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General News · 24th July 2008
Relayed by John Sprungman
Kevin Falcon on CKNWís Christy Clark show on Wednesday, July 23, 2008

Clark: News that BC Ferries prices will be going up again. Iím joined by Kevin Falcon, BCís Minister of Transportation. Thank you for joining me, Minister.

Falcon: No problem, Christy. Good to be on.

Clark: There have been eight fare hikes over the last five years. In some routes that means an over 80% increase in fares since you have been in government. When is enough enough?

Falcon: Well, look, I first of all want to be clear that these fuel surcharges are real. They impact people, and I know itís very, very tough, but you know Christy I think we have to recognize that this isnít the only sector of the transportation industry that is getting hit by this-railways, airlines, the trucking weigh scale, the truckers are having to deal with it. It is tough. And I guess the question really becomes: Is the government, the Province, doing enough on behalf of island-dependent (sic) communities? Thatís the nub of the debate. Now we provide 150 million dollars each and every year to subsidy minor routes and northern routes and try and keep fares affordable, and that is a substantial amount of money, and I get that people think we should spend a lot more but, you know, it gets very, very expensive very, very quickly.

Clark: Well, you are spending 14 billion dollars on a rapid transit plan for the lower mainland. Youíve got billions going into the Gateway project that will make it easier to get to your constituents, among others, out in Surrey, Minister. Why are you allowing all these increases to be borne solely by ferry users?

Falcon: First of all, youíve got to remember that ferries is also making multiple billions of dollars of investments. Remember, when we got elected in Ď01, we inherited a bankrupt ferry corporation with an average fleet 42 years old. The NDP drove that organization into the ground. Now BC Ferries has spent hundreds of millions of dollars improving the terminals. Theyíve spent-theyíre literally on a two billion dollar ship building program for the next 15 years to try to get that fleet upgraded. Theyíve just brought in three new ferries-Super C class ferries-that are much more fuel efficient. So theyíre doing their bit too. Thereís lots of investment being made in the ferry system itself. But the fact of the matter is fuel surcharges are there to deal with the fact that their cost of fuel has doubled. Last year they were paying 86 million dollars in fuel. This year itís140 million dollars. That is a big jump, and, you know, someoneís got to pay for it. Thereís no question about it.

Clark: Someone has to pay for it! Why not the government?

Falcon: Well, Iíll ask you this question slightly differently. We now provide $150 million a year. To put that in perspective, for the Southern Gulf Islands, part of what they call the Islands Trust area, thatís about $59 million a year for 25 thousand people. That works out to a subsidy of over $2,300 per person per year. There is no other community in the province that you can point to that receives that level of ongoing, sustained support to deal with subsidizing the cost of their transportation. So I would argue we actually are doing something. Having said that...

Clark: Now you say that, though I bet you couldnít even tell me what the subsidy is for the people who live in Whistler that are going to benefit from the massive amounts of money your governmentís spending on the Sea-to-Sky Highway.

Falcon: Thatís true, but the people driving that highway-

Clark: So how can you make that statement when you canít even tell me that?

Falcon: Well, Iím going to tell you that right now, because the same people who are utilizing that highway are also paying the increased fuel costs to get them back and forth. The people in Fort St. John who are driving to Dawson Creek, believe me, theyíre paying for it in the increased cost of their transportation. No one from government is coming and subsidizing their cost.

Clark: But you havenít increased the subsidy for BC Ferries, though, significantly. When you go out and you spend 14 billion dollars on a transit plan for the lower mainland, that is an increase. You havenít seen the same kind of increase for the ferries. What youíve done is youíve dumped all those increases are the feet of users.

Falcon: No, thatís actually not true. Last year we put in an additional $7 million of extra capital to help subsidize the increases of the costs on the northern and minor routes . Weíre looking at taking the $13.9 million rebate that we fought to get back from the federal government on the three new vessels that were built in Germany. The NDP opposed us. We supported it. Weíre getting those dollars back. Weíre going to put that into the system to help defray the costs. Thatís another 14 million dollars-

Clark: And youíre going to take credit for that? Itís federal money.

Falcon: Itís federal money that we fought to make sure went back into the system instead of having to pay it because they went and did the right things and got ferries built where they should have, below budget, ahead of schedule, when others were saying we should have forced them to build them here. So, look, I think weíre doing everything we can, be reasonably expected to do, but, Christy, I ask you this simple question: If you want me to cover all the costs of the fuel increases, itís not my money. Itís actually your money, itís the people in Prince George, Prince Rupert, Kamloops, Dawson Creek that will be asked to increase the subsidy but you can ask the question, but you know 50 million dollars last year alone is a lot of money.

Clark: I donít know how many people would be asking you to cover all of the increase for the surcharges, but I bet a lot of people would say you should chip in and do your bit at least.

Falcon: I told you how we are doing that: $20 million between the $7 million we put in last year and the 13.9 that we got back from the feds and I give the federal government credit for not taking those dollars so we could-

Clark: Seven million dollars went into capital; it didnít go in surcharge-

Falcon: No, no, it went into the fuel account.

Clark: And most of that is going to subsidize the northern route, isnít it?

Falcon: Northern and minor routes.

Clark: Now why is the northern route getting special treatment, getting subsidized for their fuel surcharges and the southern routes arenít?

Falcon: First of all, they are, as I just said, and secondly the northern route is a particularly unique situation where they have a 16 hour journey. That utilizes a heck of a lot of fuel, and for small ferry-dependent communities, they clearly are going to need some help on a long journey like that.

Clark: So theyíre getting a lot more help. How much more?

Falcon: Well, there getting some more help, and so they should.

Clark: Because their fares arenít going up 18 per cent. Their fares are going up zero.

Falcon: Well, theyíre getting some more help because itís a unique situation where theyíve got a long travel time. Itís totally different from the lower mainland and the gulf islands.

Clark: Now at what point do you think the fares are going to get so high that coastal communities will be harmed, Minister?

Falcon: Well, look, frankly Iím a little surprised that you havenít seen a drop-off in ridership. I think there-

Clark: Apparently there has been.

Falcon: Well, thereís been some, but I thought frankly it would have been higher. I think thereís some resiliency, obviously, in the system. I think people change their behaviours, etc. But I think the fact of the matter is we are going to have to sit down with the ferry advisory boards and the communities and figure out, weíre going to have to look at levels of service. Weíre going to have to look at how we can try and deal with this, because it is a big challenge, and Iím very sympathetic. I, look, I just took the ferries on the weekend. I know exactly what weíre talking about. It is a big cost. I know that. But, you know, 150 million dollars a year is also a big subsidy, and we are subsidizing seniors and students and those that are traveling on medical issues so, look, I think weíre trying to do our best to deal with this, but it is a big challenge.

Clark: What is the difference in your mind between subsidizing roads out to, for example, Surrey and subsidizing a ferry service on the operating cost for fuel surcharges from Vancouver to Victoria?

Falcon: What is the big difference?

Clark: Yeah.

Falcon: Well, if you are driving from Vancouver to Surrey, youíre spending and youíre three hours in traffic. Youíre going to be burning up a pretty fair chunk of fuel, and youíre going to be paying those costs yourself without any subsidy from the government.

Clark: But you are subsidizing the building of the road. In fact, youíre financing it.

Falcon: Well, sure, the ferry corporation is financing billions of dollars of improvements to the ferry service too, and I get that people would rather not pay for that or make any contribution, but, you know, Iíve been around politics long enough-and, you should know, Christy-that you donít get something for nothing. Politicians try to tell you you can, but it ainít true.

Clark: But people who use the ferries, Minister Falcon, will look at even just the capital investment you made in BC Ferries which you say is about seven million bucks or, ah, you-

Falcon: Not capital, that was a contribution into fuel cost.

Clark: Into your fuel cost deferral account, thank you, and the contribution that you are making to support the Gateway and the rapid transit around the lower mainland, and theyíll say your priorities are quite clear: they donít lie with people who live in coastal communities.

Falcon: Well, explain that to me. Show me one other community that gets over $150 million every single year to support transportation. Name the community.

Clark: And show me how much youíve increased the subsidy to BC Ferries over the last five years versus the subsidy for the increase for your roads and rapid transit construction budgets.

Falcon: But itís gone up every year, Christy, and Iíve just told you that the ferries is undergoing the most massive reinvestment program to try to make up for the utter devastation that were wreaked upon the BC Ferry Corporation under the NDP where they built three vessels that didnít operate and starved the system of money. There were no upgrades made, not only to terminals but to any of the vessels. The average age is 42 years old. They are the most expensive ferries to operate in terms of fuel efficiency. And the ferry corporation is now going through-I think very successfully, by the way-having to deal with upgrading all their assets, improving the service. I donít think by any measurement people cannot say that the ferry service has improved dramatically in the last number of years. So, the only issue is, it would have been a great system had not fuel prices doubled in the last 12 months. And I get that that is a big hit. Iím not trying to take away from that. All Iím saying is we continue and we are trying to deal with that-20 million dollars, additional dollars, into the fuel deferral accounts to try to keep down future rate increases, $150 million a year, each and every year, to subsidize the cost to minor routes, northern routes. That is a pretty substantial commitment that taxpayers right across the province are making.

Clark: Has BC Ferries come to you and asked for help in deferring, in adding, I guess, in-have they come to you and asked for more money to try and help to keep down this increase, this fuel surcharge increase that may be coming in the future if fuel costs continue to rise?

Falcon: Well, Iíve had-Iíve certainly had a number of conversations with David Hahn where heís told me heís very concerned about the cost of fuel increases, and weíve looked at things. Weíve tried to figure out ways we can help deal with this. Thatís where making sure that all the rebate dollars we got back from the feds that we would have had to pay for the ferry corporation to make a smart decision that-weíve taken all those dollars, weíre going to put it back in the deferral account, same with the $7 million we put in last year. Thatís all about trying to deal with this, but, look, the cost has doubled in the last year. That is a huge-thatís over $50 million. Those are significant dollars. I donít want to pretend itís not a big challenge. $20 million almost seems like a drop in the bucket, doesnít it,
when you think about the scale of the problem?

Clark: Is there going to be any more money from the Province to help bear the burden of these increased fuel costs or is the rest of it all going to go on users, Minister?

Falcon: Well, thereís-certainly not in the short term because the numbers, weíve run some numbers on this trying to figure out how we can deal with it, and, Christy, I can tell you and I can tell all the listeners out there: itís gets very, very expensive very, very quickly. So thatís not the answer. I think weíre going to have to look at, talk to the communities about service levels, try and figure out ways we can run the system maybe a little more intelligently. I think ferries is doing a very good job in that regard. Weíre going to have to have discussions about that to try and reduce costs.

Clark: What will you be looking at in terms of service levels? You mean reducing service levels?

Falcon: Possibly reducing the number of trips to certain of the islands, possibly looking at, as ferries has talked about, maybe thereís got to be a separate card or fee that can be for those that live fulltime on island-dependent (sic) communities. There might be something they can do there. Weíll be as creative as we can. Iíll tell you Iíll do whatever I can to try and help deal with this with ferries in a way that makes some sense, but I just, I just, Iím not one of those people who tries to make promises youíre never going to be able to fulfill and pretend that the doubling of fuel prices isnít something thatís going to have to be paid for and borne in part, at least, by people who are using the system.

Clark: Mr. Falcon, one last thing, lots of those ferries, at least on the smaller routes, are jammed, at least in the summer, if you reduce the level of service, if thatís one of the things that youíre considering, wonít you just make it way harder for people to get on the ferries?

Falcon: Yeah, and clearly you wouldnít want to do in peak seasons. Nobodyís saying letís do anything stupid here. I think that one of the discussions at least we can start to have with those communities is to say, look, if we can find some savings by reducing frequency, particularly during the times of the year where itís not peak, where you havenít got the jam situation, maybe that might make some sense. I donít know. I just think thatís a discussion thatís probably worth having as part of a broader discussion to how we all work together to deal with this.

Clark: Minister Falcon, thank you.

Falcon: Thanks very much for having me, Christy.
Interior Ferries
Comment by Brigid on 27th July 2008
It would be interesting to have a look at the cost of subsidizing the Interior ferries, which are all free to the user.
For example he Osprey 2000, new to Kootenay Lake in 2000, couldn't have been cheap to build, and it can't be cheap to run, its a 35 minute trip, w/ a good-sized crew.
fossil fuel costs, subsidies, threats
Comment by Barry Saxifrage on 24th July 2008
Minister Falcon consistently says that road users aren't being subsidized by the government...while ferry users on the minor routes are. I'd sure like to see that data.

A recent study just released by the great oil consuming state of Texas, no less, says not one of their roads pays for itself in gas taxes and fees. Most don't come anywhere close. In fact the biggest, most expensive roads in urban areas are massively subsidized up to 86%. One recent such road in Texas would require a gas tax of $2.22 per gallon to ever pay for itself.

In addition, the percentage of the price of gas that goes towards fuel taxes is dropping rapidly as oil price rises. An ever-smaller share of our transportation spending is going to fuel taxes. And as the total amount of fuel purchased starts to drop, the overall taxes will too. The result is that roads will get fewer dollars from gas taxes each year.

Add to that the fact that asphalt prices have nearly doubled in recent's made from oil too...means road construction and maintenance costs are going UP while the gas taxes meant to pay for them are going DOWN.

Hard to see the Gateway project squeezing billions more extra dollars from an ever shrinking pie to "pay for itself without subsidies". At the very least Minister Falcon should provide sources of data to back up his claims that seem to go against basic economic sense.

This isn't to say we should continue the insane subsidies to our fossil fuel addiction. Quite the opposite. Our oversized fossil fuel use is literally killing our future via climate change, ocean acidification and economic hyperinflation brought on by our relentless demand outstripping supply.

We will never win the "keep increasing the subsidy battle". We need ferries that are not vulnerable to oil prices...that don't hyper-pollute our future. BC Ferries needs to radically rethink what kind of ferries it is going to build to replace that 42 year old fleet. If they use fossil fuels for their major fuel source they are probably unusable in the coming decade for the minor routes.

A ferry that has long run between Japan and Taiwan just went bankrupt because of fuel costs. Those are wealthy nations folks.

Recently market analysts covering the airline industry are talking about how many commercial airlines will be bankrupt by next year if oil stays above $100/barrel. All agree it will be many. Some of the top analysts say it will be most of them.

Failure to transition rapidly to much lower fossil fuels needs is wiping out capital across the globe. It's just getting started.

Meanwhile the companies, governments and industries that "get it" are coming up with solutions. Hybrid ferries are running in Australia, SF and NYC. A french company is shipping wine, profitably, via sailing ships, with plans to build many more. Large ships and tankers in the North Sea have been using high-tech kites to dramatically cut fuel use for years.

The end of the fossil fuel age is coming rapidly and will be absolutely brutal to anyone not prepared. The window of opportunity is closing very fast. The only hope is to cut demand for fossil fuels as fast as we can in as many areas as we can.

Further subsidizing our use of fossil fuels is like putting a brick on the accelerator as we drive off the cliff.

We need a long-term plan that has a ferry that doesn't rely mostly on fossil fuels.