Information that Transport Canada collected during our review of the St. Lawrence Seaway
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Introduction
The Great Lakes St. Lawrence Seaway system, also known as Highway H2O, extends 3,700 kilometres from the Atlantic Ocean through the Great Lakes. It serves two Canadian provinces, eight U.S. states, and over 100 ports and commercial docks that connect to over 40 provincial and interstate highways, and 30 railway lines. The Great Lakes St. Lawrence Seaway system helps Canada's Prairie Provinces and the U.S. Midwest import and export goods. A 2018 Martin Associates study found that commerce moving through this system supported around 237,000 jobs, including over 78,000 direct jobs, and $35 billion in revenues in both Canada and the U.S.
The St. Lawrence Seaway opened to navigation in 1959. It's a key part of the Great Lakes St. Lawrence Seaway system and is important to both the Canadian and U.S economies. The Seaway is made up of two parts. The Montreal to Lake, Ontario section has seven locks: five Canadian and two American on the St. Lawrence River between Iroquois, Ontario and Montreal, Quebec. The Welland Canal section has eight Canadian locks that link Lake Erie to Lake Ontario. These sections of the Seaway also include 39 fixed and movable bridges. In addition, the Soo locks in Sault Ste. Marie, Michigan, allow ships to move between Lake Superior and the lower Great Lakes.
The system is used to move bulk cargo, like:
- grain
- iron ore
- petroleum products
- stone and aggregates
- coal
Objectives and approach
In July 2017, the Government of Canada announced a five-year extension to the agreement between the Minister of Transport and the St. Lawrence Seaway Management Corporation to manage, maintain and operate the Seaway. The extension lasts until March 31, 2023. To make sure that the Seaway continues to be a critical transportation corridor for North America, Transport Canada conducted a review to:
- assess market trends and forecasts that could encourage commercial and economic development on the Seaway
- identify the issues and opportunities that affect the Seaway's long-term sustainability and competitiveness
- evaluate the Seaway's governance, funding and service delivery model
Transport Canada engaged Indigenous communities and many stakeholders during the review, including:
- the St. Lawrence Seaway Management Corporation
- shippers
- carriers
- industry associations
- provinces and municipalities
We also consulted the public online from September 2017 to April 2018, and received 14 formal submissions.
Stakeholder views: what we heard
The following sections summarize feedback collected. The feedback is organized to reflect the review’s objectives. The opinions and views expressed in this report are solely those of the stakeholders and should not be interpreted as those held by Transport Canada.
Key takeaways
- Most stakeholders said that the Seaway could support higher levels of traffic, and agreed that the greatest chances for growth lie with existing bulk markets, depending on the commercial and market context.
- Several submissions noted that the St. Lawrence Seaway Management Corporation's mandate could be updated to include economic development.
- Regional development was seen by some as a way to increase Seaway traffic.
- Stakeholders identified that promoting the Seaway was important to its success in attracting potential new users.
- The Seaway was often seen as a competitive choice. Its competitiveness depends in part on the cost of marine routing compared to other routes.
- Nearly all users felt that the Seaway's seasonal nature plays an important role in its competitiveness and continued growth.
- Stakeholders saw the costs of services and fees as a barrier to current and possible users.
- Certain stakeholders said that reviewing pilotage and coasting trade (cabotage) systems could make the Seaway more competitive.
- Many noted that employment trends in the transportation sector show the wider labour challenges facing Canada.
- Stakeholders said that investing in infrastructure could help grow traffic.
- Stakeholders noted that marine transportation emits fewer greenhouse gases per tonne of cargo than other modes of transportation, which has a positive environmental impact.
- Indigenous and local communities said that monitoring the evolution of shorelines was important for supporting the environmental sustainability of the Seaway.
- Lower duties on key assets were seen to have made the sector more efficient.
- The Corporation, its Board of Directors, and Seaway users see commercialization as largely successful.
- Indigenous communities said they want commercial and economic development activities to require their consent and to be done in partnership.
- Some stakeholders saw the Corporation's current Board of Directors as too narrow and in need of expansion to allow for broader representation of market participants and interests.
- Long-term agreements between Transport Canada and the Corporation were seen as promoting cost-effective asset renewal, providing predictability and stability for users, notably with respect to long-term investments.
Economic development
Most stakeholders said that the Seaway could support higher levels of traffic, and agreed that the greatest chances for growth lie with existing bulk markets, depending on the commercial and market context.
There could be many ways to increase the use of the Seaway, like:
- raising production volumes in western Canada for harvest grain, potash, and other resources
- diversifying export markets for energy resources produced in western Canada
- diversifying trade to markets in Europe, Africa, the Middle East and Latin America
Meanwhile, other stakeholders felt that diversifying the market would favour commercial and economic development along the Seaway and could be used for both imports and exports. One example mentioned was the recent creation of a new general cargo terminal in the Great Lakes region. The terminal promotes inbound cargo for project and dimensional cargo, like extra-large construction equipment, wind mill and oil refinery equipment, destined for western Canada. Before this terminal was built, this cargo would have travelled through southern U.S. ports and avoided the Seaway system. Another example suggested shipping non-renewable natural resources from western Canada through the Great Lakes to help offset infrastructure bottlenecks on the west coast.
Several submissions noted that the St. Lawrence Seaway Management Corporation's mandate could be updated to include economic development.
Suggestions included making changes so that the Corporation could:
- recoup additional operating fees from users
- look for commercial opportunities
- provide tools to increase non-toll revenues
- re-structure executive pay by offering incentives to reduce capital expenses
Revenues for leases and licenses are directly deposited into Government of Canada accounts, so they can't be accessed or reinvested by the Corporation. This could limit incentives to grow this part of the business and the system's competitiveness. As such, a number of stakeholders felt that changing the Corporation's mandate could give it the ability and incentive to increase revenues and reduce the level of statutory payments to support the Seaway.
Regional development was seen by some as a way to increase Seaway traffic.
A few stakeholders noted that creating industrial port areas in Quebec through the Quebec Maritime Strategy could help grow Seaway traffic and increase regional economic activity. Activities in these areas would support marine transportation and would be integrated into existing transportation infrastructure. However, others cautioned that there may be a lack of dockside storage space which is in some cases seen to be rented out at very low prices.
Legislative reforms were also seen as having the potential to create new sectors of economic activity in the Great Lakes. A few stakeholders suggested that changes to the Coasting Trade Act could reduce barriers and encourage economic growth. The Act is an important tool that reserves domestic shipping activities to Canadian flagged and duty paid vessels, but these stakeholders said that the application process for foreign cruise operators to operate in the Great Lakes could be simplified or even removed.
These stakeholders felt this change is key to allowing foreign cruise vessel operators to bring in ships and crews from abroad and offer trips that start or end in the Great Lakes. They argued this could create a new sector of economic activity and increase traffic.
Awareness and promotion
Stakeholders identified that promoting the Seaway was important to its success in attracting potential new users.
Many stakeholders recognized the Corporation has successfully launched the “Highway H2O” brand as a way of attracting more traffic to the Seaway. They felt that it was important to increase promotion and awareness of the Seaway to expand knowledge of the system, break down misconceptions and increase traffic and long-term sustainability. To this end, all levels of government were encouraged to cooperate and support promotional activities. Stakeholders suggested that a shared policy approach between Canada, Ontario and Quebec should be created. The policy could be a way to develop an integrated marine strategy to help create a smoother transportation system and supply chain.
Competitiveness
The Seaway was often seen as a competitive choice. Its competitiveness depends in part on the cost of marine routing compared to other routes.
Stakeholders consistently noted that vessels use the Seaway to reach ports that are part of a broader supply chain. These chains often include other modes of transportation, like rail, road, and pipeline connections to suppliers and markets. In turn, stakeholders said that Seaway routings often compete with other transportation options that don't involve a Seaway transit. While Seaway travel has been improved with deeper drafts and better vessel design, these changes haven't increased shipping efficiency enough to attract more traffic to the corridor.
Nearly all users felt that the Seaway's seasonal nature plays an important role in its competitiveness and continued growth.
Stakeholders all agreed that other modes of transportation offer year round services that the Seaway can't. In contrast, the Seaway has an advantage for transporting bulk freight as it can be transported all together and cheaply stored for later use. The development of year-round operations could help the Seaway compete for general cargo that can't be stored during the three month seasonal closure.
However, most stakeholders recognized that moving to year-round operations could create challenges for maintaining infrastructure as important repairs often take several weeks. More generally, stakeholders believed better ice-breaking services are key to extending the Seaway season and for making sure that vessels can move quickly and predictably later in the season. Users also noted that a longer navigation season should be announced far in advance to give shippers enough time to plan and discuss the fee structure.
Stakeholders saw the costs of services and fees as a barrier to current and possible users.
Costs from services and fees include:
- pilotage
- seaway tolls
- marine navigation services
- dredging services
- ice-breaking
Stakeholders said that increasing costs over the past 20 years have created a barrier to using the Seaway as a routing option. For commodities like grain, sugar, coke (fuel), iron ore, and coal, stakeholders said that Seaway tolls make up only a small portion of transportation costs. For others like salt, steel, and petroleum products, Seaway tolls make up a larger portion of transportation costs. Specific costs like pilotage, tolls, and ice-breaking, were seen to have a direct impact on the Seaway's ability to compete with other routings and modes, such as rail and truck.
Certain stakeholders said that reviewing pilotage and coasting trade (cabotage) systems could make the Seaway more competitive.
Some stakeholders encouraged the Government of Canada to make it easier for qualified captains to pilot their own ships to help decrease costs and increase competitiveness.
Some stakeholders also suggested a review of all mandatory pilotage areas. Another option suggested was using navigation technology instead of pilotage to help guarantee security. Other stakeholders suggested that pilotage costs should be increased because of new demand coming from foreign vessel operators.
Meanwhile, other stakeholders encouraged Canada to update cabotage rules that reserve domestic short-sea shipping for Canadian flagged carriers. They felt these rules limit the size of the fleet serving the Seaway system and discourage growth and competitiveness. Stakeholders thought that foreign flagged vessels should also be eligible for short-sea shipping which could lead to growth.
Many noted that employment trends in the transportation sector show the wider labour challenges facing Canada.
Many shippers said there was a shortage of skilled labour in the maritime sector. They said this could have big impacts on the Canadian economy. Shippers thought that it was hard to recruit and retain qualified mariners because the marine transportation sector isn't well known.
To respond to the shortage, shippers encouraged the Government of Canada to review relevant legislation and procedures around hiring qualified foreigners and non-permanent residents. Shippers also said because demand for workers increases and decreases depending on the season, it makes it harder to hire people for stevedoring (loading or unloading cargo) services.
Stakeholders said that investing in infrastructure could help grow traffic.
Ships currently operating in the system are designed for the Seaway locks. As such, a few stakeholders noted that increasing lock sizes and draught depths could help accommodate larger vessels and make the Seaway more competitive and sustainable.
A few others said that building twin locks for the busiest sections of the Seaway could increase the system's capacity, and let the Seaway operate continuously and make maintenance schedules more flexible. Similarly, some stakeholders noted that technological innovation could be an important element to supporting the growth of the Seaway. Using new technologies, like blockchain, and making better use of data was seen as a way of improving how existing infrastructure is used without investing a lot of money.
Sustainability
Stakeholders noted that marine transportation emits fewer greenhouse gases per tonne of cargo than other modes of transportation, which has a positive environmental impact.
Some stakeholders also noted that creating liquefied natural gas infrastructure for fueling ships increased the environmental sustainability of transporting goods by sea, and the marine sector's competitiveness compared to other modes of transportation. The Government of Canada was asked to consider other ways to support the "greening" of the maritime sector.
Indigenous and local communities said that monitoring the evolution of shorelines was important for supporting the environmental sustainability of the Seaway.
Stakeholders, and in particular Indigenous communities, pointed out that shoreline erosion was a factor that should be taken into consideration when deciding whether or not to increase traffic in the Seaway. Some Indigenous and local communities along the waterway are concerned that Seaway activities occur without enough local involvement and at their expense, and that shoreline erosion can have important impacts on existing economic assets. Because of this, they felt that the impacts on the shoreline and the environment should be considered if Indigenous and local communities were to benefit from increased economic activity along the Seaway.
Lower duties on key assets were seen to have made the sector more efficient.
Some stakeholders said that when the Government of Canada removed the 25% import duty on cargo vessels in 2010, it encouraged fleet renewal investments, worth around $4 billion. These investments made service more efficient and available, while also reducing fuel costs and emissions.
Governance model
The Corporation, its Board of Directors, and Seaway users see commercialization as largely successful.
The Corporation's governance structure is seen by its users and stakeholders to be an improvement over its predecessor, the St. Lawrence Seaway Authority, in terms of responding to user needs and good financial management. Those consulted also said that overall, the current governance structure is working well. Nonetheless, some encouraged a review of existing practices to help identify cost savings.
Indigenous communities said they want commercial and economic development activities to require their consent and to be done in partnership.
Indigenous communities are of the view that the construction of the Seaway has had a lasting effect on Indigenous communities. They want to share the economic benefits generated by the Seaway, with some communities asking for a share of the toll revenues from traffic moving through their traditional territories. Indigenous communities also said that decisions taken by the Government of Canada about the Seaway should take into account the potential impacts these decisions can have on Indigenous rights and territories.
Some stakeholders saw the Corporation's current Board of Directors as too narrow and in need of expansion to allow for a broader representation of market participants and interests.
The board is currently made up of nine directors:
- the federal, Ontario and Quebec governments each have a representative
- five directors represent industry classes
- domestic carriers
- international carriers
- grain
- steel and iron ore
- other
- one director position is held by the president and chief executive officer of the Corporation
The current board is made up mostly of directors appointed by industry members. Other groups, including Indigenous communities, union representatives, and municipal stakeholders have said they want to participate more in the Corporation's decision-making processes.
Long-term agreements between Transport Canada and the Corporation were seen as promoting cost-effective asset renewal, providing predictability and stability for users, notably with respect to long-term investments.
Many industry players said that the certainty and predictability provided by the organization managing the Seaway was critical to their own long-term success. As such, the marine industry likes long-term agreements particularly for their medium to long-term investment plans along the Great Lakes St. Lawrence Seaway system.