Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources

Issue 6 - Evidence


OTTAWA, Tuesday, February 4, 1997

The Standing Senate Committee on Energy, The Environment and Natural Resources met this day at 3:30 p.m. to continue its consideration of Bill C-29, to regulate interprovincial trade in and the importation for commercial purposes of certain manganese-based substances.

Senator Ron Ghitter (Chairman) in the Chair.

[English]

The Chairman: We welcome our panel. Please proceed.

Mr. Yves Landry, President, CEO, Chrysler Canada Limited: Mr. Chairman, thank you for inviting us to come here to share our views on Bill C-29.

As you are well aware, this issue is critical for our industry in order to meet our environmental obligations to consumers and regulators alike. We have therefore assembled a strong team who we trust can answer any of your questions and so allow you to exercise your role of sober, second thought and still proceed to quickly pass Bill C-29.

[Translation]

For information purposes, we have distributed to you the brochure prepared by the Canadian Vehicle Manufacturers' Association. I know that you are all quite familiar with the automobile industry. What many people tend to forget is that it is directly or indirectly responsible for one job in seven in Canada and that three major automobiles manufacturers alone have invested more than 10 billion dollars in Canada over the past five years.

I am here today wearing two hats, as President of the Canadian Vehicle Manufacturers Association also as the Chief Executive Officer of Chrysler Canada. I am accompanied by Mark Hutchins, Chief Executive Officer of Ford Canada, Ms. Maureen Kempston-Darkes, Chief Executive Officer of General Motors Canada and Mr. Mark Nantais, President of the Canadian Vehicles Manufacturers' Association of Canada.

[English]

Although we are quite confident that we can refer any detailed technical or regulatory questions to Mr. Nantais, we have also brought with us today senior members of our engineering staffs.

Mr. Chairman, let me be clear about the central point of this debate. Elimination of MMT from fuel is part of an international technical consensus on the best approach to reduce emissions from the vehicle system. It is not a brand new, made-in-Canada initiative. It is a significant technical problem for all auto manufacturers around the world.

We have all come to this conclusion independently of one another and this in Stuttgart, Germany, in Toyoto City, Japan and in Detroit, U.S.A.

Canada is the centre of this issue.

North America has the toughest emission control standards in the world. In response, we have developed excellent emission control systems. These systems, however, are predicated upon the availability of MMT-free fuel, which is the norm in the U.S. and which we were assured by the Canadian government would be made available here.

Alternatives to MMT are available internationally. In the U.S. for example, ETBE and MTBE, are already available and other ready available alternatives are quite acceptable.

[Translation]

I would also like to mention that this is not a new issue for us. On the contrary, MMT gasoline has been a cause of concern for us since it was developed some 20 years ago and adopted as an alternative in order to increase octane levels in unleaded gasoline.

In 1985, Environment Canada ordered an independent study to determine the impact of MMT on vehicle emissions. The study was conducted by a multi-party working group representing the petroleum and automobile industries, the government and the Ethyl company, under the direction of the Committee on Standardization of Forms of the Canadian General Standards Board. The study ended in 1986.

The main finding of the study was to recognize that MMT increased exhaust emissions of hydrocarbons. As a direct consequence of this finding, since 1986 Transport Canada has been monitoring standards on exhaust systems of new vehicles through vehicles using MMT-free fuel.

At first, we were particularly concerned about the clogging up of spark plugs and plugging of catalysts. However, since the development of the second generation of diagnostic computers, better known as the OBD system, we have seen the emergence of more serious technical problems

[English]

MMT in fuel will prevent us from meeting current B.C. emission standards and Transport Canada's proposed 1998 vehicle emission regulations, which were predicated on the availability of MMT-free fuel.

MMT in fuel will cost consumers significantly for unnecessary repairs. MMT in fuel will irritate consumers with activated warning lights and unnecessary, time-consuming diagnostics. Lastly, MMT in fuel will worsen air quality in Canada.

Ladies and gentlemen, my colleagues from Ford of Canada, General Motors of Canada, and all other manufacturers around the world agree with this assessment of the situation.

I would also like to outline Chrysler's own situation. The 1997-model Chrysler vehicles were shipped with the OBD-II emission control system which is vulnerable to MMT and subject to aggravate our customers. Warnings about the use of fuel containing MMT are included in our 1997 owners' handbooks. It is likely that we will be forced to remove the advanced emission control systems from 1998 cars if Bill C-29 is not passed promptly. We will have to make that decision soon.

We have already cancelled the introduction of Canada's first lower emission vehicle, the Green Neon, despite the fact that we had announced in 1995 that this car would be available in B.C. and elsewhere in Canada starting in 1997.

I will now hand over to my colleagues Mr. Mark Hutchins and Ms Maureen Darkes who will clearly outline the impacts of not passing Bill C-29 promptly on both the industry in general and their companies in particular. We will then hand over to Mr. Mark Nantais, president of the Canadian Vehicle Manufacturers Association, who will briefly review the technical aspects of the impact of MMT on our systems.

Mr. Mark Hutchins, President, Ford Motor Company of Canada: For the record, my name is Mark Hutchins, I am president and CEO of Ford Motor Company of Canada. I very much appreciate the opportunity to speak to you today about Bill C-29. It is a subject of critical importance to Ford, our dealers and, most importantly, our customers.

I it will not come as a surprise to some of you present today when I tell you that Ford of Canada is not solely in the business of manufacturing and selling cars and trucks. Even though we did assemble over 500,000 vehicles and sold over 270,000 cars and trucks to Canadian consumers last year.

Put simply, we as a company recognize we are truly in the business of providing customer satisfaction. A successful automotive company in 1995 is one which accurately determines what the customer wants and provides it in the most cost-effective and efficient manner.

Today's customers both in Canada and around the world, where we expert our products, are demanding high quality, technologically sophisticated vehicles which perform to the highest standards and do so in the most environmentally friendly manner.

To meet the needs of consumers, today's vehicles are equipped with the most technologically sophisticated environmental safeguard equipment. The heart of this equipment is the OBD-II, which is our on-board diagnostics systems second generation. It is a fully integrated emissions control system. This was the product of development efforts by Ford dating back to the mid-1980s at a cost of several hundred million dollars.

In addition, as you will hear today, other automotive manufacturers have developed their own systems over a similar period of time. The cars and light trucks which we sell today are equipped with the latest vehicle emissions equipment and remove 98 per cent of hydrocarbons, 96 per cent of carbon monoxide and over 90 per cent of oxides of nitrogen from the vehicles' exhaust.

Canadian consumers who purchase and drive these new vehicles do so knowing that emissions from these vehicles are greatly reduced from the levels of only a few short years ago.

This level of environment success, however, will be available to Canadian consumers only if Canadian fuels are MMT-free. The gasoline additive MMT has an extremely negative effect on today's vehicle emissions systems. Vehicles using MMT fuel have significant amounts of manganese deposits on critical components in their system including spark plugs, oxygen sensors and catalytic converters. Degradation of these components leaves to inefficient engine and catalyst performance and increased emissions of pollutants into the atmosphere.

The critical emissions hardware, standard on all vehicles produced today, will not perform as intended when fuels with MMT are used. Canadian consumers, who are demanding more environmentally efficient vehicles and paying for the latest in environmental equipment are being denied the benefits of this technology because of the use of the MMT additive in their fuels.

To make matters worse, not only are Canadian consumers denied the benefits of this environmental equipment, there is an increased likelihood they also face increased vehicle operational costs because of in-vehicle damage caused by MMT.

Through no fault of theirs or Ford's, our customers are subjected to degraded levels of vehicle performance and unnecessary expenses because of the non-availability of the proper fuel for their vehicles.

Each of our customers purchased his or her vehicle in good faith with the understanding that they were getting the best federal vehicle emissions system in North America. Now and as the years go by, they will become increasingly disappointed when they discover that MMT-free fuel, as specified in their owners manual, is not available in Canada.

There is no shortage of data on the impact of MMT on automobiles. As my colleague from Chrysler has already stated, automobile manufacturers around the world, including Ford, have independently designed their own emissions and OBD-II systems and have determined that MMT is detrimental to the effective operation of these systems and to vehicle performance.

There has been no shortage of discussion on this issues. As early as 1984, a series of discussions with and submissions to government outline the actual and future difficulties with MMT. The government and the oil industry were informed in advance that MMT would damage the new emission systems being developed to meet increasingly tough emissions standards.

The oil industry itself recognized this fact in its 1984 submission to government, a copy of which was provided to you.

The government began actively to address this issue by passing Bill C-29 and conveying this bill to the Senate for approval. The Senate now has the opportunity to do the right thing for the environment and consumers across Canada. It can quickly pass Bill C-29.

The issue has become critical to Ford in a very practical way. On February 13, 1997, Ford of Canada will introduce to the public the new 1998 model year Ford Windstar, built for the world by the 3500 men and women at our assembly plant in Oakville, Ontario.

The Windstar will be the first 1998 model year product introduced in Canada but because of the non-availability of MMT-free fuels, this Canadian-made vehicle can meet neither the proposed Canadian federal emissions standards nor the provincial standard set in British Columbia. In fact, without MMT-free fuel, over time no vehicles in Canada will meet the 1998 emissions standard. Because over 85 per cent of the Windstars we produce are exported for sale to the United States, every Windstar leaves our Oakville assembly plant with a full tank of MMT-free gasoline. Do you know who sells this gasoline to us? A Canadian fuel company. However, unlike 1998 Windstars shipped to consumers in the U.S., for those that are sold to our Canadian owners, that will being their last tank of MMT-free fuel unless Bill C-29 is passed. It is ironic, but more importantly it is downright unfair to our Canadian consumers.

Think about it. Twenty vehicle manufacturers that sell vehicles in Canada each independently and confidentially designed their own vehicle emissions and OBD-II systems, and they are all telling you the same thing: They are experiencing MMT-related systems degradation and failures. There is no more telling evidence than that or we would not be here.

I strongly urge you to do the right thing for Canada and pass Bill C-29 now.

In summary, the use of MMT in Canadian fuels leads to shortened lives for vehicle emissions systems, added vehicle operational expense and negative impacts for the environment. The additional fuel costs when MMT is removed, as shown by both government and private studies, is projected at less than a quarter cent per litre, or around $5 per year for the average motorist, assuming that the oil companies pass this cost on to Canadian consumers. This is a very small price to pay, particularly when it is balanced against the very large expenditure already made by Canadian consumers for the latest in on-board vehicle emissions equipment. New vehicle buyers in Canada pay over $2 billion per year in total for emissions equipment in their cars and trucks. This very considerable cost to consumers alone makes any potential fuel or refinery cost increases pale by comparison. Ford of Canada, along with the rest of Canada's automotive industry, has done its part to produce vehicles with the latest in environmental safeguards. Now it is up to the Senate to ensure Canadians have MMT-free fuel so we can move forward toward a cleaner environment in Canada.

Thank you. I will turn this over to Maureen Darkes.

Ms Maureen K. Darkes, President, General Motors of Canada Limited: For the record, my name is Maureen Kempston Darkes. I am President and General Manager of General Motors of Canada.

Our company and all automobile companies in Canada have had great success in substantially reducing vehicle emissions since the 1970s. As Mr. Hutchins pointed out, the three regulated emissions -- hydrocarbons, carbon monoxide and oxides of nitrogen -- have been reduced by 98, 96 and 90 per cent respectively on all new cars. As newer, cleaner vehicles replace older ones, these emissions will continue to decline. We are committed to achieving further reductions but we are constrained by the presence of MMT in Canadian gasoline. This is the reason we are before you today.

On-Board Diagnostics-II system, or OBD-II, is a state-of-the-art second-generation diagnostics technology which monitors the engine and emissions-control system and alerts the driver to malfunctions through a warning light on the dash board. These systems are an important component of our emission-control strategy, because data show that a small proportion of vehicles on the road are what we term "gross emitters." They have been tampered with, improperly serviced, misfuelled, or some element of the emission-control system is not functioning properly. We estimate that these vehicles represent less than one-quarter of the vehicle miles travelled today but produce as much as two-thirds of total emissions. OBD-II systems are designed to identify emission increases of very small magnitude on new cars. Across the entire fleet, this significantly reduces real-world emissions.

When Canadian oil companies collectively declined to make available MMT-free gasoline to Canadian motorists voluntarily, we at General Motors were left with no alternative but to modify portions of the OBD-II systems so our customers would not be exposed to the nuisance and annoyance of warning lights coming on as a result of manganese deposits in the engine from MMT in gasoline. We were concerned that not only would this create an immediate inconvenience but in the long term it would reduce driver confidence in vehicle on-board diagnostics as an important feature of their emission-control system.

This was expected to be a temporary measure until MMT-free gasoline was made available to Canadian motorists. General Motors engineers have been concerned for many years about the impact of manganese deposits on combustion chambers and vehicle emission-control equipment. As far back as 1988, Transport Canada acknowledged the negative impact of MMT on emission control equipment by sanctioning mileage accumulation for certification testing to be done on fuels that were MMT-free. Even Ethyl Corporation agrees that 80 per cent of manganese in MMT deposits and accumulates in the power train of our automobiles. For every 160,000 kilometres travelled, as much as a half pound of manganese accumulates in the engine and related components of the vehicle. This has a direct impact on the functioning of the OBD-II system.

General Motors data, some of which we have shared with representatives of all major Canadian petroleum companies, indicate that our customers are already experiencing power-train and emission-control-systems failures at a rate many times greater than in the United States where MMT is not in use. This warranty data is in direct contradiction to Ethyl's data from their test programs which claimed real-world problems would not occur. We also have conclusive test and laboratory data showing that MMT is the sole factor contributing to rapid spark plug deterioration.

Senators, I should like permission to hand out some pictures of spark plugs that are in use in vehicles in the United States and vehicles in Canada. You will see that spark plugs in use in the United States, travelling very long distances, continue to operate as designed. On the other hand, you will see that spark plugs in use in Canada, where MMT is present in the gasoline, begin to fail at very low kilometre ratings.

Accumulation of manganese on spark plugs causes misfires which in turn leads to increased emissions of unburned hydrocarbon from the engine and carbon monoxide. At the same time, the catalyst, a key emissions-control device, is degraded from the exposure to raw fuel.

In addition, manganese deposits on the catalyst impede its ability to control emissions, leading to higher levels of hydrocarbon, carbon monoxide and oxides of nitrogen emissions. The net effect is that much of the improvement made through advanced automobile design is lost. Degradation in performance can happen as early as several thousand kilometres and worsens over time depending on the amount of MMT in the fuel that the customer buys.

Increasingly, our customers are demanding low-maintenance or maintenance-free vehicles. For this reason, and to ensure optimal emission performance, GM and most of the auto industry are introducing long-life spark plugs which require spark plugs to be changed only every 100,000 miles or 160,000 kilometres. However, these spark plugs, like their predecessors, are susceptible to the long-term build-up of manganese deposits. We find it a major customer dissatisfier when a customer requires new spark plugs because of the MMT build-ups before the scheduled useful life is over. This is not a problem General Motors is experiencing in the United States where MMT continues to be banned in air-quality problem areas such as California and the east, and where 18 major oil companies, including the parent companies of some of the biggest opponents of Bill C-29 have voluntarily agreed to provide their customers with MMT-free fuel. Clearly, in the U.S. there is a recognition that fuel quality is part of the air quality solution.

We have advised federal and provincial environment ministers that we propose to offer our Canadian customers the same state-of-the-art emissions control systems as our U.S. customers on a harmonized basis. This allows Canadians to get the maximum air quality benefit at the lowest cost. However, to be able to do so, we need to be sure that additives in gasoline do not foul sophisticated automotive equipment. For example, Transport Canada has proposed in-use emissions standards for 1988 model year vehicles similar to the U.S., which are designed to ensure that vehicles are not only low emission when they leave our factories but also that they stay that way for most of their average useful life. We would like to be able to support these standards because they would result in cleaner air for Canadians, but because of the extent to which MMT degrades the performance of our power train and emission control system, General Motors cannot do so until MMT is out of Canadian gasoline.

The delays in the passage of Bill C-29 are putting us and our customers at serious risk in British Columbia, where the government has mandated the standards which we voluntarily offered to achieve right across Canada. While Chevron is voluntarily making MMT-free fuel available in B.C., to date the other oil companies will not. The government of B.C., our dealers in that province, our customers and the automakers are all counting on prompt passage of Bill C-29 to ensure that we can comply with the B.C. legislation.

General Motors will be bringing its first 1998 models to market in the spring. We are confident that if Bill C-29 is passed quickly, the oil industry will be able to comply quite quickly. For example, some refiners such as Irving already produce MMT-free fuel for the U.S. market. Others such as Imperial Oil already provide millions of litres of MMT-free fuel to all our assembly plants in Ontario and Quebec for plant fill purposes.

We are proud of the enormous strides we have made in reducing emissions from our products and processes. We have spent billions of dollars over the past 20 years developing engines that are more fuel efficient and produce fewer emissions, and we have spent hundreds of millions of dollars in Canada alone reducing emissions from our manufacturing facilities. We have done so because we are committed to being part of the solution to Canada's environmental problems. All we ask is that our customers can buy the necessary cleaner fuel formulations to properly operate their vehicles.

Bill C-29 will ensure MMT-free fuel is available to customers so that Canadians receive the full value of their investment in a new vehicle and the maximum air quality benefits. I ask for your support for cleaner air in Canada by passing Bill C-29 immediately.

I should now like to turn it over to Mark Nantais, who will conclude our presentation with some comments on the way in which MMT affects emissions control systems.

Mr. Mark Nantais, President, Canadian Vehicle Manufacturers' Association: Our association represents Chrysler Canada, Ford Motor Company of Canada and General Motors of Canada, as well as Volvo Canada, Navistar International Corporation, Freightliner of Canada and Western Star Trucks.

We focus on issues of common members, and MMT has been on the top of our list for quite some time. I should like to spend a few minutes providing you with specific information on what MMT does to automobile components and to show you a variety of photographs and samples of such automobile parts that have been collected for you.

As was noted in Mr. Hutchins' comments, there is no shortage of information on the effects of MMT on automobile components. I believe committee members have already received a package of information along this line, which clearly shows you that quite a bit of information that exists. Hopefully, everyone has received that.

Amongst that information are 25 technical papers prepared by the Society of Automobile Engineers. These span the years from 1975 to 1994 and have been prepared by engineers from independent research companies, automotive engineers, as well Ethyl Corporation. As you will note from the summaries that have been provided with the papers, a large majority demonstrate that MMT damages automobile emission control systems. Interestingly, the only papers which claim any beneficial effects of MMT were prepared by Ethyl Corporation itself. Even so, four out of seven of Ethyl's own papers made reference to some evidence of problems in areas like catalyst plugging, increased emissions and increased particulates due to MMT.

In addition, we have included reports from the University of Waterloo, which conducted an analysis of documentation provided by Ethyl Corporation and which casts doubt on both the methodology and conclusions of procedures that have been used by Ethyl to defend the emission levels associated with MMT.

The simple truth is that every manufacturer of automobiles sold in Canada has separately and independently come to the conclusion that MMT is not compatible with modern systems necessary to achieve the highest national standards of emission control. You have heard this from my colleagues on this panel and I have no doubt that representatives of foreign automobile companies will reiterate this point later today.

Some critics of Bill C-29 have asked for delay in order to implement the so-called independent or third party studies. I submit to you that the wealth of information assembled to date proves that calls for more studies are nothing more than stall tactics.

All of these companies know, from both laboratory testing and practical real world experience, that spark plugs, oxygen sensors, catalysts and other emissions and fuel system components are damaged by MMT. This results in higher frequency of repairs and higher vehicle emissions for automobiles in Canada than in the United States.

In addition to the exhibits made available by General Motors showing that OBD/2 systems are not compatible with Canadian fuels containing MMT, we have brought with us today other samples and illustrations of automobile components so that you have the clearest understanding of the consequences of MMT use.

The first of these is oxygen sensors, one the critical components of the contemporary emission control system.

We ask that you turn your attention to the Ford book. Mr. Chairman, with your permission, I should like to have this circulated to the committee members.

I should like to ask the committee members to turn to the first photograph which shows a comparison of two oxygen sensors: One from a Canadian 1995, 3.8 litre Windstar at approximately 37,000 kilometres, which appears on the left-hand-side of the page; and one on the right, from a U.S. 1995, 3.8 litre Windstar at about 56,000 kilometres. While you are looking at this photograph, I would also like to circulate, for comparison purposes, a brand new oxygen sensor so that you can compare this to both the Canadian and the U.S. sensor that appears in the photograph.

The Canadian oxygen sensor on the left is coated with a reddish brown material which is manganese oxide. The sensor on the right, the one from the U.S. vehicle, operated on fuel that contains no MMT and shows no coating and remains a clean, white colour. The sensor from the U.S. vehicle was fully functional when removed by the technician; the Canadian sensor had malfunctioned and triggered the malfunction indicator light.

In the case of the Canadian vehicle, the malfunction sensor was removed by the technician. It is important to note that the U.S. vehicle travelled approximately 11,000 kilometres more than the Canadian vehicle and showed no accumulation of manganese oxide and no malfunction.

The remaining photographs of oxygen sensors, which appear on the subsequent pages, show identical problems that were experienced with other pairs of Canadian versus U.S. vehicles. In each case, the Canadian vehicle, which was operated on fuel containing MMT, showed signs of significant manganese oxide coating and triggered the malfunction indicator light.

Another critical component of the emission control system is the catalyst. The function of the catalyst is to convert engine exhaust emissions and to reduce the levels of oxides of nitrogen, hydrocarbon emissions and CO, carbon monoxide, out of the tailpipe.

If you turn to the section on catalysts, we have here a series of photographs illustrating the problem experienced by all vehicle manufacturers. Specifically, the cross-section view of these catalysts clearly show a high level of manganese oxide deposition on the catalyst surface causing measurable impairment of its operation.

If I might just point out for your edification, the reddish-brown material that seem to be caked on most of the surface area of that catalyst is manganese oxide deposition.

Consider the fourth photograph of the catalyst removed from a 1982, 2.3 litre Thunderbird from Alberta at about 214,674 kilometres. Compare that to the catalyst from the 1987, 2.3 litre Thunderbird at 190,476 kilometres from Philadelphia, Pennsylvania. These vehicles are fully comparable given the identical engines and emission control systems, yet there is a very dramatic difference in the amount of manganese oxide coating and plugging on the surface of the catalyst from the Canadian vehicle operated with MMT. Analysis of the reddish-brown material which coated the catalyst-active sites was confirmed to be manganese oxide.

Today, also for your interest, I have those actual catalyst bricks with me. Mr. Hutchins is holding the catalyst from the 1987 Thunderbird from the U.S. The other is the catalyst from the Canadian vehicle. Again, this is the photograph that you see there and the very heavy brown coating that coats the surface of the catalyst.

The Chairman: Would you explain the function of the catalyst for those of us with a less technical background, which is probably all of us?

Mr. Nantais: I tried to put it in the most simplistic terms I could. Its function is to reduce engine-out emissions of hydrocarbons, NOx and carbon monoxide out the tail pipe. I would refer you to one of our engineering experts to give you a bit more of an explanation.

Mr. Ron Bright, Director, Environmental Energy and Vehicle Safety, Ford Motor Company of Canada Limited: Basically it carries a catalyst coating which does the conversion. This is normally a precious metal such as platinum, and it has the chemical action of turning the more noxious gases and higher concentration of gases down to the acceptable limits for the standards.

Senator Taylor: I noticed black versus brown. What were the original colours?

Mr. Bright: The colour normally would be a light beige, but it can be various materials.

Senator Taylor: One was black. How do we know the black one is not plugged with black material as much as the brown is plugged with brown material?

Mr. Bright: That is why we have done analysis to show what the deficiencies were. There is a measurable difference in the efficiencies of the two catalysts. In fact, if you look at the plugged area, there is obviously no efficiency because there is no flow through the catalyst.

Senator Taylor: I am looking at your pictures of the three-litre Taurus from New Jersey and Oakville. In my humble opinion, they both look pretty bad. One is black and one is brown. One looks like it is plugged with manganese and the other plugged with carbon.

Mr. Bright: They do have a coating of some things. Over time it does not impair the function of the catalyst near to the effect that the manganese oxide does. There is no question over time that catalysts do lose some efficiency, but very little. In fact, we have a very small window with today's environmental aspects where we can only lose about 1-per-cent to 2-per-cent efficiency. Years ago there was a much wider band of acceptability, but we just do not have that window to work with anymore. The American catalyst in this case does the job for us, and the Canadian catalyst does not.

Senator Spivak: Three compounds are emitted -- nitrogen oxide, hydrocarbons and carbon monoxide.

Mr. Bright: Yes. Those are what we call regulated emissions.

Senator Spivak: What about carbon dioxide?

Mr. Bright: There is carbon dioxide as well.

Senator Spivak: I am wondering about the function of the catalyst. Why are there only these three emissions?

Mr. Bright: These are the regulated emissions -- hydrocarbon, carbon monoxide and nitrates of oxygen.

Senator Spivak: And the catalytic converter, or whatever it is, does not convert to screen CO2.

Mr. Bright: It does not; correct.

Senator Buchanan: With respect to the 1990 Taurus -- Kitchener, Ontario-Topeka, Kansas -- basically there does not seem to be too much difference between those catalysts.

Mr. Bright: If you look at the Kitchener catalyst, you see that in the middle of the catalyst, many of those cells are pretty well blocked. However, if you look at the other catalyst, you see that while it has turned black, they are pretty clear. The gases are moving through that one freely, whereas they are not moving through the Taurus catalyst.

Senator Buchanan: Why is there such a difference between the Taurus -- Kitchener, Ontario-Topeka, Kansas -- and the Thunderbird -- Vermillion, Alberta-Philadelphia, Pennsylvania?

Mr. Bright: The buildup of manganese oxide is dependent on two basic factors. The first is the amount of fuel going through the unit or the amount of fuel the car is using, which normally translates in most units to the mileage it covers. The second big thing is the amount of manganese in the fuel. This varies from company to company, from area to area and from the amount of different "crudes" they use. One large tank-full at the service station can be different than the next tank-full.

Senator Buchanan: Are you saying there is more manganese in gas in Alberta than in Kitchener, Ontario?

Mr. Bright: There can be, very definitely so. It varies all over the country and by brand.

Senator Cochrane: This brown coating is as a result of the use of MMT; is that what you are saying?

Mr. Bright: Exactly.

Senator Cochrane: Have you looked at other malfunctions? Could this be caused by some electrical malfunction? Could this be caused by some mechanical malfunction? How do you know that MMT has done this?

Mr. Bright: We conducted a series of chemical tests on the materials to show what the composition is. At Ford, we ran a dynamometer test over 42,000 miles where the only difference in the fuel was that MMT was added in the one case. These are the results we consistently see when MMT is in the fuel.

Mr. Nantais: On the point about manganese oxide deposition, which increases with the volume of the fuel used, I would direct you to the last photograph in the booklet. This is the photograph from the 3.0 litre Taurus at 288,000 kilometres from Welland, Ontario. It clearly shows just how severe the problem of plugging can become. Notice the severe plugging of the surface as well as the thickness of that coating. This occurs because, as Ms Darkes pointed out, 80 per cent of the manganese in the fuel is left behind inside the automobile and much of that is inside the catalyst. In such a case, the catalyst loses efficiency and can no longer function well enough to meet the stringent emission standards imposed by the federal government. Because of MMT, the catalyst simply cannot do its job to reduce emissions.

It is important to know that automobile manufacturers must not only certify their vehicles to meet new emission standards or emission standards when new. Manufacturers must also certify their products to conform to in-use standards after specific distances have been travelled. For example, the proposed 1998 Transport Canada and British Columbia regulations require vehicles to pass in-use tests up to 120,000 kilometres. What I have cited are real-world problems experienced by all manufacturers marketing vehicles in Canada.

Mr. Chairman, again with your permission, I would like to circulate a booklet from Chrysler Canada. Chrysler has also provided a series of photographs confirming spark plug misfire, oxygen sensor and catalyst problems.

Spark plug misfire is not a one company or a one spark plug condition. On page 3 of this booklet, the photograph at top of the page shows that a spark plug from a Canadian model vehicle meeting current emission standards is again coated with reddish brown manganese oxide. This photograph is important for several reasons. It depicts what we call a long-life 160,000 kilometer spark plug designed to last for the full useful life of the emission control system. Industry usage of these plugs is increasing because of progressively more stringent emission standards. The photograph depicts a spark plug that has been in use for only 42,000 kilometers, which is only about one-quarter of its expected life. In this case, the fuel used in the vehicle contained only half the maximum allowable level of MMT according to the Canadian General Standards Board.

Once again, compare the Canadian plug with the U.S. long-life spark plug operating on fuel containing no MMT. It remains clear with no noticeable manganese deposits or spark plug tracking.

Chrysler's experiences in Canada with manganese-related problems are no different for oxygen sensors and catalysts than those cited by both domestic and foreign manufacturers.

We all know that in 1995 a United States Federal Court of Appeal decision allowed Ethyl Corporation's MMT registration to proceed. Technically speaking, the U.S. Environmental Protection Agency's 20-year ban on the use of MMT was overturned on procedural grounds, making MMT usage permissible.

From 1976 to 1995, MMT was not available for use in unleaded gasoline in the United States. Throughout that period, it was available in Canada.

Though the courts in the United States have overturned the ban, it is our understanding that the EPA is actively seeking to reimpose it because the court ruling was based on procedure, not substance, and because the EPA continues to investigate the question of the potential impact of MMT on on-board diagnostic systems.

Also, the use of MMT is still severely restricted despite the court ruling in the United States because MMT cannot be used in gasoline meant for regions classified as non-attainment areas. Generally, these are zones, including large cities, which have significant smog problems and are therefore regulated more stringently than elsewhere. The Canadian equivalent, for instance, would be the Lower Fraser Valley in British Columbia, the Windsor-Quebec City corridor and the Saint John area of New Brunswick.

In the documentation we have provided to you, Mr. Chairman, you will have noted a copy of a California regulation which maintains an outright ban on the use of MMT in gasoline. The result of these federal and state regulations is that MMT, while technically legal in the United States, cannot be used in many of the country's most populated markets.

Moreover, as of September 1996, Amoco, Anchor Gasoline, ARCO, BP, Chevron, Conoco, Exxon, Hess, Marathon Oil, Mobil, Pennzoil, Phillips, Shell, Sun and Texaco all stated that they were not using MMT in United States gasoline. In the statements made by the Environmental Defense Fund, a copy of which I have forwarded, many of these companies went further and said that they had no plans to use MMT in the future. I should like to circulate those comments with your permission, Mr. Chairman. As you will note when you take a look at these, the parent corporations of some of the Canadian companies are, indeed, quoted in this document.

Given all these limitations on the future of MMT use, all automobile manufacturers in the United States continue to develop vehicles which are designed to meet the highest national emission standards and which, incidentally, are not compatible with MMT. It has always been assumed that this substance would not be available in the United States; and, in the automotive industry, that assumption stands.

The Canadian government has stated in the past its desire to harmonize its vehicle emissions and safety standards with the United States. The Canadian automobile industry, which exports 88 per cent of Canadian manufactured vehicles to the United States, wholeheartedly supports this position. Harmonized standards would ensure that vehicles could be produced for the entire North America market. This would also allow for maximum efficiencies of production and the faster introduction of technological advances across the entire marketplace.

Mr. Chairman, I also will be providing to you a statement which the then MVMA, along with our colleagues from the foreign manufacturers, the AIMC, as well as CPPI, signed in 1994. It is a statement on harmonization indicating their commitment to provide fuels that support U.S. federal emission standards, that support the vehicle manufacturers' ability to certify their vehicles to those standards, including the in-use standards, as well as customer satisfaction, performance and durability. I will be submitting that to your committee because it is indicative of the direction that we as an industry, in conjunction with the petroleum industry, have agreed to go forward on. Unfortunately, we do not see them following through with that commitment.

As well, as all three of my colleagues have outlined, harmonized standards cannot be achieved without the elimination of MMT from Canadian gasoline. Vehicles designed and produced to run on clean gasoline cannot meet performance and durability specifications if they are contaminated by MMT.

If MMT is not removed from Canadian gasoline, Canada will be faced with a serious embarrassment. The proposed 1998 vehicle emission standards will be unachievable. There will be no choice but to proceed with a lesser standard, making Canadian emission controls inferior to those in the United States.

In conclusion, senators, the chief executive officers of three of Canada's largest companies have come forward today to express their extreme concern at Canada's lack of action to date on the issue of MMT. We have, I believe, provided you with information which will help you in your deliberations on this bill. As we have shown, there is no shortage of data confirming all our concerns with MMT. Canada is an anomaly in the world in allowing the use of MMT in gasoline and must act decisively to catch up with the national standards now being set in the United States.

We urge you to move quickly on this issue because, as Mr. Hutchins has said, the first 1998 model year vehicle will be released within days. The sooner this bill is passed through Parliament and brought into effect, the better it will be for all Canadian consumers, the Canadian automobile industry and for overall air quality across Canada.

All of us will be happy to answer any questions you may have concerning our views that you have heard today.

The Chairman: Thank you members of the panel for a well-documented presentation. It raises a number of questions from my colleagues.

Senator Kenny: Welcome to the Senate. My first question is: Why are you here? Why are you folks taking up the time of this committee on a fight that you are having with big oil and why have not you resolved it some place else?

Ms Darkes: We have worked diligently to resolve this issue with big oil for several years. I personally met with the presidents of a number of the big oil companies, asking them for their support to resolve this issue. We have been met with an absolute negative response. Frankly, we thought we had this issue resolved back in 1994 when we reached an agreement with the Canadian Petroleum Institute. I will tell you what we agreed to with them. It was this: Fuel supplied to Canadian consumers must be fully compatible with all emission control equipment installed on new vehicles to ensure the proper operation of vehicles, to meet consumer demands and to meet the U.S. federal emission standards; and, fuels commercially available in Canada must not adversely affect the ability of a vehicle to comply with vehicle emission certification standards, in-use emission standards or the performance of the emission control technology for its useful life.

That is the agreement that we reached with the petroleum industry in 1994. That agreement has not been implemented on their part.

We are here today because we need legislation in order to have the appropriate fuels to operate Canadian vehicles. We are concerned that without the immediate passage of this legislation, we will have another series of vehicles on the road today that cannot meet new emission standards, new emission standards that are pending federally and emission standards that are to be in place in British Columbia. We need the legislation. We have done everything we possibly can to seek an agreement with the petroleum industry.

Mr. Landry: Our customers are likely to be dissatisfied when they progress with this and then receive a bill outside of warranty to repair a catalytic converter for between $600 to $1,000 or to replace a sensor for $200. These are all costs that would be borne by someone, whether us or the customer. At one time or another, the MMT gasoline will cause those problems to happen to our customers. It is serious stuff, and that is why we are here.

Mr. Hutchins: First and foremost, it is a customer satisfaction issue, and that is our business. We want to sell another 1.3 million vehicles this year in Canada, and it is incredible that we put those vehicles out knowing -- as you see in the pictures, the evidence, and the data -- what it does to these vehicles. The ultimate cost, whether it is under warranty or out of warranty, will be borne by the customer.

Senator Kenny: The CPPI implied earlier today that the OBD or the OBD-II equipment that you have may not work for a variety of reasons, not just because of MMT. They suggested, without putting words in their mouth, that in fact much of the malfunctioning may be due to other causes. What is your comment?

Mr. Nantais: We have some experts here who could give you a very good answer to that. We will ask Roger Thomas to step toward.

Mr. Roger Thomas, Manager, Automotive Regulatory Activities, General Motors of Canada: The on-board diagnostics system we currently have was probably one of the most technically challenging systems we have ever designed. An immense amount of work went into designing this system, and it is a remarkable system which does act as an on-board inspection and maintenance program for vehicles.

We have had some minor teething problems, and I do stress the word "minor." However, when you look at the effect that MMT is having on our vehicles in Canada, those problems pale by comparison.

Ms. Darkes: CPPI may have been referring to a service bulletin which General Motors issued. The only issues referred to in that service bulletin other than the fuels happened to be extreme weather conditions such as floods, which is a very unusual situation; the use of non-original equipment manufacturer's parts which could cause some problems; and repeated cold weather starts where a vehicle travels 500 yards and stops. I do have a copy of that service bulletin if you would like to have a copy. The main part of the bulletin deals with fuels because that is the issue for OBD-II systems. The other issues are very rare occurrences, but it does indicate that some fuels contain a manganese octane enhancer known as MMT which can affect various components of the vehicle's emission control system. These effects may result in misfire or oxygen sensored DTCs. MMT may also decrease the ability of the catalyst diagnostic to detect actual failures. Low fuel levels could cause fuel starvation, lean engine operation, and eventually a misfireDTC.

I believe this is the bulletin they referred to, but clearly the focus in that bulletin is the fuel component as it relates to OBD-II systems. Any other references are for unique events such as floods.

Mr. Hutchins: It seems ironic to me that, when you consider the northeast states of the U.S. and the data on warranty issues in the U.S. versus Canada, we have a multiple of problems in Canada. It all has to do with spark plugs and catalytic converters and sensors. The only difference between Canada and the U.S. is the fuels.

The Chairman: On that point, in fairness to what we were told about your GM service bulletin, Ms Darkes, it said considerably more than that. As I look it, it had one paragraph, a two-liner, which referred to MMT. The balance of it, probably by far the majority of it, referred to other problems. It talked about fuel concerns, improper vapour pressure of the fuel, using fuel with the wrong octane rating, refueling and the fuel cap, mud, environment, vehicle handling, severe vibration, and poor vehicle maintenance, all of which were factors which would have these impacts. In fairness to your own bulletin, I think it said considerably more.

Ms. Darkes: Clearly, senator, not using original manufacturer's is a problem controllable by the consumer. Not putting your fuel cap back on the gas tank is a problem controllable by the consumer. The issue that is not controllable by the consumer here is the quality of the fuel that he gets, and that is what the bulletin addresses. The consumer cannot do much about flooding, but clearly we can all do something about the quality of the fuel.

The Chairman: What about improper vapour pressure? Is that not a technical matter relating to the construction of the vehicle?

Ms. Darkes: Again, we are putting systems on vehicles that deal with vapour pressure and improved results there. The consumer can do nothing about the fuel quality. That is something with which he must be provided.

Mr. Landry: On the average, Mr. Chairman, whatever happens in the States in similar circumstances will happen here as well. The difference between the two is the MMT-related fuel or the absence of MMT in the fuel. That is the controllable difference.

The Chairman: I am sure we will come to that later. I just wanted to intercede on that one point.

Senator Kenny: I believe you said that going to an alternative such as MTBE would be a cost of about $7 per year per consumer, and then you contrasted that with hundreds of dollars of service calls. Is that the public policy rationale you are putting to the committee, that the absence of this legislation will result in hundreds of dollars of service calls that will be either picked up through the warranty or ultimately by the consumer, versus the $7 cost? Is it just that simple, from your point of view?

Mr. Hutchins: Again, it is a customer satisfaction issue. It is the right thing to do. The only point I am making is that we have invested millions of dollars into these systems, and we have 15 manufacturers which independently have come up with these systems. By the way, none of them are conducive to MMT.

With the investment that has already been made, and with the cost to the consumer of not being allowed to have the system in place to work to its optimum, it could cost the consumer, because of MMT, for a catalyst anywhere between $600 to $1,000, spark plugs are $40 to $100, and to replace oxygen sensors costs $200. That is $1500. It is ironic that $1500 per vehicle is about what we have per vehicle for these systems, on average.

Senator Kenny: We have heard talk about disconnecting the equipment. What will you do if we do not pass this bill?

Mr. Landry: There are two things that will happen. We will not meet the emission standards for B.C. We will not meet the 1998 emission standards for Canada. We will require a disclaimer on everything we do. We may have to disconnect the OBD-II. Some other consequential decisions will be made which will be deterrent certainly to the type of environment work that has been done in the past.

At one time a few years ago, there was the turn to the four-cylinder engines, and the industry spent $40 billion over a short period of time to meet the standards. It became more difficult to meet the standards as they were changing, and the OBD-II is the way that has been selected to do that. It has been highly effective in doing so provided that the conditions are respected as far as gasoline is concerned.

If you remove this, I do not know what is next on a short term and what we get for all of the millions of dollars that we have spent on research and development to get to the point we are at now.

Senator Kenny: Is that the position of all three companies?

Mr. Hutchins: As far as Ford Canada is concerned, we commend our colleagues from General Motors because they seemed to have the foresight to take action as far as disconnecting the warning light. We did not do that predicated on our feeling that the government would act in good faith and pass this bill.

Now we are standing with a 1998 model Windstar being put on the road on February 13 and, to be perfectly honest, at this point in time we are undecided about what action to take. We are very hopeful for a speedy resolution of this issue right here. That could save us all a lot of time and trouble.

Ms Darkes: We have disconnected the OBD-II system lights. We are awaiting the outcome of this legislation to determine what we can do for 1998. Very soon our 1998 models are also coming to market, but until we know the resolution of this issue and up to this point, we have the lights disconnected.

Senator Taylor: How optimistic are you that the legislative process would move that fast? It might be the 2001 model that will be affected.

Mr. Landry: It has been a long wait.

Mr. Hutchins: We have been waiting a long time.

Senator Taylor: I would be interested in asking the president of Ford from which refiner he obtained his MMT-free gasoline in Canada?

Mr. Landry: We obtained it from Esso and Shell.

Senator Taylor: We heard a lot of crying from both of them this morning that it was a very difficult thing to do.

Mr. Landry: We understand, senator, that Irving is supplying it. Those with the capability of producing it are supplying the eastern states with gasoline that is MMT-free.

Senator Taylor: As is Irving refinery and as is Come By Chance.

Mr. Hutchins: There is a high percentage in B.C. Chevron, I think, is about 40 per cent MMT-free in B.C.

Mr. Nantais: That is 40 per cent of the market approximately, but Chevron does produce MMT-free for the lower Fraser River Valley.

Senator Taylor: So it is not a rarity. I am a little puzzled about why you are here, too, as someone has already asked.

If the government puts in emission regulations, and if there is MMT-free gasoline already being refined and marketed, why not just let free enterprise take its course? You can tell purchasers that if they buy this vehicle and use MMT-free gasoline, they will meet the requirements and, if not, the gendarme will be there to test the tailpipe because the emissions will not make the test.

Why not just tell the consumer that they have the choice to use MMT gasoline and it will not pass in the back, or tell them to use it and you stand behind it?

Ms Darkes: We agree that consumers should have that choice. Unfortunately, MMT-free fuel is simply not available in Canada. We had asked the petroleum industry if they would assist in this by having one MMT-free fuel pump available at each and every station. It would be up to the oil industry to determine the best way of doing that. The industry said that they would not do that. So while we are recommending to consumers that they need to use MMT-free gasoline, there is nothing the consumer can do about it today because it is not available to him at the pumps.

Senator Taylor: You have all these little hotshot marketers, like Mohawk in the west, that provide ethanol. Would they not immediately leap into the breach? I can see a place for some senators to quickly get into business if you announce that they should just take MMT-free gasoline. Will it not take over very quickly?

Ms Darkes: We are amazed as you are that, collectively, all the oil companies have refused to provide MMT-free fuel to us. On the other hand, we have had some experience in the past. In Canada, we needed low sulphur diesel fuel for new diesel engines which we had developed for heavy-duty trucks. Unfortunately, we ran into the same problem. We were not able to get low-sulphur diesel fuel in Canada when it was available in the United States.

As a result, with those new technology engines, we could not bring them into Canada until several years after they were available in the United States. We really faced this problem in many different facets. That is why we are here today, because we need the regulation.

Senator Whelan: Coming from my area and having worked as a tool-and-die maker and in auto parts factories, it is good to see these three so close together.

Senator Taylor: You will never buy a Japanese car again.

Mr. Hutchins: It is only for an hour and a half.

Senator Whelan: What will happen to the warranty on new vehicles if MMT remains in Canadian gasoline? Will you honour the warranty?

Mr. Landry: The multiplicity of the cost is the big decision which we must make ourselves. We are not there yet. We will make that decision soon on the 1998 model. We already have a disclaimer in our warranty saying that MMT is necessary.

Either disconnecting the OBD-II or voiding the warranty is the choice, because if you multiply the cost by the number of cars on the road, it becomes astronomic. None of us individually can support it. It is too much.

Senator Whelan: This morning, when the other people were here, I asked several questions. I also quoted a well-informed son-in-law of ours who is a grand master technician with a General Motors dealership.

The Chairman: We will have to call him as a witness.

Senator Whelan: He is the one who has to fix these bad things that happen because of MMT. He could be a good witness here for these people who have some reservations about MMT doing any damage. He can tell you that, every day, he works on a car and he disconnects a system that is not working right and is destroying or changing the catalytic converter. He is working in the dust. The doctor is telling him he should wear a mask, a coat, and be fully covered and not be subjected to that type of chemical because it is so dangerous.

I have talked to doctors about the dust from these catalytic converters. I have a little radio program that I use and I had a doctor from Manitoba speak to this. We look not just at the mechanical costs but at the health risks. I am sure you must be concerned about that also.

Mr. Landry: There is no doubt we are. Mr. Chairman, for the record, I should like the senators to know that Mr. Whelan drives a Chrysler car.

Senator Taylor: Is that why he is always late?

Senator Whelan: I drove a Chrysler since 1950, but my wife has driven a Ford. We also own a GMC product so we are non-partisan.

Mr. Landry: He is also a great politician.

Senator Whelan: In the United States, what do they put in their gas instead of MMT? Do they put anything?

Mr. Nantais: In the United States, generally, they have what they call a higher octane pool. They may not need any additional additive to get that octane, but there has also been wide range use of MTBE which is a readily available and very acceptable alternative to MMT, if indeed it is required there. That is generally the practice.

Senator Whelan: Have you done any testing with your engines or in your whole operation with ethanol? In your pictures, you also show the propane. I imagine that would be the same with natural gas vehicles? The spark plugs and catalytic converters do not show very much damage either, I take it?

Mr. Nantais: On the question of ethanol, vehicle manufacturers, as you will note in the owners' manuals, will accept up to 10 per cent ethanol as part of the gasoline blend. That is perfectly acceptable for their products. Ethanol, by the way, is also another readily available alternative to MMT.

Senator Whelan: I am a strong supporter of ethanol. This morning, the witnesses intimated that some refiners would be closed down. They told us that, in the last 15 years, 12 or 15 refiners have closed down but not because of MMT.

You have financing your car-building by yourselves. You got rid of the banks. Why not get into the oil refining business?

Mr. Landry: They probably started with me, senator. I started my career in the oil industry for about 10 years. Maybe we should get involved in oil refining.

Senator Whelan: What I see in the oil industry today is less and less competition, buying out refineries, closing them down. I am told some of these were very good refineries. I do not see that it would have been such a bad idea because their financial statements are generally pretty good.

Mr. Landry: This is the other point. It is not a question of financial statements. I find it regrettable that we are that far with the process when the need is so clearly identified.

Forget for a minute the big three that are represented by this witness panel and think of all the other manufacturers that will be making representations to the Senate committee. I am speaking of Honda, Toyota and Mercedes. They will say fundamentally the same thing: It does not work with MMT in the gasoline. It screws up our system. It will cost money to someone some day and it even prevents us from meeting the standards the government is asking us to meet.

I am sorry we have to debate an issue that everyone is researching independently. It happens company by company. We do not exchange warranty information. We would all come to the same conclusion. It is beyond me, sir.

Senator Whelan: I am 100 per cent against MMT, so I just want to reiterate what Senator Kenny said.

It is difficult to believe that you must come here when it is so obvious that so much research is done in the United States by the same companies. Have you met with any branches of government, such as the cabinet?

Mr. Landry: We met quite a few of the ministers. We met a few of the senators and promised to meet them all.

Senator Whelan: You met some MPs too, did you not?

Mr. Landry: Yes. We have reviewed the situation and the concerns. The bill is currently in committee. We are anxious to see Bill C-29 behind us and that is probably one of the main reasons we are here.

Mr. Hutchins: Senator, you asked about the warning. I might just mention the owners' manual. I have a copy of the 1997 Crown Victoria owners' guide. On page 239, choosing the right fuel, it says:

The use of leaded fuel is prohibited by law and can damage your vehicle. The damage may not be covered by your warranty. Your vehicle was not designed to use fuel containing manganese-based additives such as MMT.

It goes on in the back to say:

Repair of damage caused by using a fuel that your vehicle was not designed for may not be covered by your warranty.

We get questions about that. Every customer that buys an automobile says, "Am I covered or not?"

Senator Rompkey: I am interested in some of the contradictions which appear.

Mr. Hutchins, in his comments, said, "A successful automotive company in 1997 is one which accurately determines what the customer wants."

However, you are the customer for the oil companies. Why are they not determining accurately what you want?

Mr. Hutchins: I wish I could answer that, senator. I do not have any answer to that.

As Maureen mentioned, we have been meeting with the oil companies. We thought we had a memorandum of understanding. We went forward on that basis. That is why I am behind the eight ball, to be honest with you. I am sitting here with a 1998 vehicle on the road because I guess they did not listen to the customer.

Senator Rompkey: They were saying this morning that you guys were the real bad guys in the game and it was quite different in the United States. What they really want is some independent study in which all the parties in which all the parties participate. They say this is happening in the United States but it is not happening in Canada

We explored that with them. They speculated as to why it might happen. It was interesting that Mr. Landry said he worked for an oil company previously. One of the reasons given as to why there might be cooperation in the United States was interlocking board of directors in the relationship between the oil and auto companies in the United States.

There seem to be contradictions between Canada and the U.S. as far as how this problem is being solved. Why are those contradictions there?

Mr. Landry: There was a list of 15 or 20 oil companies in the U.S. that are producing MMT-free gasoline and have no intention to change. Some are the affiliated companies, if you wish, of their wholly-owned subsidiary in Canada, not offering MMT-free gasoline.

Whenever there is an investment to make -- it was the same in low sulphur and again this time -- there is a reluctance and delay tactics set in. At the same time, we are not meeting the standards that, I submit with all due respect, that the country asked us to follow.

There cannot be duplicate technology for everything we do. This technology has been developed on a world-wide basis by everyone, by independent companies. This is the best we can do and without it we cannot meet the standards. We cannot do what we are asked to do from the point of view of the environment.

I hope that answers your question, sir, because I cannot say any more about the oil industry.

Mr. Nantais: If I may supplement that, they are probably referring to a test program ongoing right now with our counterpart organization. That test program is really being done in response to EPA and the court decision.

EPA expressed the view that notwithstanding the court decision, they remain concerned about the impacts of MMT on second generation onboard diagnostic systems. That program is proceeding to add to the existing body of knowledge so that EPA can go back and re-evaluate the situation. As we said earlier, indeed, they will be looking at that question again. That information will be added to that body of evidence.

Senator Cochrane: I do not have the exact quote, but one of the witnesses this morning said the reason they are so opposed to this is that it would set a terrible example.

Mr. Landry: A precedent.

Senator Cochrane: A precedent for banning other kinds of elements in gasoline. They want to take a stand here so that other things which may be harmful to the environment in gasoline will not be addressed by government.

Ms Darkes: Well, I think we are asking government to address this issue and have asked the oil companies to address it because there is clear, incontrovertible evidence that MMT in gasoline degrades emissions systems and causes failures.

The day-to-day evidence which has been shown here is clear. I cannot understand why this would set a bad precedent. What the government is being asked to do is ban a substance which has been shown to be harmful.

Senator Buchanan: As you know, Mr. Chairman, I am a non-vocal politician from small-in-size but big-in-quality Nova Scotia. I find this exercise rather confusing. As a provincial politician for 24 years, and premier of the province for 13 of those years, I find it difficult not to think sometimes as a provincial politician.

It seems to me that we have a situation here where either you people have not done your homework or the others have not, because eight provincial premiers and eight provincial governments oppose this bill. That is rather unusual in Canadian politics and I have been there a long time.

I also want to point out that I drive a Buick, my wife drives Plymouth, and one of my sons drives a Ford Windstar. I buy my gasoline from Esso, Irving, Petro-Canada, Ultramar, Wilson Fuels, Shell, and Mercer fuels in Sydney.

Senator Taylor: No loyalty.

Senator Buchanan: You understand I look after everyone.

The Chairman: And your question is?

Senator Buchanan: All of the provincial premiers oppose this bill: First, because it is an infringement of interprovincial trade, one of the things we always oppose; second, because they do not see any conclusive evidence of any environmental danger or damage here, yet; and third, because of the economy and concern over jobs in most of those provinces, with small marginal refineries where jobs may be lost because of the precarious financial position of some of those refineries.

What do you say about all this? What do you say to these eight provincial governments, three or four of which have said they will take the federal government to court?

Ms Darkes: Clearly we believe the federal government has the jurisdiction to legislate on this issue because we believe the federal government has control over --

Senator Buchanan: I am talking about interprovincial agreements.

Ms Darkes: -- interprovincial trade and foreign trade.

Senator Buchanan: Wait a minute. I do not know which constitutional lawyers you were talking to but when it comes to interprovincial trade, we fought that for about 50 years in this country and the federal government never indicated they ever exercised a jurisdiction over that and could tell the provinces what to do about interprovincial trade until there was an agreement a few years ago.

Mr. Landry: That is probably where we made an error, senator. Before building the OBD-II, we should have consulted a constitutional expert.

Ms Darkes: Senator, we have to rely on the government to choose the appropriate forum for the legislation, but what is critical to us is that Bill C-29 proceed immediately to ban MMT for all the reasons we have shown today.

Senator Buchanan: Have you met with the provincial governments?

Ms Darkes: We have met with several of them and as you know Ontario very much supports the legislation.

Senator Buchanan: That is understandable.

Ms Darkes: As does British Columbia. They obviously have legislation on the books. The facts are incontrovertible. MMT in gasoline fouls the emission control systems, and everyone knows what needs to be done. We also recognize that there are costs involved, and that is something with which all of us have struggled. The auto industry has spent hundreds of millions, if not billions, of dollars on environmental issues. I can speak to just two examples within General Motors plants. Our paint shop at Sainte-Thérèse and our paint shop in our Oshawa truck plant now use water-borne paints systems. Those two plants alone cost us hundreds of millions of dollars to convert to that new paint system. They are difficult expenditures to undertake but we have come to the conclusion that if we are going improve the environment over time, those kinds of expenditures have to be made. There is never a good time to make them, but in the end result they have to be made if we are to do the job on the environment. I recognize the difficulty.

Senator Buchanan: I have one further question. We have the Imperial Oil refinery in Dartmouth. You know what the government and premier of Nova Scotia have said about that, and the concern they have about the possibility that that refinery may suffer negative consequences if MMT is banned. I say "may" because Imperial Oil has never said they would close it but it certainly is not helpful.

In addition to that, I would like to ask Mr. Nantais a question about Volvo, which also has a plant in Nova Scotia. I know a lot about it. I opened their new plant for them, and I would hate to see something happen to that. What is the situation with Volvo regarding MMT?

Mr. Nantais: I should have mentioned this earlier. I had discussions with the president of Volvo prior to coming here. He was expecting to come, to be part of this hearing. Unfortunately, he and his entire management team had to travel to Sweden on this occasion. He regrets he could not be here with us. However, I can say to you that Volvo Canada and Volvo in the United States fully supports the findings that all the other manufacturers have put forward here today. They are indeed very concerned about MMT. As you know, they are a resident of Nova Scotia since 1963 and they too would like to continue operating in that province.

Senator Cochrane: In a publication put out by Ethyl Corporation, entitled "MMT and On-Board Diagnostic Evaluation of Engine Misfires", October, 1996, a Ford official is quoted as saying at a conference in Michigan that "...we have, over a number of years, looked at MMT contaminated plugs, and, so far, we have been unable to find one that actually had a problem."

Would you, Mr. Hutchins, care to comment on this apparent difference in the experience regarding MMT?

Mr. Hutchins: I do not know the article, the source of the information, and so on, and I do not agree with it. I cannot speak to it because I just do not know the context.

Mr. Nantais: I might add that other spark plug manufacturers -- and I think we provided this information to the committee but if we have not we certainly will -- have clearly stated in the press that they have indeed witnessed premature failure of their products as a result of MMT. Whom do you believe?

Mr. Hutchins: We also have the warranty data. As we compare northeastern U.S. with Canada, we see the failures that have taken place. Certainly it is a multiple of cost in Canada versus the U.S, with regard to spark plugs, sensors, and converters. The only difference is the fuels.

Senator Cochrane: This was a quote from a Ford official.

Mr. Hutchins: I do not know who it was.

Senator Cochrane: I have one more question. If you are convinced that MMT is detrimental to the environment, that it is a harmful substance, why are you willing to accept this bill? After all, this bill does not ban the use of MMT. Should you not be supporting a complete ban on MMT?

Mr. Nantais: Again, senator, we do not have the ability to choose the instrument that is being used here. Clearly, that would be the optimum. I think what you see in effect, as a result of this piece of legislation, is that that would result in an outright ban on MMT. Yes, one could build a MMT plant in every province, that would be the loophole, but I cannot see that happening, quite frankly.

Senator Hays: Does the non-operation of OBD-II do anything to the performance of the automobile? Does it go as fast and operate the same way without the emission controls?

Mr. Nantais: The OBD-II system is, as Mark pointed out, an on-board inspection maintenance program. It monitors about 17 different functions of the drive train and engine such as spark plugs and catalyst efficiency. It is intended to ensure that a vehicle remains within specification for the full useful life of the vehicle in terms of delivering the emission-reductions performance that it was designed to deliver.

Senator Hays: So when you unhook it, it affects more than the air emission aspect of what your systems are designed to achieve.

Mr. Nantais: The on-board diagnostic system just monitors those functions. Of course, if you do have spark plug misfire, you are allowing volumes of fuel to be emitted.

Senator Hays: But your drive train check is also gone when you unhook the OBD-II.

Mr. Nantais: There are a number of different codes. You can deactivate certain codes and others remain in place to monitor those functions.

Senator Hays: Do you know what people are looking for to satisfy themselves that MMT is a problem for your OBD-II systems? You have presented evidence to us which seems compelling to a lay person. However, it obviously does not impress them. Do you know what would impress them?

Mr. Nantais: I am not sure it is a question of impressing them.

Senator Hays: Or convincing them.

Mr. Nantais: I think it is a question of economics for them. The president of CCPI has admitted to me that this is strictly an economic problem, and he may have alluded to that here this morning. It is not a question of not having the technology to do it. The technology exists.

Senator Hays: They said the problem was a combination of industrial power brokering, which has come up already, and economics. They are also saying, if I heard them correctly, that they do not believe this is a problem.

Do you know what it would take to convince them? Have they given you any signal?

Mr. Landry: The biggest proof we could give is that 20 automobile manufacturers in Canada, from all over the world, have all, independently of one another, reached the same conclusion; that MMT is damaging, and we have no alternatives. That is basically the situation, sir.

Mr. Hutchins: We thought that coming here might convince them. We will wait and see.

Senator Hays: On the same matter, one of you said that the designers of the system have designed it for other than MMT fuels. I guess you started from the very beginning to exclude MMT fuels as something which could fire these engines.

Perhaps you could talk a bit about the design of the OBD-II.

Mr. Nantais: I would like to ask Stuart Perkins to come forward. I think he can give you a succinct answer on that.

Mr. Stuart Perkins, Director of Engineering, Chrysler Canada: The systems were designed to operate on motor fuels. Motor fuel is essentially gasoline with certain other additives. We found that the diagnostics systems could not tolerate the depletion of MMT. It clouded the diagnostics sensors. It is not that we designed them to operate without MMT; it is that the MMT additive was not compatible.

The Chairman: We thank you very much for appearing and sharing your views with us. It was very important.

I wish to welcome our next panel. Thank you very much for being here with us today and sharing your viewpoints, which are important to us. We know that you have busy schedules and that you have made a big commitment to be with us today. We are very appreciative.

As you saw from our past process, please take whatever time you feel you need to explain your position so that we understand it. My colleagues and I will then enjoy some conversation with you.

Please proceed.

Mr. Kiyoharu Owada, President, Nissan Canada, Association of International Automobile Manufacturers of Canada: On behalf of the members of the Association of International Automobile Manufacturers of Canada, I wish to express our thanks for this opportunity to speak to you today about the impact of MMT on our vehicles.

It is a special honour for me, in my capacity as the chairman of the association of the International Automobile Manufacturers of Canada, to introduce to you my distinguished colleagues on the panel.

With me today are Ernst Lieb, President of Mercedes-Benz Canada; Mr. Yoshio Nakatani, President of Toyota Canada Inc; Mr. Ikuo Shimizu, President of Honda Canada Inc; and Mr. Don McArthur, President of the association. All are members of the association's executive committee.

Also present as technical advisors are Manfred Mokry, Mercedes-Benz Canada; Glenn Brickshaw, Honda Canada Inc.; and Martin Ehmann Toyota Canada Inc.

Our association's 15 members manufacture and market vehicles throughout the world and most have manufacturing plants in North America. There are three in Canada. The total production of these Canadian plants now exceeds the import of automobiles from overseas by a considerable margin.

International automobile manufacturers have been leaders in the development of durable, fuel efficient vehicles with advance emission control devices. We know that Canadians want clean-burning vehicles. Our members have developed sophisticated emission control devices that will allow them to meet the most stringent national emission standards in the world.

However, there is a serious problem for all automobile manufacturers around the world. The emission control devices will not do their job if MMT is present in gasoline. This is a conclusion Nissan and other global manufacturers, have independently reached based on real-life, in-use results.

Canada is the centre of this issue. Our emission control systems are predicated upon the availability of MMT-free fuel, which is known in the U.S.A. and throughout the world, and which we were assured by the Canadian government would be made available here.

Not eliminating MMT from fuel in Canada today would prevent us from meeting Transport Canada's proposed 1998 vehicle emission integration, which is predicated on the availability of MMT-free fuel. It will create an unacceptable cost in unnecessary warranty repairs and will needlessly irritate consumers with false warning lights. This is why MMT is such a high profile issue here in Canada.

MMT-free fuel is vital for the operation of our emission control systems. Without the promised MMT-free fuels, we will be unable to comply immediately in B.C. and will be unable to meet the proposed 1998 Canadian federal emission regulations.

I do not know the original reasoning behind the 1970s Canadian decision to allow the use of this suspected neutral toxin as an alternative to lead as an octane enhancer in fuel, but it has long been known in international technical circles that it was a problem for cars. Spark plugs and catalysts have been degraded by MMT since 1970s. We have accepted it up to now as part of doing business in Canada, although never to our satisfaction. With the introduction of the latest emission control systems, however, we can no longer do this. My colleagues from Toyota Canada, Honda Canada, Mercedes-Benz Canada and from the North American car companies agreed with this assessment of the situation.

You have all received detailed information from us. We have brought with us today a team of technical experts who can answer any questions you may have. Nissan strongly supports the passage of Bill C-29. MMT-free fuel is absolutely necessary for our sophisticated second generation on-board diagnostics systems, OBD-II, which Nissan began installing in 1995 model year cars in anticipation of compatible MMT-free fuels.

My colleague from Toyota Canada will now outline Toyota's related research activities and concerns and the impact of failing to pass Bill C-29. Mr. Nakatani will be followed by Mr. Shimizu, who will describe Honda's technical situation. Mr. Lieb will briefly outline Mercedes-Benz activities and summarize the impact of failing to quickly pass Bill C-29.

Thank you for this opportunity. We look forward to the passing of this important bill.

Mr. Yoshio Nakatani, President, Toyota Canada, Association of International Automobile Manufacturers of Canada: It is a pleasure for Toyota to appear before this committee of the Senate of Canada.

As you are aware, Toyota is manufacturing and distributing motor vehicles in Canada and around the world. It is my pleasure to make a report to you at this time. Our Cambridge plant expansion project for 200,000 production capacity is progressing very well. It will be completed some time in May or June so that we can produce new Corollas from new facilities.

Through extensive research and development, Toyota has designed state-of-the-art vehicle emission control technology. This technology is capable of reducing harmful emissions of hydrocarbons, carbon monoxide and oxides of nitrogen to extremely low levels. We have designed this technology to comply with the most stringent emission control regulations in the world and to perform throughout the useful life of the vehicle.

I am here today because I am very concerned about the MMT in Canadian gasoline. First, I am concerned about the fact that there is evidence that MMT is responsible for the release of potentially harmful manganese oxide vehicle emissions. Second, I am concerned that MMT will interfere with our emission control technology and cause higher levels of hydrocarbons and carbon monoxide to be released. Third, I am concerned that MMT will interfere with the operation of our on-board diagnostic system which monitors whether the emission control technology is operating properly.

These concerns are very important to us as our ability to contribute to the quality of the environment and meet increasingly stringent emission control regulations is at risk. There is some data that indicates that manganese oxide emissions caused by MMT are neurotoxic. A large body of data indicates that MMT in Canadian gasoline causes manganese oxide deposits to form on catalytic converters and oxygen sensors. In some circumstances, the manganese oxide deposit on the catalytic converter interferes with the proper functioning of the catalytic converter and causes increased levels of harmful emissions to be released.

There is also concern that manganese oxide deposits on oxygen sensors could interfere with the proper functioning of the emission control technology and on-board diagnostic system. Our analysis of this problem supports these conclusions.

I would like to take a moment to outline the type of data we collected and how our analysis of the data has raised concerns for not only Toyota but also for Canadian consumers and the Canadian environment.

In 1993, we installed our most advanced emission control technology and on-board diagnostic system into selected models of our 1994 vehicles manufactured for Canada and for the United States. We conducted routine durability testing on the emission control components by collecting them from in-use vehicles in Canada and installing them on test vehicles in Japan. The emissions from the Canadian components were compared to the emissions from U.S. components. The U.S. components were collected in the same manner but operated using MMT-free fuel. We found that the Canadian components caused increased levels of harmful hydrocarbons and carbon monoxide to be released.

In order to determine the cause of the release of increased levels of hydrocarbons and carbon monoxide, we inspected the Canadian components. The results indicated that, one, manganese oxide deposits were present on the catalytic converters and oxygen sensors; two, the amount of manganese deposits increased with increased mileage; and, three, MMT was responsible for the manganese oxide deposits.

We also conducted detailed analysis of the exhaust system data which we collected from the on-board diagnostic systems of Canadian and U.S. in-use vehicles. Based on our findings, we concluded that the manganese oxide deposits found on the catalytic converters can, in some circumstances, cause the catalytic converters to lose efficiency. This would allow increased levels of harmful emissions to be released.

As a result of our findings, we also became concerned that the manganese oxide deposits found on the oxygen sensors may interfere with the emission control technology and the ability of the on-board diagnostic system to properly monitor the emission control technology.

The on-board diagnostic system is designed to alert the driver of a vehicle if the emission control technology malfunctions. The decreased efficiency of the catalytic converter and the possible failure of the on-board diagnostic system to alert the driver of a vehicle when the catalytic converter malfunctions are very serious problems. We believe that these problems may jeopardize our ability to comply with the stringent emission control regulations enacted by British Columbia and proposed by the federal Government of Canada.

We provided a detailed description of our findings in confidence with each the British Columbia and federal governments.

We understand that the both the British Columbia regulations and the federal government's proposed regulations are based on the availability of MMT-free fuel in Canada.

Although I have spent some time speaking to you about our technical concerns, I believe there are even greater concerns which affect Canadian consumers and the Canadian environment. Canadian consumers are now able to buy some of the most sophisticated emission control technology in the world. We have been able to keep the cost of this technology at an affordable level by making it available to all North Americans alike and designing it to perform throughout the useful life of the vehicle. However, with MMT in Canadian gasoline, we are concerned that the warranty costs associated with this technology will increase and affect vehicle pricing. This concern has become more prevalent as the British Columbia and federal governments introduced legislation to require that vehicles meet increasingly stringent emission levels. We are also concerned that after the expiration of the warranty coverage, the cost of repairs incurred by consumers will increase. As a result, the MMT in Canadian gasoline could lead to an increase in the cost of purchasing and owning a vehicle for Canadian consumers.

We know that the Canadian new vehicle market is shrinking. We believe that affordability is the main reason for this shrinking market. We would like to continue to make new vehicles with state-of-the-art emission control technology available to Canadian consumers at affordable prices. We would like to see vehicle affordability stimulate the new vehicle market and the Canadian economy and contribute to Canada's continuous prosperity. We would like to see advanced emission control technology contribute to the health of Canadians and the quality of the Canadian environment. However, without MMT-free fuel in Canada, it is unlikely that these goals will be realized.

Mr. Ikuo Shimizu, President, Honda Canada: I am pleased to have the opportunity today to address the Standing Senate Committee on Energy, the Environment and Natural Resources on the issue of Bill C-29.

At Honda, we are proud of our sensitivity to the environment and our record of environmental performance. We continue to be leaders in design, development, and sales of environmentally friendly automobiles and other products around the world.

In North America, since the 1970s, Honda products have led the way in exceeding the standard of environmental performance and fuel efficiency. Throughout the 1980s, the range of advanced designed products continued. In the 1990s, Honda was the first auto company to certify and produce conventional-gasoline-fuelled, low-emission vehicles, so-called LEV.

Honda's world leadership in design and development of these advanced technology vehicles has given us an insight into the problems that occur with the use of improper fuels.

In October 1994, Honda Canada submitted a confidential report to Environment Canada and Transport Canada providing details of our concerns with the fuel additive MMT. Since that time, we have been vocal in our support for the availability of MMT-free fuel in the Canadian market to support the advanced technology vehicles that we have already introduced.

Honda has concluded that the combustion products of MMT, mainly manganese oxides, foul the oxygen sensors and the catalytic converters on vehicles, reducing their ability to control and monitor the harmful exhaust emissions that we have worked so hard to minimize.

My colleagues, in previous presentations, have exhibited their concerns about the effect of manganese oxide on emission components. However, I should like to show you one of our oxygen sensors fouled with manganese oxide. One sample shows the healthy sensors after being for used 140,000 kilometres in the United States; the other shows failed sensors after being used for 75,000 kilometres in Canada.

At Honda, we pride ourselves on a superb engine management system. We gained our expertise in our formula one engine technology and then brought that experience through our environmental engineering group to ordinary drivers around the world. However, we need properly functioning sensors to make systems work, and MMT prevents that.

There has been the suggestion that, somehow, the auto companies have an underlying motive for supporting the passage of Bill C-29. At Honda, there is no underlying motive to hide. Our motive is clear: We are convinced that the negative effect of MMT is indisputable, cumulative, and irreversible, and that MMT will result in increased vehicle exhaust emissions, increased warranty and consumer costs, as well as consumer dissatisfaction.

In the future, Honda wishes to maintain its position by introducing even cleaner vehicles into the North American market. Unfortunately, due to fuel quality issues, Honda will not be able to do so in Canada without assuming an increased risk of emission system failures both during and after the warranty period.

As the President of Honda Canada, I am committed to bringing these leading-edge emission technology vehicles to Canada for the 1998 model year and beyond. I need your support to make MMT-free fuel available by passing this bill. The time has come to take a definitive action to protect the Canadian environment and the Canadian consumers by passing Bill C-29. Thank you for the opportunity to address this committee.

Mr. Ernst Lieb, President, Mercedes-Benz Canada: I wish to echo some of my colleagues' comments by providing Mercedes-Benz' views on the impact of MMT on the vehicles we sell here in Canada.

Before I turn to that subject, however, I wish to emphasize how important it is that this legislation be passed without delay so that MMT can finally be eliminated from Canadian gasoline. It is no secret that air quality is a significant problem in parts of Canada. The Quebec-Windsor corridor and the Lower Fraser Valley are two areas where the problem is most acute.

Our industry has recognized that it has an important leadership role to play in improving air quality and reducing smoke. Over the past decade, the automotive sector has voluntarily introduced more stringent vehicle emissions systems on automobiles sold in Canada. This technology is designed to reduce smog-generating emissions from individual vehicles by 90 to 98 per cent. As a result, the automotive sector is the only one in Canada to show a reduction in emissions between the years 1985 and 2000.

Having invested billions of dollars in the development and introduction of state-of-the-art emission control and diagnostic equipment in our vehicles, we now face a situation in Canada where this technology cannot function properly because of the presence of MMT in the Canadian fuel. This is an important issue in relation to our customers who expect to get the full benefit of the technology they pay for when they purchase a new vehicle.

It is also critical to our ability to meet the vehicle emission regulations being proposed by Transport Canada for 1998 and those already in place in British Columbia. These regulations were based on the assumption that MMT-free fuel would be available for the consumer. They can be met, but only if MMT is removed from the fuel.

Seen from an international perspective, the continued use of MMT in Canada leaves this country out of step with the rest of the world. No other OECD country allows MMT to be used on a national basis. Even in the United States, where a technical ruling by the courts forced the Environmental Protection Agency to grant a waiver to the Ethyl Corporation permitting the use of MMT, this fuel additive is still prohibited in California and major American cities where the U.S. Clean Air Act requires reformulated fuels.

The simple truth is that reducing vehicle emissions is a priority for governments everywhere.

Mercedes-Benz introduced advanced emission control technology in 1994 which continuously monitors the systems and alerts vehicle operators to a malfunction within the system which requires vehicle servicing. However, we have determined that MMT causes deposits within the emission control system leading to premature elimination of the indicator lights. In Western Europe, our passenger cars are equipped with similar exhaust emission technology, and in these markets we do not experience emission-control-related consumer complaints due to MMT deposits.

For the 1998 model year, Mercedes-Benz Canada plans to introduce even more advanced exhaust emissions technology to meet the B.C. regulations and the proposed 1998 federal regulations. If MMT-free fuel is not available for these vehicles, we may reluctantly find it necessary to deactivate the system to avoid customer dissatisfaction.

Mr. Chairman, honourable senators, today is somewhat of an unusual day for us. We are not accustomed to appearing before the Senate of Canada, let alone together with all of our competitors from around the world. We hope, however, that our attendance here and personal participation in the MMT issue helps to make it clear how important this issue is for this industry.

This concludes our opening statements, and we hope that we will now be able to answer all your questions about the impact of MMT on our vehicles and why it is so vital that Bill C-29 be brought into force as soon as possible.

Mr. Owada: If you have any questions, we would be pleased to answer them.

The Chairman: I am sure we do. Domo arigato gozaimasu. We appreciate your participation.

Senator Kinsella: Mr. Owada, at the bottom of page 3 of your presentation, you state that you had an assurance from the Canadian government that MMT-free fuel would be made available here in Canada. Is that your testimony?

Mr. Owada: Do I understand your question? Are we basing our emission devices on MMT-free gas fuel?

Senator Kinsella: At the bottom of page 3, you state:

Our emission control systems are predicated upon the availability of MMT-free fuel; which is the norm in the U.S.A. and throughout the world and which we were assured by the Canadian government would be made available here.

I wish to ask you some questions about that statement.

Who gave you that assurance in the Government of Canada?

Mr. Owada: We only understood that we are to help, but I do not know who gave the assurance to us.

Mr. Nakatani: As far as I understand the Canadian federal government, Transport Canada, sets the standard of emission control for 1998 model year in the condition of MMT-free gasoline. That is a Canadian government requirement or standard.

In order to meet that standard set by Canadian federal government, all of us have been working very hard.

Senator Kinsella: Is it now your testimony that you were not given this assurance by any minister of the Government of Canada?

Mr. Don McArthur, President, Association of International Automobile Manufacturers of Canada: Perhaps if we may call upon those who were doing the negotiations with the federal government at the time. They have more specific knowledge and would be happy to respond to that question.

Mr. Martin Ehmann, Manager Vehicle Compliance, Technical Operations, Toyoto Canada Inc.: At the working group level, in the discussions for regulation development, it was clear that MMT fuel would predicate this 1998 ruling on the federal side. It was also very clear to British Columbia that, to continue compliance to the total requirement in the long haul, MMT-free fuel would be required. In fact, it is available in significant quantities in the British Columbia lower Fraser Valley now.

Senator Kinsella: Did any minister of the Government of Canada give you this assurance?

Mr. Ehmann: I personally was not present at those meetings, sir.

Senator Kinsella: I will turn to another matter.

Mr. Nakatani, I am referring to your presentation at page 3, the third paragraph, where you explain to the committee that you:

...became concerned that the manganese oxide deposits found on the oxygen sensors may interfere with the emission control technology and the ability of the on board diagnostic system to properly monitor the emission control technology.

When did you come to that conclusion? I have read a document written on behalf of the Government of Canada, dated July 19, 1994, by Mr. E. Crupi in the ASFBB. He states:

This summarizes data recently submitted by... Toyota (July 13, 1994)...

The Government of Canada goes on to state in this memo:

Toyota has monitored the OBD II codes on 24 Canadian and 10 U.S. 1994 model year vehicles to determine whether MMT has significantly impacted the capability of the catalyst monitoring function in Canada. Toyota did not find any evidence that false detections made by the catalyst-monitoring system occurred as a result of using MMT.

These two statements seem to be at odds one with the other.

Senator Kenny: Can they have a copy of this document? Could we please know whose initials are on it? Could it be circulated to the committee, please?

The Chairman: That would be appropriate. When you are finished with the document, please distribute it.

Senator Kenny: It is hard to follow the question when he is quoting from a document which I have not seen. I do not know whether other members have seen it. I do not know what the ASFBB is. I do not know that organization within the government.

The Chairman: Finish your question and then we can get it.

Mr. Nakatani: In my statement today, I did not mention our testing of 1994 models. My report today is based on the same testing and the same timing as what you quoted, senator. I should not say this, but I came to Canada 18 months ago in July 1994. I was in Tokyo then. My technical staff Martin Ehmann will explain about that.

Mr. Ehmann: The document you are referencing, senator, is actually a response to something which happened a long time prior -- to be precise, in March 1993. At that time, our initial research was rather limited on that particular engine configuration and environmental technology. We had earlier introduced in 1994 and installed in late 1993, only in a selected few engine families, what we consider to be an OBD-II system.

We approached Transport Canada and explained to them our serious concern. We brought our photos and research and analogies. We were concerned that, perhaps, the MIL light might be falsely triggered. We agreed to leave the MIL light off temporarily but leave the monitoring functions in place and then conduct, early in the 1994 model, a survey based on actual in-use vehicles.

That study was done at a very early time in the vehicle life, as you can appreciate. It was done in 1994 for the 1994 model vehicles. Although we were approaching the trigger of illuminating the MIL light, actually we had not done so. However, our concerns continued because with vehicle age and mileage, we expected problems in the future.

Since then, we have also conducted additional research which confirmed that, in fact, it is a serious problem.

Senator Kinsella: This the question I was going to ask of the other witnesses, Mr. Chairman.

Building on Senator Hays' question, when you engineers were designing the OBD device, did they not take into consideration the fact that, in Canada, our fuel is principally MMT-enhanced fuel?

Mr. Owada: At Nissan we believe we have one of the most developed technology in the world for emission control. Through research and development we believe that MMT will be out. That is my understanding.

Senator Kinsella: If your engineers knew that, for the Canadian market, their OBD device would have to be able to cope with MMT-based fuel, they would have factored that in their design, would they not?

Mr. Shimizu: First, when we certify our vehicles to Canadian emission regulations, all tests will be done without MMT. The system is designed without MMT.

Senator Kinsella: Notwithstanding the fact that the fuel in Canada is MMT-based, you are going to do your tests on MMT-free gasoline?

Mr. Shimizu: That is the basic requirement.

Mr. Lieb: The certification process is actually described by Transport Canada. Transport Canada is the supplier of MMT-free fuel for certification. The certification then measures the systems and basically ensures that all the systems are working properly. There is certain mileage put on these cars and again measurements are taken. Again, it is always done with MMT-free fuel supplied by Transport Canada, by Canadian refineries.

When these cars finally go into operation with the customer, that is the first time they are exposed to MMT. To design a system for MMT additive is technically not possible. It was stated by our colleagues from North America earlier and we all agree that it is technically not possible. We have been facing this problem now for nearly 15 years. If I had a solution in the last two years, I would have put it in place. There is no technical solution for this right now.

The problem will become more severe when the 1998 model year comes on the market which will happen with Mercedes-Benz in approximately two weeks. We will have a car in Canada with OBD-II for the 1998 model year and there will be problems with that. Technically there is no solution. The certification process actually is MMT-free.

The Chairman: I should like to ask you a question which is fundamental to my understanding of what is happening right now.

In Canada, as you know, there are nine or so premiers and all our environmental departments other than a few are concerned about the situation that in Canada. As you know, our major automobile people, a major sector of industry in our country and our oil producers and refiners on the other side, are fighting with each other. It is not what you want and it is not what they want.

Taking everything you have said to be the case as to all of the negative aspects of MMT, it is my understanding that the oil industry has come forward and did so last fall and said to the Department of the Environment and to the car manufacturers, "Let's put a panel together. Let's examine the issue and if it can be shown in any way that this MMT use is bad for the environment, or is gumming up the diagnostics, that they will stop." They estimate that will take three months.

All of our premiers or the eight or nine and our environmental ministers involved, other than B.C. and Ontario, have supported that.

Why not accept it, do the work, get it finished and if what you say is true that will be the end of it and they will stop and we will not need this ongoing battle between two major industries in our country?

Why would you be opposed to this examination if you are so certain as to your position, why would you not accept what our premiers and ministers across this country are saying that they would like to have happen?

Mr. Lieb: We have to look at past years. This is not an issue which is suddenly on the table and or one which we have been discussing for the last six months. We have been discussing this for 15 years.

We have a memorandum of understanding signed in 1994 by the oil industry as well as by the automotive industry which clearly said that the oil industry will supply fuels which will allow us to fulfil the federal standard for emissions. It is not there. This is now three years ago.

The Chairman: You might not have been here this morning, but they are saying they are doing that. They are saying they are abiding by what that letter says.

Mr. Lieb: Then they have to supply us with MMT-free fuel and that is not the case.

The automobile industry is caught in a box here. On one side we have to come up with a system which we all developed. We spent millions of dollars to get the system up and running. It works in most of the world. Last year we produced 640,000 passenger cars outs of which 5,000 came to Canada. I have problems with those 5,000. The other 635,000 do not give me problems in that particular aspect.

We have a system which has millions of dollars invested in it. We have a certification process which is taking place according to the rules of Transport Canada, with MMT-free fuel. We all pass certification with no problem at all.

As soon as the car goes on the road with the consumer we have warranty problems and we will eventually have problems at the consumer end when the catalysts, the sensors and other components fail.

We are supplying a certified car which fulfills ODB-II standards for 1998, but as soon as this car, in Canada only, goes on the road we are faced with the problem that the federal emission standards are not met. We cannot guarantee it. This is our situation.

The Chairman: You still have not answered my question. I am accepting all of that to be the case for the moment. I am not questioning your argument, although there are others in this room who would.

I am merely asking why would you not accept the offer of the oil industry to take the three months with Environment Canada, do the examination, when they have said that they will stop if there is any evidence in this examination that what you say is true? Why not do it?

Mr. Lieb: The situation for Mercedes-Benz is that by February 14 we are introducing in this markets the first model year 1998 with OBD-II systems in it. We heard the same from Chrysler earlier with the Windstar. We do not have time for another three months. That is our situation. That is why we are appearing and pointing out that all the research and warranties statistics clearly indicates that MMT is giving us problems with our emissions.

The Chairman: Would you then respond so I understand your position as to what we heard this morning from the oil companies when they suggested that they have been trying since 1993 to have an examination of these issues dealt with so that you could come to a conclusion and they have had no response from your industry and your industry has refused to do so, as I understand their testimony this morning. Would you respond to that?

Mr. McArthur: Mr. Chairman, I would like to go back to some earlier testimony and that was in 1994.

At that time when we thought as an industry that we had reached a consensus with the petroleum industry that they would provide the fuel that was required. That is the reason why we have proceeded to manufacture cars that have the on-board diagnostic system that will operate with MMT-free fuel.

We knew from the very beginning that it would not operate with MMT included in the fuel.

The Chairman: Mr. McArthur, did that agreement refer to MMT?

Mr. McArthur: No, Mr. Chairman, it did not refer specifically to MMT. It did refer to compatible fuel that would permit us to meet U.S. emission regulations because we had agreed voluntarily as an industry that we would in fact meet the U.S. requirements. That was by memo of understanding. It did not refer specifically to MMT but it was recognized that the new system would not operate effectively with MMT in the fuel. That was our understanding, and it was a very clear one.

The Chairman: I do not know that I have seen a copy of that memo. Maybe in all this paper we received recently we have it. Do we have a copy?

Mr. McArthur: I think it is in that rather large box of material that you did receive. I will undertake, Mr. Chairman, to get you a copy in any event so you do not have to dig through the box.

Mr. Shimizu: Mr. Bryksaw from Honda Canada is familiar with the situation in 1994, so he is able to say something.

Mr. Glenn B. Bryksaw, Auto Compliance Co-ordinator, Honda Canada Inc.: In the summer of 1994, we met with representatives of the petroleum industry to discuss exactly this issue. We, in an in camera session, put all our cards on the table. At that time, the auto industry provided all of the data, each individual manufacturer presenting their results to the CPPI so that we were showing independent data. In other words, General Motors would go in; they would make a presentation. Then we would go in, and then Chrysler would go in, followed by Ford. All of us did it independently.

There were three committee representatives that the CPPI hired to review this data in an "impartial" committee. It was interesting to note that the person on the committee who had a lot of experience in the auto industry agreed with our findings. He said our data was thoroughly and easily definable and understandable. The petroleum company representative agreed that there were no data. The third person could not make his mind up.

We have had ongoing discussions with the Canadian Petroleum Producers Institute for as long as I have been auto compliance coordinator, and we have gotten nowhere. They will not acknowledge that there is any problem. We have presented the data, as we have done with you, sir. We did it in in camera sessions because we do not share our warranty data. It is definitely competitive. As far as we are concerned, we have done all CPPI has asked us to do. They still refuse to accept the situation.

Senator Carstairs: Earlier in today's session some of the witnesses were sitting around admitting what vehicle they were driving. Just to make you feel a little more comfortable, we are a two-Toyota family.

That is obviously not the area of my inquiries.

This 1994 date seems to me very critical. When you were at that point beginning your tests for your OBD-II, they were being conducted, I have heard, minus MMT fuel. Were the oil companies aware of that at that time? Did they know you were going through all this evaluation process with fuel that did not contain MMT?

Mr. McArthur: Senator, if I may respond, this was a prerequisite for the testing process, both for the initial evaluation and for subsequent driving tests and evaluation thereafter. This was not our requirement; this was a federal government requirement. Perhaps I should not assume but I believe it certainly was public knowledge.

Senator Carstairs: It was public knowledge that you were testing this equipment, and you were testing it with fuel that did not have MMT in it. The oil industry presumably knew that at the time they were signing this memorandum of understanding. Even though it does not say so specifically, surely there is the implication that the fuel would not have MMT in it at the time you were bringing these OBD-IIs on stream.

Mr. McArthur: That is correct.

Senator Carstairs: My second area of questioning has to do with your experience outside Canada. Obviously Mercedes-Benz is a perfect example with 640,000 vehicles, only 5,000 of which come to Canada. Do you put these OBD-IIs in all your vehicles, no matter where those vehicles are being developed, produced, and manufactured? If you do not, why do you not? If you do, is the Canadian market the only one in which you are running into problems?

Mr. Lieb: This particular problem is only happening here in Canada. We have more data, which are confidential and I do not share them with anyone, but they clearly indicate to us that we have problems with certain components of OBD-II in Canada. That is clearly due to MMT additives.

I cannot speak for the whole production but I can tell you that in Europe, mainly in Germany where we sell about 250,000 to 280,000 units of the 640,000, we do have the same systems, and we do not experience this problem. We have MMT-free fuel there. We do not have additives in Germany. The actual fuel-refining process is different and therefore additives are not necessary.

Mr. Shimizu: May I add something? We are selling the same system in the United States, Japan and our major markets. As Mr. Lieb said, basically we have no experience in other markets areas. In the last year in the United States, for instance, we sold almost 800,000 cars with the system and we have not had a problem. It is a situation unique to Canada.

Senator Whelan: Mr. Chairman, I do not intend to take long. I am almost in a state of shock to find out that we are an island in the gasoline-user world. We are the only OECD country, if I understood the evidence here correctly, that uses MMT. I am a new member of this committee but I find the questions being asked here ridiculous, asinine, unbelievable, as is the insinuation that MMT is somehow good. There has not been a thing presented to me that shows that is so, in all the material I have read and from the doctors and other people to whom I have spoken. This was discussed when I was in government at one time. I am sorry we are taking up your time. That is all I have to say.

If you see me leave, it is not because I am bad. It is because I have two other meetings to attend and I am late for one by half an hour.

Senator Spivak: As I mentioned to the last delegation, one person who appeared before us suggested that the reason they are opposed to getting rid of MMT was that they thought it would set a terrible precedent. That does not square with the fact that in 1994 they signed this memorandum of understanding to supply this fuel.

Which is their real attitude? I think they probably understand what MMT is doing to your diagnostics systems, but they have another reason, and they told us point blank this morning what it is. What is the real attitude?

Mr. Lieb: We have to assume that they just do not want to do it and their reasons are financially driven. There will be investment necessary. I am not in the oil industry, but that is what I am reading and hearing so I have to assume that is the reason.

Senator Spivak: They also told us they could switch over in 24 hours, which I assume is because they are already producing a certain amount of MMT-free fuel.

Mr. Lieb: If the bill takes another two weeks, they may have to do that.

Senator Spivak: The presentation by Mercedes-Benz says that the automotive industry is the only one to show a reduction in emissions. We heard in California, too, about the reduction of certain kinds of emissions by 90 per cent and 98 per cent.

If this were working properly, those emissions would decrease even more. As everyone knows, Canada is in violation of its promise to reduce its emissions, and it is in violation by about 13 per cent.

Will proper use of these new diagnostic systems reduce emissions and the impact on climate change in North America?

Mr. Lieb: Definitely. I cannot answer in terms of percentages. General Motors gave some detailed numbers earlier.

Senator Spivak: We were also told this morning by the oil companies that if they got rid of MMT there would be an increase in sulphur. Therefore, what would the balance be in terms of emissions? What might the overall impact on emissions from both stationary and mobile sources be?

Mr. Ehmann: I am not equipped to speak about the stationary sources, but I would be glad to respond on the automobile side.

It is evident to us that the numbers given earlier are real. The 98-per-cent reduction in hydrocarbons since the pre-regulated 1970s is very real. We continue to intend to meet more stringent standards which will further reduce emissions, whether of hydrocarbons, carbon monoxide or oxides of nitrogen. Continuing to have fuel which is unreliable to our new technology will only hinder those further achievements.

Senator Spivak: Will the decrease in these emissions have an impact on climate change?

Mr. Ehmann: Of course it will. If we are discussing global warming and total pollution, then we are talking carbon dioxide and the answer is yes. It will further reduce carbon dioxide. If we can further reduce emission output through high technology and recognition that fuel and system is part of the same equation, then we can achieve higher protection.

Senator Spivak: You only mentioned three emissions. Are hydrocarbons carbon dioxide?

Mr. Ehmann: No. Hydrocarbons, carbon monoxide and oxides of nitrogen are the three primary pollutants we are mandated to control. However, the total exhaust emissions convert to carbon dioxide, which contributes to global warming, and I believe Canada is in violation of that.

Senator Buchanan: I was interested in the comments by most of you that your new OBD-II systems using MMT-free gasoline will decrease smog-forming emissions. If that is the case, why has Alberta said just the opposite? Alberta has indicated that it will increase greenhouse gases and NOx. Nova Scotia has said the same thing; that there is no evidence whatsoever to indicate any problems environmentally, but that there is much evidence to indicate that NOx emissions will increase if MMT is not in gasoline. New Brunswick has said the same thing, as have Saskatchewan, Quebec and Manitoba. I did not get a chance to go through all the others.

They all indicate clearly in their letters that one of the reasons they oppose this bill is that the emissions are significant contributors to ground-level ozone and a major transboundary pollutant. Most of them say that if MMT is eliminated, there will be an increase of between 8 per cent and 20 per cent.

The Ethyl consultants say it would be about 20 per cent. CPPI says it would be about an 8-per-cent increase in NOx. If there is an increase in NOx, how can there be a decrease in smog in those areas where MMT is not used?

Mr. Bricksaw: With regard to the 20 per cent reduction which has been quoted so regularly, an assessment has been made by a solid and reputable group of statisticians at the University of Waterloo who have studied the Ethyl data. They have concluded independently that there is no statistical basis for making those sorts of claims.

The analysis that was done was clearly flawed. It was pointed out to us by the University of Waterloo statisticians that there was not a proper justification for that data with regard to mobile source emissions.

As auto manufacturers, we know that we could reduce NOx. It is very simple for us to do that. If you understand the balancing act that is done, you try to run a vehicle at the very fine tight control point. You have three regulated pollutants to worry about and it is a trade-off between those three; NOx on one side and hydrocarbons and carbon monoxide on the other. You cannot optimize all three other than at the point right in the middle. If you shift that point to get oxides of nitrogen lower, hydrocarbons and carbon monoxide go up.

When the OBD-II system is functioning properly, it is an on-board inspection and maintenance. It tells the customer that there is a problem with the vehicle and it must be repaired. If that system is not functioning properly, that vehicle will be emitting more of everything. It will burn more fuel; it will create more CO2 emissions; it will create more hydrocarbon emissions and it will create more CO. Our data says that what it does to NOx is about equal. That is where we stand.

Senator Buchanan: The 20-per-cent figure that I used was one figure. The CPPI used the figure of 8 per cent. Are you saying that it is not even 8 per cent, that it is less?

Mr. Brickshaw: I do not know from where the 8 per cent came. I do not know whether or not it was based on the same data that was provided from the original study. The University of Waterloo clearly stated that there was such variability in the test results that the amount of improvement or reduction in NOx was well within the variability of the data. You could not make that categorical statement based upon the data that they looked at. That was a clear indication to us that this is not a valid assessment based on the data.

Senator Buchanan: Even some of the automobile manufacturers indicate that "there is no disagreement that MMT does in fact reduce NOx emissions." The oil companies and the automobile manufacturers say that.

Mr. Brickshaw: I just made that point. We could reduce the NOx by shifting the point. But we create hydrocarbons, carbon monoxide and more CO2 because we burn more fuel. It is simple. We could do it, but you are asking us to do something that we cannot do because the regulations say that you must keep all three of those emissions below certain levels.

Senator Buchanan: What regulations?

Mr. Brickshaw: The emissions regulations.

Mr. Shimizu: The MMT affects this and they affect the whole system. Eventually, they will generate more emissions in the long run.

Senator Rompkey: Would the witness like to comment on the position of the provinces and why they took the position that they did?

Mr. Brickshaw: I am not in a position to make a judgment on their opinions. I am rather surprised at their opinions, based on the fact that the CCME has come out and endorsed the 1998 emission standards. I do not understand how these provincial bodies could go against their own environment ministers.

Senator Buchanan: But eight of the environment ministers are the ones who started the whole discussion on MMT being barred and two of them did not.

Mr. Brickshaw: I do not understand how they could say one thing at one time and another thing at another time.

Senator Buchanan: It is easy sometimes.

Mr. Brickshaw: I am sorry. I do not understand that.

Mr. Lieb: Basically, the statement is that if you have a reduction in NOx, at the same time you will have a significant increase in hydrocarbons.

Senator Spivak: It is politics.

Senator Buchanan: I do not know what you meant by saying that it is politics because it is not.

Senator Spivak: They take two different positions at the same time.

Senator Buchanan: You are not talking about party politics.

Senator Spivak: I am just saying that it is politics.

Senator Rompkey: Were the provinces basing their position upon the Ethyl study?

Mr. Brickshaw: I do not know what the justification was.

Senator Taylor: It is a trade issue.

Senator Buchanan: That is one of the issues but as I understand it, eight of the environment ministers, along with the Yukon, indicated very clearly at their last conference that they oppose the passage of this bill.

The Chairman: No. I think not, senator. As I understand their position, they wish the oil companies to cooperate with the automobile industry to do the testing.

Senator Buchanan: Yes, but they oppose the passage of this bill at the present time until that is done.

Senator Taylor: That is because of trade.

The Chairman: In fairness, I think we can have these internal debates among ourselves.

Mr. Nakatani: Sometimes it is difficult for Japanese businessmen working in this country to properly understand the relationship between the responsibility of the federal government and the provincial government.

Senator Carstairs: It is difficult for ordinary Canadians, too.

Mr. Nakatani: At the same time, I must understand that each province can have their own opinions because of the situation in which they are located. However, on national issues related to the environment, or people with health, the federal government should take the initiative, regardless of the different opinions of the provinces.

The Chairman: You must understand that the federal government has chosen not to make this an environment bill. It has chosen to make it a trade bill. If the federal government had come by with the environmental act and banned it or taken that position, that would be one thing. It has not done that. They have taken it as a trade bill. As a result, our jurisdictions that have the authority of internal trade and trade across our country do not feel that is appropriate. You are in the middle of a jurisdictional situation as well. That is Canada and that is what makes us so wonderful.

Senator Rompkey: Senator Landry put it best. He said that the auto industry should have consulted a constitutional expert before appearing here.

The Chairman: With that, I wish to thank you again for being with us today and for providing us with such useful information.

The committee adjourned.