Proceedings of the Standing Senate Committee on
Energy, the
Environment and Natural Resources
Issue 2 -- Evidence
Ottawa, Tuesday, May 7, 1996
The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 10:15 a.m. to continue monitoring all matters related to the implementation and application of the Alternative Fuels Act.
Senator Ron Ghitter (Chairman) in the Chair.
[English]
The Chairman: Honourable senators, I call the meeting to order.
Appearing before us today are Stuart Perkins, Director of Engineering, from Chrysler Canada; Roger Thomas, Manager of Automotive Regulatory Affairs in Product Engineering, from General Motors of Canada; and Ron Bright, Director of Environmental Affairs, from Ford of Canada. Please proceed with your presentations.
Mr. Stuart Perkins, Director of Engineering, Chrysler Canada Ltd.: Thank you very much for inviting us to appear this morning. In our invitation, there were three specific questions you wished answered. I will specifically address those three questions, and then any other subjects honourable senators wish to raise can be addressed during the question and answer period.
The first question was how we are doing with the development of dedicated vehicles. Chrysler Canada is doing very well, thank you. I speak of Chrysler Canada specifically because our Windsor-based Chrysler Canada engineering operation has the responsibility, for all of Chrysler Corporation, for the design, development, certification, and release of all alternative-fuel vehicles for the company. The present product systems we have available for sale include compressed natural gas, propane, methanol, ethanol, and electric; and they are all Canadian products. The initial applications were Canadian-built products: our Windsor-built mini-van; our Bramalea-built mid-sized sedan, and our Windsor-built large maxi-van and wagon.
Use of these alternative fuels is good for Canada. They are all natural resources of Canada and will help preserve the fuel security of this country. Further, they are good for the environment. Each is naturally less polluting than gasoline-based fuels. Even better news, they are all naturally high octane. There is no question of lead or MMT in these fuels, and no sulphur or particulates.
How did Chrysler Canada do? As I said, very well, thank you. Our natural gas maxi-van qualifies for certification in California as an LEV, low-emission vehicle, as does our propane-powered maxi-van. Our natural-gas mini-van is certified as a ULOF, an ultra-low-emission vehicle. It is the cleanest certified internal combustion engine in the world. The propane-powered maxi-van is a true giant step in technology. It has a liquid injection system unique to the industry. We have built and sold about five dozen electric mini-vans during the past three model years and about 5,000 methanol vehicles. Our next entry will be an ethanol vehicle.
The second question was, what are our short-, medium- and long-range plans? Frankly, our plans are to sell as many alternative-fuel vehicles as we can, and we are promoting them in every way possible. We are giving these vehicles plenty of floor space at our national auto shows across the country. We are pricing them at the very lowest prices we can afford for introduction of these new models.
Further, we are sponsoring and promoting alternative fuel challenges and clean drives across the country. At the end of the month, 12 Chryslers mini-vans donated to 12 universities will compete in a propane performance challenge beginning at the grand opening celebration of Chrysler Canada's new research and development centre in Windsor and ending at the alternative fuels conference in Toronto. We have also sponsored hybrid fuel challenges and natural gas challenges. We sponsored an alternative fuel clean city program with Burnaby, British Columbia. I have even participated at fuel station openings featuring alternative fuels.
As to our long-term plans, with due respect to my friends here at the table, my aim is to have Chrysler products in the market first and being the very best.
The third question was regarding how the passage of Bill S-7 has affected our plans. Certainly it has added confidence to our development and marketing programs. To continue with the line of vehicles, we must have a market. I must caution you that time passes, models change, and vehicle emissions regulations become more stringent. We must have a solid market for these alternative-fuel vehicles in order to invest in the next generation, and a solid market has not yet developed.
Today you will be hearing from each of the three domestic manufacturers. The products are good, the systems are high-tech, the marketing is aggressive, the prices are generously low, but the market has still not developed. Perhaps people do not want to be different from their neighbour. Perhaps Bill S-7 will make the difference with some incremental alternate-fuel vehicle sales. Perhaps those vehicle drivers will experience just how good these systems are and the word will spread. Perhaps the market will develop. I am still optimistic.
Thank you for your interest in a subject that is so important to the environment and the fuel security of Canada.
Mr. Roger Thomas, Manager, Automotive Regulatory Affairs in Product Engineering, General Motors of Canada Ltd.: We appreciate the opportunity to provide you with some background regarding General Motors' involvement in the area of alternative fuels.
As a responsible corporate citizen, General Motors is dedicated to protecting human health, natural resources, and the global environment. A key element of this commitment is to continue to pursue vigorously the development and implementation of technologies while minimizing emissions from both our processes and our products.
We have reduced smog-causing emissions from our 1996 cars and light duty trucks by 98 per cent for hydrocarbons from uncontrolled levels, and by 90 per cent for oxides of nitrogen. We are not stopping here.
We are committed to continuing to identify cost-effective strategies to achieve further reductions in emissions from our products for all to enjoy cleaner air.
Alternative technologies are one area of focus for us. GM has been pursuing alternative fuels for more than 25 years as an integral part of our commitment to improve air quality and develop alternative sources of transportation energy. GM came to market with the first mass-produced methanol variable-fuel vehicle, the first ethanol variable-fuel vehicle, and the first mass-produced natural-gas pickup. We have long been acknowledged as the leader in electrical vehicle development.
To overcome some of the refuelling infrastructure limitations, GM is still pursuing a dual-fuel design approach to alternative fuels. Both flexible fuel designs -- using one fuel system for both fuels -- and bi-fuel natural gas/gasoline vehicles, with separate fuel storage and delivery systems, are being developed. Specifically, GM is working on compressed natural-gas bi-fuel car and truck models, on liquid-propane conversions, on alcohol flexible fuel development programs, and our long-term plans call for expanded development of alcohols, gaseous fuels and electric-powered vehicles.
A natural-gas vehicle fuel-tank validation upgrade program is currently underway at General Motors due to some undesirable experiences with some after-market products. While that is being completed, our natural-gas vehicle development activities continue on both cars and trucks.
GM is in the electric vehicle business and is addressing both the technical and commercial challenges associated with this technology.
In February of this year, we did announce that if there was sufficient interest from fleet buyers, we would make available the electrically powered Chevrolet S-series compact pickup truck on a harmonized basis with the U.S. beginning as early as 1997. Right now, we are reaching out to the major fleets in Canada to gauge their interest in this product.
On April 20 in Vancouver, we were pleased to announce that the General Motors PrEView program of the Impact electric vehicle will come to the roads of Vancouver this summer as a cooperative effort of General Motors of Canada Limited, the Government of British Columbia and B.C. Hydro.
From July to November of this year, five GM Impact vehicles will be on roads in the Vancouver area. Twenty drivers will be selected to have full use of a GM Impact for a two-week period. We are working with B.C. Hydro to equip their homes with a 220-volt charger and to staff an electric-vehicle service facility to evaluate the real-world infrastructure requirements for electric vehicles. The data from this experiment will help us understand how electric-vehicle technology performs in our climate and will help us to evaluate the needs and expectations of the potential electric-vehicle customers. Ultimately, it will help us shape our electric-vehicle strategy for Canada.
In going forward, we are still confronted with a lack of supporting infrastructure, particularly in terms of fuel supply for many alternative fuels, vehicle servicing and repair.
With all emission issues, the challenge of fuel quality remains a concern for both alternative fuels and particularly for the large majority of gasoline-powered vehicles now on the road. We believe that we need a national fuel strategy to ensure that the necessary fuels are available to support clean-vehicle technology as well as to provide significant further emission reductions from the many millions of existing gasoline-powered vehicles already on the road.
While alternative technologies offer some promise for the future, a clean-gasoline strategy would make a significant and measurable improvement in air quality right now. California and other high-pollution areas in the U.S. have stepped up to this issue of fuel quality and to the important fact that vehicles and fuels must now be treated as a system. If low vehicle emissions are the goal, then this important linkage must be understood.
In terms of increasing the penetration of alternative-technology vehicles in our market, Bill S-7 was an important step in assisting in the development of sufficient volume to make alternative- technology vehicles economically viable. Because our industry is rationalized across North America, the U.S. Energy Policy Act is also playing a key role in this regard. Customer acceptance of new technologies will be greatest where the products meet their needs in terms of range, performance, et cetera, and are affordable -- that is, where a new technology is a good substitute for the older, more familiar one.
We want to ensure that alternative-technology vehicles are accepted enthusiastically by our customers, including our federal government fleet customers. Accordingly, as we indicated last year when Bill S-7 was being considered, we continue to believe that the policy of the Government of Canada should be to encourage the use of alternative-technology vehicles in government fleets wherever possible without unduly sacrificing cost and utility considerations
Mr. Ron Bright, Director of Environmental Affairs, Ford Motor Company of Canada Ltd.: Honourable senators, Ford again welcomes the opportunity to provide an update on our alternative-fuel programs and to suggest a small change of wording in the act, which we believe would further enhance the support of alternative fuels and, hence, would be environmentally positive.
We are still very supportive of Bill S-7 and the concepts it developed. We again must stress, however, that the final wording places an emphasis on economics and cost effectiveness where sections 3, 4 and 5 state "where it is cost-effective and operationally feasible." We have little quarrel with the operationally feasible aspect but believe the environmental benefits of all alternative fuels should not be overlooked.
While current gasoline-fuelled vehicles provide very low emissions compared to those previously supplied, alternative-fuelled vehicles -- AFVs -- provide an opportunity to develop and bring to market even lower emission vehicles in a shorter time frame than future lower emitting gasoline vehicles. We believe the words "cost effective" may be misinterpreted to mean that a cost saving must be shown for their use. We suggest that a simple wording change be considered in the act. The words "cost effective" should be changed to "where there are no lifetime cost penalties."
Now, let us move to the status of our Ford AFV program. Our alternative-fuel program spans more than 30 years with our long-running propane or LPG-fuelled F-700 medium truck which we continue to offer as an OEM factory-built product. Our AFV programs are fuel neutral in that we offer vehicles fuelled by propane, natural gas, methanol, ethanol and future electric programs. We will continue with products sold and serviced through Ford and Mercury dealers by both our OEM production system and our qualified vehicle modifier system, known as our QVM program. Vehicles produced under both programs must meet all Ford quality and safety standards.
Our product line-up for the 1997-98 model year, the period when Bill S-7 commences, will be as follows: compressed natural gas products include the presently produced, dedicated CNG, full-size Crown Victoria automobile, which is sold in both regular and police package versions; dedicated F-series full-size pickup trucks and Econoline vans; and compact Contour passenger cars, which have recently been added to our product line-up as a QVM-produced product.
Under the propane-fuelled products, we include the QVM-produced F-series full-size pickups, Econoline vans, and the compact Contour automobile later on, and, of course, our F-700 medium truck.
We should note at this point, though, that due to a product change, where we are moving our alternative-fuel light-truck engine from the 4.9 litre six cylinder to a 5.4 litre V-8, there will be a dry spell for gaseous-fuelled light trucks during the initial part of the 1997 model year.
Products available under alcohol programs include the popular flexible fuel M-85 Taurus mid-size automobile, which uses either M-85 methanol or gasoline automatically from the same fuel tank with no driver action required. An ethanol version, currently available in the United States, could be made available in Canada as fuel becomes available and the market demands.
Electric vehicles are being developed under both the QVM and the OEM programs and will be offered in selective markets where conditions are feasible. We believe our current and future alternative fuel product line-up covering compact, mid-size and full-size automobiles, full-size pickups and Econoline vans, and medium trucks is the most complete in the industry. We have been providing them for the current market, and we are certainly ready when Bill S-7 becomes effective for government purchases in April 1997.
Honourable senators, we believe that Bill S-7 is important because, as far as I am aware, it is the only existing Canadian legislation covering alternative fuel and faces off versus at least two federal programs and many state programs in the U.S. In that respect, it is important in that it gives us an opportunity to show a demand in Canada, and we hope this will certainly be expanded in future.
Senator Kenny: Perhaps I could start by questioning Mr. Bright. The committee has heard testimony in relation to the Crown Victoria, that it does not perform well and that it does not meet police requirements for performance, both in terms of acceleration and top speed. Could you comment on that, please?
Mr. Bright: You are referring, obviously, to the Michigan State Police report.
Senator Kenny: Yes and no. I am referring in the first instance to what the Royal Canadian Mounted Police say, and in the second instance to the fact that they use that as their reason for not proceeding faster with purchasing your vehicles.
Mr. Bright: I mentioned the Michigan State Police report because that exact comment from the RCMP came through our Vancouver office to me and asked specifically about the State of Michigan Police Patrol Evaluation Purchasing Program in 1996 which compares various vehicles.
The police version of the Crown Vic was never intended as a pursuit-type vehicle. It does not do 135 miles per hour, which is the normal operating speed for a police package Crown Vic. It was never sold as a pursuit vehicle per se. In my mind, that does not mean it is not a good police vehicle.
If you read through the report, you will see that in several cases it does not measure up in top speed and it does not measure up on the time from 0 to 60. The car runs 0 to 60 in 12.07 seconds versus the required 10 seconds; the time from 0 to 80 is 20 seconds versus 17.2; and 0 to 100 is 37 seconds versus the requirement of 28. It has a top speed of 107 whereas the police in Michigan prefer a minimum of 110 for top speed.
Bear in mind that any time you develop a compressed natural gas engine based on gasoline engines, which is the economical way to go, in the short term, at least, you have to change the compression ratio and you will not develop the power from that engine that you do from a gasoline version. We still offer the Crown Vic in the regular gasoline version which will meet all requirements and does 135 miles an hour.
It is a question of what is expected of the vehicle. I get nothing but glowing terms in the basic vehicle use and handling in normal fleet operation, which I would say is all police work except pursuit work. In fact, there was a TV program from the Atlanta area where the police chief had several in use, and from this program you would swear he was on our payroll.
Senator Kenny: What fuel do they use?
Mr. Bright: It was the CNG vehicle. Bear in mind, he was not in the highway-pursuit business.
Senator Kenny: Do you have any evidence from other police forces in Canada that are using Crown Vics with alternative fuels?
Mr. Bright: It is early in the program, so we do not have many examples. The Vancouver police are putting a few in service at the moment in three or four areas. I will see if I can find anything for you. The program is probably on a much larger scale in the U.S., and that is why I highlighted the Atlanta experience.
Senator Kenny: I must say that when I first heard that Ford would be producing Crown Vics that were dedicated to natural gas, I thought you really had a terrific idea. From the perspective of Bill S-7, you were focusing in on the largest fleet the federal government had, and it seemed to me that you were maximizing your own company's opportunities. However, if your vehicle cannot perform to meet the specifications required, the police will not buy them. Either you produce a vehicle that can meet the police requirements, or the police requirements need to be examined and we must then ask the police why they are involved in high speed chases. It seemed like you were on the right track, but if the police come back and say, "Look, we are not happy with the performance we are getting from Crown Vics," then it is a non-starter.
Mr. Bright: Again, we must realize there are two police fleet vehicles available, those for pursuit work and those for non-pursuit work.
Senator Kenny: That is not the message they gave in their testimony. They said they have both kinds at work, but they like to rotate them. They like to put the vehicles without a lot of mileage back on the road to build up the mileage.
Mr. Bright: That is unfortunate, because we did aim at that market. In the Globe 96 meeting in Vancouver about a month ago, a Crown Vic was on display in the B.C. Gas area, painted up in Vancouver police colours with the lights and bells and whistles and the whole works. They have put about six units so far in the various police forces.
The RCMP type of service may be unique, and I do not think we will ever get a pursuit vehicle from the Crown Vics. We would have to redo the whole engine.
Senator Kenny: You would need an engine designed for natural gas instead of for gasoline.
Mr. Bright: The present engine is modified for natural gas but it was not base-designed from day one.
Senator Kenny: Why did you not go ahead with a propane vehicle, given that there is a much better propane infrastructure in Canada and you would pick up a lot more of the federal government fleet with propane than you would with natural gas?
Mr. Bright: We have propane vehicles available. We have the pickup trucks and the vans, and we will have the Contour vehicle. There has been much argument as to what vehicle sizes should be offered. Some people think that the larger vehicle is passé and will not be the big market in the future. We put the flexible-fuel vehicle into the mid-size market because we thought that was a bigger market with the Taurus, and that has proven true. By far, sales are bigger there. We have the Contour coming in because many government people said they were interested in a smaller vehicle, not a larger vehicle. We try to gauge where the vehicle is applicable to the market. We thought the taxi and city police business was the place for the Crown Vic.
Senator Kenny: I do not have a bias towards any fuel. The bill is fuel neutral. However, it seems to me that if I was in your business, I would look first at where the infrastructure is, and it is three-to-one for propane over natural gas because 96 per cent of the federal fleet has access to propane versus 34 per cent to natural gas. I would also look at the costs of the vehicle. It is cheaper to convert to propane. I do not understand why more emphasis is not being placed on propane.
Mr. Bright: We must look at the North American market, not just the Canadian market. What you see in propane is particular to Canada at this time. There is an advantage in pricing relative to gasoline in Canada, whereas in the U.S. that advantage is very doubtful because gasoline is so much cheaper there. As well, access to propane is not nearly as great in the U.S. as it is in Canada. When we look at the sales of a vehicle overall, we must look at our North American base. Unfortunately, we cannot be selective just to Canada.
Senator Kenny: How active have you been in pursuing government fleets? Are you talking to fleet managers individually and examining the vehicles they have and suggesting the vehicles you have for replacement? Have you approached any of the leadership here, any of the cabinet or deputy ministers, about their vehicles and demonstrated that you have an alternative-fuel vehicle that might meet their needs?
I should like each of the witnesses to comment on how actively they are pursuing the federal government and what steps they have taken to contact fleet managers, review their fleets, and determine whether they have replacement vehicles that would make sense for the federal government's fleet. Are you just waiting for requests for proposals to go out, and are you just responding to what the government appears to be requesting?
Mr. Bright: The answer is yes and no. We have not approached any ministers, unless it has been done through our fleet department. We have now moved our alternative fuels program within Ford from an experimental basis to a regular sales vehicle and thereby into the fleet department. The fleet has its normal advertising contacts, and I expect they are proceeding with them as usual. I would have to guess that we have not approached ministers.
On the other hand, we have selectively worked with some fleets. For example, about three weeks ago, all of us were in Vancouver at two sets of fleet meetings there, one regarding government fleets and one dealing with regular fleets, to explain what vehicles we have available.
Our fleet department normally covers fleet releases to the market, outlining what is available from our point of view. Individually, we have fleet people contacting the various fleets. Obviously they are able to advise on what vehicles are available.
That is basically my "yes" and "no" answer.
Mr. Thomas: With respect to General Motors, no, we have not approached any cabinet ministers. Our fleet department is very active in talking to all fleet managers, both government and non-government, to gauge the interest in alternative-fuel vehicles. In fact, much of the input into our plans came from the fleet department when we were trying to pick which vehicles we should be doing. That is one of the major reasons we picked the vehicles we have.
Senator Kenny: Why do you not have a police vehicle? That is the largest fleet in the federal government.
Mr. Thomas: As you may be aware, General Motors Canada is getting out of the full-size vehicle business; therefore, we do not have a vehicle to suit that market.
Mr. Perkins: As far as Chrysler is concerned, no, we have not approached any senators to replace their personal vehicles.
Senator Kenny: I was asking about ministers.
Mr. Perkins: That is one of those areas where I find myself damned if I do and I damned if I don't.
What we have often found where we have made contacts with elected officials or with bureaucrats and tried to help them out with vehicles, is that they end up buying a Honda. I have for the most part given that up, but I would be pleased to take orders.
Senator Kenny: There is a vast difference. You folks can sit back and say, "We do not have these vehicles here," or you can go to the fleet managers and say, "You have a problem because next year you have to hit the 50-per-cent mark with your new vehicles. My solution is this particular vehicle. We have taken a look at your fleet, analyzed it, and we think that you can buy whichever one of these three you want. We have the answer."
You are being very passive as a group. Why are you not being active and getting out to see these fleet managers? You should be telling them, "The solution to the problem is to hit this target, and I will help you do it."
Mr. Perkins: We are being aggressive in all fleets, both government and commercial. That is where our initial vehicles are targeted. We have approached them. We have had seminars with fleet managers, including government fleet managers. The story from the government fleet managers is their budget. They are not able to afford even the base cost of the additional equipment required on these vehicles. In one case, it is about $1,500, as I recall. For natural gas vehicles, the cost of the tank is upwards of $6,000. They tell us that they have a certain budget for vehicles, and they will continue with gasoline- powered vehicles.
Senator Kenny: With respect to the regulations that are coming forward, these folks have four years to wait for a payback.
Mr. Bright, you were talking earlier about changing the legislation. The ballgame is now in the regulations, and the regulations that people are discussing would provide a four-year payback, which is pretty generous. I was afraid it would be a two-year payback and the bill would go right down the tubes. However, four years is a reasonable payback time for this additional equipment. Are you saying that fleet managers are not taking into account full-life costing?
Mr. Perkins: They are not. The ones that I have observed are taking into account only initial cost considerations at this point.
Senator Nolin: Have you been in touch directly with Treasury Board officials? I ask that because they are the real fleet managers.
Mr. Perkins: I am an engineer.
Senator Nolin: That is where you must concentrate your efforts. They are the people in charge. If you look at Bill S-7, it is written there in black and white -- they are in charge. Have any of you been consulted by the Treasury Board?
Mr. Perkins: We have not been asked by the Treasury Board, but the people who tender the bids have all been contacted.
Senator Nolin: The people who tender the bids are forced to follow rules. Those rules are established by the Treasury Board. That is why the Treasury Board is the key to that problem. Your testimony is that none of you is aware that the Treasury Board asked you --
Mr. Perkins: Not personally.
Senator Nolin: -- for instruction, guidance or information. It is one of their duties under the act.
Senator Rompkey: Senator Nolin is absolutely right. Not only do they make the rules, but they approve the expenditures. The money to buy vehicles must be approved by the Treasury Board. That is absolutely correct.
My question relates to the wider market. We have talked about fleets, but what about the general population? How are you building alternative-fuel vehicles into your advertising process? If we look at TV ads, how often will we see alternative-fuel vehicles advertised? How would that be built into your advertising program? How else do you plant to attempt to attract the general consumer to alternative-fuel vehicles?
Mr. Perkins: We have given a large amount of real estate at auto shows to our alternative-fuel vehicles. These shows are attended, in preponderance, by private citizens.
Our initial products are aimed at fleet buyers because we think that is the market.
In the 1980s, Chrysler produced a large number of propane vehicles available in all size ranges. Every vehicle we made was also a propane vehicle. They were in the sedans and station wagons that people used for their families. They were not large sellers. Fleets were the main buyers, so that is where we started.
We wanted the program to be a success. We wanted to get out on the road as quickly as possible, and we aimed at the fleets. However, our mid-size sedan -- built in Bramalea, Ontario -- was a methanol vehicle. It was sold mostly to government fleets and to other fleets, not to private citizens.
When private citizens buy a car, while only one or two people may use that car 99.8 per cent of the time, they might go to Florida next winter. They may not have gone for 10 years, but they might go next winter. They want a six-passenger sedan and a gasoline-fuelled vehicle so they can get fuel at every freeway exit. They do not want to take a chance on not being able to find propane, even though they know that it is available on every street corner in Canada. There are only 12,000 stations in all of the United States, while there are over 5,000 stations in a country that is one-tenth the size in population. They do not want to take the chance of not being able to get to Florida. However, they can get there. We have done it. One can travel from Windsor to Toronto and to Ottawa on natural gas, but you must know where the stations are. Private citizens are not willing to take that chance.
Having come from American Motors, I am used to this question: "You bought a what?"
Senator Rompkey: Which comes first, the chicken or the egg? Do you get infrastructure first, or do you get the car first and then the infrastructure later?
Mr. Perkins: I have been a leader in Canada in producing propane vehicles. We have the vehicles. The infrastructure is there. Now we need a market, and we are trying very hard. As I indicated in my presentation, it is my hope that Bill S-7 will give some impetus to that market. I think that propane is the fuel of choice for Canada, both for security and for the environment. We have concentrated on propane. While we have all the other fuels in large quantities, I think the winner in Canada will be propane.
Mr. Thompson: From General Motors' perspective, we are doing the same sort of thing and focusing primarily on fleets. We believe that is the way to try to build the infrastructure. The problem with general consumers is that there is a lack of infrastructure. As Mr. Perkins said, as long as you operate in a small area, you are fine, but if you want to go a greater distance, the consumer may not feel comfortable that the vehicle can get him where he wants to go. There is some reluctance on the part of consumers because of the lack of infrastructure. We believe going after the fleet business first and building the infrastructure will help generate interest in the rest of the public.
The Chairman: Mr. Bright, you had provided us with a wording that you would have preferred in the legislation. I did not get that. It concerned the lifetime costs. May I have that wording again?
Mr. Bright: This was just a first shot at it, and I am sure you can refine it. I am suggesting the words "where it is cost effective" be replaced with something to the effect of "where there are no lifetime cost penalties."
In other words, it is trying to look through the other end of the telescope. This can be misinterpreted. As I see it, if a government fleet manager is looking at this, he may say, "Well, I cannot do this because it is not cost effective." I think he should have more leeway than that. If there are no cost penalties, he should be able to consider it and thereby exploit the environmental aspects of the alternative fuels. This tends to limit him to the four years, if not in reality, certainly in perception.
The Chairman: When you are speaking of cost penalties, you are talking about the lifetime of the unit?
Mr. Bright: That is correct. We should give it an even shot here to look at the cost benefits over the four-year period that Senator Kenny mentioned. Many of these things cannot be pulled out of context. For the more expensive systems, such as compressed natural gas, and propane to a lesser extent, you have front-end cost penalties on the vehicle which must be offset by operational cost savings. If you can put that on longer basis, say over four years, that is fine, but you do not want a perception of, "Gee, if I can only break even, I will not do it." You would like the fleet manager to say, "If I can break even, I will do it." It is the half-full glass versus the half-empty glass.
The Chairman: At our last hearings, we were seeing paybacks on conversions of a year and a half to two years, due to the operational savings. I am interested as to why you would make this recommendation of changing the terminology of "cost effective" when you have had such little communication with government departments and no one has raised this issue with you. Or have they?
Mr. Thompson: Part of the problem with the conversion end of the business is that we have many inherent costs built into our products which they do not. We have emission development, which they do not. We do safety crashworthiness testing, which they do not. We do a lot more durability testing, which they do not. There are a lot more inherent costs in an OEM-type vehicle than there are in a conversion. Yes, you can probably do a conversion for $1500, but we cannot do that because we must comply with the other laws. There is not an equal playing field here.
The Chairman: Has anyone in the government ever raised the "cost effective" wording of the legislation as a reason why they would not buy a fleet or a group of cars with any of you?
Mr. Bright: I think the answer is no, but in all fairness, the bill's implementation date is over a year away yet. We have not had many questions from anyone in this area, and we will not have until nearer the date, which is about 12 or 13 months away.
Senator Nolin: That is an area where the Treasury Board will help you, and you will help them, because they are the ones who will establish what it means to be cost effective and operationally feasible. You must get in touch with them, not one-on-one but as a group, and bring with you the infrastructure people.
We will ask these gentlemen to appear before the committee, because they will have to answer those questions. There is much we can do, but it is up to you after that. They will establish what it means. Amending the law will not be useful for you. It is up to the Treasury Board to provide their understanding and interpretation of the law. We may agree with you on the interpretation but it is up to the board now to tell us if they agree.
Senator Kenny: Mr. Chairman, there has been a consultative process ongoing for some months now, and I cannot believe that these organizations have not been contacted by Treasury Board to help develop the regulations.
As to your proposal, Mr. Bright, to amend the legislation, your heart is in the right place, but the game has moved on. The first third of the process is legislation. The second third of it is the regulations that are coming forward defining the legislation. The area about which you have expressed concern is being defined by Treasury Board. They are determining what "cost effective" means. The third part of the process is you and the fuel suppliers getting at fleet managers and saying, "Look, we have a solution to your problems." In my view, it would be futile to try to pursue a change in the legislation. Private members' bills get through once in a blue moon, and amendments to them get through less frequently.
You do have recourse, and the recourse is in the definition from the Treasury Board. If a four year payback is not sufficient, if it turns out we are keeping vehicles for six or seven years, which may well be the case, then it is reasonable to argue for a longer payback.
I find it disconcerting to hear from at least one witness, and I should like to know whether it is true of all of you, that fleet managers are not taking into account the lifetime cost of the vehicle. I would like you all to comment on that so we are clear on this issue. The problem that we were trying to overcome was having a fleet manager say, "Look, I need to buy 20 vehicles this year, but if you want them to be on an alternative fuel, then I only have enough money for 17." The whole premise of the bill is that if they take into account the lifetime cost of the vehicle, they probably have enough money to buy 22 instead of 20. Are you having fleet managers coming to you and saying, "No, I am not taking into account the full life cost"?
Mr. Thompson: The issue here, as Mr. Perkins said, is that natural-gas vehicles are $5,000 to $6,000 more expensive than a conventional gasoline-powered vehicle. If you expect a payback over four years, you must run that vehicle an enormous number of miles to get that cost savings back.
Senator Kenny: Why take a tough example? Take propane-powered vehicles as an example, where the conversion is not as expensive and where you have a good infrastructure. Tell me the story there.
Mr. Perkins: If the fleet manager needs to buy 20 vehicles, and he has money for this year only for 17 due to the extra cost, that will not be satisfactory. He must buy 20 vehicles to service his clients.
Senator Kenny: It is pound wise and penny foolish.
Mr. Perkins: I agree. As you pointed out, if you take lifetime costs, you are correct. He probably could afford to buy 24 vehicles, but he must buy 20 vehicles this year and with the additional cost he can only buy 17 or 18.
Senator Kenny: Treasury Board is now asking people to take into account more than the first year when they make the purchase. If you can demonstrate that you can make a savings over the lifetime of the vehicle, that makes sense to a taxpayer.
Mr. Perkins: Yes.
Senator Kenny: Are you telling us, sir, that you are still bumping into fleet managers who are saying, "Tough luck. I only have this much money for this year, and I must get this number of vehicles"?
Mr. Perkins: That is correct.
Senator Kenny: Can you tell us which fleets?
Mr. Perkins: We will get back to our fleet department and work through Treasury Board and try to resolve that.
Senator Kenny: Thank you, sir.
Mr. Bright: With regard to our earlier comments about contact with Treasury Board, we tried to answer your question directly but unfortunately we did not expand on it in the way we should have. On December 22 I received a letter from Art Eggleton who, at that time, was President of the Treasury Board. He asked some specific questions. I answered Mr. Rick Andrews on January 30, giving answers to the specific questions asked. So we have had contact with the Treasury Board in many of these areas. At that time he asked whether we would be interested in further opportunities to discuss this matter and we said that we would, although nothing has come of that to this time.
Senator Kenny: You have had no feedback, draft regulations or proposals from them?
Mr. Bright: I do not believe so. I responded with a two-page letter answering specific items at the time.
Senator Kenny: They tell us that they are circulating draft proposals for comment.
Mr. Bright: That was a reply to some of his questions and draft proposals.
Senator Kenny: One of you said that you have a year to go. It is 11 months. A switch will not be flipped and it will suddenly be 50 per cent. There will have to be some ratcheting up. We are hearing figures of eight in one department and six in another. When we publish the numbers, it will be pathetic.
Senator Adams: Some of my questions have been answered already. We heard a witness from B.C. last week who showed us a video and told us that he was paid back for converting to natural gas in just a little over two years.
Our committee was concerned about how many cars and trucks could be manufactured every year. If the RCMP only want 17 vehicles, for example, it may not be worth your while to build them. What is the minimum you are able to manufacture profitably? As in any other business, you have to make money.
Mr. Perkins: Our minimum targets, as opposed to requirements, are 2,000 vehicles of each vehicle category. However, we will not turn down any orders, be they for 17 vehicles or 31 vehicles. We were prepared to build 500 methanol vehicles for Canada in the 1995 model year, and we sold 31. We even did a clean cities program in British Columbia. We outfitted our dealers with methanol and natural gas, but we just did not sell any vehicles.
Our target is 2,000. We can build them in the plant, but off-line. If we go over 5,000 vehicles a year, we can build them directly on-line, just as we do a certain colour of seat. As soon as we reach 5,000, we can accommodate. We have a little problem between 2,000 and 5,000, but I will bless the day I have that problem.
Senator Adams: What is the difference between ethanol and methanol gas? I am presently using ethanol. Would I have to convert to use methanol?
Mr. Perkins: Methanol is used in combination with gasoline. The vehicles of all three companies that are built to operate on 85 per cent methanol and 15 per cent gasoline will automatically accept fuel all the way up to 100 per cent gasoline and will pass the emission rules for all combinations of that fuel. That is generally made from methane gas or is converted from natural gas. Ethanol is currently made mostly from corn or farm products. It could be made of biomass or wood chips.
If gasoline were $1 a gallon, methanol would be about $2 a gallon and ethanol would be about $4 a gallon. Ethanol will not be an inexpensive fuel. It has a number of other problems such as corrosion of the components of the vehicle and its cost. It is not chemically astute to convert corn to ethanol. An ethanol-powered vehicle has half the range of a gasoline powered vehicle. Therefore, I think propane will be the winner.
Senator Cochrane: Is there a coordinated effort between the three manufacturing companies here today and the fuel suppliers? It is not logical to make a car for which there is no fuel available.
Mr. Perkins: In 1990-91, I went across this country beating up on fuel suppliers. I insulted the propane dealers who ruined the propane-vehicle business in 1989. In 1989, when propane was very competitive, the price of gasoline went down and the price of propane remained the same. The propane dealers wanted to supply small propane tanks for trailers; they wanted mom-and-pop stations in the country to provide a minimal supply of propane. They kept their prices high. They ruined the propane-vehicle market in 1989. We began to revive that in 1991. We have worked with the suppliers of methanol, ethanol, propane, natural gas and electricity to try to get them into the market.
The Propane Gas Association of Canada contributed, along with Natural Resources Canada, assistance in the development of our propane vehicles.
Yes, we have been working with them, even though I started out by insulting them. We got them to work with us and even to contribute to our development. They are currently working on programs with us for marketing propane vehicles. We do have their attention and their cooperation.
Senator Kenny: Mr. Perkins, you mentioned earlier that when you had an order for 5,000 vehicles, you could go on-line. Will there be a corresponding price reduction once you go on-line?
Mr. Perkins: We are trying to promote these alternative-fuel vehicles and the components required for them. We are not making any profit on them. We are charging only what they cost us. There will be a small reduction in price as production increases. They will not be competitive with gasoline-powered vehicles simply because it costs so much more to produce a pressurized tank. The tank accounts for over half the cost of the additional equipment on the vehicle.
Senator Kenny: What volume of propane or natural gas will be required to start seeing a differential decrease? If you are not talking about $5,000, are you talking about $10,000? I am assuming that, eventually, volume will cause a reduction. Can you give us a target or threshold at which it will bring it down to a $1,000 or $2,000 premium on natural gas and a $500 premium on propane?
Perhaps it is too much to ask for an answer to this question now. However, do you have people back in your offices who have done studies on this and who can indicate what volumes are needed to make prices more competitive?
Mr. Thomas: As Mr. Perkins said previously with respect to compressed gases, it is the cost of the tank that drives the price of the vehicle up. Even with a much higher volume, I do not think that will come down substantially. There will always be a cost differential because of the tank on the vehicle. The price of the rest of the components might come down as the volume goes up substantially, but they will always be more expensive than a gasoline fuel tank.
Senator Kenny: I hear you. However, at some point economies of scale could impact on the cost of tanks.
Mr. Thomas: Those volumes would have to be fairly substantial. I am sure they would have to be much more than 10,000 a year.
Senator Spivak: What is the window of opportunity? In other words, how long can you be at this without the market kicking in? Where is the technology leading you? Is it to cars that can substitute fuels, such as those that can operate with natural gas and propane?
I think there are two problems. First, I do not think that as yet it has sunk into people's minds that this is important. If it had, fleet managers would be ordering these cars. They probably consider that the question of emissions is something that does not relate to them.
What about the fact that there are a number of contestants out there, each of which has an infinitesimal share of the market? If you had a substantial minority share, then it might be better if it were natural gas or propane. That is the question.
Mr. Perkins: There is a turning point in 1998. In 1998, there will be new emission requirements for gaseous-fuelled vehicles that will require on-board diagnostics for those vehicles.
In 1998, I either have to have a system perfected or I have to get a waiver concerning those requirements. I went through this in Ontario, where federal regulations were in conflict with provincial regulations. There was a difference in requirements for certification through the years 1991 to 1993. We were selling Canadian vehicles which were made in Windsor, Ontario. I could not sell those vehicles in Canada; I could only sell them in the United States. I am not looking at an easy road in terms of getting that waiver regarding on-board diagnostics for the 1998 vehicles.
If I am successful, then we could continue without specific large-cost development and certification to the year 2001. In that year, there will be new emission regulations for almost all vehicles.
Senator Spivak: Is that based on American standards?
Mr. Perkins: They will be in lockstep. In 2001, there will be new regulations. In the case of Canada, they are in draft form. In the case of British Columbia, they have been passed already. In the case of the United States, they have been published and, about three months ago, they were about to be passed.
The turning point will be in the year 1999. The question I will ask myself then is: Have I developed a system for my 2001 vehicles? If there is a market, they will be developed. If there is no market, there will be no alternative-fuelled vehicles in 2001 from my company.
Senator Spivak: Perhaps you ought to have fleet managers watch healthy-looking kids having asthma attacks. A recent report states that lung damage is occurring as a result of low-level ozone. If these people were to take that into that consideration, they might approach this matter with more urgency.
Mr. Perkins: We have made those arguments with respect to many products, including the famous MMT argument between the auto companies and Ethyl Corporation. On the one hand, Ethyl says it is not a health hazard because 80 per cent of it stays in the engine. We say that it contaminates our catalysts and our spark plugs. We have brought this up many times.
As I mentioned this morning, in alternative fuels there is no sulphur, particulates, MMT or lead to be concerned about. It is a natural product. In fact, it is a natural resource of Canada which can be good for this country.
Senator Marchand: Mr. Perkins, you talked about propane being the way to go. What is the performance difference between a vehicle powered by propane and one powered by natural gas? I expect natural gas is largely methane, is it not? How far can you get a vehicle powered by natural gas to go as compared to one powered by natural gas?
Mr. Perkins: The range of a vehicle powered by propane is about 90 per cent of the range of a gasoline-powered vehicle. In the case of natural gas, it is about one-half the range of a gasoline-powered vehicle. In the case of methanol or ethanol, it will be about 60 per cent of the range of a gasoline vehicle. In the case of electric, do not plan on driving it all the way to work. You probably will not get that far, particularly in an Ottawa winter.
Senator Marchand: In the future, will the best prospects be in the development of specialized engines using propane or other natural gases?
Mr. Perkins: There are already specialty engines that can accommodate long-term use of propane and natural gas. Chrysler's liquid injection system is right at the edge of technology. If you walk past the propane-fuelled taxi cabs out on the street, they smell bad. With the new systems, you do not get that smell. We do not convert to a gas. Just as we do with gasoline, we inject the fuel as a liquid. They are good systems. We get high fuel economy with them, much higher than you might expect chemically, because we are taking advantage of the lower temperatures. As the fuel expands in the cylinder, it cools the cylinder and we get better efficiency. For our propane, we have in-tank fuel pumps right in the pressurized tanks. We are developing things as we go along.
What is the next step? I think the next step will be the mixture of lubricants in the liquid fuel of propane that will make the engines operate more efficiently. We have been talking to the fuel companies about that. We have not had a lot of interest because there is not a big market and they are interested in big volume. However, the equipment is already there. You will see advances.
Gasoline is a formidable opponent. Gasoline will advance. Gasoline will be better. Gasoline will be a tough competitor for the propane or natural-gas suppliers. It will always get better. It will become more efficient; vehicles will become more efficient; engines will become more efficient.
We have no apologies to make for our alternative-fuel vehicles in any case, except in the electric field. We do not have a battery that is satisfactory for use anywhere, especially in a cold climate.
Senator Marchand: Are you saying that there is better performance with engines that are designed and built to use propane versus engines that are converted?
Mr. Perkins: Absolutely.
Senator Marchand: How much better performance are you getting from the designed vehicles compared to the vehicles that you can convert with a kit?
Mr. Perkins: With a converted vehicle, we cannot meet emission regulations; we cannot meet safety regulations. However, I think you are talking about fuel economy. I would expect the fuel economy of a converted vehicle to be about 20 to 25 per cent less than an OEM vehicle.
Senator Adams: You mentioned electric buses. I saw one in Vancouver. You mentioned a plug-in for 220 volts. How long would it take to charge a bus? Do they need special places where they can be charged, or can they run 24 hours without a charge?
Mr. Thomas: The buses in Vancouver, although they are electrically driven, are not battery powered. They have a fuel cell in them. They are fuelled with hydrogen. The fuel cell converts hydrogen into electricity. These buses are not recharged by plugging them in. Compressed hydrogen is put into the vehicle to recharge the system.
The GM electric vehicles will charge overnight in about six hours on the 220-volt system, and they will charge in about 15 hours on a 110-volt system.
Senator Adams: How often do these hydrogen buses have to get recharged?
Mr. Thomas: I do not know how long those vehicles can last. It depends on whether hydrogen can be stored on the vehicle. It is difficult to store.
The Chairman: Gentlemen, on behalf of the committee, I wish to thank you for spending time with us. I am sure you sense a certain anxiety on the part of the committee to see this happen sooner than later. We appreciate the chicken-and-egg problem in this area, but anything you can do to move things along would be appreciated.
Mr. Perkins: As you can see, there is much anxiety among us as well.
The committee adjourned.