Fuel prices threaten key Canadian lifeline: ferries

It's mid-afternoon at the Marine Atlantic ferry terminal and long rows of commercial trucks are waiting to drive aboard the MV Caribou, their trailers packed with all the things the Province of Newfoundland & Labrador needs from the rest of North America: groceries, automobile parts, medical supplies, plywood.

But getting anything or anybody on or off the island of Newfoundland – where 95 percent of the province's half million residents live – has become alarmingly expensive. Sky-high fuel prices have triggered one fuel surcharge after another – a cumulative 27.7 percent since July 2007 – on the ferries that serve as the province's lifeline to the rest of the world.

Provincial authorities are angry, with Newfoundland Transport Minister Diane Whalen calling the surcharges "outrageous."

"It's getting harder and harder for many manufacturers to justify sending their products to Newfoundland just because of ferry costs," says Peter Nelson, executive director of the Atlantic Provinces Trucking Association in Dieppe, New Brunswick. "If things keep going this way we'll soon see the $8 head of lettuce in Newfoundland."

In this part of the world, ferries have long been regarded as essential infrastructure, extensions of the railroads and, later, highways, that connect Atlantic Canadians to one another and the wider world. Many communities in Newfoundland – and most in Labrador – are so remote that they are not connected to the provincial road network and people rely on local ferries to get in or out.

Residents of the province of Prince Edward Island can get to the mainland on an 11-year-old bridge, but it costs so much (C$41.50) that many prefer ferries, which are also faster if one is traveling farther east. Nova Scotia is practically an island, and residents of the southwest part of the province rely on ferry links providing vital shortcuts to Maine and New Brunswick.

"We need all the ferries we can get around here," says Harold Theriault, a provincial legislator and retired lobsterman from Digby Neck, Nova Scotia, who says they are essential to the economic livelihood of his region. "We've got a big fishery here, and all our fish and lobsters comes your way [the northeast US]. Every bit of it is trucked, and if we can't take a ferry 30 miles across the Bay of Fundy, then we have to drive it eight hours around."

But high fuel prices are threatening some of the region's ferry links, many of which were privatized more than a decade ago. As costs are passed on to consumers, fewer customers appear to be riding, making critical services inviable without fresh government subsidies.

In August, federal and provincial authorities approved over C$15 million ($14.5 million) in subsidies to rescue the ferry Mr. Theriault's neighbors rely on, a privately operated year-round car ferry linking Digby, N.S., to Saint John, N.B.

Earlier this summer, the Nova Scotia government stepped in with C$4.4 million ($4.26 million) to save the seasonal high-speed service between Yarmouth, N.S., and Portland and Bar Harbor in Maine – an essential means of getting US and Ontario tourists to the region.

"The routes would not be feasible without government assistance," says Donald Cormier, vice president of operations at Bay Ferries, the Charlottetown, Prince Edward Island, company that runs all three Nova Scotia services. He says increased fuel prices and a downturn in American travel to Canada had forced both routes into the red.

While the subsidies for the Saint John ferry continue through early 2011, it is not clear if the Maine routes – which have existed in some form for more than 50 years – will resume next year. Mr. Cormier declined to comment, but the company recently announced it would close those seasonal routes eight days early.

Until the late 1990s, most of these routes used to be operated by Marine Atlantic, the government-controlled corporation that operates Newfoundland's lifeline to the Canadian mainland. For nearly a decade, Cormier says, Bay Ferries ran them without public subsidy, saving taxpayers "hundreds of millions."

But now that fuel prices have undermined profitability, some think the government should reclaim routes. "When costs rise and traffic falls, we don't go tear up the bridges and roads," says Mr. Theriault, who adds that propping up a private service will always be a greater political challenge than simply subsidizing a government one. "The best thing that could happen is for Marine Atlantic to take it back under their wing."

A spokesperson for Canada's transport ministry, Maryse Durette, says the government is studying the problem and that "anything is on the table."

But with sky-high diesel prices, even public companies like Marine Atlantic have been unable to provide affordable service, angering Newfoundland officials. They point out that under the 1949 agreement by which Newfoundland joined Canada, the federal government has a constitutional obligation to maintain the service, and that the firm's mission statement promises it will be "reliable, courteous, and cost-effective."

The 110-mile ride from North Sydney to Port aux Basques, N.L., currently costs C$35.75 per passenger, C$101.50 per car, and C$550 for a 75-foot truck, up by almost 30 percent since July 2007.

"The Marine Atlantic service is, in effect, a continuation of the Trans-Canada Highway," says Ms. Whalen, who has asked Ottawa to freeze rates. It "has to be cost efficient in order to make our province an attractive place to do business and competitive with … provinces that don't rely on ferry travel."

Ms. Whalen said that Newfoundland & Labrador's ferry services face the same challenges, but that her government has reduced rates over the past two years.

Marine Atlantic's shareholders – the federal and provincial governments – currently pay for the first C$26 million in fuel each year, and additional costs are passed on to customers, according to company spokesperson Tara Laing. The fuel surcharges reflect the increased costs.

For his part, Mr. Nelson of the regional trucking association argues that the Newfoundland run – essentially a floating bridge – should be free to users. "It's part of the federal highway system," he says. "It should be treated so."