THE STANDING SENATE COMMITTEE ON ENERGY, THE ENVIRONMENT AND NATURAL RESOURCES
EVIDENCE
OTTAWA, Tuesday, October 24, 2017
The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 5:01 p.m. to study the effects of transitioning to a low carbon economy.
Senator Richard Neufeld (Chair) in the chair.
The Chair: Good evening, colleagues, and welcome to this meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources. My name is Richard Neufeld. I’m honoured to be chair of this committee and I am a senator from British Columbia.
I wish to welcome all of those who are with us in the room and viewers across the country who may be watching on television or online. As a reminder to those watching, these committee hearings are open to the public and are also available online at the new Senate website at sencanada.ca. All other committee-related business can also be found online including past reports, bills studied and lists of witnesses.
I would now ask senators around the table to introduce themselves. I will begin by introducing the deputy chair, Senator Paul Massicotte from Quebec.
Senator Black: Senator Doug Black from Calgary.
Senator Griffin: Diane Griffin, Prince Edward Island.
Senator Dean: Tony Dean, Ontario.
Senator Seidman: Judith Seidman from Montreal, Quebec.
The Chair: I would also like to introduce our staff, beginning with the clerk, Maxime Fortin, and our Library of Parliament analysts, Marc LeBlanc and Sam Banks.
In March 2016, the Senate mandated our committee to embark on an in-depth study on the effects, challenges and costs of transitioning to a lower carbon economy. The Government of Canada has pledged to reduce our greenhouse gas emissions 30 per cent below 2005 levels by 2030. This is a big undertaking.
Our committee has taken a sector-by-sector approach to this study. We will study five sectors of the Canadian economy, which are responsible for over 80 per cent of all greenhouse gas emissions. They are electricity, transportation, oil and gas, emission-intensive trade-exposed industries and buildings.
Our first interim report on the electricity sector was released on March 7, and our second one on the transportation sector was released on June 22.
Today, for the fifty-fourth meeting of our current study, I am pleased to welcome, from the Federation of Canadian Municipalities, Brock Carlton, Chief Executive Officer, and Matt Gemmel, Policy Advisor.
Thank you for joining us, gentlemen, and please proceed with your opening statements, after which we will go to questions and answers.
Brock Carlton, Chief Executive Officer, Federation of Canadian Municipalities: Thank you very much for the invitation.
[Translation]
I am very pleased to be here with you today.
[English]
This is the second time that FCM has been in front of this committee on this study on the low-carbon economy. Our past president, Clark Somerville, was speaking to you on transportation issues not that long ago. I appreciate the opportunity to discuss the vital role that municipalities will play in Canada’s transition to a low-carbon economy.
For those who don’t know, FCM is the voice of municipal government. We have 2,000 members representing 91 per cent of the Canadian population, so we’re representing every region and every size of community across the country. There is no question that our cities and communities are on the front lines of climate change, extreme weather and lasting solutions.
Together, our members manage 60 per cent of Canada’s infrastructure, so it’s pretty clear that transitioning Canada to a low-carbon built environment means transforming local infrastructure. This isn’t just about buildings. We think we need to be talking about buildings as parts of complex infrastructure and energy systems. In other words, building Canada’s low-carbon future depends on transforming how cities and communities are built and operated, and getting there will require significant long-term public investment.
This means investing in retrofitting existing buildings, including affordable housing, and building new ones to higher standards, such as passive house and net-zero. Second, it means decarbonizing Canada’s energy mix and investing in more sources of renewable electricity and heat, such as geothermal, biomass and biogas. This also means investing in better broadband, especially in rural and northern areas, to enable smart grid and smart city technology. And finally, this means investing in public transit and active transport to reduce emissions linked to current land use and development patterns.
The good news is that municipalities are already at the leading edge of practical low-carbon solutions. The City of Vancouver, for example, has an ambitious plan to achieve 100 per cent renewable energy by 2050, which includes heating all new buildings from renewable sources. By 2031, Guelph, Ontario, is set to cut energy use in buildings, industry and transport by 50 per cent. Toronto is using innovative financing tools to help homeowners and landlords cover upfront costs of energy retrofits to be paid back through property taxes out of homeowners’ energy savings, and Halifax has a similar scheme.
[Translation]
In Quebec, FCM’s Green Municipal Fund funded the first net-zero municipal library in Canada. The building in the City of Varennes will produce as much energy as it consumes on an annual basis.
[English]
Since 2000, FCM’s Green Municipal Fund has supported more than 1,000 projects on the leading edge of sustainability and increasingly, GMF is building municipal capacity to design and implement net-zero buildings that reduce energy consumption. With federal funding, FCM’s Municipalities for Climate Innovation Program is building local capacity to integrate climate resilience into municipal operations and to develop and implement GHG reduction strategies.
Scaling up proven local solutions can go a long way toward achieving our national climate goals. FCM examined 23 municipalities and their emission reduction plans, and we found that funding those plans would cut GHG by 51 million tonnes by 2030. That’s a full quarter of what Canada needs to meet current targets. Local solutions have been remarkably cost-effective. Many have had low or even negative abatement costs, compared to other sectors where the Parliamentary Budget Officer assessed abatement options to cost between $30 and $100 per tonne of CO2. Municipalities are already taking the lead. So how can the federal government support these efforts?
Low-carbon communities won’t be built on their own. The key to moving ahead is a partnership among all orders of government. Municipalities influence more than 50 per cent of Canada’s GHG emissions. There is huge potential here. Yet we only collect 8 to 10 cents on the tax dollar, so there is a fiscal wall that we run into when we put solutions forward. The federal government increasingly recognizes this, and they are starting to address it through the 11-year Investing in Canada plan. With the right design, this infrastructure plan can significantly reduce GHG emissions even as it drives sustainable growth and boosts our quality of life. But so much comes down to the federal negotiations with each province and territory. Those integrated bilateral agreements need to get the details right. That starts with securing full and fair contributions from provincial and territorial governments.
We’ve proposed a 40/40/20 cost share model that’s 40 per cent federal, 40 per cent provincial and 20 per cent municipal. Achieving this nationwide will ensure transit and green infrastructure projects actually move forward. There’s a full $9.2 billion of Green Infrastructure funding still to be negotiated with provinces and territories. The federal government has said green funds should support a balance of provincial and municipal priorities, but that is up for negotiation now.
In addition to the green infrastructure funding that will flow through the provinces and territories as a part of the bilateral agreements, there are also national programs connected to the Pan-Canadian Framework on Clean Growth and Climate Change that the federal government will deliver directly, such as the Low Carbon Economy Challenge. Municipalities must be key partners in the implementation of the pan-Canadian framework. In order to scale up local innovation, municipalities need to be able to access the national programs announced in Budget 2017, including the Low Carbon Economy Challenge.
Our message is this: With clear predictable access to green infrastructure investment, local governments are ready and eager to scale up local green innovation. Eligibility criteria and processes need to work for municipalities, especially smaller communities that can too easily be excluded. GHG measurement and reporting will be vital, but the so-called climate lens needs to reflect municipal capacity and local realities and must be consistent across Canada.
Finally, if we’re looking for one place to start reducing emissions from the built environment, let’s focus on retrofitting social and affordable housing. FCM has been working hard to shape the upcoming national housing strategy, and our recommendations start with repairing and retrofitting Canada’s 600,000 social housing units. This housing stock is 30 to 50 years old and its upkeep has been chronically underfunded, driving an average annual capital repair deficit to $1.3 billion.
FCM is calling for a dedicated fund of at least $615 million per year for repairs and retrofits. By targeting energy efficiency investments at social and affordable housing, we can foster social inclusion and address our long-term energy and climate goals.
I’ll close by underlining that transitioning to a resilient low-carbon economy will require all orders of government to work together like never before. We’re here to tell you that Canada’s cities and communities are ready to partner to get the job done.
I’d like to thank you very much for listening to these comments, and we look forward to the questions and the discussion that will follow.
The Chair: Thank you very much for your presentation.
[Translation]
Senator Massicotte: Thank you very much for your presentation. Very much appreciated.
Your enthusiasm and conviction that municipalities have a major role to play are important, because that is reality.
You also gave various examples of it being cost effective to renovate without federal government assistance. You place a lot of emphasis on the funding provided by the federal and provincial governments. Is that absolutely necessary? In your cost effectiveness calculations, you present a hypothetical cost per tonne of CO2. What calculations did you do?
When funding is received, it is easy to decide not to do any calculations, since that money is obtained at no cost. Yet, it is taxpayers’ money. Whether it comes from property tax, or provincial or federal sales tax, that money comes from taxpayers. How do you calculate whether it is cost effective or not, and then decide to spend those funds?
Mr. Carleton: There is no specific price associated with greenhouse gas reduction for municipalities. We should however work in partnership with the federal and provincial and territorial governments to create national greenhouse gas reduction strategies. Municipalities have to do their part. As I said in my introductory remarks, it is important that costs be shared on a 40/40/20 basis because municipalities do not have the necessary funds to subsidize projects by more than 20 per cent.
[English]
I’m going to have to switch to English because my French is limited here.
In these projects, when we’re calling for 20 per cent of municipal cost share towards achieving the objectives, it is because the municipalities are paying the full cost of the life-cycle of a project.
What we’re saying is if the municipalities are going to contribute to the national objectives of reducing greenhouse gas emissions, the cost sharing needs to be appropriate, so the municipalities contribute so the provinces and territories can contribute, so collectively the orders of government can achieve the objectives within the dollars that are on the table.
With respect to greenhouse gas emissions specifically, the municipalities need to be partners in the design of the projects that will lead to effective greenhouse gas emissions reductions so they can tailor their specific programs to those objectives.
Senator Massicotte: It’s easy for anybody to say, “Give me 80 per cent of the money and I’ll gladly spend it,” but let me jump a little bit.
You also referred to housing. As you know, most of the stock of housing is from 20 or 30 years ago now and already exists, and a large proportion of our housing is not the most efficient relative to energy use and so on. You make reference to it in your presentation, as well as social housing.
As you know, we had a debate recently. They’re currently working on a new building code for housing and also high-rise housing and so on, including commercial buildings, and that is working. As you know, it is for the province to decide in each case to what extent they will adopt those procedures. There’s even some suggestion there that there could be guidelines put in place whereby in 15 years you have to modernize your home and make it more efficient, or upon the sale or certain circumstances, but at the end of the day, it is the municipalities that decide those issues. It is the cities that say, “If you make those renovations, you have to modernize your infrastructure, electrical and heating and so on.”
What are your thoughts on that issue? That scares a lot of people, whereby we can all be forced to spend significant sums of money modernizing our homes, and you people are in the driver’s seat.
Mr. Carlton: Well, we’re in the driver’s seat within the confines of the policies and frameworks of the provincial and territorial governments. There is an alignment of orders of government here that is necessary, and leaving it just in the hands of the municipalities is not actually fair because the provinces have to also come to the table in terms of effective policy frameworks and some kind of resources.
We certainly think that, as I said in my comments, we have to do things differently. We have to build cities differently. We have to think differently about how cities are managed. In that context, with the changing framework for construction, housing renewal, et cetera, it is totally appropriate that climate change considerations be brought to bear on those pieces of work.
In terms of social housing, the minister sometime this fall will be announcing a national housing strategy, and there is $15 billion from Budget 2017 on which there will be further precision so that we can know how the money will be rolled out. What we’re saying is this is a great opportunity to ensure that the money that is put towards the repairs of the existing housing stock is also directed in a way that enhances the energy efficiency of the buildings that are going to be repaired.
As I started saying, I think there is a combination of new ways of working at the city level, but there is also a need for more deliberate or effective provincial intervention and provincial policy and program frameworks to enable the local work that needs to be done.
Senator Seidman: Thank you very much for appearing before the committee today.
Over the past few weeks, the committee has heard from officials from Natural Resources Canada and the National Research Council about these new minimum energy performance requirements for existing buildings. I will come back to the issue that Senator Massicotte referred to in a more specific way.
The new requirements would apply to all buildings at major life-cycle events, such as renovation, sale or change of occupancy. That means, for example, that a Canadian planning to sell could be faced with a hefty renovation bill before they could put their home on the market, and the same goes for condos and apartment buildings. NRCan officials told us last week it could cost as much as $35,000 to bring the home up to the new standard and that enforcement of these new energy-ready building codes would fall to the provinces and municipalities.
I’d like to know if your members have been consulted on these proposed changes to the building code and if municipalities are equipped to bring buildings in line with the costly new energy performance requirements in as few as five years.
Mr. Carlton: No, we haven’t been involved in these discussions. For me, this is the first time I’ve heard these figures. I don’t know exactly where they come from, but we have not been consulted. We’re not aware of our members, as individual municipalities, having been consulted.
Senator Seidman: It was Natural Resources Canada and the National Research Council who were here testifying before us, and they were the ones who put forward the codes and the cost, approximately $35,000, to bring a house up to scratch before sale, for example. You’re saying you haven’t been consulted on the proposed changes to the building code?
Mr. Carlton: No.
Senator Seidman: No. Okay. So now that you weren’t consulted, do you think municipalities are equipped to bring buildings in line with these new energy performance requirements within the five-year proposal?
Mr. Carlton: As boldly asked as that, I suspect the answer is no. This may be relevant to your question. There are policy frameworks that enable the taxpayer to find ways to innovate in their homes. I made reference to the City of Toronto and the example in Halifax where the provincial laws allow the municipality to loan money against future property tax payments so you can spread the cost out over time. Whether that’s an appropriate mechanism for this, I just don’t know.
Senator Seidman: Would you have something to add?
Matt Gemmel, Policy Advisor, Federation of Canadian Municipalities: Maybe I could just link the last two questions. The municipal role with the building code varies. It’s really only in B.C. where, at the municipal level, they’re approving the adoption of the national model building code. Of course, municipalities are an important stakeholder and are engaging in development of future building codes. For instance, we are in conversations with Natural Resources Canada and NRCan around improving the future national model building code around flood resiliency. We are having conversations, but we haven’t had a conversation with them on that piece.
In terms of the federal role, we’re hearing from our members that there is a role for senior levels of government to provide incentives for retrofitting existing buildings. As we know, it’s a significant portion of greenhouse gas emissions in Canada. For instance, we were in a meeting last week with The Atmospheric Fund, which is an agency that the City of Toronto set up to reduce emissions in the city, and they’ve now expanded their mandate to the Greater Hamilton and Toronto Area. They’re saying that even though there is a business case for, say, commercial property owners or landlords to make energy-efficiency retrofits in their buildings, it’s still not happening. Canada has amongst the highest per capita energy consumption in the world. The Atmospheric Fund, which has been monitoring this closely amongst commercial and residential buildings in Toronto, is seeing that the efficiency gains are not happening quick enough to meet the targets we’re talking about.
Even though there is a business case, they still very much see a role for the federal government to provide incentives. So part of the answer is on the regulatory side with building codes — and municipalities are engaged in that in different ways in different provinces — but part of the role for the federal government is that financial piece as well.
Senator Seidman: Just to clarify, obviously it’s a burden for, say, an elderly couple who is selling their home and moving to a condo and suddenly discovers that their home doesn’t meet building codes and now they have to retrofit the home before they can sell it. Then you add to that, according to what we heard, that it’s up to the provinces and municipalities to enforce that. The question then is, how does that happen? That’s what I’m puzzling over.
Mr. Carlton: I don’t have an answer other than it’s not the only time that municipalities kind of scratch their head and say, “We’re supposed to do this because another order of government has deemed it so, without resources or capacity.”
Senator Seidman: Right. It goes to support a point that you made many times in your presentation about the necessity for the three levels of government to be working well together.
Mr. Carlton: Yes.
Senator Seidman: I appreciate that. Thank you.
Senator Griffin: Thank you. It is great to hear from the federation once again. As you note, it’s another order of government that you speak for, another level of government, and it’s where the rubber hits the road on a lot of the issues we’re dealing with here, especially related to housing.
In your presentation, you covered a lot of the same issues you covered when you made a pre-budget presentation to the House of Commons Finance Committee, which is chaired by another Prince Edward Island parliamentarian, Wayne Easter. You had asked much the same thing: how it would frame a fair balance of provincially and municipally selected projects for the Green Infrastructure Fund through the negotiation of bilateral agreements with the provinces, and to ensure there is a transparent allocation of funds once the negotiations are complete.
I have two questions related to that. First, can you give me more detail regarding your concerns? Second, have you had any feedback from either the federal or provincial governments?
Mr. Carlton: On the bilateral agreements?
Senator Griffin: Yes.
Mr. Carlton: There are a couple of general concerns with the discussion around integrated bilateral agreements. One is, as I mentioned in my comments, the cost share. The federal government has said, “We’re stepping to the table with 40 per cent of the cost of a project,” and we’re saying the provinces need to step up with a full, fair cost share of their own so that the municipalities are not left holding an inordinate amount of the cost of a project. That’s one of the concerns.
A second concern is that, as you heard a few times, the orders of government are aligned, so it would be very important that municipalities are part of the conversation at the provincial and territorial level about the kind of work that goes on, the projects that are funded and the mechanisms for decision-making. The more the municipalities can be at the table as partners in those discussions, the better it is for communities, and we think we get better selection in project work, more relevant to local needs, et cetera.
I would say that those are the two main concerns: the cost share and the decision-making mechanism and the presence of municipalities as part of the discussion.
How is it going? Well, the negotiations have started. There was a meeting today. We at FCM are not asking to be at the table with the provinces and territories in the discussions with the federal government. That’s not our role. We are asking for an ongoing dialogue with the federal government about how these negotiations are going so we can get feedback and understand how that is working.
Those conversations are taking place. The federal government, the Department of Infrastructure and Communities, has been very helpful in helping us understand the progress in the negotiations and where some of the blockages are, without betraying confidentiality.
The other piece of how we work is that in our membership are each of the provincial and territorial associations. So as much as we’re pushing the feds to ensure that these integrated bilateral agreements respect the needs of the municipalities and the obligations of the different orders of government, our provincial association members are also speaking to their respective provincial and territorial governments, so you’re getting some influence from that side as well, all with the hope that the federal government will come to agreement with the provinces and territories about an effective cost share and an effective role of municipal government or the presence of municipal government in the processes for decisions made about projects that will be funded through federal dollars and with provincial and municipal dollars.
Senator Black: I like to keep things as simple as I possibly can, which is not all that hard, actually.
We all know what you pointed out, that the vast majority of Canadians live in cities; we know we’re a cold, huge country; and we know that the Government of Canada has made certain commitments that it’s the hope that the country can fulfill in, I would say, a relatively short period of time respecting carbon emissions. That’s what we know.
What I would like to know from you is the current state of play. You’re absolutely right that the cities haven’t the capacity to raise money. They haven’t got the capacity. That’s how that is. So what is the state of play now? If the government is committed to doing what they tell us they are committed to doing, what’s the state of play in ensuring that the cities can do what’s required?
Mr. Carlton: It comes down to the question of a couple of things, and one is the cost-sharing formula that I mentioned a couple of times.
Senator Black: But where are we in the conversation?
Mr. Carlton: We have made our expectations and requests known to the federal government and to the provincial and territorial governments. They’re in their negotiations now. They’re planning to have those negotiations completed I think by the end of March. What’s going on in each of those negotiations, we don’t know, but we do know that the federal government is pushing the provinces to include their contribution of full and fair cost share of project value, and the federal government is stating the expectation that municipalities will have some role to play at the provincial level in the decisions that are made about how money rolls out in the provincial and territorial jurisdictions.
Senator Black: Let’s presume that that all goes well. Do you believe that cities are going to be able to play their role in achieving the goals set in the time frame set?
Mr. Carlton: Yes, I do.
Senator Black: That’s very encouraging.
Mr. Carlton: Keeping it simple, but I’m not very clear on what you mean by “targets and objectives.”
Senator Black: The Paris objectives.
Mr. Carlton: Okay, the Paris objectives.
Senator Black: I’m sorry.
Mr. Carlton: That’s fair. Well, FCM, at our annual conference in Winnipeg, voted to endorse the Paris objectives for the country, recognizing that municipalities have a role to play. As I said, over 50 per cent of the greenhouse gas emissions in the country are under direct or indirect control of the cities and towns. They are ready to step up and, if the cost-sharing formula is appropriate on the infrastructure dollars and if the policy frameworks are enabling enough, then yes, we do think cities can play their share.
Senator Black: That’s great to know. And achieve the goals in the time set?
Mr. Carlton: Yes.
Senator Black: Fabulous.
I read on the weekend that Google is undertaking an initiative in Toronto that they are calling Alphabet city. Do you know anything about that?
Mr. Carlton: I don’t. Maybe someone younger than me does.
Senator Black: So you’re not able to comment on that?
Mr. Gemmel: Not in detail.
Senator Black: Very well. Thank you.
Mr. Carlton: I’m curious now.
Senator Black: That’s why I’m asking you. So am I. The concept is to create a completely integrated, modern and energy-efficient city. It’s chosen Toronto, apparently, to be the demonstration site. So I’m very interested to know.
Mr. Carlton: I don’t know anything about that.
Senator Black: It’s on your to-do list.
Mr. Carlton: I do think, if you look at that from a different angle, the federal government has announced or is about to announce its Smart Cities Challenge, which is not far off that kind of objective. There is, I believe, $300 million in the kitty, and cities will be applying for resources to implement Smart Cities initiatives. It sounds similar to what you were just talking about in a general sense.
The competition isn’t on yet, but I know many of our members who are lining up and organizing their coalitions and their partnerships. There is a lot of interest and a lot of commitment in cities in Canada to move in these directions. They are looking for the incentives and the opportunities to implement that. Some of them are doing things on their own. Some of them are looking for external incentives to drive a particular agenda.
Senator Black: That’s very encouraging. Thank you, sir.
Senator Galvez: I’m sorry I arrived late.
In your presentation, you said, “In other words, building Canada’s low-carbon future depends on transforming how cities and communities are built and operated. This means investing to retrofit existing buildings, including affordable housing, and building new ones to higher standards.”
We know that building codes are not higher standards. Building codes are at the low end. If I want to go into the higher standards, there are many other countries that have very high standards.
Coming to the question of my colleague Senator Seidman, you were not consulted on these building codes. However, in the mandate of NRCan, it clearly says that anybody with interest in building codes can knock at their door and enter the discussion.
Presently, the Canadian building code is a low standard. We have health, safety and fire here. Then we have energy efficiency here. We have nothing about water efficiency, recycling materials, life-cycle analysis, sustainability or resilience of infrastructure. Nothing.
There is a lot that can be done in the building sector. What is your position? You said that the federal and the provincial governments should implicate themselves more “Herculeanly,” to use one word —
Mr. Carlton: What was the word?
Senator Galvez: Herculean.
Mr. Carlton: Okay.
Senator Galvez: So, what is the role that you want to play in harmonizing the whole thing and bringing it to higher standards?
Mr. Carlton: It comes to the general statement about the alignment of three orders of government, or four orders of government if you consider the Aboriginal communities also as orders of government. It really comes to the place of a country working with four orders of government and where four corners of the table of the federation are actually talking to each other.
In this particular case, this is a very technical issue, but I think there is a very important role for municipalities to play in the discussions about the realities of building codes, the realities of construction, the realities of local by-laws and how that can work together with the federal/provincial policy and programming frameworks.
Let me give you an example that doesn’t relate to the question, but it relates to the idea of municipal involvement. About five years ago, the federal government announced that they were mandating all wastewater treatment plants in the country to go to secondary treatment. So here was a federal mandate to achieve an environmental objective, and we all agreed with the objective. But to that point, there had been no consultation with the municipalities about the wastewater treatment regulation, the new regulations, how we were going to get to the new regulations or how it was going to be costed, funded and paid for. So we got into this political discussion at a staff level. We brought technical experts together from municipalities across the country to work with the technical experts at Environment Canada to actually rewrite the regulations and to put in place a regime for moving to secondary treatment.
Wastewater is very far from building codes, but my point is the same thing: If you bring the right people to the table and have a whole-of-country conversation about the technical issues that you’re trying to resolve, you get to a place where you have new regulations, new requirements, processes, mechanisms and timetables to get to those new requirements that make sense.
Thirty-five thousand dollars per house for a new building? We don’t know what that is. But if you had the kind of mindset around the wastewater treatment story, you would have a chance of getting the kinds of technical regulations that make sense and that inform a policy, a timeline and an implementation plan.
Senator Galvez: Why is energy after health and security? The reason is because we have energy meters in every house, and you can charge every house how much they use in electricity, exactly like the Internet and other things. You just touched on a good subject in water, wastewater and the waste. We don’t see these in our bills. We don’t see it every month, but the municipality pays a fortune. It costs between $50 and $100 per tonne per waste, and it is something like between $10 and $25 per litre of water. If we don’t charge the people or we don’t tell them, they will continue.
So this happens at the house level. That’s the municipality. The municipality says, “I don’t have money,” but the municipality doesn’t tell the people how much it costs to get rid of their waste and the wastewater. What are you doing concretely on this?
Mr. Gemmel: To speak to that point about where the vision is at the municipal level, FCM’s primary role is to advocate to the federal government on behalf of our members. Where municipalities are putting forward that vision of their role of reducing emissions is really in climate change action plans at the local level.
We can see, for instance, Toronto and Vancouver, two of our largest cities, both have plans to reduce emissions by 2050 by 80 per cent. They’re putting in place really a deep carbon reduction pathway and are putting policies in place now that will shift the direction of development and energy use along that kind of pathway.
One of the capacity-building programs that FCM runs is called the Partners for Climate Protection program. We operate it in collaboration with ICLEI Canada. Through that network, we have 300 members, 300 municipalities, that have all developed climate change action plans and are moving through a series of milestones to ramp up their ambition and the level of detail of those action plans.
When you aggregate those results, you start to see a very large potential contribution of municipalities. One of the analyses we did looked at 23 of those plans and saw that, if those plans were fully funded, in partnership with other levels of government and using revenue tools that are available at the municipal level, including pricing waste, as an example, then that would contribute more than a quarter of Canada’s total Paris Agreement commitment, the gap that’s remaining.
We can see that that’s not just an aspirational goal. That’s a plan that is developed in consultation with the community and the private sector and that’s on paper and that is already in implementation. We can scale up that local innovation that is there now, and we can implement those plans. By doing so, we can realize the Paris objective. I think that’s FCM’s broader vision for the role of municipalities.
Senator Wetston: I wasn’t here at the beginning of your presentation; I’m sorry. But I’m from Toronto.
Senator Massicotte: That’s okay.
Senator Wetston: I’m used to that.
I wanted to ask you a general question. You may not discuss this, but I think that about 80 per cent of the Canadian population lives 100 miles or so from the U.S. border. Maybe it’s 85 per cent, maybe it’s 78 per cent, but it’s around that number. Many of those people live in cities across Canada, obviously, and some of them are the largest cities. Then, if you think about 100 miles, if that’s the number, and think about what is south of the border — and there are very large cities in close proximity to Canada — I would say cities become the focus of a great deal of work and effort, as your organization does, with respect to low carbon and reducing carbon. But, as you know, the U.S. is not committed to the Paris Accord. We have committed to the Paris Accord.
Do you talk about that issue at all in the federation and what that means from the point of view of Canadian efforts? You achieve other things through approaching the greening of our economy, and I realize that. But any thoughts about that?
Mr. Carlton: I was in Marrakesh for the COP 22. The entire buzz around the event was — this relates to your question, by the way.
Senator Wetston: I was wondering where you were going.
Mr. Carlton: The entire buzz around the conference was, of course, the extreme concern about the U.S. election results, but the general comment was, “Well, the mayors will save us.” In the U.S., there are many, many mayors who have stepped forward and said, “Well, we’re going to aim for the Paris Agreement. We’re going to support Paris. Forget about what Washington says.” So there is a lot of commitment, a lot of focus, in the cities in the United States around the environmental sustainability agenda and the reduction in GHGs regardless of the federal policy or federal perspectives.
We, at FCM, have very close relationships. In the U.S., there are actually three FCMs. There is one for the big cities, one for the medium-sized cities and one for the small towns. On the two, the big and the medium-size cities, we are in very close communication with them on a variety of issues, including the climate change agenda. There is a very robust exchange of experiences and knowledge and perspectives across the border at the city level.
Also, just to broaden your question a little bit beyond just the American situation, we are fairly active in the global networks of municipal government. There is an emerging Global Covenant of Mayors for Climate and Energy,, which is a combination of North American and European initiatives that Canada is playing a very active role in, helping to shape this agenda and helping to develop the mechanisms by which we can share and learn from each other across borders and around the world. Our conversations are about the Americans and with the Americans, but they’re also broader. It’s also realizing that there is a global agenda here that plays out in cities.
Senator Wetston: How is the Green Municipal Fund organized? Where does the money come from? As well, not all capital projects go the way that you would like them to go. Obviously, there may be a need for additional funding. Does the Green Municipal Fund ever act as a lender of last resort to these capital projects?
Mr. Carlton: The Green Municipal Fund was set up in 2000. Its original investment was $500 million, roughly, from the federal government, as an endowment to FCM. In Ottawa language, it’s “stackable” now. It’s deemed to be FCM money. It’s not deemed to be federal funding for programming.This government added an additional $125 million to that fund. We haven’t signed on the dotted line yet, but all of the lawyers are finished with the documents, so we are getting there.
The fund provides grants and loans to municipalities and their partners for environmental initiatives that are of interest in terms of energy savings, greenhouse gas emission reduction, brown field regeneration and public transit. There is a variety of themes. We’re giving out to the municipal proponent. Sometimes we’re providing grants for studies, for baseline analyses, to prepare for projects. Sometimes we are giving loans so that bigger capital projects can be implemented. But we’re always one of many lenders because, usually, projects are much bigger than the scope of the dollars that we could loan out. I’m not aware of any point where we’re the lender of last resort. We’re often the first one in to help and stimulate accessing other dollars to leverage up from the green funds to the total package required to build whatever it is that the city is proposing to build.
Senator MacDonald: Thank you, sir, for your presentation. In your presentation, you put forward some suggestions on behalf of the FCM regarding future cost sharing with the federal government. I just want to pull back a bit from that. In terms of those things you directly control, such as public transportation, in most municipalities and communities, one of the most visible forms of carbon emissions is public transportation — buses and school buses. I’m just curious, in terms of conversion to natural gas or other forms of public transportation, does the FCM advise the municipalities, and can you give me any update, or is there any update to give, in regard to how much conversion has occurred away from diesel products and diesel-driven public transportation around the country in the major municipalities?
Mr. Carlton: I can’t give you an update. We don’t directly advise municipalities to convert to one thing or another. What we do is develop best practices. There are many different venues where we’re doing learning experiences — webinars or seminars or workshops, et cetera — where those best practices can be demonstrated as best practices and those who have lived this experience can talk about how to and advise others to go down the same path.
For example, tying to the last question, the town of Banff went to renewable fuel sources for its public transit system. The Green Municipal Fund provided some of the initial money to do the feasibility study and work through some of the initial challenges to get there, and then we put Banff forward as an illustration of a system that now works, and here is how it works and here is how they got there, so other municipalities can emulate should they so choose.
We don’t sit here and say, “You must get away from diesel. You must go here; you must go there.” Our job is two-fold. It’s to talk to the federal government on behalf of the cities and to demonstrate best practices so that cities can learn from each other and build their capacities so that they make their local decisions in a manner informed by other experiences and other practices.
Mr. Gemmel: A number of years ago, FCM did have a program called Green Fleets that was run in collaboration with Natural Resources Canada. It was looking at public transit, but also looking at all municipal fleet vehicles. That program saw a lot of success to the extent that municipalities were already moving forward with integrating hybrids and plug-in hybrids and now full electric vehicles, and less now, but previously vehicles that were running on biofuels, so there has been some penetration there.
I think the big opportunity here is with high-order mass transit and electrifying that. We have been calling for and we are very pleased to see that electrification of transit is an eligible cost under phase two of the public infrastructure funding. That’s this new 11-year agreement. Also, the indication we have at this point is that that transit funding will be stackable with the green infrastructure stream of the Investing in Canada plan, so a municipality could maximize that investment in electrification of fleets.
Finally, there are a number of exciting examples in Vancouver, Winnipeg and Montreal that come to mind where municipalities have partnered with research institutions and transit companies to pilot and demonstrate rapid charging, so a bus coming in and being fully charged in 10 minutes, something along those lines, which has a lot of promise for the future.
Mr. Carlton: There is a really important point there around the eligibility costs. When the federal government is introducing an infrastructure program or, in this case, a public transit program, part of our effort is to make sure the eligibility criteria are such that it enables transformation in the municipalities. As Matt was saying, the enabling, the electrification, of public transit is part of the costs association with the public transit fund and is a really important part for us of creating an enabling environment for these transitions to take place.
Senator MacDonald: I had the opportunity two weeks ago to go to Silicon Valley with the Minister of Transport. We went to Tesla, and we also went to Proterra, which produces completely electric buses. Now they are producing these buses at a cost that is equivalent to the purchase of a diesel bus, but it’s the cost of running and maintaining these things. Because they don’t have an internal combustion engine, you save about a quarter of a million dollars in the life of the vehicle. It’s a technology whose time is arriving, and I would like to see the municipalities, instead of the ones burdened with this major cost, make sure to keep their eyes open on these developments. I think they should be looking at them now.
Mr. Carlton: There is a great opportunity in this country right now with the number of dollars that are being invested in public transit by the federal government from Budget 2017. It’s groundbreaking; it’s unprecedented. It creates, for the municipalities, a bit of space, whereas before, public transit in this country was so woefully underfunded. Look at comparisons with OECD. We are not on the map in terms of comparing to OECD in terms of public transit funding.There was no space for anything other than just desperately trying to maintain the status quo without depleting your municipal financial strength completely.
Having the federal government in the system now in a very strong way will create the space for more innovation, partly because of the dollars available, but also because we’re talking about long-term, stable funding. Municipalities, instead of trying to figure out from year to year how to cobble together enough money to keep OC Transpo running, they see the resources on the table in the long term, and they can start planning and start thinking longer term.
These are really important features of the federal involvement in the infrastructure generally and in public transit, this ability to see long term. Eleven years is also an unprecedented time frame for federal funding. To see that time horizon expand out so you can think about what you’re doing and plan a bit is a really important feature around how we can help to transform what is going on in the municipalities.
The Chair: I’ll just ask for an explanation. On page 13, you say “. . . decarbonizing Canada’s energy mix . . . .” You say, “This means investing in better broadband — especially in rural and northern areas — to enable the ‘smart grid’ and ‘smart cities’ technologies.”Please explain to me what you mean by that.
Mr. Gemmel: Essentially, now we can get around to answering Senator Black’s question about the announcement in Toronto, which was made by a subsidiary of Alphabet, which is Google’s parent company, Sidewalk Labs.
I think the term has become a bit of a buzz term. This government especially likes it as “smart cities.” It’s the integration of information and communication technologies, supported by high-capacity broadband Internet, to integrate those technologies with infrastructure and with public services, municipal services.
The results are wide-ranging. Certainly there are environmental results and ways to reduce energy consumption through time-of-use pricing or smart meters and that sort of thing, but also to improve communication with the public, so open data, and also to drive better social outcomes.
We see investments in broadband as being very much connected to a transition to a lower carbon economy over the long term.
There are other applications as well, such as reducing commuting time if you have more telework and that sort of thing. Fundamentally, there is no doubt that rural Canada won’t be able to participate in the economy of the future without broadband Internet connectivity. So it’s important on a number of levels.
When we look at the built environment, we see the connection between smart cities technologies, energy, emissions and linking those together.
One of the things that is interesting at the municipal level is that in recent years, rather than having a stand-alone climate strategy and a separate capital budget, Public Works strategy and asset management plan, and a separate economic development strategy, we’re seeing, especially in the larger cities, linking those together. “Smart cities” is the glue that sticks those different pieces together.
We see a lot of promise in that, and we are pleased that the federal government recognizes that innovation happening locally and is supporting that through the Smart Cities Challenge that Brock mentioned.
The Chair: Thank you. I know broadband is very important in Northern communities, but we don’t need broadband to actually have smart grids. That happens already. I know from my experience that it has. I just couldn’t quite understand the connection, but I get what you’re saying.
Senator Galvez: You have seen for sure in the last years all these floods and extreme events that have caused the destruction of cities’ infrastructure. Have you done any calculations of the cost of all of these? Could you give us some figures? What are municipalities doing to face next year when it happens again?
Mr. Carlton: We’re just going back and forth about whether we actually remember the dollars. We haven’t done a macro-study of all the extreme weather events and the impacts on municipalities. It’s obviously in the billions of dollars.
What municipalities are doing is a lot of the new infrastructure money will inevitably be used to upgrade systems to withstand greater stress than has been built in the past. The sewage, the water discharge pipes and some of the roadbeds, et cetera, are being upgraded to respond to these challenges, because there’s no longer a 100-year flood.
Senator Galvez: Are they constructed in the same place?
Mr. Carlton: There is a conversation going on right now about national flood mapping and what that is going to mean for municipalities and for land use planning. I don’t know that it’s a completed conversation yet, but there is a discussion going on about exactly this so that a house on the banks of the Bow River either has some kind of berm between the river and the neighbourhood so it’s protecting it from floods or there is a rezoning of the area so it’s not being used for building. For example, High River, Alberta has really changed some of its residential zoning by-laws because of the floods they experienced a few years ago.
There’s an ongoing discussion between the cities, the Insurance Bureau of Canada and probably the federal government — I am not sure about the federal government being in the conversation — about flood mapping and flood plains, where insurable buildings can be built and what municipalities need to do to mitigate the risks of future floods or the impacts of extreme weather events.
Senator Galvez: Can you send that information to us?
The Chair: If you send any information through our clerk, then everyone gets it.
Thank you very much, gentlemen; we appreciate that.
For the second segment tonight, I am pleased to welcome, from the Canadian Propane Association, Nathalie St-Pierre, President and Chief Executive Officer; Greg Thibodeau, Manager, Marketing, Pembina Pipeline Corporation; Guy Marchand, President and Chief Executive Officer, Budget Propane 1998 Inc.; and Taylor Granger, Business Development Leader, SLEEGERS Engineered Products Inc.
I don’t know if one or more of you are making a presentation or just one, but when you’re done we’ll go to some questions and answers. The floor is yours.
Nathalie St-Pierre, President and Chief Executive Officer, Canadian Propane Association: Good afternoon, honourable senators. It’s a pleasure to appear before the Standing Senate Committee on Energy, the Environment and Natural Resources today. We appreciate the opportunity to share with you how propane is a game changer for Canada.
[Translation]
My name is Nathalie St-Pierre. Joining me is Guy Marchand, president and CEO of Budget Propane 1998 Inc., and past president of our board of directors.
[English]
Mr. Greg Thibodeau is General Manager, Marketing, at Pembina Pipeline Corporation; and Taylor Granger is a Business Development Leader at SLEEGERS Engineered Products Inc.
The CPA is the national association for the propane industry in Canada. We represent over 400 members in every region of the country, from producers to wholesalers, retailers, marketers and transporters. Our association represents about 90 per cent of the industry.
Right now we think propane is an investment opportunity and a game changer for our country. As we move to a low-carbon economy, propane is part of the solution. That’s what we want to share with you today. There are four specific sectors where we believe that propane can play a role in reducing GHG emissions: rural and residential sectors, remote and indigenous communities, transportation and manufacturing and exports.
First, an introduction to this widely known product: We all know propane and you all have barbecues with propane. It is a greatly undervalued fuel. Before us, we heard a lot of discussions on electricity and other types of fuels, but I think propane is one of the cleanest and most versatile fuels in existence. It is recognized by the Alternative Fuels Act for its low environmental impact. Specifically, propane emits 60 per cent less carbon monoxide than diesel, 98 per cent less particulate matter than diesel and contains virtually no sulphur.
When total life-cycle emissions are considered, the case for propane becomes even stronger than that of natural gas. Unlike natural gas, propane does not emit fugitive GHG emissions or methane emissions, which are 25 times more than CO2 prior to combustion. About 85 per cent of the propane is produced as a by-product of natural gas processing. There is a tremendous capacity in Canada to produce an abundant supply of propane that is highly portable via truck, rail or pipeline, across the country and into the U.S. Current estimates put the total resource potential at almost 15 billion barrels, or about 400 years of supply, at current consumption rates.
With this easily transportable, safe and abundant supply, propane is well positioned to play an important role in reducing GHG emissions in the residential sector and in rural and remote communities, where natural gas or clean electricity will never probably reach or be available and still offer affordable and low-cost energy to homeowners.
According to Statistics Canada, 9 per cent of households still use oil. That’s over 1 million homes in Canada. For every thousand homes that would upgrade their appliances and convert from heating oil to propane tomorrow, you will have the equivalent of 661 cars off the road just by using propane and it’s a readily available solution.
Switching to propane requires little infrastructure investment on behalf of the government. Propane companies invest in their own storage and distribution assets. Since no one knows exactly what energy markets will look like in 40 years’ time, policy makers must ask themselves: Does it make sense to invest many millions in infrastructure that has an uncertain future and could become stranded assets? As we now move to a low-carbon economy, investment in propane makes sense.
Propane can also play a role in moving indigenous and remote communities off traditional fuels like diesel. Using propane, they would experience cleaner air, less noise pollution, fewer blackouts and supply issues and no fuel spills. Once other renewal resources become available, propane can play a back-up energy source to ensure reliability. Including propane in federal northern infrastructure funding programs only makes sense.
[Translation]
Propane can also be a game changer for the transportation sector, Canada’s second largest greenhouse gas emitter. Auto propane is a cost-effective, globally trusted transportation energy option. There are now more than 26 million propane-powered vehicles in use around the world. As to the electric cars we talked about earlier, we are not building them here yet, and we do not yet have electric trucks available to transport merchandise.
Huge investments of public funds are still needed to achieve significant reductions in the transport sector, whereas propane could play an important role. According to a recent study by the Montreal Economic Institute, the worst way to reduce emissions would be to subsidize electric vehicles, since the associated reductions are not significant enough. In Canada, there are 50,000 propane vehicles on the road. Investing in auto propane will immediately reduce greenhouse gases and create jobs for Canadians.
[English]
Canada’s abundant propane supply provides on-tap export potential to reduce global emissions in high-carbon-emitting nations, such as China. We can play a role on the manufacturing and export side.
According to the World Health Organization, about 4.3 million people die prematurely every year due to exposure to household air pollution caused by traditional fuels. Propane is a viable solution. It is safe, portable, efficient and clean-burning. At home, propane export terminals are being constructed on the West Coast, which will be a first for Canada. In fact, it’s a game changer for our country. These new facilities will allow Canada to compete with the U.S., which is presently reaping the benefit of exporting a large percentage of our propane to the Asian markets.
The Asia-Pacific basin is one of the world’s largest and fastest-growing energy-consuming regions, and it is a critical time for Canada to ramp up our efforts and invest to reduce GHG emissions in the world while creating jobs here in Canada.
Propane can a play a role in our major economic sectors. Let’s face it: Alternative energy sources are still limited in terms of offering sufficient, reliable and affordable energy for our mining sectors; our commercial, institutional or manufacturing sectors; and in both the agricultural and construction industries. Policies supporting propane in these sectors can help Canada achieve major reductions in GHG emissions.
From a domestic perspective, the petrochemical facilities as proposed in the Alberta communities of Sturgeon County and Strathcona County are also good examples of how Canada can add value. These facilities will convert propane into higher-value polypropylene, an important building block for plastic products used in everything — which we import 100 per cent currently — from car parts to the polymer money in your pockets, the Canadian currency. It means a 700-per-cent value-add to feed stock, and it supports thousands of construction jobs and more than 1,400 direct and indirect jobs when the projects will be up and running. They are game changers for Alberta and the Canadian economy.
In the past few minutes, I have just scratched the surface in describing how propane will greatly benefit our environment and the economy and bring significant value to all Canadians. As I have said, propane is a game changer that can help drive our country forward. In order to maximize our opportunities and the opportunities that propane can provide, it is critical that governments at all levels, beginning at the federal level, work with our members and use our expertise.
This can be done by creating pathways for the propane industry to partner with government and communities to leverage propane to reduce emissions in this and other countries now; acknowledging the impact that switching to propane for home-heating will have in providing affordable and sustainable energy alternatives for Canadians — there are still people living in rural areas, quite a few — and recognizing the positive impacts that switching to clean-burning propane can have for indigenous and rural communities, as they have to transition from diesel.
We can continue to build on the success and understanding the immediate and substantial role that propane can play in low-emission transportation both in public and private fleets until we do have more readily available solutions. Finally, we need to leverage our Canadian propane to create value in key areas like the petrochemical sector to reduce our footprint while creating jobs for Canadians.
Thank you.
The Chair: Thank you. We will go to questions.
[Translation]
Senator Massicotte: Thank you, Ms. St-Pierre, and thank you all for being here. If I understand correctly, you are saying that propane is a low-carbon fuel that governments consider to be a clean fuel. It causes less pollution than methane and even natural gas. Those are very strong arguments. If it has so many positive features, why are we talking about natural gas exploration? We assume that natural gas compares favourably. You are saying, however, that propane is more efficient and causes less pollution than natural gas. Why is that message not getting across?
Ms. St-Pierre: My first statement was that propane is not known as a fuel in Canada. There have been many discussions about reducing carbon emissions in the economy, and propane can play a role in that.
[English]
Perhaps Mr. Granger can talk about the role the product can play.
Taylor Granger, Business Development Leader, SLEEGERS Engineered Products Inc., Canadian Propane Association: Natural gas is about 95 per cent methane by composition. Fugitive emissions are an accidental release of the product just by handling it. There are fugitive emissions from the handling of natural gas, and being 95 per cent methane, methane has a global warming potential of about 25 times that of CO2 over a 100-year basis.
When we compare the emissions on a life-cycle perspective of propane, propane does not contain methane. If there are fugitive emissions of propane, you are not emitting to the atmosphere a greenhouse gas; you only emit a greenhouse gas from the combustion of propane, which we’ve also demonstrated is much cleaner — about 26 per cent cleaner than gasoline combustion.
Senator Massicotte: When you compare natural gas to propane, my understanding is that propane is a higher density. Therefore, if it leaks, it will stay on the floor. Meanwhile, natural gas is much lighter, and it evaporates and goes up in the air. Some people will argue propane is more dangerous from the home sense because you’re confined to the home. Natural gas is more apt to find an opening or a fan and evaporate. Is that accurate?
Mr. Granger: Chemically, propane is heavier than air, so it will settle. Propane is unique in that it has a narrow flammability range, and it rapidly dissipates or vaporizes. It’s very difficult to have the perfect condition for propane to combust, so if propane does leak, it will vaporize and dissipate rapidly.
Senator Massicotte: Promise? It’s dangerous. It could be potentially dangerous with an explosion. That’s what people worry about.
Ms. St-Pierre: It’s like any other type of fuel you would be using in our house. If you don’t service your furnace; if you use oil, you can have spills. You have to take care of the tanks and change them on a regular basis. For whatever type of fuel you’re using, if you don’t do what you’re supposed to be doing, you will have risk. There is never zero risk, but propane is not riskier than any other fuel in existence right now.
The Chair: If you don’t actually produce natural gas and oil, you will only have propane, so it kind of all goes together. It’s a by-product mostly of natural gas and to some degree oil.
Senator Dean: I will start by saying there is nothing I like more at my remote northern camp than my propane fridge. I cannot believe how efficient it is.
I have a couple of questions. First, what are the obstacles? I’m thinking about the conversion of generators. What’s the cost per megawatt for propane versus diesel? What’s the comparator in terms of output from a generator from the input of propane or diesel for the same unit of output?
Guy Marchand, President and Chief Executive Officer, Budget Propane 1998 Inc., Canadian Propane Association: The industry does not have the answer to your question. All I can say would relate to greenhouse gas emissions where a generator would emit 50 per cent more emissions running on diesel or gasoline than on propane.
Ms. St-Pierre: I can give two examples. We talked about buses before. From the numbers we have now, if you buy a regular diesel bus, it’s $100,000. If you buy an electric bus, it’s $300,000. If you buy a propane bus, it’s $110,000. Those are manufactured, ready to go as propane buses.But you will save a lot on the fuels, so you get your payback within not even a year. Obviously, from a trustee’s perspective, you’d rather probably invest in the classrooms than in the bus.
If you look at the conversion of a car, it could be $4,000 or $5,000. If you look at the conversion of a truck, it’s a bit more, $10,000 or $12,000. It could be maybe 10 per cent. If you were to convert a current oil furnace in existence today and change it for a high-efficiency furnace, first, consumers would save about 40 per cent on their bills and they would save 38 per cent on the emission side, and overall, including everything, we estimate it’s about $6,500 to convert, switching off oil to propane. That gives a sense of how much it costs.
Senator Dean: Staying with rural, northern and remote, do we have examples of a northern, remote community that has made the switchover, and what do we know about that? Are there transportation issues? Are there cost issues? In relation to that, given the degree of diesel generation in remote and northern communities, what can the federal government do to propel that kind of switchover or transformation? What’s your ask of federal departments?
Mr. Marchand: I would say, number one, stop subsidizing diesel fuel. Make it a level playing field, energy requirement. Coming here today, I was walking across the street, and there were three police cars that were idling at all times. I found that very strange for the federal government or even the city that these cars would be idling all the time, and that’s a requirement for safety. If the engine was shut off, he would have no more than 10 minutes of power battery to operate all the communications and everything else. Right there are emission savings and dollar savings running on propane with the same vehicle.
Ms. St-Pierre: In remote communities, Churchill, Manitoba, is a good example of a community that’s on a grid. A grid is a system similar to natural gas where you would be bringing in the propane. There are some issues, you’re correct in terms of transportation in this case because of the railroad that needs to be repaired. From an investment perspective, governments should be looking at making sure that remote northern communities and indigenous communities have access to transportation, and that would then make propane accessible.
Obviously, as Mr. Marchand was pointing out, the level playing field, if diesel is subsidized, then propane should be subsidized too. It would be a much cleaner option, allowing the government and everyone to reduce their GHG emissions and certainly to have better living conditions with propane.
Senator Dean: Thank you so much.
Senator Galvez: I agree with what you have said in comparing fuel, oil, methane and natural gas with propane. Anywhere diesel can go, propane can go. It is one instead of the other. If it goes by truck, it goes by truck; if it goes by train, it goes by train. So I agree with you, and I agree also about this balance and the unfairness and some subsidies that are given to certain types. I have also lived in Europe, where it’s always good to cook on a gas stove and be warmed by a gas stove. It’s so efficient.
I have a technical question. I know that petroleum can be pumped into a gas pipeline because gas pipelines are better constructed, but can propane be pumped into an oil pipeline?
Greg Thibodeau, Manager, Marketing, Pembina Pipeline Corporation, Canadian Propane Association: The pipeline has to be able to take the pressure, the same as natural gas. The pipeline support pumping natural gas would have to be the right pressure. But yes, if it were to be tested and said that it could take the pressure of gas or propane, yes.
Senator Galvez: Would it require a big investment?
Mr. Thibodeau: It depends on how long the pipeline is. If it’s a long pipeline and considering its age, then there are many dynamics there, but theoretically, yes. In fact, for the gas liquids that we bring down the line as Pembina into Sarnia to fractionate at the facility in Sarnia, we bring batches of mix, which is primarily propane and butanes, so they are in the same vapour pressure area. They come down the same line as all the crude oil that comes down into Sunoco, Shell and Imperial. It’s Line 5 Enbridge pipeline that comes from the West and originates in Edmonton. It’s 500,000 barrels a day. Our batches go in between the crude oil shipments. So to answer your question, yes, it does, as long as the pipeline can handle it.
Senator Wetston: I want to understand. We’re looking at the issue of greenhouse gas reduction, a 30 per cent reduction in emissions from 2005 to 2030, and you talk a lot about the potential way in which propane can contribute to greenhouse gas reduction despite its use. I’m having difficulty understanding why it is that you think culturally — I’ll use that word even though it is not quite the right word — there has not been more attention paid to propane for this use as it appears to be, as Senator Galvez was pointing out and agreeing with you. And for her to agree with you, then I’m going to agree with her because she has a lot of knowledge in this area. What is it that you believe is the issue here from the point of view of adopting propane?
My second question in relation to that is this: Is it because the industry in natural gas and oil have been more effective in the promotion and use of oil and gas? Is it because governments have been more receptive to oil and gas versus propane?
I’ll leave Senator Patterson’s concerns in the North because he may ask a question on that with respect to diesel. It’s a special case. I want to understand these challenges a bit more because you make a very important case here with respect to the use of propane and, of course, its lack of acceptability or take-up in the way in which you described.
Mr. Thibodeau: I totally agree with you; we’ve done a bad job. I’ve been in the petroleum business for 20 some years, and propane and butane for the longest time, especially at a refinery, are considered to be the gas to get rid of.Everything else was the premium product that the refinery goes for, diesel and gasoline.
In the propane industry, Guy and myself have been on the different association boards, because Canada had a one-time Canadian Propane Association board as well as an Ontario Propane Association board. So we have a bit of a device between ourselves in west-east. It’s a mature market. There are a lot of retailers. In the past couple of years, the CPA as a national body has been doing a better job of doing this sort of thing and being able to come forward as one voice for the industry in saying this is a fuel of choice. In the past, it hasn’t been done well. So you hit the nail on the head that the other industries and natural gas in their own efforts have been able to do a better job of promoting that product.
Ms. St-Pierre: Also, if you look at the overall issue, energy has been part of the debate for a number of years, but people want affordable energy. So that was the bottom line. People were looking at what is affordable. Now, in the mix, people want to have cleaner air and cleaner products. They are looking for alternatives, but they still want it to be affordable as well.
What we have seen is there have been huge amounts invested. What if the federal government and a lot of provincial governments all of a sudden say that we all have to be using electricity? Well, electricity is not always produced in a clean way, so electrifying transportation in certain provinces may not be a good solution. But there are still investments in this. We have seen a lot of investments in the expansion of natural gas.
We think our product is as good as natural gas. We can transport it. There is still a whole section of Canada that will never have access to natural gas at an affordable cost. So we’re saying that there are some investments being made from all governments to ensure that we lower the carbon footprint of everyone. We think rural residents deserve some alternatives, and certainly remote communities. There are also opportunities. So we can play a role at this time.
Senator Wetston: Do you view, given your expertise, propane as an efficient, affordable and available source of generation as natural gas?
Mr. Marchand: Yes, we do, definitely, and for a long time. Plus it’s a Canadian story. We don’t have to import it.
Senator Wetston: Thank you.
Senator Seidman: Thank you very much. I’m following along in this train of thought about this lack of uptake of propane. I must say that my association with propane are the propane tanks that we all use on our barbecues and the fear that is instilled in us that they are so flammable. “Don’t go near them. Be very careful.” There is probably a bit of public relations and educating that you have to do about propane. I’ll leave my story here and go on to something else.
You say in your presentation, Ms. St-Pierre:
As the world’s most popular alternative fuel, propane already provides opportunities for environmentally friendly energy solutions around the globe, with some 26 million propane-powered vehicles in use.
I find that pretty interesting. Number one, I was surprised to see that it’s the world’s most popular alternative fuel. You might make some comment about that. Number two, what countries have been more friendly towards the uptake of propane vehicles?
Mr. Marchand: First, propane is the largest secondary fuel used everywhere in the world. It’s probably growing because Third World countries and the Asian market are now coming out of the woods into the 21st century requiring all the new appliances. Senator Galvez indicated earlier that she probably was raised with wood-burning cooking. Now she has the advantage of using propane because propane is readily available. It’s transportable and usable everywhere.
The countries that are more popular are the European countries because of the element of the environment, the greenhouse gas emissions. European people are more aware, or seem to be more aware, than Canadians on greenhouse gas emissions and leaving our next generation a better world to live in.
If you look into Europe and why there are that many cars available, it is simply because of a lack of gasoline and the awareness of everyone that the pollution is extremely high, especially in particulates, in just about every country. Even when you travel today, when you want to rent or buy a vehicle in Europe, it will come on propane. It’s a known; it’s a given. Everybody expects that vehicle, whether it is a Mercedes or a Lada or Jaguar, to run on propane. That is how they make them. Europe is probably the largest and most open to alternative fuels.
Mr. Granger: Just to give you examples, Poland is a major adopter. They have about 2.5 million propane-powered vehicles on the road. Additionally, South Korea has about 2.6 or 2.7 million propane-powered vehicles operating. What is interesting about South Korea is that market was actually developed using Canadian technology. Dr. Richard Webb back in the 1960s had issues with propane adoption in Canada, and that technology moved overseas. So look at the growth of the market on such a green fuel using Canadian-developed technology.
I want to segue that back into the lack of adoption, which was the point that you made. Fundamentally, we can boil that down into three main issues. There is the lack of knowledge and awareness, which you brought up, but also fleet managers — because the propane solution is specifically targeted to the freight segment — are typically risk-averse. They don’t know propane. They don’t know how to service propane. They have serviced diesel fleets for 50-plus years. They don’t know how to handle propane, so they generally strive away from it.
The third issue we face is a technology premium today. Propane engine technology is more expensive than diesel and gasoline fundamentally because they can’t amortize the cost of the development of that technology because there is not enough volume and not enough vehicle sales currently.
All the major OEM car manufacturers in the United States support propane platforms. These are dedicated propane vehicles off the line. It includes General Motors, Ford, Navistar bus, Thomas Built Buses and Blue Bird bus. So these platforms are available. There is uptake in the U.S. primarily because about 48 of the 50 states now have incentives for propane. So we’re overcoming that hurdle. These fleet managers are now looking to propane, and there isn’t that cost premium for buying a propane vehicle. We are seeing this massive transition in the U.S.
Senator Seidman: If I could ask one small follow-up question, you’re leading me to the point I was going to ask you about, which is how auto manufacturers can be incentivized. You are saying they are doing it in the U.S. How? What? Because we have heard the risk-aversion story before, by the way.
Mr. Granger: Basically, these OEMs are developing new propane platforms because they are seeing their market share of propane growing with all these initiatives to reduce emissions in the States, and the incentives that are, I guess, forcing that transition.
Ms. St-Pierre: To incentivize, you could lower the carbon tax or carbon levy of propane because it’s a cleaner fuel. Right now, it’s being treated as oil and gas, like the others. Some of the states have a reduction on the propane side as a fuel, so there are different ways that it could be done to make sure that there is an uptake. From the fleet perspective, they can have a rebate on some of their investments, for instance.There is not necessarily a need for money, although it’s always nice to have monetary incentive, but just have a different approach. Some of them, if they are large emitters, can get a rebate because they are using propane. There are a whole series of ways that it can be dealt with.
Senator MacDonald: I have so many questions. I am perplexed at the lack of market penetration of propane overall in Canada. Is it strictly an issue of price? For example, when it comes to the North, you talked about the subsidization of diesel, but is it just a price issue, or is it also a transportation issue? There are certain realities to the handling and usage of propane that don’t apply to some products.
Mr. Marchand: If you keep subsidizing the natural gas, then automatically it will be displaced. You’ve got to know that whatever the natural gas industry has right now was propane before. How it came to natural gas is because the pipeline, the grid itself, was subsidized, whereas I invest my own money in my own business. I don’t borrow money from anybody around here. When I go to the bank, I’m the co-signer, nobody else.
Senator MacDonald: I appreciate that, and I agree with you, but that’s not what I asked you. I’m just curious. It doesn’t make any sense to me that there are people using diesel, especially in isolated communities, and why they wouldn’t be using propane when we know how dirty diesel is. Is there a logistical issue with the handling and the management of propane with regards to diesel, taking it to northern communities?
Ms. St-Pierre: You’re still bringing diesel up to the northern communities as well. It’s because the fuel is subsidized, so why would you change from using diesel to propane? The fuel is subsidized. If there are no subsidies for propane —
Senator MacDonald: I’m not talking about subsidies. I get that. I’m asking you about the logistical handling and usage of propane. Is there anything that makes it more prohibitive?
Mr. Marchand: No. Absolutely not. You can ship propane. As a matter of fact, Churchill was the prime example on how the industry turned around and ended up supplying a whole community within four or five months of organization. There is absolutely no logistical issues in moving propane up North.
Ms. St-Pierre: Boat, rail, it’s all accessible.
Senator MacDonald: So over the last number of decades, we’ve seen increasing usage of natural gas. Is it just the subsidies for natural gas that stopped propane from penetrating that market? What’s the relative cost of propane compared to 10 years ago? Was propane prohibitively more expensive 10 years ago than natural gas?
Mr. Marchand: No, definitely not.
Senator MacDonald: Educate me on this. Am I right to assume that you have to fractionize to get propane? You have to go to a fractionization plant, and we have one in Port Hawkesbury. This propane is being shipped out of the West Coast. Is that going by railcar or by truck?
Mr. Thibodeau: Propane that would be primarily in the Ontario area is coming out of Sarnia, so it’s coming down by pipeline from Edmonton and then we’re fractionating it out in Sarnia.
Ms. St-Pierre: And then it’s going —
Mr. Thibodeau: And then it’s moving by truck or rail to wherever it needs to get to.
Senator MacDonald: But the gas that’s going —
Mr. Thibodeau: From Edmonton to Sarnia?
Senator MacDonald: The gas that will be sent out of the West Coast of Canada, is that coming from Edmonton or is it coming from Sarnia?
Mr. Thibodeau: What’s going to be shipped off the West? That’s coming out of Edmonton, so that’s displacing Alberta.
Ms. St-Pierre: In terms of the displacement, as Guy was mentioning, the natural gas expansion that has currently been happening is displacing propane. Propane was already there. It’s because of unfair subsidies or government support to expand the natural gas that it’s displacing propane from those rural communities where propane was already there. Nobody knew and it was affordable and it was good.
It’s this thing that natural gas should be everywhere because it’s the best solution. Even discussions about bringing liquefied natural gas to northern remote communities don’t make any sense because the technology and the energy you are going to use just to cool it, bring it and decompress it, it’s just not feasible. Propane is ready. You can ship it now and use it and it would cost nothing like LNG.
Mr. Thibodeau: If I may, just with propane right now in locations where natural gas isn’t, there is a lot of conversion going on from heating oil furnaces to propane furnaces. So if natural gas isn’t there, propane is knocking out — insurance companies don’t want to deal with heating oil, and propane is taking those customers over from heating oil. But if natural gas is there, then it becomes a complication.
Senator MacDonald: When it comes to the production of energy like generators or usage in transportation and all the various ways it can be applied, is there one of these areas in which propane is far superior? Is there another one of these areas where it’s perhaps inferior? Or does it apply equally across the board in terms of replacing all other forms of carbon-based fuel?
Mr. Thibodeau: What did you say here, it’s got a thousand uses?
Mr. Marchand: There are a thousand uses for propane, from hot-water cooking, to pool heating, to restaurants, to heating industrial buildings.
Senator MacDonald: Like this building?
Mr. Marchand: Sure.
Ms. St-Pierre: Lawnmowers.
Mr. Marchand: Transportation. Anything and everything.
Ms. St-Pierre: Refrigerators. We have heard that.
Mr. Marchand: If propane had been marketed earlier than gasoline in the 1900s, propane would be the readily available fuel right now. It so happens that gasoline was ahead of propane. They found propane by pure luck. They said, “Hey, it’s a great fuel, we can use it,” but gasoline was already there.
Senator Patterson: I would like to thank colleagues for asking about the North, where I’m from, in Nunavut.
I would just like to drill down a bit on the conversion. Can you explain how you would transport propane by ship to communities? What size containers? And also, what is involved in a conversion of a home furnace or a larger boiler? Finally, does propane not liquefy in the cold? Is that a problem? Am I mistaken?
Mr. Marchand: No, not a problem. First, you transport propane by ship. We fill the same containers that you see probably in the country. That’s how we fill those. They are very large. They have about a 6,000 to 20,000 litre capacity. Then you put them on ships. They leave Montreal and go up to all of the James Bay area, all the way to Resolute. Then the containers are taken back empty. They come back to the original point, get reloaded and reshipped again.
To convert a home from oil to propane, all you have to do is remove that oil furnace, replace it with a propane furnace, and outside take out that oil container and replace it with a propane container. In terms of costs, you’re looking at about $3,500. That’s about the cost for your average home.
Propane is a liquid, yes, you’re right. Propane has a chemical property wherein it turns into vapour as soon as the temperature rises above minus 45, and it’s that pressure that feeds all of the appliances. So really, what we’re carrying is a liquid form of propane when we are moving it up to the northern territories. Then after that, it’s the application of the natural state of propane, which turns it into a vapour, that feeds all of the appliances, whether it’s for hot-water cooking or home heating.
Senator Patterson: So it will only freeze below minus 45 Celsius?
Mr. Marchand: It won’t freeze at all. It liquefies. It will not have pressure, but it will still be in a liquid state. If I had a vapourizer for large uses, let’s say for a generator or a hospital or something like that, then you would use the liquid phase of the propane through a vapourizer, because 1 ounce of propane is 270 ounces of vapour. That’s how you get the power, so that’s how you’re able to carry so much power in such a small quantity.
Senator Patterson: Can you convert a diesel gen set to propane? Or do you need to buy a whole new gen set?
Mr. Marchand: No, you have to buy the generator that is made to use, rather than running on diesel, running on gasoline or propane. So you have to buy a new gen set.
Senator Patterson: If I may, in your presentation, you talk about including propane in federal northern infrastructure funding programs. Could you elaborate on how the federal government would include propane in federal northern infrastructure funding programs?
Ms. St-Pierre: Right now, to our knowledge, propane is excluded as a fuel, so a community could not say, using this fund, they would like to have a propane system. It’s not included. Everything is about alternative energy, biomass or other sources. But at the end of the day, propane should be included even if it was as a back-up source, but it’s not currently in the program.
Senator Patterson: Did you say Churchill had converted? We have 25 diesel communities in Nunavut, total reliance on diesel. Is Churchill an example we can look to for a conversion?
Ms. St-Pierre: Churchill is the model with a grid system. You don’t even need to go to that extreme if it’s the generator you are looking to change and still produce energy for those communities. There are different options available, but that’s a good model in terms of —
Mr. Thibodeau: It’s another step.
Ms. St-Pierre: Yes, it’s a further step. It’s actually more engaged. It provides a heat source to a lot more homes directly as opposed to just producing energy.
Senator Patterson: How did that happen in Churchill? Was that just an enlightened mayor?
Mr. Marchand: It was started a number of years ago because it was then the readily available fuel for all the homes and the hospital and the schools, and they kept the diesel for generating the electricity because the gens get maxed out. They thought of using a second energy that could do anything and many things to supply the community, and that’s how it happened.
Senator Patterson: Thank you.
The Chair: I grew up on a farm in southern Alberta. My father started selling propane when people were still using gas lamps. So I am used to that. In fact, my father farmed, and his tractors were on propane, but he built his own systems to run those tractors because it wasn’t readily available off the shelf; so I go back to that world.That was big. They went away from iceboxes, exactly what you say. They used it for cooking. My dad sold it, and sold all kinds of cook stoves. So it was a change.
What happened was natural gas became available because it was piped, not trucked, and you didn’t have to have a tank at your house to be filled. It was convenience, I would say, that changed that. Because those places, where I came from at that time, are now all serviced by natural gas.
Where I had built my house, I had to pay for the line; it wasn’t subsidized. It’s on my bill for my natural gas. I don’t think your argument is with natural gas so much as it is with diesel fuel.
If you don’t have the natural gas, you’re not going to have the propane. It doesn’t just come out of the ground by itself. It comes out as natural gas and oil and is fractionized and all those things, whether it’s in Sarnia, Alberta, Saskatchewan or B.C., and that’s how you get propane. It’s a by-product of many products that come out of natural gas.
I would say things like Dennis is talking about, we did a study on the power generation in Northern Canada. Some of those plants are 50 years old. Can you imagine? Most of them are way past their lifetime in all of those communities that we visited.
If there is a place where you have to start doing some marketing, it may be to Indian Affairs Canada, whoever it is that actually provides that service to those people. That’s where you need to go, and you can start selling to them. That is an opportunity right now. I think they are going to look at replacing those, and if they look at replacing them with propane, well, it’s much better for you. You did say marketing was a problem at one time. I would say you should get marketing with those kinds of things.
In rural Canada, propane is used extensively. I know that because I have also lived in rural Canada or rural camps, worked in those, and propane is used extensively. There is an opportunity for you to actually get to the North, not talk about subsidies, and we’re better than anybody else, but better than diesel, you can bet that. Less greenhouse gas, and it will do the same job. That’s not a question; it is just a bit of information.
Senator Massicotte: Just to be very transparent, I’m a user of propane for heating my home. It’s not too far. It’s basically a suburb of Montreal. Natural gas is not always available. It depends on the circumstances.
My issue is a little of the same thing. You’re a by-product of natural gas. You say you have got 400 years’ worth. Let’s say you become extremely popular, and you use the argument that it’s even better than natural gas, but what do you do with the natural gas? What do you do with the by-product of natural gas if you’re going to sell only propane? What happens there? It’s a combination of.
Ms. St-Pierre: The debate is not whether or not we’re better. There is a use for natural gas, and, as you say, it’s a commodity because it’s piped and it’s very convenient. But the debate is on the level playing field.
Right now, there is public money being invested in expansions when there were solutions. So was there an issue before? No. This is where we’re saying it’s not just about natural gas either. There are no programs offered to those in rural areas to switch from oil. It’s the bigger picture; it’s not natural gas. It’s more the fact that they are getting subsidized.
Senator Massicotte: What subsidy? Give me some details. Other than up North. Up North, we are doing something there, but —
Mr. Thibodeau: Correct me if I’m wrong, Guy, because you are in the retail business. I have got one customer in Uxbridge. I was up visiting customers in the last couple of weeks. She has a propane business. She said that she is not able to get a credit. The credit has to come through or be analyzed or be given through Union Gas/Enbridge, which is the gas company. They really don’t have any interest in providing a credit to a propane company that is switching an oil furnace over to propane. Whereas, if that gas company goes into that oil customer and gets them converted, they get a $2,500 rebate, I believe it is, towards a furnace.
Senator Massicotte: From the federal government?
Mr. Thibodeau: Yes. Well, provincial government.
Ms. St-Pierre: It’s provincial. But there are a lot of different programs that are helping and expanding. The Ontario government invested $100 million in expansion for the natural gas sector. In Quebec, we have seen some provincial green fund money going for the expansion of the natural gas in certain areas. More and more, there seems to be investments being made with public money.
Senator Massicotte: It looks like you have a marketing job to do. You have to get your message out.
Ms. St-Pierre: Well, we have got more support.
Mr. Thibodeau: That’s part of it. The CO2 level on propane — we were just talking about today — it’s in the same category as diesel.
Senator Massicotte: Propane?
Mr. Thibodeau: Yes. Who was it?
Ms. St-Pierre: The Government of Ontario is evaluating propane as even worse than diesel.
Mr. Thibodeau: Which is absurd, but anyway.
Ms. St-Pierre: There is no information, you’re right.
Senator Galvez: I understand the question of the subsidies or the help or the system, whether it is provincial or federal.But I heat my home half with electrical and half with propane. It is the chimney and the stove, and we also want to have hot water on demand. I don’t have any problem. It is just that right now, I don’t have the money. You’re saying that somebody says you can’t use propane. Who tells me I cannot use propane?
Ms. St-Pierre: No, we’re saying that there are not very many programs, and the only program currently is in Ontario, and it’s managed by Union and Enbridge. Of course, they don’t have much support in transforming because they’re selling natural gas, so they’re not pushing for a propane program. You’re allowed to do it, but you may not have support, financial incentives to assist in making those changes.
Senator Galvez: So there is no place where it says —
Ms. St-Pierre: No.
Senator Galvez: I got that impression.
The Chair: Thank you very much for your presentation. It was interesting, and there were some good questions and some good answers.
(The committee adjourned.)