Nunavut sealift costs rise by eight per cent

Instead of the small, one per cent increase they could have enjoyed this season, the Government of Nunavut and other sealift customers will now pay eight per cent more, thanks to a Nunavut cabinet decision made last year.

The GN announced the eight-per-cent hike this past Friday, in a press release that buries the bad news and plays up the good news.

What it doesn’t say is that in the spring of 2005, the Nunavut cabinet decided not to take advantage of a contract option that would have extended its existing sealift contracts by one year, covering the 2006 season, for a price increase of only one per cent.

Instead, the cabinet chose to put those contracts out for competition.

“GN elected not to take advantage of the contract extension incorporated into the agreement. This will likely lead to significant increases in costs…” says a highly critical report on the Nunavut sealift done by the Mariport consulting group.

The Mariport report also found that widespread bungling within the GN has produced many unnecessary costs for the government, and caused the quality of sealift management to deteriorate since the service was devolved from the Coast Guard in 2000.

Since shipping companies set prices for private customers based on the price they get from the GN, everyone in Nunavut will likely face an 8 per cent rise in sealift costs this year.

But it could have been worse.

In its report, the Mariport consultants predicted the GN’s decision not to exercise the one-year contract option could have produced a cost increase of 10 to 15 per cent.

That’s because of rising fuel prices. The cost of bunker oil, used by ships, has now doubled.

By April of 2005, around the time that the Nunavut cabinet decided against the one-per-cent contract extension for 2006, that price had nearly doubled, but the GN went ahead with a new bidding process anyway.

Calls to the GN for comment went unanswered by Nunatsiaq News press-time this week.

It appears, though, as if the GN’s negotiating efforts helped keep sealift prices from rising even more than they have. They also got better insurance and liability provisions for sealift customers.

The GN’s new sealift contracts are for five years, expiring in 2011, but with two one-year extension options that can be exercised at the end of that period.

And they’re with the three companies that the GN has used since 2001: the Northern Transportation Company Ltd., Nunavut Eastern Arctic Shipping, and Nunavut Sealink and Supply Inc.

NTCL will continue to supply most communities in the Kitikmeot region, via barges that move from Hay River every summer up the Mackenzie River and then eastwards along the Arctic Coast.

But this year, NTCL will act as the GN’s shipper on another route, out of Churchill — “Area E,” which takes in the Kivalliq region and Sanikiluaq.

At the same time, Nunavut Sealink and Supply Inc., which held the Area E contract until now, will offer a Churchill-based Kivalliq service of their own, outside of the GN contract, in partnership with a company called Kivalliq Marine. NSSI will also serve the Kivalliq from Montreal.

This means Kivalliq residents — who complained for three years about having to order supplies from Montreal — may now choose between two Churchill-based shipping companies, or a Montreal-based service. [See story here.]

NEAS will ship the GN’s cargo to High Arctic and North Baffin communities, while NSSI will ship the GN’s cargo to Iqaluit and to South Baffin communities.

NEAS will also serve the frequently icebound community of Kugaaruk, but only as far as Nanisivik. At Nanisivik, a Coast Guard icebreaker will pick up Kugaaruk’s supplies and deliver them to the community.

As for shipping schedules and rates, the three shipping companies were, as of this week, still unable to make them available to private customers on their web sites.

That’s because they’re still waiting for information from the GN.

“I have a draft here but we need all the final rates before we can do our web site,” said Wagui Rayes of NSSI, this past Monday.

Normally, sealift customers start ordering goods and making arrangements with shipping companies by February or March, and often earlier.

The three shipping company web sites are:

* NTCL: www.ntcl.com
* NSSI: www.arcticsealift.com
* NEAS: www.neas.ca

All three sites will contain information about rates and schedules for 2006, and cargo booking forms for customers.