Thank you very much, Mr. Chair.
Thank you very much to the committee for having me here today.
I want to start with a brief description of who Westport Innovations is, for those of you who may not be familiar. From humble beginnings at the University of British Columbia in 1995, the company was spun out of the university through the industry liaison office. It had a basket of technologies around combustion of engines using alternative fuels, specifically natural gas. The genesis of the technology was a professor, Dr. Phil Hill, who had been working on it for over a decade. Dr. Hill is a professor of mechanical engineering at the University of British Columbia, a recent recipient of the Manning Innovation Award.
Today, 17 years later, Westport is recognized around the world as a global leader in natural gas engine technology. We've gotten there through a lot of hard work, but importantly, we've gotten there through global partnerships. We've accepted the fact that Vancouver is not a global automotive sector hub, and as a result we've reached out to partners around the world in the diesel engine industry, in the automotive industry, and in other industries, to leverage our groundbreaking technology and our portfolio of intellectual property to be able to get our products onto the roads around the world.
Today we have over 35,000 engines in service in countries throughout the world: countries such as China, where Beijing deployed over 2,000 natural gas buses for the Beijing Olympics; Delhi, India, where there's been a marked improvement in air quality as a result of deployment of natural gas vehicles, specifically natural gas buses using our engines in collaboration with Tata; we've had a longstanding partnership with Cummins, which is North America's largest independent diesel engine manufacturer, headquartered in Columbus, Indiana; and we've had many other partnerships, including now with Ford Motor Company, General Motors in an advanced development project, Caterpillar, EMD, and others.
Our goal as an organization, however bold it may sound, is to transform the transportation market from using petroleum fuel to using alternative fuels, with today's emphasis being on natural gas, given its tremendous abundance, which I think the committee has heard about in the past. There's been a sea change in the supply of natural gas in North America, but not just in North America; it's happening all around the world. The unconventional extraction technologies that are being used here in North America to unlock unconventional resources such as shale gas and tight gas are being exploited in China, in other parts of Europe, in South America, and throughout the world. Recently the IEA—the International Energy Agency—reported that we're entering a golden age of natural gas.
Why do I talk about this? Because there's tremendous opportunity in our economy here in Canada to change our energy mix in transportation. Today, transportation, whether rail, marine, automotive, large trucks, or small passenger cars, is almost entirely dependent on petroleum, a globally traded commodity, the price or in some cases the supply of which we have little control over. We do have an opportunity, however, to change that supply mix and that energy use mix by switching to alternatives, be they electric, hydrogen—which I'm sure you've heard about—or natural gas.
One of the main benefits of natural gas is that it comes out of the ground relatively ready to use. As an unrefined product, it needs only to be compressed or liquefied and purified before it can be used in an automobile, a truck, a ship, or a locomotive.
Today our energy use for transportation by heavy-duty vehicles...and I think you've heard from Mr. Claude Robert of Robert Transport here before. Heavy-duty vehicles are those large class 8 transport trucks that ply the highways of our country and move our goods and keep our economy moving. Specifically, they account for a tremendous amount of our cross-border trade. Those highway trucks, although they account for only 3% to 4% of the vehicles on the road, account for almost 18% of our energy use in transportation. So there's a tremendous opportunity and a tremendous amount of low-hanging fruit at which we could target a new alternative fuel that is cheaper, cleaner, and abundant here in Canada and throughout North America.
Importantly, also, in emissions from transportation, specifically greenhouse gas emissions, not to mention some of the urban pollution that may be attributable to transportation, 29% comes from class 8 trucks in Canada. So there's a tremendous heavily weighted greenhouse gas footprint.
One thing that needs to be considered with regard to the use of natural gas for transportation is the cost of goods movement and the impact of high oil prices on our economy's ability to grow and to continue to get goods onto the shelves of stores and to consumers throughout the country in a cost-effective way. Whether it's locomotives, ships, or trucks, they're all impacted by the price of oil.
The opportunity to switch some of that to natural gas gives us an opportunity to reduce our goods transportation costs in North America, and specifically in Canada.
I do want to mention that Westport, through its 17 years of life to date, has received tremendous support from the Government of Canada in the past, and continues to receive support from the Government of Canada. I brought a copy today...and Monsieur Roger, the clerk, has some copies. I will make sure that everyone on the committee has a copy of it. Natural Resources Canada recently published a document on natural gas use in the transportation sector. It was an industry-government collaboration, both provincial and federal government and industry and trade associations.
It gives a very thorough examination of the energy impacts—i.e., the amount of natural gas that's out there and whether it's exploitable as a transportation fuel. We looked at the trucking sector and how best to target natural gas engine technologies and natural gas into that sector, and we looked at the role the government could play in deploying that.
Several important recommendations came from that. First and foremost was education and outreach, getting out to the trucking sector and teaching them about the alternative technologies that are available. It was looking at the codes and standards that are currently being adopted in various jurisdictions around North America, and the importance of making sure those codes and standards are aligned such that a truck that leaves a depot in Boucherville, Quebec, can arrive at a depot in Chicago with the same standards for refuelling and for tanks, etc., that will make that transborder movement so much easier.
We've received very strong support as well from Sustainable Development Technology Canada. In 2005 we conducted a year-long demonstration of our technology with Challenger Motor Freight of Cambridge, Ontario. We deployed five diesel trucks and five natural gas trucks in a head-to-head comparison of the technologies. Sustainable Development Technology Canada, Transport Canada, and Environment Canada were pivotal in making that a success.
We've also received significant support from the U.S. government through the Department of Energy, the National Renewable Energy Laboratory, and others.
More recently there's been emerging support from the provinces. The Quebec government in 2010 introduced budget actions that allow for accelerated capital cost allowance for the purchase of natural gas trucks as a goal towards their objective of reducing their greenhouse gas emissions in transport.
Prior to summarizing, I just want to give you a few examples of some fleets that are actively deploying this.
You heard from Claude Robert of Transport Robert, but Vedder Transport is British Columbia's largest trucking fleet. They're what's called a “dedicated” fleet, so they have dedicated contracts hauling things like milk, food products, forest products, etc. They operate over 400 trucks in British Columbia. They just recently deployed almost 50 natural gas trucks running on liquefied natural gas in British Columbia. Those 50 trucks collectively, on an annual basis, will reduce greenhouse gas emissions by 3,500 tonnes compared to their diesel counterparts. That's the equivalent of taking 700 automobiles off the road permanently—not switching them to electricity, not switching them to an alternative fuel, but removing them from the road permanently.
You can see the tremendous leveraging impact of switching a natural gas truck as compared to an automobile. The payback on those trucks is estimated to be less than 16 months, given the lower fuel price. The fuel displaced annually is 1.5 million litres by switching just 50 trucks to natural gas.
We also have many projects in the United States. We have trucks deployed with Walmart, UPS, and a number of other major carriers and well-recognized names. UPS, as an example, in Los Angeles has deployed a fleet of 82 transport trucks moving between Los Angeles and Salt Lake City. It's formed one of the first corridors of natural gas in North America, with four refuelling stations between Los Angeles and Salt Lake City. Those trucks can now deploy across that corridor of 1,100 miles.
Now we're starting to see other fleets utilize that network of fuelling stations. In southern Quebec and southern Ontario, we now see Transport Robert operating from their depot in Boucherville, with an LNG station installed by Gaz Métro. They now have their new station in Mississauga, also operated by Gaz Métro, and they now have a corridor of natural gas availability along Canada's most heavily used transportation corridor for class 8 trucks.
I'll tell you a little bit about Westport. Last year we spent over $34 million on research and development on the back of $264 million in revenue. As a percentage of our revenue, we're probably right up there in the top five in terms of our R and D expense. We continue to invest very heavily. We have 871 employees worldwide as of the end of April 2012.
We have 363 in British Columbia and an additional 10 or 15 located elsewhere in Canada. Our headquarters are in Vancouver, British Columbia. We have offices in Montreal; in Detroit, Michigan; Columbus, Indiana; Long Beach, California; Beijing, China; Gothenburg, Sweden; Venice, Italy; Lyon, France; Weifang, China; and in Argentina. We have partnerships with some of the world's largest global automotive manufacturers, including Volvo in Gothenburg, Sweden. Weichai, in China, is China's largest independent diesel engine manufacturer. Like many things Chinese, it is also the world's largest independent diesel engine manufacturer. We have a joint venture called Weichai Westport. We also have many operations under way in India and elsewhere.
In addition to the trucks I spoke about, we also have partnerships to deploy F-250 and F-350 Ford trucks at a plant in Kentucky that was just recently opened. These are being deployed toward fleet vehicles, these F-250s and F-350s operating on compressed natural gas.
Finally, we do have partnerships in the rail sector as well. This is not technology that is limited to rubber-tired vehicles. We're working on mine haul trucks—for example, the big trucks you see in the coal mines—but we're also working with CN Rail, Gaz Métro, and others. We're also supported by Sustainable Development Technology Canada on a transcontinental locomotive project running on liquefied natural gas. Locomotives use a tremendous amount of fuel. It's estimated that CN Rail alone consumes more than one billion litres of diesel per year. You can imagine the tremendous opportunity to reduce their cost, reduce their emissions, and put them on a very low-carbon fuel.
With that, I will end my prepared remarks—not so prepared, but I just wanted to give you a bit of an overview of who Westport is and what we do—and open it up to your questions.