Proceedings of the Standing Senate Committee on
Energy, the
Environment and Natural Resources
Issue 8 - Evidence
OTTAWA, Wednesday, February 5, 1997
The Standing Senate Committee on Energy, the Environment and Natural Resources, to which was referred Bill C-29, to regulate interprovincial trade in and the importation for commercial purposes of certain manganese-based substances, met this day at 3:20 p.m(null). to give consideration to the bill.
Senator Ron Ghitter (Chairman) in the Chair.
[English]
The Chairman: Honourable senators, I welcome the representatives of Ethyl Canada. We know you have much at stake here and we want to hear your position. Please go ahead.
Mr. David Wilson, President, Ethyl Canada Incorporated: Mr. Chairman and members of the committee, I am joined today by my colleagues, Dr. Roos, who is manager of Fuels, Research and Development, and Dr. Don Lynam, Vice-President, Air Conservation. Both these gentlemen are from Ethyl Corporation. Also with me today is Chris Hicks, Vice-President of Ethyl Canada and Ethyl Corporation.
Mr. Chairman, it will be no surprise to you that we are appearing before you today to speak in favour of our product MMT and to outline the reasons for our opposition to Bill C-29.
Following my introductory remarks, Dr. Roos will review the findings of the testing programs and technical research available on this issue. Dr. Lynam will discuss the health findings of a recently completed personal monitoring study conducted in Toronto. Mr. Hicks will speak to the situation in the United States.
We do not dispute that the automakers are experiencing problems with their OBD systems. However, Bill C-29 will not solve those problems. OBD malfunctioning is an industry issue, not a legislative issue.
Ethyl Canada clearly supports the continued use of MMT, a safe and effective fuel additive. We believe this bill raises a series of problems which deserve careful consideration by this committee. It is our hope that you will evaluate the ramifications of this legislation and allow yourselves sufficient time to hear all the witnesses who wish to contribute to this debate.
We were disappointed that the schedule for the House hearings held in October 1995 did not provide for many of the people who wished to appear as witnesses.
I should like to take a few minutes to outline the reasons why Ethyl believes Bill C-29 should not proceed. These reasons are outlined in greater detail in the written document submitted to this committee yesterday and summarized in this hand-out.
Our seven reasons for opposing Bill C-29 are the following. First, Bill C-29 is poor public policy. The provisions of the bill do not match any of the objectives of the government. The government has said that it wants to stop the use of MMT. However, even if this bill is passed, the use of MMT will still be legal in Canada. As a result, the bill creates more problems than it solves. Second, Bill C-29 violates the federal-provincial agreement on internal trade. Alberta has already indicated it will take action should Bill C-29 become law. Eight other provinces and both territories have expressed opposition to Bill C-29. Third, Bill C-29 raises constitutional issues. The attempt to deal with MMT under trade legislation does not protect the bill from constitutional challenge. As such, this bill is an unwarranted intrusion into provincial jurisdiction.
Fourth, Bill C-29 contravenes NAFTA. Banning the import in interprovincial trade of MMT would violate Canada's trade commitments, exposing the government to claims for compensation. Fifth, the original rationale for the bill, fuel harmonization, is gone. With MMT now permitted in the U.S., gasoline harmonization means this bill should not proceed. U.S. refiners can choose whether or not to use MMT. That choice should also be available to Canadian refiners. Sixth, the scientific evidence shows MMT does not harm vehicle emission systems. After the most extensive testing program ever conducted for a fuel or fuel additive, the U.S. Environmental Protection Agency or EPA confirmed that MMT does not cause or contribute to the failure of vehicle emission systems. We have conducted considerable research on this issue, the most significant of which will be discussed by my colleague Dr. Roos.
We have made all our findings available for public review. In the event that you have not had the opportunity to see this material, I brought just a portion of the research reports with me today. All our material has been submitted for review and is publicly available.
Seventh, the new Canadian Environmental Protection Act, Bill C-74, introduced by the government last December, will provide an improved science-based approach for evaluating fuel formulation issues. It makes no sense to have one fuel component dealt with under special legislation at the same time that other components will be reviewed under CEPA.
We wish the committee to note that there are several expert witnesses who have asked to discuss each of these points with you. We hope you will have the opportunity to hear them as you review the issues associated with Bill C-29. Our position on this issue has remained constant since day one of this debate. We believe there should be a firm science-based foundation for any action. That is all we have asked throughout this entire debate.
Environment Canada's most recent rationale for this bill presented yesterday is that the automakers are threatening to disconnect equipment or not honour warranties.
This threat is not new. It has been made since 1994, the first year that OBD systems were required under U.S. law. Four model years later, warranties remain intact and only GM has disabled the dashboard light and only on its 1996 models. There has been no market disruption, and that rationale, like so many others, does not hold water.
The second rationale offered by Environment Canada is that the precautionary principle set out in the new CEPA bill states that the threat of serious or irreversible damage and the lack of scientific certainty should not be used as a reason for postponing cost-effective measures to prevent environmental damage, and it actually provides a solid rationale for not proceeding with Bill C-29.
Even if there is some disagreement about amounts, all parties involved in this debate acknowledge that the immediate effect of banning MMT will be an increase in NOx emissions in Canada.
On one hand, we know with certainty that environmental damage in the form of significant nitrogen oxide emissions would occur if MMT is removed from Canadian gasoline. On the other hand, we must weigh the uncertainty or speculation that MMT might impair OBD.
In these circumstances, we believe the third-party review called for by the Canadian Petroleum Producers Institute, and supported by Ethyl Canada, eight provinces and two territories, provides for a more environmentally responsible approach. This is a serious issue and one which merits a decision based on solid, scientific evidence.
On that note, allow me to introduce Dr. Roos, who will review some of the scientific findings.
Mr. J.W. Roos, Manager Fuels, Research and Development, Ethyl Corporation: Mr. Chairman, I am Joe Roos, I have a Ph.D. in chemical engineering and I manage the Fuels Research and Development Department at Ethyl Corporation.
This afternoon I would like to address the issue of vehicle emissions and on-board diagnostics and the compatibility of these systems with MMT fuels.
The time is not available to discuss in detail the contents of those reports, although I look forward to doing so in the future, if that is satisfactory.
What I wish to do is provide you with an overview of the testing that has been performed to evaluate MMT. I also wish to comment on the basis of the NVMA-AIAM's claims that MMT harms vehicle emissions systems. I shall briefly examine these claims in light of the previous, unbiased reviews and available information.
First, I want to talk about the MMT test program. The most extensive testing ever performed or planned on a fuel or fuel additive demonstrates that MMT use does not harm vehicle emissions or emission systems. The testing was designed and operated in consultation with both the EPA and the automobile companies and used real vehicles operating on public roads. For each pair of vehicles, one car used base fuel and one used MMT fuel. This provided a direct comparison for evaluating the effect of MMT and allowed for rigorous statistical treatment of the data.
This testing was designed to study only the effect of MMT on vehicle emissions systems. It included more than 120 vehicles which accumulated something like 16 million kilometres during the testing. Vehicles tested included low emission vehicles that meet California's strict emission requirements and those equipped with the latest on-board diagnostic systems. Many of the vehicles used in testing were specifically identified by the automobile manufacturers because they believed that these would be sensitive to MMT. Obviously, it was a very rigorous test of MMT fuel.
The conclusions from this testing were that MMT is compatible with current emissions control technology and the advanced emissions control technology used in low emission vehicles. MMT does not adversely affect the operation of on-board diagnostic systems. MMT provides significant emissions benefits, lowering a vehicle's average NOx emissions by 15 to 20 per cent compared to vehicles not using the additive.
Experts at the EPA considered all the data and comments presented by Ethyl Corporation and by the automobile manufacturers and concluded that MMT does not harm emissions systems. The EPA rejected the claims of the automobile manufacturers that MMT harmed vehicle emissions, emissions systems and the on-board diagnostic systems. These same claims by automakers were later rejected by the U.S. courts. I mention the conclusion of these reviews because the same issues face us today in Canada.
Despite having their claims twice rejected after third party review, and the overwhelming data to the contrary, the automobile manufacturers continued to assert that MMT use harms vehicle emissions. The automobile manufacturers' accusations are based on conclusions that are drawn from secret testing, warranty data that has not been subject to review by others and anecdotal data.
As an example, please refer to the display put forth by the automobile manufacturers yesterday and the plugged catalyst pictures that you saw. They claimed the catalyst was being plugged by MMT use and they pointed to the red colour on the face of the catalyst as proof. I do not doubt that the red colour was because of MMT. However, to imply that because MMT was used in the fuel the catalyst is plugged is rather far-fetched. Catalysts plug whether or not MMT is used in fuel.
Mr. Chairman, with your permission, I have a couple of things I would like to pass around. First, I would like you to take a look at these catalysts. In most cases I have shown the catalysts in some pictures. You will see both of them, but take a look at the actual equipment. Pictures can sometimes be misleading. This is a brand new catalyst, it has never been on a vehicle. This is what one should look like. It goes into the tailpipe of the car. The whole purpose of a good catalyst is to reduce emissions from a vehicle. In a moment you will see some catalysts in performance. Look at the emissions and the numbers and you will see a number. If it is low or below the standard, the catalyst is working. This is a new one.
The Chairman: Does this relate to what we saw yesterday, the catalyst screen? This looks different.
Mr. Roos: Yes.
The Chairman: Can you relate it to what we saw yesterday? We saw before and after pictures of oval screens. When the "after" was caked, we were told this reddish brown was manganese oxide. Are we talking about the same product?
Mr. Roos: Yes, we are. The catalysts are made in different sizes. If you look at the front, some are round, some are oblong, some are square or triangular.
The Chairman: I am showing you what we looked at yesterday. Are these the same types?
Mr. Roos: Yes. The pictures are taken head-on to the front of this catalyst. This is a brand new one that has never been used.
The Chairman: It is not just a narrow screen, it has depth to it.
Mr. Roos: Ethyl Corporation has carried out in-use testing in Canada, and during this testing we have removed catalysts from late model vehicles with high mileage. This catalyst, which was removed achieved 105,000 kilometres of use in Canada. If you look at the face, you will see there is a blackish brown deposit on the face. We removed quite a few of these.
You will see there is a card. I will pass around the pictures. The card has the mileage, but it also lists the catalysts we looked at. In this case they are GM catalysts. The pollutants are hydrocarbon, CO and NOx. I will also give you the 1998 Canadian standards. The point is, from the testing, this catalyst allowed vehicles to readily meet those standards.
The Chairman: If you do not mind the interruption as we are moving along, so we understand, how many miles are on this catalyst?
Mr. Roos: The catalysts we are passing around right now have logged 105,000 kilometres.
The Chairman: From what area of the country?
Mr. Roos: We obtained these in Ottawa from a car wholesaler. It was an easy and convenient way of saying, as you have late model, 1993, 1994 and 1995 vehicles coming in with high mileage on them, can we get the parts removed.
The point I am getting to is the history. We know it is a Canadian vehicle which has been driven 105,000 kilometres.
As you look at the pictures, you see it is covered with a reddish brown deposit. If you want to get your hands dirty, you can pick it up. You will see none of these are plugged. The impression that has been left is that plugging only occurs in Canada where MMT is used in fuel. That is just not the case.
This next set of pictures relates to catalysts obtained in the U.S. One was obtained from an in-use vehicle. On the front, they are covered with black deposits. You can see it on the picture. With respect to the catalysts, I do not suggest picking them up because this black is very dirty and it gets everything black. The pores are plugged. You cannot see through them. These catalysts have low efficiency.
The bottom line is that these catalysts have never seen MMT, yet they are plugged. The conclusion is that catalysts plug. They plug in the U.S. and in Canada. This happens whether or not MMT is used. It is not correct to say that because the catalyst is red and it is plugged, it must be MMT. This kind of information is being used, and it is extremely misleading. It should be obvious that the proof supplied by the automakers is meaningless.
The Chairman: Where did this American catalyst come from?
Mr. Roos: Both of these came from the Virginia area on the Atlantic coast. This one was picked up last year, and that was picked up about mid-1996. You can readily find this anywhere in the U.S. We have found them on the Gulf Coast.
Senator Kenny: On this subject, I accept that catalysts plug. I think the question is this: Do they plug faster if MMT is used? You said that catalysts eventually plug. I understand that, but you have not told me whether they plug faster with your product.
Mr. Roos: We have carried out 16 million kilometres of testing and have not seen plugged catalysts, whether or not they have been used with MMT.
Senator Kenny: Stop right there. You said you carried out how many miles of testing?
Mr. Roos: Sixteen million kilometres.
Senator Kenny: You have never seen a catalyst plug?
Mr. Roos: With these tests, no, we have not.
Senator Kenny: With or without MMT?
Mr. Roos: That is right.
Senator Kenny: I thought you indicated that some of the catalysts were plugged.
Mr. Roos: These catalysts have all come out of in-use cars in the U.S. or in-use vehicles in Canada.
The Chairman: What is meant by "plugged"? Plugged to me means that it has lost its efficiency, it is no longer operational and no longer doing the work it was intended to do. Are we speaking the same language here?
Mr. Roos: I have not adapted the nomenclature used in claims against MMT by the auto companies when they say "plugged". The impression they leave is if one of those pores has something covering it so that gas cannot go through that pore, that pore is plugged. That is what we are looking at here. There are black deposits covering the face of the pour so that the gas cannot move through it. That would be a plugged catalyst.
Mr. Chris Hicks, Vice-President, Ethyl Canada, and Vice-President, Government Relations, Ethyl Corporation, Washington, D.C.: These catalysts do not come from our test vehicles. These were randomly selected in the United States and Canada. We went out and looked at catalysts in the United States until we found one or two that were plugged. The point is that in real-world conditions, catalysts plug, even in the United States where there is no MMT. However, these did not come from our test vehicles.
Senator Kenny: If catalysts plug, do they plug faster with your product or without your product? I thought that is what you were leading up to in your evidence, Dr. Roos.
Mr. Roos: We do not have the numbers. Our evidence is that catalysts running with MMT have higher conversion efficiency and perform better than catalysts not using MMT. In the fleet testing, where the only variable is MMT, whether or not it is used in the fuel the evidence is that the catalysts are not plugging with MMT. They are performing better.
Senator Kinsella: That is pretty clear to me.
Mr. Roos: The performance question is whether the catalyst allows vehicles to meet emissions standards.
The Chairman: There is no mention of mileage on these examples. Can you tell us the mileage on the U.S. catalyst and the plugged catalyst?
Mr. Roos: We retrieved plugged catalysts from shops in the area that were removing catalysts because they were plugged, melted or failed. Essentially, they take these catalysts, but they do not keep records of how many miles are on those catalysts. I do not have a record of that.
The Chairman: Is your position that these are from the United States market, they are plugged and you do not think MMT was used in the gasoline?
Mr. Roos: These were obtained before MMT was reintroduced into the U.S.
The Chairman: You are dealing in terms of 1994-95 cars. That is relevant too, is it not? The technology changed as we moved further on.
Mr. Roos: I am not trying to use these catalysts to illustrate any point other than that just because the face of the catalyst has red deposits on it, it is the problem. What I am trying to illustrate is that catalysts with black deposits can be bad or catalysts with red deposits can be bad. It is not a simple question. These examples do not address the question of whether catalysts plug. That issue should be settled with hard data. That is our concern. Using pictures provided by the automakers is not sufficient proof. What will prove it is hard data showing higher rates in the U.S. as opposed to Canada or higher rates in Canada as opposed to the U.S., and a review of that data by outside experts to ensure that it will stand up to the same statistical scrutiny to which all emissions tests are subjected.
Let us look at another example of information that I believe should be subjected to the same scrutiny. When we are talking about these catalysts, hard information needs to be looked at and reviewed by outside people. In this case, it is the use of on-board diagnostics.
In the U.S., these systems are required on all vehicles of 1996 or later vintage. They were phased in for a period before that. The question is how is this system operating now that they are required on all vehicles in the U.S.
A U.S. EPA quotation from 1995 states:
... manufacturers have expressed and demonstrated difficulty in complying with every aspect of the OBD-II requirements, and such difficulty appears likely to continue into 1996 and 1997...
The automakers are having some significant technical difficulties introducing on-board diagnostics. These difficulties have been attributed to both driving habits, such as keeping your foot on the accelerator at a stop light, and conditions, such as high altitude and cold weather. In California, the auto manufacturers have complained about false readings from dashboard lights, and this was not a minor developmental problem. The auto companies asked for regulatory relief in December, and California proposed changes to ensure that the systems were not overly sensitive. The state was not about to take this move lightly, as they considered it to be "teething pains" within the system. The auto companies produced data that convinced the state to change the regulatory statute.
It is in this context of recognized problems or limitations and subsequent changes in OBD regulations that automobile manufacturers claim they cannot deliver functional OBD vehicles into Canada because of MMT use. It is the use of anecdotal and unreviewed proprietary data and unsupported claims by the automobile manufacturers which support the need for a third-party review of the MMT issue. The MVMA, unlike Ethyl, however, has refused to adopt an approach of open review and analysis of test results or to enter into a joint program to resolve the issue.
Yesterday, the presidents of the big three -- Ford, GM and Chrysler -- appeared before the committee. They stated that something like 20 automobile manufacturers have independently reached the position that MMT harms emissions systems. If that is the case, it should be pretty easy for them to provide the data to convince the U.S. EPA, the U.S. courts or the CPPI that MMT harms emissions systems.
The CPPI has repeatedly called for joint testing, and the MVMA has refused, claiming that the answer is clear and everyone agrees that MMT must go. Yet the MVMA has recently engaged in planning an MMT test program with the AAMA, its sister organization in the U.S. This program has the stated purpose of proving that MMT is harmful, but its test methods are to remain closely held secrets. I ask: Is this their idea of science and reviewable data? Since they are just starting this test to prove MMT's harm, on what data are the automakers' claims based?
The CPPI chose to undertake in-use emission testing in evaluation of OBD vehicles, and it has found excellent emission control performance and no evidence of OBD failure due to MMT. This is consistent with in-use testing sponsored by Ethyl Corporation. Recently, a set of four OBD vehicles belonging to salesmen were tracked in Ontario and periodically evaluated. After more than two years, no OBD fault codes were found and all vehicles displayed low emissions. The excellent emission results are consistent with the evaluation of 50 to 130,000 kilometre catalysts -- one of which is being passed around -- from late model Canadian vehicles.
A recently released Environment Canada report indicates a low incidence of emission failure in Canada among voluntary emission testing of in-use vehicles. A similar voluntary emission program in the U.S. shows that U.S. vehicles failed these emission tests at more than twice the rate of vehicles in Canada. This comparison was obtained by testing almost 1,500 vehicles in Canada and 2,400 vehicles in the U.S. There is no evidence that MMT has induced emission failures.
While MMT does not harm the vehicle emissions systems, removal of MMT would harm vehicle emissions. Analysis performed by Environment Canada shows that changes in fuel formulation caused by MMT removal could result in the increase in air toxins such as benzine, acid aldehyde and formaldehyde. These are all toxic or proven cancer-causing chemicals. MMT removal would also result in a 15 to 20 per cent increase in NOx emissions.
In closing, the most extensive testing ever performed on a fuel additive in evaluation of Canadian vehicles shows that MMT use does not harm vehicle emissions systems, including the on-board diagnostics. The use of MMT and the benefits it brings to Canada should not be lost because of automakers' unsubstantiated claims.
I ask you to call expert witnesses such as Alison Pollack of Environ, or Jonathan Cohen of SAI, and Ethyl Corporation's experts to discuss the testing with you and to move for an independent third party review of the facts to decide on the future of MMT.
Dr. D. R. Lynam, Vice-President, Air Conservation, Ethyl Corporation, Richmond, Virginia, Ethyl Canada Incorporated: My Ph.D. is in environmental health, and I have been working in this area for 28 years.
I appreciate the opportunity to appear before the committee today and to speak to the health concerns that some have raised regarding manganese exposures resulting from the use of MMT in gasoline. Those who argue against MMT because of health concerns have no substance and do not acknowledge that exposures to manganese in Canada are many times lower than established safe levels of exposure.
To demonstrate that point, I wish to provide you today with the results of an extensive study of personal exposures to manganese carried out in Toronto. This study is very significant and definitive in addressing health concerns about manganese from the use of MMT in gasoline. The study provides the most relevant information for use in determining the health risk, or lack thereof, to a population where MMT is contained in all gasolines.
First, let me take a moment to talk about safe exposure levels. Health Canada, in its risk assessment from the combustion products of MMT in gasoline, dated December, 1994, concluded that all analyses indicate that the combustion products of MMT in gasoline do not represent an added health risk to the Canadian population. Health Canada arrived at this conclusion by first determining a conservative, safe exposure level for manganese of 110 nanograms of manganese per cubic metre of air. One billion nanograms represent 1 gram, to give you an idea of how small a concentration we are talking about. Health Canada then examined the extensive ambient monitoring data and the Canadian exposure data on manganese that had been collected over the last 10 to 15 years. Finally, they determined that the exposures were much below the safe level established for Canadians by Health Canada.
In 1996, the Netherlands National Institute of Public Health and the Environment, at the request of the World Health Organization, carried out a scientific review to determine if the air quality guideline for manganese should be reduced. The Netherlands health group concluded that the current WHO guideline of 1,000 nanograms per metre cubed is protective and does not need to be reduced. This World Health Organization air quality guideline for manganese is approximately 10 times higher than Health Canada's conservative tolerable daily intake of 110 nanograms per cubic metre.
The Canadian ambient and exposure data used by Health Canada in its 1994 risk assessment were quite adequate for risk assessment purposes. However, this recently completed personal exposure study of manganese strongly strengthens even further Health Canada's conclusion. This study, which was sponsored by Ethyl Corporation and carried out by Research Triangle Institute, a non-profit research institute located in Triangle Park, North Carolina, represents the largest continuous personal exposure study ever carried out for any substance. It involved over 1,000 subjects and thousands of samples were collected.
RTI was supported in its research by some Canadian groups such as Statistics Canada, which did the interviewing; the Alberta Research Institute; and the University of Montreal. The study director of the Research Triangle Institute has requested an opportunity to testify before you. If you would like additional information on the parameters of the study, he would be pleased to answer your questions.
The objective of the Toronto exposure study was to determine the manganese exposure distribution among the population in a major city where MMT is being used in gasoline. The study was carried out for 15 months from June 1995 through August 31, 1996, and covered all seasons. The study showed that 95 per cent of the Metropolitan Toronto population have exposures to manganese of less than 23 nanograms per cubic metre, which is about five times lower or below the Health Canada safe level and about 50 times below the WHO air quality guideline.
It is important to note that the safe standards are set at a level chosen to protect the most sensitive sub-population over a lifetime, without risk of adverse health effects.
Analysis of the data showed that one of the strongest predictors of manganese exposures in Toronto is the amount of time spent travelling by subway. The manganese levels in the subway were approximately 50 times higher than the levels found outdoors. Manganese in subways results from the grinding of the steel rails and brakes. Steel contains high manganese levels and the subway levels are not related to MMT. We have carried out the same type of study in London, England, where there is no MMT in gasoline and have found the same thing: elevated levels of manganese in subways.
These low exposures to airborne manganese that we see in Toronto result in small amounts of manganese entering the body relative to the amounts that enter the body from dietary intake. Some witnesses will tell you that manganese that is ingested is safe, while only airborne manganese poses a threat. The research does not support that allegation. I encourage you to question Dr. Kenny Crump and Mr. Harvey Clewell of ICF Kaiser if you would like additional information on this topic. These gentlemen have also requested the opportunity to address this committee.
In conclusion, the Toronto research clearly demonstrates that MMT is a relatively small source of airborne manganese and that the elimination of MMT from gasoline will have little, if any, effect on exposures to airborne manganese. This extensive study provides additional weight to the conclusions of Health Canada in their risk assessment of 1994 that manganese from use of MMT does not pose any health risk to the Canadian population.
The Chairman: Is that study in the material before you?
Mr. Lynam: No, sir. The field sampling was completed in August of 1996. All the data have been quality-controlled and quality-assured. The manganese data are available. Many analyses are ongoing, but we can certainly provide you with tables that show the results, the study protocol and the outline.
The Chairman: That would be helpful in light of the committee's reference from the Senate which requires that we provide the Senate with our views on that issue.
Mr. C. Hicks, Vice-President, Ethyl Canada and Vice-President, Government Relations, Ethyl Corporation, Washington, D.C.: I am Vice-President, Government Relations of Ethyl Canada and Ethyl Corporation. I am an attorney by training and am based in Washington, D.C. I hope you will hold neither of those facts against me. It may prove helpful to the committee for me to give some background of what is going on and what has gone on in the United States with regard to the approval of MMT and the EPA review.
In the United States, starting in 1977, any manufacturer of a fuel or a fuel additive that was not "substantially similar" -- that is statutory language -- to certification unleaded fuel -- which means basically plain vanilla, unleaded fuel -- could not introduce that fuel or fuel additive until they met the burden under the Clean Air Act to prove to the administrator of the EPA:
... the determination that the applicant has established that such fuel or fuel additive and the emission products of such fuel or fuel additive will not cause or contribute to the failure of any emission control system or device over the useful life of any vehicle in which such device or system is used.
In other words, the burden of proof is on the manufacturer to prove to the EPA that its product will not harm any emission control system or device. I will not go into the full history of the rather protracted back-and-forth discussions between the EPA and Ethyl Corporation over the years on this issue, although I can if you are interested in it. The most relevant point is the language which says that the applicant must prove that its product does not cause or contribute to the failure of emission control systems. EPA made that finding in December of 1993.
In the Federal Register, which is an official publication of the U.S. government, the EPA, on December 9, 1993, published this finding:
The EPA administrator has determined that Ethyl has satisfied its burden under the Clean Air Act to establish that use of High-Tech 3,000 --
That is our brand name for MMT.
-- at the specified concentration will not cause or contribute to the failure of any emission control system or device over the useful life of any vehicle in which such device or system is used to achieve compliance by the vehicle with the emission standards with respect to which it has been certified. The EPA determination is based on all the information concerning the effect of MMT on emissions and emission control devices or systems submitted to EPA during the review of Ethyl's waiver application.
The waiver application is the process one goes through to get the administrator to waive the ban on the introduction of the product. The emission standards referred to in here are, as the big three auto companies characterized them yesterday, the strictest in the world.
So the EPA, in December of 1993, with information from the auto companies and Ethyl Corporation U.S. about OBDs, in addition to much other evidence, found that we had met our statutory burden under the Clean Air Act; that our product did not harm emission control systems. I will come back to this finding.
As was referred to yesterday, we did go on to disagree with the EPA on several other issues, and we eventually went into litigation on those other issues. Obviously we agreed with the EPA once it finally made the finding that our product did not harm emission control systems, but we had other disputes.
It is true that we won the lawsuit, as was characterized yesterday, on a technicality. I will not go into detail, but will just say that the technical argument had to do with when Ethyl Corporation's registration of MMT was effective.
The important thing about the litigation is that, although we sued the EPA, arguing the technical point, the auto companies also sued the EPA in the same litigation as intervenors. The American Automobile Manufacturers Association argued that Ethyl Corporation had failed to meet its burden and that the EPA erred in finding that we had.
The Court of Appeals for the District of Columbia, which is the second highest court in the United States, rendered its opinion in April of 1995. On our appeal against the EPA, we won, and the court ordered the EPA to issue our registration as we had asked.
On the auto companies' challenge of the EPA finding that we did not harm emission control systems, the court said, among other things:
AAMA contends that some data submitted by its members established that MMT caused the failure of vehicle on-board diagnostic systems. AAMA also contends that its members submitted data establishing both a theoretical basis for and actual production vehicle data confirming the failure of OBD systems caused by MMT. The Court concludes the administrator's analysis of the data submitted was careful and searching. AAMA did not come close to proving that the administrator's analysis of the data was flawed.
There has been much talk about independent review of the data submitted by Ethyl Corporation, the auto companies, CPPI, et cetera. We certainly are in favour of having a Canadian body do that, but it is important to keep in mind that both the U.S. EPA and the U.S. District Court for the District of Columbia has reviewed all the data that is before you. The auto companies put nothing before you yesterday that was not before the EPA and the Court of Appeals, and the Court of Appeals and the EPA found that the automobile companies did not come close to proving their case.
The Chairman: Can we have copies of the EPA findings in due course? We have heard much about them and it is very important that we have that material.
Mr. Hicks: Yes, sir.
The Chairman: At your convenience.
Mr. Hicks: I will give you the court opinions and also the EPA finding.
I would like to address two or three other things which were raised yesterday that may have left a false impression with the committee.
With regard to health testing, it was implied yesterday that in the testing required by the EPA of Ethyl Corporation, that Ethyl is somehow being singled out. That is not true. By a new regulation issued in 1994, the EPA is requiring that all manufacturers of all fuels and all fuel additives conduct health testing, that is neuro-toxicity testing, on their products. For products already on the market, like MMT, a manufacturer is allowed to conduct the testing while they continue to sell their product. For a new product, the health testing must be done before it is introduced onto the market. The important point I want to express is that Ethyl Corporation is not being singled out. Every manufacturer of every fuel and every fuel additive in the United States is required to undergo health testing. We are in the process of negotiating those protocols for our health testing with the EPA as we speak.
Another issue is with regard to the AAMA testing being undertaken, their 12-to-18 month, $12 million, 80-car fleet testing. It was stated yesterday that that testing is being done at the request of EPA. That is not true. As a matter of fact, EPA wrote to Ethyl Corporation a little over a year ago -- a copy of the letter is available -- and they stated that, while EPA remains interested in the issue of OBDs, and MMT's impact, if any, on OBDs, EPA does not plan to conduct or sponsor any testing at this time. AAMA informed the EPA of its intent in testing. It described the protocol. As a matter of fact, the AAMA did us the courtesy of meeting with Ethyl Corporation on the same day in March of last year that it met with the EPA, but the testing is not EPA-sponsored or -mandated.
It was also stated yesterday that the reason EPA mandated the AAMA to undertake this testing is that EPA cannot consider Canadian data, that it can only consider data generated in the United States. That is also not true. As a matter of fact, the EPA can look at anything that it wants. During the waiver proceeding, the record part of it right there is replete with data from Canada submitted both by Ethyl Corporation and by the auto companies.
Finally, it was implied yesterday that somehow the narrow technical ruling in the lawsuit precludes EPA from regulating MMT today. As a matter of fact, it was stated that the EPA, if it only had the authority, would regulate MMT today. Again, that is simply not true. The EPA is no friend of Ethyl Corporation's and reluctantly approved MMT for use in the United States. Nevertheless, it has ample authority to remove it from the market if it can meet its own statutory burden.
The statutory burden is found in section 2.11(c) of the Clean Air Act which states that the administrator may control or prohibit the use of any fuel or fuel additive if, in the judgment of the administrator, the emission products of such fuel or fuel additive will impair to a significant degree the performance of any emission control system or device which is in general use. In other words, even though our waiver proceeding is closed, and the EPA did find that we do not cause or contribute to the failure of emission control systems or devices, and even though we won it in the lawsuit, the EPA still has the authority under the Clean Air Act to come forward whenever it has credible evidence that we harm emission control systems, or health for that matter, and remove MMT from the market. It has not come forward because it does not have the evidence.
Mr. Wilson: Let me quickly summarize our position. Bill C-29 is poor public policy. It violates the federal-provincial agreement on internal trade. It raises constitutional issues. It contravenes NAFTA. The original rationale for the bill, fuel harmonization, is gone. The scientific evidence shows MMT does not harm vehicle emission systems. CEPA will provide a more appropriate forum for evaluating fuel formulation issues.
Senator Kenny: My first question is for Dr. Lynam. Did the Health Canada study to which you referred determine whether MMT had any impact on the OBD equipment?
Mr. Lynam: Did Health Canada make a judgment on OBD-II? No, it did not. It was a health-risk assessment.
Senator Kenny: Mr. Hicks, you said that EPA was reluctant to approve MMT. Can you tell me why they were reluctant?
Mr. Hicks: I do not know. It started well before my time and we may have started off on the wrong foot. With the first waiver decision that we submitted in 1990, the EPA did some testing of its own and found some fairly bizarre results coming out of its testing chamber. To make a long story short, it turned out that the EPA -- and it admits this now -- inadvertently contaminated the test fuel. These bizarre particulate results were coming out of the testing.
The EPA and Ethyl Corporation had a huge argument over that. They thought MMT caused it. We said it could not have caused it and the bad blood just continued over the years over the question of whether we cause or contribute to the failure of emission control systems. As I quoted, even the EPA finally came to the conclusion that we met our burden there.
Also, as you heard yesterday and as you will probably hear later today from the Sierra Club and others, there are groups out there -- the EPA is one of them -- which are concerned about the long-term, low-level exposure to a substance like manganese. There are other concerns about it. Dr. Lynam has addressed that and can address it further.
Senator Kenny: Mr. Wilson, is it Ethyl Corporation's position that MMT assists auto manufacturers in meeting emission standards?
Mr. Wilson: As Dr. Roos has mentioned, in our two large fleet tests, when we compared the results from gasoline with manganese versus gasoline without manganese, we found lower emissions, specifically lower nitrogen oxide emissions.
Senator Kenny: If this is the case, would you explain to the committee why all 21 car manufacturers and retailers in this country currently refuse to use the product and claim that it does not improve their emissions?
Mr. Wilson: I can refer back to the test work that we have done and that the EPA has scrutinized and which is acknowledged by the EPA and Environment Canada. It shows there is a NOx reduction when you use MMT.
Mr. Hicks: That is an often-asked question. If MMT actually helps auto companies meet emissions standards, why are they against it?
Senator Kenny: That is the question.
Mr. Hicks: I can only speculate, but I will be happy to do so. This is a bigger issue than MMT. As CPPI mentioned yesterday, this is really a dispute between big auto and big oil on who will be responsible for lowering emissions in the atmosphere. MMT happens to be the first thing along in Canada, but it could just as easily have been sulphur content or something else. This scenario is being played out all over the world right now. It is going on in Europe, the United States and Canada. It is a struggle between two big industries. In my opinion, they ought to be told, "Get out of here, quit wasting our time, and go solve your problems." Nevertheless, we are here.
It is interesting that this behaviour is not inconsistent with the auto industry's past behaviour. The auto industry does not like to be told what to do, and it does not like variables. I described the waiver process for getting a fuel additive approved in the United States, and I have a chart which I would like to hand out showing all the fuel additives that have been approved under this waiver proceeding in the United States under this section of the Clean Air Act. It includes MMT, ethanol, MTBE and methanol. It is helpful to see how big our fleets were compared to some of the other fleets. I specifically wish to draw your attention to the fact that the auto industry opposed every one of them by written comments in front of the EPA. It opposed MMT, ethanol and MTBE.
In the hearing before the House of Commons standing committee a year ago October, one of the auto representatives held up a clear pitcher of water and said, "This is what we would like all gasoline to look like." They want no additives. They want one fuel so they can build one car which can run anywhere.
The Chairman: You probably have a somewhat confused group of senators here in the sense that, yesterday, we heard from the presidents of every major car manufacturing company with witnesses in support of their position. They gave us considerable information, totally different from what we are hearing today from you, relative to the EPA, the sensors, catalytic converters and so on. Are you saying the reason they are doing this has little to do with MMT, but that the issue is much deeper than that?
Mr. Hicks: That is my guess. I do not understand why they would care about MMT if MMT can actually help them, and they must understand in their heart of hearts that it does not harm them.
There could be one other factor. I do not think it came through clearly in their testimony yesterday that they are having a heck of a time getting these OBD systems to work. One of their experts characterized the problems they are having in the United States as a few teething problems.
As outlined by Mr. Roos in his testimony, the OBD requirement started in California, when the California Air Resources Board mandated that autos in California be so equipped in 1993. The U.S. EPA picked up that CARB requirement, starting in 1994, and required it to be in all new vehicles by 1996. The auto companies have consistently opposed it. It is a difficult engineering challenge for them. However, in the United States, where MMT has not been used until the last year, they have stated a variety of reasons, both before the U.S. EPA and CARB, for why their systems do not work. In 1993, the EPA rejected the automobile industry assertions that sulphur adversely affects the OBD systems. The AMA was in protracted litigation with the environment department of the State of New York, which it lost, also claiming that high sulphur fuel harms their OBD systems.
Last August, the EPA granted the auto companies a waiver for compliance with the phase-in of OBDs. The EPA federal register indicates that manufacturers expressed concern that extreme cold weather or high altitude might prevent certain readiness codes from clearing and granted them a waiver. Mr. Roos mentioned that they have now gone back to CARB, and CARB staff recommended in December that the CARB regulations be changed because the automobile manufacturers were stating they are having trouble with vehicle variability production standards.
Mr. Roos: It was sensitivity, basically, to some of the systems. They provided data to back that up in order to persuade CARB to change the regulations.
Mr. Hicks: This is all a matter of record. It is not a few teething problems, and it could well be another motivation to blame, in Canada, MMT for their OBD systems not working the way they are supposed to.
Senator Spivak: In your answer to Senator Kenny, you mentioned MMT reducing NOx emissions. What about hydrocarbons, carbon dioxide and carbon monoxide? In your answer, you seemed to indicate that fuel with MMT in it would reduce emissions to the standards. Correct me if I am wrong, as I may have overstated your case. They must meet those standards, and perhaps later sulphur and other things.
Mr. Roos: Three regulated pollutants coming out of vehicles are hydrocarbons, CO and NOx. I will rely on the EPA analysis of the test data. They concluded that there was no change in the hydrocarbon emissions across the fleets tested. There was a small decrease in carbon monoxide, but it was not statistically significant. However, there was a large, consistent and significant decrease in NOx from vehicle emissions.
Senator Spivak: You are stating that MMT systems will not enhance the standards any better than any other fuel additives.? Perhaps I am not phrasing my question correctly. We have several different kinds of fuels. You have standards. Are you saying it is a level playing field?
Mr. Roos: We are saying that the use of MMT in a fuel does not cause or contribute to any emission system's failure to meet those standards.
Senator Spivak: Do all fuels presently in existence have the same capacities with regard to these OBD systems and with regard to meeting those emission standards?
Mr. Roos: No. Fuels are not the same. A large joint program was carried out in the U.S. between the auto companies and the oil companies, conveniently called "Auto Oil". It was smaller than the testing we have carried out on MMT. The purpose of Auto Oil was to answer the question you asked, "Are all fuels the same?" The answer is, "No, they are not." Differences occur because there are different kinds of crude oils which come from different regions of the world. It is a fundamental principle that crude oil from one area will give you a different kind of gasoline than crude oil from others.
Senator Kenny: The Automobile Dealers Association appeared before us, and they see significant differences in the costs of maintaining vehicles in Canada versus the United States under exactly the same conditions in every respect, except that the vehicles in Canada are fueled with MMT fuels and the vehicles in the United States do not have MMT in the fuel. What is your response?
Mr. Roos: I was not here. Therefore, I am not sure.
Senator Kenny: They were saying, "We think this is terrific. We have never made more money. We have significantly higher revenues compared with similar dealers in the United States who sell the same vehicles. Boy, the more MMT you can produce in Canada, the happier we will be."
Mr. Wilson: It is very nice to get that support.
Senator Kenny: There was considerable endorsement for your fuel. They were suggesting that, in essence, the consumers are getting screwed.
Mr. Roos: We run our vehicle fleet tests on commercial fuels, one which contains MMT and one that does not. These are conducted with all the variables, including icy roads and cold weather. Everything is the same for the same cars. The only difference is the MMT. We also kept maintenance logs which were submitted to the EPA. Those logs show there is no difference between vehicles when the only variable is MMT.
Comparisons between U.S. repair records and Canadian repair records, for instance those under warranty repair, may show differences. I am not privy to them and therefore I do not know. Any data of this type which is brought out has to be reviewed. Those other variables need to be taken into account. If MMT is a variable that affects the final result, then it can be given its proper weight. That is the case with warranties. Are warranties being administered differently in Canada as compared with the U.S.? Those are the kinds of questions that need to be answered.
Senator Kenny: Mr. Wilson, your sixth point had to do with harmonization. My understanding is that in Canada the standard is 18 milligrams of manganese per litre. In the United States, it is 1/32nd of a gram of manganese per gallon, which translates into 8.26 milligrams of manganese per litre. How will harmonization be achieved if we do not pass this bill?
Mr. Wilson: The Canadian Petroleum Products Institute offered some time ago to lower their maximum use from 18 milligrams to 8.6. That would achieve harmonization instantaneously.
Senator Kenny: Could you please provide the committee, Mr. Wilson, with some explanation of what you intend to do if we do not pass this legislation?
Mr. Wilson: We would be very happy, obviously. We would like to see the air cleared between the petroleum industry and the automobile industry. We have stated all along that we would be willing to participate in that process if it is done before an independent third-party review.
Senator Kenny: The second half of my question is: What will you do if we do pass this legislation?
Mr. Wilson: Sir, we would be very concerned. As you know, we have looked at this under the NAFTA situation. Perhaps Mr. Hicks would like to comment on that point.
Mr. Hicks: One alternative we have is to proceed under the investor state claim section of NAFTA to try to seek reimbursement from damages incurred. Obviously, if this bill passes, it will have a significant impact on Ethyl Canada's business. I am not the business guy, so I cannot say how much it would be, but it would be devastating. It would be particularly devastating, not only in economic terms, but because it would be done for no good reason and without scientific basis.
The Chairman: You have filed a claim already, have you not?
Mr. Hicks: No, sir.
The Chairman: Have you given notification?
Mr. Hicks: It is a notice of intent.
Although I am a lawyer, I am no expert on NAFTA. Our attorney, who is an expert on NAFTA, has requested to appear before you. If you want to go into detail, he would be happy to appear.
The procedure is that if an investor has a claim against a NAFTA government for violation of the NAFTA agreement, then that investor files a notice of intent to file a claim. There is a 90-day period after the filing of that notice of intent, during which time NAFTA does not require but clearly intends the parties to carry on consultations to try, obviously, to make the problem go away. The Government of Canada has refused to engage in consultation with us, even though we have asked. The 90 days have now passed. Therefore, under the procedures of NAFTA, we are able to file the claim itself at any time. The claim is filed not as a lawsuit but an arbitration proceeding. The Government of Canada would appoint an arbitrator, as would we. The two of them would pick a third party, and the case would be heard.
However, we have not filed a claim.
The Chairman: What is the basis for your action?
Mr. Hicks: The first is expropriation; that is, we have a business in Canada and, if this bill passes and we cannot sell MMT here, our business will be expropriated.
We can also make the argument, even if the bill does not pass, that we have already had our business expropriated in the sense that our reputation has been damaged. Our goodwill has been damaged. Our sales have been damaged. Our sales abroad have been damaged. Whether or not the bill passes, in our opinion and in the opinion of our attorneys, we have a claim already. Certainly, if the bill passes and the Government of Canada, in effect, takes our business away, then NAFTA clearly allows for the investor to recover damages for that.
Another argument is based on what is called "national treatment." That is an international law term which requires countries to treat foreign companies no worse than they treat their own. There is also something called "local performance requirements;" that is, a country cannot enact laws or regulations that would require companies to do certain things locally. In our opinion, Bill C-29 violates both national treatment and performance requirements because it does not ban MMT. What it does ban is the import of MMT and the interprovincial trade of MMT, which means that a Canadian corporation, or Ethyl Corporation, could build a plant in each province and territory and continue to manufacture and sell MMT. That violates both national treatment and performance requirements.
Senator Kenny: Mr. Hicks' answer to the first half of my question was different from Mr. Wilson's. If I heard Mr. Hicks correctly, he sees an action under NAFTA, win, lose or draw. That was not how you described it, Mr. Wilson.
Mr. Wilson: If you do not pass the bill, there would be no reason for us to go forward with the NAFTA measure.
Senator Kenny: I thought Mr. Hicks just said he had a reason to go forward with it.
Mr. Hicks: We claim that the damages arise from December of 1994, the first time Minister Copps announced that MMT was bad and that it would be removed from the market in Canada. That is when our cause of action arose.
Arguably, there is a cause of action whether or not the bill passes, because of the damage to our reputation and the out-of-pocket expenses in defending ourselves that have occurred through that time. It is really a question of damages and how big they are. However, the damages do not just start when and if the bill passes.
You are correct that we could move forward with a claim against the government whether or not the bill passes. However, we do not intend to do that. We obviously would not move forward if the bill does not pass. The reason we filed the notice of intent when we did was simply to be above board. We were not aware of this provision in NAFTA until late spring last year. We looked into it and decided it was legitimate and that our fact situation fit. Therefore, we thought the proper thing to do was to file the notice of claim as soon as possible so that people who were considering this bill would know that that is another factor out there. We contend that our damages would be in the order of U.S. $200 million.
Senator Rompkey: I wanted to get back to Mr. Hicks' claim or speculation that this dispute is part of a war between big oil and big auto, as to who will reduce emissions into the atmosphere. If that were true, surely this is Custer's last stand, because we are told that MMT is not used in any OECD country, that we are unique in Canada. As a matter of fact, we heard from Mercedes-Benz yesterday that they produce 184,000 vehicles.
Senator Spivak: No, 650,000.
Senator Rompkey: They sell 5,000 of those in Canada and they only have a problem with their vehicles in Canada. They do not have a problem in any other country in the world. We heard essentially the same thing from the Japanese manufacturers with regard to their territory: They only have a problem in Canada. If this is a war, it seems that the auto industry has won this particular MMT battle. Why are we fighting on the battleground of MMT? We might as well concede that to the auto industry and go on to some other venue because they have clearly won this particular battle.
Mr. Hicks: I respectfully disagree. Why should you concede the battle to the auto industry simply because the auto industry is telling you to do it?
The auto industry is doing two things, and Environment Canada said so yesterday. Market disruption is one reason that Assistant Deputy Minister Clark said they were moving forward. What is market disruption? It is the fear of voter response if the auto companies carry through with their threats to disconnect OBD equipment or to void warrants. That is an auto company threat.
Number two is this precautionary principle. Assistant Deputy Minister Clark said that the evidence is inconclusive -- even Environment Canada is saying the evidence is inconclusive -- that the auto companies have not proved their case. They are saying that not banning MMT will cause harm , that, therefore, we should move forward with the ban. I do not understand why Canada is simply saying, "The auto industry is telling us we should ban MMT." Since it is not used anywhere else in big amounts, therefore we should just cave in."
Canada has been a leader for 20 years in the field of environmentally responsible fuel that is inexpensive and safe for refiners to use. It does not cost much in plants and equipment. It is a mystery to me why Canada is saying, "We are the only ones out there and the auto companies are telling us to quit."
The last time I checked, the United States was an OECD country and it is approved for use there.
Senator Rompkey: It is not being used there.
Mr. Hicks: Yes, it is. It is not being used such as we would like.
Mr. Wilson: Well, sir, we sell MMT.
Senator Spivak: In the United States?
Mr. Wilson: We sell MMT in the United States and it is put into unleaded gasoline. We have customers today.
Mr. Hicks: One of the problems with the rest of the world was that the rest of the world like to wait to see what the U.S. EPA does. Only after this litigation I discussed did the U.S. EPA register MMT, in December of 1995. MMT has only been legal in the United States for a little over a year. Many of these countries that you talk about, such as Bulgaria and some small countries that are using it, were waiting to see what the U.S. EPA did. They wanted to convert, for whatever reason, their refining industry into a more inexpensive way to achieve octane.
Many of the OECD countries did what Canada did not do. That is, when they decided to phase out leaded gasoline they went to more severe refining, spent more money on plant and equipment and produced gasolines with a much higher aromatic and carcinogenic content, as opposed to Canada, which went to MMT and avoided those problems.
Another OECD country starting to use MMT is Mexico. Right now, as of today, all three of the NAFTA partners are using MMT.
The Chairman: There is some confusion in our committee as to whether or not MMT is being used in the United States. This question has come up a number of times. We have heard both sides of it. I cannot imagine a better witness to tell us the answer in that you have a lock on the market. What is happening in the United States with your product particularly with regard to volumes?
Mr. Wilson: We have customers, I can assure you of that. The customer base is expanding slowly for a number of reasons. Number one, of course, we were out of the market for 17 years waiting to get our waiver approved. In the meantime, of course, the laws were changed in the United States. Oxygenates were brought in. So there is significant octane capacity in the U.S. gasoline market. This is the market we have to compete in. It has been very slow.
In addition, of course, the action of the Canadian government has had a dampening effect on our customer base in the U.S. and around the world.
Mr. Hicks: In addition to the auto companies.
Mr. Wilson: They continue to be very vocal. Naturally, some of our customer base is not developing as quickly as we would like it to. We do have customers in the United States, I can assure you of that.
As far as the commercial volumes we sell in the United States, that is proprietary information. We cannot divulge that information. However, I can assure you MMT is being used in the United States.
The Chairman: Are you banned in California?
Mr. Wilson: California has the same process as the rest of the U.S. You have to get a waiver for approval to use MMT in their gasoline. We have not approached the State of California. We can at any time, but we have chosen not to do that at this time.
The Chairman: At this point in time you cannot sell MMT in California?
Mr. Hicks: We cannot sell it in California and we cannot sell it in areas where reformulated gasoline is required. That is about another 15 per cent of the market. Reformulated gasoline also requires another waiver process.
With regard to approval for use in 100 per cent of fuel in the United States, we have a waiver that is in effect for 85 per cent of the market, and we have yet to achieve waivers in California and for reformulated gasoline areas.
Senator Rompkey: I want to ask about the discrepancy between your study with regard to the NOx emission reduction and what we heard from the Canadian Petroleum Products Institute yesterday. They claim there is an 8 per cent reduction in NOx emissions whereas your study claims there is a 20 per cent reduction in NOx emissions. The University of Waterloo also reviewed your study and concluded that your claims with respect to NOx emissions were unfounded.
Senator Buchanan: Do you have that study?
Senator Rompkey: Do I have it in front of me?
Senator Buchanan: Is it here?
Senator Rompkey: It was referred to yesterday.
Senator Kenny: It is in our kit and available to the committee. It is part of the books I tabled for you. They are back here and they have been distributed to your office.
Mr. Wilson: I would ask Mr. Roos to address the first part of the question. When we come to the University of Waterloo study, I would like to say something.
Mr. Roos: I heard yesterday the CPPI reference to an 8-per-cent reduction in NOx. I believe they pointed to the same memo I am holding here, from John Holly of the EPA, where they looked at all the data submitted to them on MMT use and emissions, including data submitted by Ford Motor Company. This is all the same data, the 20 per cent and the 8 per cent. It is what you are comparing it to that is different. In the case of 8 per cent, which is used by EPA, they are taking the reduction, which is a certain amount of NOx, and they are saying, "What is that compared to the standard?" The standard is much higher. Therefore, you are comparing it to the standard itself. They are comparing the 8-per-cent reduction to the standard to which the car has been certified. The 15-to-20-per-cent reduction that I was quoting contains the same amount of NOx, but I am comparing it to vehicles that are not using MMT in fuel. The difference, in practical terms, is if you have two cars running down the middle of the conference room here and you are looking at the emissions they are putting into the room, you have one car putting out one amount, your base fuel, and your MMT car will be putting out 20 per cent less compared to this vehicle. As to the EPA's and CPPI's comparison, the 8 per cent, they said. "Let's look at what that difference is and compare it to the regulatory standard." They are the same numbers; it is just a different basis they are using for the comparison. That is why there is a difference in the numbers.
Mr. Hicks: The important thing to note, whether it is the 5-per-cent figure Environment Canada came up with at one point, the 8-per-cent figure the EPA has come up with, or the 15-per-cent to 20-per-cent figures, is that it is moving NOx reductions the wrong way. Even a 5-per-cent or 8-per-cent increase, which you would get immediately if you removed MMT from gasoline, is a huge NOx increase. The Government of Canada has no plan to recapture the NOx increase if MMT is banned.
Mr. Roos: I will add to the discussion of what 8 per cent means. Let us take that number. An 8-per-cent reduction in NOx is much more than the reduction the EPA is asking for in the year 2001. It is just not achievable through any other fuel reformulations. You heard the CPPI talking about the billions of dollars from sulphur reduction. This 8 per cent is a real number.
Senator Rompkey: They also talked in the context of other emissions. I remember them saying that what you lose on the roundabouts you make up on the swings. If you reduce NOx emissions, you increase the emissions of other substances. They claim they can regulate that one way or the other. Their testimony was in the context of all emissions, not just NOx emissions. I am no expert and I am not sure I fully understand.
Mr. Wilson: Our data show there is no significant difference in hydrocarbons or CO emissions when you compare the MMT fuel and the clear fuel. What you do see is this 15-to-20-per-cent decrease in NOx emissions.
Senator Rompkey: And the Waterloo study?
Mr. Wilson: We became aware of the Waterloo study at the October House committee hearings when that report was tabled. We had not seen it before. We immediately asked one of our consultants, Environ -- whose representative incidentally has asked to appear before this committee and I am sure she would be delighted to talk in more detail about the University of Waterloo study -- to review that study. She immediately found that the data that they had been supplied was incomplete. She sent them the complete data. They did a further analysis. We wanted to have our consultant, Environ, get together with the University of Waterloo to discuss the technical aspects of their evaluation. An attempt was made to meet with the two authors. This started, I believe, around February of 1996. Eventually, after many phone calls, our consultant was informed that they could not meet with her until they got approval from General Motors, who had contracted the study. General Motors, to the best of our knowledge, must never have released the University of Waterloo to sit down with our consultant to discuss these differences. Again, it is stonewalling. We want to sit down and discuss these differences. They would not come forward. General Motors would not allow their consultant to sit down with us.
Senator Cochrane: We had before us yesterday people from Ford and other large car manufacturers. I wish I had had this information before me yesterday because your document from your people at Ethyl Canada Inc. is dated October 11, 1996.
Mr. Wilson: And the title?
Senator Cochrane: The title is "MMT and On-Board Diagnostic Evaluation of Engine Misfires".
Mr. Wilson: Yes, I am familiar with that.
Senator Cochrane: That is a more recent copy, that is 1996. In that document, you quoted a Ford official as saying:
... we have, over a number of years, looked at MMT contaminated plugs, and, so far, we have been unable to find one that actually had a problem.
Now, Mr. Hutchins from Ford does not know anything about this quotation.
Senator Rompkey: And disagrees.
Senator Cochrane: He disagrees with it. Can you tell me where you got this?
Mr. Wilson: Mr. Hutchins is Chief Executive Officer for Ford Canada?
Senator Cochrane: Yes.
Mr. Wilson: I would like Dr. Roos to address that because it is pertinent to the quotation.
Mr. Roos: I believe the quote came from a technical conference on spark plugs. An issue arose about MMT and spark plugs. The scientist is recorded in the proceedings from that conference.
Senator Cochrane: A Ford official?
Mr. Roos: A Ford scientist, yes.
Senator Cochrane: And that was 1996?
Mr. Roos: The conference date, I believe, was 1995. It was late 1995. That is dated 1996.
Mr. Wilson: I do not think it is unusual for the Chief Executive Officer not to know what one of his scientists has said at a technical conference.
Mr. Roos: It is an example of our concern that one group is saying one thing about the data and the chief executive has another group of data. This has always been our concern. You hear one statement and then you go to a technical conference where people are talking about the work they do, and you hear a different statement. If their data were put on the table and reviewed, perhaps that could be reconciled.
Senator Cochrane: He did not know anything about it. I would like to have pursued that as well. If this gentleman was quoted about spark plugs at a spark plug technical conference, then he must know something about it.
Mr. Roos: He should be one of their experts, yes.
The Chairman: Do you have the name of that scientist?
Mr. Roos: Not off the top of my head, but I could get that for you.
The Chairman: Perhaps you would do that and advise us.
Senator Whelan: I am not an expert in this area, but after listening to experts from the auto industry and from Ethyl Corporation, I would not want to say there has been a bunch of liars in this room, but we are certainly confused about the evidence. Some of the accusations have been strong. One of the things you are doing which I do not like is holding a sledgehammer over our head. I dealt with three Secretaries of Agriculture of the United States of America during my career of 12 years as the minister in Canada.
We always got along very well before NAFTA. Now you are holding out the hammer and saying, "If you are not good, we will drop it on you." That is a threat and I do not like it at all. That is not the way we have done business.
Who owns Ethyl Corporation?
Mr. Hicks: It is a publicly traded company. Stockholders own it.
Senator Whelan: Is there no big oil company which owns a majority of the shares?
Mr. Hicks: No, sir.
Senator Whelan: Could Ethyl Corporation be taken over by anyone else?
Mr. Hicks: Presumably, if you buy enough shares.
Senator Whelan: It is not like Cargill, for instance? No one can ever take over Cargill, or a couple of other big companies of which I am aware, due to the way they are set up.
Mr. Hicks: It is a publicly traded corporation.
Senator Whelan: How much have you invested in facilities in Canada?
Mr. Wilson: We have a manufacturing site at Corunna where we manufacture a certain improver for diesel fuel and blend other products such as MMT.
Senator Whelan: Is that the only plant you have in North America that makes MMT?
Mr. Wilson: We do not manufacture MTT at our Corunna plant site.
Senator Whelan: Where do you manufacture it?
Mr. Wilson: At our site in Orangeburg, South Carolina.
Senator Whelan: So they use MMT in the gasoline in South Carolina?
Mr. Wilson: It is being used in the United States, yes.
Senator Whelan: Many of the companies, including Amoco, Anchor Gasoline, ARCO, BP, Chevron, Exxon, Hess, Marathon, Mobile, Pennzoil, Phillips, Shell, Sun and Texaco, have sent letters to the EDF stating that they are not currently using MMT in U.S. gasoline. They say:
If adequate, independent testing shows MTT to be safe, we wouldn't oppose its use, but Ethyl should responsibly suspend marketing MMT until health studies are completed...
They go on to say that if they did use it, they would mark the pumps and tell their consumers. Do you know if the pumps are marked in the states that are selling this, telling the customers that the gas contains MMT?
Mr. Hicks: I think what you are reading from is what EDF would like them to do. Those companies responded to an Environmental Defence Fund survey saying that they did not intend to use MMT at this time.
Mr. Wilson: That was almost a year ago.
Mr. Hicks: EDF goes on to ask them, should they start using it, would they label their pumps, and the EDF did not get any response on that issue from the oil companies.
Senator Whelan: I was the parliamentary secretary to the minister when we set up our department of the environment in Canada. We were the second nation in the world to do so.
Your presentation prompts me to quote again from this paper:
In 1925, despite protests from the public health community, Ethyl began selling lead additives for gas, with devastating results for the nation's health. Now, 70 years later, Ethyl is again disregarding health concerns and selling MMT without first obtaining adequate toxicity information.
I have not read all the evidence, but in 1925 you said the same thing, that lead was perfectly safe, and we know how bad it was. It is still in our land and our communities.
You are saying the same thing here again. I have talked to Dr. Donaldson from Queen's University and to Dr. Labella. They are very concerned about what manganese can do. You are saying that a tiny amount cannot be harmful. As I said the other day, a tiny amount of poison from a honey bee can be devastating.
You speak about the problem from manganese in subways, et cetera. I do not think we should contribute in any way when we do not know more about it.
I have strong reservations about this. The biggest consumers in the world of your product are telling you that they want a different product. Imagine a restaurateur, for instance, saying, "Yes, there is pepper in your soup. Eat it." That is what you are doing. You are saying, "There is MMT in your gasoline. You may not like it, but you must take it." I cannot believe this is taking place in our society today. I cannot believe that you cannot come up with something different. It is incomprehensible to me that this is taking place and that this committee is even listening to this.
The Chairman: I am sorry, Senator Whelan, but I think we are getting a little carried away. The witnesses should have the opportunity to respond to your allegations.
Senator Whelan: After you let other members of this committee run wild and interject, I take offence at what you are saying to me.
The Chairman: I am sorry if you take offence, but the witnesses are not here to be hectored. They are here to give us information. That is the purpose of the committee. I think the witnesses are entitled to defend their position. Questions are in order. We are here to learn, not to lecture.
Senator Whelan: We have been lectured to for over an hour.
The Chairman: Would you care to respond?
Mr. Hicks: Under the existing statutory authority in the United States, the administrator of the EPA can remove MMT from the market in the United States if, in the judgment of the administrator, any emission product of such fuel or fuel additive causes or contributes to air pollution which may be reasonably anticipated to endanger the public health or welfare. We readily admit that EPA is concerned about manganese exposure. However, if the EPA has any evidence that there is any danger to the public health or welfare, it could move to remove MMT from the market right now.
Mr. Lynam: I would also like to comment that Health Canada has looked at this product and carried out risk assessment evaluations five to six times in the last 10 or 15 years that the product has been used. The most recent one was in December, 1994. I have commented on that. It is readily available. I believe that Health Canada will be testifying tomorrow. This element is biologically essential and the exposure information we have indicates that 99 per cent of the manganese that you take in comes from your diet and that the air contains a very small concentration. The manganese in the air from MMT is a small part of the airborne portion.
The Chairman: Do you wish to respond to the analogy to lead that has been made?
Mr. Wilson: No, sir.
Senator Whelan: Is it not true that the head of the EPA went further than what you described?Administrator Carol Browner said:
EPA believes that the American public should not be used as a laboratory to test the safety of MMT.
Mr. Hicks: Yes.
Senator Kinsella: I will raise a number of questions and let the panellists respond to them.
Yesterday, the president of Mercedes-Benz said, in reply to a question from me, that their engineers could not design an OBD device that would tolerate MMT. Can an OBD be designed to be MMT-tolerant?
Second, is it your view that the OBD-II device currently available is indeed MMT-tolerant?
Third, is it your view that a third-party is needed to adjudicate this matter of whether MMT gums up the OBD or, indeed, that a third-party study need be conducted on whether an OBD can be designed that would be tolerant of MMT?
There is also the question relative to the reduction of the amount of MMT in gas, as was proposed by the oil industry witnesses yesterday. You have alluded to the proposal that MMT be reduced from 18 to 8.6. Based on your data and your analysis of the data of others, what would be the impact of such a reduction on the hypothesis that others are advancing, namely, that MMT does gum up the OBDs? If MMT was reduced from 18 to 8.6, what would be the reduction in the gumming up, if that hypothesis valid?
I also wish to refer to the December 9, 1993, EPA decision referred to us by Mr. Hicks, wherein the EPA states that the emission control devices are not gummed up by MMT. What OBD device were they discussing? My understanding is that vehicles as of model year 1994 have the on-board diagnostic device. Is the diagnostic device to which the EPA in the United States was addressing in its decision of December, 1993, the same kind of OBD? Perhaps I could get clarification on that.
As well, have you had direct orders for MMT from American refineries -- the 80 per cent about which you spoke a few moments ago -- since you received permission in the United States to use MMT in the oil refineries? If so, what is the magnitude of those orders? Have you received any notice of intention by those refineries in the United States to buy MMT and add it into their product?
I also wish to refer to the NAFTA discussion that was raised. How does the argument that was advanced by some government supporters of this bill, that ethanol from products grown by Canadian farmers might yield a substitute for MMT, and the extent to which that would be a consideration in passing this bill, factor into your NAFTA challenge?
Those are all the questions that came to my mind. Perhaps you could respond to a few of them.
Mr. Wilson: I would ask Mr. Hicks to address the first question concerning the federal register.
Mr. Hicks: Let me take them in reverse order.
Ethanol, MMT, MTBE, and several other things are used by refiners to increase octane in gasoline. There has been a suggestion that if you get rid of MMT, then everyone would use ethanol to get their octane boost instead of MMT. In the United States, they use MTBE. We have done some study of the use of ethanol and MMT together and find that you actually get the best of both worlds.
One of the reasons ethanol was developed and is popular is that it reduces hydrocarbon emissions, whereas MMT does not have much of an impact on either. However, ethanol has a negative effect on NOx emissions. It actually increases them, whereas MMT has a significant impact in reducing NOx emissions. If you use ethanol and MMT together, even though you might have extra octane, you actually have lower emissions across the board in all three of the regulated emissions.
With regard to the kind of OBD that was before the EPA when it made its finding that MMT do not cause or contribute to the failure of emission control systems, it is important to understand the difference between the two systems. I will try to explain it. I am a layman. If I can understand it, I think anyone can.
When we talk about OBD systems, as opposed to emission control systems, you must keep in mind that the on-board diagnostic system is just that. It just diagnoses a problem. It is a computer program, not hardware. Burned MMT comes into contact with the oxygen sensors that stick up into the exhaust stream after the exhaust comes out of the engine and goes through the catalyst. Basically, the oxygen sensor is there to help the fuel injector operate. It tells it whether the mixture is too lean or too rich. When the automakers were required to develop the OBD systems, they added another exhaust gas sensor after the catalyst, took measurements from both, and somehow calibrated it into a computer program that would state whether or not the catalyst is working.
It is a little misleading to say "gum up the OBD system". That is like saying "gumming up" a computer. MMT would never come in contact with the software or with the computer. The automakers are alleging that somehow we foul the exhaust gas sensors, which then send misleading information to the computer and the computer operates incorrectly. It is important to realize that those exhaust gas sensors -- and the automakers passed one around here yesterday -- are the very same pieces of hardware that have been on cars for 10 years. When carburettors were phased-out and fuel injectors came in, they had to have some sensor to regulate the fuel injector, and that was it. It was on all the cars in our fleet.
Yesterday, Environment Canada talked about our vintage 1988 fleet. It is vintage now, but it had exhaust gas sensors on it. If MMT fouls exhaust gas sensors now, it would have fouled them then. The actual hardware that was on during all our fleet testing and was the basis of the EPA finding in 1993 is basically the same as the present hardware.
The computer programs have gotten more sophisticated. CARB, the California Air Resources Board, is requiring the automakers to detect and measure more things. Therefore, the program is more sophisticated than it was in 1993 or 1994. Insofar as measuring the engine-out emissions and the catalyst-out emissions, it is the same hardware.
Mr. Roos: As Mr. Hicks pointed out, the oxygen sensors are the components in the vehicle which have direct contact with MMT fuel. They are being used the same way they have been used since 1988. The only difference is the way the computer now looks at the signal.
With your permission, I wish to pass around examples of oxygen sensors that have been removed from vehicles. These are from Ethyl's test vehicles. The only variable here is whether or not MMT was used in the fuel. In this case, we have six vehicles, three running on fuel with MMT and three running on fuel without MMT. They would have accumulated approximately 176,000 kilometres. There is a picture and the hardware is coming around also. MMT is the only variable. The key, again, is performance. If they are performing properly, the emissions should be good. What we have here is a direct comparison of the performance of sets of sensors with MMT as the variable.
The table shows that the emissions are the same and the sensors are performing the same. When EPA considered the issue and made their conclusion, they were looking at just that: the operation of the hardware. They said it works fine. They looked at both the theoretical argument advanced by the auto companies and what the auto companies called their conclusive vehicle test. That was mentioned yesterday. In this case again it was one vehicle. They could not prove to the EPA that there was an impact on the OBD systems.
On the question about the future of on-board diagnostic designs, we do not see an impact on these on-board diagnostics. Essentially it is a sensor and it seems to be working fine. I do not imagine the auto companies need to redesign them. They have talked about changing on-board diagnostic designs mainly because the present system is not the best way to do it. Everyone will tell you that this is not technically the way they would like to do it but it is proven hardware so they use it. There is plenty of research going on about new ways of doing this, but those will be put in place mainly because the present system does not work so well, just because of its own merits or flaws.
Mr. Hicks: One of the other questions was about Mercedes-Benz. I do not know of anything that Mercedes-Benz has submitted anywhere on this issue.
They talk about 20 automobile companies having done this research and, independently, coming up with the same conclusions. Some of them have submitted what they claim is good data. The "Big Three" auto companies have done a lot. Toyota and Honda submitted data, but we have never seen any data from many of these 20. If they do not have to produce any data to prove their claims, it is easy for Mercedes to come and tell you that their systems do not work here in Canada and the only reason can be MMT.
Senator Kenny asked the auto dealers about warranty claims. The auto companies keep making these allegations about higher warranty claims, but they refuse to release the warranty data which they have given to Environment Canada. We filed many Access to Information Act requests. By and large, we have received a lot of information. However, the auto companies have continued to claim confidentiality, especially on the warranty data. We would love to see that information, and we think the committee ought to see it.
Senator Kenny: On a point of order, Mr. Wilson was asked a moment ago to tell us how many gallons of MMT were sold in the United States and whether any was sold in the States where the MMT is produced. We did not get an answer. The answer that came back from both of you was that that information is proprietary.
We are getting this from both sides. This is a difficult question for us to handle when both sides come to us and say they have information which is not being shared by other folks. You are not the only folks doing it. The other side is doing it as well.
Mr. Hicks: I hear what you are saying. As president of Ethyl Canada, Dave Wilson is following our normal corporate policy, which is the normal corporate policy of any manufacturer. That is, you do not reveal, for competitive reasons, how much of a product you sell and how much money you make off of it. However, we are willing, if the committee has such procedures, to give the members information on sales in the United States if we can do so on an in camera basis so that the information is not revealed more generally.
By the same token, I hope you will ask the auto companies to come forward with their data, especially warranty data, which they have refused to make public.
The Chairman: I do not think we can give you those assurances. The moment something is filed, with the Access to Information Act and so on, it would be available to the public.
I would like to go back to something very important in your explanation. I hope members of the committee will listen to this from an understanding point of view. You have said -- and correct me if I am wrong -- that these issues relating to spark plugs and sensors and the like have been around for a long time, that we have lived with MMT in Canada for 20 years, and that the results have always been a continuum.
Something has changed. MMT is not gumming up the works as we have been led to believe. Rather, it is sending out false signals now with the on-board diagnostic equipment from these areas. That is the problem. It is not the fact that things have changed particularly with respect to these pictures we are seeing of everything getting dirty.
Is that what you are saying, or am I misstating this?
Mr. Roos: I can only address the information that I understand, the data we have taken and the data which has been presented to us by auto companies. In the case of spark plugs, there were claims of spark plug problems in Canada. The claim was supported by warranty data that showed a much higher level of warranty claims. It was "sanitized" data, so I am not sure what the real numbers were. The claim was that there was some multiple of the warranty claims in Canada versus the United States. It was broken down, in this example, by provincial regions.
We took that information and compared it to the amount of MMT used in that region. From Transport Canada or someone, there is a survey that shows, generally, how much is being used in those gasolines. Here are the examples: The average use of MMT in British Columbia was two times higher than in the Atlantic provinces, but warranty complaints in British Columbia were four times higher than in the Atlantic provinces. The average use of MMT in Ontario and Quebec was about the same as in the Atlantic provinces, but warranty complaints in the Atlantic provinces were almost ten times higher than in Ontario and Quebec. That is the information given to us. We find no correlation between the amount of MMT and these warranty claims.
On another issue, and I do not have the data because it is not released to us, General Motors itself admits that they have higher warranty claims in Canada on all components compared to the United States. That is why we say that there must be data which can be reviewed and analyzed for an MMT factor, if it is there.
With respect to the on-board diagnostic systems, you very correctly point out that the problem may be more subtle than just having a bunch of junk on the sensors. It may cause a slight change in the way that the sensor responds.
This was essentially the argument which was put forth by Ford in front of the EPA with a "one-car test" and a theoretical argument based on laboratory data. Ethyl has done quite a bit of work in that area. We have had outside experts look in that area. Ford's data and Ethyl's data together do not support the conclusion that this is occurring. You say, yes, you understand that, but this is why we want a third party to look at the data.
Every time someone has looked at the data, the same conclusion has been drawn but the data needs to be understood in that manner. That is both auto company data and Ethyl data.
Senator Kenny: Mr. Chairman, I did not understand the point that was being made. It may just be fatigue.
The Chairman: I do not think the answer was really responsive but I did not want to take more time.
Mr. Hicks gave an excellent explanation from a layman's point of view, in trying to understand the operation within a motor vehicle. I appreciated that but it left me with this point. He made comments that the spark plugs and the sensors and the light have been there in the same basic way for many years. Now we are bringing on new sophisticated equipment which is there to detect emissions. It is not hardware. It is not detecting very well. As a result, the warning systems are being fouled up for some reason. The pictures that we are seeing, with the red and brown manganese oxide, is really something which has been there forever. That is what I took from what you said.
Mr. Hicks: When gasoline with MMT is combusted, the exhaust has this reddish brown tint to it. That has been the case for as long as MMT has been used.
When burned MMT comes into contact with something, it leaves a little residue. Gasoline without MMT will leave that carbon black. Gasoline with detergent additives may leave different things, but that is the distinctive imprint of gasoline containing MMT.
That was true before OBDs and exhaust gas sensors. Once exhaust gas sensors started to be used with fuel injectors, the fuel injectors got this tint to them.
Your point is, "Wait a minute. If this red tint is an indication of manganese deposits and the auto manufacturers are saying that manganese deposits keep the hardware from working, then why all of a sudden is it not working? Why did it not work 10 years ago when the EGO sensor was being used just for fuel injectors? Why does it stop working, theoretically, get gummed up, now that it is being used for OBD detection?" It does not make sense to me.
Senator Spivak: I am sure it is true that the manganese has been depositing there for 15 years and now the auto companies are upset because it is not functioning. However, the point is that the auto companies are saying they are now asked to come to a higher standard. The emissions cannot be what they were 15 years ago. Not only is the diagnostic system not responding well to the manganese, but the manganese is causing the car not to work in the same fashion, so we are getting worse emissions. That is what they are saying, and that is the point you have to answer.
Mr. Hicks: It is extremely important, Senator Spivak, to understand that whether a car has an OBD system on or not, or whether the light is connected or not, has no impact on the emissions coming out of the tailpipe.
Senator Spivak: I understand that.
Mr. Hicks: Even if you are making the standards more stringent, you deal with that by the use of catalysts or other things such as fuels or a different engine design or other engineering ways to meet whatever the government standard is, but the malfunctioning OBD does not affect the emissions.
Senator Spivak: I should like to repeat this, because it is an important point. I quite understand that. That is just a computer indicating to you what is happening in the car. It has nothing to do with the real emissions. It is indicating to the person who owns the car that this is malfunctioning. That is not my point.
For 15 years, manganese and other things have helped make the level of car emissions tolerable, but now we are saying we cannot have those emissions, and it may very well be in the future that we cannot have sulphur or perhaps other things. That is what the oil companies fear. They used the word "terrified".
To me, as a consumer, the system is less important than what comes out of the tailpipe. MMT, according to the auto companies, is now causing them to be unable to meet the emissions standards.
Mr. Roos: We carried out testing, and this was the purpose of the side-by-side testing into which the automakers and EPA had input. We tested both Tier 1 vehicles, which are the same as the 1998 Canadian standards, and we tested low-emission vehicles, which have even lower thresholds for emissions, lower than the 1998 standards. MMT did not cause problems for these emissions.
Senator Spivak: You are directly contradicting that testimony.
The Chairman: This is an important area, and the issue should be fully explored. I will be quite lenient with supplementary questions.
Senator Whelan: I have a point of order. I heard one of the witnesses say that they did not know Minister Copps said something in 1994. In the Red Book from September 24, 1993, it was clearly indicated that the Liberals were committed to banning the use of MMT in Canadian automotive fuels.
Senator Buchanan: With respect to what Senator Spivak was saying about the emissions, if what you are saying is correct and if what the auto companies are saying is correct -- and I understand these gentlemen are saying they were speaking about the computers, not the emissions -- the EPA in the United States, in direct contradiction to what you said, came to the conclusion that MMT does not cause or contribute to the failure of vehicles to meet applicable emission standards required by the U.S. Clean Air Act.
Mr. Hicks: That is correct.
Senator Spivak: That is 1993.
Senator Buchanan: It is does not matter.
Mr. Hicks: The EPA reiterated its finding most recently in July of 1995. Any time the auto companies or anyone else gives them information that the data somehow has aged , and can validate the concerns before the EPA, the agency can remove us from the market.
The whole exercise of obtaining the waiver approval in the United States is about causing or contributing to the failure of the emission control system. That failure is measured by whether the vehicle can meet the standards to which it is certified. The federal government sets the permissible standards for a new vehicle for hydrocarbon, carbon monoxide, and NOx emissions, standard grams per mile. The car must be certified that it can meet that. If you want your fuel additive approved, you run side-by-side tests to determine whether the car still meets those emissions standards.
Our information shows that MMT-containing fuel actually comes in farther below the standards than clear fuel. As the standards become more stringent, it is harder for the automakers to meet them; however, as long as the emissions are still under the standards, you do not have a problem. As Mr. Roos said, the Tier 1 component of our fleet was composed of vehicles designed to meet the standards that are coming into effect in Canada in 1998. Even though our fleet is a few years old, the component of the fleet is very relevant to what is happening in Canada next year.
Mr. Roos: It should be noted that since 1988, when catalysts were put on cars to control these three emissions, the actual hardware approach to emission control has essentially been unchanged. What has changed is the computer programs. They have tighter control. Perhaps they will put a bigger catalyst on, but the general set-up of fuel injectors, computer-controlled vehicles, oxygen sensors and catalysts has been unchanged and is still basically the same in the low-emission vehicles and what they are calling ultra-low-emission vehicles, which are in the future for California. That is generally the same type of hardware as we have now.
Senator Kenny: I am trying to follow the discussion. Tell me if I am getting the right drift. I am hearing you say, I believe, that, with MMT, you are producing lower emissions, and the issue of whether the on-board sensor is functioning is not relevant.
Mr. Roos: We have shown, and it has been accepted, that MMT lowers the emissions of NOx. It has been demonstrated and accepted that the use of MMT does not influence the operation of the on-board diagnostic systems.
Senator Kenny: The fundamental difference in the testimony we are hearing from the auto companies is that they are saying that it does affect the operations of the equipment. Therefore, since the equipment is not working, you cannot tell whether it is polluting more or not, so, over time, you may have a vehicle that causes more pollution. You are saying, no, it does not; the system will work fine; the on-board diagnostic equipment may or may not work, but MMT is not a factor in whether or not it works.
Mr. Roos: One of the claims the automakers articulated yesterday was a question of whether the dashboard warning light would turn on and cause consumer problems. Is that correct?
Senator Kenny: That was one concern. I think they said that there was potential for a greater number of service calls because of the light going on. However, they also said that if the light was off and not functioning properly, then the car could cause more pollution over time and you would not know because the sensor was not working right.
Mr. Roos: I will address those issues in order. In terms of the light going on and falsely indicating a failure, our testing has shown that MMT does not affect the proper operation of these diagnostic systems. As GM stated, when they turn off the dashboard light in the vehicle, what they are doing is actually preventing that warning from coming to the driver and the driver then taking some action, presumably taking the car in and having it examined. A survey I saw indicated that most Canadians are very good about this; they take in their vehicles for tune-ups or maintenance a little more than twice a year. If the on-board diagnostic system is found at fault and has not turned on the dashboard light, then those numerical codes, which describe exactly where the problem is, are still stored in the computer. Essentially, they have to stay there until they are cleared.
When they go in for a tune-up, the service person downloads the information from the car computer. That information is still there. The information tells whether or not there is an emission problem. It can then be fixed. It is not as if this is a total loss. They are going in and getting them fixed, and that would continue even with the dashboard light off.
The U.S. EPA has come to the conclusion that on-board diagnostics will not make an impact on emissions today, tomorrow or next year. The first impact on pollutants will be seen in the year 2005 as these cars build up in the fleet and start to age.
The removal of MMT would have the immediate effect of increasing things like toxins because of fuel blending. As well, there would be an increase of NOx.
Mr. Hicks: The automobile companies are justifiably concerned because, if the light comes on prematurely, for whatever reason, and a customer has to take his or her car in, they may find out that nothing is wrong or they may have to pay for something to be fixed.
They are having these problems in the United States. They are asking the two regulatory agencies, EPA and CARB, for relief. As I mentioned earlier, the reasons stated for OBD malfunction in the United States -- and this was before MMT was approved for use in the U.S. -- are high sulphur, cold weather, high altitude, vehicle variability and production problems, but not MMT.
We cannot tell why their system is not working. They are having more than teething problems with it in the United States.
I wish to reiterate what Mr. Roos said about what happened when the U.S. EPA first developed regulations mandating the development of OBD-II. This goes to the point of a light not coming on when it should and the owner is driving around with a car spewing out emissions. That could happen. However, the goal of the program was to alert the driver to take the car in and get it fixed so that it would not happen. When the U.S. EPA first developed regulations mandating the development of OBD-II, EPA concluded that emission reductions are not attributable to OBD until the year 2005 because "OBD-equipped vehicles will not constitute a significant portion of the vehicle fleet for several years." In other words, it will take a while for there to be enough cars out there with these OBD systems to make any impact on emissions. Mr. Roos' point was that if you remove MMT from gasoline, we can guarantee there will be a negative environmental impact on day one because of NOx increase.
Even if you take everything the automakers say at face value, it will be several years, according to EPA, before there will be any impact due to the OBD systems.
Senator Taylor: What has been approved recently in the U.S. in terms of MMT is, I gather, in the vicinity of 8 milligrams per litre, while in Canada the figure is 18 milligrams per litre; is that right?
Mr. Wilson: That is correct.
Senator Taylor: I would like to present you with an analogy. A little bit of strychnine goes a long way; it helps the heart go faster. However, if you get too much, it stops it altogether. Does the same apply to MMT? The U.S. environmental authority thinks 8 milligrams is okay, but we are using 18 milligrams. Could that not be part of your problem? In other words, would your argument not be better if you used the same standard as is used in the U.S.?
Mr. Wilson: Those are the maximum allowable limits.
Senator Taylor: You do not sell any minimum amounts, do you?
Mr. Wilson: The amount that is used is up to the refiner, of course. The average use in gasoline across Canada is approximately 8 milligrams per litre.
Senator Taylor: Is MMT patented? It has been around a long time. Are you the only ones who can manufacture it?
Mr. Wilson: No. The patents have expired and anyone can manufacture it. The manufacturing process is difficult, but it can be manufactured by other companies.
Senator Taylor: Like Coca Cola, I suppose.
Mr. Wilson: Other fuel additive manufacturers could manufacture it.
Mr. Roos: The manufacturing and material patents have expired. However, there are patents covering different uses of the additive that are still valid.
Senator Taylor: Just for your information, the Saskatchewan dealer we had here today was not disagreeing with your evidence about the spark plugs and so on. He was simply arguing as a Chrysler dealer that he had to change his units twice as often as his counterparts in the U.S. where the cars are not using MMT. In other words, the maintenance was twice as costly.
I get the impression we are trying make this all black and white, if you will pardon the expression, or brown and white, if you have seen manganese, and it is not quite that simple. He was just arguing he could make things work but had to change things more often.
There is also the old question of having more of an American system. Why can you not suspend MMT production now, proceed with independent tests over the next two or three years, and trust us as a broad-minded, environmentally-oriented, honest bunch of people north of the border? If you come with a third party, perhaps supervised by the University of Waterloo, and prove there is no damage, then we may be able to approve its use again. Why do we have to trust you rather than you trust us?
Mr. Wilson: With regard to the withdrawal from the market, we have conducted many studies over the last 10 years which have convinced the EPA that MMT does not cause or contribute to any problems with the emission systems.
On the other point, we have offered, along with the petroleum industry, to participate in these kind of studies. That offer was made five years ago, so there was lots of time.
Senator Taylor: It took you seven years to convince the EPA. All we are asking is that you take two years to convince us. You had to withdraw it for seven years in the U.S. before you received permission to sell it, so why not withdraw it for two years up here to obtain permission?
Mr. Hicks: I do not think it will take two years to do it.
Senator Taylor: Before this committee, it would.
Mr. Hicks: CPPI and Ethyl have been recommending independent study for five years.
Senator Taylor: Go ahead and do it.
Mr. Hicks: It could have been completed. The problem is, what will the oil companies do in the interim? We have a business to run, they have a business to run. We cannot just stop selling this product for two years if we have no reason to believe there is a problem.
My point is the study will not take two years, and even if it did, it could have been completed about three times since this debate started. I do not understand the reluctance of the auto companies to enter into a study. They have been saying since late 1994 that MMT must be removed from the market immediately, in order for the 1996 model year to be introduced in the fall of 1995. That was what motivated Minister Copps to say MMT has to be off the market by August of 1995 so these OBD vehicles, these 1996 model cars, can be introduced into the marketplace. They were introduced and nothing happened; they worked just fine.
Our answer would be to turn your question around: Why do the auto companies not take three, four or six months and enter into some independent study so we can all know the truth?
Senator Taylor: You have been lucky. The minister gave you until 1995, and you have already had two more years than that.
Senator Buchanan: I do not know if you are aware that one of the major responsibilities of the Senate is, to the best of our ability, to protect the regions of Canada, particularly the smaller regions of Canada. Since I came to this place, I have believed that my duty was to do what I can to protect the region of Canada where I come from and where I served in the legislature for 24 years, and that is the Atlantic area. Atlantic Canadians are here in the Senate to do what we can to protect our region of the country.
I find it intriguing that the premiers and environment ministers of eight provinces have come to an agreement to oppose this bill at the present time, and for very specific reasons. That is a rare thing to find in Canada. I cannot recall it happening any more than two or three times over the last 13 years.
Four of the eight premiers who are opposed to this bill represent the Atlantic provinces. We are a small area of Canada. They oppose this because, they say, it violates interprovincial travel agreements; because of cost implications for our refineries in Newfoundland, Nova Scotia and New Brunswick and therefore possible job losses which the area cannot afford; and because they do not have enough scientific information to determine whether what the auto companies are saying is correct or what you are saying is correct. They say they do not have sufficient evidence at the present time to support passage of this bill.
The Chairman: Your question is?
Senator Buchanan: I am asking their opinion of that. All eight governments also say that NOx emissions in our provinces would be increased if MMT is removed. What do you say about that?
Mr. Wilson: We would agree, naturally. The provinces that you mentioned have all expressed concern to the federal Minister of Environment over this bill and the lack of scientific evidence to justify its passage. The four provinces that you mentioned are rightly concerned that this legislation be studied. They have accepted the CPPI proposal of an independent third body to look at the technical facts and, if further testing is required, to move on with it.
The Chairman: Is it possible to do the study in three months, as CPPI has suggested? Do you think a valid, independent third-party study could be conducted to determine whether MMT has an impact on these systems? Is that possible?
Mr. Roos: I do not know what kind of study CPPI proposed. I should like to hear what level of rigour Environment Canada would require before making a decision.
Obviously, a very rigorous standard takes more data because you need more confidence in your study. That would be the key piece of information. We would need to know the ground rule, the guideline or standard. It is possible to do a good study in a time frame of three or four months. I do not know whether it would answer the questions of Environment Canada without first asking them what their questions would be.
Senator Rompkey: The independent study is a bit like nailing jelly to a wall. Who chooses the panel? What are the parameters? Do you agree with the basis of information? Who has to agree? Who pays for it? Who judges the contents? There are all sorts of questions. We talk about an independent study but no one has defined in detail what the study will be, who will be on the panel, what conclusions are acceptable. We have had the two groups, oil and auto, before us. Mr. Hicks has said himself this is a war.
Senator Buchanan: I have great confidence in our provincial governments. They are sovereign governments within our Constitution, and they have set out the kinds of independent study that --
Senator Rompkey: Where will you get the independent information?
The Chairman: These are good discussions to have amongst ourselves but I do not think they are adding to our study.
Senator Buchanan: I understand the MMT waiver has only been in for one year now.
Mr. Wilson: Approximately.
Senator Buchanan: One year is not much time for 85 per cent of the refineries to catch up, but I understand that many refineries have registered to use MMT, so they could if they wished. They have registered, and you are already using it. If MMT is banned in Canada, and allowed as it now is in the U.S., would that not put our refineries, particularly those in Atlantic Canada such as Come By Chance and Irving, at a disadvantage, as is stated by the Ministers of the Environment of both provinces involved?
Mr. Wilson: Yes. I think the Canadians Petroleum Products Institute did testify before this committee that removing MMT would lower their competitiveness against other refineries.
Senator Taylor: They are selling MMT-free fuel now into the U.S.
Mr. Wilson: Absolutely.
Senator Taylor: All you have to do is run up there and give them a few milligrams to make them competitive.
Senator Buchanan: I was referring, senator, to the letters from the Ministers of the Environment of Nova Scotia and New Brunswick. They make it very clear they will be at a competitive disadvantage if they are not permitted to use MMT and the Americans are.
Senator Taylor: They know just as much about it as we did before these hearings started.
Senator Buchanan: I disagree with that. I think the Minister of the Environment of Nova Scotia is a very intelligent man.
The Chairman: I think the question is before the panel to answer.
Mr. Wilson: I will try to answer to the best of my ability, senators. The petroleum companies are the ones who must consider the economics of the use of our product, and they have told you, I believe, that removing MMT would lower the competitiveness of their refineries vis-à-vis American or European refineries that have access to MMT. That is the answer that would support the concerns of the provincial governments in this particular case.
Senator Buchanan: Let us get back for a minute then to the Imperial Oil refinery, which is the one I have a lot of concern with. We watched two refineries close in Nova Scotia.
Senator Taylor: They both had MMT, too.
Senator Buchanan: This is all historic. I would like you to go to Dartmouth and tell the people there, the hundreds of workers at Imperial Oil, that this does not really matter, that if the refinery closes, it is for some other reason. If it closes, this will be partially the reason.
Senator Kenny: They said it would not close.
Senator Buchanan: They did not say that. They said the cost implications at Imperial Oil were very precarious and, therefore, the cost reductions they have had over the last number of years -- and I know all about that --
The Chairman: I am sorry, but you have to stick to the point.
Senator Buchanan: I am told that to adapt another additive, such as MTBE, at the Imperial Oil refinery, will reduce the volumes produced at that refinery by some 10 to 15 per cent and therefore increase the cost to the refinery itself. Is that a fair statement?
Mr. Wilson: I think they were saying that our additive added something like a fraction of a drop per litre.
Senator Buchanan: That is right.
Mr. Wilson: The blending agents, ethanol or MTBE, are added at volumes of anywhere between 5 and 10 per cent. That displaces gasoline that would be manufactured at that refinery and, therefore, lowers the efficiency of the refining equipment.
Senator Buchanan: And increases the cost of operation plus the capital cost of the refit.
Mr. Wilson: That is correct.
Senator Taylor: And decreases the taxes collected by the provincial government, too.
Senator Landry: My question is a bit different. Do you suppose it would be better from the standpoint of emissions if this were in diesel or heating fuel?
Mr. Roos: Actually it is used in diesel fuel. There is an additive package to be added to diesel fuel that contains this additive, among others, and it is actually considered a premium diesel fuel package. It provides benefits, as a whole package, to things like lubricity, but it also has emission benefits because it helps lower particulate emissions from diesel exhaust.
Senator Landry: Is it used in heating fuel also?
Mr. Roos: Yes, for the same reason. In this case, it helps lower the maintenance cost of burners and boilers, and results in cleaner-burning burners.
Mr. Hicks: It is used in both diesel fuel and home heating oil in Europe, primarily
The Chairman: Do you make any other fuel additives or is MMT the sole additive that you produce?
Mr. Wilson: We manufacture a full line of fuel additives for diesel fuel and lubricant additives in Canada at our Corunna plant, as I mentioned to one of the senators. We do manufacture cetane improver product at that plant, and we blend MMT and other products at that refinery.
The Chairman: Are there any other additives that you could produce that would have the same effect as MMT?
Mr. Wilson: As an octane enhancer?
The Chairman: Yes.
Mr. Roos: Really, there are not. Historically -- and this goes back to many years of study -- MMT is the most powerful anti-knock additive that has ever been available for gasoline. It is unique. It is of benefit to the refiners that this very small amount allows them to obtain levels that they cannot usually use.
Senator Taylor: May I ask a supplementary to that? In the difference between standard and premium gasoline, is the octane enhancement that you achieve entirely as a result of MMT, or is it partly due to a different product?
Mr. Wilson: It depends on how the gasoline is blended at the refinery. In some cases, they will put premium components into the premium gasoline, and that reduces, in a small way, the amount of MMT going into that premium gasoline, but, on average, you will find that the MMT concentration is generally slightly higher in premium gasoline than it is in regular.
Senator Taylor: It is in both?
Mr. Wilson: It is in three grades.
The Chairman: Do you produce MTBE?
Mr. Wilson: No, we do not. That is an oxygenate similar to ethanol. That is not a product we produce.
The Chairman: But it is not exactly the safest product in the world in concentrated amounts either.
Senator Taylor: We make that in Alberta.
The Chairman: I appreciate that, but I also see there is a lawsuit about this in California right now.
Mr. Hicks: In certain areas in the United States there is a requirement to market oxygenated fuels at certain times of the year. They can get the oxygenate in different ways. Ethanol is one way; MTBE is another. Most have gone with MTBE. This has nothing to do with MMT at all. Most of them have gone with MTBE. It is obviously going through the same waiver process and is going through the health testing process that the EPA requires of everyone. However, there have been some complaints in Alaska, Wisconsin and California about gasoline containing MTBE. People have said it smells or that it makes them light-headed or nauseous. That is merely anecdotal.
Mr. Roos: One of the issues regarding the use of MTBE and these other blending agents for raising octane levels is that they take up large volumes. You have to use large volumes of them in the gasoline, 5 per cent or 10 per cent, whereas MMT is a drop-in-a-gallon type of additive.
The Chairman: Mr. Wilson, with respect to your seven points of position, a number of them are legal points. You may not be at liberty to provide us with this information, but have you received legal opinions with respect to your points three and four relative to the constitutional issues which have been raised? You say the bill is an unwarranted intrusion on provincial jurisdiction. That is a constitutional issue that interests me. Similarly, with respect to your point four, you suggest the bill would violate Canada's trade commitments. Do you have opinions you would be free to show us to support those legal contentions?
Mr. Wilson: With regard to item three, senator, I believe attached to the CPPI brief is an opinion by Professor Frémont of the University of Montreal on the constitutional issues.
Mr. Hicks: The notice of intent we filed with the Government of Canada outlines in some detail the legal basis for our claim. If it is not before the committee, we will provide it.
Mr. Wilson: Would you like a copy?
The Chairman: Yes, we would.
Thank you for an exhaustive afternoon. We have appreciated your being here. You have provided us with some very important information.
The next panel is from the Consumers' Cooperative Refineries Limited.
I am pleased to turn the floor to you for your comments.
Mr. Ed Klassen, President, Consumers' Cooperative Refineries Limited: Thank you, Mr. Chairman. Consumers' Cooperative Refineries Limited, CCRL, is pleased to have the opportunity to make this submission to the Standing Senate Committee on Energy, the Environment and Natural Resources.
CCRL is a wholly-owned subsidiary of Federated Cooperatives Limited, the central marketing, manufacturing and administrative organization for more than 300 retail cooperatives in Western Canada.
FCL and its member retail cooperatives are known as the Co-operative Retailing System, CRS. On its incorporation on April 1, 1934, CCRL became the first world's first cooperative refinery. It began operations on May 27, 1935, as a 500-barrel-per-day skimming plant. Since then, it has grown steadily to become today's technologically advanced 50,000-barrel-per-day refinery, integrated with the heavy-oil upgrading operations of NewGrade Energy Incorporated.
The CCRL and Saskatchewan Co-operative Wholesale Society merged in 1944 to form the Saskatchewan Federated Co-operatives Limited. Subsequent mergers with provincial cooperative wholesalers in Manitoba, Alberta and British Columbia resulted in FCL as it is structured today. The petroleum products manufactured by CCRL are marketed by FCL to its member retail cooperatives and other customers. Retail cooperatives, in turn, sell the products to their estimated 750,000 individual member owners.
In 1996, FCL exceeded 2 billion litres in annual petroleum volume for the first time. The Co-operative Retailing System is a significant participant in Western Canadian petroleum retailing, especially in the farm fuel markets in Saskatchewan and Manitoba.
FCL is controlled through a broadly based, democratic structure. The estimated 750,000 co-op members in the system elect the boards of directors of their local retail cooperatives. Each member retail cooperative is eligible to appoint delegates to elect the 19-member board of FCL. Retail cooperatives also exercise their influence over FCL through resolutions and more informal dialogue at both the elected-official and operational levels.
On behalf of our 750,000 members, we are very concerned about the impact of Bill C-29, which would effectively ban the use of MMT in gasoline in Canada. For us, petroleum pricing is already a very sensitive issue. We do not believe that the petroleum refining industry, and ultimately our members and other customers, should bear the cost of eliminating MMT unless it is shown conclusively that there is a legitimate need.
To present our submission, I call on Bud Dahlstrom, our Senior Vice-President.
Mr. Bud Dahlstrom, Senior Vice-President, Consumers' Cooperative Refineries Limited: I also wish to thank this committee for the opportunity to present our views and concerns with respect to Bill C-29.
Mr. Klassen has indicated one of my positions. I am also the manager of Consumers' Cooperative Refineries Limited.
Consumers' Cooperative Refineries Limited is a 50,000-barrel-per-day conventional light-oil refinery -- and that corresponds to about 8,000 cubic metres per day -- producing a full range of petroleum products. The refinery is fully integrated with the heavy-oil upgrading operation of NewGrade Energy Inc. The refinery upgrader complex routinely processes approximately 57,000 barrels per day of heavy Saskatchewan crude oil.
The Co-op Refinery, as it has been called for many years, is not a member of CPPI, the Canadian Petroleum Products Institute. While our views will generally coincide with those of the major part of the refining industry represented by CCPI, we feel it is important to provide the unique perspective of a cooperatively owned, independent refinery. Consequently, I speak on behalf of CCRL only, and the members we serve.
I will not present a great deal of detail. I recognize that much detailed and supportive background information has already been presented. My remarks will be somewhat more general.
The CCRL has a great deal of concern with respect to the process involved in the introduction and ultimate passage of Bill C-29 in the House of Commons, but, more importantly, with respect to the very significant impact it will have on the refining industry and our customers, now and particularly in the future.
With regard to the process involved with Bill C-29, it appears to be neither health-related, as determined by Health Canada, or a direct environmental issue -- that is, it does not contribute to the degradation of the environment. This probably explains the unique character of this bill, under which MMT is not really banned. It is just that we cannot effectively procure it or use it in the normal manner by which we, like many other industries, market our products in more than one province -- that is, we cross provincial boundaries.
The process has also ignored the input of several of the normal participants in environmental regulation, such as the Canadian Council of Ministers of the Environment, and a very significant stakeholder, the petroleum refining industry itself.
We believe it has been amply demonstrated that the utilization of MMT in gasoline does not pose a direct health risk nor is there any evidence to suggest that its use results in a direct environmental risk. Certainly this has been well covered by other presentations.
We are very well aware that another segment of the transportation industry, namely the automobile manufacturers, has concerns about the utilization of MMT and the potential detrimental effect that some manufacturers believe it may have on diagnostic equipment on some new automobiles. It is our understanding that the primary purpose of Bill C-29 is to remove MMT from gasoline to overcome this technical concern registered by the automobile manufacturers, which they believe is caused by the utilization of this additive in Canadian gasolines.
When this legislation was being studied by the Commons Standing Committee on Environment and Sustainable Development in October of 1995, the conventional wisdom of the government seemed to be that the U.S. regulations did not and would not allow the use of MMT in non-leaded gasolines. It has always been allowed in leaded gasoline in the U.S. It was considered that Canada was out of step and that regulation respecting gasoline quality should be harmonized. That still appears to be the general direction of other environmental regulations in Canada with respect to fuels.
However, in the U.S., after many lengthy court hearings and challenges, it was ultimately determined that the concern expressed by the automobile manufacturers was without merit, and MMT is now allowed in gasoline in the U.S. In fact, we currently export a modest amount of gasoline to the U.S. on an ongoing basis, and for the past year it has contained MMT.
If I may, I wish to repeat the comments I made to the Commons committee a little over a year ago:
If Canada is going to follow the lead of the United States with respect to gasoline quality, and we certainly seem to be headed in that direction, then CCRL believes we should benefit from all the work done in both countries and consider the best, most reliable information in making decisions to meet Canadian needs.
CCRL does not believe that the urgency displayed with respect to Bill C-29, without considering what may result in the U.S. following vastly greater studies, should be allowed to result in a situation where Canada may ban the use of MMT and the U.S. may authorize its use.
It now appears that the arguments related to harmonization of the gasoline regulations have been totally reversed. Since generally the same automobiles are produced and driven in both Canada and the U.S., it seems reasonable to give due consideration to the outcome of the investigations and deliberations in the U.S. with respect to the effect that MMT has on automobile diagnostic systems. The conclusion was that MMT does not cause or contribute to the emissions system impairment.
When all aspects of the background leading up to the passage of Bill C-29 are considered, there appears to be no health or direct environmental basis for this legislation. Its sole purpose is to reduce concerns that the automobile manufacturers have with respect to impairment of diagnostic equipment on new automobiles. It has been repeatedly stated by the refining industry, by Ethyl Corporation, the supplier of MMT, and most conclusively by the U.S. Court of Appeals and the U.S. Environmental Protection Agency, that there is currently no scientific or proven basis for their allegations.
Again, as we stated in our previous brief, we believe that Bill C-29 should not be allowed to proceed unless or until further fleet testing might prove that MMT really does cause a legitimate problem. Certainly, recent test results, as presented by other parties appearing before this committee, confirm our position that gasoline containing MMT has not had a negative impact on automobile environmental equipment.
We reiterate our position that if MMT were proven to be harmful to health or directly to the environment, we are prepared to agree that it should no longer be utilized in gasoline blending.
There have been comments made about the amount of MMT added to gasoline. A year ago we reduced our additions of MMT to approximately a little over half, which is the level allowed in the U.S. This was really in anticipation of what might come out of the proposed MMT legislation at that time.
I would now like to be more specific with respect to the impact this legislation would have on CCRL and the members we serve. A ban on MMT in gasoline would result in a direct increase in operating costs in our refinery ranging from $500,000 to $1 million per year. This cost is the result of increased utilization of fuel and crude oil, and decreased efficiency.
The benzene content and total aromatic content of our gasolines would directionally increase, and CO2 and NOx emissions from the refinery would also directionally increase. Of course, the benefit of reduced NOx emissions from our members' automobiles as a direct result of MMT in their gasolines would be lost.
Benzene is a recognized toxin that is soon to be regulated. There has been full consultation between the refining industry and the federal Department of Environment on this very important issue. CCRL's capital expenditure to meet the benzene requirements is something in excess of $5 million, probably closer to $6 million, and again it will cost about $500,000 a year in operating costs. This is to meet the benzene regulation. It would have to be implemented approximately a year sooner if MMT were eliminated.
However, CCRL's ongoing concern if MMT were banned is the directional increase in aromatics and indirectly of other emissions. We recognize that environmental concerns make it prudent to consider the pollution effects of aromatics and sulphur compounds and other emissions coming from an automobile tail pipe. It appears to us that it is very counterproductive to eliminate an additive that has a positive effect on known emissions, both at the manufacturing level and at the consumer level, when that additive has no proven, harmful effect in its own right.
CCRL may be faced with very high capital costs and attendant operating costs depending of the severity of future gasoline quality regulations. These capital costs are currently estimated to be as high as $70 million to $80 million. We sincerely hope all regulations will be tailored to meet Canadian needs. The elimination of MMT at this time will certainly aggravate those concerns. Directionally, the elimination of MMT, of course, will increase the aromatics, which certainly will be one of the major concerns with respect to gasoline quality in the future.
I should like to make one additional point. There has been considerable discussion and speculation regarding the effect that a ban on the use of MMT, as an octane enhancer, would have on the use of ethanol, which can also be used to boost gasoline octane ratings. Because of CCRL's background, our ownership and our close association with the agricultural community, we are very familiar with all the possible benefits and concerns related to the use of ethanol in gasolines. We can state categorically that there is no relationship between MMT and ethanol.
A ban on MMT will not enhance the use of ethanol in our refinery nor in most of the refineries with which I am familiar across Canada. That is a separate issue.
I might comment that ethanol is an oxygenate used primarily in the U.S. to reduce CO emissions. CO is not a Canadian problem, and ethanol and MTBE would be used in Canadian refineries to resolve other problems; however, the economics related to them are not nearly as good as those for MMT.
For the reasons stated above, Consumers' Cooperative Refineries Limited, on behalf of Federated Cooperative and its members, respectfully request that this committee give serious consideration to the merit of and justification for Bill C-29. Further, we would request that the recommendation of this committee to the Senate be to use sound judgment with respect to environmental policy and to defer the approval of Bill C-29. There are many potential impediments to its eventual implementation if it eventually becomes law, including internal and international trade issues, and we still have a lack of proven scientific need for the legislation.
In our previous submission, and in the various presentations that we have made, as in this case, we have had the full support of the Government of Saskatchewan and particularly the provincial ministries of environment and energy and mines.
Senator Kenny: Thank you for a succinct and clear brief. It has been helpful to the committee.
My first question deals with cost. You have described the anticipated increased costs to your company in the event the legislation is passed.
We were told by other witnesses that the costs work out to roughly one-tenth of a cent per litre, or $7 per customer over the course of a year. I do not know if this applies to your refinery, but presumably all refineries would be required to assume some additional costs if they were to eliminate MMT. The $7 per year to the consumer has been contrasted against hundreds of dollars of cost in terms of recalls and service problems to the same consumer in the event that MMT continues. I hear your argument that it will be more expensive for your refinery; however, the refineries will simply pass that $7 cost on to the consumer. We were also told that, if this did not happen, the cost to the consumer will be in the hundreds of dollars because it is expensive to take a vehicle to mechanics and garages in order to make repairs.
What do you say to that?
Mr. Dahlstrom: Passing costs on directly sometimes works and sometimes does not, as we all know. Hopefully it works on the long term. Obviously I am speaking as a refiner. Whatever that cost is, in the long term, I agree that it will be passed on.
I question whether the statement with regard to hundreds of dollars is valid. The last three hours have been spent discussing whether it is a valid statement or not.
In my own experience and in doing a great deal of driving, I have yet to experience any of the problems that have been discussed. I do not know of anyone who has had the problems being discussed. That does not mean they do not happen. All kinds of things happen, whether because of cold weather or something else. Certainly we have had our share of problems. It is amazing that many things on an automobile work when it is 30 or 40 degrees below zero. My answer is that I just do not know whether those costs are legitimate.
Senator Kenny: In your testimony, you talked about direct risk. The debate around this table is not about direct risk, but indirect risk. The question is whether the diagnostic equipment breaks down and then, as a consequence, causes greater pollution.
We have not yet heard arguments suggesting that MMT should be banned because of the manganese output. Rather, it is because it will foul up the OBD-II. Eventually, that would mean that drivers do not know whether their cars are functioning cleanly.
The direct risk does not seem to be the issue. It is the indirect risk of the breakdown of that equipment because of cumulative use of MMT.
Mr. Dahlstrom: That is a fair statement. The risk is indirect in two ways. It is generally agreed that use of MMT will not affect the pollution control equipment. If the automobile manufacturers are correct, it will affect the diagnostic equipment such that, some time down the road, it could indicate that your pollution control equipment may not be working. Broadly speaking, if their concerns are correct, the risk is indirect and will occur some extended period down the road.
Senator Kenny: You referred to harmonization with the United States. You indicated that, in an effort to harmonize, you dropped your percentage down to match the percentage allowed in the United States.
It is clear that the United States will be a patchwork quilt. We will not see MMT all over the United States no matter what Ethyl wants. We will see some states with regulations which do not match the federal government desires, and we will see other states which do match.
Since we will face that patchwork quilt in the United States, does it not make more sense for Canada to be on the clean part of quilt, rather than on the dirty part?
Mr. Dahlstrom: I am not sure that follows. I do not think it will necessarily be a patchwork quilt based on states. Excluding California, most of the rest of the states follow the federal government regulations. I would be surprised if there were a patchwork based on states. It is more apt to be a patchwork based on the capabilities of the refiners which are providing the fuel for those states.
That will also be true in Canada based on the best economics at the present time. Some refiners in the U.S. have octane literally coming out their ears. They do not need any additional octane enhancement. Others, of course, do not meet that criteria. The same is true in Canada. Some refiners are in much better shape than others, which dictates whether MMT will be used by a particular refiner. The fact that it can be used does not mean that a refiner will use it.
I should not say this when Ethyl Corporation is here, but we do not use MMT continuously. At certain times of the year, we do not use MMT because it is not economic to do so. At other times of the year, it is important that we have that capability because it is the most economical thing to do.
I used the words "directional increase". The increases to which we refer are not terribly large. If MMT disappears, there will not be a major happening in the refinery. However, the directional increases are important. Aromatics -- and benzene is one of the family of aromatics -- are a source of concern with regard to environmental regulations. Anything we do which directionally increases those aromatics, as far as I see, is a concern and a serious problem. It makes it that much more difficult and that much more costly down the road.
There is no question that everyone in the world, as was stated earlier, would like to see gasoline as a pure compound which does not hurt anything. Unfortunately, that is not the case. It is a mixture of many materials, and aromatics will always be suspect. Probably the biggest single thing, as far as I am personally concerned, is the increase in aromatics directionally. It is 1 to 2 per cent between no MMT and maximum use of MMT. That is out of about 30 per cent. That is not the end of the earth as far as any individual refinery is concerned; however, directionally, it is a move that should not be made if there is an alternative. Down the road, we will have to live with that and back up again, and it becomes more costly.
From an economic standpoint, if MMT does not have other legitimate concerns, it is a shame to ban it because I do view the repercussions as being a legitimate concern -- namely, aromatics.
Senator Kenny: Your comment at the beginning of your response, sir, related to California and the rest of the country. You indicated that California was a singularity and that the rest of the country tended to be regulated federally. That is true.
On the other hand, would you not also concede that California tends to set the tone for the rest of the country and tends to be ahead of the feds? In fact, we have a great deal of experience which shows that what happens in California eventually moves across at least to the states which are experiencing higher levels of pollution. They tend to follow California's lead.
Mr. Dahlstrom: They tend to, but there is no place in the rest of the U.S. which has the problems California has. Some of the other states have concerns that tend to approach Canada's. It is quite different. Certainly you can name three places in Canada which have concerns, but they do not approach the magnitude of the problem in California.
My concern always is that legislation and regulations in Canada are for the Canadian situation as opposed to a "me too" attitude or simply following California. The U.S. northeast decided they would do that with reformulated gasoline and then tended to back off because it was not free and because reformulated gasoline has some of its own problems as well.
Senator Kenny: Would you comment on why all 21 car manufacturers and retailers in this country refuse to use a product which you believe significantly improves the emissions of vehicles? Why are all 21 car manufacturers opposed to this?
Mr. Dahlstrom: They do not refuse to use it. No car manufacturer has even suggested that they refuse to use the fuels produced by Canadian refiners containing MMT. They complain about the fact that they feel MMT will create problems for them. We have certainly never been approached, and I suspect will not be approached, by any of the automobile companies saying, "Why not change your gasoline blends?"
Why do they all act in concert? Many companies do many things in concert because the stronger ones can influence the group or the community. I am speculating, and I should not do that, but certainly the three major North American companies feel that they have some concerns. It is my understanding that a number of the other automobile companies do not have a problem, and I have certainly seen articles in the literature which indicate that a number of them do not. Nevertheless, I agree that they are all part of the number you quoted, and I cannot speculate as to why.
Mr. Klassen: To respond to the first part of your question about pricing, it is a sensitive issue. I have farmed in southern Manitoba for over 40 years. We had a situation 10 years ago where farmers were importing fuel from the U.S. because of a slight differential. The provincial government was accommodating them by having dyeing stations at the border. The fuel is all dyed for farm fuels.
We sharpened our pencils. We were then competitive again with North Dakota, although they have powerful co-ops. We feel good about it, but it is important that we have harmonization of standards and pricing because any little imbalance can cause us to lose product to the U.S.
Senator Kenny: I accept that, sir. My comparison was that if the figures which came from the Killborn report bear out and it costs consumers $7 a year, that is what will be passed on to them. You cannot have a mechanic look at your car for less than $30 or $50. It depends where you are, but it certainly costs more than $7 when you go to the garage. It seems that the consumer will be better off financially absorbing the extra $7 without MMT than having to go in for one service call, not to mention a variety of them. That is why I mentioned the question of price.
Senator Cochrane: I thank you both for attending. I must tell you we have received a great deal of representation from western Canada. I believe this is our first from Saskatchewan, although I stand to be corrected in that regard.
The words "consumers' cooperative" create a positive image for me because I am a great supporter of cooperative things, especially as they relate to consumers.
How many refineries do you represent?
Mr. Dahlstrom: One.
Senator Cochrane: Is that in Saskatchewan?
Mr. Dahlstrom: We provide products directly for virtually all of Saskatchewan and most of Manitoba, partially directly out of Regina and partially by pipeline. In the other provinces, it is provided by exchange. We provide products in four western provinces, but directly only in two.
Senator Cochrane: This morning we heard from the dealers, the Canadian Automobile Association, the people who sell cars. They were adamant about the use of MMT and it having a detrimental effect on cars. They said that their business is booming as a result of repairs to spark plugs because MMT is plugging them up. The people you represent, the consumers, are paying. They would be happy if this bill passed.
Mr. Klassen: We used to have a service station in every town, and they have all closed down due to lack of business. In most towns, few stations actually do service work, and that is why their business is booming. As well, the newer cars do not need as much service. I have not had any problems with my 1996 GM. You only use the service stations for oil changes and grease jobs.
Mr. Dahlstrom: I am not sure I have an answer to that except, as Mr. Klassen indicated, that modern automobiles require less service. Our organization used to have five service stations in Regina. We still have a number of gas bars, but only one service station simply because there is far less service required.
Most modern automobiles are taken back to the dealers for a variety of reasons. The biggest single reason is that many things are detected by computer analysis. Even the sophisticated auto-electric places cannot do that work because they do not have access to the information or the computer programs from the major manufacturers. If you try to take your GM car to a Ford dealer for repairs, the response from the Ford dealer would be that it cannot be done, in many instances, if that analysis is required.
I would be surprised if the concerns with respect to spark plugs were valid. I get a new car every few years. I do not change spark plugs anywhere near what I used to do four, five or ten years ago. It is not related. We have had MMT all this period of time, so perhaps that is the comparison with the U.S.
If you are looking at Canada versus the U.S., I would be inclined to think that weather, cold engine starts, and a whole raft of other things have a far greater bearing on it than MMT in gasoline. However, I am prejudiced.
Senator Cochrane: They have compared rates of repairs between Canada and the U.S. Would you not say that it would be in the best interests of consumers to compare North Dakota with Saskatchewan because of weather conditions?
Mr. Dahlstrom: It might be if that comparison could be made. The quality of gasoline is better in Canada than it is in parts of North Dakota or Montana. That is a fact, not because of MMT, but because of other things. If that comparison could be made, certainly it might tell us something.
Senator Cochrane: Would that be better than comparing Canada and the U.S.?
Mr. Dahlstrom: I do not think a country-wide basis tells us much.
Senator Cochrane: Many statistics on repairs from our previous witnesses compared Canada and the U.S. You mentioned North Dakota, and you are from Saskatchewan. These two areas have comparable weather.
Mr. Dahlstrom: Approximately comparable.
Senator Cochrane: You said, as did the witnesses from Ethyl Corporation, that weather is a factor.
Mr. Dahlstrom: That is a fair statement. However, using that type of comparison, I do not know how much of a factor it is.
Senator Adams: You mentioned earlier that car manufacturers build different types of engines with different horsepower. Those engines must function in different ways in terms of burning gasoline. In order to build an engine, you must need to know what kind of gas to burn.
When I go to my gas station, I do not know which gasoline would be better for my engine and which will not pollute the air when I drive on the highway.
Over the course of the last few days, we have heard concerns about money, especially warranty money between car manufacturers and car dealers.
You have 750,000 members. You say you have fewer full-service stations. That may have nothing to do with the gasoline but may be related to the equipment.
I hear you saying that you must blame someone because the pollution controls are not working.
Mr. Dahlstrom: I did not mean to leave the impression that there is no discussion or contact between the two industries. Certainly, there is. I made the comment that we had not been approached directly -- in other words, as a refiner -- to suggest that we should stop using MMT.
The quality of fuel generally has changed significantly over the last number of years. As automobile engines have changed, our blending requirements have changed. I am not sure that it is worthwhile trying to discuss that, although it has been a factor over the years. A straight measurement of octane of gasoline, per se, does not mean the same as it did 10 or 15 years ago. You must start worrying about the octane of the various boiling ranges of gasoline. There are many things that change over the years.
To oversimplify the situation or the dispute, as I see it, from our vantage point out west, where no one comes to visit us, there are two routes to resolving problems. The first is discussion based on scientific proof. I think it is agreed by everyone that if the point is proved, there is no argument left.
The other way of doing it is to take the political route. I believe that the automobile manufacturers chose the political route because, first, they wanted to accomplish their goal quickly. That may be an unfair comment; however, from our vantage point, it seems that that is what was done. Having taken that route, it becomes difficult to resolve the issue with normal discussion between two industries.
It is fair to state that there has not been appropriate discussion between the industries. There have been many proposals made by the petroleum industry, but very little acknowledgement by the automobile industry that there should be some additional testing.
Senator Adams: Yesterday, the car manufacturers showed us some spark plugs which they say were clogged by MMT. Today, Ethyl told us a different story. It is difficult to know which one is correct. It may be that the brand of spark plug makes a difference in performance. I have found that some brands are better than others.
Mr. Dahlstrom: It is easy to find problems that may or may not be directly related to the point you are trying to make, senator. We sometimes see that. We do receive complaints about our fuels which we sometimes acknowledge as legitimate. Other times, we receive complaints which we know are not legitimate. Sometimes we accept the blame because it is the wise thing to do. I do not believe that hardware can provide the proof.
I must agree with the broader point that has been made about testing a fleet of vehicles, half with MMT and half without. That would give much better results than evidence from individual vehicles.
The Chairman: You just gave us a little Western Canadian common sense, which I appreciate.
Senator Buchanan: As Senator Adams just said, the spark plugs and catalysts shown by each side of the argument are very different.
Would you not agree that a definitive, independent study would help to clarify this situation?
Mr. Dahlstrom: That is the point I was trying to make. One can almost always find an example to prove a case.
Senator Buchanan: I find it interesting that eight provincial governments are presently opposed to the bill. They want it deferred until a definitive study is conducted. Premier Romanow has written on at least three occasions expressing Saskatchewan's continuing concern with this bill banning the importation and interprovincial trade of the gasoline additive MMT.
Mr. Dahlstrom: As I tried to point out, perhaps not so subtly, this is a unique bill and a unique approach. If there is an environmental concern, there should be a means of directly approaching the problem. This seems to be a round-about way of approaching it by the various provincial ministers of the environment. Once the bill was introduced, they backed off. The discussion that should have taken place, and should still be taking place, is not happening. It is all being done, as you pointed out, by letters objecting to the legislation and so on. It bothers us that the discussion is not taking place, as it is with regard to other legislation.
The legislation with regard to benzene has been discussed thoroughly. I am not at all unhappy with what is happening there. I may feel, as refiners sometimes tend to, that the legislation which ultimately results is a bit severe. It may or may not be. However, at least there has been ample opportunity. This approach this time has been different, and that bothers many people in the industry.
Senator Whelan: Mr. Chairman, I must be careful with these people because I have had a long-time association with the co-op movement.
The chairman of the Canadian Automobile Dealers Association appeared before the committee today. His name is Ted Knight, and he is from Regina. He told us that he likes the business he gets replacing computer equipment, sensors, catalytic converters, et cetera.
Mr. Dahlstrom: I will have to speak to him when I get home.
Senator Whelan: You spoke about a health situation. I am involved with a radio program on Saturday mornings, and Dr. Labella from the University of Manitoba was on that program. Mr. Klassen, you are from Manitoba. Have you ever discussed that with him? He has strong feelings about this substance not being used.
Mr. Klassen: I have no knowledge of it. I have only been in Saskatchewan for approximately a year.
Senator Whelan: He has been working on this for 15 years.
You say that sometimes you do not use MMT. Why not?
Mr. Dahlstrom: The economics are not necessarily in favour of using MMT at all times. It depends on what else is happening in the refinery.
I must also clarify that we sell a great deal of diesel oil. We do not sell as much gasoline as we would like to sell, and we do not sell as much as some other refiners do, primarily because we supply an agricultural market.
You did not hear me say that we were spending capital to eliminate MMT. We do not need to spend any capital at this point in time if MMT disappears because we have sufficient capability within the refinery to produce the octane alternatively, without MMT. However, it is more economical to use MMT.
There are times of the year, for example in the summer, when we use MMT for premium gasoline. It varies. It is purely related to the economics of the day.
Senator Whelan: I am confused. You base it on economics. Some people base it on performance.
Mr. Dahlstrom: Yes, that is correct. There are times when we do not use MMT. Under those circumstances, our motoring customers do not receive the benefit of MMT as far as NOx is concerned. That is a valid point.
Senator Whelan: In other words, they do not have such a big bang.
Mr. Klassen says that he owns five GM vehicles. We have three vehicles in our family. Our son-in-law was born in Regina, Saskatchewan. His father was the doctor in charge of a hospital there. His grandmother lives in St. Lazare, Manitoba; his father and mother have now retired in Abbottsford, British Columbia; and the other great-grandmother lives in Quebec City. He is a grand master technician with General Motors. He has said, "I will appear before the committee and show you all the things that I have to replace."
Do you think that perhaps they are adding too much MMT to the gasoline in southwestern Ontario and that that is giving them more problems?
Mr. Dahlstrom: I do not think so. The question asked earlier was: If you cut the MMT in half -- that is, if MMT does create a problem in the first place -- will it create a lesser problem? I suppose the obvious answer is yes. If you cut it down to one-tenth, it is probably still greater.
We must remember that all the testing work that has been done -- and I do not want to ignore it -- and all the fleet work and so on use gasoline with MMT reasonably close to the allowable limit. Still, under all the testing that has been done, there was no discernible difference between the condition of the automobile that used MMT or the one that did not, and there was no discernible difference in the emissions other than the fact that there were less nitrogen oxides from the vehicles containing MMT.
Concerning whether too much is being used, if the government of the day were to legislate that Canadian refiners should use the same amount currently allowable in the U.S., that is exactly what would happen. Perhaps that is a compromise. Incidentally, it is a compromise that the oil industry has offered to take up. As I indicated earlier, we already have offered that compromise.
I am not responding to your question directly, but I do not know how to respond any other way.
Senator Whelan: Did "we" not work together closely when "we" built the refineries in Regina?
Mr. Dahlstrom: In what context are you saying "we"?
Senator Whelan: Did you get any government assistance?
Mr. Dahlstrom: Not with respect to the refinery; with respect to the upgrader, yes, very much so.
Mr. Klassen: We have five GMs, and we have an image of being poor farmers. I do not wish to dispel that image, but three are moth-balled. On the farm, you need a number of grain trucks and so on. I have two vehicles that we use all year -- one for my wife and one for myself. They range from 1974 to 1996. I have never had a motor taken apart yet, and I use co-op fuel exclusively. As president, I could not be caught buying any other kind of gas.
Senator Anderson: My question is somewhat related to Senator Whelan's. Mr. Dahlstrom, does your refinery have a research department? Have you conducted any studies or tests to counteract the claim of the automobile industry that MMT causes problems with the spark plugs and the emission control systems?
Mr. Dahlstrom: The answer to your first question with regard to a research department is no, other than a modest amount of research that we would do in-plant with regard to certain aspects. We did some work a few years ago with respect to the use of canola oil in diesel fuel and things of that nature. We have done projects with the University of Saskatchewan and with the Saskatchewan Research Council, but we do not have a research department directly.
With respect to MMT in gasoline, again the answer is no. We would almost acknowledge that if we were doing research on fuels, but because of the nature of our customers and the nature of the refinery, we have more concerns with respect to diesel fuel and the merits and advantages of blends of diesel fuel, primarily with respect to our farm customers.
I do not want to suggest that we do not pay any attention to gasoline; we pay a lot of attention to it. However, we are not in a position to do the kind of things that you suggest. Therefore, we have not done them.
The Chairman: I should like some clarification on one of the comments contained in your document. You say that you currently export a modest amount of gasoline that contains MMT to the United States on an ongoing basis. Is that a recent occurrence with your refinery, Mr. Dahlstrom?
Mr. Dahlstrom: We have a kind of funny exchange agreement. We normally do not export much product.
Some condensate, which is natural gasoline, light gasoline, call it what you will, comes from gas separation facilities south of the border. We are the closest refinery. Someone hauls it into our refinery. We theoretically process it and send gasoline back. It is an exchange arrangement across the border. This has been going on for several years, but the MMT addition has only gone on for the last year.
The regulations with regard to the quality of that gasoline are such that it taxes our facilities to meet the requirements of the U.S. gasoline at this point in time. That will change over the next period of time as the Canadian regulations change as well. The use of MMT in that particular gasoline is quite important to us right now because the regulations have changed just within the last year and a half or so. If we could not use MMT, we would probably give that arrangement up. We just happen to be on a borderline because there are a number of things different about that gasoline from our own.
The Chairman: Will that be a potential expanding market for you, or is it very limited in the future?
Mr. Dahlstrom: No.
Senator Landry: Do you add MMT to diesel?
Mr. Dahlstrom: No.
Senator Landry: Do some refiners?
Mr. Dahlstrom: We sell what we refer to as a premium diesel. The premium diesel we produce is produced because of the components. There is concern about certain numbers, so we add a package of additives. It is also as a result of the quality of the fuel as it is blended. MMT is not one of those components.
Senator Whelan: You mentioned NAFTA indirectly in your presentation. Your membership is mostly farmers. I suspect you followed the NAFTA rulings. Rarely do the Americans pay attention to a ruling that is against them. They are harassing the Canadian west again about wheat. They are harassing eastern Canada on potatoes, although I do not think Nova Scotia is concerned about that too much. They do not appear to pay much attention to the NAFTA rulings.
Do you have any opinion on that?
Mr. Dahlstrom: I would not argue with the comments you just made, senator. The only concern I would express with regard to NAFTA is that it would be unfortunate if this particular situation resulted in a challenge under NAFTA. I think there are better ways of resolving it. It is not the nature of our organization to participate directly in challenges of that type.
The Chairman: Thank you, Mr. Dahlstrom and Mr. Klassen. We appreciate your appearance here. You have shown us that good arguments can be made quietly and gentlemanly and in a pleasant way. We have appreciated it.
We will now hear from the Sierra Club of Canada.
Ms Elizabeth May, Executive Director, Sierra Club of Canada: Mr. Chairman, thank you very much for making time for the Sierra Club of Canada to present our views to you on this important piece of legislation.
We are strongly in favour of the passage of Bill C-29, and we would like to tell you why.
By way of background, we are a national, non-profit, membership-based organization committed to environmental goals and environmental values. We are perhaps best known for our work on protection of wilderness, but we have active research and public education programs dealing with biological diversity, climate change or what is sometimes called global warming, clean air, toxic chemicals, sustainable energy, and the transition to a sustainable economy.
To be honest, I think this is the first time in my life that I can remember a politician being ahead of the environmental movement, on any issue, frankly. The MMT issue took us by surprise. When Sheila Copps introduced the bill to ban MMT, I wondered what it was about because we had not been working on this issue and were not aware of it. In investigating it, I became a strong supporter of what the former and current Ministers of the Environment have been trying to do.
My personal awakening on this came from, aside from our research, a presentation by Dr. Philip Landrigan, a noted medical doctor from Mt. Sinai Medical School in New York. It would be wonderful if he had a chance to appear before you as witness, as he is extremely knowledgeable.
I heard him speaking on the subject of MMT and rallying an audience in the United States to oppose its introduction into U.S. gasoline. He presented very compelling evidence of MMT's impact as a neurotoxin -- as a brain poison. He talked about what we do not know, but he also talked about what we do know. We know that manganese is a neurotoxin. In occupational exposure, it has caused Parkinson's-like tremors. We know that it causes damage to the human brain. Dr. Landrigan also explained what we have learned from our experience with leaded gasoline. If you want to introduce a potent neurotoxin into the blood and brains of people, especially children, adding that neurotoxin to gasoline is an extremely effective delivery mechanism.
From that presentation in the United States, I also learned that the U.S.-based manufacturer of MMT, Ethyl Corporation, had been using the Canadian experience with MMT in their advertisements there, claiming that 17 years of use in Canada had somehow proved the safety of their product. Paradoxically, I found that U.S. groups and experts such as Dr. Landrigan were unaware that, even as Ethyl advertised the Canadian experience with MMT, Minister Copps had already introduced the legislation to ban it in Canada.
This issue of advertisements is interesting. In the United States last year, Ethyl was advertising that MMT was "the most tested fuel additive in history". I also have another ad from a U.S. magazine for the same corporation stating that exhaustive tests have been conducted which have established the safety of their product when used properly.
I should like to circulate this ad they ran in 1924 defending lead. They have not changed their advertising company, obviously, in all these years. They are quick to advertise that they have proven the safety.
Meanwhile, in Canada, Ethyl Corp. claimed that the U.S. EPA had turned itself around and would drop objections to MMT. The reality is far different. Due to a very narrow court ruling in terms of a very specific question of law, the court forced the Environmental Protection Agency in the U.S. to register MMT for use. The EPA administrator, Ms Carol Browner, stated at the time that she was doing so "under protest". She also said at the time that she did not think the population of the United States should be used as a laboratory to test the safety of MMT. The vast majority of U.S.-based gasoline refiners have publicly committed that they will not utilize MMT in their gas. Many parent companies have appeared before you against this bill.
Moreover, one of the major gas-guzzling states south of the border, California, maintains its own state-wide ban on MMT. In essence, Ethyl Corporation's desperate lobbying for its product has pitted the U.S. experience against the Canadian experience, using the U.S. so-called "approval" to gain approval in Canada and the Canadian so-called "approval" to gain acceptance in the United States. This strategy only works if Ethyl Corp. assumes that environmental groups do not have access to telephones. We have been working together, the environmental groups in Canada and in the United States who think this product has no business being added to our atmosphere.
It is thus misleading to suggest that Canadian regulatory action is inconsistent with the North American approach to MMT. The reality is that both countries' environment ministers would prefer to ban MMT. State action in the U.S. guarantees that use there will only be limited. Voluntary commitment from the U.S.-based refineries to avoid MMT mean that even if technically legal south of the border, MMT will not be introduced into most U.S. gasoline.
The heavy lobbying from the big guns of industry on this bill should be seen in light of this broader regulatory context. Ethyl Corp. stands to lose its market, not only in Canada, but also its potential market in the United States. The Canadian ban will remove the one argument that Ethyl Corp. has to allege the safety of their product, but the truth is that the absence of proof of harm does not equal proof of safety because there have been no studies. There have been no studies of the extent of environmental and health impacts from the use of MMT in Canada. Thus, its continued use is simply irresponsible.
[Translation]
In the meantime, MMT threatens air quality because of the increased risk of automobile emissions. Since MMT hampers diagnostic equipment in vehicle emission control systems, using MMT might increase air pollution. As a factor contributing to toxins, MMT is an environmental hazard.
[English]
The car manufacturers have been adamant that MMT gums up the diagnostic systems of their products, and we have heard much of that already today. Ethyl Corp. claims that their product does not have these impacts in their studies. In such a clash of experts and studies, it is useful to ask which party stands to gain or lose in the dispute. Obviously, the automobile manufacturers have no reason to be concerned about MMT unless it does, as they say, compromise the efficacy of the on-board diagnostic systems, including the pollution control devices. On the other hand, Ethyl's interest in promoting contrary studies is obvious. The auto manufacturers are legitimately concerned that the failure of the on-board diagnostic systems will cause them huge financial problems under warranty policies, as well as increasing air pollution. On an individual basis, cars have reduced air pollution through some of these mechanisms.
I should note parenthetically that this may be the one and only time that the Sierra Club of Canada and the automobile manufacturers of Canada are on the same side on any issue. We are clearly on side with them here.
Environment Canada is also strongly persuaded that the use of MMT will increase automobile exhaust pollution. Air pollution, particularly due to automobile exhaust, causes serious environmental and health problems causing thousands of deaths every year and significant costs to the medical system. Air pollution from cars also increases environmentally damaging ground-level ozone and acid rain with impacts far beyond our urban centres in lakes, streams and forests.
As an environmental group, the Sierra Club is also concerned with a different type of diagnostic equipment -- that on-board diagnostic equipment we carry between our ears, the human brain. MMT is particularly troubling due to the risk it poses of widespread, low-level brain poisoning of the human population. The fact that Canadians have been exposed to this substance for nearly 18 years in the absence of any evidence of its acceptability from a health and environmental point of view is deeply disturbing. As early as 1978, Health Canada identified important data gaps in its understanding of MMT. I will quote from a 1978 assessment of MMT by Health Canada, which states:
There are no data available on the effects of chronic exposure to low concentrations of manganese on special groups, such as pregnant women, children and those with respiratory diseases.
[Translation]
Unfortunately, almost 20 years later, the federal government has still not commissioned epidemiological studies nor any other inventory on environmental exposure. Dr. Donna Mergler from the University of Quebec at Montreal did, however, conduct a first-rate study on the effect of MMT on human health. Her study was commissioned not by Health Canada, but by the U.S. Environmental Protection Agency.
[English]
While work in Canada may have lagged, international research data continues to mount that MMT poses significant risks to the human population.
After I prepared this brief and had it sent to your clerk, I was able to come up with yet another study. I want to introduce it to you. It is from the American Journal of Industrial Medicine. I was published in January of this year, 1997. It is a survey of much of the health evidence looking specifically at the question of what happens to the U.S. if MMT is added to gasoline. What is the impact on the U.S. human population? It is a very interesting survey. It makes a number of points that I would like to reinforce.
The survey looks at more than 10 different studies of the impact of MMT or manganese exposure. We know manganese is a neurotoxin. The question is what happens if people get exposed to very little. We know what a lot does. What happens when they are exposed to a little over a long period of time? Ten different studies, taking different approaches to this question, came up with low-level neurotoxic effects that would not be as prominent and as pronounced as a Parkinson's-like tremor problem.
Page 111 of the study I have just given you talks about the fact that there is very good consistency in these results indicating that motor performance and memory -- when you cannot remember something, think about MMT because it may have something to do with it -- are affected by manganese exposure at levels too low to cause clinically evident toxicity.
We have some significant information here that low-level chronic exposure can be a problem. Health Canada was concerned early on about vulnerable groups in the population.
In this connection, the Sierra Club would like to associate itself with a brief you will hear tomorrow from the Learning Disabilities Association of Canada. We know that manganese-based gasoline additives are likely to have impacts similar to manganese itself. Manganese clearly is a neurotoxin. Scientists now understand that its effect on the brain is due to its impact on dopamine, a key brain chemical. Manganese easily crosses the placenta and is absorbed early in life.
In addition to concern about the impact on young children, we are also concerned about the impact on seniors. Manganese has been linked to premature aging of the brain.
The Sierra Club urges you to give swift passage to Bill C-29 so that, as quickly as possible, exposure of the Canadian public and the environment to this neurotoxin can end. We also recommend that this committee call on the government to bring forward an action under CEPA to ban MMT outright.
In that connection, I read this morning's Globe and Mail and disagree with the conclusion, although I respect the Assistant Deputy Minister of Environmental Canada, Mr. Clark, a great deal. I think that MMT is clearly toxic under the definition of CEPA. In addition to this bill, it would certainly clarify the situation if we had an outright ban under CEPA. This should have the salutary effect of blunting any suggestion that the trade-related ban is in any way a protectionist measure.
We urge you on the strongest possible terms not to be lured into a "pollute now, repent later" approach. In that category, I put any letters you have received saying, "Let us study this for a while more before we do anything about it."
We do need to learn more about MMT. There is no question that it is not 100 per cent known how great the impact of MMT on the Canadian public and environment will be and has been.
However, one thing is clear: The Canadian public should not -- to paraphrase U.S. EPA administrator Carol Browner's comments -- be used as a laboratory to test the safety of MMT. The Canadian public has played that guinea pig role for 20 years now. It is in your hands to ensure that the irresponsible use of MMT in Canada comes to an end now.
Senator Buchanan: I should point out that Ms May and her parents are friends of mine from Nova Scotia. However, as far as politics and policies, it ends there.
Ms May: We tend to disagree.
Senator Buchanan: I am interested in the policy of the Sierra Club of Canada. As I understand your comments, there have been no studies to indicate whether MMT is a danger in Canada.
Ms May: There has been some good research, and there is good research under way by Dr. Donna Murgler who is a neurotoxicologist in Quebec. We have many suggestive studies which would make us concerned that this is probably causing some damage to the human population. When no one does any studies, it is hard to assert exactly how much damage has been caused.
Senator Buchanan: That is my point. You believe that MMT causes environmental problems and health problems for the people of Canada.
Ms May: That is right.
Senator Buchanan: The Health Canada study was a rather comprehensive one. It concluded that the use of MMT in gasoline does not represent a health risk to any segment of the Canadian population.
Ms May: The Health Canada study is flawed. It is out of step with much of the work being done internationally. This is actually a core part of the problem with the Canadian regulatory response to MMT. Health Canada allowed the use of MMT initially knowing that they had big data gaps. They have never addressed those gaps.
Unfortunately, my experience as an environmentalist with Health Canada over the years has been that, once they have taken a position to allow the Canadian public and the Canadian environment to be exposed to something, they tend to lock themselves into defending that product.
They have been prepared to say that MMT should be removed from use in Canada because of the impact on the on-board diagnostic equipment of the automobile. They have made an error not to also say it is a significant danger to human health and a neurotoxin.
Senator Buchanan: If you are saying this, then you are contradicting the policy of the Sierra Club of Canada, as I understand it. You are saying that, in effect, we in Canada should rely on foreign reports and studies rather than doing our own. That is not Sierra Club policy. Your policy is that we should do our own studies in Canada to determine effects on environmental problems in Canada.
Ms May: I would be more than happy to see Health Canada, once MMT is banned, do an epidemiological study surveying whether various segments of the population in Canada, as compared to control groups elsewhere who have not been exposed to MTT, show any kinds of discernible neural-behavioural problems such as those identified in the studies cited in the report which I distributed.
In the absence of appropriate action in Canada, we will take relevant health studies where we find them.
Senator Buchanan: I know you are aware that, in Canada, there has been no comprehensive environmental study by the department on MMT.
Ms May: Environment Canada has done a survey which assured them that the events as related by the car manufacturers were in fact happening and that increased air pollution was resulting from the use of MMT.
Senator Buchanan: That is not what we were told. We were told that Environment Canada did not carry out, nor were they asked to carry out, an environmental assessment on the use of MMT.
Ms May: They did not carry out an environmental assessment; that is correct.
Senator Buchanan: Do you believe that they should have done that?
Ms May: Before MMT was introduced into the marketplace, there should have been a thorough health study assessing the impacts on vulnerable groups. At the same time, they should have assessed whether there would be an environmental impact. Those things were not done. The government has responded appropriately, since introducing Bill C-29, in order to get MMT out of use.
Senator Buchanan: Is that so, even without an environmental study?
Ms May: I have never known government to move hastily to get rid of a chemical which has a significant lobby behind it.
Senator Buchanan: How do you justify that stance with the fact that the Sierra Club has, in the past, been a strong proponent of environmental assessments? Just last month the Sierra Club filed a lawsuit against the Government of Canada over the sale of CANDU reactors to China because no environmental assessment was completed. In fact, you are quoted in a press release as hoping for a successful case to compel the federal government to undertake comprehensive environmental assessments in this and other similar projects.
Your position there is certainly that, in matters affecting the environment, there should be a complete environmental assessment before legislation or policies are passed.
Ms May: If I can clarify, the Canadian Environmental Assessment Act would not apply or require an assessment prior to Bill C-29 being passed and prior to a decision being made to remove MMT from use.We are suing because the Canadian Environmental Assessment Act compelled certain ministers to do certain things that they did not do. No one in the MMT situation has broken the law or avoided an environmental assessment which would ordinarily have been required under the Environmental Assessment Act.
Senator Buchanan: You have spoken about environment and health. Why is this bill a trade bill and not under the environment act?
Ms May: I think that is because Health Canada has done a terrible job on this file. I suspect that, at one point, Minister Copps realized there were significant environmental reasons why MMT should be out of use in Canada. It would compromise air quality. She could not get the support of the health minister due to bad advice from bureaucrats in Health Canada. That is my honest view. I think CEPA would have been a better route, but the bill is before you, having passed through the House of Commons.
Despite what I think is a circuitous route to doing the right thing, you must follow through and ensure that the right thing is done and that Bill C-29 is passed.
Senator Buchanan: If the federal government is sincere in saying that MMT is an environmental problem and a health problem, should they have introduced this as an environment bill under the environment act, rather than as a trade bill?
Ms May: I agree with you. If you could start over, that should be done, but I urge you not to start over. That falls into my "pollute now, repent later" category. We do not want MTT continually discharged into the atmosphere.
Senator Buchanan: If I were to tell that you a comprehensive study, if accepted by the two opposing sides here, would be done under the auspices of Environment Canada and would be done as quickly as possible and that CPPI have agreed to abide by that decision, would you agree there should be an environmental assessment before this bill passes?
Ms May: No, and I will tell you why. A poison is being added to our gasoline. A poison is reaching children every day. The legislative process of this country grinds slowly. I want to see MMT out of gasoline as quickly as possible.
Senator Buchanan: That is your opinion, but Health Canada says it is not a hazard to health. Let us clarify.
Ms May: Both Environment and Health agree it is a hazard to the environment. There is no question there within the federal system. The response they have taken is due to the impact that MMT has on the inner workings of the diagnostics systems of cars.
Senator Buchanan: Why do you suppose that eight of ten provincial ministers of the environment oppose passage of this bill at the present time until there is a comprehensive environmental assessment conducted?
Ms May: They must be unaware of the evidence pointing to the significant health and environmental problems.
Senator Buchanan: They have been given all the evidence.
Senator Adams: Ms May, what is the membership of the Sierra Club of Canada?
Ms May: At this point, we have 4,000 members across Canada in chapters and groups located right across the country.
Senator Adams: Is your head office in Ottawa?
Ms May: Yes.
Senator Adams: Do you have some information as to the mammals which are affected by MMT?
Ms May: I do not recall that part of my testimony, but MMT as a neurotoxin in humans would also be a neurotoxin in any mammal or animal. The brain chemistry is the same. The major environmental impact is not so much in wildlife as the impact of the increased air pollution which occurs because the cars are polluting more than they otherwise would be.
Senator Adams: In the last few days, we have heard witnesses say that we do not have any proof that MMT is affecting health. Oil distributors and car manufacturers say it is only a problem with equipment. However, you are concerned about the environmental effects of MMT?
Ms May: The studies would show the increases in carbon monoxide and other emissions because the diagnostic equipment fails. As a result, the pollution control devices are compromised. There is a clear environmental risk from the use of MMT.
It is difficult to be told that you must have 100-per-cent proof that a substance is dangerous. Ethyl Corporation added lead to gas for 60 years or more, and the evidence kept mounding that it was compromising and ruining the lives of children. The lead that got into children's brains meant they did not learn as well. Their intellectual capacity was compromised for the rest of their lives. All the time that evidence mounted, we heard the same argument: There is no real proof that lead in gas is all that dangerous or that taking lead out of gas would make that much difference for children.
Since lead in gas has been taken out, the blood lead levels of children has dropped. This has made a major impact in terms of the capacity of children to experience their full intellectual potential.
We are in the same ballpark with MMT. We know it is a neurotoxin. We know that it has serious effects when it is used on lab animals. We know that it has effects occupationally. We know that the studies looking at chronic low level exposure give us cause for worry.
Do we turn a blind eye to those studies and say, "Since we are not sure, it is probably all right," or do we say, "All the evidence points to a significant neurotoxic effect, so we ought to be careful about exposing the entire human population -- and particularly vulnerable groups like pregnant women, young children, the elderly, asthmatics and people with respiratory illnesses -- to this particular substance, especially when alternatives are available"?
Senator Whelan: The brief is quite short and informative, and I congratulate Elizabeth May for her presentation.
How many of your members have the same information you gave us today?
Ms May: All of them. We make our information available on our web page on the Internet so that we are able to keep in touch with our members.
Senator Whelan: Does that include my niece in Manitoba?
Ms May: His niece in Manitoba is one of the members of the board. She is my boss.
Senator Whelan:I have one other question. Have you made representations to Ethyl Corporation about the ad they used in the United States?
Ms May: No.
Senator Whelan: You have not. When did you become aware of this?
Ms May: The Environmental Defence Fund in the U.S. is the primary group we work with on this. They are Washington-based. They have had conversations with them.
Both ends are being played against the middle by Ethyl Corporation. They are telling Canadians we should use MMT because it is now proclaimed safe in the U.S., and they are telling people in the States that everyone in Canada loves it. Neither case is as they present it. Both countries are on the verge of ensuring it is never used again.
Senator Whelan: Dr. Landrigan appeared on my radio program. He is an expert, knowledgeable person on this. Who else have you contacted?
Ms May: We have been in touch with Dr. Landrigan and Dr. Needleman's office. I forgot to mention I photocopied the New York Times article that Drs. Landrigan and Needleman had as an opinion piece.
Dr. Landrigan speaks of this as déjà vu all over again. We have a neurotoxins like lead and MMT. The history feels very similar for people who fought the issue of lead in gasoline for years.
Senator Whelan: Will the papers Ms May submitted today be appended to our report?
The Chairman: We can certainly have them placed in with our proceedings. The Clerk has a copy of them.
Senator Whelan: It is most important that this be added. They were saying the same things in this ad back in 1924, namely that this substance will not harm people.
The Chairman: Senator Whelan, if we do that, we should say that everything that has been submitted to us should be part of the record, not just one piece of paper. In fairness, if we have motions submitting some aspects of the record, everything we receive should be part of the record. If you would not mind making a motion to that effect, that would be appropriate.
Senator Whelan: I would suggest that, yes.
Senator Kenny: We are talking tonnes here, Mr. Chairman.
The Chairman: I want the committee's work to be balanced. I do not want one piece of paper left hanging out there.
Senator Kenny: I understand the principle, and it is a good one.
The Chairman: We will come back to that in a moment.
Senator Cochrane: You have made some serious accusations about the detrimental effect this will have on pregnant women and children. You have said that it will cause brain damage and so on.
In Canada, we rely on Health Canada and Environment Canada for evidence in these matters. These are the people who analyze all the factors and make conclusions.
Health Canada says that MMT has no adverse effect on the Canadian population. Environment Canada says that MMT is a non-toxic substance.
Ms May: The definition of "toxic" under CEPA is that it constitutes or may constitute a danger to human life or health. Given the medical studies and the opinion of experts around the world, I think MMT fits that definition.
I do not want to sound totally critical of our government. Environment Canada and Health Canada both support this legislation, as does the Sierra Club. We urge you to pass it as quickly as possible. However, with regard to whether it is safe, the Health Canada study does not say that it has not had impacts on the Canadian population because they did not do an epidemiological survey.
Senator Cochrane: I am sure that Environment Canada must use the same definition of "toxic" as you do.
Ms May: Jurisdiction under the Environmental Protection Act is shared jointly between the Minister of the Environment and the Minister of Health. If it had been entirely under the jurisdiction of the Minister of the Environment, a different definition might have been used.
Senator Buchanan: You were involved in putting it together.
Ms May: I like to think so.
The Chairman: Thank you very much for your evidence.
Ms May: I appreciate your forbearance, and I hope you will give the bill swift passage.
The Chairman: Senator Whelan, would you accept that rather than printing all of this, in an effort to save costs, we simply keep it in the archives?
Senator Whelan: Yes, that is fine.
The committee adjourned.