DETROIT TUNNEL OPERATOR COMPLAINS HAS BEEN SHUT OUT OF

UNCLAS SECTION 01 OF 02 OTTAWA 003362

SIPDIS

SENSITIVE

STATE FOR WHA/CAN (BREESE, ERVITI)

TRANSPORTATION FOR OST/IA (EDDIE CARAZO)

COMMERCE FOR 4320/MAC/WH/ONIA/WORD

DHS FOR OFFICE OF THE SECRETARY (AL MARTINEZ-FONTS, KAREN
MARMAUD)

E.O. 12958: N/A
TAGS: ELTN ECIN EINV PREL CA
SUBJECT: DETROIT TUNNEL OPERATOR COMPLAINS HAS BEEN SHUT OUT OF
LEASE EXTENSION

SENSITIVE BUT UNCLASSIFIED--PLEASE PROTECT ACCORDINGLY. NOT
FOR DISTRIBUTION OUTSIDE USG CHANNELS.


1. (SBU) The President of the Detroit and Canada Tunnel
Corporation (DCTC),Gordon Jarvis (a Canadian citizen),
contends that despite many good faith attempts to negotiate
an extension of their current lease arrangement for the
tunnel with the City of Detroit, it appears that they are
being shut out of negotiations in favor of an arrangement
between the City of Detroit and the owner of the Ambassador
Bridge. Jarvis believes that such an agreement, which would
place the both the Ambassador Bridge and the DCTC under the
control of the same individual may be imprudent from a
homeland security perspective, may further complicate cross-
border efforts to build a new Ontario-Michigan crossing and
will exacerbate tensions between the two cities regarding
tunnel operations, revenues and ancillary benefits. Jarvis
will be taking his concerns to U.S. federal legislators and
to the Michigan State House seeking support to move the City
of Detroit to re-open negotiations with DCTC. Jarvis
expects that should this effort fail, that DCTC might
consider raising antitrust concerns. Jarvis has met with
staff in the Canadian Deputy Prime Ministers Office to relay
this message as well. End summary.


2. (U) The Ambassador Bridge and the Detroit Tunnel in the
Detroit-Windsor corridor jointly carry about 25 percent
(approximately US$100 billion per year) of the total Canada-
U.S. merchandise trade. They are arguably the two most
significant pieces of critical infrastructure along the
entire frontier. The Ambassador Bridge is privately owned
(and carries the vast majority of trucks). The Detroit
Tunnel (which principally services passenger vehicles) is
jointly owned by the cities of Detroit and Windsor and is
currently operated by the Detroit and Canada Tunnel
Corporation (DCTC) under a lease arrangement with the City
of Detroit that runs through 2020 where Detroit receives a
percentage of revenues as well as property taxes. On the
Canadian side DCTC holds a Joint Operating Agreement valid
until 2007 with the City of Windsor and DCTC is paid a
management fee for the services it provides.


3. (SBU) On November 9, Gordon Jarvis, President and CEO of
the DCTC (a Canadian citizen) and DCTC's Legal Counsel in
Ottawa, Jacques Shore from the law firm Gowling-Lafleur-
Henderson LLP met with DCM and ECON Specialist to up date
the Embassy on their efforts to negotiate a follow-on lease
with the City of Detroit. Jarvis and Shore told us that
they perceive that the Administration in the City of Detroit
has decided to no longer negotiate with the DCTC for a lease
extension beyond 2020. Rather, Jarvis and Shore contend,
the City of Detroit is favoring a proposed agreement with
the owner of the Ambassador Bridge, Manuel Maroun, that
would see Mr. Maroun, through a new company, gain the lease
to operate the Detroit-Windsor Tunnel in exchange for US$30
million. Jarvis and Shore emphasized that the recent
process involving the City of Detroit and the owner of the
Ambassador Bridge has not been conducted in an "open, fair
and inclusive manner". Moreover, in their opinion, allowing
these two pieces of critical infrastructure to be controlled
by the same private entity may, from a homeland security
point of view, be imprudent. They also argued that such
consolidation should not be allowed from an antitrust
perspective.


4. (SBU) Jarvis told us that DCTC will soon be approaching
Michigan's federal and state legislators and will argue
their case to those individuals that the City of Detroit
should be compelled to negotiate DCTC's counter offer in
good faith. Jarvis and Shore noted that the efforts by Mr.
Maroun to gain operational control of the DCTC generates
significant cross-border concerns, consequently they have
also discussed this issue with senior staff in the office of
Canadian Deputy Minister Anne McLellan. They argue that
Mr. Maroun's proposed plan would not effectively reduce
congestion, will complicate efforts by the Binational Group
to expeditiously achieve a decision for a new Ontario-
Michigan crossing and will also exacerbate existing tensions
between the cities of Detroit and Windsor about tunnel
operations, revenues and ancillary benefits.


5. (U) Jarvis and Shore shared with the Embassy a series of
correspondence between the DCTC and the office of the Mayor
of Detroit on the matter of the DCTC's efforts to meet and
negotiate a counter offer to the one being offered to the
city of Detroit by Mr. Maroun. They also provided their
analysis of the putative agreement being proposed by Mr.
Maroun, and correspondence from Michigan State legislators
and Michigan State officials opposing that agreement. We
will provide copies to WHA/CAN.

Wilkins