Natural Resources Committee on June 14th, 2021

[Don Romano]

Let me verify the question. Are you talking about the production of the vehicle itself or the point at which our fleet will become carbon neutral?

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

The narrative we get is that there are a lot of carbon dioxide emissions in the production of the vehicle, but over time—and I don't want to lead the witness here—it seems to be a year or two when that is overcome and the vehicle becomes carbon negative, whereas an ICE vehicle just continues to be positive throughout the life of the vehicle.

[The Chair, Liberal, James Maloney]

You have time for a very short answer.

[Don Romano]

I can't answer that. We're not into production at Hyundai Canada—we're into distribution—so I really don't know how long it will take. I just know that we are focused on reducing the carbon footprint in the production of the vehicles.

[The Chair, Liberal, James Maloney]

Thank you, Mr. Cannings.

I believe Mr. Patzer is next.

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

Thank you very much.

Mr. Romano, I'm going to go back to you, but before I begin I want to read something here from a study by UC Davis down in California. They did a study regarding the impact of the additional weights on roads. It said:

The damage analysis for an example waste facility access road modeled for only 500- to 2,000-lb. increases in the weights of waste-hauling trucks from conversion to natural gas indicated (a) that for fully loaded inbound trucks, the 500-lb. vehicle weight increase reduced the life of pavement overlays by approximately 5 percent and (b) that there was an approximately 13 percent reduction in life with the 2,000-lb. vehicle weight increase.

The reason I'm asking is that in Saskatchewan there is a tax now on EVs that people are all up in arms about. The reason they are doing that is to make up for the loss of fuel tax. We know the fuel tax is used for road maintenance and upkeep as well.

As we are shifting to EVs—industry is saying we're going this way—we know that there's going to be a disproportionate impact on the infrastructure, yet we're losing all this tax revenue. Who's going to pay for the road maintenance and infrastructure upkeep if we lose that tax base?

[Don Romano]

All I can tell you is that I believe we are at the eight-track tape phase of electrification. We're not even at the cassette, let alone the SiriusXM streaming phase.

The batteries are going to get smaller and lighter. Companies out there are currently working on solid-state batteries, which are significantly smaller and pack a lot more energy. I can't answer that question directly. I can just tell you that the direction we're headed at this point, as we do with all technology, is to become more efficient, smaller and lighter.

Today the EVs we produce are relatively small. In terms of the example you gave of one of my competitors, I just can't answer the question on that particular vehicle and the weight that it has relative to its combustion engine model.

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

With your vehicles, I mentioned earlier the impact there's going to be on rural infrastructure, but also just for rural Canadians. We've had a lot of vehicles over the years.... One example is the power sliding doors in minivans. They do not work on gravel after a period of time. They wear out. They get dusty and they just don't work.

Has your company done any review or checking to see what the impacts on EV performance are going to be from driving on country roads and gravel roads, and even from wintertime, when we start pounding through snowbanks and different things like that?

[Don Romano]

All I can tell you is that we do substantial studies in all weather conditions on all road types here in Canada. We do exhaustive studying by putting the vehicles through the rigours of the different climates and road conditions. In terms of the results, we wouldn't put it back into the marketplace if we felt it wasn't going to be able to maintain its lifespan. There's not much more information I can give you than that.

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

Thank you.

I'm going to switch over to the rep from Ballard.

There's a lot of agreement about the importance of free trade for the future of the Canadian auto sector, especially with the old NAFTA agreement. Back when CUSMA was negotiated, there were concerns about the new rules leading to rising auto prices. Would this not create another problem for these new types of vehicles?

[Nicolas Pocard]

Yes, it will.

I think at the stage today when we are trying to really drive cost reduction for technology, if barriers to trade, especially within North America—I think the buy America regulation is a good example—might force production sites to multiply across borders, increasing costs are not going in the right direction. We need to scale up the benefits of a global supply chain in order to reduce the cost of those technologies. Scaling up and industrialization are how we're going to be able to compete with diesel engines. Those trade barriers are going to go against this cost reduction.

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

Would you like to add a little more to how hydrogen is going to be able to compete with other industries, whether it be for vehicles, for example, or for batteries? What's the competition going to be like? Do you have a forecast of which one is going to win out or what the preferred one is going to be?

[Nicolas Pocard]

I think it depends on the scale of use. Are we going to need both technologies, both battery electric and fuel cell electric, depending on the use of the vehicle?

At the end of the day, a fuel cell engine is very similar to a diesel engine, but much less complex. There are many fewer parts operating at a high temperature and many fewer moving parts. The cost of producing a fuel cell engine at scale, when you reach 10,000 engines or 50,000 engines per year, will be at parity with a diesel engine. I think on the cost we'll get there.

[The Chair, Liberal, James Maloney]

Okay. Thanks, Mr. Patzer.

Mr. Serré is next, but I see that the bells are ringing in the House. They are 30-minute bells.

With unanimous consent we can continue until one o'clock and finish this meeting and will still have plenty of time to vote.

I see that everyone is willing to provide their consent. We'll carry on. Thank you.

Mr. Serré, you have five minutes.

[Marc Serré, Liberal, Nickel Belt, ON]

Thank you, Mr. Chair.

Thank you to all the witnesses. A lot of what you were saying will be really useful for our study.

For my first questions I'll go to Mr. Moore and Mr. Roy.

You heard earlier from Mr. McLean and Mr. Simard. On the transition and the challenges that the government is facing moving forward, I would like to hear your comments on what the government has done with the clean fuel regulations and the hydrogen strategy. Do you have additional recommendations for moving forward on the transition side?

[Simon Moore]

Perhaps I could comment. Thank you very much.

Again, we think there is a tremendous framework in place. Quite frankly, that's one of the reasons we were excited to announce our project last week.

I did make a couple of suggestions in my remarks about some things to keep focused on as you move forward and create additional opportunities. Blue is not better or worse than green; it's about the carbon intensity. Less carbon intensity is better, and I think the program should reflect and focus on that.

I think we definitely want to recognize and reward putting CO2 in the ground, not capital spent to recover CO2. Programs that support CO2 recovery are not necessarily spending capital, but then again, we have a nuance around the outsource model whereby we provide a lot of value to our customers in making sure that this is not negatively impacted by the regulations going forward.

Those would be a couple of suggestions that we would make for things to keep in mind.

[Marc Serré, Liberal, Nickel Belt, ON]

Mr. Roy, do you have anything to add?

[Dr. Jacques Roy]

I think the government can help, since hydrogen is a risky investment. I am thinking of the high–frequency train, for example, which will be pulled by a locomotive using diesel fuel, while in Europe, they are moving toward hydrogen trains. The same thing is happening in the Toronto region. The company Metronic recently announced it was backing off its hydrogen train project.

I think those projects need government encouragement, as decision–makers may not be ready to take the risk of being the first to have a hydrogen tramway or a hydrogen train in their region.

The same goes for buses. Many electric buses are being purchased around the country thanks to government assistance, while there are nearly no hydrogen buses. However, there are surely places where they would be more appropriate.

[Marc Serré, Liberal, Nickel Belt, ON]

Mr. Moore, we heard that the biggest challenge with hydrogen is its transportation. You addressed this issue a bit earlier.

When we look at pipelines and TMX and a project right now in Boucherville, Quebec, what kinds of recommendations do you see for us with regard to the transportation of hydrogen via pipelines and some of the standards around that?

[Simon Moore]

It's a great question.

I think pipeline and the transportation of liquid hydrogen and the transportation of gaseous hydrogen via truck will all be part of the answer in different places.

I think what's important is to make sure there is a level or an open playing field. You're not necessarily advantaging a certain type of company or existing companies in certain areas. The market will determine the best solution for transporting this hydrogen in a given situation.

[Marc Serré, Liberal, Nickel Belt, ON]

We talked a bit about the grades of hydrogen and about not looking at colours, but is what you have right now when you're talking about carbon density and the 95% capture rate patented? We heard some challenges in that regard from other witnesses. Is what you're doing something that you feel the industry will work on? I ask because the carbon capture element is really the problem we have out west with oil. What recommendations do you have for us and the industry on that?

[Simon Moore]

We're proud of our innovative project, but I can't say it's unique to Air Products. As we shared in our press release and our comments last week, we are very much looking forward to doing additional similar projects in the area.

As you pointed out, again this goes back to the ability to take hydrocarbon, in this case natural gas, and create zero-carbon hydrogen. I think it is very exciting.

I would just acknowledge, of course, that for this to be successful, no single company can do this alone. We will not be able to do all of the projects needed. Many others will need to participate as well.

[The Chair, Liberal, James Maloney]

Thank you, Mr. Serré.

We're moving into the next round. It's a six-minute round. We have about 12 minutes left, so we have time for two more questioners. We'll have Mr. McLean, and then we'll finish with Mr. Weiler.

[Greg McLean, Conservative, Calgary Centre, AB]

Thank you very much, Mr. Chair.

Mr. Moore, thank you very much for all you've added here today. You talked about the carbon capture utilization credit needing to look like the 45Q in the States, and you know the government is going through some consultations on that process right now. Can you tell us what your investments in Canada will look like compared to those in the U.S. if we don't have a similar type of tax credit in Canada?

[Simon Moore]

Again, I think there are a lot of different ways to create the value for the sequestered CO2. I think if a program was based on the capital spent, I would unfortunately incent spending more capital. If the program is based on CO2 in the ground, then it's going to incent putting CO2 in the ground. I think that as we said, it works a little bit more efficiently to directly reward the activity that we're looking to do.