Transport Committee on May 17th, 2012

[The Chair, Conservative, Merv Tweed]

Good morning, everyone.

Welcome to the Standing Committee on Transport, Infrastructure and Communities. This is meeting number 38. Pursuant to Standing Order 108(2), we are studying innovative transportation technologies.

Joining us today, from the Canadian Gas Association....

Monsieur Aubin.

[Robert Aubin, NDP, Trois-Rivières, QC]

I just have a point of order. I am wondering why the motion put forward last Tuesday is not on the proposed draft agenda. I think the debates were not finished. Mr. Coderre is one of the people who wanted to talk about it. As for me, I had an amendment to propose. However, it seems that this issue has been completely removed from the agenda. I would like an explanation, please.

[The Chair, Conservative, Merv Tweed]

Once a motion has been tabled—which was done at the last meeting—it doesn't show up on the agenda again. It simply means that it's live at the table. You can bring that forward at any point you choose. We don't show it as an agenda item after it has been tabled; it's only done when it needs to be presented for the first time. At the end of this meeting, if you want to raise it, you can do so. Or you can raise it now, if you choose. But it's considered a part of our agenda until it's dealt with.

[Robert Aubin, NDP, Trois-Rivières, QC]

Okay, thank you.

If it is possible, I would like us to finish the discussion we began on that topic. It was my understanding that you would give the floor to the members who were already on your list. I think Mr. Coderre was supposed to be the next person to speak.

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

Point of order.

[Merv Tweed, Conservative, Brandon—Souris, MB]

Mr. Poilievre.

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

Mr. Aubin does not have the right to simply put it on the agenda. First of all, you can't raise a motion on a point of order. So no.

[The Chair, Conservative, Merv Tweed]

Before I recognized you he did raise a point of order. I addressed his point of order and then he raised his issue as a floor item. He is entitled to do that.

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

He isn't on the speakers list.

[The Chair, Conservative, Merv Tweed]

He initiated the motion at the last meeting, and it can be brought forward to the committee at any time during a committee meeting. That's his right as a member. That's the rule.

Ms. Michaud.

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

I suggest that we discuss the amended motion that was presented at the end of that committee meeting. The witnesses could testify first, but we could set aside a minimum of 15 minutes—perhaps even a half an hour—to discuss the motion at the end of the presentation.

[The Chair, Conservative, Merv Tweed]

Mr. Coderre.

[Denis Coderre, Liberal, Bourassa, QC]

I think we should hear from witnesses. Therefore, I suggest we postpone this debate. However, we should have the debate at the beginning of the next meeting and deal with the two motions. We have two motions, which must be discussed. We should hear from the witnesses today, but at the next meeting, the witnesses should be informed from the outset that we will begin with the two motions. For now, I suggest that we postpone the discussion of the motion and hear from the witnesses.

[The Chair, Conservative, Merv Tweed]

Actually, it is debatable, because there's a condition that has been applied to the motion. Mr. Coderre has made a motion that we table it to the first item of business at our next meeting. By putting that condition on it, it becomes a debatable motion. If he were to simply end debate, then it's non-debatable.

If there's agreement.... Monsieur Aubin, are you okay with that?

[Robert Aubin, NDP, Trois-Rivières, QC]

Of course.

[The Chair, Conservative, Merv Tweed]

Thank you very much.

We do need to vote on Mr. Coderre's motion, which is basically that we suspend debate and put this as the first item of business at our next meeting.

(Motion agreed to)

[Chair]

Thank you.

To get back to our guests, thank you for being here today. Joining us from the Canadian Gas Association is Mr. Timothy Egan, president and chief executive officer; from the Canadian Natural Gas Vehicle Alliance, Alicia Milner, president; and from Compression Technology Corporation, Tim Sanford.

Welcome.

I'm sure you know the routine. I'll ask Mr. Egan if he wants to start, and then we'll move to questions from the committee.

[Timothy Egan, President and Chief Executive Officer, Canadian Gas Association]

Thank you very much, Mr. Chairman and members of the committee, for the opportunity to be here.

I will make my presentation in English, since my French is not very good, but you may ask questions in French.

I will give an overview presentation on natural gas and natural gas in transportation in Canada. You should all have copies of the slide presentation in front of you.

The first slide talks about the focus of my industry, which is the customer. We are a network of delivery organizations across the country delivering natural gas to 6.3 million customers across the country.

Natural gas currently meets approximately 30% of Canada's end-use energy needs. It isn't well known that it's more than electricity on a national basis. We believe there are significant future opportunities for the use of natural gas in homes and businesses in close integration with alternative energy services, like partnering in renewables; partnering with district energy systems, or in combined heat and power systems for broader use for gas power generation; and most importantly, in terms of our presentation here today, for transportation.

The chart on the right of the slide gives you a breakdown of natural gas use in Canada.

I mentioned that my member companies are the delivery side of the value chain for natural gas in Canada. We have 6.3 million customers, and we estimate that represents about 20 million to 25 million Canadians coast to coast to coast. That gas distribution industry is growing. We also represent transmission companies, manufacturers, and suppliers. You can see a breakdown there of the companies across the country.

The next slide talks about the product and its attributes. Much of what we do is try to explain these attributes to Canadians. There are seven key ones that we highlight. It is a domestic resource. It is abundant. We used to talk about a 30-year supply, but new discoveries give us estimates of more than a 100-year supply in Canada. There's the fact that it is affordable and has continued to be affordable as the price of gas has gone up and down over the last several decades. The price is at historic lows right now, which makes it even more affordable. It's clean. There are fewer emissions than alternative fossil fuels, and because of how it partners with other technologies in its versatile and efficient end use it's very clean.

I mentioned its versatility. It has been a reliable energy source without interruption for decades in Canada. Ultimately, the most important priority is that it's safe. Safety is the first priority for our industry across the country.

I'll go through the opportunities we have identified for natural gas in transportation. First is for on-road heavy, medium, and urban vehicles. The opportunity for natural gas in heavy-duty vehicles is the most significant one. Natural Resources Canada conducted a road map highlighting this opportunity, and it's the focus of our activities today. The life-cycle carbon emission reduction opportunity by use of natural gas in heavy-duty vehicles is 20% to 25%. Increasingly important is the cost-saving opportunity that the fuel option represents. In the right-sized fleet it can reduce fuel costs by 15% to 30%. That number varies so much because it depends on fuel use, type of vehicle, and other similar variables.

The next slide gives you a graphic image of vehicle trends in Canada and demonstrates why we're focusing on the heavy vehicle use opportunity. Heavy truck use in Canada has increased significantly over the last 20 years. It's about 4% of the on-road fleet, but represents almost 30% of on-road GHG emissions. That trend for increased use is continuing, so the opportunity to deliver on affordability and a cleaner emission profile is significant there.

There are other opportunities for natural gas in transportation as well. In the next slide we talk about the use of LNG, or liquefied natural gas, as a marine fuel. This is an opportunity that has emerged very dramatically over the last couple of years. In large part it's a response to the changing supply picture and the consequent affordability. As fleets are switched over when engines retire, the timing is very good for the opportunity for natural gas.

The next slide talks about rail and remote communities. These are two opportunities that are just emerging in our consideration. There are conversations going on with rail companies across Canada about substitution of natural gas as an alternative.

Remote communities are a particularly exciting opportunity, in our view. There are literally hundreds and hundreds of remote communities across Canada's north, as all of you will know. Those communities tend to be fuelled by diesel, which is very often flown in at enormous cost. Oftentimes that cost is borne by the national taxpayer where there is federal assistance. So there is an opportunity to deliver a cleaner fuel option that is much more affordable.

The other point about the gas application, as I mentioned earlier, is its versatility. It can be combined with other technologies, so this offers a chance to bring a variety of different applications for energy services to these northern communities.

Last but not least is the opportunity in homes and in communities. The focus of our work is on the heavy-duty vehicle opportunities, but we do want to acknowledge the long-term opportunity that would exist in lighter-duty vehicles.

In terms of personal vehicles, technology is not the issue. Original equipment manufacturers—that is, the major automotive companies—are bringing product into the marketplace around the world. There is not product in the Canadian marketplace of any significance at this time, but as the conditions continue to change that should change. What we need is to build public interest and Canadian market demand.

I'll mention a couple of leading adopters for you. Those of you from ridings along the 401 may recognize in the picture in slide 10 a truck from Robert Transport, a Quebec-based trucking company, which is in a partnership with Gaz Métro and with Enbridge Gas Distribution for the substitution of natural gas in their trucking fleet. They are ultimately going to 180 trucks, and I believe they're at 50 right now, so it's a significant venture and it's one that's highly visible on a principal transportation corridor in Quebec, la Route bleue , the Blue Road, as it's known.

Next I will talk about a couple of leading adopters. There's Vedder Transport, in British Columbia, which is refuelling an LNG-powered truck fleet; and Waste Management, WMI, which is working with FortisBC on a CNG fuelling station. CNG of course is compressed natural gas.

I had mentioned applications in marine, which are detailed for you, for some work that is under way right now for liquid natural gas for ferries in Quebec. This is a new initiative with Gaz Métro, involving ferries crossing at a number of points on the St. Lawrence. The delivery of vessels is scheduled for spring 2013 and 2014. Those of you who are familiar with that part of the country will know that the amount of ferry traffic is very significant across the St. Lawrence, so there are significant opportunities there. It's not exclusively on the St. Lawrence, it's also up the Saguenay River and elsewhere, but it's significant.

A summary of advantages of natural gas: the supply picture is a dramatically improved one that has worked to improve its affordability; the safety record is extraordinary and a first priority for the industry and an ongoing priority; the environmental advantages I've already highlighted; and of course the natural gas pipeline infrastructure is one of the hidden jewels of the system.

I mentioned the 6.3 million customers. What that represents is an extensive distribution system already in place across the country. That distribution is on the back of the highway system of the natural gas industry, which is the pipelines that are distributing this product right across the country. That infrastructure is an enormous national asset, which we can better utilize as we go forward in trying to drive our better energy use.

Some of the barriers we have—and I know my colleague Alicia Milner will get into these a little bit more—are refuelling infrastructure, upfront capital costs, and codes and standards. We are working on these in various ways.

I'll start from the bottom up, on codes and standards. The work with the NRCan round table has been a significant first step in an effort to make sure that the conditions are in place for the market to evolve. That work continues, and NRCan is to be applauded for the efforts they've undertaken there.

On the upfront capital costs, when you think about moving to natural gas as a transportation fuel, you think about the fuel, you think about the vehicle technology, and you think about the infrastructure. We're there on fuel. In some instances, particularly for heavy-duty vehicles, we are there on the vehicles. The issue is whether the refuelling infrastructure is in place. Those early market leaders I identified are helping to put that infrastructure in place, but we have more to do there.

We should also think about this as a continental opportunity. I know that Alicia Milner is going to reference that as well.

With respect to the role of the gas distribution utility, we have a great national asset in our delivery pipeline infrastructure. We have significant history in delivering natural gas. And we have the ability and interest to partner and invest in new ventures as we go forward.

The last slide is a snapshot, which I'll talk about. I'm happy to give you more information on it at a later date. ETIC stands for Energy Technology & Innovation Canada. It's a new venture we've started at the CGA to stimulate investment in demonstration projects for new applications of natural gas. We believe that the key to long-term energy and environmental sustainability is to drive efficiency and innovation. Utilities are leaders in doing that, and through ETIC we hope to do that more. Transportation is one of the four areas in which we're doing that. The others are integrated community energy systems, the use of renewable natural gas, and industrial processes.

I just want to highlight that venture as something I would be happy to get all of you more information on at a later point.

With that, Mr. Chairman, thank you very much. My apologies, but I'm fighting a cold.

[The Chair, Conservative, Merv Tweed]

We'll go to Ms. Milner.

[Alicia Milner, President, Canadian Natural Gas Vehicle Alliance]

Thank you for the opportunity to be here today to talk to you about natural gas vehicles. I'm here representing the Canadian Natural Gas Vehicle Alliance. We're the national not-for-profit trade association that advocates for greater use of natural gas for both economic and environmental benefits.

With my remarks, I'll address the question of natural gas use for personal vehicles, including home refuelling. I'll comment on barriers, market development timing, and how we see light-duty fitting together with the industry's near-term focus on medium- and heavy-trucks and buses, which committee members will recall was the focus of the deployment road map, and I know you've heard that from a number of witnesses. Finally, I'll close with three recommendations to the committee members regarding how to encourage more use of natural gas in transportation.

Before talking further on the personal side, I'd like to just take a moment to talk about transportation generally.

Transportation is a large consumer of energy. It uses about one-third of all energy used in Canada. But unlike every other sector of the economy, it's uniquely vulnerable because it relies on one energy source to meet of 98% of energy needs, and that's crude-oil-based fuels. Of course the renewable fuel standard is going to change this, given the ethanol and biodiesel mandates, but we're still in a situation where we've seen little change in energy use and no choice for the consumer, despite more than three decades of investment in alternative technologies and fuels.

Looking at the opportunity with natural gas, the real critical question is how we can be successful in transforming the market. How do we ensure that any changes are sustained in the marketplace as we move forward?

Right now in Canada, we've got about 12,000 natural gas vehicles. That represents one-tenth of one percent of the total vehicle population. In the U.S., the penetration for natural gas is also about one-tenth of a percent: 120,000 vehicles out of more than 240 million vehicles.

Why in North America are we lagging behind, when we've seen such tremendous growth for natural gas in other markets globally? First, it's important to understand that most of the growth in the global natural gas vehicle market has involved after-market conversions, which we've had in North America for more than three decades. The reasons the after-market approach has not taken off here are cost and the lack of a broader system to support consumers. A typical natural gas vehicle conversion costs between $7,500 and $12,000 in North America. There are fewer than 15 certified conversion shops in all of Canada and no shops in many provinces and territories. Now, don't get me wrong, the technology performs very well, but the consumer is left without a support system, which can be very problematic, based on our experience in the industry.

After-market conversions certainly work for some high-mileage fleets and for certain consumers who have a payback of less than three years. Following my remarks you're going to hear from Tim Sanford, who is going to talk to you about how a small Ontario business is making this work in their local community.

If after-market conversions are not the primary strategy, how can we get natural gas vehicles for personal use? The single biggest enabler of natural gas for personal vehicles, which can also open the door to home refuelling, is having a choice of factory-built vehicles. Right now there are only two factory-built vehicles that will soon be available in Canada. Both of these vehicles, from General Motors and Chrysler, are pickup trucks that will be sold to commercial fleet owners. In the U.S., GM also offers cargo vans, and there's the natural gas Honda Civic that Tim mentioned. But the Civic only operates on natural gas. It's a dedicated vehicle. Given that in Canada we've only got 41 public stations, this would be a challenging vehicle to own in Canada.

The question of imports, then, if we want to import other natural gas vehicles, really shifts to offshore markets—like Italy, for example. But then we're talking about a lot of changes needed to the vehicle and a lot more complexity to comply with Canadian standards, given that we're fairly harmonized with the U.S. in this direction.

If factory-built light-duty vehicles are the key for the personal transportation market, why aren't the automakers producing more models for sale in North America? In a word, it's infrastructure. They need to see a strong build-out of public stations, as well as home refuelling options. They also need to see a market opportunity that involves Canada and the U.S. Canadian production volumes alone are not enough to justify the investments that would be needed to bring more natural gas vehicles to the market. As corridor fuelling stations are built for heavy trucks, this could provide a renewal of infrastructure to fuel personal vehicles. For example, a Highway 401 service centre that offered liquefied natural gas for trucks could also have a separate pump to offer compressed natural gas for passenger vehicles.

With respect to home refuelling, there's a major initiative under way in the United States involving natural gas producers, utilities, and the U.S. Department of Energy to develop a next-generation home refueller that would have higher output, lower cost, and a longer operating lifetime. You may have seen that GE and Chesapeake recently announced a collaboration to bring such a next-generation home refueller to the market by mid-2013.

The final enabler we see is having the capacity to support vehicle owners and to execute projects in an efficient and cost-effective way. With heavy truck and bus fleets, there are already more than 50 models of factory-built vehicles available with full dealer, parts, and warranty support. And with the current road-map work, industry and government are already jointly addressing the technical barriers and ensuring harmonization with the U.S. where possible. All this capacity-building work is going to ultimately support greater adoption in the personal vehicle market.

We believe that personal natural gas vehicles, including home refuelling, are coming and are coming on a scale that will be accessible to all Canadians. In the meantime, the work that is under way to develop the market for medium and heavy trucks and buses provides an important foundation to support the future use of personal natural gas vehicles.

In closing, we'd like to make three recommendations regarding how the committee can assist and encourage greater use of natural gas in transportation:

First, highlight the role that natural gas vehicles can play in Canada as an innovative transportation technology within the committee's upcoming report.

Second, engage the automakers and seek their input on what is needed to create the right conditions for the manufacture of factory-built natural gas vehicles for sale in Canada and the U.S.

Third, collaborate with the United States, through the clean energy dialogue, to establish north-south natural gas trucking corridors. This infrastructure can become the backbone of a much greater infrastructure build-out that will support personal natural gas vehicles.

Thank you for your interest.

[The Chair, Conservative, Merv Tweed]

Thank you.

Mr. Sanford.

[Tim Sanford, Director of Sales, Compression Technology Corporation]

Thank you very much for the opportunity to speak.

My name is Tim Sanford. I'm with the Compression Technology Corporation. We're based in the Toronto area. We're the exclusive distributor of the BRC FuelMaker compressor line across Canada. We are the home refueling people that you would see for compressed natural gas.

If I could direct you to the screen, I have a presentation I'd like to walk you through. It's a little more visual and I can explain as we go through the presentation itself.

To give you a bit of an update and overview of the different markets and the compression around those markets, you can see the large public and private stations that are available. They tend to service very large fleets, whether it's trucks, buses, waste haulers, or many cars on natural gas that are available. Then we look at the small to medium-sized private stations, which would incorporate fleets and hockey arenas. We have about 250 hockey arenas. Ice resurfacers are powered by natural gas and we refuel them right in the ice resurfacer room at the hockey arenas. The forklift market is a large market here in Ontario. We have about 150 plants that operate their forklifts on natural gas. Then, obviously, we have the home refueler, which is aimed to supply fuel to passenger vehicles in your garage, right at home.

The Phill product will be launched here in Canada in the fall of this year. The Phill you can see on the garage is the size of a payphone. It tees into the existing natural gas line at your home, compresses the natural gas, and fills the vehicle. It was formulated and designed around vehicles such as the Honda Civic, to be able to fill that up overnight while you're sleeping. It has a gas detector as well as a small exhaust fan built into it for safety purposes, and it allows you to fill your vehicle right in your garage at your residence.

The next item you can see is the VRA, the vehicle refueling appliance. This has been available since the late 1980s and is used primarily industrially, but it has been used worldwide for residential refueling. You can see it sits on a patio stone, so it's roughly two feet by two feet. It tees into your natural-gas line. This compresses natural gas, fills a vehicle, and produces about the equivalent of three litres of gasoline per hour. The Phill unit is around one litre of gasoline per hour.

What are some of the home refueling obstacles we've seen in the past that are being overcome and have been overcome? As mentioned by my two colleagues, it is the availability of OEM vehicles. We're starting to see more vehicles worldwide—about 20 in Europe, Honda Civic in the U.S., and we'll be starting to see pickups available here in Canada over the next little while. The availability of OEM vehicles is crucial to the growth of home refueling.

The cost of after-market conversions referred to earlier by Ms. Milner.... Regarding costing, you were looking in the past at $7,500 to $12,000. It's starting to be reduced a bit and we're starting to see some costing around the $5,000 mark. What we have been working on is to roll in the cost of the conversion as well as the cost of the home refueler into a financing package to make it a little easier and affordable for the homeowner.

Enbridge Gas in Ontario has a rental program in place under which you can rent a home refueler--the VRA that was shown in the second picture you saw earlier--for around $100 a month. The important point about that is that the price differential between natural gas and gasoline is now significant enough to warrant the conversions and to take a look at some form of rental program. In the past, when gasoline was selling at around 90 cents per litre and natural gas at your home was 50 cents, the delta itself was very tight. Now we're looking at a spread of approximately a dollar. It's $1.30 per litre for gasoline, and natural gas is around 30 cents a cubic metre delivered to your home, so we're starting to see the economics coming into play. The availability of OEMs is going to be crucial in the launch of this product and the success of the home refueler.

How can the Government of Canada assist the growth of home refuelling? Home refuelling needs more visibility. We need to encourage and mandate the use of alternative fuel vehicles in federal fleets. Leading by example would help the homeowner take a look at a product that is viable and extremely convenient.

We need to encourage the provinces to recognize alternative fuel vehicles through the use of HOV lanes, for example. I've driven in Phoenix in the past, where HOV-lane access, because of alternative fuel vehicles, was permitted. This is just a perk that you receive by having an alternative fuel vehicle; it's not a financial gain, but at the same time, it is a convenience.

Reduced vehicle registration fees and exemptions from emission testing are other items that might help encourage people to convert to natural gas.

Also we're finding that interprovincial harmonization of vehicle conversion and station infrastructure standards would be of tremendous benefit. For example, across Canada right now, if we were to look at converting a vehicle over, the cylinder that goes into that vehicle may only be certified for Ontario. You might have to have that tested for other provinces. That becomes a cost and a hindrance to the whole industry. So recognizing testing done in other provinces, through harmonization, would help in lowering some of the costs.

As well, if Transport Canada could look at accepting the potential of foreign vehicle testing to help promote vehicles to be imported into Canada, that also would be of tremendous benefit.

I appreciate the opportunity to speak. Thank you.

[The Chair, Conservative, Merv Tweed]

Thank you very much.

Mr. Aubin, go ahead.

[Robert Aubin, NDP, Trois-Rivières, QC]

Thank you, Mr. Chair.

Good morning, distinguished guests. Thank you for joining us. You have surely broken records this morning in terms of the information you managed to provide in 10 minutes. It is very impressive. It brings many questions to mind. Unfortunately, our time is limited, so I will try to cover the three main issues I am especially interested in.

My first question is probably for you, Mr. Egan. Two figures from the very beginning of your presentation have stuck with me. You think that we currently have a guaranteed 30-year supply in natural gas. We are talking about a 100-year potential supply, as you said immediately after, when it comes to natural gas sources. I assume that we may be talking about transforming biogas.

I would like you to elaborate on your thoughts regarding this 30-year supply and the potential 100-year supply. Does that include, for instance, massive development of shale gas across Canada?

[Timothy Egan]

Thank you for the question.

Just to clarify, what I had said was that we used to talk about 30 years of supply; we now talk about more than 100 years of supply. The reason we talk about more than 100 years of supply is that unconventional supplies across North America have come into the marketplace.

Yes, that does include shale gases. That's part of the unconventional supply. Those are being developed extensively right now, as you know, in western Canada, in British Columbia, and opportunities exist for significant development in Alberta as well. Eastern supplies have not been developed at this time. As you know, in the province of Quebec there is a study under way on the advisability of developing the shale gas resource in Quebec, and so too in New Brunswick; studies are under way about the development of the resource there. Significant shale gas supplies, or very closely related formations, are occurring in the eastern United States, in the Utica and Marcellus shale basins.

So those are part of that new assessment, yes.