Mr. Chair and members of the committee, good morning.
My name is Geoff Tauvette, and I am the director of Fuel and Environment at WestJet. In my current role, I manage all aspects of the fuel supply chain, including the fuel-related infrastructure investments at airports, maintaining fuel safety and quality, and programs intended to reduce greenhouse gas emissions.
As you're maybe aware, WestJet began in 1996 with 200 employees and 3 aircraft. Today we employ over 8,500 WestJetters, and our fleet will soon reach a hundred Boeing 737 next generation aircraft. Over the next several years we have 30 additional aircraft on order.
Last week we also announced an agreement with Bombardier to purchase up to 45 Canadian-built Q400 turboprop aircraft for the launch of our new regional carrier in late 2013.
Your committee's study on innovation and transportation is more than timely. When we look to the competitiveness of Canada's aviation sector and the challenges we face, innovation and technology development are critical to ensuring the future success of our transportation system. We believe that government has a leadership role to play in this area.
Today I would like to highlight developments in aviation biofuel, the opportunity it presents for Canada, and the need for the federal government to develop a comprehensive and coordinated policy framework to advance aviation biofuels into production and use.
The cost of fuel today remains one of the biggest challenges to the aviation industry's economic vitality. Fuel now represents an air carrier's largest expense, typically at 30% or more of our total operating costs. Based on the current price of about $140 a barrel, jet fuel is typically about $30 to $40 over the quoted WTI price of a barrel of oil, which you hear about in the media. WestJet is forecast to spend over $1 billion this year on our fuel.
Over the past decade we've also spent billions on upgrading our fleet and driving operating improvements. As a result we have improved our overall fuel efficiency by 43% since the year 2000. The resulting fuel savings are equivalent to the amount of fuel that would have been used to fly a Boeing 737 between Calgary and Toronto, and back, up to 34,700 times.
Improved fuel efficiency obviously lowers aviation emissions. However, existing technology can only take the industry so far in achieving even further emission reductions. The aviation industry globally is now looking to develop an innovative new fuel source, aviation biofuel, which will begin to lessen our dependence on conventional jet fuel, lower our emissions, and decrease overall price volatility.
As recently as five years ago aviation biofuel was more science fiction than science fact. The skyrocketing price of jet fuel and the aviation industry's stated objective of lowering our aviation emissions has resulted in biofuel research being conducted by the airlines, aircraft, and engine manufacturers around the world. Companies such as Boeing and GE, among others, are deeply involved in supporting biofuel programs, and they have worked with industry to develop aviation biofuel specifications. Recently both the ASTM and CGSB, the overall regulatory bodies responsible for approving fuel specifications in the U.S. and Canada, have approved aviation biofuels and certified them for use in aircraft.
Aviation biofuels can actually be derived from a surprising range of materials, including industrial crops, such as canola and mustard seed, tallows, fats, and algae. Many of these crops are and can be grown in Canada.
Aviation biofuel is designed to be a drop-in, meaning it looks and behaves the same way as current jet fuel. It can be used by any aircraft fleet, and older engines.
The main challenges to developing an aviation biofuel that demonstrates a lower emission profile when compared to conventional petroleum-based jet fuels are that it does not compete with important feedstocks such as food crops and, of course, that it be economically viable and affordable for the airlines to purchase.
There is still much work to be done to advance aviation biofuel from small test plants to viably sized commercial projects. While cost is still the main challenge today, with technology improvement and scalability the costs of making aviation biofuel will become more affordable with time.
Canada has all the right ingredients and know-how to become a global technological leader in advancing non-food feedstock and aviation biofuel commercialization. However, what's missing is a clear policy framework focused on development and promotion of aviation biofuels in Canada.
In the context of the committee's current mandate, we recommend that the federal government identify a federal department as the lead in developing a federal aviation biofuel strategy that integrates efforts of various federal and provincial stakeholders as well as industry.
This will not be a simple process. We are looking at developing an evolving technology over the next five to ten years, but the need for policy is now.
As we will discuss in a moment, the United States is forging ahead with the development of such policy, increasing the risk that Canada will end up simply supplying the feedstock to the U.S. biorefiners to sell back to Canada without any accompanying benefits. Currently in Canada federal departments do have various biofuel development activities under way and provincial governments are now entering the aviation biofuel space in particular. Discussion is occurring, and there are pockets of good things being done, but they are not being adequately leveraged across all stakeholders.
Through Transport Canada we have attempted to call together Transport Canada, Environment Canada, Natural Resources Canada, Agriculture Canada, and the Department of National Defence to discuss prioritizing aviation biofuels. What is needed is a designated lead department. The U.S. experience is illuminating in this regard. The U.S. is implementing an aggressive plan to becoming the world technological leader in biofuel production and generation. In addition to taking a coordinated view on developing aviation biofuels, they are providing incentives through policy development and grants.
President Obama has created a presidential interagency working group on biofuels, comprising the U.S. Department of Agriculture, the Environmental Protection Agency, and the Department of Energy. Their mandate is to accelerate the establishment of an advanced biofuels industry, the whole being influenced by a primary vision of energy independence.
The Federal Aviation Administration, the FAA, has taken the lead role at the federal government level to support the aviation industry in establishing affordable aviation biofuel refining and production. Additional examples of this commitment come from the recent MOU between the FAA and the U.S. Department of Agriculture to further the implementation of industrial cropseeds for use as aviation biofuel. The FAA has also been awarded funds to distribute to suitable aviation biofuel production initiatives.
While the FAA represents aviation at the federal level, various U.S. agencies have made complementary investments across the entire biofuel supply chain. Ultimately the U.S. has an underlying strategy to coordinate efforts for the development and production of biofuels by assigning leadership responsibilities to each affected governmental agency. For example, the FAA is responsible for testing and performance and quality standards. The Department of Agriculture is looking into feedstock development and production. The Department of Energy is enabling production. The airlines, of course, are agreeing to purchase the produced biofuel.
These departments have provided almost $1 billion in grants for biofuel-related projects. For example the USDA, Department of Energy, and the Navy have committed $510 million to advance biofuel production. The U.S. Department of Agriculture has awarded $13 million for feedstock development. The FAA has recently awarded $7 million to several producers to develop aviation fuels for testing from different sources.
Industry has actually played its part. Airlines 4 America, A4A, and Boeing have partnered with the USDA to develop a program called farm to fly. This program promotes efforts at the farming level for feedstock research and production to use at the airline level.
In late 2011 the EPA revised its renewable fuel credit program to award aviation biofuels production with one of the highest credit values. The policy incents refiners to produce biofuels from sustainable non-food sources such as industrial cropseeds, camelina and mustard seed. Ironically, Canadian sources of feedstock are highly sought after by U.S. companies as an opportunity to produce biofuels with a high credit value, with any excess production for resale back to Canada. In short, Canada is sending our feedstock to the U.S. for processing and potentially buying it back without receiving any benefit under the EPA credit program.
Canada has a world-class expertise in developing and growing industrial oilseed feedstock, canola being a prime example of this, and this expertise should be leveraged accordingly. Since feedstock represents more than 90% of the cost of biofuels, it is a critical piece of the supply chain to reduce the cost.
This is an opportunity for industry and government to work together to leverage Canadian expertise and to position Canada as a world leader in aviation biofuel development. However, we need a policy framework to advance aviation biofuels into production and use. We need to identify a federal department to lead the development of the aviation biofuel policy framework and integrate efforts across industry, federal departments, and provincial governments. The U.S. has built the initial template, and Canada has the opportunity to strengthen that model.
Additionally, by accelerating the production of sustainable Canadian-made aviation biofuel, WestJet and the rest of the aviation industry can achieve further significant emission reductions. This will strengthen the competitiveness of our industry so that we can continue to deliver the affordable and quality air service that our guests have come to expect from us.
Thank you. Merci.
First of all, I'd like to clarify that I am the group president for Discovery Air government services, in addition to being the CEO of Top Aces.
Mr. Chairman, vice-chair, and members of the committee, thank you for the opportunity to discuss with you today an emerging transportation solution that should be of interest to Canada. I'm talking specifically about hybrid air vehicles.
This technology holds much promise, especially for economic development in Canada's remote areas, such as the north and Arctic regions. In addition, Canada has an opportunity to establish itself as a major contributor and a world leader in the development of this technology by creating conditions that will attract investment and companies that are involved in the field.
What I can tell the committee is that Discovery Air is already actively participating in a collaborative effort with a world leader in this field. This effort has potential to bring significant development activities to Canada, but this will not occur unless the government can find ways to support it.
As with all new technical developments, there's always an element of risk, but with risk comes reward. By participating in the early stages of development, Canada and the Canadian aerospace industry will benefit from the jobs and cutting-edge expertise created throughout this development cycle.
With increased scrutiny on the environmental impact of development, and as nations push the geographic boundaries of where resources are developed, it is our belief that traditional infrastructure, such as roads and railways, will no longer be the preferred solution. Not only do these traditional solutions have significant negative impacts on the environment, they are capitally intensive and saddle governments with unsustainable support costs for years to come.
We don't believe Canada can afford to develop its wealth of natural resources using traditional methods. This is one of the reasons we should be exploring promising technologies, such as hybrid air vehicles.
Let's talk a bit about Discovery Air. Discovery Air Inc. is an aviation services company operating across Canada and in select locations internationally. We're one of the largest air operators in Canada. Actually, we are the second largest when it comes to the number of airplanes. We employ more than 850 flight crew, maintainers, and support staff to deliver a variety of air transport, maintenance, and logistics solutions to our government, airline, and industry customers.
We're headquartered in Yellowknife, and we're flying more than 45,000 hours per year in the Arctic. Discovery Air already provides air transportation and logistics in the remote regions of Canada's north. We're intimately familiar with the challenges this unique operating environment brings. When we began participating in buoyancy assisted flight workshops a decade ago, we immediately recognized the important role hybrid air vehicle technology could play in the future, and started to architect how Canada's aerospace industry, communities, and partnerships could benefit.
Hybrid air vehicles are not airships. Hybrid air vehicles are specifically designed to overcome the traditional problems associated with handling airships. The hybrid air vehicle generates its lift from a variety of sources, namely, helium, aerodynamic lift similar to a conventional aircraft, and vectored thrust from the engines. This combination of lifts is what allows the hybrid air vehicle to operate in remote locations, as it requires minimum support and infrastructure.
The other part of the hybrid air vehicle design that facilitates remote operations and minimizes the requirement for large infrastructure investments is the air cushion landing system. This system is similar to a hovercraft and allows the hybrid air vehicle to land on water, gravel, snow, ice, or grass, providing it's relatively flat. The airflow within the landing system can also be reversed to create a suction effect that stabilizes the air vehicle on the ground for loading and unloading operations. This negates the requirement for expensive runways in areas of thawing permafrost and rapidly changing ice conditions.
The initial hybrid air vehicle we plan to introduce to Canada can carry 50,000 kilograms over more than 5,000 kilometres. This would allow a non-stop flight from Hay River, Northwest Territories to Canadian Forces Station Alert and its return, without the traditional logistical challenges and the addition of infrastructure on the ground.
Because most of the lift is generated through buoyancy, the hybrid air vehicle does not burn as much fuel as conventional aircraft. For example, the 5,000 kilometre flight from Hay River to Alert can be done on about 12,000 kilograms of fuel, whereas an RCAF C-17 or a Boeing 747 freighter would burn over 80,000 kilograms of fuel. The hybrid air vehicle is therefore more environmentally friendly than comparable heavy-lift aircraft.
What are the obstacles to success? Introducing a new technology like the hybrid air vehicle into a service is not without its challenges.
After serving potential end-users of the technology in the oil and gas, mining, and transportation industries, we have concluded that interest in this technology is very high. However, no resource company is willing to initiate years of environmental approval based on a conceptual air transportation system, and very few companies are willing to invest the required capital to develop this technology.
To move ahead with the commercialization of the hybrid air vehicle, we need to design, build, and certify a demonstrator and prove that the technology works. This requires people with the correct skills, a receptive regulatory environment, and funding.
The Government of Canada has various funding programs that support research and development, such as the strategic aerospace and defence initiative. However, SADI eligibility criteria associated with intellectual property and geography are not attractive to international joint ventures such as ours. If a partnership with international members approached Industry Canada with a technical solution to some of Canada's transportation challenges and a plan to establish Canada as the global leader in the commercialization of the technology, the request would likely be denied, unless all of the intellectual property belonged to a Canadian entity. This is not conducive to international collaborative efforts for commercializing technology that originates offshore.
This issue is currently being discussed in the aerospace review the government has asked the Hon. David Emerson to lead. We believe that the aerospace review will generate a series of recommendations regarding access to funding for international collaborative efforts that will have several benefits for Canada. We urge the government to seriously consider these recommendations.
With respect to training, technical skills obstacles will need to be resolved. There is no academic institution specializing in buoyancy-assisted flight technology. And although Canadian aerospace engineers and technicians are globally recognized, specialized training in the intricacies of hybrid air vehicles will be required. We have initiated an annual student paper competition through the Canadian Transportation Research Forum to help encourage academic institutions to focus on the application of this technology. But time will be required to develop an understanding of buoyancy-assisted flight and to generate the required skill sets to build and maintain these aircraft.
The National Research Council Institute for Aerospace Research has no buoyancy-assisted flight expertise. They will need to acquire it if they are going to remain a trusted source of aerospace advice to the government.
There are at least three companies investigating or proposing commercial buoyancy-assisted flight operations in Canada at this time. The U.S. government spent over a billion dollars in buoyancy-assisted flight operations last year alone, so it is highly likely that this innovative transportation solution is coming to Canada sooner or later. Canada has a chance to be at the forefront of this innovation cycle and to establish itself as a global leader in this technology.
Let's talk about the regulatory environment. The regulatory environment for hybrid air vehicles also needs to be addressed. The Transport Canada regulations on buoyancy-assisted flight refer to the U.S. Federal Aviation Administration, the FAA, and the European Aviation Safety Agency regulations for both technical certification and operator certification. Industry will have to work with Transport Canada to develop the regulations in parallel with the development of the air vehicles.
According to Transport Canada, there are 220 people in Canada with valid balloon licenses, none of whom are instrument rated and most of these licenses are for hot-air balloons versus commercial airships. Part of the challenge is that a clear licensing route for multi-engine instrumented operations of hybrid air vehicles does not exist. For example, Transport Canada currently requires a hybrid air vehicle pilot to have a hot-air balloon licence, which is comparable to mandating a candidate for a driver's licence to know how to ride a bicycle.
The third obstacle to success with hybrid air vehicles is one of infrastructure. In order to meet the market demands, the air vehicles are very large. A 50-tonne version measures 150 metres in length. It's 55 metres wide and 36 metres high. This is big. This is roughly the size of a CFL football field and 10 stories high.
During construction, the advanced composite layer hull must be laid on a heated floor and requires approximately 20% more space than the air vehicle dimensions in length and in height. There is no hangar anywhere in the world that can accommodate a 50-tonne variant and we have future plans that call for a 200-tonne variant measuring 200 metres long, 80 metres wide, and 50 metres high.
Whoever creates the facilities for the manufacture and final assembly of these air vehicles will establish a global centre for research and development in the field of hybrid air vehicles. This in turn will create jobs and the conditions for significant participation in this emerging field.
As Discovery Air has become better informed about the unique lifting mechanism and ground handling capabilities of the hybrid air vehicle, it is apparent that the possibilities for this transportation solution are very promising. Instead of thinking about the technology, we started to think in terms of economic development, environmental stewardship, and aid delivery. For example, imagine the vast regions of Africa that can be developed for food production because goods can easily be transported to these markets with no need for investment in roads and airports.
Canada could be a leader and contribute an environmentally friendly transportation solution direct from the warehouse or the farm to refugee camps without incurring losses due to spoilage or handling. Imagine the significant improvements in the quality of life we can bring to our remote communities by changing how education and services are delivered. Instead of bringing people to hospitals, let's bring the hospitals to them while at the same time not being held hostage to the seasonality of ice roads and ice-free ports.
With the ability to land on water and unprepared surfaces, think how quickly a hybrid air vehicle could respond to a natural or man-made disaster. Canada could become the global leader in disaster response and humanitarian aid.
It is our hope to introduce a fleet of 50-tonne air vehicles and to establish a centre of excellence here in Canada. With the global support of this fleet we look forward to working with our government and industry partners to realize this vision. By rapidly identifying itself as a leader in the development of a hybrid air vehicle, Canada can become a dominate player in this field, reap the benefits of this technology, and continue to provide cutting edge opportunities for the 80,000 people employed within Canada's aerospace industry.
Merci. Thank you.
Has the motion been circulated? Okay, then I move:
||That, the Standing Committee on Transport, Infrastructure and Communities immediately commence a study on the subject matter of the sections of Bill C-38, An Act to implement certain provisions of the budget tabled in Parliament on March 29, 2012 and other measures, which directly fall within the mandate of this committee, namely Part 4, Division 31, Railway Safety Act; Part 4, Division 45, Canada Marine Act, and Part 4, Division 48, Canadian Air Transport Security Authority Act.
If the committee would allow me a few minutes, I will talk a bit about these three sections because just recently we dealt with Bill . This committee just spent at least one meeting on that. We've had many meetings prior to this session of Parliament studying and improving the Railway Safety Act. It just passed the House two weeks ago after it had gone through the Senate, and it has been studied at least twice. All of that was occurring while this was being drafted, which is bizarre. To not have this section of the Railway Safety Act in front of us for discussion doesn't make any sense at all.
Let me address this more precisely. I'll talk briefly about the Canada Marine Act and the Canadian Air Transport Security Authority Act. The government is proposing that section 16 of the Railway Safety Act be amended following subsection 4 by adding:
||However, if a grant has been made under section 12 in respect of the railway work, and the proponent of the railway work, or any beneficiary of it, is a road authority, the maximum amount of the construction and alteration costs of the railway work that the Agency may, under subsection (4), apportion to the road authority is 12.5% of those costs or, if a higher percentage is prescribed, that higher percentage.
Precisely what does that mean? If there is a road authority, then the construction work would be 12.5%. Why 12.5% and not 15%, or why not 50%? It's not clear.
Then section 16 of the act would be amended by adding the following after section 5:
||The Governor in Council may make regulations exempting any railway work, or any person or railway company, from the application of subsection (4.1).
So the government could choose, if it wants, to exempt any part of this percentage. Then, there is a clarification in proposed subsection 5.2:
||A regulation made under subsection (5.1) may exempt a group or class of persons or railway companies, or a kind of railway work.
It's not very transparent why this is proposed. Having this debate at the finance committee makes no sense; it should be in front of this committee.
I then looked at section 16 of the Railway Safety Act. What does it talk about? Well, let me tell you what it talks about:
||That the proponent of a railway work, and each beneficiary of the work, may refer the apportionment of liability for the construction, alteration, operation or maintenance costs of the work to the Agency for a determination if they cannot agree on the apportionment and if no recourse is available under Part III of the Canada Transportation Act or the Railway Relocation and Crossing Act. The referral may be made either before or after construction or alteration of the work begins.
We're just trying to understand what this is all about, and so I went back to look at part III of the Canada Transportation Act and realized that this section 16 and the Marine Act and the Air Transport Security Authority Act—which I am going to get into—are really complex.
What we've noticed is the centralization of power in the ministers and the cabinet, that is, in the order in council.
Do we believe in that direction? Why are we doing this with the ports? Why are we doing it with air transport?