[Recorded by Electronic Apparatus]
Thursday, June 1, 1995
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[English]
The Chairman: Order. Good morning, colleagues. This morning we're going to deal with our order of reference of May 11, 1995, that Bill S-7, an act to accelerate the use of alternative fuels for motor vehicles, be now read a second time and referred to the Standing Committee on Natural Resources.
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As you know, in our discussions over the last number of days the decision was made to try to move this private member's bill along in the committee at a fairly rapid pace today.
Our first witness today is Senator Colin Kenny, the author of the bill. We welcome him here this morning for his presentation. We will then hear from departmental officials and private sector witnesses. If we have time before Question Period, we'll do clause-by-clause. If not, we'll do clause-by-clause after Question Period.
Now we'll have Senator Kenny explain in detail the rationale of Bill S-7. You will then have the opportunity to question him more thoroughly.
Keep in mind, colleagues, that I will be a little more aggressive than normal in keeping us on schedule, because I'd like to see us get through this bill today.
Senator Colin Kenny (Rideau): Thank you very much, Mr. Chairman. This is my first opportunity to appear at this end of the table, and it's a novel experience. I very much appreciate the opportunity to appear before this committee and speak to Bill S-7.
I started working on the bill a couple of years ago. It was clear at that time that there was a problem with proceeding further with alternatively fuelled vehicles.
When I spoke to manufacturers, they were of the view that they'd like to make more alternatively fuelled vehicles, but there was insufficient fuelling and infrastructure. When I spoke to fuel suppliers they said they'd love to put in more refuelling stations, but there weren't enough vehicles on the road.
I then started to examine the problem in the context of federal government purchasing. It became clear, if you include the departments and crown corporations, that the federal government had something in the area of 39,000 vehicles, purchased over period of 5 or 6 years. They purchased just under 20% each year.
When I first looked at this issue it was clear that an environmental project on its own wouldn't fly. It was important that any proposal coming forward to Parliament be cost-effective and demonstrably save taxpayers' money. So I spent a great deal of time with researchers, staff, and people in the private sector looking at various paybacks for different types of vehicles, fuel usages and amounts of kilometres driven.
Eventually we concluded that if the federal government converted 75% of its fleet, as much as $7 million dollars a year could be saved and CO2 emissions would be reduced by about 20,000 tonnes a year. That seemed like a significant target and worthwhile goal to aim for.
The bill is fuel-neutral. It includes five fuels: ethanol, methanol, propane, natural gas, hydrogen and electricity.
The intention is that these fuels would be used in different regions of the country, depending on where they were most available and where it made the most economic sense.
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A model in the United States appeals to me a great deal. Under the aegis of the Clean Air Act the federal government there goes to the local municipalities or regional governments and tells them to pick the fuel that makes the most sense to them. The federal fleet in their area will then match that fuel. I think that's something worth considering.
There has been a significant amount of interest in the bill on behalf of the private sector. I believe the clerk and all members of the committee have received the document I made available. It includes letters from a large number of fuel suppliers. They are listed from west to east, so you can take a look at your own province or region if you wish.
The letters indicate that private sector companies are prepared to invest between $40 million and $50 million in the event the bill proves successful. They've done that, using what I believe to be fairly conservative estimates of the number of vehicles they're likely to get in their regions.
If you look at the chart, you'll notice that out of the 39,000 we have in the fleet, there is a total of only 13,000 vehicles required to make this whole thing go. So I think there is a fair element of conservatism in the proposals put forward by the private sector. They haven't just rushed out and said they're sure they're going to convert 75% of 39,000.
They've taken a look at what they think their market share is going to be. They've taken a look at how many vehicles there are in their region. They've taken a look and made some assumptions about the mileage or kilometres driven by the vehicles in their areas. Then they've said, let's not get carried away, let's come in with a realistic rather than an exaggerated figure. I think that with the 13,000 they're really only looking at one-third of the vehicles being converted in order to come up with this addition to infrastructure.
I'm spending a bit of time on this issue, Mr. Chairman, simply because I think that in these economic times it's important to find a way to stimulate spending in different regions of the country. Here we have a group of companies that have identified their service area and said they're prepared to make this spending and create those jobs in their area if this goes forward.
I also understand some of the witnesses you will hear from later signed some of these letters, and I expect they'd prepared to speak to them.
There is also a smaller but no less important document called ``The Following Canadian Private Sector Companies Have Indicated Their Support for Bill S-7.'' It lists a group of companies I would characterize principally as sunrise companies. They're small high-tech companies. Some are as small as 20 or 25 employees; some are as large as a couple of hundred.
They're in the business of developing new techniques for doing things, new equipment, different ways of storing fuel, new tanks and new valves. It's quite interesting high-tech equipment. I think it's important for Canada to have it and encourage it in various regions.
The letters speak for themselves. There's a fairly good diversity from across the country. I commend the letters to you if you haven't had a chance to see them.
When the bill came to the Senate the propane and natural gas suppliers, at least Union and Consumers, made a commitment to the committee: if the bill went ahead, they would be prepared to convert the federal fleet, where economical, to their fuel at no cost. I draw that to your attention. You'll have representatives from two of the three companies here later today. I think that's a significant offer and worth exploring. I would encourage members of the committee to explore that with them.
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In essence it's a deal that takes the risk out of the federal government, at least in the first stages, and leaves the benefits with the federal government. It's an attractive proposal, not unlike the Federal Buildings Initiative program where buildings are converted and renovated environmentally. I wasn't expecting this when I was drafting the legislation, but I think this is an attractive addition that has come forward since then and is a significant plus, to which I hope the committee gives some consideration.
In the course of preparing for the bill we took a hard look at the Auditor General's Report of 1991, which has been made available to the committee. I think it's required reading for anyone interested in understanding how the federal fleet is handled.
It's very critical of how the fleet has been managed and suggests we have too many vehicles. It is very clear about the fact that we're not purchasing vehicles well and it is critical of the fact we have too many types of vehicles. We counted 106 different makes and models in the federal fleet, and I think that's bizarre. I see no reason at all why we can't have a dozen general-purpose vehicles in the fleet.
You asked why I'm concerned about that. I don't think there's any likelihood of car manufacturers building 106 different alternatively fuelled vehicles. I think there's a good opportunity for each of the big 3 manufacturers taking on 4 vehicles and building them.
As an aside to you as members of the House of Commons, I say that in the process of dealing with this bill one of the things that will inevitably come forward is a re-examination of the size of our fleet and the types of vehicles we have in our fleet. As a by-product, I hope we'd bring pressure on the government to reduce the different types of vehicles we have.
This would make sense in terms of how we purchase. We could save more money in purchasing vehicles, in maintaining them and having predictability in our operations. There's room for all sorts of innovation in terms of departments sharing vehicles and so on.
The Auditor General did have a bright point in his report. He suggested that the RCMP do purchase their vehicles well. He pointed out that they have the same kind of vehicle from coast to coast, with the same package of fittings, and that they do get true economies of scale when they make a purchase.
A copy of the Bronson Report, which was commissioned by NRCan, is in the kit I provided the committee. I commend it to you as worthwhile reading if you're interested in fleet management. It's significant for a variety of reasons, two of which I'd like to draw to the committee's attention.
First is the page that relates to availability of alternative fuels. It indicates that 100% of the federal fleet obviously has access to gasoline right now; 96% has access to propane; 36% has access to ethanol blends; 34% has access to natural gas; and 6% has access to methanol. It's quite significant that 96% of the fleet, as it sits today. has access to at least one alternative fuel, and one-third of the fleet has access to three alternative fuels today, without any adjustments or changes.
This study is based on 25,000 vehicles. The discrepancy between the 25,000 in this study and the 39,000 I talk about in the legislation is explained by the fact that the 25,000 just covers government departments, while the 39,000 in the legislation refers to government departments and crown corporations.
Of the 25,000 vehicles - that is, in government departments - examined in this study, 11,200 are used for less than 20,000 kilometres per year. That too seems to me to be a little unusual. As parliamentarians we should all be concerned about the underutilization of these vehicles.
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The Department of Transport suggests that 20,000 kilometres a year is the minimum for which vehicles should be used in a year, and we have 11,000 vehicles that are being used for less than the minimum. Some of them may well be airport fire engines or something like that, but it's a fair guess - at least our committee on the other side guessed - that we didn't need all these vehicles, we should be leasing some, we should be paying public servants to use their own in some cases and maybe some people should be using bicycles or walking.
But we thought there should be fewer here and if there were fewer vehicles in the fleet.... If you don't have a vehicle, it doesn't pollute, and if you don't have a vehicle, you save money right off the bat. Also if you take off your low-usage vehicles, it means the other vehicles are going to be used more. That means they're going to be better candidates for alternative fuels.
So that's why I'm boot-legging the issues of different makes and models and the fact that the fleet is too big, because if we can make changes in those two areas, they will make the alternative fuels more viable. So I leave these documents for your consideration.
The committee did send a copy of the legislation down to the United States and was holding hearings there on a variety of issues. We got very positive feedback from the Americans. I've given your clerk a copy of a letter from Ms Christine Ervin, U.S. Assistant Secretary, Energy Efficiency and Renewable Energy. This letter is available to members of the committee.
Ms Ervin notes that through their legislation in place at present they're converting 10,000 vehicles in their fleet to alternative fuel this fiscal year. In the next fiscal year they're converting 12,000 vehicles, and by 1999 they'll be converting 35,000 vehicles a year to alternative fuels. She points out that with the auto pact there is some logic in our proceeding apace.
I would like to point out that there are real economies here if we choose to aggregate some of our purchasing. The fact that the Americans are doing this means that if we can persuade some provinces and municipalities to move in this direction, it's going to make it an awful lot easier for manufacturers to start building lines of these vehicles.
At the end of the day that's the objective: to start having some manufacturers building alternatively fuelled vehicles as original equipment, so we don't have to convert them. So it's important that we at least be aware of what's going on with our neighbours to the south and take advantage of opportunities to work together whenever we can.
We have also given you a copy of a letter from Mr. Mark Hutchins, President and CEO of Ford Motor Co. of Canada Ltd. He is supportive of the bill to the extent that he likes its direction. He is concerned, however, that the bill doesn't move quickly enough. In essence he says - and you're welcome to read the letter for yourself - they've been studying this issue for years and it's time to get on with it.
Mr. Chairman, I know time is short and I'd like to just briefly remind the committee of Canada's commitment at the Rio Conference to keep our CO2 emissions in the year 2000 at the 1900 levels. This is a positive step towards that.
It is important for the government to be able to point to specific things it is doing, not just things it's trying to persuade other people to do. It's important for the government to say, here is something our fleet is doing to help meet the real commitment. I believe Bill S-7 is a step in that direction.
I also think the bill is useful from the perspective of leading by example. All too often we see legislation going through this place where we as legislators are telling other people to do things and not cleaning up our own act. In this case it's us cleaning up our own act and not telling other people to do anything.
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I'd like to comment briefly about why it's important to proceed by way of legislation. The reason is that we've had guidelines in place for 19 years. In 1976, for the first time, guidelines were in place from Treasury Board. The Auditor General reported they were to be the first consideration of fleet managers in that year. Precious little has been accomplished since then.
These guidelines have been revised on occasion since then, but to very little avail. My own view is that there hasn't been much progress by way of guidelines, because when you examine the manual that directs fleet managers on how they should make a vehicle purchase, it is so complicated, so complex, and has so many different issues fleet managers must take into account that at the end of the day they do what they like and get what they like. They can justify it simply because it's a complex document and there are a variety of ways of dealing with their own issues.
In a general sense that covers the presentation and description of the bill. With the indulgence of the committee I would like to briefly comment on some changes the committee might wish to consider by way of amendment when you get to the clause-by-clause stage. I have a few suggestions that might improve the bill if the committee agreed with them.
Generally I think it would be useful if there was a reference in the bill to some measure of cost-effectiveness, particularly in clauses 3 and 6. There are some concerns in Parliament that would be addressed if we made it clear in the bill that we wanted these conversions to take place in a cost-effective manner. That certainly has been my intention throughout the piece.
Second I think it would give comfort to some parliamentarians if we used the words ``operationally feasible.'' The bill only requires 75% of the fleet to be converted and does give considerable flexibility in paragraphs 6(a) and 6(b) to defining the population of the fleet that's to be converted.
Including the words ``operationally feasible'' in clauses 3 and also in clause 6, which gives the regulation-making power, give comfort to people. We're not insisting that vehicles located far from sources of alternative fuel be converted just to meet some arbitrary quota.
It would be useful if the bill had the capacity to provide regulations on how fuels are to be used. That's consistent with defining the vehicles and defining the fuels.
It might be useful if we gave Treasury Board the capacity to make other regulations to implement the objectives of the act. As one gets down the road often what happens is that issues come up that weren't anticipated by authors of bills, legislative committees or Parliament. It's important to provide that sort of flexibility down the road.
I should say that I would not be in favour of any changes to the bill that watered it down, or reduced the population of the bill. I would not be in favour, for example, of removing crown corporations from the bill. It's important that they remain part of it.
I take a degree of comfort from clause 7, which provides for some transparency and allows us as parliamentarians to see what the government is doing and how officials are handling this. It's very important that we have the ability to see what is happening, assuming the bill is passed, and as officials start putting it into effect.
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Mr. Chairman, that concludes my presentation.
The Chairman: Thank you, Senator Kenny.
Colleagues, I'm taking names to get into the question period. I'll start with the opposition.
[Translation]
Mr. Deshaies (Abitibi): Good morning, Mr. Kenny. I'm happy to see you again today and to discuss Bill S-7, which seems very interesting, a bill aimed at reducing gas emissions that contribute to the greenhouse effect. Since the government operates 39,000 motor vehicule, which is not very many, I'm wondering if you are simply trying to set an example rather than fighting directly the greenhouse effect problem. You said in your amendments that the conversions would not be profitable in certain areas and impossible in others and that it would also be impossible, in remote areas, such as the North, to get alternative fuels.
Is it therefore your intention, with this bill, to set an example and to develop new markets for alternative fuels, for example the development of a market for propane gas and other products such as natural gas or hydrogen, or are you simply saying that we will be reducing the greenhouse effect?
[English]
Senator Kenny: It would be fair to say that there's a range of objectives I'm trying to achieve with the bill. Using the government as a vehicle to break what I refer to as the chicken-and-egg cycle inevitably will increase the size of the refuelling infrastructure.
It will give an opportunity for more alternative fuel vehicles to be built. The very fact that we're talking about this issue now is creating interest and will cause a wider interest.
The government savings in dollars and the government savings in CO2 emissions are clear and measurable. They will prove to be an example. I would expect they would be an example first and foremost to other levels of government, to encourage them to move to the alternative fuel that makes more sense in their area.
In your area there's considerable interest in electric vehicles. You have an abundance of hydroelectricity, which is ideal for electric vehicles. The only thing lacking at this point is batteries.
It's fair to say that by government doing this, ultimately we would find that manufacturers would start building enough of these vehicles, and the infrastructure would be completed throughout the country so that people in the private sector could also buy an alternatively fuelled vehicle, if they so chose.
Right now it's very difficult to walk into a car dealership to buy an originally manufactured vehicle. You really have difficulty doing it. You can perhaps go in, buy one and get it converted at an additional cost, but you can't just walk in and choose one.
I am hopeful that decades from now there will be some element of choice as a result of this bill being passed. I haven't answered your question directly, but I would say there are several objectives this bill can achieve. The most important is for the federal government to show leadership in this particular area.
[Translation]
Mr. Deshaies: It was said earlier that the incentives used in the past had not worked and that there were too many questionnaires.
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It is not reasonable to think that 75% is realistic simply because of all the constraints. With a bill, there could be repercussions on the other levels of government as well as on the private sector.
In the family business where I used to work, we had converted some trucks from gas to propane. At the time, the technology was more or less advanced and we had to reconvert the carburators.
Many in the private sector still have doubts about the practicality of these products, be they propane or something else. Before converting, they will need a much more concrete example.
As far as you are concerned, do we really need a bill? When you pass a law, that really forces people to act. In principle, I agree with the bill, but is there no other way to force the public sector managers of the fleet to adopt alternative fuels?
[English]
Senator Kenny: Let me refer to your first question about the problems. I think there have been a great many problems with alternative fuels in the past; there's no question about that.
Having said that, I think the problems have been dealt with one at a time and the problems have been overcome one at a time. I'm not suggesting that every fleet that has alternative fuel vehicles is running perfectly now; I know that's not the case. I will say there have been significant improvements in technology, and that someone who had experience with alternative fuels five years ago would have a very different experience now. The problems varied according to the fuels.
We had a range of private sector users coming forward who gave evidence before our committee in the Senate. The evidence is available to this committee; it's here and I'd be pleased to provide it to you.
They gave evidence in their own words on how they found their particular alternative fuel to be effective, and how they saved money on it. We had several large fleets, delivery services and representatives from police forces.
We were concerned about the usual things like operational problems for police forces. I have information from 12 police forces in Canada that are now operating on propane. The number of vehicles they have range from 320 for the Peel Regional Police; 196 for the Niagara Regional Police; and 210 for York Regional. There is an outline of the savings involved; I'd be pleased to make this available to the clerk.
We had a variety of users who came forward to the committee and said, look, we worked our way through the problems, the technology has evolved, with the right training you can get the performance you need from alternative fuels, and you can save significant amounts of money. I'm not discounting the fact that there have been problems in the past, but I am suggesting that the technology has improved and there are many happy users out there.
You asked if it takes a bill to make things happen. I don't know. I've been around this town for awhile, and it's pretty tough to make things change in Ottawa from time to time. I looked very hard and long at the question of whether we need to have a bill to do this.
It's a pretty rational thing to say, look, you're the government of the day, go on, do it, fix it up, what's the matter with you folks? That is the first reaction of someone who comes and addresses this issue.
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I have to tell you that when I brief people, that's their first reaction. It's a rational, reasonable question when someone first comes to it.
It's only when you get into the issue for awhile, when you see the competing forces at play in the bureaucracy and you recognize that we're dealing in an environment that is not profit-driven.... If you're at UPS and someone describes how you can save a lot of dough, there is a real incentive for a manager to go, to move and to do something. But in the public sector there is not the same sort of profit-driven incentive. We don't run the government on the same basis, with the same bottom-line approach as exists in the private sector. That's the first point.
I have a second point. We take into account a great many varying objectives in the government. We do this far more than the private sector. Frankly running the government is a hell of a lot more complicated than running any private sector operation. To be a skilled government manager, you have to be skilled at a lot of intangibles, something that simply isn't required in the private sector.
There are a couple of reasons a bill is important here. First it distinguishes the alternative fuels and it really causes the public servants to focus on it in a way they haven't done in the past. The proof of the pudding is in the tasting or in the eating, and we just haven't had any vehicles here.
This isn't a new idea. It isn't something we just pulled out of the air. Right now we just don't have many vehicles in the fleet running on alternative fuel. They could be. We could be saving a lot of money and cleaning up the air. If it could happen through guidelines, it would have happened by now. Nineteen years is a long time to have to wait for it.
My second argument is that there are a lot of folks out in the private sector who are prepared to invest a lot of money. If you were in the private sector, which of these would give you more confidence in making an investment: a guideline issued by Treasury Board or a piece of legislation passed by the Parliament of Canada?
Mr. Morrison (Swift Current - Maple Creek - Assiniboia): Senator, I want to pursue Mr. Deshaies' point a little with respect to the 75% figure. I'm very curious as to how you arrived at that number. It seems a little arbitrary. You say that to make your proposal economically viable you would only have to convert 13,000 vehicles, which is less than half the current fleet.
I'm sure you're aware of the Treasury Board analysis that indicates that on the basis of physical practicality and cost-effectiveness, only about 3,000 government vehicles could be converted, that is to say, something less than 10% of the existing fleet. Now, the fleet's too big, so let's say if they got the fleet down to a rational size, the 3,000 vehicles might be 18% of the fleet. Why did you put 75% in there?
Senator Kenny: You're quite right, Mr. Morrison. The 75% is totally arbitrary. It was just picked out of the air. There's no magic to it at all. What was clear was that 100% wasn't going to work. There's no way that 100% of the fleet is ever going to be converted. The driving factor on the 75% really has to do with the fact that when you take a look at paragraphs 6(a) and 6(b), they define the population that is ultimately going to be converted.
You're also right that when we're done, the number may well prove to be less than 39,000 in the total population. What you have to understand is that when we got into this process, the kilometres driven and the litres of fuel used weren't apparent to everyone. Those figures weren't produced. This doesn't at all diminish the value of the proposal. It just simply means that the number is going to be somewhat smaller.
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The question of what makes it economic or not is quite different. The point you are making about the 13,000 vehicles has nothing to do with my proposal at all. What makes my proposal economic or not is whether you can convert any given vehicle to an alternative fuel, save money on it and clean up the air. If you can do that, then it's a terrific idea.
This business of the 13,000 is a totally separate issue altogether. This has to do with the commitments people in the private sector have made. This is what they're going to do if the bill is passed. The only point I was trying to make was that even if the number is a whole lot less than the 39,000, these guys are still on the hook to spend $40 million to $50 million.
Now, if you like, you can debate whether there are going to be 13,000 vehicles converted at the end of the day or not. I don't know the answer to that. I won't know that until somebody goes through the fleet and examines how many litres of gasoline are used in each vehicle and examines whether or not it's a good candidate for conversion. Once that happens the number is going to be reported back to all of us in Parliament and we'll all have a good understanding of that.
Let me say what this document really represents. Let's take something in the middle of the country: Centra Gas in Manitoba. They think they will find 1,000 government vehicles to convert. If they find 1,000, they say they're going to spend $7.5 million on expanding the infrastructure.
I think it's probably fair to say that if they find 500, they're only going to spend a little over $3 million it. I don't know; you'd have to ask them. But the point I'm trying to make is that 1,000 government vehicles in Manitoba is not an unrealistic figure. It's within a range of...could happen. Nobody can tell you with any precision exactly how many vehicles are going to be right to convert until the analysis is done.
Mr. Morrison: But Senator, if Treasury Board is correct in its analysis and they can only see 3,000 vehicles that could be suitably converted at this time, I would then question if these companies would be prepared to proceed with any significant infrastructure development or spending in order to pick up that tiny market.
You and I have discussed this question of spending stimulation before. It is a double-edged sword, because if you use available funds for artificial pump-priming, then those funds become automatically unavailable for market-driven applications. In other words, state planning isn't always the best way to open up a market to a commercial supplier.
If you did open up that market, Senator, once there is a small market locked in, would the gas suppliers continue to keep prices low? There would be nothing to deter them from raising the price and putting it on a competitive level with gasoline. We know that to some extent that happened with diesel. We also know that when people were converting to diesel for economic and environmental reasons the government stepped in at both levels and upped the taxes on diesel so that again you ended up with a stand-off. There was no economic gain. I'd like you to comment on that.
My final observation, which I would like you to comment on, is that if, as you say, the bureaucrats haven't responded to the guidelines during 19 years, how much of that is due to inertia and how much of it may be due just to good management?
There isn't much evidence of good management if they have 106 vehicle types. That seems to be a bit defective, but those 106 vehicle types, just like the excessive vehicle inventory, don't really have a lot to do with what we're discussing here today, the question of alternative fuels.
I would look at the RCMP, for example, as a model of fleet efficiency. They have been doing a marvellous job with their fleet from an economic and physical standpoint. It is my understanding that the RCMP is adamantly opposed to the proposal that they would have to convert their cars to propane or LNG. Thank you.
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Senator Kenny: Thank you very much, Mr. Morrison. On the first point you made about Treasury Board, candidly I don't have a lot of confidence in Treasury Board's figures. I've read documents that have come forward.
I'll give you an example. Treasury Board or the bureaucracy is still talking about 4,000 litres of gasoline as the appropriate level for conversion of a vehicle. You'll hear testimony that suggests that you can convert to propane for 3,200 litres. I ask you who you want to believe: the guys who are actually doing the conversion, or the bureaucrats who are writing the cabinet documents? I don't have a whole lot of confidence that these folks have a better grip on it than the people who are making it work in the private sector.
If you have doubts about the economics, I'd welcome you to go down the the Château Laurier Hotel and have a chat with any one of the Blue Line taxi-drivers. They'll tell you they're not environmentalists; they're doing it to make a buck.
Mr. Morrison: They're driving 100,000 kilometres a year.
Senator Kenny: Fine, that's terrific.
As far as the question of prices changing, you're quite right. It's a free market society. I expect prices to change. I expect that as demand increases for propane and natural gas, the price will go up. As demand for it goes down, it'll go down. In the last decade we've seen very significant swings in the price of natural gas. Anybody like you from a producing province understands that natural gas prices can change an awful lot in a short period of time. I accept that; that's part of the deal.
No one is suggesting that we legislate the differential. But there has been a differential for some period of time. Most energy economists suggest that the differential is going to continue for a period of time.
I don't know if I've covered all your points.
Mr. Morrison: There was the question of the RCMP.
Senator Kenny: Yes, the RCMP are using propane in Fort St. John right now, so they're not totally opposed to it. I have a lot of admiration for the RCMP. On this particular issue I'm not sure they've taken notice of all the improvements that have taken place with alternative fuels.
I think they're a very progressive force and they're going to be looking at what some of their brother and sister forces are doing. When they discover how much money they're saving and how well the vehicles work, they're going to take advantage of it as well.
Mr. Reed (Halton - Peel): Senator, it's always a very uplifting day when the Reform Party commends the government for good management.
Some hon. members: Oh, oh!
An hon. member: Especially Mr. Morrison.
Mr. Morrison: Did I say that?
Some hon. members: Oh, oh!
The Chairman: Mr. Reed, I don't think Mr. Morrison said that.
Mr. Reed: Senator, first of all, you must be commended for being an individual of your time when we are on the cusp of what is probably the greatest increase in energy demand in the history of our planet. The industrialization of China and India, particularly now, should be sending up red flags about energy consumption all over the place. It would appear that the next decade is going to place an incredible demand on what we have known as traditional energy forms.
If you look a few years ahead, it's not hard to appreciate that the need for options, for storable, portable fuels is going to increase. As these years go by, it will be absolutely essential for Canada to have alternatives that are demonstrated and available, where a delivery infrastructure is in place.
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Senator, you mentioned private investment because of government action. I have to draw to your attention the fact that since the government took its positive stance on ethanol last December, in Ontario alone $300 million has been committed by the private sector for ethanol production. That should give us an indication of just what can happen when government does do something, however modest. I believe this bill, especially with the amendments you have agreed to, makes a very modest move.
I'm going to ask you to comment on the issue of crown corporations in a couple of minutes. The apparent reluctance of crown corporations to become involved in this venture surprises me. If I was Canada Post today, I would be clamouring to move to the alternate fuel area, so I could plaster that public relations gesture on all my trucks.
I would want to be doing that because I think it's an organization that has a very high profile across the country. They certainly need all the public relations uplift they can get. For the life of me I don't understand why there would be a certain reluctance there at all. Maybe inertia would be the word.
Senator, I have one specific question. How many vehicles are replaced annually by the government?
Senator Kenny: It varies, Mr. Reed. In general, between one-fifth and one-sixth of the fleet gets replaced on an annual basis. But it could vary from one year to the next, depending on how tight the government is in a given year.
Mr. Reed: It would be reasonable then to assume that by the year 2004, most of the vehicles - let's say 90% of the vehicles - in the government fleet will be new vehicles?
Senator Kenny: I expect it would be higher than that.
Mr. Reed: So we'll put the cautious twist on there.
The record should show that the automobile companies already are producing variable-fuel vehicles. This is not new. There are Ford Tauruses for sale in Mississauga today that will burn up to 85% ethanol. I drove a General Motors product last January. On one trip I was burning 49% ethanol; on a return trip, it was 81% ethanol. The car performed beautifully. They sell for exactly the same price as a gasoline-burning car.
I know the reluctance. I know the debate that's gone on behind the scenes. We very often find ourselves in a chicken-and-egg situation. Somebody says, we don't have the outlets so we can't do the thing and the other people say, we can't build the outlets until we have the demand.
I can point out to you that with respect to propane availability now, there are about 5,000 outlets across Canada. For ethanol blends there are 500 right now. There were about 50 two years ago, and the prediction is that there will be 5,000 in another 2 or 3 years.
The other thing I'm very pleased about in this bill is the fact that the door is open for novel fuels, other options. There are two other fuels we're not considering directly, or are not named here. One will be on the market within about two years. There's a clamouring demand from industry for it. The other one is a heavier type of fuel, which is now geared to stationary, industrial engines, but probably will be adapted as the years go on.
I would suggest this is the time for leadership in Canada, and you're demonstrating that leadership. I believe most of us here are very pleased this is happening at this time.
Senator Kenny: Thank you very much, sir.
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The Chairman: Thank you to Mr. Reed for being short and succinct. It's really a good start to the day for some of us. Thanks, Julian.
Mr. Arseneault.
Mr. Arseneault (Restigouche - Chaleur): I'll try to be as short and succinct as Mr. Reed - maybe even shorter.
First of all, I'd like to commend the senator. Having experienced successfully a four-year battle to get a private member's bill passed through the House of Commons and then the Senate, and just recently having that succeed, I know the type of work and dedication it takes. So I must commend you, and also commend you for the documentation you have constantly supplied to the committee and members of the House of Commons. It has been excellent. I commend you, and in so doing I commend your staff as well -
Senator Kenny: They're the ones who do the work.
Mr. Arseneault: - because I know quite often we rely on them, as we do here in committee.
I have a few specific questions, Senator. There is a requirement in the bill, if it passes, that Treasury Board report to Parliament on an annual basis. I'll pose the three questions and after that you can respond to them. What type of information would you expect from this report? What type of information or indication would we get from that report?
Another question would be regarding what you said earlier about legislation versus recommendation. As Mr. Deshaies and Mr. Morrison mentioned, why do we need legislation? You had mentioned the need for it. In my estimation, legislation doesn't necessarily work too often unless there are sanctions in there. I don't know if you see any. You haven't referred to anything regarding sanctions. I'm just wondering whether you had thought about that. What were your thoughts regarding that, and why weren't they included?
The other point I would like to ask is regarding your documentation in reference to private investment of $40 million to $50 million. Coming from Atlantic Canada, we certainly look for private investment. I'm just wondering if you could relate to the committee, and to myself in particular, what type of investment you would expect in Atlantic Canada, if any at all, and what type of improvements.
Thank you.
Senator Kenny: Thank you very much, Mr. Arseneault.
If I could deal with the last question first, most of the companies you see listed here relate to the natural gas industry. As you know, natural gas at this time runs from Vancouver Island through to Montreal and then it tends to turn south pretty promptly.
However, if you look at Superior Propane, that is a Canada-wide commitment there. There'll be a witness from Superior Propane coming later in the day. I'm sure he or she can provide you with maps of Atlantic Canada where they have already installed propane outlets in quite a significant fashion. I expect a proportionate share of the $1.75 million they're talking about here would be in Atlantic Canada.
I also should tell you it's my understanding that there is a new effort moving ahead offshore in Nova Scotia to bring natural gas ashore. The routing for that would be through Nova Scotia, New Brunswick and then south down to the Boston-New England market. One can visualize laterals being developed there.
As that happens, there will be competition developing in Atlantic Canada for the automotive market. I would expect the gas companies - employees of which will be here shortly to testify - the gas distributors, or whoever gets the distribution rights for Atlantic Canada from Sable Island would be seeking out that market very aggressively.
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One of the reasons why the industrial benefits are a little bit skewed here is that propane has a head start. Earlier I pointed out to you that they have a 96% penetration rate into the federal fleet already, whereas natural gas is down in the low 30% right now.
I will just relate a story.
I went back to the president of Superior Propane and said that the gas folks are spending millions and he has just a small figure here. His answer was they gave at the office. They have already invested in their infrastructure. They have the 5,000 stations out there. The natural gas people are catching up with them now. As they catch up with them, they're spending the money now. I'm sure the propane people will tell you for themselves that they've already spent that money.
You're quite right, my figures don't do the Atlantic region justice. But part of it is the money has already been spent there. I think part of it is there's going to be some coming when Sable Island comes ashore. But it hasn't come ashore yet, and it didn't make any sense to quantity something that I can't tell you for sure is going to happen.
If I can move back to the question of sanctions, which was your second question, this bill is a little unusual in fairness. It's a bill to get the government to do something to itself.
I think the sanctions really lie in clause 7, where we'll see you. The punishment for a government that doesn't perform is they have to tell you. This bill says we get a chance to see whether they've performed or not. Frankly, it didn't make any sense to me to have sanctions in the bill.
This is the government regulating itself, if you will, and what it's doing is holding up a flag to the public. This is a public commitment that the government is making. If this bill is passed, Parliament is making a public commitment to Canadians that this is going to be a priority for us.
The sanctions are going to be...if they cop out, if they figure out all sorts of ways to chop this bill up into little pieces of liver. I'm going to be watching, and I hope you folks are going to be watching. I have no doubt that Julian is going to be watching. If they're not performing and they're not producing, we're going to say so. I'm around until 2018, so I'm going to be saying so loud and clear for a long time if something isn't happening on this.
So the sanction is that there are some people out here who are going to bug them a lot if they don't do it. I don't think there's need for more sanctions than that.
As for your question of what should be reported, my assumption is we're going to get a report regularly on how many vehicles are converted, usage of fuels, the type of fuels used, and a pretty thorough description of what's happening.
Mr. Arseneault: Thank you very much.
The Chairman: Thank you very much, Mr. Arseneault.
I would suggest to Senator Kenny that he would probably be around a lot longer than we will to keep an eye on it, based on the fact that unless I am elected to the Senate and get to stay there until 75...otherwise you're on your own, Senator Kenny.
I want to go to Mr. Loney. Then I have a question of my own.
Mr. Loney (Edmonton North): Senator, with reference to the Ford letter on page 2, the suggested revisions, could you comment on that? Do you feel these revisions that have been suggested are feasible? Would they be acceptable?
Senator Kenny: The first Reform member I spoke to had two reservations about the bill. It was Mr. Chatters, actually. He said his first problem is it's not 100%; his second problem is you wait two years before you get going.
From the reaction I'm getting back in the system, I guess my instincts are that folks are feeling pushed a little bit.
You're going to have a panel of witnesses next from the public service. I think some of those people would like a little more time to examine what's going on and to take a look at where they're going. I don't think it's unreasonable to ask people to plan a little bit to go forward.
I think what the president of Ford was saying is that, from Ford Motor Company's point of view, they would like to get on with it right now.
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When you're charged with managing a fleet of 39,000 vehicles, and in fact the management of that fleet is spread out in a whole lot of different areas, I think there's a really massive education process that has to go on.
I think the officials that you're probably going to see here are going to be the people driving that education process, where they're going to be talking to fleet managers from all the different departments, because the management of the fleet takes place in 20 or 30 different areas, I guess. It's not a centrally organized sort of thing.
I think there is going to be a very heavy burden placed on the fuel suppliers, on the vehicle manufacturers, on the conversion people and on the bureaucrats to educate themselves as to what is available out there, what the opportunities are, what makes most sense in their region, how to come up with ways to handle the programs, such as the offer that Union Gas, Consumers Gas and Superior Propane have come up with about letting them pay for the conversion.
I think there is a whole lot of work that has to go into that process. I think if this bill passes, they're going to be very busy for the next couple of years just getting organized and trying to make it happen in a smooth and reasonable way.
So I think it's a sensible thing to keep it in the bill. But I was pleased that Ford wanted to move faster.
Mr. Rideout (Moncton): Just a quick question. Senator, you referred earlier to possible amendments and things that are ready. I know there's been some consultation going on with different people. Julian has some amendments for you. As I understand it, just so I'm clear, you're supportive of all those amendments except for one.
Senator Kenny: I'm not supportive of any amendment that would take crown corporations out of the purview of the act.
Mr. Rideout: That's the one where you have some problems. That's the ``may'' or ``shall''.
Senator Kenny: Yes. But I'm happy to have a reference to making it cost-effective. I'm happy to have it operationally feasible. I think those make sense.
I think the government needs to have the capacity to define how fuels are used. I think it needs to have the capacity to define the vehicle. I think it should have a catch-all clause that says if we've forgotten something in terms of managing it, we need to have the ability to put it in.
Mr. Rideout: I just thought, because you will be finished here and some members of the committee may be wondering whether the amendments are acceptable or not...it's just the one area where it ``may'' or ``shall'' in that section.
Senator Kenny: Yes, sir.
Mr. Rideout: Great. Good.
The Chairman: First of all, I would ask the clerk to hand out the proposed amendments.
Let's be frank, if we can, for a second, because this committee's members have always been very frank with each other.
You can imagine that Senator Kenny, as our colleague, has really done a lot of lobbying. That's the way things work around here.
There have been some amendments suggested by the department, in particular Treasury Board. I don't want to put words in Senator Kenny's mouth, but they're friendly amendments in the sense that they clear up some wording.
There happens to be one that Senator Kenny doesn't agree with, which is where the Treasury Board wants to take corporations out of this bill. That is something we'll have to decide as a committee, whether we think it is a good idea or not.
I think it should be put on the table, because this is a private member's bill. Whether Senator Kenny agrees with those amendments...then that's fine. They can be presented and we can vote on them. But I thought we would hand them out to everybody before the officials sit down at the table, because we're going to quiz them as to why they seem to think these amendments are necessary. Whether Senator Kenny agrees with them or not, that's the way we should proceed here this morning, I would think.
That having been said, Joe, I think you wanted to ask a question.
Before I do that, I want to ask Senator Kenny the obvious question: Why does the Treasury Board want to take crown corporations out of the bill? Simply because, of course, you have other sections of the bill that say if it's effective and the cost affordable and efficient...I mean, you can't be more flexible than that. If it doesn't make good common economic sense, then they don't have to do it anyway. So can you explain to me what seems to be the hang-up with Treasury Board, as it relates to that one particular issue?
Senator Kenny: Thank you, Mr. Chairman.
As unaccustomed as I am to defending Treasury Board, I'll do my best to comment on that.
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I think it's principally a style question, Mr. Chairman - that the government would prefer to deal with crown corporations at arm's length. It's more really a style of how ministers would prefer to deal with entities that report through them.
Having said that, I am supporting amendments that would ensure that no vehicle would be converted unless it was cost-effective, unless it was operationally feasible, which is a pretty positive sort of thing. I do have letters from crown corporations that are very supportive of the proposal. I've circulated these letters to everyone.
As an example, I have the CBC writing to say that they recently completed a thorough re-engineering of their internal procedures regarding fleet management. This has resulted in the standardization of vehicle models, which reduced the number of models from 82 to 21 and the restriction of the number of authorized manufacturers from 13 to 3. They go on to say that, depending on the results of your committee's investigations, the CBC will certainly make every effort to specify alternative-fuel vehicles, both for conventional functions and when building future mobiles and replacing existing ones.
I have a letter from the post office that says they think they can meet the target by the year 2004. They point out that their vehicle mileage or kilometreage is very low though. It's only 10,000 kilometres a year. However, post office vehicles are different from most inasmuch as they idle a lot; they have the engine running a lot, and it would be more significant to know the number of litres of fuel they are using in a year.
None of the crown corporations wrote back expressing any opposition to the bill at all.
I must say that Treasury Board commented on three separate occasions in writing to me - on August 30, November 2, and March 17 - never making any reference to crown corporations, and there have been a variety of opportunities for them to make that reference.
I think there might be crown corporations, for example, that are about to be sold and there may be a reluctance on the part of some people to ``mess'' with a crown corporation that's just going out the door, if you will. I don't have any problems with that. I think there are ways that one could exclude a crown corporation like that if it's about to be sold. I think that could be handled under paragraph 6(b), which deals with classes of vehicles, and you could exclude that class of vehicle, if you like, from the act. I think there are lots of ways of handling it.
Have I dealt with your question sufficiently?
The Chairman: Yes, you have.
Is that the only amendment you are not supportingand the others you would perceive to be more in line with your thinking in tightening up some of the clauses?
Senator Kenny: Yes, sir, and consistent with my thinking throughout the piece.
I haven't been trying to make water run up hill here. I have been trying to ensure that we convert vehicles where it makes economic sense and where we can actually do it, but I want to make sure we do it. The problem is that in the past there's been a lot of good words in the guidelines, but there hasn't been any action.
The Chairman: Thank you.
Mr. McGuire, did you have a question?
Mr. McGuire (Egmont): Mr. Chairman, if this bill passes and the federal government converts to alternate fuels, and if, as the senator says, the general public picks it up and it's picked up by the people of the United States and the CO emissions are reduced dramatically, I want to say in this committee today that the people of Prince Edward Island will erect a statue of the senator on the New Brunswick side of the fixed link for giving us another 100 years of existence. That's all I want to say.
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The Chairman: Thank you, Joe. I appreciate that. I understand that you and the Minister of the Environment have been talking a lot about P.E.I. disappearing. It's a concern of ours, too. I don't know if I'll be around to see it, but I think about it every night.
At this time I'd like to give Senator Kenny, if he wishes, a wrap-up opportunity and final comments. Also, colleagues, I've asked Senator Kenny, because he is a colleague of ours, as a member of Parliament, to sit at the table with us to continue the day and not to sit in the crowd as a spectator, because it is his bill. Therefore, I've invited him to sit at the table with us. If he wants to question the witnesses we will allow him to do that after the members have exhausted their interest in questions.
I'd like to allow Senator Kenny the last opportunity and then we'll move on to the other witnesses we have this morning.
Senator Kenny: Thank you, Mr. Chairman. I'm honoured by your invitation, and I assure you I won't abuse the opportunity to ask questions.
I would like to ask the members of the committee to think about the bill in the context of going back to your constituents and saying, ``Today I worked on a bill that would save you money as a taxpayer. It would clean up the environment in your region.'' Let's pick Alberta, if you like. In Alberta it would cause additional spending on infrastructure between $11 million and $20 million, which would cause companies that are active in Alberta to provide jobs that are not farming jobs or oil and gas jobs, but high-tech jobs of the future for young people in Alberta. Also in Alberta we have found new markets for propane and for natural gas. If you are an Alberta member of Parliament, I'd like you to think about how that message would be received and whether that's a message you'd like to deliver to your constituents.
I can recraft that message in Quebec if you want. I could see going back to Quebec and making the same case about cleaning up the environment and about saving the taxpayers' money. But Quebec is dependent on offshore for its gasoline. It doesn't come from western Canada; it's dependent on offshore. It's very important for that province to diversify its transportation fuels. Alternative fuels also give great opportunity for electric vehicles at some time. With the abundance of hydroelectricity in Quebec, it means it's going to be clean electricity. There are tremendous opportunities there for a home-grown vehicle to be developed.
In addition to that, Gaz Métropolitain is promising to spend an additional $5 million in the province, which will create more jobs and more economic activity.
All of that will come relatively quickly if this bill passes. That's why I've tried to divide the information according to region and according to province. I think it's important that all of you, as representatives of different parts of the country, be able to go back to your constituents and tell them how today's work has benefited them. This bill will benefit your constituents and will do it in a way that you can describe to them fairly simply and fairly cleanly. I think you'll find that you have their support.
Thank you, Mr. Chairman.
The Chairman: Thank you, Senator Kenny.
Colleagues, we're going to take a five-minute break and start right at 11 o'clock with our other witnesses this morning. They will be from Treasury Board, Environment Canada and NRCan.
We'll take a five-minute break, get organized, and then get on with the next witnesses.
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PAUSE
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The Chairman: Colleagues, before us this morning from the Treasury Board of Canada we have Al Clayton, and Rick Andrews; from Environment Canada we have Chandra Prakash; and, of course, Bill Jarvis, who's been here so many times he could be on the committee. He has Mr. Harper with him, who's his expert in the field. So if he gets into trouble, he'll ask Mr. Harper to answer for him.
The witnesses and I have decided to let all of the witnesses make their presentations, which will run from 5 to 15 minutes, depending on the witness, and then we'll go right into questions by the members of Parliament.
So I want to turn the floor over to Mr. Clayton, who's going to start, and we'll just go from there.
Mr. Al Clayton (Executive Director, Bureau of Real Property and Materiel Programs Branch, Treasury Board of Canada): Thank you very much.
It is a pleasure to appear before the committee on a subject of such importance, and obviously such visibility in the press in the last month, related to the operation of vehicles in the federal administrative fleet. I would like to take the next few minutes to describe the policy framework under which the fleet operates and then outline information on the operating characteristics of the fleet.
The research staff has provided a small deck called ``Alternate Fuels in the Federal Fleet'', which I will be referencing from time to time.
The governing Treasury Board policy, which is noted on page 1 of the deck, is based upon ensuring vehicles meet operational needs of departments and then that they are managed, that is vehicles, using a life cycle approach to economics. Within this framework other factors have to be considered. One of them is the need to conserve energy and protect the environment.
In meeting this latter requirement I may note there is no reference in existing policy or any Treasury Board policy that has been issued at any time to alternative fuels.
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We are now in the process of revising this policy, however, to incorporate many items, including alternate fuels, and of course the nature of that policy will to some extent be dependent upon the decisions made by Parliament related to this bill.
It is the responsibility of individual departments to manage their vehicles within this policy framework, and the Treasury Board, in addition to the policy, assists departments in implementation.
It has been mentioned a few times. The report of the Auditor General in 1991 related to the federal fleet, and I won't bore you by going through my traditional public relations speech about what has been done since, but I think I'll note three items.
The first thing is the number of vehicles procured - the procurement issue. There are now 4 classes of vehicles and 32 types of vehicles in the general specification of the Government of Canada.
The RCMP has been noted as a model. It has 4 vehicle classes and 26 types of vehicles. In the last four years there has been a significant reduction in the types and the classes of vehicles. There is a committee that works with Rick Andrews, who is with me today, to reduce those numbers and types of vehicles.
The second item is that, as noted, there are about 25,000 vehicles in the federal administrative fleet. We do not have crown corporations in that number. That has a reduction of 5,000 in the last four years and the trend is continuing.
The third item is that back three or four years ago I think it was fair to say we did not have a good handle on operational information in the fleet. In 1994 the collection of fleet management information was moved to a service provided by various private sector firms. All departments now record operating information, maintenance information, repair information on these databases and use these firms to help control their costs. We now feel quite confident that we have good data for policy-making purposes across the fleet on its operations and on its costs.
As is shown on page 3 of the hand-out that I've mentioned, about one-third of the fleet belongs to the RCMP. That is some 8,000 vehicles. With respect to the conversion of RCMP vehicles to alternative fuels, about half of this fleet consists of what they consider high-performance pursuit cars. The RCMP does not preclude the possibility of use of alternative fuels in general for their administrative cars or even possibly for pursuit cars, but they are very cautious. In correspondence to the Treasury Board Secretariat, they have indicated they will work in whatever the environment, where both economics and items are operationally feasible, but I will note they are cautious.
The second largest fleet operator is National Defence with 16% of the vehicles. This figure does not include National Defence combat vehicles. These are administrative vehicles.
In terms of the history of National Defence, back in the early 1980s they had over 3,000 propane vehicles. They now have, I believe, a few hundred - 300. They were the pilot in the federal government back in the early 1980s. You've heard a lot about the problems with that program, and National Defence was in many ways the one that had to hit those problems.
Transport has 10% of the fleet. Agriculture has 8%. Heritage, essentially Parks Canada, has 6%. Fisheries and Oceans has 5%, and then it's spread widely amongst other departments.
Of the crown corporations, by far the largest operator of vehicles is Canada Post with about 7,500 vehicles. I have no statistical measure, but I think the conclusion generally of people who deal with them is that they have the most sophisticated fleet management operation in the federal system.
As is shown on page 4 of the hand-out, when we start getting into vehicles by classes and by departments, sedans and wagons only comprise 43% of that 25,000. Most vehicles are various types of trucks and vans. This statistic highlights an important feature of the federal fleet. When people think of automobile fleets, they think of cars being used as a taxi service or a rental car service or maybe personal vehicles for salesmen.
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For the federal fleet, a high percentage of vehicles are used as short-haul pick-up trucks, operating primarily at isolated sites. When you think about defence bases, airports, ports, harbours, research stations, or national parks, they are quite often operated on a seasonal basis as well because of the nature of, for example, the parks system in much of this country.
It should not be surprising then that an analysis of the operations of the fleet indicates that the consumption of fuel for many vehicles is relatively low. I'm not saying there are not too many vehicles, but it should not be surprising that the characteristics of the federal fleet are not the same as those of a taxi company. This is a key concern, of course, when considering alternative fuel use.
The analysis of Natural Resources Canada indicates that a vehicle needs to consume 4,500 to 5,000 litres per year in order to be able to recover the extra capital costs of purchasing or converting vehicles to alternative-fuel vehicles. Private sector operators have used 5,000 litres as their break-even point and others have used 3,500. It is an area over which economists can have legitimate disagreements about basic assumptions.
On page 5 of the hand-out we have done an analysis from the database I've mentioned of the consumption of litres of fuel by type of vehicle. Our statistics indicate that there are 6,273 vehicles - these figures were taken this spring - in the federal fleet that consume greater than 4,000 litres. That is about 25% of the fleet.
If you use the 5,000 litre consumption figure as a break-even point, the number is 3,800 or about 15% of the fleet. If you use 3,500, the number that was mentioned today, you're around 32% of the fleet. Note that this is based upon current economics. As you can imagine, the underlying assumptions can change considerably if the capital cost of alternative-fuel vehicles reduces, or if the cost of gasoline increases, or if federal and/or provincial governments change their tax treatment, the favourable tax treatment that is now provided to alternative fuels.
Certainly one method of changing these economic factors is to arrange a form of partnership where fuel suppliers will help defray the costs of converting vehicles to alternative fuels.
As noted, the propane and natural gas suppliers have offered to enter into such an arrangement, and Natural Resources and industry officials are now in discussions.
From the Treasury Board Secretariat viewpoint, we very much support trying to make such an arrangement. We do, however, note that we have to be concerned in that arrangement with issues that arise under the Financial Administration Act of borrowing money from the private sector without authorization of Parliament, as well as questions of competition related to purchasing and public tendering for government business.
Of course, the objective of this bill and the new Treasury Board policy is not only about the economics relating to vehicles; it is about the environment, particularly vehicle emissions. Conversion to alternative fuels is one method of reducing emissions. The number that is quite often quoted is up to 20% reduction of vehicle emissions over normal types of fuels. But there are many other methods to reduce emissions from the fleet, and the one that is quite simple is to have fewer vehicles. When you eliminate a vehicle, you eliminate 100% of its emissions.
In addition, there are other techniques for better environmental performance, including better vehicle maintenance, small vehicles that consume less fuel, improved driving habits of public servants who use them, and, when using alternative-fuel vehicles, tougher quality control on conversions.
The departments that manage the federal fleet, the various departments that have the vehicles, with NRCan, Environment, and TBS, are providing assistance and are moving on all of these fronts right now, related to improving the environmental and economic performance of the federal fleet.
I thank you for the opportunity to address you and, after the other two speeches, we'll be pleased to answer any questions.
The Chairman: Thank you, Mr. Clayton.
Mr. Jarvis.
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Mr. Bill Jarvis (Director General, Energy Demand Branch, Energy Sector, Department of Natural Resources): Thank you, Mr. Chairman.
I'm very pleased to come before this committee to provide some information on this very important issue, a matter that has been an important issue for Natural Resources Canada as part of its responsibility for policies and programs to encourage alternative transportation fuel development use in Canada.
I'd like to take you through three different parts of a presentation to bring before you the current status of the ATF market in Canada, what the marketplace looks like, what our understanding of the economics of alternative transportation fuel vehicle purchase is from the perspective of the Government of Canada, and the policies and activities of my department, Natural Resources Canada, what we have done and proposed.
With regard to the current situation, I will review some facts I'm sure you're all familiar with, just to get them on the record. There are three alternative transportation fuels in use in Canada today: propane, natural gas, and methanol at 85% blend. Methanol is also available, but only in low-level - that is 7% - blends with gasoline. It's also an important matter that these low-level ethanol blends are available and can be used in any conventional gasoline vehicle. So there is no distinct vehicle purchase issue with respect to ethanol blend at 7% to 10%.
With respect to vehicles, we estimated there are about 150,000 vehicles now operating on propane in Canada, and 7,000 public and private refuelling stations. It's a relatively mature alternative transportation fuel industry at this stage. There are about 30,000 natural gas vehicles and about 200 public and private stations across the country.
At the moment, for methanol, we're limited to about 500 vehicles that are in demonstration programs, with 12 public and private refuelling stations to support those. In addition, there are approximately 500 stations that deliver low-level ethanol blends, although that's changing very rapidly as the number of stations is increasing, partly in response to changes in government policies.
In terms of the geographical location of fuel availability, propane is really the only alternative fuel that's available across the country. The delivery network is reasonably well developed in virtually all regions.
Natural gas is available in some specific regions. There's very good availability in the lower mainland in British Columbia; a limited refuelling network in the Calgary-Edmonton corridor in Alberta; quite a good network established now in southern Ontario; and some limited refuelling networks in the Montreal-Quebec City corridor.
Methanol is really only available in a few selected sites in British Columbia, in Alberta, and a number of sites in Ontario. As I said, ethanol is available in a large and growing number of stations from British Columbia through Quebec.
The economics of alternative transportation fuel use and vehicle purchase are determined principally by the interaction between the incremental cost of a vehicle - that is the technology that uses the alternative transportation fuel - and the difference in fuel costs between the gasoline and the specific alternative fuel in question.
My presentation shows the costs of purchase for vehicles that will be functional on alternative transportation fuels. There are two ways to do that. One is through a conversion program. The other is to buy the vehicles that are capable of using the alternative fuels from the factory.
For propane vehicles, we estimate the incremental cost for propane vehicles is currently in the neighbourhood of $2,000 to $3,000. There is this range because different vehicles have different requirements. For instance, if you have a flatbed truck with lots of room in the back, you don't have to mess around putting a tank in. There's lots of room for the propane tank to go in. In a small vehicle, there's a lot more banging of metal to try to get the tank fitted in properly.
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The price for both conversion and for new vehicles is significantly higher for natural gas. The range is now about $2,800 to $4,500 for conversion of vehicles in Canada. Factory vehicles, which are just now starting to be produced, run in the range of an incremental cost of $4,000 to $7,000.
For methanol, which is usually running 85% methanol and 15% gasoline blend, the cars available in Canada are currently available at no incremental cost over similar gasoline vehicles - partly as a promotional vehicle, a part of our overall program to get those vehicles into the marketplace. We estimate the actual incremental cost of producing these vehicles is relatively low, in the the $300 to $400 range.
With respect to the cost of the fuels, all alternative fuels that we've described here are exempt from the 10¢ per litre federal excise tax. The 7% ethanol that goes into the ethanol blends is also exempt from that tax.
Provincial road taxes are also reduced or do not apply to alternative fuels in most of the provinces, and certainly the provinces where the alternative fuels have made significant penetration.
Gaseous fuels - propane and natural gas - are priced somewhere in the range of 60% to 65% of the price of gasoline in the marketplace. In most regions of the country, methanol fuel is currently priced at about the same price as gasoline on an energy-equivalent basis, as is the ethanol blend.
As we understand it, that's the status of the marketplace. The table in my presentation shows an explanation of the commercial conditions for the Government of Canada in the purchase of alternative transportation fuel vehicles. There are a lot of ways to do this, but the table tries to look at how many years of fuel savings it would take to pay back the incremental capital cost of purchasing the alternative transportation fuel vehicle. As some of the testimony you've heard today clearly indicates, the number of litres that are being used each is an important factor in how quickly those can be paid back.
With respect to this, the table illustrates for the government three different ways to calculate the commercial conditions. The first column shows simple pay-back, which means if you spend $1,000 incremental to purchase of vehicle, when do you get $1,000 worth of savings? It shows for propane vehicles - for the 15% of the fleet that now goes over 5,000 litres - you'll get the pay-back of the incremental costs in about four years.
Like everybody else, the government has financing costs of the interest rate on the money that has to be used for the initial purchase. So if you include the interest rate on that money - using the same calculation for propane vehicles - that 15% of the fleet that goes over 5,000 litres a year would take almost five years - 4.9 years - to get a pay-back including the interest payments.
There's another element in cost to the government that is the effect of the excise tax exemption in the current situation for all these alternative transportation fuels. The government's excise tax on gasoline is about 10¢ a litre. When a federal vehicle goes up to the gas station, the price it sees for gasoline includes 10¢ that will eventually return to the coffers of the Government of Canada through Revenue Canada's taxation collection system.
Of course when federal vehicles use alternative transportation fuels, part of the attractive pricing of that alternative transportation fuel is the absence of that excise tax. But of course that excise tax then doesn't come back to the government. So the pay-back to the Government of Canada as a whole - that is if you take the full effect on the Government of Canada's fiscal position of alternative transportation fuel vehicles, the effective spread on the fuel price - is significantly reduced. The effective spread on the fuel price is significantly reduced and therefore the pay-back period is a lot longer. In fact, in the case that I was talking about earlier, propane vehicles that are going 5,000 litres a year...it's clearly outside the life of a car before pay-back occurs, before the government as a whole can recoup its price.
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That's indicative - and as my colleague Mr. Clayton said, there are lots of ways to cut these numbers. But they will come within the scope and range of the numbers you see on this table, regardless of what kind of underlying assumptions you would make with fuel.
I would like to turn now to the federal government's existing support for alternative transportation fuels, which I think gives an important context for the bill that is being proposed.
The government has supported the development of alternative transportation fuels with a full range of activities, including research and development, field trials, demonstrations of new technologies in the marketplace and a number of incentives. Early on, the development of the propane vehicle business in Canada, for instance, was assisted by grants to consumers who wished to purchase propane vehicles. The same is true today for people who wish to purchase natural gas vehicles.
There is a wide range of promotional activities. All these activities were undertaken in very close collaboration with the industry. I believe it's fair to say that Natural Resources Canada and the alternative transportation fuels industry, both the alternative fuel producers and the manufacturers of automobiles and other technologies, have developed a close collaborative approach to the development of alternative transportation fuels in Canada.
In October 1994 in Vancouver at the world LPG forum, Minister McLellan committed to look at the government use of alternative transportation fuels and asked the Department of EnerCan to develop an aggressive program, which he described recently in front of the committee in the other place.
The EnerCan fleet program has three basic elements and it's consistent with many of the objectives my colleague Mr. Clayton talked about in terms of a good use of government vehicles. The first was to reduce the fleet size for Natural Resources Canada. Currently, the fleet size is about 700 vehicles and the minister is committed to reduce that by 40% to 420 vehicles. It's a very considerable reduction, I think you will agree, in fleet size.
Second, the minister committed to improve the efficiency with which those vehicles are used through ensuring that all EnerCan drivers had access to driver education. We had highly structured vehicle maintenance programs to ensure efficiency. We used vehicle pooling where that was appropriate and useful, and we used new technologies for route planning and onboard computer systems where that in fact could improve the efficiency of the fleet use.
The third element of this program, and the most important one for this discussion today I think, is the minister's commitment to the advance and use of alternative fuels in the Natural Resources Canada fleet. There she committed to converting 100% of all Natural Resources Canada vehicles where it can be shown that it's cost-effective and operationally feasible - those conditions that were discussed earlier this morning.
In addition, she is committed to having the department investigate vehicles where the feasibility or the cost-effectiveness cannot be demonstrated but is in doubt, so that we can test the marketplace for an expansion of the applicability of alternative transportation fuels in government operations.
Finally, she is committed to working closely with the industry to try to develop programs whereby the industry can participate, perhaps even in a financial way, in developing programs that can be used in converting the Natural Resources Canada fleet and, by extension, use that as a model where other fleets in the government can do that as well.
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This program is not inconsistent with anything we've heard here today. In fact, the minister believes it will aggressively provide an example and a demonstration of how the objectives of the bill being discussed today can be implemented in the Government of Canada.
Also at the same venue I previously mentioned, the world LPG forum in October 1994, Minister McLellan did indicate a broad range of the criteria for support of alternative transportation fuels by the Government of Canada.
It's probably useful to go through these and you'll see how they bear on the bill in question.
First of all, the minister indicated that fuel neutrality would be an important part of the government's approach; that is, within the alternative transportation fuels community, the government did not want to select one or another fuel, but rather let all the fuels have not identical but equal, in the broadest sense of the word, access to the programs of the Government of Canada.
Second was environmental integrity. One of the main rationales for the support of alternative transportation fuels was the pursuit of the environmental benefits. There have been some circumstances in the past where the environmental integrity of some conversions have been questioned. The minister was strongly of the view that environmental performance had to be an important part of the ATF policy.
The third one, and one that bears very strongly on today's question, is leadership by example. She committed, as I've said previously, that the federal fleet use of ATFs can indeed be an important part of our national policy, a mechanism whereby the government can show important leadership.
Fourthly, it was important that market criteria be a part of the overall policy; that consumer demand be what led Canadians to choose alternative transportation fuel vehicles so that market signals were going to be the ultimate arbiter of the penetration of alternative-fuel vehicles in Canada.
Finally, technology development, because in this important new area of energy use, technology is still evolving. Natural Resources Canada has had and continues to have a broad range of research and development activities, which were done in collaboration with industry, of which I think we're justly proud, that have made Canada a world leader in many of the aspects of alternative transportation fuels.
Mr. Chairman, the rest of my presentation, which I hope will be available to your members, reports on a variety of programs. I think it would be useful for members to review those to get a flavour of what has been done, but they aren't directly germane to the question at hand. So I'll end my presentation there.
The Chairman: Thank you, Mr. Jarvis.
We'll now go to Mr. Prakash, please.
Mr. Chandra Prakash (Head, Transportation Fuels Section, Environment Canada): Mr. Chairman, with your permission, I will move to the other side of the room and show some overheads. I believe it will be easier to explain some of the environmental benefits and some concerns about alternative fuels.
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The Chairman: That's fine.
[Slide Presentation]
Mr. Prakash: Motor vehicle emissions are a major concern in most parts of the world. In Canada, typically, we can see that the light-duty vehicles, which are basically the passenger cars, contribute roughly 15% of carbon dioxide, 45% of CO, 30% of hydrocarbons and about 25% of nitrogen oxyde emissions.
Again, the figures I have given on the top are just to give you some idea that, out of the total of roughly 17 million vehicles, the major fuel is still gasoline and diesel. If you look at the side, the alternative fuel vehicles are still more or less insignificant. Propane is the highest with about 150,000, then natural gas and methanol with really very few, roughly 500.
If we look at some of the reasons why we want to reduce the motor emissions, the main driving forces include the ground-level ozone. By the way, ground-level ozone is something that is formed in the ambient air based on the complex reactions between hydrocarbons and nitrogen oxides in the presence of sunlight. In Canada this is more or less a summer problem. It would be a different situation in California.
The second one is the toxic components. Under the Canadian Environmental Protection Act, benzine and the poly-aromatic hydrocarbons have been declared as toxics. The EPA has a definition of the motor vehicle toxics and it includes five of these individual species.
Carbon monoxide is another problem, and this is typically a winter problem.
Finally, everyone talks about global warming, and there are a number of gases that are creating this greenhouse effect, CO2 being one of the major ones.
Before I get into the alternative fuels, traditionally people use alternative fuels for three reasons: economic considerations, energy security, and of course the environmental benefits. So far in Canada most of the use of alternative fuels has been because of economic considerations. The fuel is cheaper, and if you drive a long enough distance in the vehicle it results in a fuel cost savings.
In the U.S., most of the programs are based on the second item, energy security. In the U.S. they import 30% to 40% of crude, and their emphasis is to use the indigenous resources. All the alternative fuels are not indigenously available in the U.S., but they have a broader base from where they can import.
In their definition of alternative fuels, they also include coal. That means if you're going to start with coal and produce gasoline from it, then this will be considered as an alternative fuel.
To make it short, we have to look at all the aspects. We have to look at the environmental considerations, we have to look at the economics, and if energy security is an issue in Canada, of course we have to look at the energy security and the diversity issues.
In today's presentation, I'm just going to cover three of the alternative fuels: natural gas, propane and alcohol fuels. I'm not going to talk about hydrogen or electric vehicles.
To start with, all these fuels we are looking at today have simpler molecular structures than gasoline. That means that if you design the engine to burn this fuel, it is easier and simpler to obtain complete combustion. That means the emissions are going to be lower.
All these fuels have lower carbon to hydrogen ratios. That means that if you burn a certain amount of fuel for a certain calorific value or heat content, your carbon dioxide emissions are going to be lower as compared with gasoline. That means the engines can be designed to run at a higher compression ratio and therefore they can be more efficient than the present-day gasoline engine.
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They produce lower toxic emissions. In the distributed list I have included the molecular structures in the back, and as you can appreciate just by looking at the molecular structure, the toxic emissions are going to be much less. They will also have a lower ozone-forming potential because the hydrocarbon emissions are less reactive. Then there will be a tendency not to form ozone or to form lessor quantities of ozone.
The two other fuels that are in the gaseous state are natural gas and propane. Therefore they will have lower carbon dioxide emissions because they do not require any enrichment of the fuel-air ratio.
When you start the gasoline car in the winter...in the old cars you have to pull the choke. That means the fuel-air ratio has to be rich. But because the gaseous fuels are already in the gaseous state, the mixing is very easy and you do not require any higher fuel ratio. Therefore the incomplete compression is lower and the CO emissions are low.
There are some concerns. All these fuels have lower caloric value or lower heat content. That means the driving range for the same size of tank will be lower for the alternative fuels. There are also some concerns about the availability of the fuel or the infrastructure. Of course, the cost of these vehicles at the present time is higher than the gasoline vehicles.
We have to realize that the motor vehicle emissions are really contributed by two aspects. One is the emission control technology, the vehicle design; the second one is the type of fuel or quality of the fuel, and they both have to be matched.
That means if we are buying the vehicles that have been designed to run on alternative fuels, what we call OEM vehicles - or the original equipment manufactured vehicles - then you will have this compatibility between the fuel and the engine.
So in this case the reason I have listed is that the natural gas and propane vehicles can be either OEM type, produced by the manufacturers, or they can also be converted after market. That means the vehicles are designed to run on gasoline or diesel, and then by making some changes you are converting those vehicles to run on alternative fuels.
When you make the conversion it can be either mono-fuel - that means you want to run only on that alternative fuel - or it can be bi-fuel, which means that even after the conversion you can have the option to run the vehicle on alternative fuel or gasoline.
The alcohol-fuel vehicles - and here I'm talking about the high-level blends. M85 is 85% methanol, 15% gasoline. E85 is 85% ethanol and 15% gasoline, and these vehicles are only OEM vehicles. They are designed by the factory and they can run on gasoline, from gasoline up to M85, or from gasoline up to E85, or any mixture of that.
They are perfectly designed because of the lack of infrastructure for M85 or E85 fuels. Depending on the availability of the fuel, preferentially you would fill the tank with M85 or E85, but if the fuel is not available you can also run gasoline or any combination of gasoline and M85.
So based on common sense and looking at that systems approach, the best option is the OEM alternative fuel.
The next one will be the after market conversion in which the conversion system has been matched with the vehicle technology, and this is what I'm calling electronic type. This is a state-of-the-art conversion. These conversion kits are available. By using these conversion kits, you can achieve vehicle performance that is maybe not as good as the OEM, but pretty close.
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These are the older conversion kits and they are sort of phasing out of the market. They were being used only because of the economics. Typically, a state-of-the-art conversion kit may cost $3,000. The simple kit may cost only $1,500. If there is no real incentive, the consumer may opt to buy the cheaper one. This is where we have to be cautious. The compatibility is important. The type of conversion we use should be definitely compatible with the vehicle emission systems.
Finally, I will show this qualitative plot, and again, here is a listing of fuels. This is a rather busy slide, but I have the listing of fuels and the direct emissions, hydrocarbons, CO, oxides of nitrogen, toxic.
Reactive hydrocarbon is shown because the reactive hydrocarbons are the ones that take part in the reaction with oxides of nitrogen to form ground-level ozone.
Methane is also a hydrocarbon, but it is not reactive. That's why if you look at compressed natural gas, most of the hydrocarbon emissions from natural gas are propane and they are not reactive. Therefore the reactive hydrocarbons are much lower compared to gasoline from CNG.
The ground-level ozone potential is based on the calculations and the data obtained by the California Air Resources Board. California, as you know, has done a lot of work in reducing the motor vehicle emissions. Typically, if you compare it with gasoline, compressed natural gas has only 18% ozone-forming potential compared to 100% for gasoline, and the other fuels follow: 50% for propane, and so on.
Global warming, again, is much lower for CNG and propane. For methanol, it depends on the source. These days methanol in Canada is produced from natural gas, and when you produce menthanol from natural gas you lose roughly 40% of energy. That's why the global warming potential of CO2 emissions are going to be higher for M85 compared to the other alternative fuels. If you are producing methanol from coal, the CO2 emissions are going to be even higher.
I will stop at this point, and if there are any questions, I will be happy to address them. Thank you, Mr. Chairman.
The Chairman: Colleagues, we're going to get right into questions. Bernard, are you going to start?
[Translation]
Mr. Deshaies: I have a question for Mr. Clayton. In your presentation, you seem to prove that it would be difficult for a government organization to accept a reducing of 75% of its present fleet to change to an hybrid fleet. Do you think that such requirements are too cumbersome?
[English]
Mr. Clayton: I think, as noted, on the requirements in the bill, starting with a 50% conversion, or at least procurement, of alternative fuel vehicles in a few years and then going up to 75%, if you look at this operation as purely an economic one and you do not use the terms economically in operation and feasible, it would be, to use your term, too rigid.
If you have the qualification that it is within the framework of economics as such, that is, the quotas apply within the economic and operational feasibility, then I think the percentages can be met.
[Translation]
Mr. Deshaies: In the bill, you are given the option of dispensing yourself from complying with the Act when this is not feasible economically or technically, when the fleet is not big enough or if there are no supply sources for the alternative products.
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You will perhaps not be able to get 75%, but don't you think it is commendable to try to somewhat force those organizations to get at 75%? In my opinion, there are different ways of getting at 75%. I am sure that managers will include a decrease in the number of vehicules, a decrease in the engine's capacity and a decrease in the driving range to get the nice little percentages that will enable them to attain 75%. In my opinion, all this should contribute to meeting the goals.
[English]
Mr. Clayton: I'll talk about two different types of objectives, one that's specifically in the bill and another one, which I already talked about, regarding things like smaller vehicles.
The Treasury Board policy that has been developed focuses on reduction of emissions. If you focus on a target of reduction of emissions, you're then talking about a whole series of ways you can reduce the total emissions from the federal fleet, including smaller vehicles and fewer vehicles. That's one type of target.
The second type of target, which is the target in this bill, is related to alternate-fuel vehicles and has the secondary impact of reducing emissions. As I said, with the 50% going to 75% rule, the question becomes what is the population of vehicles you're applying it to? With the amendments Senator Kenny mentioned he was supporting, clearly that population would be defined differently from the full 39,000 vehicles. I can't say how it would be reduced.
I note the United States example that's being used and the way they define populations. If I understand correctly, they have a 75% quota, but it's to about 50% of their fleet, because they exclude police vehicles and a whole lot of other types of vehicles from the basic population they apply the quota to.
[Translation]
Mr. Deshaies: Somebody also said that the RCMP would reluctantly think of getting smaller cars to chase vehicules. It is true that policemen need fast cars, but we also know that the police is not only doing chases, and some salesmen will probably offer bi-fuel vehicules, preferably a little less fast to avoid killing people.
Do you think that the goal of Bill S-7 is worth supporting, either in qualitative or quantitative terms? Whether we meet the goals or not, we will be aiming towards them. Do you think that Treasury Board could agree to support this bill?
[English]
Mr. Clayton: According to the preamble of the bill, the objective of the bill is to accelerate the use in Canada of alternative fuels in motor vehicles and to reduce carbon dioxide and greenhouse gases. Certainly this bill moves toward those objectives. Treasury Board policy is also carrying out a lot of other activities that help in meeting those objectives.
To get to your RCMP question, about half the RCMP fleet of 8,000 is more traditional and administrative, which would be like any other department. The other half are called high-pursuit vehicles - police cars and highway patrols, particularly, of course, outside of central Canada.
If I understand correctly - and the RCMP can provide more details - their issue is performance criteria. That's acceleration and the ability of police cars on alternative fuels to meet those types of criteria. It isn't a matter of smaller cars; it's essentially a matter of the ability to perform.
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Mr. Morrison: I had an RCMP officer tell me the other day that if they're forced to convert their pursuit cars, they're going to change their slogan to ``we sometimes get our man''.
I want to ask Dr. Prakash one question, and then I will pass to Mr. Stinson.
With respect to global warming, I personally am somewhat skeptical that human-produced CO2 has a significant effect on climatic cycles. As a scientist, I'm wondering if you are totally convinced there is a direct cause-effect relationship between the two phenomena.
As an addendum to that question, are you aware of a program of core drilling, which was done I think a couple or three years ago on the Greenland ice caps, where they noted from the ice cores that there were higher levels of CO2 in the atmosphere shortly before the beginning of the Industrial Revolution than there are now? This would indicate there must be something in addition to human activity, or perhaps more important than human activity, causing these fluctuations of carbon dioxide levels.
Mr. Prakash: That's a very good question. There has been debate over the last 5 or 10 years. This was the view of the United States representatives, that it has not been proven for sure that global warming is real. Finally it was decided that even if the scientific evidence does not prove it 100%, it's a kind of insurance policy. Even if there is a great likelihood of this thing happening, then it is better to act on it now.
Yes, it's true that all the CO2 or greenhouse gases are not man-made. But one of the concerns is that the rate of increase of the man-made greenhouse gases is increasing at a much faster rate. Unless something is done to get away from the carbon-containing fuels or to improve the fuel efficiency, this rate will not be controlled.
So yes, this is not 100% proven, but I think it is a good approach to buy some kind of insurance. If it is real, let's do something about it.
Mr. Stinson (Okanagan - Shuswap): I have a couple of quick questions. A few years ago we were sold the concept of the catalytic converter and how it was going to get rid of all these problems you're saying we have now. So the catalytic converter is not working.
Mr. Prakash: No, the catalytic converter on the vehicle is to reduce the emissions of carbon monoxide, hydrocarbons - which are a product of incomplete combustion - and the oxide of nitrogen, which is formed because of the high temperature in the combustion zone.
If you take any carbon-hydrogen-containing fuel, which is the case of gasoline and most of the alternative fuels, if the combustion is complete then all the carbon should go to carbon dioxide. All the hydrogen should go to water. Even if the combustion is 100% complete, the carbon-containing fuels are going to produce CO2. The catalytic converters are doing very well.
If you look at the pre-control cars, the catalytic converters have reduced carbon monoxide and hydrocarbon emissions almost by 98%. But the question is, even if you have complete combustion, which is a theoretical thing to have, you still are going to produce carbon dioxide because you have carbon in the fuel. How do you want to handle that? That can be handled only by improving the efficiency, using less fuel, or switching to the fuel that has less carbon.
People talk about the use of hydrogen. Hydrogen does not have any carbon; so if you use hydrogen you are only going to produce water. If the reaction is taking place at high temperature, of course you will produce some oxides of nitrogen.
So the catalytic converters have been very successful.
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Mr. Stinson: One other question. I believe Mr. Clayton mentioned that National Defence had a larger percentage of propane-powered vehicles and now they've downsized. Could I have a better explanation of why they downsized? Maybe you could give us some indication if you know what was the cost factor.
Mr. Clayton: This goes back about ten years when this happened - and my colleagues may have more information - but the downsizing was that the pilot was a failure. Over time they have essentially stopped using propane vehicles and have gone back to the traditionally fuelled vehicles.
Mr. Wayne A. Harper (Chief, Programs and Development, Transportation Energy, Natural Resources Canada): I think there are a number of poor conversions done on the propane vehicles. This was before the technology had advanced to the state it is today. I think those same vehicles that are converted today would not be the poor conversions they were. I think that was the major problem. They were also used in areas where the price of propane was too high, so that led to some dissatisfaction. So I think a combination of costs and the poor conversion quality....
Mr. Stinson: I've also heard that there's a problem with storage of propane vehicles for underground parking and such. Is this...?
Mr. Harper: In the province of Alberta it's actually banned to park a vehicle underground. With the new systems coming out, they're becoming cold systems, which should not be a problem in the future.
Again, the technology is improving dramatically and the new vehicles coming out, such as the one Chrysler will producing shortly, will be cold systems. There won't be a spitter valve on it so the propane won't be able to leak out. That should not be a problem in the future.
The Chairman: I'd like to ask Mr. Clayton a question that obviously comes to mind. Based on what the senator has told us in his submission, we've had some sort of regulatory regime in place since 1978; therefore the obvious question that needs to be answered is how many new cars have we purchased since that time that are of alternate fuels as opposed to the conventional fuel?
The argument that's being put by some circles around here is that regulation is fine, we don't need legislation; we can do it on our own. It seems to me that's not the case as of yet.
I'd like to know, if we are doing a good job and we are moving in that direction, how many new vehicles...because we continue to purchase new vehicles. Obviously the old ones wear out, and yes, we are downsizing, but we still are purchasing new vehicles.
Can you tell me how many new vehicles we've purchased since 1978 and how many of those used alternative fuel?
Mr. Clayton: There are two items I want to react to. As I noted in my speech, there has been no new Treasury Board policy regulation, directive, or guideline related to alternate-fuel vehicles. There has been one related to management of vehicles, but there has never been anything that has been specifically related to alternate-fuel vehicles. I cannot say how many we have bought over that time. At the moment we have 765 alternate-fuel vehicles in the federal fleet.
The Chairman: That's out of 25,000?
Mr. Clayton: Yes. As I noted, a few years ago it was up quite a bit higher, but it has gone down particularly because of the Defence situation.
The Chairman: Mr. Harper, based on the question Darrel asked...I was going to ask the very same question. Obviously, there was a sense from the pilot project DND did that the technology wasn't there. What year would you say the technology is to a point where we would consider it to be effective to go back to propane?
Mr. Harper: Today. The OEMs are getting into the propane business right now, and certainly when they come out those vehicles will be very good. The technology has advanced.
Chan talked about these new electronic systems that are being developed for propane now. I think the systems that are going out today are very good. They're meeting the emission standards.
A lot of work is going on in B.C. with the Air Care program out there, and they have to be able to meet the system in place out there. So the onus is on the industry to respond to the pressure zone and I think it's responded quite well.
I would think by the time this program kicks in in 1997-98 pretty well the only vehicles out there will be fairly good vehicles. I think they'll all be good vehicles, in my opinion. The technology is advancing that quickly.
The Chairman: That obviously begs the question of Mr. Clayton: why aren't we now purchasing alternate-fuel vehicles if in fact what Mr. Harper is saying...? Obviously it's much more efficient. It is up to speed, technologically speaking, and very good for the environment.
It is the old chicken and egg scenario. When I look at the cost estimates for alternative transportation fuels in Canada and the cost that was given to us by Mr. Jarvis...it costs quite a bit to buy a factory vehicle using natural gas or propane. Obviously that is because nobody is going out to push this issue; therefore it is expensive for the industry itself to make them.
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I'm trying to figure out who's going to start this if the government doesn't set the example. You say the technology is there, but nobody seems to be doing it. If we don't pass a bill like this, I'm trying to find out how we'd get you guys to do what we think is the right thing to do and have the industry feel comfortable that at least the government agrees that is the way to go. Can you give me an explanation or some form of comfort that you guys are going to start purchasing these vehicles if the technology, as Mr. Harper says, is A-1?
Mr. Clayton: I think on the technology side Mr. Harper said it very well. We've also talked about the economic side, in terms of departments. When departments look at this purely from an economic performance viewpoint, where there's a certain percentage of the fleet that could be converted economically, they then face a capital conversion problem - that is, the money or capital and where they get it. That certainly is why, if we can make it work, we would be very interested in making it work with the fuel suppliers in terms of a program in which they would share the risks and also provide the front-end capital, which would help.
I also note Senator Kenny's point. I think it's also fair to say that the technology is now recently available. I've talked about some of the issues. It takes a lot of time in terms of education and getting the system working.
I will note something else to understand. We don't know if it's a trend, but in the last two years the number of vehicles purchased by the federal government is way down. Part of that reason is because in the last two years most departments don't know what their future is. We are now coming out of a trend, with a program that can be aggressively applied.
National Defence is a classic example. They didn't know what bases they were going to have, and most of the National Defence vehicles are on bases.
As we now are coming out of that, literally from January to February of this year, where departments have more surety about their future, in most cases they're smaller -
The Chairman: Let's be frank about this. That has nothing to do with this issue. If the technology is there and you replace vehicles, as I replace my vehicle...after so many years you've got to replace them whether you like it or not. It's either that or they start using a bicycle or go on foot.
I would assume that the government replaces its vehicles every 10 years or so and that there's a complete revamping of the vehicles in the system as we go along. Wouldn't you agree with that?
If so, why aren't you purchasing as you go, in the next 10 years, as vehicles are bought...over to alternative fuels? You have to make an argument for that. You can't say that because we don't know what's going to happen at DND, we can't convert. I mean, that's a frivolous argument. The question is, if you buy a vehicle at DND, why isn't it an alternate-fuel vehicle? That's what I want to know.
Mr. Clayton: I guess what I was trying to explain was that I think the take-off, if you wish to use that term, of converting alternate-fuel vehicles and alternate fuels has been occurring in the last couple of years. In the last couple of years, first, we haven't been buying very many vehicles. There is normally about a five- or six-year turnover. If you look at the numbers for the last two years, it's way down.
The Chairman: That's my question.
Mr. Clayton: That's number one.
The Chairman: You have bought vehicles in the last two years.
Mr. Clayton: Yes.
The Chairman: It may be 500 vehicles or it may be 200 vehicles. How many of those were alternate-fuel vehicles?
Mr. Clayton: Very few.
The Chairman: Well, that's my question. Why is that the case if the technology is there, if Mr. Harper says it's right up to snuff?
I have a different approach from Mr. Morrison. I don't think the RCMP ever get their man. They're best to let them go to the next stop and just put up a road-block. They don't have to go 110 miles an hour.
I'm trying to find out why you're not doing it now, if the technology is obviously there and if Environment Canada believes this is good for the environment and private industry is waiting for someone to set an example. The United States has already done it. Why aren't we doing it?
It has nothing to do with whether we're downsizing or whatever. We bought cars last year, did we not?
Mr. Clayton: Yes, but we obviously have a disagreement here. What I'm saying is that we are buying less cars, number one. Secondly, where it is economic, I will note - it's not all vehicles that we use. Departments are sitting there unsure of what their budget will be, including their budget to buy vehicles, and they're unsure about their future operations.
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With a lot of things going on in government, in terms of new initiatives, they've been waiting for some direction. I think we are now at that position where the take-off is going to take place.
The Chairman: Okay. But I'm still having a heck of a time following you here.
Mr. Reed: Mr. Chairman, it might be appropriate at this juncture to remind us all - and I'll paraphrase the words of the late Robert Kennedy. He said most people see things as they are and ask why; I see things as they might be and ask why not?
What we're ignoring here is the fact that time goes on, technology goes on, things move ahead. I could ask the question: How much longer do you think the price of crude oil is going to stay below $15? Well, it hasn't been for the last 14 months. What we were told at that time was the prospect was it was going to stay below $15 for the foreseeable future - I think six years.
I would just make passing reference to pursuit vehicles. I would ask you to remind the RCMP, if you're talking to them, that the Indy 500 was not run on gasoline.
A voice: Maybe they should be, with nitrous oxide.
Mr. Reed: I have great sympathy for the question of infrastructure and the general availability of fuels, especially in isolated areas.
I suggest to you, though, that the infrastructure changed dramatically during those heady years when oil prices were going up and propane came on the scene as a motor fuel. I was one of the early ones to have my farm truck converted, and I would suggest to you that the prognosis for ethanol blend - there's nothing to preclude ethanol blends in this scenario - is for 5,000 outlets, as many as propane outlets, in the very near future.
We're not talking pie in the sky. The fact is, and I think the chairman pointed it out very well, we have to start somewhere with ``the journey of 1,000 miles''.
At any given point in history, we can convince ourselves that something is not feasible. It can be done today. It was done with us almost two years ago now when we were told that ethanol was not a good idea for various and sundry reasons. We could have left everything static. We could have left it in place and never gone anywhere.
So I suggest to you that time marches on; technology marches on. Some people do look into the future and have a vision of where we can go. There are some compelling reasons now why we should. One of them is the fact that the price of oil has not stayed below $15 a barrel.
Thank you, Mr. Chairman.
The Chairman: Thank you, Mr. Reed.
Any further questions or comments? I'm going to give our witnesses the last opportunity to make closing comments, if they wish.
Mr. Clayton.
Mr. Clayton: Maybe just one comment on your question related to crown corporations. I'll try to speak for them.
I think the issue for crown corporations is a matter of philosophy in their relationship to government. It does not have to do with the issue of alternative-fuel vehicles.
Under the Financial Administration Act, which governs the accountability of crown corporations, they pretty well have autonomy related to what are considered internal administrative matters. Occasionally, certainly in areas that I would call of broader public policy, such as official languages, we have applied legislation to crowns. However, this would possibly be the first bill to be considered an internal administrative provision to a crown corporation. That is the issue that they would raise, not the issue of whether or not alternative fuels are good or bad. That is the issue at stake.
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The Chairman: I'm sure you've reviewed the bill, so the question I'd ask you is, doesn't 6(b) cover that?
Mr. Clayton: No. I think one of the reasons, if I understand correctly, for the legislative drafters' amendments is that certainly the government's legislative drafters have said that the ability to define ``class'' - If you look in the bill under ``motor vehicles'' in the definitions, they do not consider that the ability of 6(b) to define ``class'' includes the ability to exclude organizations or, for example, RCMP pursuit vehicles. That, I think, is the reason for the request for the amendment as it's talked about. I will leave it to the legislative drafters to say whether or not that's true, but that has been the position.
The Chairman: Okay. We'll get into that as we go further down the road, Mr. Clayton. I just wanted to get a sense of that analysis from you.
Thank you very much, gentlemen, for your presentations this morning. We very much appreciate it.
It's noon now. We're going to have lunch and you're welcome to stay.
To Mr. Jarvis, in particular, whom we see here on a regular basis, thank you for coming again to the committee.
We're going to carry right on and get into the issue of witnesses in the private sector.
Before I do that, believe it or not, I have to get a motion passed so you can have lunch. I didn't do that the other day. I thought maybe we would eat first to see if it's any good and then pass the motion because we might not like it and may not want to pay for it. However, I don't think we'll get away with that. Can I get a motion from somebody?
Mr. Reed: So moved.
The Chairman: It is moved that the committee authorize the disbursement of the funds for today's working lunch.
Motion agreed to
The Chairman: We'll take 10 minutes just so you can grab a quick bite and we'll be back here at 12:30 sharp. Everybody will be at the table ready to go at it.
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PAUSE
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The Chairman: I call the meeting to order. I would like to introduce our guests who are here this afternoon from the Canadian Petroleum Products Institute: Brendon Hawley, vice-president of public affairs, Richard Dupuis, director of government affairs; From Consumers Gas we have Ronald Munkley, and from Superior Propane, Tim MacDonald.
Roger Thomas is here with us from General Motors.
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As you have noticed, gentlemen, we have let everybody give their submission. We try to keep it to 10 or 15 minutes apiece and then we go right into questions. I would leave it to you to decide who is going to start. Mr. Hawley, okay.
Mr. Brendan P. Hawley (Director, Public Affairs, Canadian Petroleum Products Institute): Thank you very much, Mr. Chairman. It's a pleasure to be here today on behalf of the CPPI.
In terms of background information to our presentation, I would like to note that CPPI was involved in a national air quality consultation that we initiated with governments, industry and with environmental groups some two years ago. As our presentation will show, this gave us a perspective on both air quality and environmental issues at the same time. We've also been looking at fuel reformulations, alternate fuels.
My colleague Mr. Dupuis, who is more of a technical expert than I am, will offer our comments on the proposed bill today.
Mr. Richard Dupuis (Director, Government Affairs, Canadian Petroleum Products Institute): Judging by the presentations you've heard this morning, a few of my remarks will be repetitive. I'll try to shorten them for the sake of time, as it seems you would like to do this fairly quickly.
The presentations from people from the different departments talked about some of the key statistics, and we've circulated a copy of the presentation. You can follow that.
What I've titled view-graph number one repeats some of the key statistics that are important to appreciate the bill itself, which intends to convert 75% of the fleet. The size of the fleet has been mentioned before to be 39,000. Another presentation mentioned that the total fleet in Canada is 17 million vehicles. The conversion we've seen today is already indicated through another presentation. Some of the charts have shown 168,000 or 150,000 for propane and about 30,000 for compressed natural gas.
I would like to mention that our member companies do sell all of these fuels, including the conventional fuels of gasoline and diesel. So in some ways we are a participant in that alternate fuels market.
From that perspective you can conclude, for at least our industry sector, that it would not have a major economic impact for converting that size of fleet when you look at 39,000 vehicles and 17 million vehicles, and less than 2% of the vehicles in Canada are converted to ATF.
The main reason for our presence here today is, as Brendan said earlier, that we have built a fair amount of expertise and understanding of the economics, the environmental impacts, and some of the technology development issues that exist for ATF.
If you turn to the second page of that package, we've isolated maybe three areas from the background material that was prepared to present Bill S-7. We would like to take you through those three elements one by one. They include the economic justification, the environmental recommendations, as well as the technological development points. We would like to show you some of our observations on these elements.
The third slide intends to talk about the economic justification. When you look at the economics of conversion, as you would imagine, companies like ours make investments on a regular basis. We have to look into the justification for spending dollars and we do that on a continuous basis for many billions of dollars of investment at all times. So there's a certain process that we're accustomed to using to look into these projects, and they tend to be looking at some of the key numbers and statistics that will help us make those decisions.
Looking at the conversion, the question you have to ask yourself is exactly how much is it going to cost? Today we've seen some of the numbers show up, and they're significant numbers - anywhere from $2,500 for some types of vehicles to $6,000 for OEM types of vehicles. There is the first number that's available to you.
Then you start looking at where are the savings, and they can be for operational savings amd for efficiency savings. For the private sector, you would throw in the tax savings because obviously the road tax and the excise tax savings would be a major factor.
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I think most of the people who have appeared in front of the Senate committee talking about their support for the bill and their support for conversion, and those who have converted, would tell you, and have said, that they'd do it on an economic basis. That's their main justification. If so, in the same event, they get the environmental benefits; they certainly would wish to acknowledge that.
When you look at it, though, from a government perspective, we say we shouldn't be looking at the tax savings because the tax savings don't really exist. You're taking money from one pocket and putting it into the other.
Earlier this morning NRCan presented a copy of their brief. They show a table of economic analysis, or pay-back, as they've put it. This analysis had three columns to look at the pay-back. One was just getting your conversion cost. The other column was to get your interest on the dollar, because the government has to borrow the money to do these conversions. Finally, they had a third column looking at these conversions, where they recovered the exise tax, as I'm suggesting you should do.
We would support the analysis that Natural Resources Canada has done, and I think it provides you with quite an effective chart to look at how to make your economic decision on selecting which vehicle of the fleet should be converted.
You obviously need to accompany that with another piece of information. You can't look only at the theoretical savings; you have to look at the practical savings. That also was mentioned this morning by a number of presenters.
The Bronson study, where the government looked at 25,000 of their vehicles, identified that the fleet has a fairly low usage. I think many made the remark that less than 10% of the fleet would qualify for economic conversion at this point in time, at least with the present utilization. That again was noted by a number of presenters.
Our analysis of these numbers gets us to conclude and confirm that at this moment - and I'm suggesting that there might be changes as you rationalize the fleet and do some efficiencies - very little of the fleet can be economically converted. That might partly answer some of the questions that were asked earlier.
Switching to the other element that was used to justify going ahead with this bill and talking about the environmental challenges, as Brendan said at the opening, we have been working on the environmental dimensions for years. Certainly in the last couple of years priority was given with government to look into a couple of key areas of ground-level ozone, or smog as some like to call it, for the greater Vancouver area and the Montreal-Windsor corridor.
In our analysis, we approached it by asking where the problem is, how much of a problem we have, and then what potential solutions we could put forward for this problem to be addressed in the most effective way. In order to do that, we ranked the different options by their cost reductions, or the reduction of emissions and the cost for these reductions, for each and every individual proposed solution.
On this particular chart, we listed the four more important solutions that were promoted and are being implemented in many areas of the country. The first was to talk about the fleet turnover, as everybody would recognize.
The quality of the vehicles that are manufactured nowadays has improved significantly, and these improvements certainly go a long way in reducing some of the emissions that are producing ozone. So this is definitely low-cost, high-efficiency, and is progressing quite significantly, and we can see the trends of each and every station improving over time.
The other program that we were strongly in favour of, again, because of its volume impact and its cost, was an inspection and maintenance program for vehicles. You've seen some of that happen in British Columbia, for example, where the program is in effect, and already you can see some of the benefits through the analysis they have done of their program. That's a start.
We've also looked at a number of vapour collection systems. Excuse the jargon, but we've called things canister or stage two, and we're simply saying it's two ways of collecting the vapour, either in the car or at the service station. We've shown that some of the numbers there are quite effective in collecting emissions.
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Finally, the industry has reformulated its gasoline voluntarily and reduced the vapour pressure in gasoline, so again we would reduce the emissions of volatile organic compounds. These are emission reduction opportunities that we classified and prioritized and which are being implemented now.
We continue that study to include alternate fuels as a means of analysing whether or not they would be economic. Looking at the numbers, we found that they would not provide a significant improvement. The lack of significant improvement in terms of their cost also made it, on a unit basis, fairly ineffective. From that, the conclusion of the air quality study for ground level ozone did not recommend that we go ahead with the implementation on a force basis.
The second area we worked on for the last year and a half was the climate change. Obviously we started with the same type of approach as when looking at alternate fuels. We looked at the life cycle analysis of greenhouse gas emissions for the different fuels.
The International Energy Agency, IEA, which is part of the OECD, published data with numbers comparing the climate change effect coming from the different emissions of the different fuels. This was also looked at by many stakeholder groups that were looking at the climate change measures.
You may recall that they produced a report indicating that they looked at 88 measures, among which were programs for alternate fuels. In the end, after their analysis of the benefits and the risks, they decided they would go with a voluntary program. The national action plan for the Canadian government recognized that voluntary measures were the best approach to dealing with climate change at this point in time.
The data we've seen argue that you could achieve those environmental benefits much more through rationalization of the fleet, much more through the efficiency gains that you can obtain from the analysis that the Bronson study showed you. Our view would be that this is the best approach at this point in time and that the mandate, per se, is not going to produce the environmental benefit as much as the reduction of the fleet.
The last point we wanted to cover was the issue around technology development. I'm glad to hear a lot of people here today mention that the vehicles exist today. There are models; they are available. Companies are ready to sell them, and I'm sure they would be happy for more of these vehicles to be bought. Certainly it's available today.
The same applies to the fuel. All of the fuels mentioned in the bill are available today. As I said earlier, our member companies do sell them, so they're available for people to grab.
I would add that the network also came out this morning in a very favourable way, and that's different from what I've heard before. Through the Bronson study, for example, 96% of vehicles of the government are exposed to propane, and over one-third of vehicles are also able to use natural gas or other alternate fuels. So it's a significant availability and exposure to these fuels.
As you would recall from many of our presentations, we always stand for letting the market forces do their thing, letting the market forces provide you with continuous opportunities for change, for new development, for choosing things as they present themselves and provide you with better benefits. Obviously mandates tend to limit those choices, and certainly mandates over a long period of time start reducing your options as time goes by and new options come to your service.
Those are our views on the technological development.
I will conclude with chart 6, by saying that as a final analysis it is quite possible that a portion of the government fleet can be converted to alternate fuels. I think we would support that happening and support it when it's economically feasible. I urge some of the proposed modifications of the bill that would introduce such a concept and certainly would be along the lines that we would support.
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The government fleet conversion to ATF really doesn't provide you with priority solutions to some of the environmental and technological issues that were promoted. I think there are many other options that are cost effective that can address those areas, and we would support those.
Again, making the point that market forces to us have always been a better way of dealing with opportunities, it provides fleet managers with opportunities to make the right choices at the right time, with the right opportunities.
To us, mandating the uneconomic portion of the fleet wouldn't really be consistent with what the government has been promoting in terms of eliminating subsidies, reducing costs or deficits. I would suggest that this would be recognized as people look at the economic conversion of the fleet.
In summary, we have heard a number of proposed amendments, and I think they go in the direction we're recommending here in terms of amendments, to make sure there are economic tests before capital is invested. This way, you would be able to sustain the conversion over time. A push should be to try to rationalize the fleet and make sure that as many of the vehicles are operated as long as possible. The economics then will justify more and more of these alternate-fuel vehicles being within the government purview.
That's a short, quick, to-the-point summary of our recommendations and observations. We would be prepared to answer any questions later.
The Chairman: Thank you, Mr. Dupuis.
We will hear from Mr. MacDonald next.
Mr. Tim MacDonald (Vice-President and Chief Operating Officer, Superior Propane Inc.): Thank you very much, Mr. Chairman. We appreciate the opportunity to be a part of this committee hearing on Bill S-7.
Due to prior scheduling commitments, our president and chief executive officer, Don Edwards, is in British Columbia and is unable to be here today.
Superior Propane is very pleased to support and endorse Bill S-7, an act to accelerate the use of alternative fuels for motor vehicles. We believe this legislation accomplishes four key goals.
First of all, it contributes to the sustained growth, competitiveness and job creation potential and the ATF industry.
Secondly, it reduces the operating cost of the federal fleet, thereby saving taxpayers' money.
Thirdly, it shows government leadership in integrating both economic and environmental goals.
Finally, it contributes to the reduction of the transportation-related greenhouse gas emissions.
At the same time, this bill addresses the key issues pertaining to the broader use of ATFs in the Canadian market. These issues are economic benefits of alternate transportation fuels; environmental benefits of alternate transportation fuels; refuelling infrastructure; technology and vehicle availability; and, finally, consumer acceptance. Superior Propane has always worked closely with government, in partnership, to address all of these issues.
Turning now to economic benefits, our industry employs 4,500 people directly and generates $1 billion in revenue annually. The auto propane segment represents 1.3 billion litres of demand, which is approximately one-third of our industry, and is supported by an infrastructure valued at $200 million.
For fleets, today private and public sector fleets experience savings of about $200 million annually. This allows them to improve their competitiveness and provide for jobs.
Finally, there are many spin-off benefits with respect to alternate transportation fuels and with respect to propane. There are many equipment manufacturers, parts manufacturers, and R and D companies that produce materials and services for auto propane, both on a domestic market and an export market basis. We feel there is conservatively at least an impact of 5,000 jobs on this basis.
Turning to environmental benefits of propane, the current interest in ATF transportation fuels markets has certainly been stimulated by the recognition of the environmental impact of transportation.
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Propane is acknowledged worldwide as having a positive environmental impact. When vehicles are optimized for a specific fuel, all the transportation fuels provide significant economic benefits.
Regarding lower greenhouse gas emissions, on a life cycle basis propane produces the smallest amount of greenhouse gas emissions of any commercially available alternate transportation fuel today.
Secondly, with respect to reduced smog, propane's ozone-creating potential is half of that of gasoline's, resulting in significantly reduced emissions of smog. Environment Canada did an excellent job this morning outlining the various benefits propane brings to the table in terms of the environment. Propane is a viable and sustainable choice for meeting environmental goals.
In terms of refuelling infrastructure, firstly in terms of supply, the supply is Canadian. The production exceeds 9 billion litres a year. The domestic demand is only 3 billion litres. There are 6 billion litres in excess of demand, which is mainly exported to the United States. There's ample supply to increase further growth of auto-propane-powered vehicles.
As you've heard earlier today, there are 5,000 outlets across the country where propane can be purchased, from St. John's, Newfoundland, to Victoria, British Columbia. In fact, there's more propane available than diesel.
Our own company, Superior Propane, has 2,000 outlets coast to coast, supported in western Canada by over 120 car lots, and over 150 conversion dealers, who provide conversion capability and after-market service for converted vehicles.
As has been stated earlier, the Bronson report, commissioned by Natural Resources Canada, has determined that 96% of the federal fleet is capable of refuelling on propane today.
In terms of propane vehicle development, the government and the alternate transportation fuel industry have a long record of cooperation. There are a number of OEMs involved in demonstration vehicles and OEM production vehicles. Two years ago, Ford started the F-series-700, medium-duty OEM truck. The first year it sold 700 vehicles; last year, 2,400. Chrysler, as you probably already know, is launching a ``B'' van in 1996. It will be unveiled on June 14 of this year. And many other OEMs are producing OEM propane-powered vehicles.
The industry is working towards greater OEM participation in factory production and QVM programs. Industry and government production and cooperation is essential to continue vehicle development.
Finally, customer satisfaction is critical to the success of any alternate transportation fuel strategy. There are several key elements to this equation. First, vehicle availability can be achieved either through a conversion or through an original equipment-manufactured vehicle.
Second, fuel availability. As I said earlier, supply is plentiful and it's Canadian. The refuelling structure is plentiful - 5,000 outlets across the country in all provinces, the Yukon and Northwest Territories - and it's convenient.
Third, there are 150,000 vehicles on propane today that appreciate the life cycle benefits of propane. The life cycle benefits to these companies, including cost of conversion, fuel and maintenance savings, are a proven fact. They're experts at managing their fleets. They're into propane because it saves them money. They appreciate and gain from the life cycle benefits of propane.
Finally, there's the overall performance satisfaction of the operation of the vehicle. Our customers tell us they find operating on propane comparable to gasoline. They're very satisfied with its performance, and that includes various police vehicles across the country. We have 11 police customers in Ontario, representing over 750 vehicles, utilizing propane, both for their administrative and high-pursuit vehicles.
We feel Bill S-7 is a very positive step. First of all, it saves the taxpayers money. Second, it's good for the environment. Third, it sustains and creates jobs and opportunities. Fourth, it stimulates broader consumer acceptance of alternate transportation fields. Finally, it continues the government leadership in this area.
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In conclusion, the greater use of alternate transportation fields provides Canadians with tangible economic benefits that contribute to growth, jobs and competitiveness for Canadian companies. In addition, alternate transportation fields make a positive contribution to Canada's environmental commitments. Thank you very much.
The Chairman: Thank you, Mr. MacDonald. We'll go to Mr. Thomas.
Mr. Roger Thomas (Manager, Automotive Regulatory Affairs, General Motors of Canada Ltd.): I appreciate the opportunity, on behalf of General Motors, to provide this committee with some important perspectives on alternate-fuelled vehicles in Bill S-7. I've passed out copies of the slides I'm going to talk to here.
New gasoline-powered vehicles are regulated based on tailpipe exhaust emission hydrocarbons of organic compounds, oxides and nitrate or NOx and carbon monoxide. These compounds are classified as regulated emissions. With the voluntary 1984 through 1996 phase-in of tier one emission standards to be completed this fall, automakers will have reduced smog-causing emissions of hydrocarbons and oxides of nitrogen by 98% and 90% respectively from uncontrolled levels. Carbon monoxide has also been reduced by 96%.
On a national basis, the overall fleet emissions from cars and light-duty trucks have projected the decline for the next decade as a result of these newer, cleaner cars replacing all high-emitting vehicles. Automobiles are the only sector projected to decline in overall emissions, as graphically represented on your chart there. It is important to note how very little opportunity remains to make further substantial gains in comparison with those that have been implemented today.
GM has been pursuing alternate fuels for more than 25 years as an integral part of our long-term investigation, as one of our means to improve the air quality and develop alternate sources of transportation energy.
We came to market with the first mass-produced methanol vehicle, which was designed and built in Oshawa, the first mass-produced ethanol vehicle, the first mass-produced natural gas pick-up truck, and we are the leader in electric vehicle development.
Three weeks ago we announced the largest single model alternate-fuel vehicle production program in history. In 1997, all General Motors four-cylinder small pick-up trucks will have ethanol flex-fuel capability. We purposely announced this program well in advance to encourage development of ethanol infrastructure. GM is also currently the largest supplier of vehicles to the federal government fleet.
GM automakers would like to be able to offer alternate-fuel vehicles. The challenge is to find the significant volume associated with the economies of scale to satisfy the business case for a given product program. A manufacturer also needs to be assured that the infrastructure will exist to support the vehicles in use. We support the federal government in taking a leadership position in sourcing alternate-fuel vehicles as a mass purchaser when economically viable and equivalent safety and emission standards exist, in comparison to conventional gasoline vehicles.
At the present time, no specific alternate-fuel vehicle can be identified as a clear winner in responding to the problem of localized urban air quality or carbon dioxide or CO2 emissions associated with enhanced greenhouse effect or climate change.
Each of the respective conventional alternative fuels have both advantages and disadvantages, as depicted on page 5. Even so-called zero emission electric vehicles need to be recognized for what they are: remote emission vehicles dependent on emissions from the power source.
Any of the traditional alternative fuels being advocated by Bill S-7 can only have a limited impact on the reduction of the three regulated emissions, with so little opportunity left as a result of the substantial reductions as I indicated have already been made.
On page 6, this chart compares respective vehicle CO2 emissions on a gram per mile basis. Although alcohol fuels, such as methanol or ethanol, if derived from renewable sources, or electrical vehicles using nuclear or hydro-generated power, do have the theoretical potential to provide measurable CO2 advantages, only a slight advantage over conventional gasoline is available from reformulated gasoline, propane or natural gas.
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The primary variable influencing CO2 emissions is fuel efficiency of the vehicle, which has improved by 125% on conventional gasoline vehicles since the 1970s.
Even if there were a clear wonder fuel, lack of an infrastructure, which must be equal to the availability of gasoline, will not overcome the fickle consumer's reluctance to accept the new technology.
Based on General Motors' experience with methanol vehicles from 1990 to 1993, even offering a variable-fuel product that operates not only identically on gasoline but also satisfactorily on a second fuel, comparable to a conventional gasoline vehicle, is not sufficient to develop market acceptance. On this basis, the government needs to recognize and encourage bi-fuel and flex-fuel vehicles as a means to achieve alternate-fuel vehicle targets.
As has been discussed previously, in the classification of alternate-fuel vehicles there are two very different types of vehicles in the fleet today. The vast majority of vehicles have been retrofitted with alternate-fuel components by an aftermarket conversion, after having been originally designed and sold as conventionally powered gasoline vehicles.
There are a smaller number of original-equipment-designed-and-manufactured vehicles. Vehicle manufacturers must comply with the Canadian motor vehicle safety and emission standards, as mentioned by Transport Canada. If the bill's intent is truly to focus on reducing emissions, with the recognition of vehicle safety it is vitally important that vehicles considered to fall under the mandate of Bill S-7 only be those that comply with Transport Canada's emission and safety requirements. Anything else will be a step backwards.
British Columbia's emission inspection and maintenance program, which provides the only real world fleet data available in Canada today, has concluded that the vast majority of alternate-fuel vehicles in use in the fleet today are significantly dirtier than the conventionally powered gasoline vehicles. In general the fleet evaluated in B.C. consists of vehicles originally powered by gasoline and subsequently converted to operate on alternate fuels. Very few, if any, aftermarket-converted vehicles comply with any emission regulations.
In support of the federal government's deficit reduction efforts, the alternate-fuel vehicle purchase focus should be on a price parity basis with equivalent gasoline-powered vehicles and vehicles that meet the utility requirements. If an alternative fuel is available, purchase should be encouraged.
In addition to the fuel economy, operating cost issues, representatives also need to consider the economies of scale that may be lost and the added capital cost associated with the purchase of alternate fuel vehicles. Based on the deficit reduction efforts of the federal government today and the scarce resources available, in the selection of alternate-fuel vehicles the highest consideration should be given to those available that have a price parity with equivalent gasoline-powered vehicles.
Beyond the initial capital cost issues, restricting the assortment of vehicles available to the federal government fleet administrator to only the handful of currently available alternate-fuel vehicles would create a significant purchase-cost penalty, to be absorbed by the taxpayer.
If auto makers know the federal government's market requirements, we can determine whether it is worth while to develop alternate-fuel vehicles for the market, given appropriate lead times. General Motors of Canada does continue to be committed to the development of alternate-fuel vehicles. We have engineering in Oshawa responsible for pursuing alternate-fuel vehicle development for the entire corporation.
In conclusion, we urge the government to ensure that the objectives of Bill S-7 are met in terms of reducing emissions and providing cost savings to the taxpayer. For new vehicles sold in Canada today it is necessary to specify vehicles that meet safety and emissions requirements, as demanded by Transport Canada.
Anything less than recognizing the importance of procuring vehicles for the federal fleet that comply with all Transport Canada new vehicle CMVSS requirements would undermine Transport Canada's regulatory mandate and be a step backwards in terms of providing cleaner, safer vehicles.
For situations where vehicles are not available at price parity with gasoline equivalents, we recommend that procurement mandates become targets to ensure the availability of vehicles suitable to meet the needs of the government.
The Chairman: Thank you, Mr. Thomas.
Mr. Munkley, please.
Mr. Ronald D. Munkley (President and Chief Executive Officer, Consumers Gas): We too have been active in national air quality and climate changes. In fact, Consumers Gas was recently the first Canadian corporation to submit an action plan on Canada's national voluntary climate change initiative to Ministers McLellan and Copps.
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I want to thank you for the opportunity to appear before this the Standing Committee on Natural Resources to present our views on Bill S-7. I have a few prepared remarks and I've made copies of these remarks available for those those of you who want them. You'll find that my remarks are somewhat similar to Mr. MacDonald's, with a twist.
Very briefly, Consumers Gas is a natural gas distribution utility. We supply essential and competitively priced energy services to over 1.25 million residential, commercial, industrial and other customers in central and eastern Ontario and western Quebec and to several thousand customers in northern New York State.
We have a fleet of approximately 1,000 light-duty commercial and passenger vehicles, which has been converted to operate on bi-fuel, natural gas and gasoline. As a result, our company saves $500,000 annually in fuel costs, which more than offsets the cost of all of the vehicle conversions. I believe firmly that our experience can be easily transferred to the federal fleet.
Bill S-7 would ensure that by the year 2004 75% of all vehicles operated by the federal government will be using alternative fuels. The legislation is welcome. It demonstrates forward thinking by all governments to resolve economic and environmental issues facing the country.
The use of natural gas as a transportation fuel is well established around the world. In Canada there are actually 38,000 natural gas vehicles or NGVs now in use. In addition, there are 80 natural gas buses in service in seven Canadian communities and there are more than 200 natural gas-fuelled buses on order from Canadian manufacturers.
The natural gas industry has worked closely with the federal government to encourage the growth of the natural gas vehicle industry and to development new NGV technology. In fact, the model of government-industry cooperation has resulted in world-class products such as refuelling systems, the transit buses I referred to, storage cylinders and dedicated natural gas vehicles being developed in Canada.
As Mr. Jarvis pointed out to you this morning, over the past 12 years the federal government has invested approximately $32 million in support of NGV market development. Initially the federal government program was funded from general revenues, but since 1986 virtually all of the federal government's incentives directed towards natural gas vehicles have been financed from the market development incentive program or MDIP funds, which were cofunded together with the Province of Alberta, with the objective of building new markets for Alberta gas. It's administered by Natural Resources Canada and the incentives in the MDIP fund are scheduled to end on March 31 of 1997.
Now, $32 million is a very significant contribution, but the number should be viewed in its proper context. In fact, it represents 17% of the total amount that has been bested directly in the industry, and that does not include outside investments in manufacturing facilities and conversion centres. However, despite the federal government's long-standing support, less than 1% of the federal government's fleet now operates on natural gas.
Senator Kenny indicated that the successful implementation of Bill S-7 will have a substantial economic impact. In particular, it will stimulate investment from others, including my company, to build new and additional infrastructure that can be utilized not only by government fleet vehicles but by the Canadian public as well. In fact, the numbers that Senator Kenny showed you this morning were meant to be conservative estimates of what we would spend. We didn't want to be seen to be inflating the estimates of infrastructure investments, so the 1,000-vehicle and $6 million investment that we intend to make is what we think is realistic and conservative should this bill be passed.
The growing natural gas vehicle industry in Canada now employs about 2,000 people in equipment and vehicle manufacture, installation and maintenance, and research and development. The longer-term economic benefits of Canada's position as a world leader in natural gas technology are worth building on. Every government talks about knowledge-based high-technology industries being the cornerstone for a successful future, and we have that here right now in the NGV industry.
We have a cluster represented by a range of mostly small but highly specialized organizations whose aggregate expertise is breaking new ground in the NGV business. The Canadian industry exemplifies the type of industries that Canada must develop to ensure its future prosperity.
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In marked contrast with most Canadian industries, virtually all of the natural gas vehicle products manufactured in Canada are developed in Canada. A high proportion of the manufacturing companies have their home base in Canada and manufacture their products for world markets here.
The industry is R and D intensive and Canada has established a position of leadership in virtually every area of the industry. It's growing; it provides high-tech, high-value-added jobs and is export oriented, and Bill S-7 will give the industry an additional boost. Essentially, we've created a world centre of excellence in NGV right here in Canada, centred mainly in southern Ontario and B.C. at the present time.
From an environmental perspective, we firmly believe natural gas can assist Canada in meeting its international commitment to stabilize greenhouse gas emissions at 1990 levels by the year 2000. Natural gas is inherently the cleanest of all fossil fuels and of all alternate fuels. It's primarily methane, and methane is chemically very simple. When it burns, the products of combustion are small amounts of carbon dioxide and water vapour. This characteristic of natural gas allows automotive engineers to design for and achieve extremely low exhaust emissions.
I have a couple of comments on the B.C. air care emissions testing that were referred to earlier. I know that in the instance of natural gas vehicles that were tested, they were first-generation vehicles tested that were converted five or six years ago. There's been very little conversion work done in B.C. in the last three or four years because of some regulatory problems that were developed there.
The vehicles that were tested were very primitive. The conversion shops had no controls and ripped out catalytic converter systems. That kind of thing simply doesn't happen in this industry any longer and it doesn't happen in B.C. either. I don't think the testing in the B.C. air care experiment for NGV vehicles, in any case, should be considered as a precedent for any decisions you're making.
Natural Resources Canada outlined the science for you earlier. A practical example is that Chrysler Corporation recently produced a natural gas-fuelled version of the popular Magic Wagon designed and produced in Ontario by Chrysler Canada. This new mini-van has been certified to meet California's future emission standards, which are widely recognized as the most stringent in the world.
Moreover, Chrysler's NGV mini-van is the world's first production vehicle and so far the only production vehicle to be certified to meet California's ultra-low emission vehicle standards. The vehicle's emissions approach the equivalent of a zero emission vehicle. You also saw from President Hutchins' letter that Ford Canada now has several OEM products available for the market as well.
In addition to an abundant supply, a North American pipeline network is in place which guarantees access to natural gas across North America. In Canada, NGV is dispensed from a network of 120 public refuelling stations, most at sites operated by petroleum product retailers. There are five public NGV stations in the Ottawa area alone. In addition, there are more than 70 private stations in operation to service private fleets.
As well, in the past few years more than 1,700 vehicle refuelling appliances have been installed to provide slow-fill overnight refuelling for individual vehicles and for small fleets right in their driveways. Since natural gas is transported by a huge network of underground pipes to homes and businesses, it is widely accessible for vehicle refuelling. A vehicle refuelling appliance, or VRA, taps into the gas lines and enables one or two vehicles to be filled overnight.
In conclusion, we strongly urge you to support Bill S-7. Consumers Gas and indeed the entire natural gas industry stand ready to support such an initiative. I am confident in making this statement because I'm also the vice-chair of the Canadian Gas Association, and the association and its member companies have all endorsed the bill.
We are prepared to offer the federal government training, technical advice, fuelling station installation, vehicle adaptation services and financing. This would allow the federal government to convert a substantial number of vehicles to operate on clean-burning natural gas at no cost to the taxpayers.
Thank you very much, Mr. Chairman.
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The Chairman: Thank you. Mr. Munkley, just out of curiosity, how many of those VRAs you were talking about that tap into the gas lines and enable you to fill your vehicle overnight exist in Canada? I live in northwestern Ontario. You are the person or individual that supplies a lot of that gas. I have never heard of this before. I happen to own one house out of a few that have natural gas hooked up to the house. Could I get one of those in northwestern Ontario, or is there some sort of regulatory problem with having houses hooked up to that?
Mr. Munkley: Mr. Chairman, there's now about 1,700 of these appliances in Canada and you could get one in northern Ontario as long as you have gas at your home. It's a product that's been developed in Canada through about three generations of technology over the last five to eight years and is now pretty solidly established in the marketplace, although we're still working at the cost-effectiveness of it. So it's a new technology, but an established one.
Mr. Rideout: Is this a personal issue, Mr. Chairman?
The Chairman: Well, you know, colleagues, we were going to get into the price of gas as an off-topic issue, and part of that, of course, is the amount of gas stations, the competitiveness, etc., of the fuel you use in your automobile. Obviously this means that if you don't have a guy pumping your gas for you, you don't have to go to a gas station and the taxes and overhead of that business, there should be a significant reduction to somebody who purchases a certain kind of fuel.
That's why it just hit me as obvious that I wouldn't mind having one of those, if it works. It's curious that I never heard of it. In northwestern Ontario we're always a little bit behind. We get The Globe and Mail a couple of days late. I figured maybe that's why I hadn't about it yet.
Anyway, I apologize. I don't want to get into this today, Mr. Munkley, but I was curious as to how many there were, because I had never heard of this in northwestern Ontario. That doesn't mean there aren't any there, I just may not have been made familiar with it.
Mr. Munkley: Mr. Chairman, what you have seen to be obvious is in fact obvious. The economics of natural gas refuelling with an NGV should be even better than at a public fuelling station because of the lower requirements for maintenance and manpower, and in fact they are.
The Chairman: Thank you.
We'll go to the regular order of individuals. Mr. Deshaies and then Mr. Morrison, please.
[Translation]
Mr. Deshaies: I don't have many questions. After having heard many witnesses, we are beginning to have answers to a lot of our questions.
I would like to put to Mr. MacDonald or Mr. Munkley a question on performance. People are switching from gasoline to other products. In general, propane is the first they go to because it is the one that is the most available in terms of outlets. Do the current vehicules, or those who will soon roll out, have technical problems as in the past or are they ready? For instance, we're talking about starting the car, using it in cold weather, the safety and the size of tanks. Is the propane industry, along with the automotive industry, ready at this point in time? I could later put the same question to Mr. Thomas and Mr. Dupuis who might have different points of view. Are the vehicules performing well?
[English]
Mr. MacDonald: To answer your question, the propane industry has evolved its technology over time. We spend a lot of time working with conversion equipment manufacturers such as Emco Ltd. in California, Autotronics Systems Inc., various parts manufacturers, etc., that go into the use of a conversion to make sure we have the latest technology available.
To ensure that conversions are properly installed and properly maintained today, we are working with these various manufacturers and parts manufacturers and putting together kits in modular form. They're easier to install, so the control of the installation is better than it was in the past. We are working very hard and very diligently with the conversion component manufacturers on conversions.
Secondly, we're working with OEMs like Ford and Chrysler, etc., with respect to specific projects such as the Chrysler B-van to promote and utilize propane in off-line OEM production vehicles.
We've proven through these initiatives that the quality of the conversions is better, the emissions results are significantly better than with earlier conversions, and clearly with OEM production vehicles the emissions results are excellent and the operating performance is good.
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In the area of propane, I think many users have found the performance of propane to be excellent over time, as evidenced by the number of users in the private sector who utilize propane.
[Translation]
Mr. Deshaies: Mr. Thomas, with regards to propane, you are asking yourself questions on the cost of fuel and on the major disadvantages and the reduced performance range. When you're talking about reduced performance and especially about performance range, are you saying that the vehicule is less performing and less autonomous?
[English]
Mr. Thomas: With regard to the fuel costs, the cost of propane tends to fluctuate much more than the cost of regular fuels. Generals Motors was into a heavy propane program in the late 1970s, and just after we got all the product validated, the cost of propane went up exponentially and we couldn't give the trucks away. So it's much more volatile than natural gas, for instance.
If you don't have a dedicated vehicle - in other words, if you have a bi-fuel vehicle - you do suffer from reduced vehicle performance in that the vehicle loses horsepower, and you are limited on the range because it's a gaseous fuel and therefore the tanks are large to package.
Did I answer your questions?
[Translation]
Mr. Deshaies: When you're saying that you are using more propane than gasoline, are you talking about the volume used for the same range? Would you need a bigger tank for propane for the same range?
[English]
Mr. Thomas: I wasn't talking propane versus natural gas, I was talking propane versus gasoline.
[Translation]
Mr. Deshaies: No, I'm talking about gasoline.
[English]
Mr. Thomas: Yes, you do.
[Translation]
Mr. Deshaies: What is the proportion?
[English]
Mr. Thomas: Maybe I'll pass that to Mr. MacDonald. Do you know the difference in range?
Mr. MacDonald: I would say the Btu difference is about 80% gasoline to propane, so I think you can probably get pretty close to gasoline within 15% to 20% in terms of range. A lot of our users are high-mileage users, such as taxis and police cruisers, and they find the range equivalent. They have enough range within their fill of propane to get their job done and get back to their central fuelling point without any problems in terms of range.
Mr. Chairman, I'd like to talk about this issue of price. If you look at the price differential between propane and gasoline, we track that very closely. The price spread between gasoline and propane has been maintained over the last 10 or 15 years. If it wasn't maintained to the customers' benefit, they wouldn't keep converting vehicles to propane. Over time, the differential between propane and gasoline is there to provide economic benefits for fleet users.
Mr. Morrison: I don't usually throw flowers at our witnesses, Mr. Thomas, but I would like to compliment you on your paper. It's something to get someone here who seems to not wear coloured glasses on either side of an issue, and I do appreciate that.
I would like you to comment on the bill itself if you have had the opportunity to study this thing. Have you?
Mr. Thomas: Yes, I have studied the bill. I guess our only concern is the roll-out is a little aggressive. It doesn't give manufacturers the opportunity to develop vehicles for this bill. Anything you're going to pick up in the next two or three years is already going to exist. We won't be able to design something that would have complied with the requirements. So we'd like to see a little less aggressive roll-out, perhaps.
Mr. Morrison: I guess what I really meant was this. If we weren't on this fast track here and there was a chance to really work on this bill, are there any specific changes you would recommend or that you would like to see in the bill to make it better?
Mr. Thomas: The definition of fuels. It talks about sole-source fuel, and I think we need to be careful on the definition of that. We need to encompass bi-fuels in the early years.
Optimally you'd like to have a mono-fuel vehicle, but with the lack of infrastructure, people are very reluctant to buy mono-fuel vehicles. So we need to be careful that we don't shut those out of the market with this bill.
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Mr. Morrison: Do I have another question?
The Chairman: Are you going away from Mr. Thomas?
Mr. Morrison: No, I was going to go with Mr. MacDonald.
The Chairman: Can I ask Mr. Thomas a supplementary to what you were asking, Lee?
You suggested that the bill moves too fast and doesn't allow corporations like your own to create new models. The letter we got from Ford suggests there are significant models that already exist. Are you then going away from what Mr. Morrison's compliment suggested, having your foggy glasses back on, suggesting that it's Chrysler that has a problem with not enough models, but the competition that you're against does have enough, that therefore then you want to slow this down so you can catch up to Ford? Would that be a fair assessment? The letter we got from Ford says they have all the different products that we're basically talking about.
Mr. Thomas: The problem with the roll-out, as I said, is that it picks up anything that exists. It doesn't give you time to develop something. So it depends on what the roll-out of the individual companies was.
The Chairman: What are you talking about - something that doesn't exist? What would you like to create that I can't really in my mind think of? Ford already has the ones I would maybe be interested in, which is a Taurus sedan that uses M-85 flexible fuel, and the E-85 model available in 1996. They have natural gas; they have propane medium-duty trucks. What else is there? I hate to tell you, but my family's a Ford family, so I've never bought a Chrysler. There may be a few nice ones. I know the clerk wants to buy a Camaro, but that's a different argument.
I'm concerned that maybe you're suggesting the bill is not acceptable because Chrysler isn't prepared for it, but that Ford -
A voice: General Motors.
The Chairman: Sorry, General Motors - but that you are. I'm not a Chrysler or General Motors person, either.
Mr. Thomas: As I said, my concern was that, yes, it will benefit people who already have plans in place, but it doesn't give time for someone who might not have had all the plans in place to develop a product for the mandate.
The Chairman: Sorry, I just wanted to get that clarified, because I was under the impression that maybe there was nothing available as to -
Mr. Thomas: No, no there's lots of alternate-fuel vehicles out there. We've only announced one of ours at this point in time. We are working on a number of others.
Mr. Morrison: I think the point Mr. Thomas is making is that technology evolves.
The Chairman: It's not my fault GM is slow. It seems to me that Ford's really moving along, and I'm all in favour of that.
Mr. Morrison: Mr. Chairman, do you know specifically what any automotive company is going to have on the market three years from now? If you do, I want to get you to be my investment counsellor.
The Chairman: If you're asking me if I have shares in any of those corporations, no.
Mr. Morrison: My question is for Mr. MacDonald, and Mr. Thomas has actually touched on this - the volatility of the propane price.
If we legislate a captive market for you, what assurance could you possibly give us that at some point down the pike the cost of propane will not be higher than gasoline and yet we would have both the government and the crown corporations locked into a situation where they have to buy the alternative fuel? We can't start reconverting and, say, go from propane to ethanol. You're going to do a lot of converting on these vehicles. What assurances do we have, if any, that this wouldn't happen?
Mr. MacDonald: That's a very good question. Propane is a commodity, it's impacted by world forces. It's a question we get asked by private sector fleets as well, obviously, because they're making hard-earned investment decisions with respect to conversions. If you look at the facts over time, the facts are that the supply is Canadian made; 9 billion litres of propane are produced in Canada and the domestic demand is 6 billion. So there's ample supply to meet the demand. Supply is long in the country.
Secondly, there is competition. Clearly, if the price of propane rises to a certain point, the marketplace will adjust. But if you look at it over time, we have had people on propane for the last 15 years. I think of the Peel Region police, who have been on propane for 14 years. They are on it because they like to use the product and because they have significant economic savings. Propane's economic benefits with respect to gasoline have stood the test of time.
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Mr. Morrison: Actually, Mr. MacDonald, you avoided my question regarding a legislated captive market. The Peel police can change according to economic forces. If we pass this bill in its present form, forcing our people by law to convert away from gasoline, price is not going to be a factor.
Going further on the same track, propane is not the undernourished kid on the block; you have outlets all over. Why do you suppose you haven't been able to successfully lobby the government fleet managers to voluntarily convert to your product? In your opinion, if there are indeed efficiencies and economic savings, if it's good for the environment, and all the arguments a good lobbyists could raise, why aren't they willing to do this? Why do you think you haven't been able to succeed in the marketplace to do this, that you require legislation to get there? What is your explanation?
Mr. MacDonald: Initially there were growing pains when the alternate transportation fuel industry started in the early 1980s. There were some high-quality conversions done, but at that time the technology was not as advanced as it is today. Early on various conversion shops didn't do high-quality conversions. As a result, various users, including the federal government fleets, got poor conversions, had problems with conversions, had down time, were discouraged with those results and moved off the product.
Over time, our industry and our company have learned and we've worked with OEM manufacturers of propane conversion technology. Today the technology has advanced significantly. Today we do much better conversions because we have better-quality conversion equipment, better-quality kits and better-qualified conversion dealers to do high-quality conversions. If we didn't have that level of quality, there wouldn't be 150,000 vehicles out there today utilizing propane.
On the issue of the federal government, there certainly were growing pains at the beginning. With the conversion quality much improved from the past in the last year or two, the time has come where the federal government fleet can take advantage of these improved conversion capabilities and benefit from the economic and environmental benefits propane can provide.
Mr. Morrison: But my point is, why aren't you making your pitch to the people who run the fleets rather than to us as legislators? If you have a good product, you should be able to sell it.
Mr. MacDonald: We have a good product and we have been able to sell it. Critically, though, business makes business decisions based on risk. There are significant investments required. Earlier we heard about the amount of investment required. The mandate certainly reduced the element of risk and will encourage further investment in infrastructure and conversion technology, to the point where it will encourage further efforts by all alternate transportation fuels to come to the table with investments that will help to increase the conversion of federal government vehicles to alternate transportation fuels.
The Chairman: Mr. Munkley wanted to jump in on the question that was asked by Mr. Morrison.
Mr. Munkley: In response to the member's question with respect to what might happen to prices of alternate fuels when there are prescribed mandates for purchasing alternate-fuel vehicles, I would only point out that the legislation does not prescribe a particular alternate fuel and there will still be competition between the fuels. In fact, on the natural gas industry side, the industry is regulated from field to burner tip. All of its costs and margins are regulated. The natural gas for vehicles segment of our business is only about a tenth of one per cent of the total business right now. Even if it increases tenfold, it's not going to reach a level of sales that is going to tempt anybody to price themselves out of the market and lose to their competitors, such as propane.
.1340
Mr. Morrison: This raises a very important technical point, and I would like an answer. If we get into this, there would be market competition between propane and natural gas. If somebody was plugged into LNG and wanted to change over to propane, or vice versa, how major would the technical conversion be?
Mr. Munkley: Mr. Chairman, the conversion technology is completely different. It would be a major change. If a vehicle was already purchased on one fuel, switching to the other would be quite a major technological change in the vehicle.
The Chairman: I might just clarify one of the statements Mr. Morrison made. This legislation does not force the government to convert to 75%. It's a quota. Quite frankly, if it's not efficient and economic, they don't have to meet the 75%. This is an attempt to try to move them down the road a significant amount.
If he left a false impression that this is a mandated legislative process, that now we will convert, I don't want everybody to get excited about that. That's not what this bill says at all.
Mr. Arseneault: On a point of order, I think you're jumping ahead. The amendments say that.
Mr. Morrison: Yes, that's what the bill says.
The Chairman: No, it doesn't.
Mr. Reed.
Mr. Reed: Mr. Chairman, perhaps we should clear up the lack of clarity. It has popped up two or three times. One happened to be the CPPI submission. The graph on the last page includes CO2 emissions. It doesn't differentiate between those emissions that are carbon-neutral in our environment and those that are the not. The last five are carbon-neutral. In the future we should be careful about those things.
We also do it with gas. Natural gas is a very clean product when it gets to us, but when it's coming out of the well it has a different set of properties and it may or may not be the cleanest thing in the world. It's the same thing with electric-powered vehicles. It depends what the prime mover is. If it's water power, it's great stuff, but if we're going to burn a tonne of coal down at the lakeshore to fire up the electric vehicle, you can forget it.
I realize we're all promoting our own game here, but I think we should be very astute about that.
Mr. Dupuis: Mr. Chairman, could I respond?
The Chairman: Certainly, Mr. Dupuis.
Mr. Dupuis: We tried in our presentation to make it as neutral as possible. One of the ways of doing this is to get the information from sources that are not from our industry sector and are able to produce the data, which we can then quote.
The attached chart on the climate change question is produced from the OECD. They looked at all fuels with their own methodology. Their methodology looked at the vehicle emissions, the fuel supply emissions and the manufacturing dimensions, so that's what's this chart reflects. It's not a CPPI-produced chart; it is circulated worldwide to analyse alternate fuels.
Mr. Munkley: Mr. Chairman, I might add that it's been pointed out that life cycle benefits are an important measure. They certainly are. I haven't seen the chart that was referred to, but one has to be cautious about what gets rolled into which fuel's life cycle. For instance, a lot of propane is produced as a by-product of natural gas production; a lot of natural gas is vented to the atmosphere as a by-product of oil production and then gets charged against the natural gas industry in a life cycle benefits analysis.
I haven't seen the chart, but it is something you have to be cautious about when you're assessing.
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The Chairman: I want to thank you very much and apologize for the short notice we gave you in the last few days. We've had some significant problems with this bill as far as getting it through the committee is concerned, so I want to again apologize and thank you for the tremendous effort I'm sure it took to get you all here this afternoon.
Colleagues, we're going to take a few minutes to clear the room and then we're going to go to clause-by-clause study.
.1346
PAUSE
.1405
The Chairman: Colleagues, we'll bring this meeting back to order. We are going to get into clause-by-clause.
You will find that we have a number of amendments from the government side that have been, for your information, accepted by the author of the bill itself. There are also some amendments from the Bloc. The Reform will more than likely put their amendments at report stage, when it goes back to the House.
We will begin the amendments. We look at the order of consideration, and consideration of clause 1 is postponed pursuant to Standing Order 75(1).
On clause 2-Definitions
The Chairman: Clause 2 has two amendments. We will start with G-1, which is the government's first amendment, and ask Mr. Reed to read it into the record, please.
Mr. Reed: Mr. Chairman, it's my pleasure to present this amendment.
I move that clause 2 of Bill S-7 be amended (a) by striking out line 1 on page 2 and substituting the following:
- Definitions
- (1) In this Act
- (b) by striking out lines 16 to 18 on page 2 and substituting the following:
- ``Crown corporation'' means a corporation named in Schedule III of the Financial
Administration Act unless excluded pursuant to subsection (2);
- and (c) by adding, following line 26 on page 2:
- excluding Crown corporations. The Treasury Board may by order exclude any Crown
corporation from the application of this Act after consultation with the board of directors
of the corporation.
An hon. member: Yes.
Mr. Morrison: I'm not too clear on the intent or the meaning of what we're doing here.
Mr. Rideout: What it will do is create the possibility for the crown corporations to be included or not.
Mr. Morrison: But as this is worded, who is going to make that determination?
The Chairman: The Treasury Board.
Mr. Morrison: This committee will have nothing to do with it?
An hon. member: That's correct.
The Chairman: The amendment is the Bloc's amendment, you'll notice.
Mr. Morrison: I didn't notice it, but okay.
Amendment agreed to [See Minutes of Proceedings]
.1410
The Chairman: Colleagues, we'll go to amendment B-1, presented by the Bloc, which is the amendment to clause 2 on page 2.
I will ask Mr. Deshaies to read the amendment, please.
Mr. Rideout: Just before that, is it assumed that the French is passed at the same time with respect to the amendment?
The Chairman: Yes.
[Translation]
Mr. Deshaies: My amendment deals with lines 10 to 15. I want to remove what is now a description of alternative fuels. I am not saying that those products are not any good, but we can't say what will happen in one, two, three, four or five years. Somebody may prove that ethanol, which seems like a good product now, may look a lot less ecological when we consider the costs of soil pollution associated with the culture of corn.
If it is prescribed by regulation, we can change the list by adding or removing some products and we can decide whenever technical discoveries justify changing the list. This is why we don't really have to name the products. We know that if the products are good, they're good products. If scientists find out that they were mistaken at some point, the list will not be cast in stone, in lines 10-15.
[English]
The Chairman: Is there any discussion? Mr. Morrison.
Mr. Morrison: It looks good to me.
[Translation]
Mr. Arseneault: Mr. Chairman, clause 6 (a) gives us the flexibility that you are asking for, I believe.
- The President of the Treasury Board may make regulations prescribing any fuel for the
purposes of the definition ``alternative fuel''...
Mr. Arseneault: There is some flexibility in the bill and I don't see how this is limiting.
Mr. Deshaies: No, the problem is not that it is limiting, but that now, if we make a list that seems efficient and ecological for now, tomorrow or next year some circumstances may happen and we may find out that soil pollution by chemical fertilizers is increasing with the production of ethanol. What then will you do to take it off the list? Will you have to amend the act? It would be much simpler to change a list that is part of a regulation. It could be the very same list, but I would prefer not to see it in the bill itself. This is why I'm asking you what is the advantage of keeping this list in the bill. You may convince me. You see, it is just the contrary: the way I suggest, there is no problem; but with your wording, there is one.
[English]
Mr. Reed: I questioned this myself earlier when I first saw this bill. I should point out that if I interpret this correctly - and I hope I do - it says:
- including, without limiting the generality
- (a) any fuel for the purposes of the definition ``alternative fuel'',
Why those are named in there might be worthy of an explanation, but I do believe it's broad enough that it does not limit it to these.
The Chairman: Obviously the reason we have the author of the bill here is to explain the rationale. It's much different from having the officials here, because of course they're not the sponsors of the bill. Maybe we could let the sponsor speak to that particular clause.
Senator Kenny: I thought the explanation we just got was a good one. I share the concern. My feeling is that there needs to be a reference to the fuels that appear to be on the horizon right now. In fact, we've stretched out a fair distance in terms of some fuels that really aren't close to being economically viable at all when we're talking about hydrogen and electricity.
Having said that, I think it is not limiting to the ones we have here and it does give the President of the Treasury Board and Treasury Board, after consultation, the capacity to define fuels in the future.
My view and certainly the view of the committee when we were considering it before was that we felt that as legislators we could not see the future. We spent a great deal of time discussing the fact that we did not have the ability to predict the future clearly, and our view was that this provided for that sort of flexibility to future governments.
Mr. Morrison: Reading this paragraph we're talking about, which states in general the fuels, would this exclude dual-fuel vehicles? If we accept that as written, would you then not be able to use a dual-fuel vehicle?
Senator Kenny: That would not be my view.
Mr. Rideout: The key words are ``without limiting the generality''. Those are the very key words that give you the power to add all over the place.
Senator Kenny: And to exclude dual fuels would slow the process down significantly.
Mr. Morrison: It would be unacceptable to me if that's what it means.
Senator Kenny: It is not the intention of the bill to do that.
The Chairman: Mr. Deshaies.
[Translation]
Mr. Deshaies: Last word. If one of the products listed today is no longer ecological, what would be the procedure?
[English]
Senator Kenny: You would define it.
Mr. Deshaies: On division, no problem.
Senator Kenny: But you'd get rid of it.
Amendment agreed to on division
Clause 2 as amended agreed to on division
On clause 3 - Alternative fuels policy
The Chairman: There is an amendment to clause 3. Mr. Reed, please.
Mr. Reed: I move that clause 3 of Bill S-7 be amended by striking out line 29 on page 2 and substituting the following:
- for every fiscal thereafter where it is cost-effective and operationally feasible, seventy-five
Clause 3 as amended agreed to
On clause 4 - Implementation of policy
The Chairman: There is amendment G-3 in your package. Mr. Reed.
Mr. Reed: I move that clause 4 of Bill S-7 be amended (a) by striking out line 38 on page 2 and substituting the following:
- that acquire motor vehicles shall, where it is cost-effective and operationally feasible to do so,
in the
- and (b) by striking out line 12 on page 3 and substituting the following:
- Obligatory use
- (2) Where it is cost-effective and operationally feasible to do so, a federal body shall use
an alternative
.1420
Amendment agreed to
The Chairman: Shall clause 4 as amended carry?
Mr. Morrison: I have an amendment.
The Chairman: You do? I haven't seen one. How many amendments do you have?
Mr. Morrison: That's the only one.
The Chairman: We'll continue and then go back to clause 4 and Mr. Morrison's amendment.
Clause 4 allowed to stand
Mr. Morrison: On a point of order, if we could do it, it may have some effect on some of the other clauses. It's up to you, but there may be some ramifications.
Mr. Reed: Mr. Chairman, I don't think that's relevant. It won't change the wording of other clauses of the bill. It might have ramifications, but it doesn't change the text.
Mr. Morrison: Okay.
On clause 5 - Crown corporations
Mr. Reed: Mr. Chairman, I move that clause 5 of Bill S-7 be amended (a) by striking out line 16 on page 3 and substituting the following:
- acquires motor vehicles shall, where it is cost-effective and operationally feasible to do so,
select in per-
- and (b) by striking out line 27 on page 3 and substituting the following:
- Obligatory use
- (2) Where it is cost-effective and operationally feasible to do so, a Crown corporation
shall use an
Amendment agreed to: yeas 7; nays 1
Clause 5 as amended agreed to
On clause 6 - Regulations
The Chairman: It is my understanding there are two amendments to clause 6. B-2 is first. So it'll be the Bloc amendment. We'll hear from Mr. Deshaies and his amendment to clause 6.
[Translation]
Mr. Deshaies: In order to be able in the future to judge amendments to this legislation, that is products that will be added or, as Mr. Kenny has said, products that we would have to remove from it, it should be up to the standing committee of the House of Commons to pass judgement on it, instead of leaving it to the President of the Treasury Board.
That is the rationale of our amendment, that it be done on the recommendation of the standing committee of the House of Commons, which usually deals with energy-related issues, and that recommendations be made after the committee has been consulted. That is the kind of formulation that would be agreeable to us and it would give more representativity to the committee since we are working on that issue.
We already gave a lot of discretionary powers. But these powers must be put to good use. I believe that if the Natural Resources Committee had the opportunity to include some products it would have its normal say in the process and would be much more efficient and effective in the exercise of its mandate.
[English]
Mr. Rideout: [Inaudible] may delay the process. This will allow us to move more quickly as a government. That's in the better interest of the intent of the bill than to have it come to the standing committee. It could take months. Look at how long it has taken to get this to where it is today.
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The Chairman: Mr. Kenny.
Senator Kenny: If the amendment were to proceed, I presume it would include both houses and the committees of both houses. But having said that, one of the efforts throughout this bill has been to allow managers to manage and legislators to legislate. Bringing it back here every time means in essence that this committee wants to manage the function for government rather than provide it with policy direction.
I know there is a certain attractiveness and frustration on our side from time to time when we see things not managed as well as we would like by the administration, that if they would only give it to our committee we would solve it. But having said that, Parliament has the capacity in clause 7 to see whether the managers have managed well or not and if they aren't managing well, we have the opportunity to criticize them or we have an opportunity to change the policy. But I believe this would be usurping the managers' function.
Mr. Morrison: With respect, Senator Kenny, by the nature of the bill, I think what we're doing here is getting the legislative function into the managerial area already. Having done so, I think I have independently come to the same wisdom as the hon. member from the Bloc. I think the committee should be involved here. We can't have it either one way or the other. If we're going to legislate this type of thing, then it must remain in the purview of the legislators. If we're going to let the managers manage, then we shouldn't be discussing this bill.
Mr. Arseneault: I think Senator Kenny supports a good point in the sense that if the amendment should go ahead, it should include the Senate committee as well, seeing that the bill did come from the Senate. They have a standing committee as well, of equal status to our committee, I would hope.
[Translation]
Mr. Deshaies: I believe that the Senate committee could review this as well. But essentially I do not believe that we must manage this on a daily basis. We are saying that in the event there would be major amendments, it would be brought back in front of our Committee. Everything is in place for that to work out. We will not be called upon every week to check whether the whole thing has been well managed. I have the feeling that the major orientation matters should be brought back either to our Committee or to the Senate committee if you prefer to do so.
[English]
The Chairman: Having heard all the discussion, we'll move to voting on acceptance of the amendment as presented by the Bloc.
Mr. Morrison: I would like a recorded vote.
Motion negatived: nays 5; yeas 4
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The Chairman: We'll now move to the next amendment on clause 6.
Mr. Reed: I move that clause 6 of Bill S-7 be amended by striking out lines 36 to 40 on page 3 and substituting the following:
- (a) prescribing any fuel for the purposes of the definition ``alternative fuel'';
- (b) prescribing any class of motor vehicle for the purposes of the definition ``motor vehicle'';
- (c) respecting the criteria to be used in determining cost-effectiveness and operational
feasibility; and
- (d) generally for carrying out the purpose or any of the provisions of this Act.
Clause 6 as amended agreed to
The Chairman: Next is new clause 6.1. Mr. Reed.
Mr. Reed: I move that Bill S-7 be amended by adding, immediately after line 40 on page 3, the following:
- Measures
- 6.1 The Treasury Board may take such measures as it considers appropriate for giving
effect to the purpose or any provision of this Act.
Mr. Reed: It means what it says.
Mr. Morrison: What's the rationale? What's the purpose? I'm not a lawyer.
Mr. Rideout: It gives the Treasury Board the flexibility to put into place whatever it deems appropriate to make sure that the act and the intentions function properly.
Mr. Morrison: In other words, if that is put into place they can basically do anything they like with the act.
An hon. member: Exactly.
Mr. Morrison: I'd strongly oppose that.
Mrs. Sheridan (Saskatoon - Humboldt): Mr. Chair, as a point of clarification, it seems to me that what's proposed in new clause 6.1 from a legal perspective - and I am a lawyer, not that it makes me special - is that it simply gives the Treasury Board those powers that it must have in order to carry out the spirit and the intent of the legislation. This is typical of most legislation where there must be a provision to enable whatever body it is to carry out the intentions of the act. But it does not in any way provide a blanket power to go beyond the scope of the act, or to frustrate the act.
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Senator Kenny: It was described very well just then, Mr. Chairman. It is designed to give them the capacity to put the act into effect, but it is not there to give them the capacity to frustrate it.
The Chairman: As the author, are you accepting of this particular amendment?
Senator Kenny: Yes.
Amendment agreed to
On clause 7 - Report to Parliament
The Chairman: I am aware of no amendments to clause 7.
Mr. Morrison: I'd like a recorded vote on that. You're still referring to crown corporations.
Clause 7 agreed to: yeas 6, nays 1
On clause 4 - Implementation of Policy
The Chairman: Now we go back to Mr. Morrison's amendment to clause 4, which was held over until we received a copy of it. Mr. Morrison, could you read the amendment to clause 4?
Mr. Morrison: I move that clause 4 be amended (a) by striking out line 5 on page 3 and substituting the following therefor:
- (a) twenty-five per cent, for the fiscal year com-
- (b) by striking out line 7 on page 3 and substitute the following therefor:
- (b) thirty per cent, for the fiscal year com-
- and (c) by striking out line 9 on page 3 and substitute the following therefor:
- (c) forty per cent, for the fiscal
The Chairman: Yes, Mr. Morrison.
Mr. Morrison: Senator Kenny, I'm not doing this merely to be obstructive. I'd like to explain why I am proposing lowering those numbers.
You did state when you appeared before us a couple of hours ago that these are essentially arbitrary numbers. The ones I have picked are, of course, equally arbitrary. But since the purpose of your bill, as I understand it, is primarily optical, there is going to be no more major economic and/or environmental effect than if we were to run the government vehicles on tomato juice. There aren't enough vehicles involved.
Therefore, it is my proposal, by lowering this arbitrary set of numbers to another set of arbitrary numbers, to give the fleet managers and the purchasing agents more room to move. You would still get the result you want, which is to draw public attention both nationally and internationally to what the Government of Canada is prepared to do. But you wouldn't risk getting your motor pools into a bind by trying to force them to do something that might prove to be impractical and perhaps have us back here in two or three years to write new legislation that could be reasonably accepted by the bureaucrats.
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There is nothing to prevent them for shooting for 50%, 60% and 75%, but I think that rather than going for the high ceiling, we should go for a lower one. We still get where Senator Kenny wants to go, but we don't risk tying our motor fleet into a knot.
That's the total of my argument.
The Chairman: Okay. Is there any discussion?
Senator Kenny: First, I don't accept any of your premises, Mr. Morrison. I think this is going to cause some savings. I think it is going to clean up the air.
If you understood the bill as it is written, you'd be more inclined to increase the total to 100% because the leverage is all in clause 6, which defines the pools that are going to be converted. In fact, if one were interested in changing the arbitrary number, you'd go to 100% because the play is all in clause 6, where you define what's operationally effective, what is feasible, the cost elements. Those definitions and the ability to make the regulations, in fact, are what are going to determine the size of the actual pool being converted. So there would be far more logic in your amendment if you went to 100%, sir, than to the 25% you're suggesting here.
Having said that, the premise that you start from is not one that I would choose to start from. I think that in fact there will be some results from this legislation.
[Translation]
The Chairman: Mr. Deshaies.
Mr. Deshaies: I would like to say to Mr. Morrison that if we set a ceiling of 25% and only get to 23% or if we set 75% and get to 27% only, I would rather see that 27% being set and some pressure being applied on them to attain that goal rather than blame them for not reaching the 75% level.
I am quite convinced, as you are, that in the real life those goals may be difficult to achieve, but I think that we have to set a real high ceiling. There are so many possibilities for that percentage to go down, for instance by removing some vehicules that are not eligible. If we set that percentage too low, nothing will be done and if we go for 100%, we would be trying to achieve an unrealistic goal.
However, let us say that 75%, with all the flexibility they would have, would theoretically be a level that can be reached because those vehicules that are not energy efficient enough will not be converted. I feel obliged not to support your amendment.
[English]
Mr. Morrison: Senator Kenny, if, as you say, the regulations will be sufficiently flexible that the managers are not going to be bound by these quotas or these targets, then why do we have them there at all? We could just as well say 0% or have no reference whatsoever to percentages. If that is true, 0% would be equally as good as 100%, if I understand what you're saying.
Senator Kenny: I think the reason we have the targets there is because in fact we will get 75% of the pool. What we've done, though, by introducing the amendments we did today is probably reduce the size of the pool; how much, we don't know. We really won't know until we see some of the arguments coming forward as to what constitutes cost-effectiveness and what constitutes operational feasibility. That will be an interesting debate that will take place, and when we see the results posted after the first year of operation, there will be opportunities for this committee, and for our committee in the other place, to call the officials in and have them justify how they've gone on this.
But the fact of the matter is I can't predict with any great certainty, and I don't believe anybody else can predict with any great certainty, until we see the application of it move forward.
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The Chairman: If I'm correct, what is basically happening is that when they come up with the definitions and the pool that will be dealt with, the 50%, under (a) for 1997.... Would it follow logically - and this was the argument that was made by some of the witnesses when they kept bringing up the fact that to convert them was not cost-effective - if there are certain vehicles that are not worth converting, that would reduce the pool significantly, and we may be talking about a very small number of conversions in a short period of time, so the 50% would be a very small number?
Senator Kenny: First of all, we're not talking about converting anything we own right now.
The Chairman: But that's a possibility, though?
Senator Kenny: Well, it wouldn't be one that I would encourage as a general principle, simply because if we have them now they probably have some mileage on them and you don't get the pay-back that you'd like to have.
With the vehicles you have now, you might well find yourself using something like ethanol, because you can take a vehicle you have now and just drive down to the pump and fill it up without any capital investment.
But the real pay-back, if you're talking about conversion and fuels like natural gas and propane, is when you're purchasing new vehicles. It is conceivable that you would have a new vehicle that you're purchasing.... Let's take an extreme example of an airport fire-engine that has worn out but has only been driven, on average, 5,000 kilometres a year. No one is going to make that a candidate for conversion because the fuel usage is insufficient, and it's going to be excluded.
Now, as to how they'd choose to define the criteria for ``operationally feasible'', we could have some ridiculous definitions here or we could have some fairly realistic definitions. When I see that 96% of the fleet has access to propane, I'm inclined to think that's pretty operationally feasible for at least that fuel. If you don't have access to a fuel, though, I think there are operational problems.
Cost-effectiveness is a different question, and if they start chucking in a whole lot of new or unusual costs, then I think legislators may have some concerns.
The Chairman: Colleagues, I think we've had a significant debate on the amendment to clause 4, so I will ask the question.
Mr. Morrison: I'd like a recorded vote, please.
Amendment negatived: nays 6; yeas 1
Clause 4 as amended agreed to on division
Clause 1 agreed to
The Chairman: Shall the preamble pass?
Some hon. members: Agreed.
The Chairman: Shall the title carry?
Some hon. members: Agreed.
The Chairman: Shall Bill S-7 as amended carry?
Some hon. members: Agreed.
An hon. member: On division.
The Chairman: Shall the committee order a reprint of Bill S-7 as amended as a working copy for the use of the House of Commons at the report stage?
Some hon. members: Agreed.
The Chairman: Shall I report Bill S-7 as amended to the House?
Some hon members: Agreed.
The Chairman: Colleagues, believe it or not, we're almost finished.
I just want to touch on one order of business. We've done Bill S-7 and I'll give Senator Kenny an opportunity to say a few words so he can have the last word on Bill S-7.
I just wanted to remind you that on Tuesday we're supposed to be meeting with NRCan to look at the outlook document. I want to get some confirmation from you, as members, as to whether you're prepared for that meeting and whether you know what we want to get into with the officials.
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My recommendation to you now is that we're not prepared and we should not waste the time of the officials or ourselves coming here just to beat around the bush in a very general sense. We'd be best to cancel the Tuesday meeting, spend some time as parties having a discussion as to what we expect to do with that particular document, and then reschedule the meeting with the officials when we can also give them an idea of what we'd like to talk about. Otherwise they'll come here totally unprepared, not knowing what to expect from us.
I wanted to make that recommendation to you and get your input. Could I have a sense of what you think of that particular suggestion? I, as I'm sure you all are, am not too keen on going to meetings for the sake of going. We could probably use our time much more appropriately doing something else.
I want to start with Mr. Deshaies, Mr. Morrison, then go to the government side and clear that up.
[Translation]
Mr. Deshaies: I, for one, am not prepared to ask any specific question, except in terms of new directions resulting from budget cuts. That is the only matter I would pursue with them. Mr. Canuel is not here this week and I cannot speak on his behalf, but I think that for the time being we do not need those officials to appear on Tuesday.
[English]
Mr. Morrison: I'm in the same boat as Mr. Deshaies. I find it difficult to speak for my absent colleagues. I don't personally, at this very moment, have a question that I would like to ask an official because I simply haven't addressed the question yet. So I'll have to sit on the fence on this one.
The Chairman: Let me make it clear. I'm not suggesting that we cancel the issue.
Mr. Morrison: Oh no, I understand you.
The Chairman: I just say we delay it and revisit it when we're ready. It's obvious by the first two speakers and myself that we aren't really all that ready.
Now, there may be a few on the government side who are overly prepared, as Mr. Arseneault always is. But I'd like to get your input over there as to what you think of all this.
Let's start with Mr. Arseneault.
Mr. Arseneault: I'll accede to my colleagues in the opposition. If they want to postpone, I'll gladly do so.
The Chairman: All right.
Mr. Loney: Do you have a suggested alternate date?
The Chairman: No, I don't at this point. But I can guarantee you that it will be done within the week or so after.... We have quite a bit of time available. I just don't see the sense of meeting at this point when we're not prepared.
Mr. Rideout: Could I just add to that, Bob?
What would be helpful, from the department's point of view, is to have an idea of what those questions are. Then we can bring those officials here to answer, because it's a choice of either only giving general answers or having a room full of officials to try to anticipate everything. So once we decide that we want to go forward, it would be helpful if members could give a general idea of the areas they want to deal with.
The Chairman: Exactly. And keep in mind that when the room is full of officials, that's all we have left. They're not working if they're all over here, right? I just wanted you to know that.
I will of course try to convey, through private discussions, your interest of what kind of discussion you'd like to have with the officials when we get to that.
Remember, now, that if we cancel Tuesday's meeting, then Thursday is the start of our gas and energy pricing study. We'll look at a preliminary phase to see whether there is some sort of problem with that particular sector as it relates to gas pricing and/or alternatives. So just keep in mind that's on Thursday and that we start with some witnesses. That's still there.
The clerk reminds me that's televised. I requested it to be televised because, as you know, there's a lot of interest out there as to whether we're doing this or not doing this. I thought it might be a good idea to televise it and let them listen to the expert witnesses who will be coming on Thursday.
Since you've got Tuesday as a day off from the committee - and you know how I hate to have you guys and gals do nothing - on June 6 Avenor Newsprint Mill in Gatineau is arranging a visit for us to look at the recycling process. A bus leaves Parliament Hill at 12:10 p.m. I expect to return by approximately 2 p.m. So if you are interested in going on that field trip, it's available to you. Please convey that message to whoever is organizing it.
Mr. Arseneault: Has that been sent to our office?
Mr. Jean-Luc Bourdages (Committee Researcher): Yes, I think it was sent in a Green House info sheet.
The Chairman: Well, we'll make sure we send another copy, because that's the first time I've seen it.
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Colleagues, it's been a long day. I want to leave the last words to the author of the bill that we've spent a significant amount of time in the last few weeks trying to deal with. So we'll turn the floor over to Senator Kenny.
Senator Kenny: Mr. Chairman, I'd like to thank you and, through you, your committee for your cooperation and indulgence with my bill. I feel that members of your committee, from all sides, have looked at it diligently and have made very helpful comments. I'm truly grateful to you for the time you've spent on it and I appreciate your assistance in moving it forward.
The Chairman: Thank you, Senator.
Colleagues, as you well know, this bill will go to the House. There's been a significant amount of work done by Senator Kenny and his staff, and background information is available. So those of you who will probably speak to this in the House may want to fill your bags full of information as you go. We'll see you in debate in the House of Commons on this issue.
The meeting is adjourned until next Thursday, unless something comes up of grave importance and I have to get you guys up and running. Thank you very much for your patience.