This page describes and explains Commission-related developments affecting ferry service on British Columbia’s north/central coast following the sinking of the Queen of the North on March 22 2006. Events are in reverse chronological order, ending with the sinking of the Queen of the North at the bottom of this page.
September 17, 2006
Commission Agrees Northern Terminal Improvements Needed
Commission Order 06-07 dated September 17 2006 finds that BC Ferries proposed expenditures of $33.4 million on northern terminals to accommodate a new northern vessel (see below) are reasonably required, meaning the Commission will recognize their costs in setting fare caps for the north for the second performance term starting April 1 2008.
August 14, 2006
Commission Declares a Newly Constructed Northern Replacement Vessel is Reasonably Required.
On July 14 2006 BC Ferries asked for a Commission declaration that a newly built replacement vessel for northern routes is reasonably required, meaning that the Commission will recognize the cost of the vessel in setting fare caps in the north for BC Ferries’ second performance term starting April 1, 2008.
As background, BC Ferries informed the Commission that before the loss of the Queen of the North in March 2006, its negotiations with the Province (which provides taxpayer support for northern routes through service fees) had confirmed the requirement to replace the northern vessels in the following years:
- the Queen of Prince Rupert in 2009
- the Queen of the North in 2010, and
- the Queen of Chilliwack in 2011.
However, as a result of the loss of the Queen of the North, BC Ferries reported that it agreed with the Province to advance this vessel replacement schedule to resume service on the Northern Routes as early as possible. Accordingly, BC Ferries focused on two parallel initiatives: a search of the used vessel market, and accelerating the acquisition schedule for the new vessels.
On August 14 the Commission found the new vessel to be reasonably required. You will find the details in Commission Order 06-06, which includes a 6-page review of BC Ferries’ application and the reasons for the ruling. At the same time the Commission directed BC Ferries to keep open the options for alternative service providers (ASPs) to own and/or operate the new northern vessel. See the page ASP Plan Milestones on this site for more information.
July 14, 2006
Commission Extends Allowed Reduction in Northern Service for the Rest of the Summer Season as Temporary and Extraordinary
The Commission has authorized, as both temporary and extraordinary, through to the end of the summer season (September 30 2006) the reduction in service in the north previously allowed in Order 06-02 only to July 16, 2006. After an independent examination in a consultant’s report on BC Ferries’ search to replace the Queen of the North, Order 06-05 states that the Commission is satisfied that BC Ferries made a thorough search for a suitable replacement vessel in a systematic and competent manner.
BC Ferries already has adequate vessel capacity to provide the lower core levels of winter service to the north starting October 2006. The acquisition of a used vessel (see below) would help BC Ferries to re-establish its contracted higher core service levels in summer 2007.
July 4, 2006
Commission Declares Used Vessel for the North to be Reasonably Required
After a worldwide search BC Ferries identified a suitable used vessel which could be deployed to rebuild service levels on northern routes in 2007, following the reduction in service resulting from the sinking of the Queen of the North in March 2006.
BC Ferries has stated that after an extensive search of the used vessel market, including the review of close to 100 vessels, most were eliminated because they did not meet stability requirements, operational requirements such as length, draft, beam, speed, or were in poor condition.
A suitable used vessel was available for immediate purchase. After an application by BC Ferries for a ruling, in Order 06-04 the Commission declared this vessel to be reasonably required under section 55 of the Coastal Ferry Act. This means that the cost of the vessel will be recognized in setting fare caps in the north for BC Ferries’ second performance term starting April 1, 2008. In its ruling the Commission alerted BC Ferries that insurance proceeds from the loss of the Queen of the North may be taken into account in setting these fare caps, in a manner to be approved by the Commission.
May 10 2006
BC Ferries Concludes that Northern Vessel Replacement is Unlikely in 2006.
BC Ferries advises the Commissioner, in a letter of May 10, 2006, of its efforts to obtain a suitable replacement vessel for the Queen of the North and states its conclusion that it is unlikely that a replacement vessel will be available for service on the two routes for summer 2006. Accordingly Commission Order 06-02 extended the date of the reduction in service by 60 days from May 18, during which time the Commissioner is to review information from BC Ferries regarding its search for a replacement vessel. In June the Commission engaged an independent consultant to advise on this review following a request for proposal dated June 2, 2006.
April 24 2006
Commission Recognizes Northern Service Reduction as Temporary and Extraordinary
Following an April 10 2006 application by BC Ferries under section 43 of the Coastal Ferry Act, Commission Order 06-01 of April 24 formally recognizes, as being both temporary and extraordinary, a reduction of service on BC Ferries’ northern routes, through May 18, 2006. This Order is essentially technical. Section 43 of the Coastal Ferry Act states that if BC Ferries “wishes to reduce service on a designated ferry route below the core ferry services required for that designated ferry route (it) must make application to the commissioner for the authorization … and must, in that application, justify the requested reduction.”
On April 24, BC Ferries released its plans for reduced service on the northern routes starting May 18 for the summer of 2006. Here is a link to BC Ferries announcement on its summer schedule for the north.
March 24 2006
BC Ferries Gives Notice of Force Majeure to Province
On March 24 BC Ferries formally notified the province of the sinking of the Queen of the North, stated that it was unable to fulfill the core service levels for northern routes numbered 10 and 11 and gave formal notice of an Event of Force Majeure (EFM) pursuant to section 15.25 of its service contract with the Province.
This does not necessarily mean that BC Ferries believed that the cause of the sinking was an EFM. To the best of the Commission’s knowledge the cause of the sinking is still unknown and has not yet been established by a federal Transportation Safety Board investigation underway.
As defined in the service contract, an EFM means an event beyond BC Ferries’ reasonable control and without BC Ferries’ fault. It is apparent from the wording in the contract that an EFM can be an ongoing condition and not just something that occurs at one point in time. In the case of an EFM, BC Ferries is contractually obliged to “use its reasonable efforts to … resume compliance with its (service) obligations”. The contract states that, if caused by an EFM, no party will “be liable to another for any … interruption … of their … obligations”, and “the time period for completion of any such obligation will be automatically extended for the duration of the Event of Force Majeure.”
This indicates that BC Ferries is not liable for, among other things, interruption of its core service levels and neither is the province liable for interruption of its payment of service fees, for the duration of an EFM.
As of July 16 2006 the Commission had not heard whether or not the province concurs that there is an EFM, nor its possible duration. The Commission has not been nor expects to be asked to endorse BC Ferries’ belief that there was or is now an EFM in effect. The Commission is not party to discussions between the Province and BC Ferries, for instance on possible alterations or amendments to the terms and conditions of the contract which might adjust service fees and service levels in light of the sinking. Such adjustments might be done by agreement of the two parties outside the provisions of Section 3 and 4 of the schedule B of the contract. The Commission views these as matters between the two parties.
Note that, if there is not an EFM, so that the parties are held to their contractual obligations, then there are provisions in Schedule B of the contract to adjust downward the amount of service fee, after a grace number of sailings missed, according to a formula which is driven by the actual sailings and traffic carried. The matter of reducing (due to reduced service) provincial service fees is between BC Ferries and the province. BC Ferries has not asked the Commission for relief from such a reduction under Schedule B, section 3, of the contract and referred to in section 4(d) and (e) nor is the Commission aware of a reduction in service fees.
March 22 2006
Vessel Sinks, Service Interrupted
After the Queen of the North sank there was an immediate interruption of normal northern ferry service.