Nova Scotia will spend more than $32 million over the next two years to support a new ferry service between Yarmouth and Maine that will transport passengers using a ship owned by the U.S. navy.

Transportation Minister Geoff MacLellan and his deputy minister, Paul LaFleche, announced the new deal Thursday alongside Bay Ferries Ltd. president Mark MacDonald.

According to the contract between the province and Bay Ferries, the province will advance the company $6.4 million before the end of March. The province will also reimburse the company for up to $750,000 in startup costs.

"We've been committed because this service is important to the region," MacLellan said.

The ferry was built in 2007 and is owned by the U.S. navy's Military Sealift Command. It's been chartered by Bay Ferries for two operation seasons, with options for two more.

The Bay Ferries contract with the province is for 10 years.

Taking possession within 1 week

The new ferry will be renamed The CAT and will travel on a daily schedule between Yarmouth and Portland, Maine.

Bay Ferries will take possession of the ferry on or just before April 1. Before it's put into service, it will head to a shipyard in South Carolina to prepare it for service.

According to a government statement, the ferry service is scheduled to begin on June 15 and run until Sept. 30.

The contract was signed Thursday morning. Going forward, Bay Ferries will only pay for full charter fees 140 days a year, and will undergo annual budget and ridership reviews with the province.

The CAT came back

Bay Ferries takes over the route from Nova Star Cruises, which ran up huge losses in the two years it ran the service.

The company received $39.5 million in subsidies from Nova Scotia taxpayers during that time. The ship had about 110,000 passengers, short of its two-year goal of 180,000.

Bay Ferries is low-balling expectations about ridership and revenue for this coming season and said it won't expect more than 60,000 passengers this year.

"The hope of course is that the business gains some traction over the next couple of years and we start to move the revenue line," MacDonald said.

It's not the first time in the captain's chair for Bay Ferries. In 2010, the previous New Democratic government stopped funding the company's high-speed Yarmouth service, also known as The CAT.

The company had wanted at least $6 million to keep that ferry going between Yarmouth, Bar Harbor and Portland, but was ultimately denied.

Bay Ferries Ltd. CEO Mark MacDonald answers questions at the press conference regarding the new Yarmouth to Maine ferry. (CBC)

No transport trucks allowed

The biggest difference between the new CAT and the old is the new vessel will not take large transport trucks.

"Very few vessels fit the bill," MacDonald told reporters, adding that another more conventional ship was in the running. It was ruled out in December, he said.

A major consideration was concerns expressed by the City of Portland, which didn't want more trucks on its streets. Although the new ship has the theoretical capacity to hold about 25 trucks, MacDonald says "the issue was taken off the table by Portland at a very early stage."

The trucking industry was kept in the dark about this decision until now, MacDonald says, because Bay Ferries was in confidential negotiations with Portland.

Some alterations will be made to the Yarmouth terminal, namely the construction of a new car-loading ramp.

In comparison to the Nova Star's international crew, core positions on The CAT will be manned by Americans due to the terms of the charter.

Read the presentation about the new ferry.