Transport Committee on March 6th, 2012

[The Chair, Conservative, Merv Tweed]

I call the meeting to order.

Thank you and good morning, everyone. Welcome to meeting 25 of the Standing Committee on Transport, Infrastructure and Communities. The orders of the day are, pursuant to Standing Order 108(2), a study of innovative transportation technologies.

Joining us today from Encana Corporation is Sam Shaw, vice-president, natural gas policy development, and from the Canadian Propane Association we have Jim Facette, president and chief executive officer.

Welcome, Mr. Shaw. We had you here recently and had to leave you, so we'll try not to do that today. I'll ask you to make your opening comments. Then we'll go to Mr. Facette and after that to the committee for questions.

[Dr. Sam Shaw, Vice-President, Natural Gas Policy Development, Encana Corporation]

Thank you so much. It's a pleasure to be back again. I hope there's no vote today, Merv. You said there wasn't, so thank you so much, although every vote is a good vote.

My agenda is going to be very simple. I'll talk about Encana as an industry natural gas supplier, describe some applications and innovations, and give you a couple of recommendations.

Natural gas is abundant, affordable, clean, reliable, and a domestic solution. Encana is one of the largest natural gas suppliers in North America, with 40% of our plays in Canada and 60% in the U.S. As we start looking at a game changer and talk about innovation, it is really around looking at the supply of natural gas. It is very abundant. We estimate there's over a 100-year supply in terms of what we're currently doing.

On transportation, the biggest displacement would be around light duty, but again a lot of emphasis has been on heavy duty. We're also looking at applications for the marine side and the rail side and at operations such as drilling rigs.

What's Encana's role? Clearly it's about education and awareness. It's leading by example. Our own fleet is running on natural gas. Our oil rigs are running on natural gas. We look at collaboration, which is a very important piece as we start looking at the natural gas industry.

Why is liquefied natural gas important in transportation? It's clearly due to economics. If you're looking at a competitive situation with the U.S., we need to be looking at the competition side. I'll reference Robert Trucking out of Quebec. They purchased 180 natural gas trucks. They are a leader in this country, not only in the greening they undertake with their training, but also in their transportation. LNG is around 20% to 40% cheaper than diesel on an equivalency basis.

We chill LNG to -162 degrees Celsius, transport it to a plant or a station, and then dispense it by pump. Encana has pioneered mobile refuelers, so we can go to a yard of heavy-duty trucks and fill them on location.

If you look at the time zone for different milestones, the first marine gas engine was built and patented in 1860. The first LNG facility was in 1912. The patents for barges carrying liquid gas were in 1914. Then you start looking at the first U.S. LNG export in 1969. The first LNG import terminal was built in the U.S. in 1971. The first LNG plant in the U.S. to service the transportation market was built in 1994. In 2003, the conventional diesel locomotive engine was replaced by a smaller natural gas turbine. Again you're starting to see the utilization of natural gas, particularly in the U.S.

The Gulf Gateway Energy Bridge deepwater port opened in 2005. The very first LNG mining truck in the U.S. was in 2010. There are 26 LNG vessels in operation worldwide in 2012. When you start looking at the application of marine rail and heavy-duty trucks, you see LNG starting to get a foothold in the transportation grid.

For LNG supply, there are peak facilities in both Canada and the U.S. We can ship LNG by rail, transport, and intermodal means. When you start thinking about the train system in Canada and the U.S., you realize you have a distribution network for LNG anywhere you want to go.

On the marine side, the Staten Island Ferry in the U.S. has converted over to LNG. Some foreign countries, such as Japan, are looking at transporting in and out with LNG to service their power needs, particularly now in trying to displace nuclear.

If you start looking at the elements in terms of different vehicles, you see that if you have one locomotive, it burns as much as 96 cars. One mining hauler truck is equivalent to burning 142 cars of gasoline. One rig is 426 cars, and one passenger ferry burns as much fuel as 1,160 cars. If you're starting to look at displacement of diesel, clearly natural gas is the way to go.

President Obama has made that commitment in a series of state of the nation addresses in looking at an executive order, and most recently there is their blueprint for energy in terms of weaning themselves off foreign oil. Seventy per cent of foreign oil goes to transportation in the U.S., and clearly that is a priority in the executive agenda in the U.S.

In terms of the corridors in Canada, we're looking at the eastern Quebec-Windsor corridor and the corridor from Edmonton to Vancouver in terms of facilitating those corridors to switch over to natural gas. In terms of global trends, you can look at the European experience, where many vehicles have switched over to natural gas. As well, there are opportunities for redesigning engines and so forth.

In terms of distribution, I'd point to some very innovative practices going on in home refuelling. If you have a natural gas line for your barbecue, you can install a natural gas system for refuelling your car. Currently it's $1,500 to install in the U.S. and $4,000 to purchase. What we're trying to do, working with some partners in the U.S., is get that price down from $5,000 to $1,000 as an appliance in your house.

In terms of innovations, clearly one of the greatest examples in Canada is Westport Innovations. Using innovation out of UBC and rolled out as a commercial entity, they have developed a 15-litre natural gas engine. Now they're developing a 11.9-litre engine, and that is much more attuned to the small commercial fleets.

With regard to tanks, the 3M company has developed a new material, and Chesapeake Energy in the U.S. will partner with 3M on the tank material. Using nanoparticulate, it will be 20% lighter and have a 10% to 20% greater capacity. As nanotechnology comes to the foreground, it certainly has greater applications.

President Obama has also indicated that there will be significant dollars for the Department of Energy to look at infrastructure for tanks, home refuelling, and stations. There are a lot of innovations related to stations. Quantum is a producer of tanks for natural gas. They're looking at shorter and thicker tanks. Vision natural gas vehicles produced in the U.S. will travel 390 kilometres.

The important thing that you're starting to see in the U.S. is their look at standards, particularly in terms of particulate. They're looking at PM2.5. because the particulate coming out of gas-fired generation plants, diesel trucks, and so forth relates to issues around health, respiratory disease, and so forth.

In other innovations, Italy, with Fiat, has done a lot of research, and again, Fiat owns Chrysler. I'm hoping everyone saw the article in The Globe and Mail yesterday in regard to natural gas vehicles. Chrysler announced a Dodge Ram 2500 pickup truck. That's an OEM version. If you have the opportunity, we'd invite you to Vancouver to look at that truck at GLOBE 2012, where it will be displayed for the first time in Canada.

As you may be aware, Natural Resources Canada has embarked on a road map, and the road map is now looking at the standards and the education sides.

Finally, as some recommendations, we need to do a better job in terms of applied research on the natural gas side for all modes of transportation. We need to align our standards with the US. As I said last time, I would humbly ask for you to start looking at some funding programs in 2013 for municipalities that want to green their fleet.

Thank you so much.

[The Chair, Conservative, Merv Tweed]

Thank you very much.

Mr. Facette, welcome.

[Jim Facette, President and Chief Executive Officer, Canadian Propane Association]

Good morning, Mr. Chair.

Thank you very much to the committee for the opportunity, and thank you very much for your interest in looking at innovative technologies in transportation.

I'm pleased to inform the committee that this year the propane industry celebrates its centennial anniversary. We hope that at the end of our presentation you will agree that propane is a green energy solution and a partner in any sustainable energy strategy.

Our specific request today is that this committee recommend to Minister Oliver that propane be included as part of the Canadian natural gas deployment road map, which it is not now, and that the federal government lead by example by converting more of their fleet vehicles to propane.

Today we will be focusing on the availability of propane and its affordable price. The following presentation should provide you with a good understanding of propane's many advantages.

With a $10 billion impact on the Canadian economy each year, Canada's propane industry supports the livelihood of over 20,000 Canadians, while contributing over $900 million in annual taxes and royalties. Nearly 100% of propane consumed in Canada is produced domestically. In Canada, approximately 83% of propane is produced from natural gas processing, and the remaining 17% from crude oil refining.

Your committee is conducting a study of innovative technologies in all modes of transportation that are commercially viable and relevant to Canada. Propane is commercially viable and relevant to Canada.

The propane industry has a role to play in a clean energy mix and is committed to maximizing its value to Canadians over the long term. Canada has a well-developed propane infrastructure, with tremendous capacity to produce an abundant supply with high portability across Canada and into the United States.

Propane is such a clean-burning fuel that it is often used for vehicles that operate indoors. In fact, I'm sure that each and every one of you has seen the most visible indoor vehicle that runs on propane, the ice resurfacing machine commonly known as the Zamboni.

In the industrial sector, forklifts use propane fuel not only for vehicle propulsion but also for load-lifting work. Many proposals for fighting climate change and reducing the environmental impact of energy use will have to wait for new technologies to be perfected; however, propane produced right here in Canada can make major and immediate contributions using today's technologies.

Some of you will recall the many gas vehicles that were converted to propane during the 1980s and 1990s. More than 13 million vehicles throughout the world are fueled by propane. In Canada, the figures are more modest, but right now we are witnessing a renewed interest in propane-fueled vehicles for both environmental and economic reasons.

Since people are looking for ways to reduce expenditures and greenhouse gas emissions, for many vehicle fleets, including the federal government's car fleet, we believe that Canada's propane sector can contribute significantly to meeting those objectives.

In comparison with conventional energy sources, propane produces less greenhouse gases and air pollutants for nearly all of the applications where it is used. Propane-fueled vehicle fleets produce up to 26% less greenhouse gases than gas-fueled vehicles, representing a kilo of greenhouse gas for each 36 kilometres travelled, and approximately 50% fewer pollutants and other emissions found in smog created by gas engines.

One private corporation that has a significant propane fleet is United Parcel Service. UPS currently has more than 600 propane vehicles in Canada, including some that are being used here in Ottawa. Six other examples of organizations that have opted for propane and are benefiting from its economic and environmental advantages are TransHelp, from the Peel region, the London Police department, Airways Transit, ThyssenKrupp Elevator, the city of Prince George and Canada Post.

TransHelp from the Peel region was motivated primarily because of environmental protection concerns. Their engines idle in zones that are sensitive to pollutants, such as in hospital admitting areas, and because their passengers have special needs, they have to ensure that the vehicles' temperature is maintained.

As for the London Police department, almost all of its 60 patrol vehicles are fuelled by propane and, over the years, significant savings amounting to millions of dollars have been achieved while maintaining an impressive safety record.

Airways Transit, the largest provider of on-demand, shared-ride airport ground transportation in Canada, operates a fleet that is 100% fuelled by propane. Compared to the use of gasoline-fuelled fleet vehicles, the use of propane has resulted in a reduction of 588 tonnes of greenhouse gas emissions per year for Airways Transit.

ThyssenKrupp Elevator, the largest producer of elevators, is running eight Roush CleanTech Ford E-150 vans and three Roush CleanTech F-150 pickup trucks. They have eight more propane vehicles on order. By the second quarter of 2012, ThyssenKrupp Elevator will have 19 propane-fuelled vehicles—which equals one-third of their fleet in Phoenix—running on this clean-burning alternative fuel.

Their commitment to propane extends further west, with six Ford E-150 vans on order for Seattle, eight for L.A., and 10 for San Diego. According to ThyssenKrupp's director of fleets, Mr. Armstrong, Phoenix-area service vehicles average 25,000 miles each year. This means that for each vehicle purchased, ThyssenKrupp Elevator is reducing its carbon footprint by 12,237 pounds of carbon dioxide each year, for a total of more than 67 tons annually across 11 vehicles already in use.

Just recently, the City of Prince George unanimously approved a city green fleet strategic plan, which includes a pilot project to convert five city vehicles to propane as part of the 2012 action plan. The project will be examined with the possibility of expanding it into 2013.

Finally, Canada Post currently has 100 medium-duty parcel delivery propane vehicles, and an additional 200 vehicles will be converted this year. They also have 10 mail delivery light vans and 20 patrol cars, used by postal inspectors, operating on propane today. Canada Post also has one operational propane refuelling station in Ottawa and plans to construct two additional stations this year.

We believe that there exist tremendous opportunities for many fleets to adopt the use of propane, which would not only help them combat climate change but would also reduce their operating expenses. This is why we are asking this committee to recommend to the Minister of Natural Resources that propane be included as part of the natural gas deployment road map, which has as its purpose to identify the optimal use of natural gas in Canada's transportation sector.

In 2010, under the ecoTechnology for Vehicles program, Transport Canada and Roush collaborated to test a propane-fuelled Ford E-150 van. The test results support the industry position that propane is a clean, affordable, efficient, and sustainable option when considering alternative transportation fuels. In this specific case, the medium-duty propane vehicle tested had carbon dioxide emission reductions of 11% compared to conventional fuel, based on combined city/highway emission results.

Canada's federal government currently faces a number of challenges that should favour their adoption of alternative fuels such as propane.

These challenges include the federal government emission reduction target of 17% from 2005 levels by 2020. The use of propane-powered vehicles on their own can achieve a reduction of up to 26%.

Next, budgetary pressures could be reduced through the application of energy alternatives that yield significant operating cost reductions. Over the last decade, on average, propane has been sold at 36% less than gasoline.

I should also add that the public is looking for the federal government to lead by example with initiatives that both address budgetary concerns and improve environmental performance. With a fleet over 32,000 vehicles, the federal government has a unique opportunity to save money and reduce its environmental impact by using propane in its fleets.

The federal Alternative Fuels Act is aimed at achieving these very goals by directing the federal government to buy alternative-fuels vehicles or to convert existing ones to operate on alternative fuels such as propane, natural gas, and ethanol. The purpose of the legislation, which took effect in 1997, is to accelerate the use of alternative fuels in motor vehicles in order to reduce the emissions of carbon dioxide and other greenhouse gases.

However, for fiscal year 2009-10, the last year for which we could find data, the Treasury Board Secretariat reported that only approximately 10% of federal vehicles were powered by alternative fuels, and only two vehicles were powered by propane.

One of the reasons stated for this is a lack of availability. We differ. Not only are there over 2,000 refuelling stations across Canada, but fleets can also be easily fuelled at fleet headquarters through a tank card-lock system, just as both Canada Post and UPS do.

In conclusion,

we have said that propane is readily accessible and available, and that is the case. Our country currently produces considerably more propane than it uses and we know that we have an ample supply to meet the needs of the future.

We also told you that the price of propane is affordable. The vehicle fleets of companies such as UPS and Airways Transit have proven over and over again the economic benefits of propane.

Propane is also a multi-purpose product. Whether it is used in agricultural applications, as vehicle fuel or as a means of heating our homes, or for many other uses, you can count on propane.

In conclusion, we hope this committee recommends to Minister Oliver that propane be included in any transportation road map and that the federal government lead by example by converting more of their fleet vehicles to propane.

Mr. Chairman, thank you for the opportunity.

[The Chair, Conservative, Merv Tweed]

Thank you.

Go ahead, Mr. Nicholls.

[Jamie Nicholls, NDP, Vaudreuil—Soulanges, QC]

Thank you, Mr. Chair.

Thank you for your very informative briefing. It is highly appreciated.

I lived in the Republic of Turkey for five years, so things like LNG refuelling stations and propane taxis are quite a common site on the landscape, given that the price of gas in Turkey is about three times the price of what it is here.

However, we've seen that for natural gas refuelling stations in Canada, the numbers actually fell from 134 in 1997 to 72 in 2010. What's the main reason for this decline over time, and what are some of the problems with maintaining and expanding a refuelling network across Canada?

[Dr. Sam Shaw]

Thank you so much.

One of the issues was a catch-22 in looking at vehicles that run on natural gas and not the marketplace. Now what you're starting to see is this. Particularly in the U.S., there are 1,200 stations. There are some of ours and some from Clean Energy. We just opened our Strathmore facility in the fall. You are starting to see it come back.

It was a case that there was no product, only conversions of passenger vehicles or trucks. Now that you have the OEMs starting to produce—unfortunately, they are not producing them in Canada—you are now starting to see the rollout. Certainly there are some companies that are very interested in reintroducing natural gas stations.

Again, I'd reference the fact that maybe we need to change the game by looking at home refuelling. That's very different. In fact, in one of the focus groups that we had, a number of people said, “Well, if Samantha bought one, maybe it's just a scheduling issue; we'll just go over to Samantha's and fill up our vehicles over there, even at the current price of $4,000, with a $1,500 install price.” Again, people are very cognizant of the cost of gasoline, particularly in the U.S.

[The Chair, Conservative, Merv Tweed]

Go ahead, Mr. Facette.

[Jim Facette]

Thank you, Mr. Chairman.

One of the main barriers in Canada to having more self-refuelling stations, or a self-refuelling station, is regulatory and standards in nature. If you have a vehicle in Europe, you can pull up to what they call an autogas station in Europe and fill up your propane-powered vehicle by yourself. In Canada we face some regulatory barriers to get there. That's basically due to a lack of understanding, a lack of harmonization with standards that exist around the world. We believe that if we look elsewhere, abroad, at the way they do it.... If it can be done safely in Europe and accepted every day of the week, it can be done here in Canada as well.

We have some regulatory issues to get through. We have to work with the Canadian Standards Association to do some harmonization across the country as well as recognition of what's done elsewhere in the world, and not try to duplicate or go one up just because it's done one way somewhere else. We should look at doing likewise here in Canada.

[Jamie Nicholls, NDP, Vaudreuil—Soulanges, QC]

Thank you.

My second question is more to Mr. Shaw. You spoke a lot about LNG. I'm wondering about LNG versus CNG. I've heard there are efficiency problems with LNG at high altitudes, which would make transport corridors using LNG difficult. With, say, the Edmonton-Vancouver corridor, there would be difficulties with the high altitudes there.

[Dr. Sam Shaw]

There are not, really—you're looking at a 3% loss on performance side—but clearly the LNG product is for longer distance. You get six times the value CNG gets, and that's why, in the heavy-duty trucks, LNG is used. There's one company that is doing some research on LNG for passenger vehicles, and that's Jaguar.

Typically what we've seen in the U.S. is that the triangles of LNG corridors are operating very well, particularly in Colorado, Texas, and so forth. The high altitude is not a problem.

The other thing that I see happening is the innovation out of Westport. Their joint venture of Cummins Westport has done a lot of research on the efficiency rate of LNG vehicles.

[Jamie Nicholls, NDP, Vaudreuil—Soulanges, QC]

Thank you.

As you know, many Canadian provinces have an abundance of hydroelectricity—notably Quebec, where I'm from, but British Columbia and Manitoba also have significant hydroelectric production facilities.

Measuring emissions and energy production in the burning of these fuels is a complicated science, but can you give us a sense of how natural gas and propane vehicles compare with electric fleets powered by hydro? How do you make your case to jurisdictions in these regions of the country?

[Jim Facette]

From the propane perspective, Mr. Chair, I'll have to get back to the member on the exact calculation. There are other people who will have far more of the answer than I, so I'll get back to you.

In terms of making the case, it depends where you are. There's not one solution that will fit everybody in Canada. The price of hydro for an electric car is probably cheaper in Quebec that it's going to be or is now in the province of Ontario, so when you look at the math, the math really depends on where you are. The math of converting to propane for fleets works out quite nicely in some jurisdictions and may not otherwise.

At the end of the day, it boils down to choice and giving the market the opportunity to decide what is best for a particular jurisdiction, be it a municipality or anybody else.

That's really what the propane industry wants. We have a product that has been around for a hundred years; it has been in fleets for a long time. Technology has advanced a great amount, and today it is essentially seamless in your fleet vehicles, whether they are trucks or anything else. If we're given the opportunity to compete with someone else or with any other source of energy for the fleet business, we'll do just fine. We'll win some and we'll lose some. That's okay.

The back half of your question really depends on where you are. If a municipality in the province of Quebec or the provincial government of Quebec chooses to go electric because it's less expensive to power that vehicle, then so be it, but they could choose propane for all kinds of reasons; maybe they can't get enough power to power a certain community. You can also use propane for more than just transportation, depending on where you are. It really depends on geography.

[The Chair, Conservative, Merv Tweed]

Thank you.

Go ahead, Monsieur Coderre.

[Denis Coderre, Liberal, Bourassa, QC]

Thank you, Mr. Chair.

My first question is one that is being asked by a layman.

What is the relationship between propane and natural gas? Are you working together? Are you enemies? Do you want to hug together?

It seems that you should all be part of it. I don't understand why you're not on the road map.

Do you want to talk about it, Jim?

[Jim Facette]

Mr. Chair, I have no idea why we're not on the road map either. Part of it may be that someone decided just to go in one direction rather than look at propane. I'm really not sure. The fact of the matter is, and I think you're alluding to what I said earlier, that 83% of the propane in Canada comes from natural gas exploration.

It's interesting to look at where the producers, some of whom are our members as well, are putting their money in their exploration. They're getting away from what he would call a "dry play", which is natural gas only or methane only, and are going to "wet plays", which have propane, butane, and ethane attached to them, because candidly that's where the money is. Heaven forbid that they try to make a buck in this country, but good on them. That's where the money is, in "wet plays".

So I don't know why, and that's why we make the request today.

[Dr. Sam Shaw]

Yes, I would agree. You start with methane first, and then you end up with propane, but as we start looking at natural gas in Canada, we note that it's at the lowest price it's been for decades and we need to seize the opportunity. Certainly they're doing that in the U.S.

I would say again, Denis, that it's really a continuum of using whatever fuel you need for a particular mode of transportation. You don't use propane typically for marine and rail and heavy-duty transport; you use LNG. Again, it's the product, depending on the mode of transportation, that is important.

[Denis Coderre, Liberal, Bourassa, QC]

It's a complementary kind of approach.

[A voice]

It is, very much.

[Denis Coderre, Liberal, Bourassa, QC]

Do you believe, Mr. Shaw, that we need also to take a look at the regulations? What would you propose?

[Dr. Sam Shaw]

Yes, and one of the things that my friend alluded to is that when you look at the regulatory side, NRCan, under the standards subcommittee of the implementation committee, is looking at LNG refuelling structures and so forth. Yesterday The Globe and Mail reported that the U.S. builds natural gas tanks for pickup trucks at 3600 psi; we're at 3000. We need to align our standards. Clearly a way forward has to come out of NRCan.

The other element involving standards and regulations is that we need to have harmonization in looking at north, south, east, and west. Interprovincial standards need to be looked at. I mentioned that the last time in noting that we had a valve part produced in Manitoba that wasn't certified in Alberta, and we had to wait three months. This situation is making us uncompetitive, whereas in the U.S.you can get it one time.

It comes back to our needing to have a standardization across Canada.

[Denis Coderre, Liberal, Bourassa, QC]

Would you suggest that this should be a priority in our recommendations?

[Dr. Sam Shaw]

It should.

[Denis Coderre, Liberal, Bourassa, QC]

This is a major issue.

Jim, you spoke a lot about this being a good product that we should use more.

I'd like you to expand a little on what you are doing in R and D.

[Jim Facette]

The industry could do more research and development.

Companies such as Roush, out of Germany, are investing time and money with OEMs such as Ford to advance the use of propane. The fuel injection engine has really allowed for great advancement. When you use propane in a vehicle, it's a liquid, similar to what is in your barbecue tank, and the vapour is what burns. Now we have a lot of opportunity—there is some R and D going around the world—that will allow for greater usage of propane.

As I said in my presentation, there was recently a project with eTV, the eco-technology program within Transport Canada. We hope it continues, because it was, if you will, a government-private sector R and D partnership that looked, both from an environmental side and from an engineering side, at whether there was a loss in power and that kind of idea.

We'd like to see that kind of thing continue. We think there are some good efficiencies in bringing government investments together with the private sector to advance the cause, be it through universities or whatnot. We made that recommendation to the Standing Committee on Finance last year. This is an important thing that would help us advance the cause of propane and technology and their usage.