Evidence of meeting #33 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 bus.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

  • David Pascoe  Vice-President of Corporate Engineering, The Americas, Global Headquarters, Magna International Inc.
  • Russell Davies  Manager, Transit Fleet, Calgary Transit

8:50 a.m.

Conservative

The Chair Merv Tweed

Good morning everyone. Welcome to the Standing Committee on Transport, Infrastructure and Communities. This is meeting number 33. Our orders of the day are pursuant to Standing Order 108(2), a study of innovative transportation technologies.

Joining us today in the witness chair from Magna International Incorporated is David Pascoe, vice-president of corporate engineering, the Americas, global headquarters. We also have from Calgary Transit, Russell Davies, manager of transit fleet.

I know that you've been given a little bit of direction about how the committee will proceed. You'll make brief presentations, and then we will move to committee questions. I'm not sure who wants start, but I'll open the floor.

Mr. Pascoe, go ahead, please.

8:50 a.m.

David Pascoe Vice-President of Corporate Engineering, The Americas, Global Headquarters, Magna International Inc.

Thank you, Mr. Tweed.

I want to start with the auto industry's biggest challenge, and that is energy use. Right now, the issue is around having a reasonably cost-effective, portable fuel. It's an issue not only with transportation, but in other markets, and it affects the economies of countries globally. The issue is the price of oil. When economies are not really strong, as they grow, the demand for oil goes up. We have issues now with dipping economies into a recession. In my opinion, that's going to be an issue for quite a while to come.

How do we deal with that? Right now, the CAFE regulations from Canada and the U.S. are going to require us, between now and 2025, to use half the fuel to go 100 kilometres. That's really quite an enormous challenge.

If you look, for example, at the Honda Fit of today, which is their smallest car, it's slightly better than today's number. But for 2025 or even 2016, it's far away from what's required. What does that mean for the car companies? It means that companies that may be selling Cadillacs, Buicks, or large-sized sedans, such as Chrysler, Ford, and BMW are going to have to have fuel economy that is significantly better than a Honda Fit or a Toyota Corolla across the board on average.

So how do we get there? Obviously we're looking at things like electric cars, hybridization, and so on. One of our customers who I was speaking to feels that between now and 2025 there's going to be a $3,000 to $8,000 cost per car. What does that mean for the industry? It means that the price of cars is going to go up significantly to the extent that we'll lose a significant number of our customer base who are going to move off of vehicles. It's going to affect top line revenue and bottom line profit for both the auto companies and the supply base. It's going to be an issue.

Obviously we'll do our best to get there. Electric vehicles and hybrids won't be the whole answer. I'm here to recommend that we think more and talk more about natural gas. Natural gas, in the words of Boone Pickens, is cheaper, is cleaner, is plentiful, and it is ours. That applies to Canada, as well as to the U.S.

We're all awash in natural gas because of new means of extraction. We have over three times the known reserves that we had in the past. We've gone up to 140 years of known reserves. Prices are dropping, they have been dropping, and are expected to stay down for the medium and long term. It doesn't require investments in refineries. It's a big opportunity for us. We've all talked about the energy crisis. We've all talked about the price of gasoline. If we said that we had a fuel that cost 10% or 20% less than gasoline, and that you can use the same vehicle-type infrastructure as people are used to with piston engines, then that would be great. We could at least find a bridge to get us to the future, when other technologies can take over.

In 2011, natural gas was 69 cents per litre equivalent to gasoline at the pump. If you pumped it at home, it was 25 cents a litre. That's probably high for a number of reasons, such as the low volume of vehicles that we have here, and the low number of filling stations.

At this time, it's the only real replacement fuel that can be used more broadly across the board. It has the potential to be all that we hope. It provides emission reductions because of the nature of the molecule, which has less carbon. It is cheap transportation energy with enormous reserves, and so on.

In Pakistan, they have 2.3 million natural gas vehicles today and over 3,000 filling stations. In Argentina, there are 1.8 million vehicles that are run by natural gas today and 1,850 filling stations. In Iran, there are 1.7 million natural gas vehicles, and they're an oil producer. They have over 1,000 filling stations. There are a lot of countries that have a million or more. Contrasting with Canada, we have 12,000 vehicles and 80 filling stations across the country.

From 2000 to 2010 we had 30% growth in natural gas vehicles globally, but we had a reduction in North America. So I think we're currently running against the opportunity.

What do we need? We need a network of filling stations, and there are really two things we can do. One is to encourage filling stations at corner gas station centres, possibly by policy. The other is to somehow incentivize the use of home refuelling stations. There is a natural gas infrastructure in place today that feeds many suburban homes with natural gas. A line to the garage, or whatever, for overnight filling would make sense for a lot of people until there's a broader infrastructure in place. We need to build this infrastructure quickly to avoid constantly hitting our heads on the price of oil-based fuels every time the global economy expands. That's my first message.

Second, the call is for technology discussion on the potential for new types of vehicles. We've done studies on electric vehicles. I'm sure a lot of you have heard this before, but in an electric car the battery costs more than the rest of the car. So to make a payback business case for the consumer is really difficult. It takes a lot of fuel savings to pay for that battery.

But as you move downscale to a plug-in hybrid, a strong hybrid, a mild hybrid, a micro-hybrid, and the battery gets smaller, the payback period gets shorter and becomes reasonable. So with a hybrid vehicle you can maybe have a four-year payback. With a micro-hybrid it could be a two- or three-year payback. That starts to make sense for the consumer. If you have a 12- or 15-year payback, the car is used up before you get your money back on your investment in extra technology like the battery.

Looking at that and an alternate industry called electric bikes, and going to small batteries, there is room for classes of vehicles that operate between bicycles, pedelecs, and scooters; and cars called “enclosed three-wheelers” or “three-wheeled pedelecs” that could be more practical for use on the road.

Currently there is no legislation for these types of vehicles, but I think it's going to come. So we need some clarity on legislation for these three-wheelers. My preference would be that they operate as pedelecs. The same way a bicycle can be a three-wheeled bicycle, any bike could be a three-wheeled e-bike.

If you have this type of vehicle you can operate it in at least three seasons. It's low cost. The battery is only a few hundred dollars. You would have reduced congestion and no emissions. If it's a pedelec version it's good for your health. So for small towns, and that sort of thing, this type of vehicle can make a lot of sense.

Today we're just on the cusp of it, with things like the Segway and the T3 Motion, which is the three-wheeled vehicle you see security people using. But if you expand it to something a little bigger, with the battery you could even have a heated vehicle so it's comfortable. We all know we have cold weather from time to time in Canada. If you're doing a small commute, it's a nice, comfortable way to go.

I think there's room for this type of vehicle. We should build legislation around it now, because there are plans in place to bring these vehicles into play globally, and hopefully in Canada.

9 a.m.

Conservative

The Chair Merv Tweed

Mr. Davies.

9 a.m.

Russell Davies Manager, Transit Fleet, Calgary Transit

Thank you, Mr. Chair.

By way of background, Calgary Transit is a division of the City of Calgary. We currently operate just over 1,000 buses in our fleet at the moment, all of which are powered by diesel engines. Our fleet varies in age from some brand new buses that we've just taken delivery of to some that are probably over 25 years old. A fleet of that size at the moment currently uses about 26 million litres of fuel per year to deliver service.

One of the issues we obviously hit up against at the moment is the increasing cost of diesel fuel, plus the volatility of the fuel market as well. This is to such a degree that with our current usage, a small increase of around about 4¢ per litre of fuel adjusts our budget by more than $1 million per year. That was our first introduction to where our energy problem was in terms of managing our fleet.

On a more social level we were also experiencing problems with emissions from our older buses, and noise pollution from buses running through residential areas and in the downtown area as well, primarily associated with our older fleet.

Just so everybody's aware, in terms of a bus fleet, buses typically sit and idle probably 50% of their duty cycle. So they're only moving half the time; the rest of the time they're just sitting and idling.

These kinds of issues associated with the environment and the noise, as well as the cost issues we were seeing, led us to investigate some alternative technologies. We looked primarily in two areas, hybrid buses and CNG buses.

Our investigation looked at what we first experienced over 20 years ago with CNG, which was marginal success. The buses themselves worked particularly well. The issue we had with CNG 20 years ago was more on the infrastructure side as well as with the fuel delivery system. It wasn't quick enough to be able to allow us to operate a fleet of any significant size, and it was a little unreliable as well in terms of a fleet delivery system. That system ended about 15 years ago, and we haven't really looked again since. But the market and the current environmental pressures we're under have made us look elsewhere.

We did look at a number of CNG installations across North America. We looked at L.A., Atlanta, Boston, and New York. We did do some phone interviews with other agencies. Hamilton was a major one, obviously, that we talked to, as well as some of the other agencies throughout the U.S. It looked more and more as though CNG was the direction in which we needed to go.

In our direct comparisons with an electric hybrid vehicle, there were a number of issues we hit up against. The capital costs associated with a hybrid bus is about 50% premium, so just for ballpark numbers, a regular size, 40-foot bus is usually around the $400,000 mark. To make that a hybrid bus, it's an extra $200,000 premium on top.

We did speak to some of the major hybrid manufacturers, BAE as well as Allison, and we did some extensive life cycle costing studies with both of those agencies. The return on investment for those vehicles was in the twelve-year period. With a bus only typically having a life cycle of around 12 to 15 years it didn't make any sense at all to pursue the hybrid option, so the CNG option was the one that came to the forefront, really.

We held a number of discussions with major gas suppliers in Calgary to look at various options. There was a lot of interest from their part as well as on our part, primarily looking at things like long-term fixed price fuel contracts. Obviously the price of the fuel was significantly less and they would work with us on that. There was even some talk about possibly contributing towards some of the infrastructure costs, which was going to be the major driver, or the major barrier I guess for us, to implementing CNG.

As our study carried through, CNG looked to be the direction we wanted to go in. They did hit a barrier in terms of what the minimum size was that we needed to look at in terms of fleet size. It looked as though we needed to get about 150 buses before we could get any cost benefits from the capital costs of the infrastructure as well as the capital costs associated with the vehicle.

This wouldn't necessarily be a simple solution for a small agency, but it's certainly a viable option for an agency the size of the city of Calgary, or city of Ottawa, that kind of size.

So a proposed solution originally was to modify one of our existing facilities to make it CNG-compliant and procure 200 CNG buses. We were fortunate that since there were a number of projects aligning at the same time for building rehabilitation as well as fleet replacement, it made sense at the time.

We were looking to get longer term fuel price stability. There were significant improvements, in terms of reliability, that we were expecting to get. Current diesel buses, so you're aware, have a significant amount of equipment on the post-exhaust processing side to reduce emissions. None of that is actually necessary with a CNG bus, because it's the cleanest-burning carbon fuel that we have today.

In addition to reducing emissions, the CNG engine is considerably quieter than the diesel engine. The numbers we've seen from Cummins Westport indicate that the CNG engine is around 10 times quieter than a diesel engine, so you can imagine that if a bus is sitting and idling, which is the main issue, I guess that bus will be quieter sitting there. The road noise, when it's moving, would be pretty much identical, but as the bus is sitting and idling, that quiet time becomes a significant environmental issue in terms of social impacts in some of the more residential and built-up areas.

Obviously, as David mentioned earlier on, gas supply is plentiful. We've certainly heard there's fuel availability for over 100 years based on current usage, and that's without finding any more gas. So in terms of availability of the fuel, I don't think it's an issue. It's local fuel as well, so there were benefits that we were seeing everywhere. This is not to say that we didn't hit any obstacles. There was public perception about safety. There were concerns about whether or not CNG vehicles can operate in cold weather. There was concern about how many vehicle suppliers were actually available, from a bus supplier perspective. So there were some legitimate concerns.

To try to address some of those concerns, we revised our plan slightly. We revised and expanded it, so we're no longer doing a small conversion of a facility plus 200 buses. We've now decided to progress and build a brand new bus maintenance and storage facility capable of supporting 400 buses. That will be a CNG-compliant facility, so we will be transitioning to 400 CNG buses out of that facility as well.

We're currently with P3 Canada to develop a procurement model for the facility alone. We're hoping for an opening date of somewhere around 2015. That's obviously a little far in the distance, so as a prelude to that, and to try address some of the concerns that we were receiving, we've decided to run a trial of the CNG technology as a proof of concept, so we are procuring six CNG buses this year. The request for proposal was actually closed yesterday and we expect to see probably three of them around October and three of them in spring of next year.

Both major bus suppliers from Canada were the two agencies we targeted. They were New Flyer Industries out of Winnipeg, as well as Nova Bus out of Montreal. We've been working with both those groups to supply the buses. We will be trialing them to see how they work in cold weather. We will be using them as a communications tool for members of the public, and we'll be using them as a familiarity tool for our operators, for our mechanics, and for staff in general.

We intend to run the trial for about 18 months, so we're hoping to run it through two winters. We had an exceptionally mild winter this year, so it wouldn't have helped us in some ways. But we're hoping to get some cold weather simply to prove that this concept works.

In terms of barriers that we face at the moment, I guess our biggest issue is the infrastructure costs needed to convert from a diesel fleet to a CNG fleet. The issue isn't necessarily buying a CNG bus. There is now a premium associated with a CNG bus of about $50,000, but the problem is the infrastructure needed. You need to have significant compressor stations, you need to have significant natural gas storage, and you need to have gas lines of significant pressure brought to the facilities. Those costs are probably the biggest barriers we face right now and that capital cost is probably the biggest barrier to smaller facilities. It's something that probably the City of Calgary is working with, which is why we're looking at a P3 model, but assistance is always needed in projects of that scale when you try to transition from one technology to another.

If we were looking at recommendations here, I think we do need, as an agency, some support for transitioning to a more green fleet-type technology and certainly to alternative fuel methodologies. Maybe there are some interest-free loan schemes that could help with these initial capital costs that could be paid back over time from the fuel savings. There are a number of areas where we could be working with the federal and provincial governments for these more green technologies.

I think there also needs to be more promotion of CNG as a genuinely viable alternative fuel. We see a lot of commercials on TV. We see lots of commercials in newspapers about electric vehicles, about hybrid vehicles. Certainly, for the larger vehicles, there doesn't seem to be the payback that makes it a valid technology, whereas CNG really does provide a solution that is available today. It just requires some infrastructure development.

Thank you.

9:10 a.m.

Conservative

The Chair Merv Tweed

Thank you.

Ms. Chow.

9:10 a.m.

NDP

Olivia Chow Trinity—Spadina, ON

Thank you for taking the time to come here. I first learned of your project, Mr. Russell Davies, from your mayor. He's been out there saying we need to do this.

Let me just ask about financing. I am quite familiar with the repayable loan fund. The City of Toronto had the Atmospheric Fund, which is a grant upfront, but repayable after you make energy savings. That's how a lot of the buildings, including the TD Bank's about 20 years ago, started being retrofitted. Because they saved energy, they then paid back the City of Toronto.

The FCM has the green fund, which again is a repayable loan fund. Can you lock in fuel price for 30 years? What's your assumption on that? For how long can you lock in your natural gas price?

9:10 a.m.

Manager, Transit Fleet, Calgary Transit

Russell Davies

We haven't had any formal discussions with any of the gas suppliers yet, but we comfortably think a five- to ten-year window should be achievable. That's compared to diesel right now, where really all anybody is willing to lock in to is a six-month contract and possibly up to a year.

9:10 a.m.

NDP

Olivia Chow Trinity—Spadina, ON

Have you done a business plan that's all inclusive? Both the capital and the operating costs per bus are extra. Right? You said there would be $50,000 extra, but that's only for the bus. Then, there is the fuelling station and the garage and all of that. What do you think is the payback period? Is the payback period 5 years, 10 years, or 20 years? This means that if there is an available loan fund of some kind, what is the payback period?

9:10 a.m.

Manager, Transit Fleet, Calgary Transit

Russell Davies

For the smaller study we did of around 200 buses when we were going to convert a facility, we did do a detailed costing of that, and the payback period of that was around six years.

9:10 a.m.

NDP

Olivia Chow Trinity—Spadina, ON

Was it that fast?

9:10 a.m.

Manager, Transit Fleet, Calgary Transit

Russell Davies

That was based on a fairly conservative fuel model as well. If the natural gas prices stay as depressed as they are today, or possibly even lower, then obviously that period becomes shorter again. We haven't done that study for the bigger facility, of a new facility, plus 400 buses. Obviously, with the more buses or more vehicles you have, you expect that payback period to become quicker.

9:10 a.m.

NDP

Olivia Chow Trinity—Spadina, ON

The longest period of the payback period is six years, assuming 200 buses. You are aiming for 400 to 500 buses, so I assume it would be faster. Does that include the building of the garage? Or is it just that?

9:10 a.m.

Manager, Transit Fleet, Calgary Transit

Russell Davies

In the initial study it did include the capital cost associated with retrofitting an existing building. As I say, we haven't done a detailed costing study of a new facility yet because we are still working with P3 Canada to see exactly how much our capital costs would be with a new facility. We certainly expect no longer than 10 years as a worst case in what we're looking at right now for a payback.

9:10 a.m.

NDP

Olivia Chow Trinity—Spadina, ON

Are there other cities in Canada that are also doing the same thing in looking at natural gas buses? You had mentioned Hamilton. Are there others?

9:15 a.m.

Manager, Transit Fleet, Calgary Transit

Russell Davies

Hamilton already operates a natural gas fleet, but that's an older fleet. There have been significant changes in the CNG technology from about 2007 when Cummins Westport developed a new engine, which made the vehicles more comparable in terms of performance, in terms of reliability to a diesel bus. So there are other agencies. We know Edmonton is looking at it as well. We believe there are other agencies within B.C. that are also operating natural gas vehicles and looking to expand as well.