Natural Resources Committee on Feb. 14th, 2013

[The Chair, Conservative, Leon Benoit]

Thank you, Ms. Liu.

Mr. Anderson, go ahead.

You have up to five minutes, and you'll be followed by Mr. Gravelle and Mr. Calkins.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Thank you, Mr. Chair. I wish we had more time with the witnesses today. We've heard some good testimony.

Mr. Simpson, the president of your Canadian LNG business, Doug Bloom, recently said:

We are going to need to diversify our market. Even if they foresee it wrong, and it wouldn't be the first time, growth in North America will be modest. The reality is rapid long term growth is in Asia. We need to be there.

Can you speak to us today about the importance of diversifying our markets beyond the United States?

[David Simpson]

Thank you for your question, and I'll probably have to be brief with my response.

Mr. Bloom is the president of the LNG portion of our business, which is exploring the opportunity on the west coast. I'm most familiar with the distribution company in Ontario.

But to the point of diversity, whether he was making the comment abroad or with respect to Spectra, I think that sort of pipeline business would be a new element of business stream for us. In regard to diversity, as a shareholder, I see that as very positive. With respect to the energy portfolio, whether it be within Canada, North America, or abroad, again, the diversity is alive and well. The role that gas will play both in North America and abroad is going to be significant.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Thank you.

Mr. Lalonde, earlier you talked about the fact that the tipping rate was affecting the competitiveness or commercialization of the project you're doing.

Can you explain how the tipping rate plays into this particular project? Who's paying it to whom, and how does it impact your bottom line? I want to talk about that for a minute.

[Vincent Lalonde]

Basically, the tipping rate is paid by us, the municipality, when we dispose of either garbage or organic waste.

As Mr. Costanzo stated, when we dispose of garbage and we truck it to a landfill, it's $107 a tonne. Right now, because our facility is not built, we're disposing it to a facility that composts the material. That's roughly half the tipping rate. In terms of any organic waste that we divert from garbage, or, for that matter, recyclables from garbage, the tipping rates for those materials are a lot less than for garbage. There's a savings there.

In the case of our biofuel plant, I was attempting to explain that our business case for the biofuel plant that we forwarded to P3 Canada, after quite a bit of research, was that you can't make enough money just from converting organics to fuel to pay for the capital investment and the operation of the plant. There has to be an input. In other words, when you're accepting organic waste, you have to charge people to dump at your facility. That becomes part of the business case.

The municipality is going to have a contractual relationship with a proponent that's going to build the plant. Our solid waste division, if you will, will pay the tipping fee, but then the city, because we're a partner in the whole development of the actual plant through P3, will be receiving part of the profits of the sale of the green gas.

It would further offset our—

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

I guess my confusion there is that the city is delivering the garbage to their own facility. I'm just wondering why the fee is in there. You're talking about your private partner who, I assume, needs part of that. If you're dealing with other municipalities, they will be paying you that tipping fee as well. Is that an opportunity to be able to make money on that project?

[Vincent Lalonde]

Yes. We kind of created, if you will, a separate entity to run the plant. So you're correct. The city doesn't pay itself, but it pays the partnership for the plant.

Similarly, other municipalities would basically pay our same tipping rate into the plant, but then the city would receive a portion of the profit derived from converting that fuel. We would receive a portion of profit—so the more volume we have, the more profit—from some of the tipping from other municipalities.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

If that were removed, would you be commercially viable?

[Vincent Lalonde]

No. We did the business case. To the best of our knowledge, there's no other facility certainly in North America where you could open a biofuel facility, accept free waste from anyone to dump, and then make a profit just on your fuel. The numbers don't quite work out. They work out quite well, however, when you consider the value of what it costs to dispose of organic waste.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Anderson.

We now go to Monsieur Gravelle for five minutes.

[Claude Gravelle, NDP, Nickel Belt, ON]

Thank you, Mr. Chair.

My questions are for the City of Surrey.

I'm looking at slide 6, and I can see that Canada has 12,000 of these trucks behind such countries as Pakistan, Iran, India, Myanmar, countries which, some of them, may be third world countries. What's holding us back? Why so few?

[Robert Costanzo]

I think part of the problem in Canada, and in North America in general, is the lack of faith in CNG in general. CNG technology took off in the late 1980s and the 1990s, but the technology at that time wasn't quite where it is today. The cost of natural gas back then was on par with the cost of gasoline and diesel. Because of the lower efficiencies of using that technology, we started seeing in this region, and likely across Canada and the U.S., CNG disappearing from the marketplace.

CNG didn't stop developing, however. While in North America traditionally we've paid low fees for gasoline and diesel, around the globe the technology has continued to improve. In continents like Europe, for example, there's always been a disparity in the cost of diesel and gasoline compared with CNG. The technology that we're leveraging with respect to biofuel really stems from the European model, where they looked to develop this gas because of economic reasons. They started running bus fleets, garbage fleets, and taxi fleets using CNG versus gasoline and diesel. Only now are we starting to realize the benefit of doing the same here in North America.

More importantly, though, to answer your question, we're also realizing that the technology is such a dramatic improvement over what we used to have years ago that it's becoming quite viable. Again, the cost difference is really marginal. When we look at a 20% difference over a 10-year period, with the cost of gas being less than half the cost of diesel, that's quite a significant change from what we used to have 20 years ago.

[Claude Gravelle, NDP, Nickel Belt, ON]

Thank you.

Your slide 8 says that natural gas vehicles emit 23% less carbon emissions and 90% less particulates compared to diesel trucks

We've heard that liquefied natural gas vehicles have an issue with fuel evaporating in storage tanks in the vehicles after a few days before it can be combusted. When we hear that LNG vehicles have lower GHG emissions, we're usually talking just about the combustion of the fuel. But fuel is also lost due to evaporation and that loss is often not calculated by analysts comparing conventional gas to LNG.

Have you experienced any of these issues? Have there been any advancements to address this problem, and what is needed for infrastructure to make sure LNG is used before it evaporates?

[Robert Costanzo]

To answer your question from an operator's perspective, these vehicles are operated by a city contractor. They have not experienced any such issues.

To clarify, we're using compressed natural gas and not liquefied natural gas, so some of the problems you are asking about are with respect to LNG and not CNG.

I can't answer your question relative to LNG as we don't have that experience here at the City of Surrey. We don't have LNG-operated vehicles.

[Claude Gravelle, NDP, Nickel Belt, ON]

All right. Thank you.

Slide 9 indicates, “Pilot results: 50% drop in garbage tonnage”. What kind of savings is that for the taxpayers, in real dollars? How much does a taxpayer save?

[Robert Costanzo]

I'll refer you to slide 14. If you look at the fourth bullet, we're estimating a cost savings of approximately $600,000 a year.

Actually, at this time it's going to be slightly higher than that given that it's going to a facility that's basically taking the material and composting it into a mulch or nutrient-rich compost. Eventually the facility we establish will have a higher tipping rate than the one we're presently taking it to has, but the rate will be lower than the current tipping rate for garbage.

If the garbage tipping rate remains at $107 per tonne, by the time the facility is established we'll see at least $600,000 a year in savings. If it increases to $108 per tonne, there will be significantly more savings for the taxpayer.

[Claude Gravelle, NDP, Nickel Belt, ON]

Are you taking into account the savings at the municipal dump? The more you recycle and the more you use for the natural gas, the longer the municipal dump is going to last. Have you taken those savings into consideration?

[Vincent Lalonde]

No, this is excluding those kinds of savings and without an analysis of how long the existing facilities may continue to operate. That is definitely an issue that could be of importance, especially in other regions.

[The Chair, Conservative, Leon Benoit]

Thank you.

[Robert Costanzo]

I should also clarify—

[The Chair, Conservative, Leon Benoit]

Keep it very brief.

[Robert Costanzo]

The cost of $107 a tonne is a regional cost. The region manages all the waste garbage transfer stations and the landfill. It is the city's responsibility to collect the waste. Our savings are entirely on our waste collection system, which is on the backs of the taxpayers.

The regional system is also on the backs of the taxpayers, but it's dispersed among 22 municipalities versus waste collection in Surrey, which is dispersed just through our own customer base.

[The Chair, Conservative, Leon Benoit]

Thank you.

Thank you, Mr. Gravelle.

Mr. Calkins, go ahead please, for one question.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

Thank you, Mr. Chair.

I have a question for Mr. Bradley. Unfortunately, it has three parts, but that's okay.

Mr. Bradley, as an Albertan I struggle with the issue, and you're probably aware of some of the issues surrounding the grid changes there. What can you tell this committee about innovation and technological advancements, looking at alternate current versus direct current transmission? What are some of the issues we have there?

What are some of the innovations that need to happen to go from localized generation to distributed generation?

Also, in the photovoltaic area, what can we expect in innovations for battery storage, and where is that part of the industry moving to?

[Francis Bradley]

It's a three-part question, and I have just a little bit of time.

Innovation in DC-AC is certainly something companies are looking at. Of course, DC transmission is something we're likely going to see an increased use of simply because of the reduction in line losses and other efficiencies you can achieve.

Moving to distributed generation, that's really one of the central issues with respect to smart grid, ensuring we have the technology in place to be able to fully maximize the ability to move into a world of distributed generation. It's absolutely central to where we want to get to.

I had mentioned that incubator project, that incubator initiative in the tech fund of SDTC. A number of the companies that we're pitching and individuals who we're pitching were specifically pitching things that related to how we can in fact increase, and maximize, and control that.

Finally, on the final part of your question with respect to photovoltaics and storage, storage is going to be the Holy Grail for electricity renewables simply because when we look at both photovoltaics and wind, the challenge for both of those technologies is they are intermittent and they are non-dispatchable. The only way you can really maximize them is either you back them up, and as was mentioned previously, there's an increase certainly of natural gas that's being used for those purposes, but if you can find technology to back up through storage, it certainly increases that.

We have seen some innovation that has taken place. Previously before this committee I mentioned the Ramea project, which is a pilot project in Newfoundland where they're looking at twinning wind with hydrogen production and using that really as the storage medium. I think there's going to be a lot more research that's going to be done with respect to storage because once we are able to crack that nut, it gives us the ability to really maximize those intermittent renewables.