination, because people on saltwater pay onerous fares while inland ferry users enjoy free sailing, services that have cost the province over $200 million during Christy Clark’s time as Premier.

The province reports $491 million in tax expenditures in fiscal year 2015-16 for film and television tax credits, which is three times what it contributes to BC Ferries. Despite the importance of BC Ferries to the culture and economy of BC, the BC Liberals refuse to allocate federal infrastructure grants to this purpose. They prefer to spend billions for the benefit of the natural gas companies that are laying off workers in northeast BC.

Another issue is BC Ferries’ purchasing policy, which has contributed to the destruction of competitive ship and boat building on Vancouver Island and the lower mainland. About $1 billion has been contracted by BC Ferries outside of British Columbia.

The intermediate-class ferry new-construction, S-Class refits and the planned LNG fuel facilities are proceeding without full disclosure and public discussion of details. To avoid risk to passengers, BC Ferries has long had a policy of restricting dangerous cargoes to special sailings. Now, they plan to sail with LNG tanker trucks fueling vessels while parked beside customers’ vehicles.

For example:

Submission by BC Ferries to Ferry Commissioners

“At this time, it appears most likely that the ICFs will be fuelled from LNG tanker trucks parked on the vessel car deck.”

From BC Ferries website:

To replace these vessels, BC Ferries will be introducing its Salish Class of vessels, otherwise known as Intermediate Class Ferries (or ICFs). The Salish Orca and the Salish Eagle will be introduced into service on the Southern Gulf Islands routes starting in 2017. These two new vessels, as well as a third ICF (the Salish Raven) that will serve to augment peak and shoulder season service in the Southern Gulf Islands, are being built at Remontowa Shipbuilding S.A. in Gdansk, Poland.

Would you be comfortable travelling with your family on a ferry where your car is parked alongside an LNG fuel truck? Should we trust a ferry operation that has a record of overpriced under-competent management, supervised by almost two dozen patronage appointees of Christy Clark’s government?

TRUST US, THEY SAID

The audio file below is a recording of my time on CFAX1070 with Ian Jessop March 28, 2016. We talk of BC Ferries, Site C and Laila Yuile.

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