Natural Resources Committee on March 7th, 2013

[Andrew Morin]

It's not all doom and gloom out there as far as new technology in the auto sector is concerned. We're in the midst of the biggest technology spend by all companies globally, and particularly in North America, to meet these new U.S.-aligned GHG regulations, which are a derivative of course of new fuel efficiency regulations.

To your point, the regulatory infrastructure will come. The point is that the technology's ahead of the parade to some extent. Regulations are notoriously slow at catching up with new technology. Work is ongoing with Transport Canada, NRCan, Environment Canada, and our industry to develop codes and standards to support the more extensive deployment of electric vehicles in particular. I'm speaking of pure electric vehicles.

[Ted Hsu, Liberal, Kingston and the Islands, ON]

You're telling me that some work needs to be done in the federal area as opposed to the provincial regulation of—

[Andrew Morin]

We certify vehicles to federal standards. Although there are provincial highway traffic acts of course that can bear on certain motor vehicle characteristics, by and large it's a federal emission standard and a federal safety standard. We can't lose sight of the safety side of the equation either.

[Ted Hsu, Liberal, Kingston and the Islands, ON]

Thanks.

Mr. Lavoie, you told us there have been a lot of gains in energy efficiency from improvements in the equipment that is used. We've talked a lot about Canadian industry being able to import equipment from overseas to improve labour productivity and the usefulness of lower tariffs on imported equipment.

I'm wondering if that is connected to gains in energy efficiency at the same time.

[Martin Lavoie]

It's a good question. Investment in any type of machinery and equipment, imported or not, is definitely a good thing. I don't have the numbers to see how much is imported versus made here, but we do have a pretty strong manufacturing sector of machinery and equipment in Canada. We export a lot of that. I would need to verify that. I'd be happy to get back to you. This would be an interesting stat to have.

[Ted Hsu, Liberal, Kingston and the Islands, ON]

Thank you.

Mr. Haughton, we've heard in this committee from other gasification companies involved in gasification of waste. In my mind I'm trying to build a picture of different companies and different technologies. I was wondering if you could highlight some of the differences between your company and some of the other companies in Canada. What are three distinct things about your company that I should remember?

[Alistair Haughton]

We're the only company in Canada that has a commercially operating facility. We're the only company in Canada that holds patents globally, including China, oddly enough, and more than 11; we actually went over the top. I think we went to 36 countries for patents. Our technology to date is able to attain the highest level of international compliance over all other technologies, while utilizing the least amount of emissions control systems.

To give you a snapshot, if you take the physical footprint of, let's say, a facility of 60 tonnes a day, most technologies are on par with the size of the footprint; it's the emissions stack that looks like an oil refinery hanging off the back side of it. Our emissions stacks are actually internal to the system and represent about one-third of the footprint. We're able to remove a vast cost component from the capitalizing of the project, which puts us into a far greater accessibility range for communities and industry.

Last, the technology we deploy, not to oversimplify it, is so straightforward. It's very simple to understand. It's very simple to operate. It does not take a team of hundreds of engineers to operate the system. As I mentioned before, the system can be operated by community members—

[The Chair, Conservative, Leon Benoit]

Thank you.

[Alistair Haughton]

Pardon me?

[The Chair, Conservative, Leon Benoit]

I'm sorry. Go ahead.

[Alistair Haughton]

Of course, in the utilization and the recovery of the energy, we're able to take energy from the secondary chamber, from the combustion of the gases, and we're then able to convert that into three positive revenue streams. We're not just taking the energy and converting it from the waste into, say, gas, for firing an engine. We're not taking that energy and converting it into a fuel, which we could do.

We're taking that energy and converting it into three usable streams, one being the process, heat; the second being that community grid type of saturated heat; and then, of course, the third being electricity. We end up becoming a true combined heat and power facility with a very small footprint, very low capital costs, and proven patented technology.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Haughton.

Thank you, Mr. Hsu.

We'll go now to the five-minute round, starting with Mr. Trost, and then we'll have Mr. Calkins and Ms. Liu.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

Thank you, Mr. Chair.

Probably the widest energy efficiency or energy innovations that everyone in the country would notice would be with regard to their cars. Most of us drive. It's a big thing as far as most people's lives go, usually starting in their late teens and going forward.

My first question is for Mr. Morin. From your industry's perspective, what is it that drives the fuel efficiency of the vehicles? One of the things I've often wondered is why governments are always so.... Even our government meddles way more than it needs to, I think. Why are governments so interested in doing fuel economy regulations when consumers can sit down and figure it out? Do they want to drive an F-350 Ford or do they want to get a much smaller putt-putt vehicle to get them to and from work?

From your perspective, why don't consumers pick the fuel-efficient vehicles on their own? Why is it that the government has to get in there, or why is the government getting in there to push consumers in certain directions?

Also, could you give us a brief summary of how fuel efficiency regulations work here in Canada?

[Andrew Morin]

How much time do we have?

[Voices]

Oh, oh!

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

You have three and a half minutes.

[Andrew Morin]

Very quickly, in Canada we have, in effect, a greenhouse gas emissions regulation as opposed to a fuel efficiency regulation, but one is a derivative of the other. Those regulations are much to the industry's support. I think I'm speaking for all auto companies in this country when I say that, generally speaking, we think a U.S.-aligned direction is good. A continental perspective on this is probably the wisest move. There are, of course, niggling issues for some companies with some aspects of the U.S. regulations and in terms of the technology and the vehicle choices that those may drive in this country.

I would just say to your point that we're becoming fuel efficient for a couple of reasons. One is that consumers are demanding it. Two, governments in turn are demanding it, for various reasons. Canada is doing it as part of its effort to meet environmental targets and climate change targets. Certainly, the U.S. is moving for the same reason. I would just say that, generally speaking, Canadians do make fairly fuel-efficient choices in vehicles that suit their needs: the gentleman who might need the F-350 Ford out in the Prairies to do farming will do that.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

Let me follow up on that. In the way that the regulations are set up, is the environmental tax, we'll call it, put on each individual, specific vehicle, or is it applied on a fleet basis? Do you end up, effectively, with some vehicles subsidizing other vehicles through the way the price structures have to be skewed? Is it very vehicle specific? Can the technology be much more vehicle specific or is it more broadly based?

[Andrew Morin]

I would say that the targets the vehicles are required to meet or the fleet is required to meet, on an average, are class segment specific. Light trucks have one set of targets, essentially, and passenger cars and smaller SUVs have their own set of targets.

Ironically, our regulations, I must say, do put a disproportionate share of the burden on the cars that are already the most fuel efficient. Ironically, they have the most stringent targets and the biggest challenge ahead of them to become more fuel efficient in turn.

This is not to denigrate the makers of trucks. It's simply to say that the U.S. rule, I would say, which we have aligned with, is a little more lenient in some areas in terms of the pickup truck use—

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

Good.

[Andrew Morin]

—for various reasons, some of which my members might not support, and others that might make practical sense.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

Could I get in one quick last question?

I was reading an article the other day about the flexibility of fuels that you can have in different parts of the world. They were noting in China it's methanol and gasoline, back and forth, and Brazilians have a bunch of options, including ethanol and natural gas.

Are there specific challenges in Canada that would make it difficult for us to adopt more ability to flex between different fuels? I'm not just talking about ethanol; it's a whole range of things. What specifically in Canada would stop us from taking on those innovations such that people could then shop in a marketplace between options of fuels for their vehicles?

[Andrew Morin]

There's very much a chicken-and-egg argument here. The fuels aren't available. The engine technology and the powertrain technology won't be there to support the use and the consumption of those fuels. Conversely, the same applies.

I will say that it's our position among our membership.... You won't hear, traditionally, a stampede of support for higher levels of biofuel, and in particular ethanol, among our members. That's not to run it down as a fuel. It's simply to say that higher level blends within gasoline, separate from E85—so I'm looking at E15, E20, and beyond—still have not been proven in terms of the durability on the current existing vehicle fleet, and in particular, on those 15- to 20-year-old trucks we were talking about that people like to keep and maintain. Similarly, the jury is still out in the United States on this. There are several lawsuits flowing. I'm not looking to pick an argument with the renewable sector at all, but simply to say that we urge caution in that respect.

The other thing about boutique fuels is that everybody these days seems to have a panacea to introduce into a litre of gasoline or diesel to make it go further and stretch its efficiency. We don't support drop-in requirements for fuels. We need good quality fuel. Generally speaking, plug-and-play compatibility with new additives is not our preference until there's been durability testing done, and in both the United States and Canada, obviously, to support that.

[The Chair, Conservative, Leon Benoit]

Thank you.

Thank you, Mr. Trost.

Mr. Calkins, you have up to five minutes. Go ahead, please.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

Thanks, Chair.

Mr. Lavoie, we hear a lot at this committee. We're nearing the end of a study, and I have to say that most times I don't hear a lot of new things. Everybody brings a different perspective on their particular industry, but we hear a lot of the same themes over and over again.

The one different thing that you brought today, and my colleague, Ms. Crockatt, touched on it earlier, is that training of employees is a key part of any sustainable development initiative. That's something I don't think I've heard said by anybody else who has come to this committee.

I'd like you to elaborate, if you could, in just a minute or so, on what precisely you mean by this and how that particular aspect of your program has actually.... If we can train everybody in various industries or provide incentives to train people in various industries to be more economically efficient or energy efficient in the delivery of whatever it is, of the products and services that you're delivering, I think this is the low-hanging fruit, and we're not even talking about it.