Proceedings of the Standing Senate Committee on Energy, the
Environment and Natural Resources
Issue 5 - Evidence
OTTAWA, Tuesday, February 4, 1997
The Standing Senate Committee on Energy, The Environment and Natural Resources
met this day at 8:00 a.m. to consider Bill C-29, to regulate interprovincial
trade in and the importation for commercial purposes of certain manganese-based
Senator Ron Ghitter (Chairman) in the Chair.
The Chairman: We will begin with witnesses from Environment Canada. Please
Mr. H. A. (Tony) Clark, Assistant Deputy Minister, Environmental Protection
Service, Environment Canada: With me today are Ellen Fry, general counsel from
the Department of Justice; and Mr. Frank Vena, director of Transportation
We in the government believe that clean air is a priority for Canadians. When we
look at Canada, we see that most of the people are in the cities and near the
urban centres. There is now a very clear indication through lots of data which
shows that air quality and health are inextricably linked. For example, on a
bad smog day in Toronto, we find that many more people go to hospitals,
particularly those who are at risk with respiratory ailments. Those are the
Our nation is increasingly urban. More people are living in the cities. The
transportation sector is the single leading source of air pollution in Canada.
When we speak of transportation, we automatically think of the motor vehicle
and the automobile. There are about 14 million of those automobiles plying the
roads in Canada at this time.
Air pollution and pollution from automobiles is a matter which is national in
scope. The Canadian Council of Ministers of the Environment established a task
force on cleaner vehicles and fuel some years ago. A number of recommendations
arose from that task force. The federal government was asked to adopt tighter
new vehicle emission standards in harmony with the U.S. and to work on cleaner
fuels. For example, it was recommended that we lower the sulphur in diesel fuel
and in gasoline, and also lower the benzene in gasoline.
The Canadian federal government responded favourably. We have already announced
our intention to implement the new emission standards for motor vehicles. Those
standards will be consistent with those in the United States.
We have been told over and over again that, in North America, we have one
vehicle basically designed. That vehicle has state-of-the-art control
technologies on it.
We are also working closely with the fuel industry to develop those cleaner
fuels which are required nationally by the CCME.
The task force recognized that the engines, the technology, the vehicles and the
fuels are an integrated system. They work together. The automobile people are
incapable of meeting the stringent emission standards out of the tailpipes of
these vehicles unless the fuels are there to make that happen.
In fact, the CCME went so far as to say that the federal government should be
moving into the area of lower emission vehicles by the year 2001. At one point,
British Columbia went so far as to call for zero-emission vehicles. However,
that is another matter with which we are still struggling in North America
concerning how practical it is. I can tell you that it is the future.
Bill C-29 is in line with the national approach to improve fuel quality and to
limit harmful emissions from vehicles.
The bill is contentious, and that is why we are here today. We have two of the
largest industrial sectors in this country unable to come to an agreement on
the matter of MMT. The government has been facilitating these discussions for a
number of years. The question of MMT has been a rather difficult one and it is
clear that, after many years, we have agreed to disagree. Both sides have groups
of experts and have done many studies and neither agrees with the conclusions
of the other side.
The automobile industry says very clearly -- and, all manufacturers have been
part and parcel of the consensus -- that the on-board diagnostic systems are
affected by MMT. Both the ethyl and petroleum industries claim otherwise.
The OBD system, as it is known, is basically an on-board inspection and
maintenance function. It alerts drivers to any malfunctioning of the technology
in the automobile. From that standpoint, it is a sophisticated piece of
hardware. It should reduce air pollution into the atmosphere.
However, because of the lack of agreement on this particular matter, time was
running out. The new engines are on the market as of last year and more of them
are coming out this fall. The automobile industry got very concerned about
warranty liability, and some of them started to offer reduced warranties. In
fact, some of them are already beginning to disconnect the systems. It is a
rather interesting situation where the industry spent millions of dollars to
develop this high technology and then they are beginning to disconnect the
systems in Canada. The consumer is beginning to face a problem in terms of the
warranty situation with automobiles.
The evidence is not conclusive either way vis-à-vis the studies of either
side. We have looked at the data on both sides. Both sectors have had their
people look at the data. The bottom line is inconclusive.
The government decided to be prudent and to err on the side of caution, the
environment and human health. This is an excellent example of the precautionary
principle that this government signed onto at Rio, with Agenda 21, back in
I have worked in the environmental field for 30 years and my work has been
simply one of reaction. We wait for problems to occur and then we fix them. We
give lip service to the precautionary principle, but we never pay any attention
These are two giants in Canada who are unable to resolve this matter
voluntarily. Recognizing that vehicles are coming into the marketplace; that
any further studies in this area would take probably several years more to
complete; and that there is no solution in the near future, the government chose
to act on the basis of available information.
One factor that needed to be taken into account was the disruption in the
marketplace because of the loss of warranty and the disconnection of these
systems. Consumers would get very upset.
The government decided to use its trade and commerce powers to prohibit the
import and the provincial trade of MMT, effectively removing it from the
That is where we are today. We believe that we made the right decision. The
Americans are currently getting the best from their technology. The question
is: Should we in Canada settle for less?
Senator Kinsella: Mr. Clark, would you put on the record what MMT technically
Mr. Clark: Yes. It is methylcyclopentadienyl manganese tricarbonyl.
Senator Kinsella: If we had a container of MMT, what would it look like? What
colour would it be, for example?
Mr. Clark: May I ask my technical expert?
Mr. Frank Vena, Chief Transportation System Division, Air Pollution Prevention
Directorate, Environment Canada: I am not sure what it would look like.
Mr. Clark: I am not sure, either.
Senator Kinsella: This is a two-litre container of water. If that was a barrel
of gasoline that had been refined up to that point in the refining process when
the MMT is added in the polishing stage, how much MMT would I put into this
container? This is so that members of the committee can have a sense of the
proportion of what we are dealing with. We do not know what it looks like and we
can hardly pronounce it. Let us try to get quantitative indication. About how
much MMT would I have to put in this pitcher?
Mr. Vena: If that pitcher was about two litres, the maximum concentration that
we can put in there by law is 18 milligrams of MMT, as manganese, per litre.
That is a small quantity in that two-litre pitcher.
Senator Kinsella: Would I be correct in saying that if I put one drop of water
into this container, that would be roughly the proportion? We are laymen and
women here, but that is the amount of MMT we are talking about?
Mr. Vena: You are approximately talking about a few drops, yes.
Senator Kinsella: My first question relates to an attempt to understand the
logic that underlies this bill. I will start with your department.
I reviewed the testimony that you gave in the House of Commons, Mr. Clark. At
one point you stated that it was clear that "they" -- I think you
were referring to the automobile manufacturers -- thought they had evidence
showing that the OBD systems would be affected by MMT and that they made that
very clear to you. That is part of the sense of what you told us here this
Although we were not as much interested in what the Canadian Vehicle
Manufacturers Association thought they had evidence on, my question is: Do "they"
have evidence or do "they" not have conclusive evidence, as you see
it, as the ministry responsible for the environment in our country?
Mr. Clark: I remember distinctly when this matter came to a head. The entire
automobile industry held a symposium in Ottawa. I am not sure whether they held
the same thing for the Standing Committee on the Environment, but certainly
Environment Canada and other federal government officials attended. It was a
rather interesting exhibit because, all along the walls, they showed a series
of exhibits of what they claimed to be the effects of MMT on the catalytic
systems of their automobiles. They even had evidence concerning the spark plugs
and they had the slices of these pieces of equipment. They sawed them through.
It was clear -- at least on what we saw -- that there were heavy deposits of
material on these systems, which, if true, would undoubtedly impair the
performance of these systems.
They also gave us a series of studies in terms of the effects of MMT on on-board
diagnostics. In fact, they flooded us with paper, and I believe you have most
of that paper.
Senator Kinsella: Mr. Clark, are you aware of the General Motors Service
Bulletin number 57-65-21, dated November, 1995, on the subject of OBD-II
serviceability issues? The GM bulletin itself issues several causes of OBD
malfunctions, including low fuel levels; failure to properly secure the gas cap
after refilling; routine added-on equipment such as cell phones and antitheft
alarms; and environmental conditions like weather, altitude and excessive mud
cakes on the wheels. Are you aware of that service bulletin?
Mr. Clark: I am not aware of it.
Senator Kinsella: What studies has Environment Canada conducted on whether or
not MMT gums up OBD devices?
Mr. Clark: We have done no studies.
Senator Kinsella: You have alluded to the controversy or the argument that was
taking place between different parties. You have alluded to a call for an
independent panel. This was your statement in the house committee on October
18, when they were examining Bill C-94. You said that Environment Canada did
not see the value of an independent panel.
We are trying to understand the logic behind this bill. If you have done no
studies and there has been argument on what the scientific base is -- that is,
what the truth is -- why was an independent study not done? A lot of reference
has been made to the EPA work in the United States. Why was the U.S. EPA work
not considered independent? Why did the Canadian Council of Ministers of the
Environment not conduct of study of MMT in their task force report on cleaner
fuels and vehicles?
In the same vein, why was the idea of striking an independent expert panel by
the Royal Society of Canada not seen as a viable option? Also, recently the
Minister of International Trade and the Minister of Natural Resources praised
the results of an independent expert panel formed by the Royal Society, which
concluded that the government of France was wrong to ban importation of a type
of Canadian asbestos. Why was this model or this expert panel of independent
people, brought together by the Royal Society, not warranted on this topic of
Mr. Clark: A bit of context might be helpful here. We were sequestered with both
industries for several years trying to bring a voluntary resolution to this
problem. They both put forward their studies. It was our view in Environment
Canada that an independent review would have solved nothing. In any event, that
independent review would have taken years to complete. This was not something
that could have happened in one or two months, or three, or six.
The timing was very important. We were already at a point in time where the new
vehicles and new technologies were coming on to the road. You may quarrel with
their view but, having tried for several years, the government felt it was time
to act. An independent review would neither prove nor solve anything. From that
standpoint, we declined to get into that particular box.
Senator Kenny: Perhaps we could follow up on Senator Kinsella's comments. Why
would an independent study by the government solve nothing?
Mr. Clark: An independent study by the government would have cost a lot of money
and would have taken a lot of time. These two industries had already had
independent people looking at these results. The independent people had said
the results were inconclusive and that it could go either way on this
particular subject. We are not quite sure where this would have taken us.
Senator Kenny: Why are you here before us? There is a lot of talent sitting
around this table. We are spending time here dealing with a bill. Some of us
are puzzled as to why we are here acting as referees between two industry
groups. We would like to know why the issue was not resolved some place else,
why you did not take up the offer of CPPI to fund the third party study, and why
this issue has come to us and was not settled some place else.
Mr. Clark: We had a similar feeling. We were being asked to referee between two
industrial giants in the Canadian sector. We thought this was a wonderful
opportunity to keep the government out of this particular issue. After all,
both the fuel people and the car people are selling one product to a consumer,
a person who buys the automobile. Why do they need big government to act as
referee between both of them? We did not feel included enough to continue to
referee after several years of this matter.
Timing was important. The engines were on the ground. For both groups, this was
a wall issue. Those are their words, a "wall issue". However, on the
automobile side of things, they were beginning to disconnect technology. They
were beginning to say that they were not liable for warranties. We felt that
there would be a serious problem in the marketplace. Where there is a serious
problem in the marketplace, the government would probably be brought to bear
with respect to what it would do about this. In this instance, the government
thought this was the most prudent way to act to bring some stability to the
Senator Kenny: It is difficult for the committee to address this because, if I
understand you correctly, you are saying that we will hear from experts over
the next week on one side who will prove conclusively that MMT is satisfactory
and a good additive. We will then hear from experts on the other side who will
tell us conclusively that MMT will gum up the diagnostic equipment. We would
like to look to a third party who can tell us the truth. What is the truth?
Mr. Clark: What is the truth? As far as the government is concerned, the truth
is that MMT can gum up the OBD systems. That can cause more air pollution,
which is bad for the health of Canadians. It will disrupt the marketplace in
terms of the consumer. Using the precautionary principle in terms of erring on
the side of human health and the environment, MMT should be banned.
Senator Kenny: Upon what do you base this truth?
Mr. Clark: This truth is based on the precautionary principle that it can be bad
for human health and the environment.
Senator Kenny: Perhaps the witness could help us with the question of Bill C-29
and whether it is inconsistent with the government's obligations under the
Mr. Clark: The government does not believe that the bill is inconsistent with
the environmental provisions of not only the NAFTA but also the GATT, which is
now the WTO. Provisions in both of those instruments speak to environmental
protection. We believe that it is consistent with the environmental protections
of those two trade agreements.
Senator Kenny: Notwithstanding Mr. Eggleton's letter.
Mr. Clark: Mr. Eggleton had a view. I cannot speak for Mr. Eggleton, but the
government's view is that it will move forward on this particular bill.
The Chairman: The government or your department?
Mr. Clark: The government. This is a government bill, not an Environment Canada
If I can speak to process for a moment, any policy, regulatory initiative or
piece of legislation goes through a rather excruciating process in government
before we get it onto the Order Paper. Everyone in this town has a kick at this
cat. Every conceivable aspect of the policy is looked at, whether it is
economics, trade, jobs, unity or the environment. To get anything on to the
Order Paper requires a superhuman effort. This bill required a superhuman
effort, as other bills do. It is a government bill, not an Environment Canada
bill. I want to make that extremely clear.
The Chairman: We look forward to having Mr. Eggleton before our committee as
well so that we can ask him those questions.
Senator Cochrane: You said that one of the factors for not going ahead with this
study was the cost factor. Was that not so? Is that why you did not do a review
of MMT and do more of a scientific study?
Mr. Clark: Costs may have been a factor, even though the parties were prepared
to fund those costs.
Environment Canada receives a lot of requests to prove out technology. We
receive them regularly. Someone has their favourite little widget, and they
would like to have Environment Canada assess that widget and say that it is the
greatest thing since sliced bread so they can get market advantage. We decided
a long time ago that we did not have the resources, the time and the people --
decreasingly so in these days of cutbacks -- to do that sort of thing. We are
not in that business any longer. We might have been at one time, but we are not
Senator Cochrane: Someone must be in business to do a review of something that
you are claiming to be so detrimental. Is another department responsible for
doing these assessments?
Mr. Clark: No. In the environmental field, I am not sure there is any other
department in that business.
Senator Ghitter: You are not suggesting that an issue of this magnitude compares
to a widget.
Mr. Clark: That is an interesting question. Our understanding is that both the
capital and the operational costs to replace MMT are in the tens of millions of
dollars and perhaps even $100 million. No, it is not a widget, but, by the same
token, while it is a lot of money, we are not talking about something that is
excruciatingly expensive either.
That is a judgment call and should be struck from the record.
Senator Cochrane: Are you aware that the American auto makers are conducting
their own $12 million test program on MMT?
Mr. Clark: Yes. Because MMT was not being used in the United States, they had no
evidence on the effects of MMT on OBD systems. We have it up here; they do not
have it down there. In the typical U.S. tradition, the data must be generated
down there. The EPA has certain protocols that must be followed. They do not
accept data from other countries easily, so they insist on doing their own
thing. However, it is not EPA doing the work; it is the private sector doing
the work according to EPA protocols. The government down there is not paying
for the tests and is not doing an independent study either, but it must be
Senator Cochrane: Could we not wait for the results of that being put forward?
Mr. Clark: MMT is not being used in the United States; MMT is being used in
Canada. The automobile is in use in the U.S. and in Canada. The problem is not
down in the U.S; the problem is up here in Canada with the gummed-up systems.
Senator Spivak: Could you clarify why the precautionary principle has now been
accepted by most of the nations in the world? It means that where there is
inconclusive evidence, it is up to the company or the institution that wishes
to sell a particular chemical or get it into use to prove conclusively that it
is not harmful. That is a change in the way that we have been operating. Is that
Mr. Clark: You mentioned two things: User-producer responsibility and the
The precautionary principle says that where there is a lack of full scientific
certainty, that is not a reason to say that you should not act.
The history of the environmental field is littered with absolute
cause-and-effect linkages. I will be a bit dramatic. Until the dead bodies are
in the street, we do not do anything about it. Until acid rain, smog or
stratospheric ozone depletion has occurred, we will do something about it only
after we have skin cancer, and so on. The precautionary principle says that you
do not have to prove it 100 per cent completely. Sometimes the weight of
evidence is enough to say that you should do something about it. That is the
People who produce new products in the marketplace now, for example new
chemicals, increasingly have a responsibility to show that their product will
not harm human health and the environment. The government used to take on that
responsibility. The government is saying, "We do not have the resources to
do that. In any event, that is not the right thing to do. It is your product.
You prove that it will not hurt the environment."
Senator Spivak: How many chemicals are in circulation in the United States and
Canada that have not been tested for their safety?
Mr. Clark: There are approximately 70,000 chemicals in circulation in the U.S.
and approximately 23,000 in Canada. I cannot tell you how many have been tested
because that is the old way of doing business, but in terms of the new
chemicals coming onto the market, about 1,000 new chemicals per year are coming
onto the market globally. Each of those chemicals must go through the
environmental screen. In terms of new chemicals, the producers must prove that
those chemicals cannot harm the environment before they are allowed into
production and commerce.
Senator Spivak: You say, "We understand the problem with MMT is in Canada
and not in the United States because it is not generally in use there." I
understand there is a manufacturer in Canada of something called MBTE, which is
as effective an alternative as MNT and perhaps less toxic. How prevalent is the
use of MMT both in Canada and in the world? How prevalent is the use of MMT
worldwide? How many other countries besides Canada use it? What is in Canada?
What is the extent of the use of alternatives to MMT?
Mr. Clark: I believe we are the only country using MMT, but I could be corrected
by Mr. Vena on that.
Senator Spivak: I understood that Bulgaria also uses it.
Mr. Vena: My understanding is that the Ukraine -- and probably the
representatives from Ethyl can clarify this -- may have applied for use as
well. Some other South American country may be using it also. Obviously, Canada
is the country where it is used foremost.
Mr. Clark: Let us say that we are the only major country that is still using
Senator Spivak: What about the use of the Canadian-manufactured alternative?
Mr. Clark: There many types of alternatives. You mentioned one. We have done
some studies on MTBE. A few years ago, it was deemed non-toxic. I believe MTBE
is used in the United States, too. It is used in the Canadian marketplace. It
is a niche product. It could be used as a replacement for MMT. Several other
types of octane enhancers can be used. There is choice in the marketplace.
Mr. Vena: With respect to the MTBE, it is the oxygenate of choice in the U.S.
for octane enhancement, as well as world principle constituents and RFG, which
is a cleaner burning fuel mandated in a number of areas in the U.S.
We have a facility in Edmonton that produces MTBE largely for export to the U.S.
and also for use by Chevron in Alberta, which uses MTBE in their fuel
formulations. Another plant that is being constructed in Alberta will be
producing MTBE and the ethanol derivative.
Senator Spivak: Where in Alberta?
Mr. Vena: My understanding is that it is located in Fort Saskatchewan.
Senator Whelan: We asked for the measurement of this MMT per litre. Regarding
the former addition of lead to a litre of gasoline, does anyone know how much
lead there was in gasoline? Could you measure the amount of lead that was
contained in a litre?
Mr. Vena: It was in terms of the concentration. It was a similar situation.
These are metallic compounds. A drop or a pinch would probably give you the
proper octane number.
With respect to the question, it is difficult to know what it looks like because
it is put in a carrier and then it is distributed across the country. Depending
on what the carrier looks like -- that is, the organic material in which it is
placed -- it is difficult to see what it looks like.
Senator Whelan: All of us realize that it does not take very much of something
for it to become a dangerous killing material. If I may use a real wild
example, one could say that the venom from a rattle snake or the poison from a
honey bee is so small that you can hardly measure it, but it can certainly do a
lot of damage.
I have read all the material that we have been given by doctors. I recently had
a discussion with Dr. Labella from the University of Manitoba and I have read
materials by other learned people who have made comparisons with lead. In 1922,
everyone said, "Lead is not damaging. Lead will not hurt you." They
are now saying the same thing about MMT in 1990, 1992 and 1994. After reading
these other reports and after the discussion that I had with Dr. Labella, I
cannot see why anyone would even want to manufacture this product.
There was talk about damage to automobiles. I have a close relative who is a
grand master technician. That is a mechanic who knows an automobile from bumper
to bumper. I had a discussion with him on the weekend. Platinum spark plugs
that are supposed to last for 100,000 kilometres -- and they do where there is
no MMT -- last for only about 20,000 kilometres in Canada. They must be replaced
because they are guaranteed for 100,000 kilometres.
When they say that there is no damage, you can give them the other examples
regarding this material. When you talk to Dr. Labella and others about the
damage caused by the dust that falls out when mufflers are repaired, they
maintain that these mechanics should wear some kind of complete coveralls with
masks, et cetera, because of the dangers related to inhaling this very toxic
material. All of this is so plain in the evidence. We are asking for a further
study when it is obvious to me that this a bad situation.
The Chairman: Do you have a question to ask?
Senator Whelan: Can you tell the committee the status of the U.S. test that was
mentioned before? Have the Canadian vehicle manufacturers carried out similar
definitive studies and are they involved in the current U.S. studies?
Mr. Vena: The U.S. study involves largely the parent companies of the Canadian
manufactures, as well a number of importers. It is a joint effort between the
automotive manufacturers in the U.S -- that is, domestic manufacturers -- and
two importers. They are looking at 80 vehicles and are breaking them down into
two categories. Approximately 40 of them will be used to measure emissions at
various intervals from vehicles burning clear fuel and those burning fuel with
MMT. The other 40 will try to answer a very simple question, largely a binary
question. They will age the catalyst in those vehicles to see if this
malfunction indicator light which suggests that there are problems with the
catalyst is affected by the use of MMT. That program is taking place as we
speak. We are expecting results from it sometime in late 1997 or early 1998.
To underscore the point that Mr. Clark made a little earlier, our understanding
is that to date MMT is being used very sparingly in the U.S. In essence, they
have the time to develop this information to be used in assessing what should
happen in the U.S. That is the extent of the test program.
In Canada, they have not done this kind of testing.We have a real world
situation. MMT has been used, and the vehicle manufacturers can speak to the
kinds of problems and impacts they have been seeing on their vehicles.
Senator Whelan: I am sure you are aware of all the doctors who have made
statements concerning MMT. What is your opinion of some of these learned
people: Dr. Cummings from the University of Western Ontario, Dr. Donaldson from
Queen's and Dr. Labella from Manitoba? Do you have an opinion on their opinion?
Mr. Clark: We would prefer that the health people who will appear before the
committee answer the health questions. We are not in a position to comment on
that. On any issue, you can find people on both sides. We find that today in
the climate change issue as we have found on acid rain and many other issues.
It is important to understand that this is not about lead. I do not want to
bring lead into this discussion, but the senator did. Increasingly, in the
environmental field today, we are dealing with trace amounts of things in the
environment that accumulate over time. It does not matter whether it is one drop
or two or three. Using dioxins as an example, one part in a billion will ensure
that there will be reproductive effects in certain forms of wild life. That has
been proven by the Canadian Wildlife Service.
My point is that quantity is not always important; it is trace amounts and the
accumulation in the human systems that are of concern.
I do not wish to be facetious, but if you are concerned about the exposure of
humans to toxic substances, or any other form of substance, a good place to
combust it would be in automobile fuels in the cities of Canada.
That is why we come back to the precautionary principle. The EPA in the United
States lost its court battle on a technicality. The EPA is very concerned about
MMT. On their behalf, Ethyl is running a battery of tests on health and the
automobile people are running a battery of tests on the OBD systems. They
continue to say that they do not want to use the American people as guinea pigs
for MMT and gasoline. Some of these things must be taken into consideration in
the precautionary principle.
Senator Taylor: Mr. Clark, is MMT a widely accessible product? Is there
competition in the selling of it?
Mr. Clark: It is widely accessible. There is only one supplier, as I understand
it, but it is accessible across Canada.
Senator Taylor: Does that mean it is patentable; that they are the only ones who
can sell it in the world?
Mr. Clark: I am not sure, but I am sure it is patentable.
Mr. Vena: At one time the chemical may have been, but it has been around for a
while. Our understanding is that Ethyl Inc. is the only manufacturer. It is
imported by Ethyl Canada from its U.S. parent and distributed across the
Ms Ellen Fry, General Counsel, Legal Services, Environment Canada: Ethyl may
have some comments on that issue when they appear here.
Senator Taylor: There is only one corporation that makes this, but you do not
Senator Whelan: They have supply benefit.
Mr. Vena: That particular company has made a number of other additives in the
past. Its business is largely making fuel additives and fuel lubricants. It is
the principal one in the U.S.
Senator Buchanan: I have been following this issue for a number of months. I did
not think it was that big an issue until in the late fall when I started
hearing from other political people and also from people in the oil industry,
primarily in the Atlantic provinces. I took great interest then in finding out
what it is all about.
You said some things this morning that disturbed me a bit because they oppose
the view that has been presented to me. You said that the Americans do not use
MMT at all. Is that correct? That is not my understanding. I understand that
when the Supreme Court lifted the ban on EPA, many companies in the U.S.
registered to use MMT and that some are now using MMT in the process.
Mr. Vena: Our understanding is that many have registered, but registration does
not necessarily mean that they are using it. Our latest information from
surveys that were done by the American Automobile Association last summer and
this winter of a number of gasoline servers across the country show that, if it
is being used, it is being used sparingly.
Some of those surveys did not show that there is MMT in the fuel.That does not
mean it is not being used in smaller centres, but discussions we have had lead
us to believe that is being used sparingly.
Mr. Clark: To the best of our understanding, the large companies are staying
away from MMT. Exxon, Shell and Sun are not putting it back into gasoline. One
wonders why not.
Senator Buchanan: I have a statistic here which says that less than one year
ago, of 24 of the largest U.S. firms, 18 have registered to use MMT. Since
then, I have learned that a few have proceeded to adjust their refineries to
I was intrigued when you said that in the United States there was no use of MMT.
You also said that the Americans are getting the best from their technology and
that we should not settle for less. What did you mean by that?
Mr. Clark: The EPA and the Americans have driven new technology for emission
controls. They have been world leaders. As a consequence, tailpipe emissions
have been reduced by 90 to 95 per cent or more since the 1970s.
The automobile sector has spent millions, if not billions, of dollars creating
the new technology to ensure that air is cleaner. The Americans are getting the
benefit of the new technology because of the fuels they have there which are
compatible with the technology.
In Canada, the automobile companies were beginning to disconnect that
technology. If you were to buy a new car it would have the new OBD technology,
which will increase the price of the car another $2,000. A person in the
automobile dealership then disconnects the $2,000 technology. On that basis, I
do not think we are getting the benefits of the technology.
Senator Buchanan: What about NOx?
Mr. Vena: I think the senator must be referring to reports which indicate that
in fuel which contains MMT and in fuel which is clear, there is a nitrogen
oxides benefit with respect to the MMT fuel. Nitrogen oxide is one of the
principal tailpipe gases which comes from automobiles. It is one of the prime
constituents in the formation of ground level ozone. The question is pertinent,
From what EPA has looked at with respect to the Ethyl testing and from what we
have seen in analyzing that data, it is clear to say that for some models in
their test there is a NOx benefit. That NOx benefit is in the order of .1 gram
per mile. How that particular NOx benefit recognized in the test situation is
then extrapolated to a real world situation involves a number of statistical
That aside, if there is a NOx benefit and if you are into a policy decision,
then the question which must be asked is: Are there trade-offs here? That is
the situation in which we find ourselves, without getting into the veracity of
it because there is some value in that NOx benefit. The rationale here is one
of protecting pollution control equipment and ensuring that it works well.
Obviously, if it does, then that benefit must be greater than this potential
We could get technical and suggest that some people argue with that NOx benefit
in terms of how it has been extrapolated. They ask if those test values can be
put into the real world. We have had discussions with Ethyl to try to
understand that particular issue. I believe that the motor vehicle
manufacturers will tell you that this is not a significant statistic. We have
tried to accept it at face value because we get a lot of information at face
value. Having put it into the real world and having recognized the trade-offs,
the benefits outweigh that particular issue.
Senator Buchanan: Why do you say that? In looking at some statistical
information here, I see that the removal of MMT would increase NOx levels up to
20 per cent. The two independent studies which have been done indicate that the
increase in levels without MMT would be in the range of 50,000 tonnes by the
year 2000. If that is even close to being true, you are saying the trade-off of
that is ensuring emission standards and the gumming up of vehicles. Yet, after
a lot of studies, the EPA in the United States concluded that MMT does not
cause or contribute to the failure of vehicles to meet applicable emission
standards required by the U.S. Clean Air Act. What is the trade-off, then?
Mr. Vena: Returning to the up to 20 per cent issue, the range is there, although
it could be somewhat less than that. Those independent studies were done mostly
Senator Buchanan: T.J. McCann and Associates is not a member of the Ethyl group.
Are you saying that independent consulting groups would do what their masters
tell them to do?
Mr. Vena: My point was that that work was contracted to McCann by Ethyl.
Senator Buchanan: That is fine. When you contract work out, you also contract it
Mr. Vena: I was simply making the point that that work went out from Ethyl.
Senator Buchanan: Have you conducted any studies?
Mr. Vena: Assuming there is a NOx reduction that comes out to so many tonnes,
the other side of the coin which I was trying to explain is that there are
three ways to try to reduce motor vehicle emissions, as Mr. Clark said a little
earlier. We tighten standards, improve the fuel and try to ensure that those
vehicles are properly maintained and inspected.
The only area of the country in which there is a full-blown inspection and
maintenance program on vehicles which tries to deal with the third leg -- that
is, ensuring that vehicles operate properly -- is in B.C. In vehicles from
their vehicle fleet which have gone through that test, carbon monoxide
emissions have been reduced by 24 per cent, hydrocarbons by 20 per cent and NOx
by 3 per cent. They have also improved fuel economy by 5 per cent. In essence,
that is a program that looks at the maintenance of vehicles.
What we have here is a real-time situation which tries to alert us to the fact
that these on-board diagnostics monitor the performance of that equipment. I
was trying to equate the fact that if that equipment is there as a pollution
measure, there are benefits on that side as well.
The Chairman: This is an important point. The EPA in the United States also
stated that Ethyl has satisfied its burden under the Clear Air Act to establish
that the use of MMT in the specified concentration will not cause or contribute
to a failure of any emission control device or system within the life of the
engine. That runs contrary to what I am hearing.
Mr. Vena: There is a qualifier to that. That decision was rendered on testing
that was provided by Ethyl to EPA. That testing was done on approximately 44
vintage vehicles from 1988 and some 46 vintage vehicles from 1992-93. My
understanding is that few of those, if any, had functioning on-board diagnostic
systems. The EPA made it very clear that they still had reservations and
concerns about the proper functioning of this equipment.
The Chairman: If what you say is true, I must return to Senator Kinsella's
point. After the House of Commons hearing, General Motors released a bulletin
in which they stated that they had looked at many other causes of the gumming
up of the works, so to speak, which included things ranging from weather to
faulty installation. There is a multitude of things that GM themselves is saying
that it could be other than MMT. I am confused.
Mr. Vena: That is a fair statement which indicates that on-board diagnostics are
a new and fairly complex technology. Our understanding is that there is work
going on right now at EPA over a two-year period in which time they will assess
the implementation of this new technology. It is a matter of course for them.
In speaking to EPA officials, this technology is on all vehicles. It works. They
are into better understanding implementation -- that is, the on-board
diagnostic codes and what that really means with respect to the operation of
In California, they are even adding elements that are being sensed by their
on-board diagnostics systems. They are not removing them.
Senator Buchanan: When was the on-board diagnostics systems first installed in
the United States?
Mr. Vena: They have gone through a number of generations. Right now, they are on
to OBD-II, which is the second generation.
Senator Buchanan: When did they install them for the first time?
Mr. Vena: It is my understanding that OBD-II started to come into the U.S.
marketplace in the 1994 model year.
Senator Buchanan:If that is the case, why did the EPA not appeal the decision of
the Federal Court of Appeals? They could have appealed it, but they did not.
If they had information on these new systems that may change the decision of the
court, they had up to December 5 to appeal, but they did not.
Ms Fry: They were caught in that case on a technical situation. They realized
that in that situation, they would not win on appeal. The technicalities do not
affect how they feel about issues of policy, health, and so on.
Senator Buchanan: What was the technicality? I cannot find it anywhere.
Ms Fry: They said we are entitled to consider health effects. The court said
that health effects are important, but if you look at the detailed provision of
the law they were relying on, it did not say they could look at health effects,
so they were out of court.
They are taking future action. They are calling for health studies to be made.
Obviously, this is tangible evidence that they have a continuing concern.
Senator Carstairs: Clearly, we have had two evolutionary processes here: One in
the United States and one in Canada. One is MMT as additional fuel incentive
and you have the United States with a different history. Why?
Mr. Clark: I will try to respond and perhaps Mr. Vena can take over. The lead
issue has been instructive to EPA.
There was a concern about labile metals floating around in the atmosphere,
particularly if they are included on top of fine particles that are breathed
into the lungs. There was a general concern about fine particles that people
breathe into their lungs. I think that is one of the reasons why they had a
Mr. Vena: The advent of pollution control technology brought about certification
of vehicles to ensure that those vehicles meet standards of safety and
In the late 1970s, the common wisdom was that manganese in fuels would cause or
contribute to the failure of these devices. That is precisely why EPA banned it
for their 49 states.
The EPA were putting forward concerns about catalyst plugging, spark plugs not
working and that, in addition to this NOx reduction, it is clear that you see a
hydrocarbon increase with manganese in fuels.
Initially, in 1978, when it was prohibited for use in unleaded gasoline in the
U.S., it was largely a concern that manganese would cause or contribute to the
failure of emission control decisions of the day to meet the standards. There
have been four waiver attempts by Ethyl since then to overturn that decision.
They went differently because of regulatory requirements in the U.S.
In Canada, it started to become an issue in the middle to late 1980s, when we
moved away from lead. We were harmonizing our standards with those in the U.S.
For many years now, that has been the principal, disharmonizing element with
respect to fuels.
Senator Carstairs: Obviously, if they were aware that this was a problem as they
were developing generation one OBDs and then into generation two, why did we
suddenly seem to come upon this so late?
Mr. Clark: We did not come upon this late. We have been sitting down with the
fuel and automobile people since 1993, or thereabouts, trying to resolve this
The automobile people were very concerned about the model year, starting around
1996, 1997, and certainly 1998. There was constant pressure on us to help them
resolve this matter with the fuel industry. This has been going on for at least
Mr. Vena: When Canada embarked on a harmonization policy with the U.S. to
harmonize our 1988 standards in the U.S., the issue of MMT then came up. It was
recognized that there was some concern with MMT and that a hydrocarbon increase
could arise with the use of MMT.
At that time, through a Canadian General Standards Board assessment of the MMT
issue, it was recognized that there could be durability concerns with respect
to equipment and that we should keep a watching brief on this issue additive.
In essence, it has not come late. It has been since the mid-1980s. In attempts
to deal with this issue, we have not been successful with reconciliation.
The Chairman: I know my colleagues have more questions to ask, but we must press
Before we do, I would like you to explain this to me: If MMT is everything you
suggest it is, then why are we dealing with a trade bill and not an
environmental bill? Why are you not just banning it? Why are we dealing with
this type of legislation which brings up NAFTA issues, lawsuits, threats from
our provinces who are threatening to take us to court, and a $200 million claim
Why not just ban it under legislation, rather than regarding this as an
importation/exportation type of bill which raises all these other issues?
Mr. Clark: All I can say is that the government looked at all the options and
this seemed to be the most effective way of ensuring the ban on MMT.
The Chairman: Speaking just for your department, why did your department not
move to ban it? I know the government's position. What about your department?
Mr. Clark: We could not move in Environment Canada that way.
The Chairman: Why?
Mr. Clark: The mandates we have do not permit us to do that at this point in
The Chairman: Why?
Mr. Clark: We do not have mandates under the Canadian Environmental Protection
Act, for example, to ban MMT in terms of the use and production of those
The Chairman: Even if it is deleterious to the environment, you do not have that
right under your legislation?
Mr. Clark: If something is toxic, yes, but to this point in time -- at least for
the priority substance that we use in Canada -- manganese is not a toxic
The Chairman: In other words, you could not prove your point under environmental
legislation on that basis, so you had to find another piece of legislation to
deal with it. Is that what I am hearing?
Mr. Clark: You could say that, yes.
Senator Kinsella: It is clear that we have other questions and we must invite
these witnesses back.
We floated around a number of issues which flow from the Department of the
Environment. We have not really focused on the issue of your question.
In light of what you just said, I have a document here with Mr. Vena and Chandra
Prakash's signature, dated October 24, 1994. It is a document going to the
Minister of the Environment of the day relating to meetings with interested
parties on MMT.
You focus on manganese, to which you alluded a second ago. Are you saying that
manganese is not something that Environment Canada is on top of as part of your
Mr. Clark: We have a clear process under the Canadian Environmental Protection
Act as to how we assess substances as to whether or not they are toxic. It is a
clear and narrow corridor. It must go into the environment, there must be
exposure, and there must be an effect. In terms of the protocols that we follow
on the CIPA, at this point in time, we have not dealt with manganese as a toxic
Senator Buchanan: You said it was non-toxic.
Mr. Clark: The Health Canada people will be attending. Everything must be
related to exposure and the risks and the levels in the environment. It could
be non-toxic at one level and quite toxic at another.
Senator Buchanan: Health Canada says that health risk speculations are not
Mr. Clark: Health Canada did not deal with the possible effects on OBD systems
which could create additional air pollution and which could definitely affect
The Chairman: We may well be inviting you to return. We will determine that
later. We must proceed now. Other witnesses are waiting. Thank you for
We will now hear witnesses from the Canadian Petroleum Products Institute.
Mr. Alain Perez, President, Canadian Petroleum Products Institute: Before
proceeding, I should like to explain that CPPI is a national association. We
have a membership of 15 companies which are involved in refining and marketing
of oil products. We have facilities in every province and territory in Canada.
Directly and indirectly, we employ approximately 300,000 people in Canada.
Collectively, our membership accounts for over 90 per cent of all transportation
fuels manufactured and sold within Canada. Our institute represents the
industry on economic and health issues and, more and more often, on
Bill C-29 has been a complex issue over the past years. It touches on the
environment, economics, and health. Equally important, in our view, it touches
on provincial and regional interests in the country. It touches on issues of
good governance and on how public policy is being developed in this country.
Approximately 17 years ago, Canada became one of the first, and we are still one
of the few countries in the world, to eliminate lead from gasoline. Lead
provided octane, so we had to replace the octane. The decision was made at the
time that MMT, as an additive, was the preferred option.
Quite quickly after that, allegations were made as to the effect of MMT on
catalysts. This was in the late 1980s. Allegedly, it resulted in increased
tailpipe emissions. Studies were conducted in 1986 by the Royal Society of
Canada and the Canadian General Standards Board, and they both recommended that
we retain MMT in Canadian then-unleaded gasoline.
With the production of newer technology control -- that is, OBD-II, on-board
diagnostic systems, second generation -- in the early 1990s, the question of
MMT was raised again. The question was: Did MMT foul emissions sensors?
In 1993, we agreed with the vice-president of Ford Motor Company that both
industries should conduct a test. We wrote to the MVMA at that time, telling
them our understanding of what the test would entail, and that letter was
approved by Ford representatives on the board of MVMA. We agreed to such a test
but, unfortunately, the other auto makers on the MVMA board rejected the notion
of the test, and we have been fighting on the issue of whether and how to
conduct the test since then.
During the discussions, both the Canadian and American governments were also
reviewing MMT. Health Canada reviewed issues related to health and manganese
exposure. The U.S. EPA reviewed issues related to MMT, its impact on
emissions-control technologies and tail-pipe emissions - that is, pollution.
In 1994, Health Canada concluded that "the use of MMT as a gasoline
additive in Canada does not represent a health threat to any component of the
Their study was a real-life study based on real exposure as opposed to other
studies that were done using models. The same year, the EPA reported that the
use of MMT did not "cause or contribute to a failure of any emission
control device," after having received information from both the auto
manufacturers and from Ethyl. In the same year, EPA concluded that removing MMT
from gasoline would increase nitrogen oxides in the atmosphere by an average of
8 per cent of the standard. We will return to that point.
In essence, both Canada and the United States, in separate, impartial,
government reviews, determined that MMT use represented neither a health
concern nor an impediment to the efficient operation of OBD systems.
One would have thought at this point that the MMT issue would have faded into
well-deserved obscurity. Such was not the case, since in 1995 the federal
Minister of the Environment determined there was a pressing need to ban the use
of MMT. Since MMT did not pose a health concern, a ban using CEPA, the existing
Canadian Environmental Protection Act, was not possible. You must prove under
CEPA that the substance is toxic before you can regulate. Since MMT did not
increase vehicle emissions -- in fact, it lowers emissions -- using the Motor
Vehicle Safety Act was also impossible; hence the need for special legislation,
Bill C-94, which became Bill C-29.
My colleagues will talk about the flaws in that special legislation, and
problems we have as an industry in using special legislation to regulate a
minor additive in gasoline.
Here we are with Bill C-29. It is a ban which is not a ban. It prohibits neither
the manufacture nor the use of MMT within the boundary of any province. It will
still be widely used, and the bill does not, in fact, address the issues that
were raised as its own rationale, such as the environment, health, et cetera.
Mr. Brian Fischer, Senior Vice-President, Products and Chemicals, Imperial Oil
Limited: We believe Bill C-29 is a very biased and flawed piece of legislation.
If endorsed by the Senate, it would set several extremely prejudicial
precedents in Canadian public policy. The resulting legislation would adversely
affect the competitive position of an entire industry sector without
Most importantly to yourselves as senators, it will precipitate a series of
events resulting in protracted political and legal confrontations among the
federal government, provincial governments, the Canadian Council of Ministers
of the Environment, and several private-sector companies. These disputes will
centre on matters of domestic trade, international trade, the constitutionality
of the legislation, and issues of financial compensation.
While there are many theories as to what is behind the legislation, I want to
state for the record once more that if a case was ever made on scientific
grounds for the banning of MMT, we would be supporting the objective of Bill
C-29, not opposing it.
As an industry, we accelerated the phase-out of lead in gasoline, we have
introduced low-sulphur diesel fuel, and we have reduced summer gasoline's
vapour pressure, which reduces evaporative emissions. This was all with a goal
of improving the environmental performance of our products. Further, we have
proposed to the Canadian Council of Ministers of the Environment a national fuel
standard which, if adopted, will give Canada the most stringent national fuel
standards in the world.
These actions clearly show that our industry has acted, and will act, on fuel
composition to improve environmental performance where there is a need.
Our association has opposed Bill C-29 from its inception because of its lack of
foundation. Since the beginning, we have also suggested constructive
alternatives for resolving this issue. We have made repeated offers to the auto
makers, federal government departments, the provinces, and even to the Prime
Minister, to reduce the allowable limit of MMT in Canada to match that of the
United States, while conducting a comprehensive test program on MMT's effects
on vehicles. Further, we have agreed and stated that we will abide by the
eventual findings of such a test program.
While repeatedly rejected by the auto makers, and not supported by the federal
Environment Minister, our offers have been unconditionally endorsed by the most
federal departments, the provinces, the Council of Energy Ministers, and a
number of editorial writers.
We ask you to reflect carefully on the legislation before you today. We believe
you have the opportunity and the obligation to rework Bill C-29.
Mr. Jim Pantelidis, Executive Vice-President, Petro-Canada: I would like to
start by giving you some historical perspective on this issue. We cannot
rewrite history today, although we would like to do so. After almost two years
of debate within the cabinet and in the House of Commons, the government
invoked closure on Bill C-29 and passed the bill for review by the Senate.
However, the issues raised by the debates in the house have not dissipated with
a call of the roll. It is now the responsibility of the Senate to consider this
extraordinary piece of legislation.
Our chairman has already noted the question of motivation concerning the issue
of MMT. For a question so often asked, there are few clear answers, just many
theories of political gamesmanship and industrial power brokering. I will not
get into those theories today, but I will provide some facts.
There have been four primary justifications for Bill C-29 since its inception:
harmonization of fuel standards, health, air pollution, and the impact on
vehicle technology. We have filed with the committee's research staff all the
relevant documents referred to in my discussion. They are available to you for
further consideration. I will briefly summarize our views on each of these four
On the issue of fuel harmonization, when the Canadian government introduced its
MMT ban in 1995, MMT was not used in unleaded gasoline in the United States.
MMT has always been allowed for use in leaded gasoline, which is still used in
many parts of the southwestern U.S.
Following extensive testing of MMT in the U.S., in 1994, the Environmental
Protection Agency determined that it "will not cause or contribute to a
failure of any emission control device or system to achieve compliance with the
The EPA elected to defer issuing a waiver until December 1995, when so ordered
by the U.S. Court of Appeals.
Opening the U.S. fuel market to MMT not only eliminated the harmonization
argument, but passage of Bill C-29 would now create an exception to the
principle of harmonization.
On the second issue, health, CPPI has always taken the position that we would
abide by any decision of the Health Protection Branch of Health Canada in terms
of the use of MMT.
Several reviews resulted in the branch making the determination in 1994 that MMT
use did not represent a health threat. We understand this continues to be the
case. Clearly, if new evidence were to come forward supporting the need for
more caution in the use of MMT, we would want to know.
Please remember, it is our employees who work most closely with vehicle fuels,
and we are committed to ensuring their health and safety. For this reason, we
have continued to work with Health Canada in monitoring the issue. We, along
with the federal government and the Quebec government, have continued to
cosponsor the research work of Dr. Joseph Zayed, who I believe you will hear
from as well.
On the third issue of air pollution, our chairman noted earlier that the CPPI
continues to be engaged in a wide-ranging program of fuel redesign to improve
its environmental performance. The phasing out of lead, the reduction of
gasoline vapour pressure, the use of deposit control additives, the
introduction of low-sulphur diesel fuel, and use of MMT are part of a broad
strategy to make transportation fuels better. While we use MMT for its octane
enhancing qualities, it has also provided a benefit in terms of reducing
nitrogen oxide emissions which reduce urban smog.
Air quality data from Environment Canada's monitoring reports consistently
indicate a continuing improvement in Canadian air quality, notwithstanding
increases in vehicle ownership and use. Prohibiting the use of MMT could
quickly reverse these air quality improvements, particularly in regions where
urban smog is an issue.
For example, estimates developed by the U.S. EPA suggest that the removal of MMT
would result in an overall 8 per cent increase of nitrogen oxide emissions from
vehicles. This would result in a significant downturn in the Canadian air
quality, especially for large urban areas. For refiners to offset this NOx
increase through fuel formulation, we would have to severely limit the sulphur
content in gasoline, at a cost of roughly $2 billion. The technical and
financial demands entailed in this effort are well beyond the capability of
most if not all the refining companies in this country. The impact on the
refining industry could be substantial.
On the last issue of MMT's impact on emission control systems, Mr. Perez has
already noted the findings of the Royal Society, the Canadian General Standards
Board and the U.S. EPA on this issue. Ethyl Corporation will be providing
substantial additional information on their studies. Clearly, our agreement
with Ford in 1993 to sponsor a test program would indicate that even some auto
makers were uncertain of the facts concerning MMT use and wanted to find out
more about it.
We have not seen evidence that confirms the need for a ban on MMT use. Our
member companies have taken part in the Royal Society and the CGSB
deliberations. We have carried out our own independent research programs and
supported an independent review of the research by Ethyl Corporation and the
Through all of this, at worst what we saw was some anecdotal evidence suggesting
the issue needed to be reviewed. We agree. When the Prime Minister initiated
his review of the legislation last August, we told the inter-departmental
review committee that, having failed to enlist the support of the government
and auto makers in an independent test, we would do one ourselves and report the
results to them.
Over a three-month period, ORTECH Corporation and Protect Air of Mississauga
tested 1964 to 1996 model year vehicles which were equipped with the latest
emission control technology. These vehicles had an aggregate mileage of 11.4
million kilometres, accumulated by their owners under Canadian driving
conditions. The objectives of our study were to determine if any emission
problems could be detected and also to determine if the vehicles' computers were
noting any failures of the emission control systems.
The results indicated that the vehicles' emission control performance was
excellent. All the vehicles tested were well within the Ontario test standard,
which covers hydrocarbon, carbon monoxide and nitrogen oxide emissions.
In addition, tests of the vehicles' on-board diagnostic systems showed
problem-free performance in 184 of 185 vehicles. One vehicle had an indication
of a problem related to a faulty spark plug, but there was no evidence to
suggest the failure was related to MMT.
As with any sample survey of this nature, we did not expect to get conclusive
evidence solving the issue, but we did expect to get sufficient information to
either validate claims about MMT's impact on vehicle systems or at least give
some indication of a trend. We found a very high level of performance of
vehicle systems integrated with fuel containing MMT.
Beyond our own experience on this matter, many provinces have had the benefit of
hearing the technical arguments of auto makers and Ethyl Corporation and have
concluded that the evidence presented today does not lead to the conclusion
that a ban is warranted. What everyone has concluded, however, is that a test
program is required, something we have been trying to get going since 1993.
Currently, American auto makers are conducting their own $12 million test
program on MMT. This is a surprising contradiction to the view of the Canadian
auto industry which seems to feel that they know all there is to know about
What we proposed to the auto makers two years ago and again last summer was to
have an independent authority conduct a test program. Such a program should
involve active monitoring of the in-use performance of a range of Canadian
vehicles equipped with the current emission control systems and fuelled with
MMT and lasting for a period that allows enough mileage to permit some
conclusions to be made.
I would like to turn things over now to Mr. Routs.
Mr. Robert Routs, President, Shell Canada Products Limited: Mr. Chairman, I
would like to speak about consequences and conclusions.
We believe that this is an opportune moment for the Senate and each individual
Senator to rigorously examine this legislation and pass judgment on its merit.
If not considered closely, we know that Bill C-29 will be the catalyst for
serious conflicts between the federal and provincial governments caused by the
lack of appropriate review of the legislation and its premise.
You are already aware of the expressions of concern registered by several
provincial premiers and most environment and energy ministers on this point.
They have repeatedly requested of the Prime Minister and the federal
environment minister that this legislation be deferred until a proper
evaluation can be completed.
You are aware of the potential for Bill C-29 to disrupt domestic trade relations
through a challenge to the bill under the Agreement on Internal Trade. While
Alberta will launch the challenge, it has widespread provincial support.
You are aware through media reports of the possible challenge to the legislation
under the NAFTA which the product manufacturer, Ethyl Corporation, is
We will know that Bill C-29 is deemed to be beyond the constitutional competence
of the federal government. The legal briefs have been filed with the research
staff, and we understand that two provinces are considering a challenge to Bill
C-29 in this context.
With respect to our industry sector, we have been driven in recent years to
reduce costs and invest efficiently so that Canadian oil products remain
competitive with imports. By doing so, Canada continues to benefit from an
annual $2 billion trade surplus in oil products with the United States.
If unfounded and unchecked, Bill C-29 will cost our industry some $115 million
for capital equipment and some $69 million annually in operating costs,
according to estimates provided by a third party, Kilborn Engineering, to
Environment Canada. These expenses will be required to bypass the loss of MMT.
The cumulative effect of Bill C-29, in tandem with some other potential changes
in gasoline formulation, will jeopardize the future of several Canadian
refineries. Older and smaller refineries will be the most affected.
We believe there are several alternative courses of action the Senate could
consider prior to reporting the bill.
Number one, given the many requests for tangible evidence of the need for Bill
C-29, we believe an obligation has been created to require the completion of an
assessment of all technical issues, as would normally be conducted by any other
comparable legislation. This could compel the completion of a vehicle test
program as has been recommended so widely. This action could address directly
the many concerns raised by the provinces and ourselves about the need for and
merit of this legislation.
Additionally, several trade and constitutional issues have arisen since the
legislation was reviewed in the house. We believe an equal obligation has been
created to examine the potential consequences of Bill C-29 in these areas.
The Standing Senate Committees on Legal and Constitutional Affairs and Banking,
Trade and Commerce should have the opportunity to advise you on these matters
to ensure full consideration of the bill before final reporting.
Finally, the committee could further refer consideration of the bill to be
conducted in tandem with any upcoming discussion of the Canadian Environmental
Protection Act. The legislation makes provision for examining fuel and vehicle
issues within the context that a need for any regulatory measure must be
validated in an open manner.
We believe that Bill C-29 would not exist today if required to meet the test of
scientific legitimacy inherent in most other existing federal legislation. We
appeal to this committee to exercise your best judgment in encouraging the
development of responsible public policy.
Senator Kenny: If the on-board diagnostic systems on the vehicles being produced
today are impaired, are we likely to see increases in vehicle emission
Mr. Fischer: The evidence that Mr. Pantelidis put forth through the ORTECH test
that was conducted would indicate that that is not the case and that the
emission equipment is not being impaired.
Senator Kenny: That is not my question. If it is impaired, would we see
Mr. Fischer: We would not know until it happened. We would have to measure it
once we understood whether it did impair.
Senator Kenny: You are just ducking that question, then.
Mr. Fischer: I do no know the consequences. We have not seen the impairment of
the OBD systems.
Mr. Perez: Your question goes to the heart of what has been claimed by the
Minister of Environment last July to justify his reintroduction at third
reading of the legislation. The argument we have heard is as follows.
If MMT or anything impairs the OBD-II systems, the auto manufacturers will have
to disconnect those systems. Otherwise, it will give false warnings. If the
driver receives false warnings or if it is disconnected, he will not know if
his car is or is not actually polluting, if and when it happens. There is a
possibility that, down the road, some of those cars will exceed the emission
standards without knowing it. Therefore, there will be some increased level of
Even if you accept, which we do not, that the evidence is that those sensors
will be fouled, and if you look statistically at what has happened to sensors
in the U.S. in the past three or four years, the amount of increased pollution
would be minuscule compared to not inspecting cars and certainly compared to an
8 per cent increase in NOx, which is a gigantic step in smog production,
particularly in large cities such as Toronto.
I do not know what it would do, but obviously OBD-II systems have been affected
by many things in the U.S. in the past three years without MMT. GM, among
others, has asked seven states for relief from regulation because of problems
with their OBD-II systems and has disconnected them while waiting to correct
those issues. Clearly, they are not MMT related. They have stated altitude in
Colorado, humidity in some states and bad driving habits as the causes of these
problems. In Canada, they are stating that MMT is the problem.
Again, we are not disputing that there would be a remote possibility that it has
an effect. All we are asking is that we work on the evidence. We will abide by
the results. We have been saying that for three years, but we have gotten
I hope I am addressing your question.
Senator Kenny: You are.
Related to that, in the event that OBD systems broke down, would consumers be
penalized by increased service calls and the associated costs and inconvenience
related to that?
Mr. Perez: If they break down because of a manufacturer's defect, there will be
inconvenience, but it will be the liability of manufacturers. That is a large
issue in the minds of all manufacturers when they are introducing new
technologies. That may be something this committee should keep in mind. If it
is caused by our fuels, we will be liable. We will get out of that problem long
before we are liable for anything. If it is an issue, it will not be an issue
for long because we can stop using MMT in 24 hours.
Senator Kenny: Mr. Pantelidis mentioned the point that your association is very
much in line with the government's position on reducing motor vehicle
pollution. Specifically, you made reference to Health Canada tests. You are
aware that those tests did not relate to pollution from malfunctioning emission
Mr. Pantelidis: Yes, we are aware that they were not.
Senator Kenny: Is that not the issue that we are into here? It is not a question
of whether MMT itself is a pollutant -- the question is whether the product
gums up the OBDs.
Mr. Pantelidis: Basically, there are two issues. One issue initially was the
potential health impact of MMT relative to the manganese related to MMT. That
is what we referred to when we said that Health Canada's position had been that
their study showed that MMT did not cause health issues related to manganese.
In terms of health issues related to overall broader emissions with the on-board
diagnostic systems working faultily, there has not been a conclusive test
program. That is what we have been vying to get going since 1983.
Senator Kenny: I understand that. When you referred to the Health Canada study,
though, it really did not relate to whether or not we would see increased
pollution as a result of the OBDs being gummed up, did it?
Mr. Pantelidis: No.
Senator Kenny: I have a question for Mr. Routs. You made reference to the cost
figures. You specifically referred to the Kilborn study. You suggested it was
done for Environment Canada. It is my understanding that it was done for the
Canadian Council of Ministers of the Environment. The figures that I have are
significantly different than the $2 billion that Mr. Pantelidis mentioned or the
figures that you had.
The costs that came from the Kilborn study were $115 million in capital
expenditures and $50 million in ongoing expenditures. It netted out to $5 per
year per consumer.
Is that consistent with what you have, Mr. Routs, or is that something
Mr. Routs: The capital figures and the operating cost figures for removal of MMT
are about the same as the ones that I referenced.
The figure of $2 billion to obtain the same NOx or nitrous oxide reduction deals
with the equivalent sulphur reduction that we must do to obtain the same 8 per
cent reduction in nitrous oxide. That means major investments in our refineries
in order to address the sulphur issue.
Mr. Pantelidis: Ultimately, it points out the real value of MMT.
Senator Kenny: We have a list of companies, such as Amoco, Anchor, ARCO, BP,
Chevron, Conoco, Exxon, Hess, Marathon, Mobile, Penzoil, Phillips, Sun and
Texaco, which are not using MMT. Why is it a problem for you and it is not a
problem for them?
Mr. Pantelidis: Obviously, you are mentioning a lot of U.S. companies in this
Because of the ban on MMT in unleaded fuels in the U.S., they were forced to
cope with the issue and invest accordingly to avoid having to use the MMT,
which they were not allowed to do. In retrospect, had they not been required to
remove MMT, they could potentially have saved quite a bit of money in capital
expenditures in the U.S. industry.
It is interesting to note that in the last 10 years, the U.S. refinery industry
has spent close to four times what we have spent in Canadian refineries to cope
with environmental legislation. It has moved their industry from a leading
world-wide position competitively to, in many categories, the second-most
efficient industry in the world. Many of those refiners today would tell you
that they have not received a return for their investment and that in many
cases the investments were not the best alternative they could have chosen.
We view this debate on MMT and the potential avoidance of having to remove MMT
as a potential advantage for the Canadian industry, especially if there is no
good environmental rationale for removing it. That is part of our premise. If
we could spend our money on really helping the environment while at the same
time providing a competitive position for our refineries in Canada so that the
industry remains healthy, we would have the best of both worlds.
Mr. Perez: The fact that they are using their investments to create octane also
means that in the U.S. they are running more crude oil to get the same
equivalent of gasoline, which means they are producing more CO2 and more gases
at the refinery level. Our refineries are more environmentally efficient when
it comes to that because we use less energy to produce the same amount of
Senator Hervieux-Payette: Is this a financial problem or a technical problem? It
seems to me that we are talking two languages. First, is this product
incompatible with the type of equipment being fabricated by the automobile
industry and therefore they are asking you to change your product, or are you
saying, "Adapt the product and things will go well"?
It is hard to solve a problem when we do not know exactly what the problem is.
Mr. Perez: It is a financial issue. It is not huge, like sulphur or others would
be, but it is significant for some refiners, particularly the small ones. It is
not an overwhelming financial issue; it is money wasted.
It is a technical issue because we cannot get the answers. More importantly, it
is legislation which creates a precedent.
Instead of letting the two industries negotiate, as they do in the U.S. and
Europe, the Government of Canada has clearly taken sides. It has interrupted a
negotiating process which was not going well, I agree, and removed any
motivation for the auto industry to continue negotiating with us. Now all they
need do is wait for the U.S. results or create something better for themselves
in Canada and use that as a precedent. What truly terrifies us -- and I use
that word consciously -- is that the precedent will then be used on other
components of gasoline.
The real issue for us is whether we will be footing the next $5 billion of
environmental bills without a chance for study, without a chance for rationale,
and without any chance for negotiating because a precedent has been set.
Newspapers have quoted political staff of the current minister as saying that
most of the next gains in air pollution will come from fuel purity. That was in
the Montreal Gazette a few months ago.
We want to negotiate. If we can survive as a competitive industry, the country
will be better off. If we cannot survive, we cannot survive. However, it is a
certainty that if there are no negotiations, and if we end up footing the next
$5 billion bill, half of the industry will disappear. Everything east of
Alberta will disappear.
That is what is at stake. That is why we are so adamant in telling the federal
government not to pass legislation which sets such a bad precedent. That is the
real issue for us.
Senator Hervieux-Payette: The users will pay the bill. Where do we stand among
the Group of Seven or the OECD countries with respect to the cost of oil and
making an abstraction of taxes? There is your price and then there is what
everyone is adding. We know what the Europeans are adding.
Since our country has been targeting world trade as a major trend for all our
industries, transportation has become very important. Where do we fit
internationally in terms of the energy cost for the transportation of our
Mr. Pantelidis: Let us look at the refinery industry because many of the costs
we are talking about today are related to that industry. That industry made
great strides in the last five years to become world competitive.
Salomon Brothers ranks refineries across the world in 10 categories. In a number
of categories, we have moved up to first position relative to our competition,
including the U.S. refineries. One reason for that is the needless expenditures
which refineries in the Unites States have had to make which have put them in a
less competitive position.
If you were to make the hypothesis that we were forced to spend needlessly and
without good rationale in a number of areas to improve our fuels, the net
outcome of that would be either a closure of our refineries or our refineries
becoming less competitive worldwide. The net outcome could be that we would
have to rely more and more on imported finished products, especially in Eastern
Canada. That would obviously affect the balance of trade.
Even more punitive would be the result that the net cost of our product to our
consumers would increase substantially. That could lead to any number of things
-- a decrease in demand, an increase in the costs the consumer pays and, at the
end of the day, our industry being in a less competitive position than it is
To what extent that would happen depends to a large extent on how much money we
must expend over the next 10 years for environmental and competitive reasons.
In very simple terms, it is a foregone conclusion that shutting down refineries
will be a net negative outcome for Canada.
Senator Hervieux-Payette: You spoke about history, and I need some clarification
there. Fuel has always been a factor with car manufacturers. Are they breaking
the process in terms of testing your product with regard to their mechanics? It
is a partnership. They cannot develop a car without fuel. If cars are not using
your fuel, then, possibly, they could use water. That is something everyone has
been dreaming about for a long time, especially those of us in Canada.
It is important that you supply us with an economic analysis of this situation
in order for us to make a decision. We need to know how it will affect Canada's
competitiveness with regard to the quality of fuel, since that is something we
do not want to sacrifice.
What is the situation now in terms of the breakup of the marriage between the
car industry and yourselves?
Mr. Fischer: Clearly, as we pointed out, the issue around this current piece of
legislation is far beyond just MMT. It is the precedent it sets. That precedent
says that whenever there is an area of disagreement or a negotiating difficulty
between the oil industry and the automotive manufacturers, we will resort to
this type of legislation to resolve it. That is because, clearly, it chooses a
winner and a loser. It is our concern that this process will be invoked on
other even more expensive gasoline issues.
In the United States and in Europe, there is a close working relationship
between the automotive manufacturers and the oil industry, although it does not
always run smoothly. In those jurisdictions, the government has not elected to
choose sides. They have elected to allow the industries to work out their
issues and resolve them. That is the fundamental difference between what has
happened in this case and what goes on in other countries.
Mr. Pantelidis: Over the last few years, we have attempted very proactively to
try to get meaningful negotiations between ourselves and the MVMA. As I mention
in my brief, that has been done with outside objective measurements and bodies
assessing the issue.
Mr. Fischer and I visited Minister Copps about a year-and-a-half ago. We
basically encouraged her to try to bring the MVMA to the table. We were still
positioned at that time to say, "We will undergo an independent study on
this issue and add according to the results." We encouraged Minister Copps
to do that. We left her office with the impression that that is what she would
The net outcome of that meeting was that she informed us, through public means
-- and I am paraphrasing her comments -- that the two of us should meet to
resolve this issue, and if we could not, the government would pass Bill C-94.
The net result of that was that the MVMA said "We do not need to negotiate
if we cannot come to an agreement because we will not talk to you anyway. The
bill will be passed." That was the extent of the cooperation we got from
the environment ministry at the time.
Senator Hervieux-Payette: When lead was removed from gasoline over the last 25
years, I suppose that you had to conduct some tests and then adjust your
formulae. You were not doing that on your own without contributions from the
car industry. Was there a break in your partnership? What role do you see the
government playing in ensuring that you are serious about cleaning up the air
while at the same time ensuring that we move at a speed which will keep us
competitive in the world? Was there a break in this relationship two or three
years ago because of the U.S. situation?
Mr. Routs: Our company has been involved in discussions with the auto industry,
both in the U.S. and in Europe. An issue like this has never come up. Usually
we have been able to come to some agreement.
It has been repeated a number of times that we have undertaken every effort in
the book, even going to the Prime Minister when we said, "We want this
cooperation and we want to resolve this situation." There is a willingness
on our part to come to the table. The other party seems to want to wait until
the government intervenes.
With regard to economics, I do not know if most people around this table are
aware that this industry makes large volumes of fuel. Any issue can be made
ridiculous in terms of cents per litre and cost. The minister has said, "This
issue will cost the industry .2 cents per litre, so what are they worrying
about?" Our profits are less than 1 cent per litre. Some members of the
industry make more, some make less. If you put it in that context, you can see
that .2 cents on 1 cent is quite a bit.
Mr. Fischer: The closest we have come to being able to elicit input and
collaboration from the MVMA was in late 1994 when we established an independent
panel of three people. We asked both the auto manufacturers and Ethyl Corp. to
bring forward their data. At that time, we said that we would abide by what
comes out of that panel.
The conclusions of that panel were somewhat disappointing. They concluded,
first, that views held by Ethyl and the auto manufacturers were diametrically
opposed. Second, they concluded that the data and conclusions were
irreconcilable due to different vehicles, test conditions and scientific
rigour. Third, they concluded that Ethyl had used more controlled testing
protocols whereas the auto manufacturers relied heavily on warranty rate
differences between Canada and the U.S., inferring that those differences were
due to MMT. They concluded, and continue to support the position that we have
taken, that the only way to resolve this issue would be to put together a joint
test to do so. We have been unsuccessful in doing that, largely because this
bill supports the removal of MMT, which has not fostered that type of joint
Mr. Pantelidis: The other point we should underline here is that, from our
viewpoint, this is really an issue of process. We have examples which show that
when the process was right, the outcome was correct. I go back in time to
1992-93 when we first started talking about low sulphur diesel. That process
involved ourselves, the MVMA and various departments of government. The process
followed a scientific approach. It came to a conclusion which required the
refineries in Canada to spend a considerable amount of money to reduce sulphur
in diesel, but it was based on scientific data. On a voluntarily basis, not
through legislation, we and the refineries undertook to reduce sulphur on the
basis of that scientific data. That was in conjunction with the MVMA. Because of
the process, we both came to the same conclusion, one by which we abided.
Putting the MMT issue aside, which is somewhere in the middle, it is the same
process we are now using to determine the use of sulphur in gasoline. In this
particular case, a number of departments in the government, the MVMA and
ourselves have agreed to a study to come to a conclusion by which we will
Here are two processes on either side of MMT where we have the full cooperation
of government and the MVMA. I believe in both those circumstances that the
outcome will be something by which we can all abide.
The MMT issue is stuck in the middle. I am not sure if that is because the issue
was politicized early in the process, or whether there is a reason the MVMA is
not putting forward as to why they do not want to follow the traditional
process which has proved successful in the past and which we hope will prove
successful in the future.
Mr. Perez: If Environment Canada had provided leadership in 1993, 1994 and 1995,
the issue would have been solved before 1994. I think the bureaucrats wanted to
do that. They have done it with us. We work very well with them on 99 per cent
of the issues.
You are being kind. In 1995, when Bill C-94 was introduced, it immediately
became a highly charged and politicized issue. If you refer to the Debates of
the House of Commons, the tone employed was describing us as people leaking
information and being untrustworthy.
Suddenly, in one month, it became a "do or die" issue politically.
Instead of having to prove something technically, we found ourselves having to
fight a political battle, which my industry is not used to doing. That is when
we started talking to provinces and getting allies. It has been politicized
above whatever the department itself wanted, and the issue became controllable
at that point.
The Chairman: I must comment that, coming from the west, I have seen your
industry fight the odd political battle. I am not sure you are quite as naive
about that problem. You might want to comment on that before we move on.
In a press release issued in September of 1996, you were quoted as saying:
We have already initiated a technical review of MMT and will provide the results
of that analysis to the federal government upon completion next month;
You have done that.
... a full comprehensive study could be completed in a few months, with the
proper support of the government...
If I were the motor vehicle people looking at this with the pressures which are
apparently on them, from a credibility point of view and considering the nature
and complexity of the issue, I would wonder if you were serious when you
indicated you could do this in a few months. One of your letters referred to
three months. Do you feel it is reliable or credible that you could do that type
of comprehensive study within that short period of time?
Mr. Perez: All we would have to do is take a sample of 300 cars and add a few
hundred more. First, we would ask Environment Canada to lead the study. We want
the government to be in charge of the process of that study, similar to what we
are doing with sulphur. We would take those cars off the road and drive them
under hard conditions, on the bench or on the runway, and get them to the
mileage that would satisfy the auto manufacturers as being the mileage that
would meet their warranties.
How long does it take to go from the 40,000 kilometres that the cars have today
to 160,000? Probably a month or month and a half of constant running. While
doing that, you periodically check the computer codes in the car. If, at the
end of that, you have codes which indicate fuel failure or sensor failure, you
know you have a problem. If the codes do not say that, you know you have no
It is not a difficult test. We are not asking for something beyond a reasonable
doubt. We want MMT to stay out of the legislative process, and we want to reach
a compromise. We have told Minister Marchi and Minister Copps that we do not
want the legislation. We do want some evidence that those claims are real. If
they were there, and if government led the study, I believe it could be done in
three months. If it is a question of resources, we will provide the resources
-- the cars.
Senator Taylor: I am glad you made that comment about politics in the oil
industry. I thought perhaps I was in an entirely different hearing for a
I have a short technical question on the difference between MMT as an octane
enhancer, regular gasoline, and premium gasoline. Is there any MMT in regular,
or is there just less in regular than there is in premium?
Mr. Pantelidis: Are you referring to Canada?
Senator Taylor: Yes.
Mr. Pantelidis: If I may speak for our refineries, we generally use MMT in all
our grades of gasoline in equal dosages. The way it is used is that it enhances
the total octane pool. You use it as an additive to your total octane before
you actually start to split it between premium and regular.
Senator Taylor: You are speaking about cooperation. Several years ago, the
automobile industry offered to accept a solution whereby you would do as you
did in the past with ethyl, which was to have two pumps: those with MMT and
those without MMT. Therefore, if your mechanic told you that MMT was not good
for your car, you could buy it from the other pump. You say you refused to do
that. Why was that?
Mr. Fischer: It was the cost of putting in another segregated system for yet
another unique product, which an MMT-free gasoline would be. MMT exists in all
grades of our gasoline presently. You would require segregated distribution
facilities in your refineries. More importantly, we would be required to
install some 20,000 to 30,000 additional tanks at our service stations to
segregate it, as well as additional pumps.
If we had some evidence that MMT should be removed from gasoline because it
causes harm to OBD systems or raises health issues, we would not put in that
type of system; we would simply take MMT out of gasoline. However, we could not
justify the cost of a completely segregated system for MMT.
Senator Taylor:When you pull up to a Shell station, you have quite a time
deciding which pump to go to. They have everything under the sun, starting with
70 octane all the way up to 105, which might be so high it would pull my old
car's motor right through the radiator. I hope they are not all coming out of
the same tank.
Mr. Routs: My colleague referred to the number of extra tanks we would be
required to put underground. Today, we put two or three tanks underground.
Senator Taylor: Do you get six grades out of the three tanks?
Mr. Routs: You are not far from the truth. For the octane question, we use two
underground tanks and blend to the required octane. You are still getting the
product you are paying for, but it is delivered in different ways to the
Senator Taylor: My last question is one of motives. This is probably more legal
or philosophical. If, indeed, you are right that the manganese does not foul up
the OBDs on the automobiles, and, indeed, if things happen and manganese is not
used in gasoline and yet two years from now these OBDs are still fouling up,
would the automobile industry not have lot of egg on its face? Why would a huge
industry like the automobile industry ask you to cut back on manganese when, if
it was done, it would not make any difference? I cannot understand what motive
you are ascribing to the manufacturers if they do not have an honest belief
that manganese is ruining their OBDs.
Mr. Perez: I would be happy to answer that question on motivation.
Several years ago -- I do not have the details, but it is clear in my mind, as
it is in yours, I am sure -- Chrysler Corporation issued statements saying that
if anyone uses ethanol in gasoline, they would void the warranties. The
warranties for a period of time were voided if people used ethanol in their
cars. You will not hear any manufacturer today tell you that their engines
cannot sustain a mixture of ethanol with gasoline, so why did they make these
There is no question, Senator Taylor, that if you had fewer additives in
gasoline and if some components were reduced, it would be technically easier
for their engineers to make their systems and perhaps make them more reliable.
Conversely, if they demanded less octane, it would be much cheaper for us and
it would be environmentally more sensible to produce gasoline. Octane is the one
which requires more energy, more severity, additives, et cetera. These are the
issues we should be discussing back and forth with them.
Would they have egg on their face? I will refer you to the ethanol issue. I
refer you to the fact that, in several states, they are claiming that their
sensors are not working, without saying it is MMT-related.
I do not know. We are really puzzled by the variety of claims and how the
rationale shifts: harmonization; fouled sensors; plugged catalysts; spark
plugs; health issues; manganese. Obviously someone is running after rationale
to justify something, but in the case of the manufacturers, they have a simple
way of doing it: On a preponderance of evidence that there is a technical issue,
we are out of MMT in 24 hours.
Senator Kinsella: Mr. Chairman, the witness mentioned meetings they have had
with Minister Copps. Frank Vena, who was a witness from the environment
department earlier this morning, in a memo that he prepared for the minister in
preparation for one of these meetings, wrote this:
With respect to health impacts of manganese, there are areas in Canada for
example, near steel making facilities in Hamilton and Sault Ste. Marie, where
airborne manganese levels sometimes exceed the concentrations that Health
Canada would consider safe. These elevated levels of manganese are not caused
by MMT in gasoline, but by the industrial steel making sources. Given the
Minister's stand on MMT in gasoline, Ethyl Inc. and fuel producers may be aware
of this information and may draw this to the Minister's attention with a view
to demanding action in this area if the Minister continues her pursuit of MMT.
In your meetings with Minister Copps, did you raise the question to which that
memo alludes, that if the concern is with manganese and the environment, there
is more concentration caused by the steel mill in Hamilton than by automobiles
Mr. Fischer: We had a meeting with Minister Copps in Hamilton in October of
1994. We desired to meet with her at that time because she was positioning a
favourable position in the media towards the motor vehicle manufacturers. We
restricted our dialogue to two points. One point surrounded the health impacts
of MMT as ruled by Health Canada because our subject was MMT, not steel mills or
what have you. We did not raise that as a particular issue. The other point was
our encouragement for her to help us get the motor vehicle manufacturers into a
process to resolve the issue, rather than taking sides and leaving them with an
impression that, if they did nothing, that their way would be met.
To the best of my knowledge, in any meetings in which I participated, we
restricted any discussions or comments on health issues on manganese related to
what goes into the environment from the use of MMT, which has been monitored in
Canada for the past 17 years or so.
Senator Kinsella: You mentioned what I took to be a compromise proposal in your
testimony earlier this morning in reference to reduction of MMT, reduction in
quantity. The government may persist with this piece of legislation. They have
the majority and they can insist. If the government persists, notwithstanding
receiving no answer on whether MMT damages the environment or causes health
damage or gums up the OBDs, should this committee attempt to get into some
detail on your proposal or to make an amendment to the bill dealing with, not
the prohibition of the transportation of MMT, but rather with the real issue of
the manufacturing of MMT and finding a way in which we could have a reduction?
That is the general question.
If the answer is that yes, in a bad situation we should be exploring that, how
much of a reduction are you speaking of in terms of the quantity that is put
into the finishing process? What effect will that reduction have on the NOx
phenomenon which, as Premier Savage says in his letter from Nova Scotia, is a
positive benefit of MMT? Would you comment on that?
Mr. Pantelidis: We have any number of times volunteered in conjunction with
launching a test on this issue to reduce from 18 to 9 milligrams per litre.
That is a 50 per cent reduction.
What impact will it have on emissions? It is hard to say because utilization
between 18 and 9 differs across the country depending on the age of the
refinery, how much octane is needed, et cetera. However, we were willing to
reduce an average of 9 across the country. We did that more in conjunction with
the number which was actually tested by Ethyl Corporation in the U.S. in their
tests to determine whether there were any impacts on the OBD-IIs or on the
emissions from vehicles.
We figured that if we could align ourselves with proven test results, we could
then get the agreement from the auto manufacturers to proceed with the tests
and maybe, at the same time, alleviate some of the concerns which might be
there relative to manganese, which we feel are unfounded.
Senator Kinsella: Mr. Fischer, if this approach were adopted, how would that
impact on the Imperial Oil refinery in Dartmouth, Nova Scotia, in terms of its
ability to achieve the necessary octane level with the equipment that is in
Dartmouth but with the reduction in the usage of MMT?
Mr. Fischer: Let me clarify what Imperial Oil has stated publicly about our
refinery in Dartmouth.
Our refinery in Dartmouth, Nova Scotia, is the last refinery in Nova Scotia. It
is not advantaged by scale. We are constantly challenged by "survivability"
but have been successful in surviving. Over the last 18 months, the refinery
has reduced its cost structure by $11 million and a further 60 staff.
The removal of MMT adds about $4 million in costs. Essentially, 40 per cent of
that reduction is wiped out by the unnecessary removal of MMT. I would view
that as a major setback. It is not something that would force us to close our
refinery. We would go on to look for other ways to reduce our costs.
In answer to your specific question, I would guess the impact of restricting MMT
to half its present level would result in a $2 million cost impact on Dartmouth
rather than $4 million.
Senator Kinsella: I represent the province of New Brunswick, along with other
colleagues from my province. We have in Saint John the major Irving refinery.
As a lay person, I spent an afternoon there trying to understand as much as I
could of the process.
I was pleasantly surprised, Mr. Chairman, at how tidy an oil refinery is.
I understand that Irving is not a member of the CPPI. Have you had consultations
with them? It is my understanding, and I would like to put it on the record if
it is true, that they are in agreement with the position of CPPI on this. Is
Mr. Pantelidis: Yes.
Senator Kinsella: They have been manufacturing MMT-free gasoline, mainly for the
New England market, for a number of years. Therefore, they would be able to
manufacture for the Canadian market but with some added capital costs. Is that
Mr. Pantelidis: Capital and operating costs.
Senator Kinsella: It is my understanding that the Minister of the Environment in
the province of New Brunswick has expressed his opposition to this bill as
The question was raised here as to NOx reduction, and we are receiving various
numbers. What are the factual numbers?
Mr. Fischer: I think Ethyl's data would show some reductions up to 20 per cent.
The study we have relied on was provided by the U.S. Environmental Protection
Agency on July 1, 1994. The letter was written by the chief of data management
analysis at the EPA. It said that test data for NOx showed a substantial and
consistent decrease for this pollutant and that the average across the vehicle
models was 8 per cent of the standard. That is where we got our figure of 8 per
Mr. Perez: Actually, senator, we would like to table the data with the
committee, if we could.
Senator Cochrane: Mr. Perez, could some marginally profitable refineries,
especially in Atlantic Canada, be forced to shut down as a result of this
legislation? I am thinking particularly of the Come By Chance refinery in
Newfoundland which has been dealing with the United States in regards to MMT.
Could you tell us perhaps how many jobs would be at stake if they do shut down?
Mr. Pantelidis: It is hard to pinpoint one particular piece of legislation as
the cause of a shutdown of a refinery, but it is a foregone conclusion that a
number of older and smaller refineries in Canada, given an accumulation of
different pieces of legislation related to environmental expenditures, will at
some time get to a point where they are no longer viable.
As to your question with respect to the Come By Chance refinery, we cannot speak
on their behalf. Frankly, we do not know enough about their operation to
determine whether this legislation or this legislation in conjunction with
something else might put it in jeopardy. However, I want to stress that there
is no doubt that a number of smaller and older refineries, through an
accumulation of different pieces of legislation on the environment, will be
forced to leave their present locations.
You asked about the number of jobs that might disappear. Generally speaking, a
refinery employs anywhere from 200 up to 500 employees, so the number of jobs
in jeopardy would be 200 to 500 times the number of refineries.
In the recent analysis done by CPPI, refinery jobs were classed as the second
highest in terms of complexity of manufacturing jobs and contribution to the
overall economy. They are extremely valuable to the economy because of the
gross disposable product they generate.
Senator Cochrane: Mr. Chairman, just for the record, I have received information
stating that the Come By Chance refinery will be adversely affected if this
legislation goes through.
Mr. Perez: That refinery is not part of CPPI. I had some informal discussions
with them and was told that one of the most perverted, although unintended,
results of this legislation is that their competition in the United States, the
small refiners, will be using MMT and lowering their costs at the moment when
the Come By Chance refinery will not be able to use it because you cannot export
gas with MMT. They will lose some of their competitiveness against their U.S.
competition. This is why they have stated that it would adversely affect them.
Senator Cochrane: I know that you have repeatedly suggested to the federal
government that an independent assessment be done. In fact, this assessment
could have been done in the period since this legislation was first introduced.
Has the federal government indicated to you why it refuses to do so?
Mr. Pantelidis: They have never really given us a good rationale. As a matter of
fact, the indication we received from Minister Copps was that she would
endeavour to get the MVMA to agree to a joint test. This was just prior to the
release I mentioned earlier where she said publicly that if the MVMA and the
CPPI could not come to an agreement, the government would introduce legislation.
That was the only attempt I know of -- a half-hearted one -- to encourage us to
work this thing out.
The Chairman: Would you speculate as to why this is happening after the
assurances you seem to have received? Can you speculate a little for us as to
what you think caused the turnaround?
Mr. Perez: It has been claimed several times that those studies were in the
possession of the minister.
The Chairman: Which studies?
Mr. Perez: Studies proving the facts alleged by the MVMA. In the House of
Commons, the minister has stated on at least two occasions that those studies
A question was asked during the debate: "Then why do you not share it with
everyone?" The response was that famous quote: "If I give it to CPPI,
they will leak the results of those studies. They are confidential. I, as
minister, am convinced that those results are correct. I do not need more."
The inference was that studies existed, but they would not be given to us, and
that whatever their content was, it was sufficient for the minister to decide.
Senator Rompkey: Just to continue on that particular point, I am a little
puzzled because obviously the Canadian auto makers are being portrayed as the
bad guys in the game. That does not square with the Canadian image at all. We
are good guys and we do not go around being bad guys.
I am told that the European auto makers cooperate and the American auto makers
cooperate. I thought there was some relationship between the American auto
makers and the Canadian auto makers, but perhaps I am wrong.
Mr. Perez: They are the same companies.
Senator Rompkey: You are telling me that the American auto makers cooperate and
the Canadian auto makers, which are the same companies, do not cooperate.
Mr. Perez: Yes.
Senator Rompkey: Can you explain that?
Mr. Perez: I cannot, but I can speculate.
First, the facts are absolutely clear. In the U.S., Ford, GM and Chrysler are
members of a board that also has four oil companies on it. It represents both
industries at the CEO level. They, in turn, have a technical committee which
advises them. The whole process is known as U.S. auto-oil. They cooperate. They
have ongoing discussions. There are minutes. Those minutes go to the companies.
The EPA acts as an observer.
Senator Rompkey: The difference is that the different corporations cooperate.
Mr. Perez: Actually, they cooperate so well that Environment Canada and us and
the MVMA are undertaking a review right now. Our job between now and the end of
April is to go to the U.S. jointly and get from the oil and auto industry in
the U.S. all the information they have regarding sulphur. It will be the next
issue with Environment Canada. It is well managed. I want to say that right
away. They cooperate. It is their way of life.
Why do they not do that here? Well, perhaps they do not have to do it. These
three companies are Canadian subsidiaries, 100 per cent owned, of U.S.
companies. There may be some difficulties in negotiating different positions in
the U.S. and Canada. I do not know that. I am speculating here.
The other speculation I can advance -- and this one, I believe, is well founded
-- is that they have been trying to achieve breakthroughs in Canada for their
industry which they can use as precedents in the U.S., Mexico and elsewhere. I
do not doubt that they would like simpler fuels, just like we would prefer
lower octane. That is not the issue. I think that is why they do not negotiate
because they do not have to. For them to have to negotiate, we must get them
into a process like sulphur where the Government of Canada acts like the honest
broker. However, we have not had any face-to-face dealings for a long time.
Mr. Pantelidis: I do not want to give the impression -- I want to make sure that
we are fair about this -- that we have never negotiated or that we do not plan
to negotiate in the future. We have had a few successes with the MVMA.
If you look at MMT, my only speculation as to why we have had problems with this
specific issue is that at the time it was being considered for removal in
Canada, it was not used in the U.S. When we were negotiating with the MVMA back
in 1993, the Canadian counterparts had very strict instructions from the U.S.
telling them -- I am speculating now -- that by no means should they ever agree
to not have MMT removed from gasoline in Canada because we had been successful
in the U.S. not to reintroduce it. That goes back to 1993.
When it was eventually reintroduced in 1995 by the U.S. Supreme court, for all
intents and purposes the game changed in the U.S. That does not mean, though,
that the U.S. auto manufacturers are in agreement with the reintroduction of
MMT. I suspect one of the reasons they are going through this test in
cooperation with the oil companies is that ultimately they believe the outcome
might say that MMT should not be used. In the interim, they do not want the
Canadian auto companies to make any commitment to add MMT back to gasoline in
case it is eventually removed again in the U.S. A process of timing in terms of
this issue caused this disagreement.
Senator Rompkey: Earlier on, the remark was made that perhaps MMT had become
politicized. What does that mean? My impression is that this is not a burning
political issue in the country. The water cannons are not out to disperse the
demonstrators. We are heading into an election. We want to question Mr.
Eggleton, but as far as we know, the Prime Minister and the cabinet want this
bill passed. How has the issue been politicized?
Mr. Perez: You are absolutely correct. The context is that you have a minor
piece of legislation, in terms of its desired effect, removing one additive
from gasoline. It suddenly becomes a political issue in the sense that eight
provinces are opposed. Their environment ministers make representations; their
energy ministers make representations; and their premiers make representations
in three cases. Quebec goes to the extra step of voting unanimously twice in
their national assembly, first a warning shot and then a blank. Why did all of
that happen? Even if we were accused of having provoked it, surely we cannot
convince a provincial government to do something that they would not view as
being in their interests.
It was politicized, I think, because of what was used technically to make that
legislation happen. One of my colleagues stated here that they could not use
CEPA. They could not use the motor vehicle safety acts because they do not
increase pollution, so they used a trade act. That is where the trouble began.
Now you are using something which restricts trade. You are restricting the trade
of a substance which has no health impact -- Health Canada -- and which has no
emission impact -- Transport Canada. Environment Canada, as far as I know, has
never said it is a big priority of theirs at a departmental level.
You are invading provincial jurisdiction very clearly. In doing so, you are
running against the principles of an accord signed a year-and-a-half ago -- the
agreement on interprovincial trade -- which states that those kinds of things
will not happen.
We are afraid of precedents such as sulphur, et cetera, but think of everything
that could be banned by simply saying it is legal inside the province but that
no one shall transport it across the border of the province. That is what got
several provinces up in arms, and that is why I believe there will be those
kinds of political consequences if the bill passes without amendment the way it
Alberta has already stated publicly that they will challenge the bill under the
agreement on interprovincial trade. They have already given notification that
they will proceed in that manner. They are awaiting Royal Assent to do so.
Two provinces are examining the constitutional validity of Bill C-29. I cannot
speak for them, but I believe they will challenge the bill.
This bill has become politicized because it is using a sledge hammer to get rid
of a little fly.
So many other things could have happened to prevent that from happening up to
three months ago and up to now. Give us a chance to test, and we will promise
you, just as we promised the Prime Minister, to abide by the results. If you do
not give us that opportunity, we will have been denied by the minister, the
cabinet, the house and the Senate of a very fundamental thing.
Are we to be legislated component by component in our products? That is the
issue and that is why we embarked on this political game.
Senator Rompkey: On page 5 of your brief you state that your offers have been
endorsed by most federal departments. Could you give us a list of the federal
departments that have endorsed your offers?
Mr. Perez: Natural Resources Canada. When you say "endorse" --
Senator Rompkey: I did not say "endorse"; you said "endorse".
Mr. Perez: In July of 1996 when the Prime Minister ordered a review of Bill
C-29, he did so in a way that would represent the two camps, if I can use that
phrase. He asked Minister Marchi, Minister Manley, Minister Eggleton and
Minister McLellan. They were in two camps comprised of those who were for Bill
C-29 and those who were against Bill C-29. That debate went on inside the
cabinet and in the House of Commons around trade issues with Minister Eggleton.
Obviously once the decision was made, the cabinet stopped arguing and the
government became united.
Senator Rompkey: The only departments that have been involved are energy,
environment, health and perhaps industry.
Mr. Perez: Yes, industry. More departments have been involved. Minister Dion's
department has also been involved. I have spent time with the minister on the
basis that the PCO has a responsibility to look at the process used in
legislation in Canada.
When the July review was ordered by the Prime Minister, Mr. Dion assured me that
they would play a significant role in that study. The review was cut short
after a few weeks. We can speculate why, but the real review as ordered by the
Prime Minister never happened. It took the form of some discussions between him
and some ministers, but there was not the review that we were promised would
Senator Rompkey: I would like to explore that a little more down the road as to
the position of other government departments.
The Chairman: I should bring to the attention of the committee that we have
asked Ministers Eggleton and McLellan to appear before this committee and they
have refused. I sent them a further letter indicating that it is important to
our work that we have them here. I have not received a response to that yet.
Clearly, their input is essential to the work of this committee. Hopefully they
will reconsider this position and come here to answer some of these questions.
Senator Buchanan: One of the unusual and unique situations we have here -- at
least in the time that I have been involved in provincial politics for 24 years
as an elected member and 13 as premier -- is that eight provincial governments
out of ten are basically in substantial agreement on an issue. This has
happened before on some minor issues. The other one that I recall was the 1981
constitutional impasse where the so-called "gang of eight" got
together and agreed on certain procedures. I recall that very well; I was one
To follow up on Senator Rompkey's comment and the politicization, it is unique
also. There are no politics involved here. You have four Liberal provincial
governments, two PC governments, one NDP government and one PQ government. How
much more diverse could you get than that? It is not a political issue at all.
Senator Rompkey: I was not referring to big "P", I was referring to
Senator Buchanan: That is fine.
As Mr. Perez mentioned, this involves interprovincial trade. I can remember
discussions on that over a longer period of time. This issue also concerns jobs
and the environment.
You mentioned that you were looking for allies. I suspect that the CPPI did not
go out looking for these provinces. The provinces decided on their own that
they would be opposed to this bill for those three reasons. I think the
provinces have looked at those, although perhaps not with exhaustive studies.
With respect to Nova Scotia, their studies were conducted on emissions from
automobiles. There is no question that NOx reduction came partially as a result
of MMT. I recall that from several of those studies.
I want to concentrate on the Atlantic provinces for a minute. Specifically, I
wish to talk about Nova Scotia.
Mr. Fischer, as far as Imperial Oil is concerned, I have watched the struggle
that it has had in the local markets and competitively off shore. I have also
watched where the employees and management at Imperial Oil have worked very
hard over the last number of years to keep competitive in what has been a real
struggle for them as a small refinery.
We have watched two refineries in Nova Scotia close over the last few years.
With great regret, we watched those jobs go. Quite frankly, we do not want
anything to happen which may -- and I say "may" -- result in another
I am told that the removal of MMT will undo much of the cost saving that the
employees and management have achieved over the last number of years at
Imperial Oil and also could put us in a precarious position with Imperial Oil.
A very distinguished Nova Scotian has said that Bill C-29 would place the
Dartmouth refinery in a precarious financial position and threaten 234 skilled
jobs. I agree with Premier John Savage 100 per cent. We have always looked upon
our refineries in Nova Scotia, and specifically now Imperial Oil, as employing
those 250 people, but there is a large indirect employment related to that too.
We have statistics in our department -- at least, when I was there we had the
statistics, and I know they still do -- that many other jobs in the
Halifax-Dartmouth area are dependent on that refinery. It is not just a few
jobs. Literally hundreds of jobs in the service industry, the transportation
industry and the consumer industry are affected by that refinery. This puts us,
as Premier Savage says, in a precarious financial position as far as Imperial
Oil is concerned. Would you comment on that?
Mr. Fischer: As I have noted, over the last 18 months, the refinery has worked
extremely hard in cooperation with management and all the employees to bring
about structural cost reductions in the order of $11 million. That is a very
The removal of MMT erodes about 40 per cent of those savings. As I said, the big
disappointment to us is that we have taken three steps forward and one back
because of that. We have not declared defeat and we will look for ways to
offset it, but it has undone a substantial amount of the fine work that has
Senator Buchanan: It has undone a lot of the work that employees and management
have done over the years. We have watched them work very hard to keep that
I have taken a look at the Come By Chance Refinery and checked some statistics.
There could be a precarious financial situation there. Even though they are not
members of the CPPI, I am told that they are very concerned about loss of jobs
with that refinery in Newfoundland, as Senator Kinsella has said. The Minister
of Environment has pointed out clearly the competitive position of the refinery
in Saint John if MMT is not permitted to be used there any longer. He also talks
about the lack of understanding and the lack of substantive evidence and
information about the so-called health problems and environmental problems
concerning MMT, as does Wayne Adams, the Minister of Environment as he was then
in Nova Scotia. There is no evidence at all, as far as they are concerned, that
MMT is the great, bad additive that some of us say it is.
The Chairman: And your question is?
Senator Buchanan: Do you agree with that?
Mr. Fischer: I can comment on our Dartmouth refinery; I cannot comment on Come
Your last statement, that there is no evidence that MMT is a bad additive, is
the evidence that we have as well.
Senator Buchanan: Those are quotes taken from our own environment ministers in
Nova Scotia, New Brunswick and, I believe, in Newfoundland, but I am not sure
If an independent study is conducted over the next while and conclusively states
that there is a danger to health, the CPPI is willing to take the risk of
waiting for that and removing MMT if it is proven that MMT is a health hazard.
Is that right?
Mr. Fischer: Absolutely.
Senator Rompkey: This has nothing to do with a health hazard. We are not
discussing a health hazard here.
Mr. Perez: Yes, if it is a health hazard or involves OBD-II or any of the claims
that have been made.
Mr. Fischer: That is the offer we have been making since 1993.
Senator Buchanan: I have it here. That is the offer they have made.
The Chairman: We have that information on the record.
Senator Whelan: How much does the industry contribute to research and to whom do
you make that contribution?
Mr. Fischer: In our downstream petroleum products industry, Imperial Oil spends
about $30 million a year and, in our upstream, about $20 million a year on
Senator Whelan: Does that account for research to public institutions,
universities, et cetera?
Mr. Fischer: Imperial is a member of the Environmental Science and Technology
Association of Canada, which supports 17 universities on collaborative research
Senator Whelan: Do you have a dollar figure?
Mr. Fischer: I believe our grant program and the ESTAC program would add up to
about $1 million a year.
Senator Whelan: What about Petro Canada?
Mr. Pantelidis: I do not have a specific number, but we contribute similarly to
a number of universities and a number of research programs, especially at
Memorial University in Newfoundland. We are very active in offshore production
and exploration, et cetera.
Senator Whelan: Mr. Chairman, my real concern is government cutbacks in research
and independent research that would protect the general population of Canada.
There is a very dangerous element to this. I know of instances where funding was
cut back by companies in the agricultural field because they did not like the
research that the public institution was carrying out.
Research by government has been cut back. Government researchers today are
scared to make a statement because, if they lose their jobs, the only place
they could go to work is for the big companies. They are very cautious about
what they are doing. I am concerned about that.
You also speak about political pressures. One of you said that you have no
trouble working with the laws in Germany, for example. I do not know about the
laws for the gasoline industry, but I know about the laws for the chemical
industry because I lived near a huge chemical plant all my life. I worked there
when I was younger.
The laws for that kind of plant in Canada and the United States are completely
different than in Germany. Germany enforces the laws for disposal of waste
products, rather than having huge settling beds that contaminate the
underground water supply.
Are you saying that the oil industry has a great working relationship with the
auto industry in Europe and not in North America?
Mr. Perez: We did not say "great". We said there is a continuous
process in the U.S.A. called auto-oil between all the American auto
manufacturers and the oil industry. They talk constantly. It is a very
structured process which is ongoing as we speak. It stopped functioning in
Canada a few years ago. We know that the same discussion happens in Europe. In
the case of Europe, the European Community is usually the observer, and they
end up making recommendations to the European states.
With regard to research, we agree with you that the government is getting away
from research, which is a worrisome trend.
A very small example, but relevant to our discussion, is that Environment
Canada, Health Canada, the MVMA and us have agreed to undertake a study on
sulphur. The total bill will probably be from $900,000 to $1 million. We are
contributing 75 per cent of that, recognizing that it is very difficult for
governments to find that kind of money. Environment Canada has contributed a
substantial amount. Some provinces have contributed $5,000. They have all tried
to contribute to the study, but it is difficult. There is much less money in
governments today for that kind of research.
We have given the money, but we have given complete management of the study to
independent scientists and to Health Canada and Environment Canada. We have
absolutely no influence in the outcome of that study, other than as a member.
Senator Whelan: If you did not like the results of a study, you would not cut
Mr. Perez: No, sir, we are stuck with it. Mr. Vena knows about the process. The
money has been given in advance. The funds are being managed by the former
principal of McGill University. We would never think of cutting back even one
If anything, we have opened the door for more contingency funds to be spent if
there is justification. We need the science on sulphur to be on the table in
order that policy making can be based on something, just as we need the science
of MMT to be on the table.
Senator Whelan: I am a very strong believer in research. When I was Minister of
Agriculture, we built the biggest research branch of any branch in government
because we believed that research was our biggest product. We also thought it
was our most independent research body, but we find that that is not so today.
When the scientists are let go, they can only go to big industry. If they have
been speaking against big industry, their chance of getting a job is at least
50 per cent less than if they had been cautious about what they said.
I have spoken to these people. Three hundred and fifty of them were let go. Some
of them went to Germany and various companies. Some did not go anywhere.
If I understood you correctly, you said it would be great if our laws were the
same as those in the United States of America.
Mr. Perez: No. It would be nice if the auto manufacturers -- GM, Chrysler and
Ford -- followed the same process that their parent company follows in the U.S.
It will be essential to have some level of harmonization between fuels in both
countries because we drive the same cars.
Currently, outside of those areas in the U.S. which have great environmental
problems, I believe that our fuels are of a higher standard and will continue
to be of a higher standard. As well, we have some climate conditions which are
unique, et cetera.
We are not asking for the same thing, although we think it would be smart not to
have disharmony between the two.
Senator Whelan: It alarms me a little when you refer to those great southern
states using MMT. Those are among the most polluting states there are in the
agricultural industry. They pollute streams and underground water. There are
hardly any laws controlling them.
I am not impressed to hear that the southern states are environmentally
concerned because I know that they are not. I know that they are not concerned
about labour laws or very many social laws at all.
Mr. Pantelidis: The southwestern states that were using MMT were using it in
leaded gasoline, not in unleaded. We were just pointing out that there are
areas in the U.S. that actually use MMT.
Our view is that the use of MMT would actually help the environment in those
southern-western states. If they need improvement, that will go a long way
Senator Whelan: Dr. Baribeau, Dr. Labella and Dr. Donaldson are probably
receiving research money. I talked to Dr. Cummings from the University of
Western Ontario and he says that they are violently opposed. Are you now saying
to these highly learned people who are concerned about health that they should
not be concerned about health?
Mr. Pantelidis: We are not saying that.
Senator Whelan: In essence, you are saying they are wrong because you outline
all the virtues of MMT and say that it does no damage.
Mr. Pantelidis: What we are saying is that Health Canada has stipulated a number
of times that MMT, and specifically the manganese in MMT, is not a health
concern in the amounts that we use in the oil industry. To a large extent,
these are the same researchers to whom you are referring.
Senator Whelan: I am also saying that Health Canada is not superior to Dr.
Barabeau of Montreal, Dr. Donaldson of Queen's or Dr. Labella of the University
of Manitoba. I know some of the people in Health Canada. I dare them to say
that they are superior to these other people.
When you say "politicized", I tend to side with these doctors who are
still independent and who, hopefully, will stay that way.
Mr. Chairman, we know there is a simple way to get rid of MMT and to ensure that
both the environment and gasoline are good. It is through the use of ethanol.
You oppose ethanol. Most of you opposed the plant being built in Chatham. You
can drive all the way across the states from Detroit to Washington State using
ethanol gasoline. The scientific proof is that ethanol does not have the
pollution that MMT does.
Mr. Routs: First, you are talking about the cooperation between the car industry
and the oil industry. It is on that level that we are commenting on the states
and the political process tied into that, not so much on the regulations or
legislation that are in place in the U.S.
Second, if we look at learning processes, what we see happening in Europe is
that the European Community, together with the car and oil industry, has
learned from the American situation. They have decided that, to a certain
extent, the U.S. has gone overboard and that there are better and cheaper
solutions for the environment.
Your question related to research. Our company has put quite a bit of money into
research. In that regard, we are comparable to Imperial Oil in Canada.
Worldwide, we have a tremendous research program which looks at those
Pertaining to your question on ethanol, ethanol is one way to increase octane.
There are a number of other ways. We can run our refineries differently. As Mr.
Pantelidis has said, we can increase the severity of our reformers, which is
one of the processes in our operations. We can increase octane that way. We can
also do it through the use of ethers. MTB is the best known ether used in the
U.S. We can tie into a number of components in order to improve our octane
Most of those components are more expensive and not as effective, or they need
subventions from the government, as ethanol does to a large extent, which costs
the taxpayers a lot of money in the end.
If we go to an ethanol content that would give us the same bang as other
components do, then a 10 per cent ethanol scenario is not unthinkable. Ten per
cent ethanol at 34 billion gallons of gasoline is 3.5 billion litres of
ethanol. This would cost the government something in the order of $800 million
per year. Is that the kind of situation the government wants to get into?
Senator Whelan: The health situation in Canada is also in the order of billions
of dollars. I have listened to these doctors who have done all this research
over the course of many years. I would ask them how we can measure what you are
saying. We know there are many things out of which we can make ethanol.
How many refineries have you closed in the last 10 years in Canada?
Mr. Pantelidis: I would say around 12.
Senator Whelan: The closing of those refineries had nothing to do with MMT, did
Mr. Pantelidis: To a large extent it was an accumulation of factors. At the end
of the day, these refineries could not be competitive.
Senator Whelan: I can remember when, in my town, we had seven gas stations. We
now have two. The population has increased nearly threefold.
I have a very close relative who is a grand master technician. That is a
mechanic who knows everything from bumper to bumper. He is bilingual too. He is
a very bright young man. He can tell you what MMT does to platinum spark plugs
and all the other things on cars. I just met with him on the weekend again. He
is my son-in-law.
I asked him if he would come before this committee, Mr. Chairman. His marks in
all his exams were excellent. He was very distressed when, one day, he only got
96 per cent on one exam. He said: "I should have got 98. I got cheated out
of two marks." He loves cars and engines. He studies what your material,
or any other material, does to automobile engines. He says that MMT does damage
to the cars.
Senator Hays: First, I should like to thank the presenters for their thorough
and helpful evidence before this committee. For obvious reasons, they have done
a great deal of work on their presentations.
I had some questions that came up during the course of the discussion thus far,
some of which have been answered. I will list them and ask for further comment
or clarification. You may have covered one in response to Senator Whelan when
you said that without MMT, nitrous oxide emissions would increase by 8 per
cent. What is the assumption with regard to their being substitutes for MMT, MTB
or whatever is used and the fact that they are not as efficient?
The other comment was that fuels with MMT would still be widely used even if the
legislation were passed.
On the competitiveness issue -- and this may have been some sort of an
exaggerated comment -- the comment was made that arbitrariness on the part of
the government in determining the components of fuel could lead to closure of
all refineries to the east of Alberta. In terms of what you said about U.S.
competitiveness not being as good as Canadian, I should like a further comment.
In terms of industrial power brokering, if there is something more to what you
said in answer to Senator Rompkey's question about levering, timing and so on,
that would be helpful.
Another of my questions has to do with the return to the refiner of 1 cent per
litre and the increased costs. This question goes back to the figure of about
.002 cents and the ability to pass that cost on in terms of the refining
sector. Why would it be difficult to pass on those additional costs?
Mr. Perez: With regard to the figure of 8 per cent, as has been mentioned,
studies have shown the figure to be between 8 per cent and 20 per cent. The
study which resulted in the 20 per cent finding was done by Ethyl. Therefore,
we do not think it has the credibility of the EPA, certainly in the eyes of
this committee. We have always chosen to quote the EPA study, which study is
documented in a letter I will leave with the clerk after our presentation.
I do not think any companies would be able to answer your second question as to
whether the fuel would be widely used. It raises many competitive questions
amongst them. We belong to the same association, but our members compete with
Clearly, a company which has a contained, provincial supply network will be
tempted to keep using MMT after Bill C-29 because the law allows it to do so.
Therefore, it is my contention that some level of MMT, probably substantial
levels, will continue to be used.
Senator Hays: Stockpiled, in other words?
Mr. Perez: You would have to stockpile the additive, and very small amounts are
needed for gasoline. It could also be manufactured. Making MMT is not a
difficult process. We could manufacture it in two or three provinces and sell
it with gasoline within those provinces. It is not a CPPI policy to do that,
and this would never be discussed with the CPPI among all the companies.
However, each company would have the option, and it is probable that some
levels of MMT will be in gasoline for a long time to come.
You mentioned competitiveness and made reference to everything east of Alberta.
This situation was not in reference to MMT but in reference to the comparison
between MMT removed and NOx increases of 8 per cent. Truly, 8 per cent would be
an unsustainable level for many Canadian cities. We have no way of removing 8
per cent. We could remove half of that by removing almost all the sulphur in
gasoline. That would cost $2 billion, according to a study handed to Environment
Canada by consultants this week. Half of the country would not be able to
afford that kind of investment. Therefore, it would be a very different
refining network in the country. MMT will not have the effect of closing down
half the refineries. It may not have the effect of closing down any refinery. It
may precipitate financial problems for a number of them. We have stated that
the smaller ones and the other ones in Eastern Canada are in the most
Again, the study on sulphur we are doing with Environment Canada produced some
results on a refinery-by-refinery basis, all 18 CPPI refineries, plus Irving in
Newfoundland. In Eastern Canada, it shows that in 1995-96, return on investment
has been between 0 and 4 per cent; in Ontario, between 2 and 5 per cent; and in
Western Canada, between 10 and 12 per cent. You have a picture over two years
of an industry which is doing reasonably well in the west and which is not doing
well at all in the east.
The Chairman: That applies to most things in life -- the west just does better.
Mr. Perez: That is true.
Mr. Fischer: We view the current bill as being very arbitrary. We are still
searching for the science that would underlie it and allow it to be looked at
in a different way. Currently under discussion around the world is the topic of
sulphur in gasoline, and Mr. Perez outlined the process. However, it is merely
If, arbitrarily, Canada set a standard for sulphure in gasoline not based on
sound work, negotiation, and clear science and which was substantially lower
than in other parts of the world, you would put the refineries in Canada at a
competitive disadvantage. A Bill C-29 approach clearly allows that, which is
why it is such a poor precedent to establish. If you could say that no gasoline
with a higher sulphur content than "X" can move across a provincial
border, that would restrict the industry to taking actions that were very
Senator Hays: As a lawyer -- perhaps you are lawyers as well -- I accept your
reasoning. That is one way of making a point. However, this is not necessarily
the beginning of a series of steps. Is there anything more we should know?
Mr. Fischer: It certainly establishes the precedent for that when there is a
debate between industries and you put in place some legislation which allows
one industry to win the debate.
Senator Hays: It could be your side, though.
Mr. Pantelidis: That is our fear. In the past, we have been able to work out a
distinct process based on science, and we were successful. I cite the low
sulphur diesel example. It was so successful that it led to the oil industry
actually volunteering a reduction as opposed to having to enact legislation to
We are concerned about going from that to a precedent of an arbitrary removal on
the basis we have discussed here today without a well-defined process to
establish why it should be removed. In the future -- and we use the example of
sulphur in gasoline -- someone saying, "Here is an arbitrary level because
the MVMA feels you should have 100 parts-per-million of sulphur in your
gasoline," could lead a portion of our refinery industry to be completely
non-competitive and eventually disappear.
Mr. Perez: This is not speculation; this is happening today. Two or three weeks
ago, we had a meeting with Environment Canada and the MVMA on sulphur. Against
any result that had been produced in the U.S. or Europe or Japan, before we had
even completed our work here, they handed us a document entitled "American
Automobile Manufacturers Association Standards for Future Lower Emission
Vehicles". It reads 80 parts-per-million compared to 360 parts-per-million
here. They are taking the step of saying, "We do not want that in the
gasoline." Why? It will not be a health issue, as the Canadian study will
prove. It will not be a compatibility issue, as the U.S. has already proven. It
means that they would have to spend less money on their catalysts. We are
saying, "Let us compare how much money you would have to spend with how
much we would have to spend, and let us negotiate."
The precedent is there in their mind. They are pressuring the system now to get
down to a level that, frankly, we will not be able to sustain and which is
unreasonable because it is way beyond what the Europe, the U.S. or Japan are
doing or are willing to do.
We are puzzled. Perhaps you could ask those questions and enlighten us as to
The Chairman: To follow on that point, there is a time when governments must
provide leadership. As we saw in California when our committee went there, they
have legislated reformulated gasoline, which is having an immense impact in a
positive way in severe reductions in pollution. The government did take action,
and it seemed to me to be very appropriate. This is moving off the topic
somewhat, but it has been on my mind since our trip to California.
Why is there not more movement toward reformulated gasolines in Canada? We could
solve many of these problems, get away from the more minor issues and come to
grips with the products. Maybe you could help us on that.
Mr. Perez: We are reformulating all the components of gasoline in consultation
with Environment Canada. We are finding under their leadership a new national
standard. That national standard, overall, will be better than the one in the
We are addressing parts of the U.S. which have pollution problems that are
unknown in this country. Therefore, I believe that Environment Canada has never
felt under any obligation to decree that Toronto or Vancouver or Montreal
needed a California-type or even what the U.S. calls ozone non-attainment
regulations because we do not have those problems. If we ever had those kinds of
pollution problems in any Canadian city, we would absolutely favour
reformulating gasoline to abide by those emission standards.
We recognize that Environment Canada has a duty to issue standards for the
country according to science, as they do, and according to Canadian policy.
Once those standards are there, we are there to meet them. There is no dispute
If we had a California-type situation, we would favour California-type fuels. We
do not have that situation in Canada. Environment Canada would be the most
credible people to explain that to you. We do not have those rules because we
do not have those problems.
The Chairman: They did explain it to us in a sense this morning when they
explained that they must sometimes take precautionary measures even though all
of the scientific evidence is not there. They would argue, in light of your
response to me, that we should not wait for that to happen in Canada. Perhaps
we can do it in advance and be proactive instead of always reactive, in the
words of Mr. Clark this morning.
What is your response to that? Surely we do not want to wait for a California to
come to Metropolitan Toronto.
Mr. Pantelidis: We do not want to give the impression here that we are not
working with Health Canada and, to a certain extent, with the MVMA to be
proactive. This made-in-Canada, reformulated gasoline we are discussing has
been examined very intensely over the last year. I believe it is at the
position where we can get mutual agreement to legislate that as the new
standard. Much work was done. That is proactive and that is thinking in the
Even if we were to use MMT as an example -- and that is why I think this is
mostly a process issue -- and even had we acted on this in 1993, whatever the
outcome would have been, by 1994 we would have done one of two things: Either
the government would have legislated something with which we agreed, or we
would have voluntarily agreed to remove MMT or reduce it.
We are now speaking three years after the fact. I cannot see Health Canada
saying that sometimes you must act in a precautionary sense because we could
have acted three years ago had the process been right. That is our contention
in this particular issue.
Senator Kinsella: Mr. Chairman, can you get from someone an articulation of this
precautionary principle? I would like to know exactly what that means. My
understanding is that it refers to serious threat. We need an articulation of
this principle. It has been used three times this morning. I am not sure what
it really means.
The Chairman:I would be happy to send a letter of inquiry to the department.
Some of their representatives are here right now. Possibly they would not mind
responding to Senator Kinsella's inquiry as to what that does mean. We would
Mr. Perez: The principle is defined in the draft of the harmonization accord
between the federal government and the provinces. It is defined there, and that
is likely the information you are requesting. It is very clear.
Senator Kenny: Some legislators have been concerned about reports of refineries
closing in their ridings or areas as a direct result of the MMT legislation. If
I have heard you correctly as a panel, your response to that is, no, you do not
believe that any refineries will close as a result of this MMT legislation.
However, you are concerned that it will have an impact on some of your more
marginal refineries, and you are concerned that it sets a precedent for future
legislation. Have I correctly summarized your position?
Mr. Pantelidis: To a large extent, that summarizes it well, yes.
Senator Whelan: You do not believe that we should wait until Vancouver gets as
bad as California.
Mr. Perez: I do not believe Vancouver will wait. We do not make policy.
Senator Whelan: We know what the weather does in Vancouver. It goes up against
the mountains and backs up as far over as Victoria.
Mr. Perez: This country has clean air. This country does not have the problems
of other countries such as the U.S. This country has those results because of
good government leadership and good cooperation from the industries. We have
never disputed that. We want that to continue.
Mr. Fischer: British Columbia, in recognition of some specific issues in the
Fraser Valley, has put in place more severe restrictions and appropriately so.
Mr. Routs: I was personally involved in those negotiations. We did the right
thing for British Columbia in my opinion.
Senator Whelan: In the first part of my career, I worked with a minister who was
a chemical engineer with a Ph.D. and a master's degree in business. Minister
Jack Davis was minister when the environment department was created. I was his
parliamentary secretary, so I know a little bit about British Columbia and
about Canada. I know a little about the U.S. because I live in the shadow of
Detroit, and I know we get pollution from there.
Thomas Jefferson, during the American Revolution, said that no nation shall tell
another how it shall be governed. We should be independent in Canada. We feel
this is right. You can call it politicizing. Our government policy, as set out
in the Red Book as of September 24, 1993, was to ban MMT. I am sure they are
aware of that.
Mr. Perez: I know your committee will be considering hearing a second panel of
CPPI companies next week.
The Chairman: We have made no decision.
Mr. Perez: I have checked with Parkland, Husky, Sunoco, and Ultramar. They would
be very eager to come and talk to you. One of the reasons you should talk to
them is that they represent the type of industries which are not represented at
this table today. They are one-refinery companies. Some of them may look at the
issues of economics and vulnerability differently than the people on this panel.
They are the ones who have been the most in touch with their provincial
governments, and they may want to give you that perspective also. It does not
need to be a two-and-a half-hour session, but I would urge you to consider