Transport Committee on March 13th, 2012
Evidence of meeting #27 for Transport, Infrastructure and Communities in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was gas.
A recording is available from Parliament.
On the agenda
The Chair Merv Tweed
I call the meeting to order.
Good morning, everyone. Welcome to the Standing Committee on Transport, Infrastructure and Communities. This is meeting number 27. The orders of the day are, pursuant to Standing Order 108(2), the study of innovative transportation technologies.
Joining us today from the Canadian Trucking Alliance is Mr. David Bradley, the president and chief executive officer; Ron Lennox, the vice-president of trade and security; and Geoffrey Wood, the vice-president of operations and safety. From Groupe Robert, we have Claude Robert, president and chief executive officer.
We welcome you.
I think everybody has been told about the process in committee. I'm not sure if either one wants to take the lead on it, but maybe I will start with Mr. Bradley. Then we will move to Mr. Robert, and then open it up for committee questions.
David Bradley President and Chief Executive Officer, Canadian Trucking Alliance
Thank you very much, Mr. Chair and members of the committee. It's our pleasure to be here today. I commend you for the topic. This is something we've wanted to be able to address parliamentarians on for some time.
First I'll give you a little background on the Canadian Trucking Alliance. We're a federation of the provincial trucking associations in Canada, representing over 4,500 trucking companies from across the country, in all regions, all sizes, and all commodity specializations. We, like the industry, are basically an organization of small family-owned establishments. Almost 40% of our members have fewer than 10 trucks.
Certainly technology is a driving force in our industry. We're in the midst of a cultural change. Our industry is now about 20 years into deregulation. If you look at any industrial textbooks, we're now reaching the point where we're becoming a much more sophisticated business. We're still very entrepreneurial, but technology is helping to drive that cultural change or to facilitate the change that is already under way.
Our members hold some pretty strong core values. One is that competition should be based on service and price, recognizing that price includes the true cost of compliance by everyone. We have been told by governments ever since economic deregulation that they were going to regulate on the safety front and that they were going to be sure to enforce the safety rules. We now have technologies that enable governments to do that more than ever before, and we urge governments to adopt those practices so that we're all competing on a level playing field.
Second, in terms of the environment, and specifically with regard to reducing greenhouse gas emissions, the economic goals of our sector are aligned with society's goals more than they have ever been in our industry's history. Technology exists today to help make the industry safer, to help level the playing field, to make the air we breathe cleaner, and to reduce the risk of climate change. The goal has to be to take these technologies that already exist today and accelerate their penetration into the marketplace. We believe this can be accomplished through a combination of regulation and investment incentives.
There are barriers we need to overcome. Sometimes we need regulation to make it clear what the technologies are, what they are supposed to do—this is an industry that has been sold snake oil in the past—and that the technology will do what it says it will do. Sometimes we need to get everybody on board. Therefore, regulation is unavoidable.
In our industry there are a couple of examples right now of emerging technologies that we would like to see the Government of Canada pursue on the regulatory front. For one thing, we believe electronic on-board recorders should be universally mandated. The public would call these black boxes. They are used to monitor driver compliance with the hours-of-service regulations, which are arguably the most important safety regulations the Government of Canada has with respect to trucking. We believe that all trucks for which the driver is currently required to have a paper logbook should, in this day and age, be required to have an electronic on-board recorder.
Similarly, we now have something called electronic stability control, which helps to prevent rollovers of trucks. It basically takes the decisions away from the driver, or at least accelerates the decision-making for the driver. The United States will be moving to mandate this technology. We have supported this technology for years. It's cheap insurance.
There are other barriers. We are an industry that crosses borders, and not just the Canada-U.S. border. You will see in the documents we have provided to you that we look to opportunities for harmonization with the U.S., although “compatibility” is probably a better word; harmonization for the sake of harmonization is not always a good thing. As well, the provinces basically have responsibility for, or have been delegated, the administration of extraprovincial regulations. That can also make it difficult in terms of trying to come up with national standards.
However, we also need to stimulate investment in this country. Canadian business on the whole is undercapitalized compared to the United States.
In particular, trucking is a very undercapitalized business. Not only with respect to other industries outside of transportation, but even compared to the railways, for example, we're very undercapitalized. There are three or four trucking companies that are publicly traded; the rest are dependent upon debt financing, and that, of course, has become more difficult in recent years.
Also, for certain things it's virtually impossible to get financing. For example, if you want to do retrofits of environmental devices on truck trailers, which can certainly have a significant impact in terms of improving GHG reduction, it's virtually impossible to get financing for that retrofit. If you buy a new trailer or a new tractor, you can get financing for that, but if you want a retrofit, you can't.
In some areas we believe there's a role to be played by government in helping to stimulate this investment. We are in the age of the smog-free truck in Canada now. By law, as of 2007, all new tractors and engines produced in North America have basically zero smog emissions. They've eliminated NOx and particulate matter emissions.
The problem is that the fleet is aging, the capital is not there, and the industry is not growing particularly. The question I think you have ask yourselves is this: do we want to wait for 30 years for that to have an impact and eventually replace the fleet, or is there something that can be done now to accelerate that penetration? I look to Quebec as an example, where the new smog-free trucks have a 60% straight-line depreciation rate, which is really helpful.
We're soon to be in the age of regulation of GHGs from heavy truck engines. There is a regulation being developed right now by Environment Canada. I won't get into all of the details, but it's different from the smog regulation in that it doesn't say, “This shall be the GHG-compliant truck”, and that's something that we think should be part of the regulation so that people know what to buy.
Again, there should be credits, accelerated capital cost allowances, for those GHG-compliant trucks. Just about every other industry gets super-acceleration for investment in environmentally friendly technology.
The other thing is that the regulation only covers new tractors. It doesn't cover trailers, nor does it cover existing equipment, so again, in terms of its relative impact, it will take a long time before we start to see the GHG benefit, whereas there are things now, some of them actually manufactured in Canada, and there's at least the prospect for a fledgling industry to develop. When the Canadian Transportation Equipment Association comes before you, I think they'll be able to talk to you about that a bit more. In any case, we need to create a market here.
We think that the regulation for a GHG truck should be accompanied by a program of voluntary measures to stimulate a retrofit of the aerodynamic devices: the wide-base single tires and the trailer side skirts and those sorts of things that have a proven impact in terms of reducing GHG.
LNG tractors and engines are also showing great potential, particularly for those trucks that operate on regular routes where you can have a distribution system set up at either end; however, the reality of it—and this has been borne out by an industry-government paper on the subject—is that those trucks cost twice as much as conventional trucks, so again, if you want to get into that business, there is no way that you're going to be able to make anything other than the most modest of penetration without introducing the kinds of measures that we see in other industries.
Again, Quebec is taking the lead here. They're providing 80% straight-line CCA rates for investment in LNG tractors. That's something we're going to have to think about if we want to grow this segment. Again, there's a Canadian technology there. It works, and there's no doubt it reduces greenhouse gas emissions, but if we want to get it into the marketplace, we're going to have to make the price more attractive. Monsieur Robert will be able to speak to that in much more detail than I can.
We've provided you with a one-pager that we hope tells you our whole story, and those were my comments in a nutshell.
We'll be happy to answer any questions you might have, but I think Mr. Robert has some comments.
The Chair Merv Tweed
Thank you very much.
Go ahead, Mr. Robert, please.
Claude Robert President and Chief Executive Officer, Groupe Robert
First, thank you very much for inviting me. I'm very honoured.
Groupe Robert is a family-owned company. I will give you some numbers, very briefly. About 2,600 people work for the company. We are in almost every type of trucking as solution providers, including warehousing and everything you could imagine that goes with it. Many of you have seen our yellow and black trucks on the road, so I'm sure you're familiar with us.
Today I would like to leave you a couple of messages. I believe that productivity comes from two things. It comes from changing things around, and it comes from working with—
The Chair Merv Tweed
I'm sorry; if I may interrupt you, we're having some challenges with interpretation. Is it that you're just not picking it up?
Isabelle Morin Notre-Dame-de-Grâce—Lachine, QC
You are too far away from the microphone.
The Chair Merv Tweed
Sorry about that.
President and Chief Executive Officer, Groupe Robert
Certainly I could talk all day, but I know I have 10 minutes. I will not talk about Transport Robert, but about the preoccupation of the industry.
Mr. Bradley has touched on many issues. One of the things that concerns me as an individual who has been in the trucking industry for 45 years is that if we want to make things more productive tomorrow, we need to create changes. If we leave things as they are today, nothing is going to happen, ever. In our industry, we need to change. We need to change; we need to go with new technologies to take us to 2020, 2030.
We keep our trailers 20 years, which means that if I make a decision today on equipment, that trailer's going to be on the road until 2030. People do not realize that the decisions we make are long-term decisions. It's not a car that you trade in every three years. We need to go with new technology, and these technologies come from Europe and from all around the world.
We have the privilege in Canada to have a corporation called Westport, which is manufacturing a new injector technology that uses natural gas. If there is a commodity that is abundant in Canada and abundant in the United States, it is natural gas. I have left six packages for you that are very detailed about the technology of LNG. I have offered to give the clerk, Alexandre, all the information electronically for your laptops so that you can understand in detail.
This is very peculiar in terms of technology, but the beauty of it is that you automatically use about 4% to 5% fuel, and the rest, 95%, is natural gas. This natural gas has to be liquefied, and the liquefaction of the gas means that it is carried on the vehicles and into our yards at minus 260 degrees. In order to be able to be able to cope with this extreme temperature and the characteristics of the LNG, we need to make major investments.
In our industry, if you put a tank in your yard to get LNG, well, you pay for it. If the same organization that manufactures the tank puts a tank in development for new technology, they will get grants and support or additional amortization or accelerated amortization to do the investment. In our case, we don't get any of that. Only in Quebec do we get a small portion right now, and I'm here to pledge that we have to sensitize the people of the country to the need to get together and ask where our future is.
Even though we export—well, we try as, you know. I'm not going to comment on the situation in the west with the United States, which you know that better than I, but, as you know, in the east we import all our basic petroleum. We do have natural gas reserves, and we could heat our houses, fuel our trucks, and eventually do a lot of other things.
I'm future-oriented. I know I'm going to die soon, although I don't know when, but one thing is certain: the gas of the future is natural gas. The alternative gas is will come about through natural gas. Look at the formula of natural gas: CH4. What is important? It's the H4. What is the “H” for? It's hydrogen. The trucks of the future, the cars of the future, are going to be using hydrogen. Where is this hydrogen going to come from? Certainly not from water, because water's only H20; it's going to come from CH4.
Whether people like it or not, they should look ahead. I feel so bad sometimes when I discuss with people who do not have that vision. I swear to God, I was in a shop in Phoenix and saw that people were running engines on hydrogen right now, using methane to produce the hydrogen. It does exist today—not tomorrow, but today—so what are we going to do to bring Canada up to par and into that environment of tomorrow? I thank the people who invited me, Monsieur Coderre and others, but this is the message I'd like to bring over to you.
As well, we have a pile of technology coming from Europe, but through Transport Canada we decided to shut the door on these technologies. Why did we do that? The answer is that a deal we signed a long time ago with the Americans says that all the trucks should come from the United States.
Well, this is not true anymore. Even the Americans are importing the Hino and other trucks of the world that are made by Toyota. They come Japan. It's fine if they come via the United States to Canada, but in Canada we cannot stand up and say that we could have a partnership with Europe. All the advanced vehicles are made in Europe. In Europe, they adopt technology that is recognized worldwide, whereas here in North America we use the EPA standard.
Earlier I showed some of you a document I picked up yesterday. The title is “EPA’s cost analysis of 2004-2010 emissions mandates questioned”. A group of people created an organization, EPA, under the government's support, and today it's costing us an average of $20,000 per truck to support EPA. We've lost two miles a gallon on fuel economy. In our case, that represents 25% of our consumption.
People are still supporting EPA standards without question, whereas we have standards that we could develop, working together with Europeans, that would be worthwhile and that are much more efficient. The beauty of it is that now the Europeans are buying into Westport's natural gas technology to bring it to Europe; we in Canada use the Westport technology, but through EPA, so for 4% and 5% of diesel into our engines, we respect EPA and we pay $20,000 more per truck. That is what we are and this is where we are.
I certainly wish I could speak with you for hours, because I know the details and everything behind this. These were some of the things I wanted to share so that you'd be fully aware that the world doesn't stop here. The world is far ahead of us, and we need to have an open horizon to look at things differently. If we want to change, let's look for the change. I keep saying that if you keep looking into your mirror, you only look at the past, because what is behind you is behind you—it's the past. You need to look through the windshield to look ahead, to look in front. That's my philosophy of life and that's what I wanted to share.
The Chair Merv Tweed
Thank you very much.
Go ahead, Ms. Chow.
Olivia Chow Trinity—Spadina, ON
I have a question for Mr. Bradley.
When the vice-president of engineering of the National Research Council was with us a few weeks ago, he basically confirmed that the studies they did, and a lot of European studies, determined that side guards—not side skirts, and he was very clear about that—resulted in a reduction of greenhouse gas emissions and fuel consumption of anywhere from 5% to 20%.
You and I have an ongoing discussion about whether it's side guards or side skirts, but one way or another, it's a piece of plastic among all the other plastic that you attach to a truck that would result in $561 million of savings for the entire trucking industry if we calculate it using just a 5% reduction in fuel.
If that's the case, whether you talk about guards or skirts or whatever, because the payback period is anywhere from two years to three years at most, it really makes a lot of sense to invest in it. What you're saying is that a lot of the owners just don't have a lot of available cash, and there's no government program to give that extra push.
Last year in the immigration committee I suggested a repayable loan program under which you'd lend money to immigrants, and once they were established, they would pay it back. Now the government is, in fact, starting that repayable loan program.
If the greenhouse gas emissions are going to be reduced and fuel savings are going to make money eventually for the trucking industry, and if the government had a program for repayable loans or repayable grants that would have to be paid back within five or 10 years, because you will capture that dollar amount, would that assist the industry in installing any number of these devices? Could we really reduce the greenhouse gas emissions of the trucks and save money in the meantime?
President and Chief Executive Officer, Canadian Trucking Alliance
We'll set aside whether we're talking about side guards or side skirts. I'm talking about side skirts, and there's no question that side skirts—you'll see them in our diagrams—do improve fuel economy.
Perhaps somebody has made a side skirt that can also be a guard. We're not aware of them here in Canada, although we've had some discussions about what they may or may not be doing in Europe. If someone could develop and bring to market here something that does both, that would be great.
However, there are a couple of other aspects. You're seeing more and more companies now investing in side-skirt technology when they're buying new trailers. As Claude said, a trailer lasts 20 years, so the turnover rate is slow, but more and more companies, when they buy new trailers now—and you'll see them out on the highways—have those side skirts.
We have to distinguish among the types of trailers and be clear about where the fuel economy can happen. It depends essentially on the type of van and on the kind of trailer. You can see in the diagram that there is a van type. There are all kinds—tank trailers, flat deck trailers, and those sorts of things—but the fuel economy savings for a van trailer operating at highway speeds are not in dispute. They have an impact.
What we would like to see and what we've been promoting for the last few years, under a program called enviroTruck, would be options for the industry. If you're operating a van trailer, there are certain things you can do; if you're operating a tank trailer, there are certain things you can do. One option would be a side skirt. You could retrofit your existing equipment to get the bang for the buck, in terms of the environment, more quickly.
One of the principal ways we thought that could be done was through a repayable grant. Sure, we'd love to have an outright grant, and there are lots of success stories in that connection. There used to be a program for auxiliary power units that had a real payback to government and to industry. It involved a very small investment on the part of government and a significant investment on the part of industry.
However, given the current times, we recognize that may be difficult, so a repayable grant system would help to create the capital that is not there right now.
Olivia Chow Trinity—Spadina, ON
If that is the case, can you explain a bit more about Canada and the U.S. developing harmonized fuel efficiency regulations in 2014 if new tractors come online? Does that mean that trucks going to the U.S. have to be mandated to reduce the greenhouse gas emissions?
By the way, Coca-Cola's big trucks have side guards and not skirts. Anyway, through the ongoing discussion—
President and Chief Executive Officer, Canadian Trucking Alliance
The pop trucks, again, operate within city centres. That's why you see side guards on those. Those side guards, I can guarantee you, are not creating a fuel economy benefit in that particular case, because they're not travelling at highway speeds. They're not highway vehicles. That's why they have side guards; it's because they tend to operate more in urban areas.
In terms of what's happening right now both in Canada and the United States, the U.S. announced last May that it was going to introduce regulations for fuel economy standards/GHG emission reductions for new heavy trucks. Canada, at the same time, said that it was going to mirror those regulations, and that is in the process right now.
I think we obviously want to be as compatible as we can, but I'm not sure that just adopting the U.S. regulation is necessarily the way to go. In fact, we've proposed to Environment Canada some areas where we have to make sure, because Canada has a different weights and dimensions regime, that the base vehicles that they use for measurement don't put the Canadian industry behind the eight ball.
Also, there were some areas in which we felt we can and should go further in Canada, and those things are being worked out right now. I don't know whether that will come to pass or not. The regulation is somewhat different from the smog regulation. The smog regulation said that by such-and-such a year, the truck manufacturers in North America will eliminate the emissions of particulate matter and NOx, two major precursors to smog. They basically said, “We don't care how you do it, but you're going to do it.”
In this case, it's not really as prescriptive as that. What the regulations, as we understand it, will say to manufacturers is that a portion of their sales have to obtain a certain reduction in greenhouse gas emissions. They will either be given a credit, if there's a market for it, or perhaps there will be some penalties or lack of credit if they don't get there.
There's nothing that compels the customer to buy what we would call a GHG-compliant truck. If somebody walks in and wants to buy the same big old thing—I won't use the brand name, because they take heat for it, but they also produce good trucks—with way too much horsepower and all the bells and whistles on it, they're going to sell them that truck. It's going to take a long time for this regulation to have the kind of effect on GHG that they think it will have, but it is a step in the right direction. What we've been arguing is that it should be supplemented by a program of complementary measures that would allow us to retrofit existing equipment and include trailers. The EPA has said that they are considering regulating GHG from trailers because it's all part of the aerodynamic drag, and you have to look at the whole vehicle. They're considering it by maybe 2018.
The Chair Merv Tweed
I have to interrupt you there, Mr. Bradley. We're way over the time limit.
I have to go to Mr. Coderre.
Denis Coderre Bourassa, QC
Thank you very much, gentlemen.
Mr. Robert, obviously, I stand behind your rallying cry. We are indeed facing certain realities. Both you and Mr. Bradley spoke to that complexity, and I realize this isn't just a Transport Canada issue. It even involves the Department of Foreign Affairs and International Trade and Environment Canada.
Do we need to define a new trucking policy in Canada? From everything we have learned from you and Mr. Bradley today, it is clear that the complex and inconsistent regulatory regime is hurting the industry and can have a direct impact on environmental issues.
I am especially disappointed that we cannot diversify the technology as far as Europe is concerned. Is there a Canadian or Quebec technology that would allow us to be competitive? If not, why wouldn't the government sign an agreement with Europe to give us access to that technology?