I want to start with the auto industry's biggest challenge, and that is energy use. Right now, the issue is around having a reasonably cost-effective, portable fuel. It's an issue not only with transportation, but in other markets, and it affects the economies of countries globally. The issue is the price of oil. When economies are not really strong, as they grow, the demand for oil goes up. We have issues now with dipping economies into a recession. In my opinion, that's going to be an issue for quite a while to come.
How do we deal with that? Right now, the CAFE regulations from Canada and the U.S. are going to require us, between now and 2025, to use half the fuel to go 100 kilometres. That's really quite an enormous challenge.
If you look, for example, at the Honda Fit of today, which is their smallest car, it's slightly better than today's number. But for 2025 or even 2016, it's far away from what's required. What does that mean for the car companies? It means that companies that may be selling Cadillacs, Buicks, or large-sized sedans, such as Chrysler, Ford, and BMW are going to have to have fuel economy that is significantly better than a Honda Fit or a Toyota Corolla across the board on average.
So how do we get there? Obviously we're looking at things like electric cars, hybridization, and so on. One of our customers who I was speaking to feels that between now and 2025 there's going to be a $3,000 to $8,000 cost per car. What does that mean for the industry? It means that the price of cars is going to go up significantly to the extent that we'll lose a significant number of our customer base who are going to move off of vehicles. It's going to affect top line revenue and bottom line profit for both the auto companies and the supply base. It's going to be an issue.
Obviously we'll do our best to get there. Electric vehicles and hybrids won't be the whole answer. I'm here to recommend that we think more and talk more about natural gas. Natural gas, in the words of Boone Pickens, is cheaper, is cleaner, is plentiful, and it is ours. That applies to Canada, as well as to the U.S.
We're all awash in natural gas because of new means of extraction. We have over three times the known reserves that we had in the past. We've gone up to 140 years of known reserves. Prices are dropping, they have been dropping, and are expected to stay down for the medium and long term. It doesn't require investments in refineries. It's a big opportunity for us. We've all talked about the energy crisis. We've all talked about the price of gasoline. If we said that we had a fuel that cost 10% or 20% less than gasoline, and that you can use the same vehicle-type infrastructure as people are used to with piston engines, then that would be great. We could at least find a bridge to get us to the future, when other technologies can take over.
In 2011, natural gas was 69 cents per litre equivalent to gasoline at the pump. If you pumped it at home, it was 25 cents a litre. That's probably high for a number of reasons, such as the low volume of vehicles that we have here, and the low number of filling stations.
At this time, it's the only real replacement fuel that can be used more broadly across the board. It has the potential to be all that we hope. It provides emission reductions because of the nature of the molecule, which has less carbon. It is cheap transportation energy with enormous reserves, and so on.
In Pakistan, they have 2.3 million natural gas vehicles today and over 3,000 filling stations. In Argentina, there are 1.8 million vehicles that are run by natural gas today and 1,850 filling stations. In Iran, there are 1.7 million natural gas vehicles, and they're an oil producer. They have over 1,000 filling stations. There are a lot of countries that have a million or more. Contrasting with Canada, we have 12,000 vehicles and 80 filling stations across the country.
From 2000 to 2010 we had 30% growth in natural gas vehicles globally, but we had a reduction in North America. So I think we're currently running against the opportunity.
What do we need? We need a network of filling stations, and there are really two things we can do. One is to encourage filling stations at corner gas station centres, possibly by policy. The other is to somehow incentivize the use of home refuelling stations. There is a natural gas infrastructure in place today that feeds many suburban homes with natural gas. A line to the garage, or whatever, for overnight filling would make sense for a lot of people until there's a broader infrastructure in place. We need to build this infrastructure quickly to avoid constantly hitting our heads on the price of oil-based fuels every time the global economy expands. That's my first message.
Second, the call is for technology discussion on the potential for new types of vehicles. We've done studies on electric vehicles. I'm sure a lot of you have heard this before, but in an electric car the battery costs more than the rest of the car. So to make a payback business case for the consumer is really difficult. It takes a lot of fuel savings to pay for that battery.
But as you move downscale to a plug-in hybrid, a strong hybrid, a mild hybrid, a micro-hybrid, and the battery gets smaller, the payback period gets shorter and becomes reasonable. So with a hybrid vehicle you can maybe have a four-year payback. With a micro-hybrid it could be a two- or three-year payback. That starts to make sense for the consumer. If you have a 12- or 15-year payback, the car is used up before you get your money back on your investment in extra technology like the battery.
Looking at that and an alternate industry called electric bikes, and going to small batteries, there is room for classes of vehicles that operate between bicycles, pedelecs, and scooters; and cars called “enclosed three-wheelers” or “three-wheeled pedelecs” that could be more practical for use on the road.
Currently there is no legislation for these types of vehicles, but I think it's going to come. So we need some clarity on legislation for these three-wheelers. My preference would be that they operate as pedelecs. The same way a bicycle can be a three-wheeled bicycle, any bike could be a three-wheeled e-bike.
If you have this type of vehicle you can operate it in at least three seasons. It's low cost. The battery is only a few hundred dollars. You would have reduced congestion and no emissions. If it's a pedelec version it's good for your health. So for small towns, and that sort of thing, this type of vehicle can make a lot of sense.
Today we're just on the cusp of it, with things like the Segway and the T3 Motion, which is the three-wheeled vehicle you see security people using. But if you expand it to something a little bigger, with the battery you could even have a heated vehicle so it's comfortable. We all know we have cold weather from time to time in Canada. If you're doing a small commute, it's a nice, comfortable way to go.
I think there's room for this type of vehicle. We should build legislation around it now, because there are plans in place to bring these vehicles into play globally, and hopefully in Canada.
By way of background, Calgary Transit is a division of the City of Calgary. We currently operate just over 1,000 buses in our fleet at the moment, all of which are powered by diesel engines. Our fleet varies in age from some brand new buses that we've just taken delivery of to some that are probably over 25 years old. A fleet of that size at the moment currently uses about 26 million litres of fuel per year to deliver service.
One of the issues we obviously hit up against at the moment is the increasing cost of diesel fuel, plus the volatility of the fuel market as well. This is to such a degree that with our current usage, a small increase of around about 4¢ per litre of fuel adjusts our budget by more than $1 million per year. That was our first introduction to where our energy problem was in terms of managing our fleet.
On a more social level we were also experiencing problems with emissions from our older buses, and noise pollution from buses running through residential areas and in the downtown area as well, primarily associated with our older fleet.
Just so everybody's aware, in terms of a bus fleet, buses typically sit and idle probably 50% of their duty cycle. So they're only moving half the time; the rest of the time they're just sitting and idling.
These kinds of issues associated with the environment and the noise, as well as the cost issues we were seeing, led us to investigate some alternative technologies. We looked primarily in two areas, hybrid buses and CNG buses.
Our investigation looked at what we first experienced over 20 years ago with CNG, which was marginal success. The buses themselves worked particularly well. The issue we had with CNG 20 years ago was more on the infrastructure side as well as with the fuel delivery system. It wasn't quick enough to be able to allow us to operate a fleet of any significant size, and it was a little unreliable as well in terms of a fleet delivery system. That system ended about 15 years ago, and we haven't really looked again since. But the market and the current environmental pressures we're under have made us look elsewhere.
We did look at a number of CNG installations across North America. We looked at L.A., Atlanta, Boston, and New York. We did do some phone interviews with other agencies. Hamilton was a major one, obviously, that we talked to, as well as some of the other agencies throughout the U.S. It looked more and more as though CNG was the direction in which we needed to go.
In our direct comparisons with an electric hybrid vehicle, there were a number of issues we hit up against. The capital costs associated with a hybrid bus is about 50% premium, so just for ballpark numbers, a regular size, 40-foot bus is usually around the $400,000 mark. To make that a hybrid bus, it's an extra $200,000 premium on top.
We did speak to some of the major hybrid manufacturers, BAE as well as Allison, and we did some extensive life cycle costing studies with both of those agencies. The return on investment for those vehicles was in the twelve-year period. With a bus only typically having a life cycle of around 12 to 15 years it didn't make any sense at all to pursue the hybrid option, so the CNG option was the one that came to the forefront, really.
We held a number of discussions with major gas suppliers in Calgary to look at various options. There was a lot of interest from their part as well as on our part, primarily looking at things like long-term fixed price fuel contracts. Obviously the price of the fuel was significantly less and they would work with us on that. There was even some talk about possibly contributing towards some of the infrastructure costs, which was going to be the major driver, or the major barrier I guess for us, to implementing CNG.
As our study carried through, CNG looked to be the direction we wanted to go in. They did hit a barrier in terms of what the minimum size was that we needed to look at in terms of fleet size. It looked as though we needed to get about 150 buses before we could get any cost benefits from the capital costs of the infrastructure as well as the capital costs associated with the vehicle.
This wouldn't necessarily be a simple solution for a small agency, but it's certainly a viable option for an agency the size of the city of Calgary, or city of Ottawa, that kind of size.
So a proposed solution originally was to modify one of our existing facilities to make it CNG-compliant and procure 200 CNG buses. We were fortunate that since there were a number of projects aligning at the same time for building rehabilitation as well as fleet replacement, it made sense at the time.
We were looking to get longer term fuel price stability. There were significant improvements, in terms of reliability, that we were expecting to get. Current diesel buses, so you're aware, have a significant amount of equipment on the post-exhaust processing side to reduce emissions. None of that is actually necessary with a CNG bus, because it's the cleanest-burning carbon fuel that we have today.
In addition to reducing emissions, the CNG engine is considerably quieter than the diesel engine. The numbers we've seen from Cummins Westport indicate that the CNG engine is around 10 times quieter than a diesel engine, so you can imagine that if a bus is sitting and idling, which is the main issue, I guess that bus will be quieter sitting there. The road noise, when it's moving, would be pretty much identical, but as the bus is sitting and idling, that quiet time becomes a significant environmental issue in terms of social impacts in some of the more residential and built-up areas.
Obviously, as David mentioned earlier on, gas supply is plentiful. We've certainly heard there's fuel availability for over 100 years based on current usage, and that's without finding any more gas. So in terms of availability of the fuel, I don't think it's an issue. It's local fuel as well, so there were benefits that we were seeing everywhere. This is not to say that we didn't hit any obstacles. There was public perception about safety. There were concerns about whether or not CNG vehicles can operate in cold weather. There was concern about how many vehicle suppliers were actually available, from a bus supplier perspective. So there were some legitimate concerns.
To try to address some of those concerns, we revised our plan slightly. We revised and expanded it, so we're no longer doing a small conversion of a facility plus 200 buses. We've now decided to progress and build a brand new bus maintenance and storage facility capable of supporting 400 buses. That will be a CNG-compliant facility, so we will be transitioning to 400 CNG buses out of that facility as well.
We're currently with P3 Canada to develop a procurement model for the facility alone. We're hoping for an opening date of somewhere around 2015. That's obviously a little far in the distance, so as a prelude to that, and to try address some of the concerns that we were receiving, we've decided to run a trial of the CNG technology as a proof of concept, so we are procuring six CNG buses this year. The request for proposal was actually closed yesterday and we expect to see probably three of them around October and three of them in spring of next year.
Both major bus suppliers from Canada were the two agencies we targeted. They were New Flyer Industries out of Winnipeg, as well as Nova Bus out of Montreal. We've been working with both those groups to supply the buses. We will be trialing them to see how they work in cold weather. We will be using them as a communications tool for members of the public, and we'll be using them as a familiarity tool for our operators, for our mechanics, and for staff in general.
We intend to run the trial for about 18 months, so we're hoping to run it through two winters. We had an exceptionally mild winter this year, so it wouldn't have helped us in some ways. But we're hoping to get some cold weather simply to prove that this concept works.
In terms of barriers that we face at the moment, I guess our biggest issue is the infrastructure costs needed to convert from a diesel fleet to a CNG fleet. The issue isn't necessarily buying a CNG bus. There is now a premium associated with a CNG bus of about $50,000, but the problem is the infrastructure needed. You need to have significant compressor stations, you need to have significant natural gas storage, and you need to have gas lines of significant pressure brought to the facilities. Those costs are probably the biggest barriers we face right now and that capital cost is probably the biggest barrier to smaller facilities. It's something that probably the City of Calgary is working with, which is why we're looking at a P3 model, but assistance is always needed in projects of that scale when you try to transition from one technology to another.
If we were looking at recommendations here, I think we do need, as an agency, some support for transitioning to a more green fleet-type technology and certainly to alternative fuel methodologies. Maybe there are some interest-free loan schemes that could help with these initial capital costs that could be paid back over time from the fuel savings. There are a number of areas where we could be working with the federal and provincial governments for these more green technologies.
I think there also needs to be more promotion of CNG as a genuinely viable alternative fuel. We see a lot of commercials on TV. We see lots of commercials in newspapers about electric vehicles, about hybrid vehicles. Certainly, for the larger vehicles, there doesn't seem to be the payback that makes it a valid technology, whereas CNG really does provide a solution that is available today. It just requires some infrastructure development.
Thank you.
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I respect that. When you look at CNG, from everything I've read it's cleaner, it's quieter, there's less maintenance, and presumably the vehicle would be more reliable. I look at all those as positives. I look at your payback and think that if I could make that, as somebody who was in business for over 30 years before taking on this role in politics, it would be pretty—I don't want to say “easy”—saleable to financial institutions. You could tell them that they can bank on this.
The advantage you have coming from—did my colleague say the wealthiest?—maybe not the prettiest but the wealthiest province in the country—
Some hon. members: Oh, oh!
Mr. Ed Holder: —is that you certainly have the provincial government, and as has been stated, the cities are creatures of the province. I'm not sure what's left of the heritage fund at this point, but I would say to you that there are some opportunities to make your case there, and if that's what you need to do, I certainly wish you well.
I want to go back, if I can, but thank you for that.
Mr. Pascoe, you made some comments about the number of filling stations we have. I just did a quick calculation. You can't trust my zeroes anymore, obviously, but when I did a quick calculation.... You made reference to there being 1.8 million vehicles to 1800 filling stations in Argentina. I think that's 1000 vehicles—it's probably 10,000 now, based on my zeroes—for every filling station. You have Pakistan, with 2.3 million vehicles for 3,000 filling stations; that's 7,660 for every filling station. In Canada there are 80 filling stations to 12,000 vehicles.
That's 150 to one; actually, our ratio is excellent. One might make the argument that there may not be enough of them, but I would say that of all the countries you've referenced, ours has the best ratio of filling stations to vehicles.
But I have a more critical question for you. You seriously referenced the need for more stations, but you also talked about home refilling stations. We've had earlier testimony talking about the safety of filling stations. Do you have any concerns, in your experience as an engineer, based on what you have studied, to suggest that home filling stations would be safe? I'm not worried about reliability. Safety, I think, is the biggest concern any of us on this committee would have.
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I'm aware of his idea. I think one of the reasons he's looking at Israel is that the geographic size is a little more reasonable. That's why, if you were to take up the challenge, it might be an appropriate location.
With regard to swap stations, I don't think it has a good chance at all. The reason is that if you go to buy a car, the pile of parts on the floor for a smallish car is maybe $10,000. If it's electric, now the battery costs probably $10,000 to $12,000. So the cost to the car company, which they have to pass on, is now double. If you want to have battery swap stations, now you have to make a third battery to go to the swap station in case you need to make a swap, or at least a certain number of additional.
That capital cost, whether you own the battery or not, ultimately has to pass on to the consumer, because Shai Agassi is not in business to lose money, and neither are the car companies. You're going to end up paying for a car plus two batteries instead of a car plus one battery, if you have a recharging system. From an economic perspective, I can't see it working.
There's another thing with regard to deployment of batteries to swapping stations. On Super Bowl Sunday, for example, when everybody's moving from one part of the country to another, the first 40 guys come in and pick up their batteries, but the rest of the guys moving along in their electric cars, instead of being able to use their front-row Super Bowl tickets, were sitting in the swap stations, and now have to watch it on television. There were no extra batteries at the battery swap station.
Those types of things will cause problems, right?
That, pursuant to Standing Order 111.(1), the committee invite Mark Wright, the appointee to the board of directors of the Thunder Bay Port Authority, Jennifer Clarke, the appointee to the board of directors of the Prince Rupert Port Authority, Gary Valcour, the appointee to the board of directors of the Oshawa Harbour Commission, Colin Watson, the appointee to the Toronto Port Authority, Jean-Sébastien Harvey, the appointee to the Saguenay Port Authority, Elmer Derrick, the appointee to the board of directors of the Prince Rupert Port Authority, Éric Dupont, the appointee to the board of directors of the Quebec Port Authority and Pierre Rivard, the appointee to the board of directors of the Quebec Port Authority to appear before the committee prior to May 31, 2012.
My reason for making this motion is that we have discovered that the candidates nominated by the government have a lot of ties with the Conservatives. I am not including people who have been nominated for a second time, because it would be too easy for the Conservatives to tell us that the reason is that they gained experience in their previous mandates.
I will start with Jennifer Brunsdale Clarke, who gave $700 to the riding association in Abbotsford in 2010, $364 to the association in Burnaby—Douglas in 2009 and $600 to the association in Vancouver Quadra in 2007 and again in 2008.
Among the large donors are some presidents of Conservative riding associations. There is Gary Valcour, former president of the Conservative riding association in Whitby—Oshawa. There is also the secretary of the Conservative riding association in Jonquière—Alma, who also donated to the Conservatives in past years.
Pierre Rivard is also mentioned a lot. He was the lawyer when Josée Verner, who is a senator now, sought to…
I will say this in English because I have it written down here in English.
[English]
Pierre Rivard was the lawyer who filed the request, on behalf of then Minister Josée Verner, seeking to question the subpoena to appear in court regarding a business partner suing her communications company.
[Translation]
There are a lot of conflicts of interest in these appointments. The Conservative government based its recent campaigns on transparency and open government. The task of members of Parliament is to make sure that good decisions are made. If the government has nothing to hide, it will allow the committee to do its work and it will bring those people in so that we can ask them questions. That is why I am making this motion.
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Mr. Chair, if the government has nothing to hide, there's absolutely nothing wrong in bringing forward these eight appointees.
I'm particularly interested in Gary Valcour, because I want to ask whether he wants to work with the mayor of Oshawa and others, because the people of Oshawa are very against the refinery plant. I want to ask Mr. Valcour whether he has the experience to mediate between what the citizens want and what some of the folks who donate a great deal of funding to the Conservatives, such as Tim O'Connor, want. He wants to build this ethanol plant and wants the federal government, with taxpayers' money, to subsidize such a plant.
So there are lots of questions there.
I'm very interested in asking Mr. Elmer Derrick about his approval of the gas pipeline in his area, even though the majority of the chiefs and leaders in the area are very much against it. What vision does he have for Prince Rupert and the port authority there. What kind of vision does he have for Prince Rupert? Jennifer Clarke is also a big donor to the Conservatives. How do both of them see Prince Rupert? It happens to be a huge port and is a port that certainly can expand. I'm slightly concerned about the size. Does it need to be bigger, with tankers getting bigger? Would Prince Rupert be able to deal with the increasing size of these new tankers that want to come in?
With Prince Rupert, especially, quite a lot of grain is transferred there through CN or CP. What kind of experience are they having in terms of the delivery. Is it on time?
These are all the folks that will be dealing with these port authorities. Under our committee's mandate, we have every right to talk to them about their qualifications and the visions they have for the port authorities they will be serving on or are serving on now. I think it's useful for us to connect with them.
Several are in the Québec Port Authority. Éric Dupont, Pierre Rivard, and a previous failed Conservative candidate, I believe, were appointed there. So there are three. We didn't get that last one, but certainly we should talk to these two and get their vision of what the Quebec port should be. What's the first-year plan and the five-year plan for the Quebec port?
We have eight appointees to these boards, these port authorities. My colleague has documented their relationships with the Conservative Party. They may be very qualified people, but let's talk to them.
Mr. Chair....