Mr. Chair and members of the committee, good morning.
My name is Geoff Tauvette, and I am the director of Fuel and Environment at WestJet. In my current role, I manage all aspects of the fuel supply chain, including the fuel-related infrastructure investments at airports, maintaining fuel safety and quality, and programs intended to reduce greenhouse gas emissions.
As you're maybe aware, WestJet began in 1996 with 200 employees and 3 aircraft. Today we employ over 8,500 WestJetters, and our fleet will soon reach a hundred Boeing 737 next generation aircraft. Over the next several years we have 30 additional aircraft on order.
Last week we also announced an agreement with Bombardier to purchase up to 45 Canadian-built Q400 turboprop aircraft for the launch of our new regional carrier in late 2013.
Your committee's study on innovation and transportation is more than timely. When we look to the competitiveness of Canada's aviation sector and the challenges we face, innovation and technology development are critical to ensuring the future success of our transportation system. We believe that government has a leadership role to play in this area.
Today I would like to highlight developments in aviation biofuel, the opportunity it presents for Canada, and the need for the federal government to develop a comprehensive and coordinated policy framework to advance aviation biofuels into production and use.
The cost of fuel today remains one of the biggest challenges to the aviation industry's economic vitality. Fuel now represents an air carrier's largest expense, typically at 30% or more of our total operating costs. Based on the current price of about $140 a barrel, jet fuel is typically about $30 to $40 over the quoted WTI price of a barrel of oil, which you hear about in the media. WestJet is forecast to spend over $1 billion this year on our fuel.
Over the past decade we've also spent billions on upgrading our fleet and driving operating improvements. As a result we have improved our overall fuel efficiency by 43% since the year 2000. The resulting fuel savings are equivalent to the amount of fuel that would have been used to fly a Boeing 737 between Calgary and Toronto, and back, up to 34,700 times.
Improved fuel efficiency obviously lowers aviation emissions. However, existing technology can only take the industry so far in achieving even further emission reductions. The aviation industry globally is now looking to develop an innovative new fuel source, aviation biofuel, which will begin to lessen our dependence on conventional jet fuel, lower our emissions, and decrease overall price volatility.
As recently as five years ago aviation biofuel was more science fiction than science fact. The skyrocketing price of jet fuel and the aviation industry's stated objective of lowering our aviation emissions has resulted in biofuel research being conducted by the airlines, aircraft, and engine manufacturers around the world. Companies such as Boeing and GE, among others, are deeply involved in supporting biofuel programs, and they have worked with industry to develop aviation biofuel specifications. Recently both the ASTM and CGSB, the overall regulatory bodies responsible for approving fuel specifications in the U.S. and Canada, have approved aviation biofuels and certified them for use in aircraft.
Aviation biofuels can actually be derived from a surprising range of materials, including industrial crops, such as canola and mustard seed, tallows, fats, and algae. Many of these crops are and can be grown in Canada.
Aviation biofuel is designed to be a drop-in, meaning it looks and behaves the same way as current jet fuel. It can be used by any aircraft fleet, and older engines.
The main challenges to developing an aviation biofuel that demonstrates a lower emission profile when compared to conventional petroleum-based jet fuels are that it does not compete with important feedstocks such as food crops and, of course, that it be economically viable and affordable for the airlines to purchase.
There is still much work to be done to advance aviation biofuel from small test plants to viably sized commercial projects. While cost is still the main challenge today, with technology improvement and scalability the costs of making aviation biofuel will become more affordable with time.
Canada has all the right ingredients and know-how to become a global technological leader in advancing non-food feedstock and aviation biofuel commercialization. However, what's missing is a clear policy framework focused on development and promotion of aviation biofuels in Canada.
In the context of the committee's current mandate, we recommend that the federal government identify a federal department as the lead in developing a federal aviation biofuel strategy that integrates efforts of various federal and provincial stakeholders as well as industry.
This will not be a simple process. We are looking at developing an evolving technology over the next five to ten years, but the need for policy is now.
As we will discuss in a moment, the United States is forging ahead with the development of such policy, increasing the risk that Canada will end up simply supplying the feedstock to the U.S. biorefiners to sell back to Canada without any accompanying benefits. Currently in Canada federal departments do have various biofuel development activities under way and provincial governments are now entering the aviation biofuel space in particular. Discussion is occurring, and there are pockets of good things being done, but they are not being adequately leveraged across all stakeholders.
Through Transport Canada we have attempted to call together Transport Canada, Environment Canada, Natural Resources Canada, Agriculture Canada, and the Department of National Defence to discuss prioritizing aviation biofuels. What is needed is a designated lead department. The U.S. experience is illuminating in this regard. The U.S. is implementing an aggressive plan to becoming the world technological leader in biofuel production and generation. In addition to taking a coordinated view on developing aviation biofuels, they are providing incentives through policy development and grants.
President Obama has created a presidential interagency working group on biofuels, comprising the U.S. Department of Agriculture, the Environmental Protection Agency, and the Department of Energy. Their mandate is to accelerate the establishment of an advanced biofuels industry, the whole being influenced by a primary vision of energy independence.
The Federal Aviation Administration, the FAA, has taken the lead role at the federal government level to support the aviation industry in establishing affordable aviation biofuel refining and production. Additional examples of this commitment come from the recent MOU between the FAA and the U.S. Department of Agriculture to further the implementation of industrial cropseeds for use as aviation biofuel. The FAA has also been awarded funds to distribute to suitable aviation biofuel production initiatives.
While the FAA represents aviation at the federal level, various U.S. agencies have made complementary investments across the entire biofuel supply chain. Ultimately the U.S. has an underlying strategy to coordinate efforts for the development and production of biofuels by assigning leadership responsibilities to each affected governmental agency. For example, the FAA is responsible for testing and performance and quality standards. The Department of Agriculture is looking into feedstock development and production. The Department of Energy is enabling production. The airlines, of course, are agreeing to purchase the produced biofuel.
These departments have provided almost $1 billion in grants for biofuel-related projects. For example the USDA, Department of Energy, and the Navy have committed $510 million to advance biofuel production. The U.S. Department of Agriculture has awarded $13 million for feedstock development. The FAA has recently awarded $7 million to several producers to develop aviation fuels for testing from different sources.
Industry has actually played its part. Airlines 4 America, A4A, and Boeing have partnered with the USDA to develop a program called farm to fly. This program promotes efforts at the farming level for feedstock research and production to use at the airline level.
In late 2011 the EPA revised its renewable fuel credit program to award aviation biofuels production with one of the highest credit values. The policy incents refiners to produce biofuels from sustainable non-food sources such as industrial cropseeds, camelina and mustard seed. Ironically, Canadian sources of feedstock are highly sought after by U.S. companies as an opportunity to produce biofuels with a high credit value, with any excess production for resale back to Canada. In short, Canada is sending our feedstock to the U.S. for processing and potentially buying it back without receiving any benefit under the EPA credit program.
Canada has a world-class expertise in developing and growing industrial oilseed feedstock, canola being a prime example of this, and this expertise should be leveraged accordingly. Since feedstock represents more than 90% of the cost of biofuels, it is a critical piece of the supply chain to reduce the cost.
This is an opportunity for industry and government to work together to leverage Canadian expertise and to position Canada as a world leader in aviation biofuel development. However, we need a policy framework to advance aviation biofuels into production and use. We need to identify a federal department to lead the development of the aviation biofuel policy framework and integrate efforts across industry, federal departments, and provincial governments. The U.S. has built the initial template, and Canada has the opportunity to strengthen that model.
Additionally, by accelerating the production of sustainable Canadian-made aviation biofuel, WestJet and the rest of the aviation industry can achieve further significant emission reductions. This will strengthen the competitiveness of our industry so that we can continue to deliver the affordable and quality air service that our guests have come to expect from us.
Thank you. Merci.