Evidence of meeting #37 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 trucks.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

  • Jonathan Burke  Vice-President, Global Market Development, Westport Innovations Inc.

8:55 a.m.

Conservative

The Chair Merv Tweed

(Motion agreed to: yeas 6; nays 5)

We'll now move to orders of the day and welcome our guest back to the table.

Mr. Burke, please proceed.

May 15th, 2012 / 8:55 a.m.

Jonathan Burke Vice-President, Global Market Development, Westport Innovations Inc.

Thank you very much, Mr. Chair.

Thank you very much to the committee for having me here today.

I want to start with a brief description of who Westport Innovations is, for those of you who may not be familiar. From humble beginnings at the University of British Columbia in 1995, the company was spun out of the university through the industry liaison office. It had a basket of technologies around combustion of engines using alternative fuels, specifically natural gas. The genesis of the technology was a professor, Dr. Phil Hill, who had been working on it for over a decade. Dr. Hill is a professor of mechanical engineering at the University of British Columbia, a recent recipient of the Manning Innovation Award.

Today, 17 years later, Westport is recognized around the world as a global leader in natural gas engine technology. We've gotten there through a lot of hard work, but importantly, we've gotten there through global partnerships. We've accepted the fact that Vancouver is not a global automotive sector hub, and as a result we've reached out to partners around the world in the diesel engine industry, in the automotive industry, and in other industries, to leverage our groundbreaking technology and our portfolio of intellectual property to be able to get our products onto the roads around the world.

Today we have over 35,000 engines in service in countries throughout the world: countries such as China, where Beijing deployed over 2,000 natural gas buses for the Beijing Olympics; Delhi, India, where there's been a marked improvement in air quality as a result of deployment of natural gas vehicles, specifically natural gas buses using our engines in collaboration with Tata; we've had a longstanding partnership with Cummins, which is North America's largest independent diesel engine manufacturer, headquartered in Columbus, Indiana; and we've had many other partnerships, including now with Ford Motor Company, General Motors in an advanced development project, Caterpillar, EMD, and others.

Our goal as an organization, however bold it may sound, is to transform the transportation market from using petroleum fuel to using alternative fuels, with today's emphasis being on natural gas, given its tremendous abundance, which I think the committee has heard about in the past. There's been a sea change in the supply of natural gas in North America, but not just in North America; it's happening all around the world. The unconventional extraction technologies that are being used here in North America to unlock unconventional resources such as shale gas and tight gas are being exploited in China, in other parts of Europe, in South America, and throughout the world. Recently the IEA—the International Energy Agency—reported that we're entering a golden age of natural gas.

Why do I talk about this? Because there's tremendous opportunity in our economy here in Canada to change our energy mix in transportation. Today, transportation, whether rail, marine, automotive, large trucks, or small passenger cars, is almost entirely dependent on petroleum, a globally traded commodity, the price or in some cases the supply of which we have little control over. We do have an opportunity, however, to change that supply mix and that energy use mix by switching to alternatives, be they electric, hydrogen—which I'm sure you've heard about—or natural gas.

One of the main benefits of natural gas is that it comes out of the ground relatively ready to use. As an unrefined product, it needs only to be compressed or liquefied and purified before it can be used in an automobile, a truck, a ship, or a locomotive.

Today our energy use for transportation by heavy-duty vehicles...and I think you've heard from Mr. Claude Robert of Robert Transport here before. Heavy-duty vehicles are those large class 8 transport trucks that ply the highways of our country and move our goods and keep our economy moving. Specifically, they account for a tremendous amount of our cross-border trade. Those highway trucks, although they account for only 3% to 4% of the vehicles on the road, account for almost 18% of our energy use in transportation. So there's a tremendous opportunity and a tremendous amount of low-hanging fruit at which we could target a new alternative fuel that is cheaper, cleaner, and abundant here in Canada and throughout North America.

Importantly, also, in emissions from transportation, specifically greenhouse gas emissions, not to mention some of the urban pollution that may be attributable to transportation, 29% comes from class 8 trucks in Canada. So there's a tremendous heavily weighted greenhouse gas footprint.

One thing that needs to be considered with regard to the use of natural gas for transportation is the cost of goods movement and the impact of high oil prices on our economy's ability to grow and to continue to get goods onto the shelves of stores and to consumers throughout the country in a cost-effective way. Whether it's locomotives, ships, or trucks, they're all impacted by the price of oil.

The opportunity to switch some of that to natural gas gives us an opportunity to reduce our goods transportation costs in North America, and specifically in Canada.

I do want to mention that Westport, through its 17 years of life to date, has received tremendous support from the Government of Canada in the past, and continues to receive support from the Government of Canada. I brought a copy today...and Monsieur Roger, the clerk, has some copies. I will make sure that everyone on the committee has a copy of it. Natural Resources Canada recently published a document on natural gas use in the transportation sector. It was an industry-government collaboration, both provincial and federal government and industry and trade associations.

It gives a very thorough examination of the energy impacts—i.e., the amount of natural gas that's out there and whether it's exploitable as a transportation fuel. We looked at the trucking sector and how best to target natural gas engine technologies and natural gas into that sector, and we looked at the role the government could play in deploying that.

Several important recommendations came from that. First and foremost was education and outreach, getting out to the trucking sector and teaching them about the alternative technologies that are available. It was looking at the codes and standards that are currently being adopted in various jurisdictions around North America, and the importance of making sure those codes and standards are aligned such that a truck that leaves a depot in Boucherville, Quebec, can arrive at a depot in Chicago with the same standards for refuelling and for tanks, etc., that will make that transborder movement so much easier.

We've received very strong support as well from Sustainable Development Technology Canada. In 2005 we conducted a year-long demonstration of our technology with Challenger Motor Freight of Cambridge, Ontario. We deployed five diesel trucks and five natural gas trucks in a head-to-head comparison of the technologies. Sustainable Development Technology Canada, Transport Canada, and Environment Canada were pivotal in making that a success.

We've also received significant support from the U.S. government through the Department of Energy, the National Renewable Energy Laboratory, and others.

More recently there's been emerging support from the provinces. The Quebec government in 2010 introduced budget actions that allow for accelerated capital cost allowance for the purchase of natural gas trucks as a goal towards their objective of reducing their greenhouse gas emissions in transport.

Prior to summarizing, I just want to give you a few examples of some fleets that are actively deploying this.

You heard from Claude Robert of Transport Robert, but Vedder Transport is British Columbia's largest trucking fleet. They're what's called a “dedicated” fleet, so they have dedicated contracts hauling things like milk, food products, forest products, etc. They operate over 400 trucks in British Columbia. They just recently deployed almost 50 natural gas trucks running on liquefied natural gas in British Columbia. Those 50 trucks collectively, on an annual basis, will reduce greenhouse gas emissions by 3,500 tonnes compared to their diesel counterparts. That's the equivalent of taking 700 automobiles off the road permanently—not switching them to electricity, not switching them to an alternative fuel, but removing them from the road permanently.

You can see the tremendous leveraging impact of switching a natural gas truck as compared to an automobile. The payback on those trucks is estimated to be less than 16 months, given the lower fuel price. The fuel displaced annually is 1.5 million litres by switching just 50 trucks to natural gas.

We also have many projects in the United States. We have trucks deployed with Walmart, UPS, and a number of other major carriers and well-recognized names. UPS, as an example, in Los Angeles has deployed a fleet of 82 transport trucks moving between Los Angeles and Salt Lake City. It's formed one of the first corridors of natural gas in North America, with four refuelling stations between Los Angeles and Salt Lake City. Those trucks can now deploy across that corridor of 1,100 miles.

Now we're starting to see other fleets utilize that network of fuelling stations. In southern Quebec and southern Ontario, we now see Transport Robert operating from their depot in Boucherville, with an LNG station installed by Gaz Métro. They now have their new station in Mississauga, also operated by Gaz Métro, and they now have a corridor of natural gas availability along Canada's most heavily used transportation corridor for class 8 trucks.

I'll tell you a little bit about Westport. Last year we spent over $34 million on research and development on the back of $264 million in revenue. As a percentage of our revenue, we're probably right up there in the top five in terms of our R and D expense. We continue to invest very heavily. We have 871 employees worldwide as of the end of April 2012.

We have 363 in British Columbia and an additional 10 or 15 located elsewhere in Canada. Our headquarters are in Vancouver, British Columbia. We have offices in Montreal; in Detroit, Michigan; Columbus, Indiana; Long Beach, California; Beijing, China; Gothenburg, Sweden; Venice, Italy; Lyon, France; Weifang, China; and in Argentina. We have partnerships with some of the world's largest global automotive manufacturers, including Volvo in Gothenburg, Sweden. Weichai, in China, is China's largest independent diesel engine manufacturer. Like many things Chinese, it is also the world's largest independent diesel engine manufacturer. We have a joint venture called Weichai Westport. We also have many operations under way in India and elsewhere.

In addition to the trucks I spoke about, we also have partnerships to deploy F-250 and F-350 Ford trucks at a plant in Kentucky that was just recently opened. These are being deployed toward fleet vehicles, these F-250s and F-350s operating on compressed natural gas.

Finally, we do have partnerships in the rail sector as well. This is not technology that is limited to rubber-tired vehicles. We're working on mine haul trucks—for example, the big trucks you see in the coal mines—but we're also working with CN Rail, Gaz Métro, and others. We're also supported by Sustainable Development Technology Canada on a transcontinental locomotive project running on liquefied natural gas. Locomotives use a tremendous amount of fuel. It's estimated that CN Rail alone consumes more than one billion litres of diesel per year. You can imagine the tremendous opportunity to reduce their cost, reduce their emissions, and put them on a very low-carbon fuel.

With that, I will end my prepared remarks—not so prepared, but I just wanted to give you a bit of an overview of who Westport is and what we do—and open it up to your questions.

Thank you.

9:10 a.m.

Conservative

The Chair Merv Tweed

Thank you.

Go ahead, Mr. Sullivan.

9:10 a.m.

NDP

Mike Sullivan York South—Weston, ON

Thank you.

And welcome. We've heard lots about you from other witnesses, so I'm glad you're here.

LNG is a fuel. The comment from Groupe Robert was that there were regulations because your LNG vehicles require a tiny bit of diesel. How tiny is tiny?

9:10 a.m.

Vice-President, Global Market Development, Westport Innovations Inc.

Jonathan Burke

It's a relatively simply process, but it's relatively complicated in that it costs us $200 million to get there. It's an injector that has two nozzles. Importantly, a diesel engine doesn't use a spark plug; it uses compression ignition. It compresses the air and then injects fuel and the fuel auto-ignites. Natural gas doesn't have the same ignition properties as diesel, so we need to use a small amount of diesel right at the end of the compression stroke to ignite that fuel and get the flame effectively started in the combustion chamber, and then we inject natural gas. We use between 1% and 6% or 7% diesel, depending on the duty cycle of the vehicle. It's a pretty constant injection of diesel on every combustion cycle, but the natural gas varies according to the power load of the engine.

9:10 a.m.

NDP

Mike Sullivan York South—Weston, ON

In terms of the regulations, the problem with this is that the regulations that apply to diesel engine road vehicles are now applying to yours, even though yours is not really a diesel engine?

9:10 a.m.

Vice-President, Global Market Development, Westport Innovations Inc.

Jonathan Burke

That's an interesting point you make. Our engines have to meet all the U.S. Environmental Protection Agency standards that a diesel engine would, or a gasoline engine, for that matter. Whether it's a Ford F-250 or a forklift—we do forklift engines as well—or a locomotive, we have to meet all those minimum emissions criteria, and maximum emissions criteria, for that matter, that are prescribed by the United States Environmental Protection Agency and correspondingly adopted by the Canadian government. In the case of other jurisdictions, like China or South America or Europe, we meet the Euro standards. So we have to go through all the testing that a comparable diesel engine would go through to meet our emissions standards.

Historically, our natural gas engines have always either met or exceeded the emissions standards by quite a margin. Diesel engines have become progressively cleaner, with all the after-treatment systems that are being adopted by the diesel engine manufacturers to get their emissions down. Those would be criteria emissions, which are particulate matter, which is the soot that comes out of the tailpipe, and nitrogen oxides, which cause that yellow haze on the horizon when there's a lot of it. Those emissions standards have to be met by natural gas engines as well.

Our big emissions advantage today is on greenhouse gas emissions. Importantly, also, we don't have to use anywhere near the complexity of after-treatment equipment, typically, to achieve the same emissions level as a diesel engine, or exceed it, for that matter.

9:10 a.m.

NDP

Mike Sullivan York South—Weston, ON

The other issue I have with the way this is rolling out is that it appears that the United States is rolling it out faster and rolling it out with greater refuelling capacity, etc. Is there pressure on you to manufacture your engines in the U.S. as a result of the U.S. standards—in other words, to move your operation? There's nothing stopping you doing that. Why wouldn't you?

9:10 a.m.

Vice-President, Global Market Development, Westport Innovations Inc.

Jonathan Burke

Other than the fact that we love to live in Canada, and we love Vancouver especially, and our home was the University of British Columbia and we're quite loyal to that.

But a lot of our manufacturing is already done in the United States. We sell to U.S. transit agencies. We sell to U.S. government entities and whatnot. We do research and development in the United States as well, and we have to meet certain criteria around U.S. content, so to speak. We do the same in India, for example.

We do have a manufacturing facility on Annacis Island in southern British Columbia. It's a waypoint, effectively, for components that come from all around the world prior to going to truck plants in Texas, Washington State, and Mexico, for example.

We also do manufacturing in China and Mexico as well. So with regard to the incentive to go to the United States, I can tell you that the market there is quite substantial. There has been very consistent government support for alternative fuel vehicles in the United States.

In looking at displacing petroleum consumption, the Bush administration introduced tax incentives that were targeted at ethanol, biodiesel, natural gas, and even electric vehicles and hydrogen fuel cell vehicles. Those tax incentives, as they related to large class A trucks, were quite significant. They accounted for a tax credit of up to $32,000 for a class A truck purchase.

More recently, the Obama administration has spoken quite positively about the use of natural gas in transportation. Most recently, at a press conference at a UPS depot in Las Vegas, where our trucks were featured, the Obama administration quite vocally supported the use of natural gas in transportation.

In addition to that, a number of pieces of legislation have been moving through the U.S. Senate and the U.S. House of Representatives. One of them, known as—it's an acronym—the NAT GAS Act, is looking at providing tax credits to private companies of up to $64,000 per vehicle towards the purchase of natural gas trucks. Those would be scaled and on a declining scale over time.

The industry has been quite consistent that there isn't the need for endless tax support on this, but the need is to overcome the inertia of what's already out there. The industry in the United States—and likewise in Canada—has indicated, on the infrastructure side, their willingness to build infrastructure.

There is a lot of private capital lying in wait or being deployed right now in British Columbia. FortisBC, a utility, is deploying several million dollars' worth of infrastructure to support Vedder, Waste Management, and other fleets. In Quebec, Gaz Métro is investing millions of dollars in infrastructure to support the deployment of liquefied natural gas ferries and trucks. Likewise in Alberta, Shell Canada and Encana Corporation are investing millions of dollars in infrastructure to support liquefied natural gas trucks and mine haul vehicles and natural gas drilling rigs.

So the infrastructure investment is not where the support is needed. Where the support is typically needed is with the trucking companies, which have a capital decision to make and have only a fixed amount of capital. It's an extra capital burden to purchase a natural gas truck, compared to a diesel truck.

In the United States, for example, there is one company that is going to be building approximately 150 liquefied natural gas truck stops throughout the United States—and very close to our borders, in some cases—which will provide a competitive advantage to U.S. trucking companies coming into Canada and running on a substantially less expensive fuel.

9:15 a.m.

NDP

Mike Sullivan York South—Weston, ON

In the public transit world, you talked about some of the.... We've heard from some public transit agencies, but mostly on compressed natural gas, not liquefied natural gas. In the U.S., again, there are strict regulations, in that if a public transit agency wants federal funding, they have to build that in the U.S. There's no 50-50 rule when it comes to public transit.

Does that drive you into making sure that your operations are sufficient in the U.S. to do that? We don't have a similar Buy Canadian policy here.

9:15 a.m.

Vice-President, Global Market Development, Westport Innovations Inc.

Jonathan Burke

It certainly drives who we partner with in the United States in terms of manufacturing partnerships. All of our transit bus engines have been delivered through our Cummins Westport joint venture, in which the majority of the engines have been assembled in Rocky Mount, North Carolina.

9:15 a.m.

NDP

Mike Sullivan York South—Weston, ON

It's part of the Buy American policy that keeps that happening in the U.S.

9:15 a.m.

Vice-President, Global Market Development, Westport Innovations Inc.

Jonathan Burke

Yes, that's correct. Also, importantly, U.S. transit properties have been very aggressive in their switch to alternative fuels. The Los Angeles Metropolitan Transit Authority operates no diesel buses. They've done over a billion miles on natural gas. They retired their last diesel bus a year ago.

Nearer jurisdictions, in terms of climate maybe, are Boston, Washington, D.C., and a number of others that have adopted significant fleets of natural gas vehicles. At some of the annual transit conferences, they are sort of wagging their noses at some of the fleets that have stuck with diesel, due to the fact that they've been able to ride some pretty competitive natural gas fuelling prices, keep their transit fares low, and stay competitive.

9:15 a.m.

Conservative

The Chair Merv Tweed

Thank you.

Monsieur Coderre.

9:15 a.m.

Liberal

Denis Coderre Bourassa, QC

Thank you, Mr. Burke. I am impressed with your approach.

I am wondering how it is managing to happen faster in the United States than in Canada. It is as simple as that. What is the explanation for that? You have been polite with the government, you have had money to do research and development, and we will come back to that, but is there a culture problem? Is the reason that the oil lobby is stronger and more established than the natural gas lobby? Is it the fear of natural gas? We know that when natural gas came into homes, education did in fact have to be done. What explains the fact that it is happening slower in Canada than in the United States?