Transport Committee on May 15th, 2012

[Jonathan Burke]

It certainly drives who we partner with in the United States in terms of manufacturing partnerships. All of our transit bus engines have been delivered through our Cummins Westport joint venture, in which the majority of the engines have been assembled in Rocky Mount, North Carolina.

[Mike Sullivan, NDP, York South—Weston, ON]

It's part of the Buy American policy that keeps that happening in the U.S.

[Jonathan Burke]

Yes, that's correct. Also, importantly, U.S. transit properties have been very aggressive in their switch to alternative fuels. The Los Angeles Metropolitan Transit Authority operates no diesel buses. They've done over a billion miles on natural gas. They retired their last diesel bus a year ago.

Nearer jurisdictions, in terms of climate maybe, are Boston, Washington, D.C., and a number of others that have adopted significant fleets of natural gas vehicles. At some of the annual transit conferences, they are sort of wagging their noses at some of the fleets that have stuck with diesel, due to the fact that they've been able to ride some pretty competitive natural gas fuelling prices, keep their transit fares low, and stay competitive.

[The Chair, Conservative, Merv Tweed]

Thank you.

Monsieur Coderre.

[Denis Coderre, Liberal, Bourassa, QC]

Thank you, Mr. Burke. I am impressed with your approach.

I am wondering how it is managing to happen faster in the United States than in Canada. It is as simple as that. What is the explanation for that? You have been polite with the government, you have had money to do research and development, and we will come back to that, but is there a culture problem? Is the reason that the oil lobby is stronger and more established than the natural gas lobby? Is it the fear of natural gas? We know that when natural gas came into homes, education did in fact have to be done. What explains the fact that it is happening slower in Canada than in the United States?

[Jonathan Burke]

Monsieur Coderre, I would say the principal reason we see more adoption in the U.S., and certainly in larger economies, is the fact that we're naturally more risk averse here in Canada. Our industries are more susceptible, if we make the wrong decisions, to failure, given their relative size. If you're a transit property in a small community in Canada and you operate 50 or 60 buses and you make a decision to go to an alternative technology, the risk may seem higher relative to a large transit property like Los Angeles. What we do see in Canada is a small amount of risk aversion, that they might not be as willing to jump in with both feet. Maybe that's cultural.... I wouldn't say it's cultural as much as we're just a smaller country and we have less capacity to jump into these technologies.

I would say, in addition to this, that despite the fact that the United States, since Richard Nixon, has been seeking energy independence, there has been pretty solid support for alternative fuels in the United States, given their concern about their dependence on foreign oil. So they have a number of well-established programs, through the Department of Energy and others, that have been long-standing and that have supported the adoption of alternative fuels. They're grassroots programs at the municipal or state level, and people are making significant inroads into alternative fuels.

I would say it's somewhat cultural and somewhat just the attitude towards alternative fuels.

[Denis Coderre, Liberal, Bourassa, QC]

So we're getting there.

Let's talk about R and D. I always have respect for a company that will invest its own money, which is living proof that you believe in your product. But there is a role, of course, for academic institutions or governments.

What's up for the next five years? When you have that kind of engine and now it's working, you have to look at the standards for a better environment, and the gas emissions and all that. What's in your plan for the next five years? What kind of engine should we take a look at, a mix with an electric motor plus natural gas? I'm just curious about what kind of R and D you're doing right now, when you accomplish what's supposed to be done. You have the engine now and it's working.

[Jonathan Burke]

Sure. One area we're focused on is we've been able to establish the identical performance profiles of a diesel engine, for example, using natural gas. Now our goal, for example, with our research and development program with groups like General Motors is to go to the next step.

Natural gas has tremendous properties as a fuel. When you take an engine that was originally designed to operate on diesel or gasoline and you just switch it to natural gas, you're making certain trade-offs because you're using the underlying legacy architecture that was around the use of gasoline or diesel.

We're working now on direct injection technologies that hopefully will push the boundaries of engine technologies using natural gas. We're really working on how you design a natural gas engine from the ground up, thinking that it will only ever live on natural gas, and how do you optimize its performance.

Another area where we're very focused right now is on large, high horsepower engines, things like locomotive engines. The locomotive industry and the rail industry in North America is coming under increasing pressure to adopt some new emissions regulations. It's not pressure; they're actually the law. The locomotives will become quite complicated if they continue to operate on diesel. They'll have to use lower sulphur diesel and other things that the trucking industry has had to make the switch to since 2007.

In using natural gas, there's the opportunity to reduce some of the emissions after-treatment equipment and to keep the relatively simple configurations of those locomotives while using natural gas, which brings its own economic benefits.

[Denis Coderre, Liberal, Bourassa, QC]

How do you deal with intellectual property? You might have a situation in other countries, like China and all that.

[Jonathan Burke]

We have a very large patent portfolio. In fact we have one of the strongest patent portfolios around the world in natural gas engine technologies, and we're often cited by our partners and our competitors for the underlying patents we have. We have a very large team in Vancouver that is focused on protecting our intellectual property and establishing and maintaining our patent portfolio. It's not cheap to do that. We also have a process by which we encourage employees to always think outside the box with regard to new ideas, and we show them how to protect those once they are developed and established.

With regard to the protection of our intellectual property in other countries, we typically focus on who our partners are and establish our partnerships with companies with which we have a good trusting relationship to begin with. That usually establishes the grounds upon which we can then start to share intellectual property. But of course whether it's with another Canadian company or with a Chinese company, you always need to be very mindful about how this is done in the procedures you establish within your organization. Our main challenge as a company is that we're partnered with numerous different companies, all of whom are in many cases competitors, so we have to almost have our own internal competitive barriers and intellectual property protections, notwithstanding our protection of our own intellectual property.

[Denis Coderre, Liberal, Bourassa, QC]

Our role is to get some recommendations, of course, for the future. We believe in alternative energies, but I think that through regulation incentives and intellectual property rulings, we maybe need to do better.

So what should we do regarding the patent law work on intellectual property? Do you believe that we protect our products enough, and how should we manage with other countries, for example, the States and those in Europe?

[Jonathan Burke]

The more cooperation there is between countries, given the fact that there's no going back from a global economy, and the more we can align intellectual property protection between some of our major trading partners and eventually globally, I think the better we all will be.

In some cases, organizations may be unwilling to go to countries like China because of their perception that their intellectual property may be impacted, but the reality is that Chinese companies are developing as much intellectual property as we are today, if not more. They're investing heavily in research and development. They're going to be a force to be reckoned with, and already are in many cases in a number of different industries. So they have as much to gain by protecting intellectual property and establishing good safeguards for the protection of intellectual property as we do here in Canada.

[Denis Coderre, Liberal, Bourassa, QC]

So we should do better here.

[Jonathan Burke]

Better cooperation is always helpful. Certainly at the government level, it establishes the ground rules by which companies can then work. I think small and medium-sized enterprises in Canada may be reluctant to go to China for the wrong reasons. The government could play a role in better informing companies about how to establish good business practices for dealing with other countries, rather than just—

[Denis Coderre, Liberal, Bourassa, QC]

It's like when we put together Team Canada, or stuff like that.

[Jonathan Burke]

Exactly.

[Denis Coderre, Liberal, Bourassa, QC]

That should be the role of the Government of Canada.

So what recommendations would you make? You spoke about intellectual property. Are you satisfied with the relationship vis-à-vis R and D? Do you think the private sector should take care of the infrastructure level?

[Jonathan Burke]

I think the private sector should take care of protecting its own intellectual property, but I think the government can play a role in opening dialogue with other governments for the sharing of best practices and aligning of systems for protection, and certainly with regard to some of the litigation that may emerge from it.

[The Chair, Conservative, Merv Tweed]

Thank you.

Monsieur Poilievre.

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

Your core business is to manufacture the engines?

[Jonathan Burke]

Our core business is to develop the underlying technology and then to partner with other organizations to manufacture and deploy it.

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

So you would, for example, come up with a technology, and if a manufacturer—I think you mentioned GM as your latest partner—wanted to institute natural gas into its truck line, then you would work with them to apply your technology to their vehicle.

[Jonathan Burke]

No two partnerships are the same. For example, with Cummins, we have a joint venture. It's 50-50 ownership with a joint board. The management team is all established in Vancouver as an independent company, and yet the manufacturing is done at Cummins plants, and the distribution and supply of those engines is done through the standard Cummins distribution network.

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

You bring to the table intellectual property and expertise on how to use it?

[Jonathan Burke]

Yes, intellectual property, expertise on how to use and develop it. Typically we'll bring people to the table as well, in terms of management and whatnot, and also market development activities.