Transport Committee on March 6th, 2012

[Mark Adler, Conservative, York Centre, ON]

Okay.

[Jim Facette]

Basically a suburban neighbourhood today has a grid that fuels the neighbourhood. You don't see the spaghetti piping of natural gas. Propane would be the same thing. The fuel tank would be off-site somewhere else. You wouldn't see it. There could be a network right under the homes to fuel everything that you want done in your house, including your hot water tank, furnace, fireplace, stove, dryer—even your lights.

[Mark Adler, Conservative, York Centre, ON]

What would you say is the percentage of Canadian homes that are part of a grid at this point?

[Jim Facette]

It is minimal. There are few, actually.

The tradition in Canada has been that people have perceived propane as a means to an end, not an end unto itself, not as a solution. To be honest, we're trying to change that and position propane as a solution, because it can do everything for the consumer or business that you want it to do.

[Mark Adler, Conservative, York Centre, ON]

Mr. Shaw, I was just down to Washington last week and met with a number of U.S. legislators. Both Democrats and Republicans were very disappointed with the decision the administration took over Keystone. Notwithstanding that, everyone down there is convinced that no matter who wins the election in November, Keystone will carry on.

[Dr. Sam Shaw]

They're already starting.

[Mark Adler, Conservative, York Centre, ON]

Yes, they're already starting. They're just not doing the part in Nebraska.

You alluded to the President's blueprint for energy. Could you talk about natural gas as part of a North American energy solution?

[Dr. Sam Shaw]

The U.S. has a tremendous supply of natural gas. We're down in our natural gas exports to the U.S. because Canada has a big supply and the U.S. has a big supply. That's where we're looking at Kitimat in terms of exporting LNG to the Asian markets. The Prime Minister did a good job in China. Again, we see that as a tremendous marketplace.

In terms of a North American strategy for natural gas, we are probably at least a couple of years behind the U.S. on the transportation side, both for natural gas in heavy-duty vehicles as well as for light-duty vehicles. In terms of off-road, I would probably think that we are on a par with the U.S., whether it's oil rigs operating on natural gas or some of the other modes of transportation.

As for the potential marketplace, I have to bring in the global context, because Australia wants to be the number one exporter of LNG in the world and to supplant Qatar. In that particular opportunity, we may be remiss if we don't get on with looking at the export markets for natural gas. When we look at a North American strategy, we have to look at trade diversification as well.

[The Chair, Conservative, Merv Tweed]

Thank you.

Go ahead, Mr. Nicholls.

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

Thank you, Mr. Chair.

I have questions about the different pricing systems used in jurisdictions around the world. From what I know, there are three types of contract pricing. One is market index. Another, such as what is used in Japan, is based on oil prices or the basket of imported crude. The third is the one used in Europe, which is based on energy carrier index contracts and is linked to the Brent price, the HFO, the LFO, the GO, the coal price, and the electricity price.

From my understanding, in Canada we use a market-indexed pricing system. Could you explain how, in Canada, the pricing system works? The reasoning behind this question is to understand which pricing system is more advantageous to the consumer and offers the lowest price to the consumer.

[Jim Facette]

The back half of your question is easier to deal with than the front half.

The best prices offered to the consumer are usually the market prices. Competition usually dictates the best price for the consumer at the end of the day. Where there are more players in the market, you see better prices. I know that's a simplification, but for propane that is certainly the case.

I will give you a case in point. In Montreal last summer, I believe, on a propane tank exchange program, it was about 10 bucks in a very competitive environment, as opposed to 20-something somewhere else.

As far as the pricing in Canada is concerned, a lot of the propane is pricing down at Brent. Traditionally, but not necessarily this year, the price of propane has tracked oil. What we're seeing this year, though, because propane is a commodity traded around the world, is that prices are set for it out in Sarnia, at the BP facility in Sarnia, and it goes from there.

There is an excess supply of the product right now, owing to the warm winter that many of us have experienced. You could probably get a pretty good price long term if you were to pursue that for your home or whatever else. That's essentially the way it works.

Some jurisdictions in this country—for example, New Brunswick and Nova Scotia—will regulate the price of propane based on how you offer it for sale and how many times you touch it. If you do certain things, you can add 5¢. If you do other things, you can add 10¢ to the price. However, they use Sarnia as a bench price and they go north of there depending on how it goes. It depends on where you are. In other jurisdictions across Canada—in fact, most of them—it's just a market price.

[Dr. Sam Shaw]

Let me just add one component to what my colleague has said: the transmission price. The tolls of the TransCanada are an issue.

Clearly, to take natural gas from western Canada to eastern Canada costs a lot in terms of the tolls that are in existence. This is an issue that is being dealt with by the NEB. Right now you can bring in natural gas from the Marcellus field in the U.S. more cheaply than we can supply it from the west to the east, so there may be a trade imbalance if we don't look at that issue.

In fact, going back to my learned colleague Mark, is the North American strategy to import natural gas from the U.S. because of exorbitant tolls on the TransCanada Pipeline? There's an issue for you.

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

Just to clarify, Mr. Shaw, does the market pricing offer the lowest price to the consumer?

[Dr. Sam Shaw]

Market index contracting does, yes.

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

Thank you.

In your opinion, how would the private sector react to a fuel tax policy that charged rates to consumers based on the level of pollution created by each fuel, with the more polluting fuels paying higher fuel taxes?

[Dr. Sam Shaw]

Is that a sophisticated way of saying a carbon tax?

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

No.

[Dr. Sam Shaw]

I'm not understanding what you're saying.

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

Based on particulates in nitrogen emissions—

[Dr. Sam Shaw]

You're not talking about carbon; you're just talking about NOx and SOx and mercury in particulate.

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

Yes.

[Dr. Sam Shaw]

There is a difference between Canada and the U.S. The electricity regulation that is supposedly coming down that was in the Canada Gazette talked about CO₂ emissions but did not talk about NOx, SOx, and mercury, whereas the EPA is actually looking at the NOx, SOx, and mercury in particulate, particularly in PM2.5. In either case, whether you're looking at propane or at natural gas, one of the things is that you'll get lower emissions in the utilization of propane and natural gas. This is a good thing in terms of environmental footprint, and it's certainly a bridge to the future.

[The Chair, Conservative, Merv Tweed]

Thank you.

Go ahead, Mr. Poilievre.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

Thanks very much.

I'm very intrigued by this home-fill option. You've raised the concern about the absence of refilling infrastructure stations. We know we have the infrastructure to bring natural gas to tens of millions of households in this country. There are some households that are still on oil heating and other forms, but in most urban environments natural gas is the principal space heating source.

You're saying it's only $1,200 to $1,500 to attach a compressor that can allow you to fill a vehicle at home.

[Dr. Sam Shaw]

It's $1,500 to install and currently $4,000 for the appliance itself, so that's $5,500 total.