Transport Committee on May 17th, 2012

[Isabelle Morin, NDP, Notre-Dame-de-Grâce—Lachine, QC]

Thank you.

I would like to know whether companies or distributors are interested in selling natural gas vehicles directly, without a conversion being necessary.

Owing to a lack of time, I would not be interested in buying a conventional vehicle and going through the conversion process. At first glance, I feel that's a waste of time in my life. I wanted to know if anyone was interested in selling those vehicles directly. I know they can be bought in the United States, but we must go through customs controls to bring them back to Canada. Once again, I think that is a waste of time.

Mr. Sanford provided some recommendations for encouraging people to use natural gas vehicles, but I do not see anything about simplifying the process or encouraging distributors to sell natural gas vehicles.

Do you know whether any of them are interested in doing that? How do you mean to encourage them? What approaches are you considering?

[Alicia Milner]

I guess I would go back to my earlier comment that looking broadly across Canada, we don't think the time is right for consumers.

That said, there will be small groups—for instance, a plumber or an electrician who drives a lot of miles—who will be motivated to go out of their way for fuel and be willing to go through the hassle of having their vehicle converted for that fuel savings. Definitely there will be that part of the market, and I think that's where Mr. Sanford's company has been successful, in finding those high-mileage drivers.

For the average consumer, though, I completely agree: I don't think we have all the pieces yet to offer this to the consumer in Canada. As mentioned, having those factory-built vehicles is a big part of it. We do see that this is coming.

To go back to the truck and bus example, that's something that is extremely powerful there. All those manufacturers have their own dealer networks. The beauty of that.... For instance, in the Robert project in Quebec, that particular dealer I believe covers half of the province for truck sales for Peterbilt. There are many fewer channels to go through to provide the product. In that case, the manufacturers have made it very simple. Their sales representatives can go in, just select the natural gas product, and it will get properly built at the factory, delivered, and all the rest of that.

So I think it's a question of timing, but yes, understand that right now those are a lot of challenges for the consumer.

[Isabelle Morin, NDP, Notre-Dame-de-Grâce—Lachine, QC]

Could you tell me when those vehicles will be available to consumers?

[Alicia Milner]

Yes. I would like to say that within the next three to five years I think is extremely realistic. The other thing we haven't mentioned this morning that we see as also encouraging is that we're starting to see more of the companies involved in the energy industry, the natural gas producers, trying to encourage their own employees to use the fuel. Some of them are offering incentives—better parking in the company parking lot, even free fuel for a year.

So we need some of these little steps first, to help fill in the spaces, before it starts to be close to the consumer, but the timeframe of three to five years I think is very achievable in North America.

[Isabelle Morin, NDP, Notre-Dame-de-Grâce—Lachine, QC]

Thank you very much.

I will move on to Mr. Sanford.

In your slide titled “How Can the Government of Canada Assist the Growth of Home Refuelling?”, you talk about the need for more visibility. With regard to that, you recommend “encouraging or mandating the use of alternative fuel vehicles in federal fleets”.

The Directive on Fleet Management: Executive Vehicles, says the following under item 5.3.3:

Executive vehicles must be: a. hybrid-electric, if available from the manufacturers; b. factory-equipped for natural gas, propane, or E-85 ethanol fuel, if available from the manufacturers, where fueling infrastructure exists or is planned; or c. factory-equipped with a 4-cylinder conventional fuel engine [...]

What do you want to change? Those characteristics are already being promoted. They are included in accepted vehicles. I don't see how more could be done. Do you want those characteristics to be mandatory? I don't see how your recommendation could be applied. You talk about encouraging or mandating the use of vehicles, but that is already being done.

[Tim Sanford]

Yes, I realize it is in the act. However, we haven't seen it being promoted with the end-user on the federal fleet side. There has been some traction, but not a tremendous amount of traction. If we are hoping to lead by example, then we have to maybe have a bit more of a concentrated effort in trying to implement it into the fleets themselves.

So yes, I understand it has been written into the act. However, we still haven't seen that being implemented into the fleet yards, for example, for any on-site refuelling or use of vehicles themselves. It could be education, and maybe some of the private sector could assist with educating some of the fleet managers, for example.

[The Chair, Conservative, Merv Tweed]

Merci.

Mr. Watson.

[Jeff Watson, Conservative, Essex, ON]

Thank you, Mr. Chair.

Thank you to our witnesses for appearing today.

I find your interventions, particularly some of your recommendations, to be very practical and very pragmatic. Of course the big issue if we're talking about light-duty vehicles is the expected sales point, if you will, for an automaker.

I suspect we're not at that critical point yet; otherwise, they'd be building these vehicles in big numbers. It costs on average anywhere in the range from $1 billion to $5 billion to develop a single light-duty vehicle in the auto industry. That's a huge amount of development cost, so there has to be an expected return.

The Canadian market for light-duty vehicle sales is just under two million units a year, and we're about 9% of the North American market. I'm not sure that if we change much here it's going to influence the OEMs' decision to produce light-duty vehicles for market sales. I think largely they'll be driven, as it's always been, by what's happening in the United States.

Having said that, you're recommending that we talk with the OEMs. I'm not sure of what we're hoping to obtain from them, because it will be a purely economic decision about whether they have a market for it or not.

Have you had discussion with any of the OEMs? Have they indicated any barrier other than whether they expect to get the return for their developmental cost?

[Alicia Milner]

We have talked with the OEMs, and we work quite closely with GM.

I'm not sure if you're aware, but General Motors has their global gaseous fuel development centre in Oshawa, so they do this work here in Ontario. Part of it is that they also watch for signals from government. Yes, it's economics, but also it's understanding where things are shifting and whether they see that governments are going to get more serious about support for a given alternative.

I think that's another thing that goes into the mix, and I think the number of electric vehicles is very telling in that regard. Partly it's a new and innovative technology, but they're also seeing strong signals from government, and that supported the decision they've made internally.

[Jeff Watson, Conservative, Essex, ON]

What government support are you recommending then? What does the government need to do to send the signal to them to do this? Largely, there are two overwhelming considerations. One is price point for the consumer. In Canada, consumers tend to favour much lower cost alternatives and more simple alternatives than the American market. The second is the cost of abatement of new technologies for the OEM.

What support are we supposed to offer that will make 9% of the North American market a little more attractive for them?

[Alicia Milner]

I don't think “support” is the right word. Right now we have the Canadian Automotive Partnership Council that Industry Canada has. I would ask committee members whether this subject has been discussed with that group, with all the OEMs around the table. I don't know the answer to that.

[Jeff Watson, Conservative, Essex, ON]

Neither do I, actually, but that may be a good topic.

You mentioned north-south trucking corridors and the clean energy dialogue. Is that for the benefit of the trucking industry at this stage, as opposed to consumers?

You say the consumer market is not there. What are you looking for--fuelling stations along the 401? What are you talking about there? What about private money? You said private money is sitting on the sidelines with this kind of infrastructure. What do they need to leap into it?

[Alicia Milner]

As to the infrastructure for trucks on the corridor, this is a truck issue entirely. The bigger issue there, though, is a competitive one for Canada. By the end of this year, there are going to be 72 truck stops with LNG. A year from now, there will be 150. These are already funded and there have already been announcements made in the U.S. There is a lot of north-south movement of trucks and movement of goods. It will put the trucking fleets in Canada at a relative disadvantage if these trucks are operating on fuel that's 30% less expensive. So that's a competitive threat on the trucking side of things.

[Timothy Egan]

You referenced the clean energy dialogue, and I want to highlight the fact that—

[Jeff Watson, Conservative, Essex, ON]

She referenced it; I was just confirming what she said.

[Timothy Egan]

The clean energy dialogue does not talk about natural gas at this point, right? The focus of the dialogue on energy between Canada and the United States has not factored in natural gas. We think that's a shortcoming. It may be understandable given some of the history. But the changes in the marketplace, the supply picture, and affordability dictate that this needs to be part of the dialogue. We think that this will stimulate a lot of discussion, and that the OEMs among others will take notice of it.

[Jeff Watson, Conservative, Essex, ON]

The choice you presented was whether this would be happening suddenly or gradually. What's the upside to its happening suddenly? What's the downside to its happening gradually? If we were to do nothing in the short term, literally nothing, you say it's coming anyway. What barriers would we ultimately have to face as the technology becomes more available and more affordable to the consumer? What would we eventually have to face if we did nothing in the short term?

[Alicia Milner]

I think this is about opportunity and opportunity loss. We can leave it to the market, but we think it's going to happen.

I'll give you the example of Shell's investment in Alberta. They're spending $250 million to build an LNG facility west of Calgary. They're doing that to support the transportation market and they're going to use that fuel. They will be able to move it by truck and rail to support our western corridor, and they will also sell into other markets, like drilling rigs and stationary engines.

I think the question for the committee and for Canada is how many more of those investments there will be and how we can encourage those investments to happen in the next three to five years rather than the next ten to fifteen.

I mentioned the marine market. That could be a bit of a pain point. To comply with the emission standards coming in 2015, the shippers will either have to add scrubber technology, though there's not enough capacity to get the ultra-low-sulphur diesel they'll need for marine, or they'll have to go to LNG. The challenge with LNG is that they need it at certain points and they need 100% certainty that it will be there. Their timeline on vessel modifications is a minimum of 18 months, and it's usually longer than that.

That could be one area where there are some challenges. We're seeing Transport Canada starting to work with them very closely on how we facilitate this so that the shippers don't hit these crunch points. But on the onroad side, it's really about investment stimulating that private sector investment and shortening the timeframe it's going to happen over.

[The Chair, Conservative, Merv Tweed]

Thank you.

Mr. Sullivan.

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

Thank you.

I'm going to start with marine. The Canadian Gas Association's document said that liquid natural gas reduces SOx by 100% and particulates by 100%. How do we get zero particulates out of a natural gas engine?

[Timothy Egan]

I have to go back and look at the technology. We're getting this information from some of the marine users right now.

I was going to comment on measurability, but go ahead.

[Alicia Milner]

You have to understand that baseline fuel is 5,000 parts per million sulphur. Onroad now is 15. Natural gas traditionally has had a very strong advantage on particulate emissions. It was one of the reasons California encouraged the use of it way back when. I think measurability is maybe part of the issue here, but natural gas definitely has inherently lower particulate and NOx emissions.

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

But not zero.

[Alicia Milner]

It comes down to how you can measure it. Yes, I take your point on that.

[Timothy Egan]

But it does go to measurability, though. You're right, ultimately there's no zero, but the point is—