Transport Committee on May 15th, 2012

[Élaine Michaud, NDP, Portneuf—Jacques-Cartier, QC]

Okay. So there aren't more challenges for your industry to use any type of natural gas being extracted in many different ways...?

[Jonathan Burke]

No, not at this point. On a semi-annual basis we do an evaluation of the upstream footprint of natural gas, because there's a lot of research and there's a lot of stuff in the news around the greenhouse gas footprint around unconventional gas.

In collaboration with the U.S. DOE and with NRCan, we do a scientific study that goes into their models for actually determining the greenhouse gas footprint of the fuel as it goes into the vehicle. We haven't seen a dramatic change in the upstream footprint of that gas such that it's going to negatively impact our greenhouse gas emission reductions at the tailpipe. The bulk of greenhouse gas emissions from a vehicle occur at combustion. Once the fuel is already on board, the bulk of the greenhouse gas emissions emerge when it gets used.

[The Chair, Conservative, Merv Tweed]

Thank you.

Mr. Holder.

[Ed Holder, Conservative, London West, ON]

Thank you, Chair, and I'd like to thank our guest for attending this morning.

I've learned more about methane emissions, frankly, than I've ever wanted to know. I'm not sure if we want to call that “cow power” or “sow power”.

Forgive me, because I come from an urban centre. It happens to be the tenth largest city in Canada, but we don't have agriculture in my particular riding, although we are all beneficiaries of it.

I appreciate the renewability aspect of it, but how sustainable is this alternative methane emission as a legitimate source of power?

[Jonathan Burke]

Biogas?

[Ed Holder, Conservative, London West, ON]

Yes.

[Jonathan Burke]

It's quite sustainable when it's readily accessible as a renewable source. In situations such as a landfill or a waste water treatment plant or a dairy, where many of those emissions are already being concentrated, or in many cases by regulation have to be captured, it's very sustainable. Once you get a little further out and you start to look at capturing waste material and gasifying it and whatnot, it becomes more challenging to determine how that's going to play out in the marketplace.

But as energy prices increase, there are going to be more and more market forces that drive people to look at those alternatives that seem very far out of reach today. I'm sure capturing methane from a dairy farm 15 or 20 years ago seemed widely out of reach, yet it's an economically feasible way to fuel a vehicle today.

[Ed Holder, Conservative, London West, ON]

It's amazing. It's interesting to hear the chair talk about “French fry power”. I'm just wondering what you could do with all the politicians on Parliament Hill, what that would mean. But that's probably more hot air than natural gas, with all due respect—perhaps.

I was looking at the background of Westport, and it seems to be totally focused toward automotive, whether it's engineering design, etc., of various natural gas technologies to support heavy-duty diesel engines or to support various alternative fuel engines and the like.

Have you taken your technology and worked it towards powering companies? We think of the natural things, such as powering vehicles, and that's logical, although my sense is you may well be limited by the capabilities of, let's say, servicing centres across the country—and I'd like to come back to that. But where are you, in terms of your technology, in empowering business to be able to do what it does? I would think that's just a very easy transition.

Where are you in that marketplace, if at all? If not, why not?

[Jonathan Burke]

We've looked at power generation in the past. We had a project that actually ran a very large engine in Manitoba doing power generation exploration, looking at the possibilities of running our technology. It was very successful. It was at a time when there were many energy people who thought North America was running out of natural gas, so we shut down that project at the time.

Since that time, there are businesses throughout North America and around the world, Australia being a case in point, where distributed energy, using liquefied natural gas or natural gas from a pipeline, has become quite popular. It all depends, of course, on whether you're going to generate electricity using natural gas on a distributed energy level, for example, using a large internal combustion engine generating electricity. What is your alternative cost of electricity? From what we understand, in certain jurisdictions where electricity is very costly, such as where it's being generated by diesel power plants, it's a very good economic decision to switch to natural gas. However, when you're going from the grid, which might be quite cost-competitive, to an alternative fuel power generation application, it may not be worthwhile.

That being said, because of the growth of distributed energy in mining and other areas and in remote areas, companies like Caterpillar, Cummins, MTU, and others have come up with some very sound technology for that application, so we're not about to compete with them at this time on that. They have some great engines. There are mines in Australia where they truck out LNG 1,000 kilometres to the mine site, and then the LNG is used to power natural gas generator engines.

[Ed Holder, Conservative, London West, ON]

Is that all through pipelines and the like?

[Jonathan Burke]

It's typically trucked out, because there are no pipelines to these mines either. The cost of a pipeline far exceeds the 30 years of driving a truck back and forth with a tanker full of LNG.

[Ed Holder, Conservative, London West, ON]

How efficient is that process?

[Jonathan Burke]

It's very efficient. Up to about 500 or 600 miles, it can be very efficient to truck liquefied natural gas. There was a pipeline that operated for a number of years in China where they were trucking liquefied natural gas from northwest China almost 3,000 kilometres to southeast China, to where the industrial heart is. It was basically a rolling pipeline, because the cost and time to get that pipeline built exceeded their needs for gas now. So they started running fleets of 400 trucks at a time as a truck train down the highway.

[Ed Holder, Conservative, London West, ON]

Where do you see natural gas competing or finding its place among all the other fuel options in the longer term? If you had to project this out during your lifetime—I'll give you another 20 years, although I presume you'll live longer—where do you see the role of natural gas going in the next 20 years?

I'll come back to your company, but if you'd respond to that....

[Jonathan Burke]

Sure. We see natural gas playing the role diesel did in North America in the sixties and seventies, when all large trucks were running on gasoline. Diesel engines were introduced and were shown to be longer lasting. They provided a better power profile. They got better fuel economy, but there was no infrastructure.

It took 10 to 15 years for diesel trucks to be adopted, to the point where 95% of all large class 8 trucks on the highway now are diesel, and it works very well. With the pressure now on petroleum prices, just as there was then, we see natural gas becoming a very dominant part of the energy mix in transportation in North America and many other jurisdictions around the world.

[Ed Holder, Conservative, London West, ON]

Certainly in southwestern Ontario we've seen a dramatic impact on gasoline prices for fueling vehicles in the last 18 months.

Again, over the next 20 years, do you see the cost of natural gas being stable, increasing modestly, being more...? It sounded like you said earlier that the ability to extract it was fairly simple compared to other fuel resources, and there wasn't much that had to be done with the actual material once it came out of the ground. So how would you define the price stability of your product?

[Jonathan Burke]

I can't speak to price stability going forward. If I could, I wouldn't be here; I'd probably be sitting on an island in the Bahamas or something. But I think it will continue to be quite stable. I think the supply picture has really settled in North America. It's now in sufficiently diverse geographic areas around North America. Whether it's in Pennsylvania, Ohio, North Dakota, British Columbia, Alberta, etc., we're seeing a diverse supply mix.

We're seeing a whole range of unconventional extraction methods. I think we're going to see good, solid, stable prices for the foreseeable future. I hope they will be at a somewhat higher level that can sustain the industry in a healthy way.

[The Chair, Conservative, Merv Tweed]

Thank you.

Mr. Adler.

[Mark Adler, Conservative, York Centre, ON]

Thank you, Chair.

Thank you very much for being here today. Your knowledge and grasp of this subject matter is absolutely incredible. I really appreciate the fact that you're here and we're able to listen to you.

When was Westport founded?

[Jonathan Burke]

It was 1995.

[Mark Adler, Conservative, York Centre, ON]

Who was it started by?

[Jonathan Burke]

The co-founders were Phil Hill, a mechanical engineering professor at the University of British Columbia, and David Demers, his business partner.

[Mark Adler, Conservative, York Centre, ON]

So two guys founded this company. When did it go public?

[Jonathan Burke]

It was on April 1, 1996.

[Mark Adler, Conservative, York Centre, ON]

So it was virtually the following year.