Panel on Transport (Minutes) 6 July 99

Legislative Council

LC Paper No. CB(1)147/99-00
(These minutes have been
seen by the Administration)

Ref: CB1/PL/EA/1

LegCo Panels on Transport and
Environmental Affairs

Minutes of joint meeting held on
Tuesday, 6 July 1999, at 8:30 am
in the Chamber of the Legislative Council Building Members present :

Members of Panel on Transport

*Hon Mrs Miriam LAU Kin-yee, JP (Chairman)
*Hon LAU Kong-wah (Deputy Chairman)
Hon Edward HO Sing-tin, SBS, JP
*Ir Dr Hon Raymond HO Chung-tai, JP
Hon LEE Kai-ming, SBS, JP
*Hon CHAN Wing-chan
Hon CHAN Kam-lam
Hon FUNG Chi-kin
Dr Hon TANG Siu-tong, JP

Members of Panel on Environmental Affairs

Hon Christine LOH (Chairman)
Hon HUI Cheung-ching (Deputy Chairman)
Hon Bernard CHAN
Dr Hon LEONG Che-hung, JP
Hon Mrs Sophie LEUNG LAU Yau-fun, JP
Hon LAW Chi-kwong, JP

Members attending :

Hon Martin LEE Chu-ming, SC, JP
Hon Emily LAU Wai-hing, JP

Members absent :

Members of Panel on Transport

Hon Albert HO Chun-yan
Hon LEE Wing-tat
Hon Mrs Selina CHOW LIANG Shuk-yee, JP
Hon Andrew WONG Wang-fat, JP
Hon LAU Chin-shek, JP
Hon Andrew CHENG Kar-foo
Hon TAM Yiu-chung, GBS, JP

Members of Panel on Environmental Affairs

Prof Hon NG Ching-fai
Hon WONG Yung-kan
Hon YEUNG Yiu-chung
Hon CHOY So-yuk

* Also a member of Panel on Environmental Affairs

Public officers attending :

Mr Kim SALKELD,: Deputy Secretary for Planning, Environment and Lands (Environment)
Mr Howard CHAN,: Principal Assistant Secretary for Planning, Environment and Lands (Environment)
Miss Agnes KWAN,: Assistant Secretary for Planning, Environment and Lands (Environment)
Mr Patrick HO,: Principal Assistant Secretary for Transport
Mr MOK Wai-chuen,: Principal Environmental Protection Officer, Environmental Protection Department
Mr WONG Chan-po,: Chief Engineer/Gas Production & Supply, Electrical & Mechanical Services Department
Mr Simon CHEUNG,: Chief Transport Officer, Transport Department

Clerk in attendance :

Miss Odelia LEUNG,: Chief Assistant Secretary (1)1

Staff in attendance :

Mr Andy LAU,: Senior Assistant Secretary (1)6

I Election of Chairman

In the absence of a quorum at the time when the joint meeting started, members agreed that the meeting should begin as a meeting of the Environmental Affairs Panel until a quorum for the joint meeting was attained. Miss Christine LOH therefore took the chair.

II Liquefied Petroleum Gas Taxi Scheme
(LC Paper No. CB(1) 1645/98-99(01) - Information paper from the Administration.

2. At the invitation of the Chairman, the Deputy Secretary for Planning, Environment and Lands (Environment) (DS/PEL(E)) briefed members on the salient points of the paper. He said that fuel cost was the most important component of the operating cost of Liquefied Petroleum Gas (LPG) taxis. To make LPG taxis a more attractive option, the Administration would not levy any duty on auto LPG. Further, in order to reduce the cost of auto LPG and to facilitate the setting up of more LPG filling sites, the Government had made the following proposals with a view to providing the necessary impetus to ensure the provision of a comprehensive LPG filling network and auto LPG at a reasonable price -

no premium would be required for the five dedicated LPG sites to be provided in the urban areas and in the North East New Territories under a "Design, Build and Operate" contract. The sites would be awarded to whichever tenderer who offered the best scheme for providing LPG facilities by 1 January 2001, a fixed LPG price at a reasonable level during the first year of operation and a formula that set the lowest price of LPG after the first full year of operation;
for the existing petrol filling station sites held on lease that were suitable for LPG filling stations, extension of the lease for a period to be agreed at no additional premium would be considered where any company would undertake to provide a specified number of LPG dispensers by an agreed time and to sell auto LPG at a fixed price during the first year of the mandatory LPG taxi scheme and thereafter at a price set by a formula related to the import price of LPG; and
where in Government's view additional land was required to enable LPG facilities to be installed at existing sites, no premium would be asked for this additional land, subject to the same conditions in respect of LPG price in (b) above.

3. With the assistance of visual aid, the Principal Assistant Secretary for Planning, Environment and Lands (Environment) (PAS/PEL(E)) briefed members on the proposed LPG filling network in the territory. He said that the Administration had been closely liaising with the oil companies on their plans to set up a LPG filling network. All of them had pledged support to the LPG taxi scheme and had been studying the technical feasibility and commercial viability of both the existing stations and new potential LPG sites. LPG filling stations would be provided at strategic locations throughout the urban areas and in the New Territories. During the first year of the mandatory LPG taxi scheme, the preliminary indications were that 17 existing sites would be converted to incorporate LPG filling facilities, in addition to two new petrol-cum-LPG filling stations. Furthermore, in consideration of the lack of suitable existing locations within the urban areas and in the North East New Territories, the Administration had also identified five separate locations in Chai Wan, Western District, Kwun Tong, West Kowloon Reclamation Area and Tai Po which could be developed into dedicated LPG filling stations. The Administration believed that the initial LPG filling network should be sufficient to cater for the demand in the first year of the mandatory scheme.

4. PAS/PEL(E) further said that the search for additional potential sites for LPG filling stations was on-going. So far, the Administration had consulted all of the Provisional District Boards (PDBs) on the proposal and the relevant PDBs on each of the 67 potential sites including 41 existing petrol filling stations and 26 new sites. In summary, the respective PDBs expressed support/in-principle support to provide LPG in all existing petrol filling stations and 16 new sites. Subsequent to the consultation with the PDBs, 26 additional sites including 19 existing petrol filling stations and 7 new sites had been identified. The Administration was in the process of arranging further consultation with the relevant PDBs as soon as the additional sites had been vetted by government departments.

5. Regarding the provision of vehicle workshops and mechanics for servicing LPG taxis, PAS/PEL(E) advised that the Electrical and Mechanical Services Department (EMSD) had disseminated to the vehicle service trade the requirements for setting up LPG vehicle workshops. So far, EMSD had received seven applications to set up such workshops. To provide additional sites for LPG vehicle workshops, the Administration intended to make available sufficient land for such a purpose at six industrial sites scheduled to be let out in this year Land Sales Programme. These sites were located in Kowloon Bay, Tsing Yi, Kwai Chung and Yuen Long districts. One site in Tsing Yi would be reserved for the sole purpose of LPG vehicle workshop and other ancillary services. If LPG workshops were eventually set up at the above sites, the Administration estimated that they could provide about 290 LPG vehicle service bays.

6. PAS/PEL(E) further advised that the Vocational Training Council had so far trained 84 LPG mechanics. Registration was in progress and 23 mechanics had been registered as competent persons under the Gas Safety Ordinance. The plan was to train 180 mechanics each year to meet the trade demand.

Setting up LPG Filling Stations

7. Mrs Miriam LAU queried the sufficiency of LPG filling stations, particularly during the peak shift-change hours. She pointed out that as there would only be five dedicated LPG filling stations in the territory, inadequate filling service could be envisaged in certain districts. Given the support of the respective PDBs, she urged the Administration to speed up the provision of LPG in existing stations and increase the overall number of LPG filling stations. Dr TANG Siu-tong shared Mrs LAU's view.

8. PAS/PEL(E) advised that the Administration estimated that in the first year of the mandatory scheme, there could be 3,000 to 5,000 newly registered LPG taxis. Based on the experience of the oil companies and the result of a survey conducted by Government's consultants, the Administration estimated that about 60% of the existing taxi fleet re-fuelled their vehicles during the peak shift-change hours in the afternoon. On this assumption, about 40 to 60 LPG dispensers were needed to satisfy the demand during the afternoon peak shift-change hours during the first year of the mandatory LPG taxi scheme. Notwithstanding that the demand could be fully satisfied in terms of quantity, the uneven distribution of LPG filling stations would mean that LPG filling service would be insufficient for some districts. Hence, the Administration had planned to set up five dedicated LPG filling stations within the urban areas and in the North East New Territories to meet the demand. Each dedicated site would have up to 12 dispensers with 24 nozzles. Further, the search for additional potential sites for LPG filling stations would continue. The Administration was liaising with parties concerned including the oil companies with a view to speeding up the provision of LPG filling stations. In the course of discussion, the oil companies had indicated that the number of additional sites would be provided commensurate with the growth of the number of LPG taxis. Given that only 3,000 to 5,000 LPG taxis were expected to come into operation by the first year of the mandatory LPG taxi scheme at this stage, it might not be viable to provide LPG filling stations in excess of the demand at the outset. Nevertheless, the Administration had made a number of proposals to provide the necessary impetus to ensure the provision of a comprehensive LPG filling network and LPG at a reasonable price.

9. Mrs Miriam LAU noted with concern the provision of only one dedicated LPG filling station respectively in the North West New Territories (NWNT) and on Lantau. PAS/PEL(E) said that the oil companies had indicated that they would consider incorporating LPG filling facilities in four existing petrol filling stations in NWNT. A new petrol station with LPG filling facilities would also be provided in the area this year. As such, the initial network should be sufficient to meet the demand. The Administration would continue to identify suitable locations to fill the gap in future. As regards Lantau, PAS/PEL(E) said that he understood it was not a normal practice for urban taxi and New Territories taxi drivers to refuel taxis en route to the New Airport on Lantau Island. In terms of quantity, one filling station should therefore be adequate to meet the demand of Lantau taxis at the initial stage.

10. Referring to the provision of LPG filling stations, Dr LEONG Che-hung enquired whether the slow pace of development was due to the stringent requirements imposed by the Government or a commercial decision of the oil companies. DS/PEL(E) advised that safety was an important consideration, having regard to the population density in Hong Kong. As such, each of the potential sites would have to conduct a quantitative risk assessment and meet the design and construction requirements for LPG filling stations under the Gas Safety Ordinance. The Chief Engineer/Gas Production & Supply added that the safety standard adopted in Hong Kong in respect of the supply of LPG was similar to that adopted in overseas countries. DS/PEL(E) further said that the oil companies would wish to secure a quick return on their own investment. As LPG filling business was not new, oil companies might not be willing to make excessive investment at the outset, particularly if the initial number of LPG taxis would only be in the region of 3,000 to 5,000. To tackle the situation, the Government would take the lead in setting up dedicated sites for use by LPG taxis. The Administration had also proposed incentive measures to ensure the provision of a comprehensive LPG filling network.

11. As regards costing, DS/PEL(E) said that the respective costs of incorporating LPG filling facilities in existing petrol stations and of setting up a new LPG filling station were around 9 million and 15-20 million. These figures had not included land premium and represented the capital costs of construction and equipment only.

12. As negotiation with oil companies would be a determining factor in the whole issue, the Chairman asked if sufficient expertise had been secured to assist the Administration. DS/PEL(E) said that in the course of negotiation, the Planning, Environment and Lands (PEL) Bureau would work hand in hand with the Economic Services Bureau and the Finance Bureau. PAS/PEL(E) added that the Gas Production and Supply Division of Electrical and Mechanical Services Department (EMSD) would provide expert advice on gas-related matters. If necessary, the Administration would also seek expert advice from outside parties.

13. Mr LAW Chi kwong opined that in order to ensure the smooth implementation of the LPG Taxi Scheme, consideration could be given to providing mobile LPG filling stations as a transitional contingency measure. DS/PEL(E) took note of the member's suggestion and undertook to explore its feasibility.	Admin

Provision of financial incentives

14. Whilst recognizing the importance of expediting the setting up of supporting facilities in time to support the switch from diesel to LPG taxis, Mrs Miriam LAU pointed out that the success of the LPG Taxi Scheme also depended upon the assistance rendered by the Administration to the taxi trade for procuring new LPG taxis. Mr CHAN Wing-chan echoed this view and opined that the Administration might consider providing LPG taxis at no cost or providing low-interest or interest-free loans to the taxi trade to facilitate the switch.

15. Pointing out that the fuel cost per km travelled as well as the price for diesel taxis and LPG taxis were comparable, Mr LAU Kong-wah was of the view that financial incentives should be provided to promote the switch. He called on the Administration to provide a concrete timetable in this regard.

16. Mr Edward HO indicated his support to the LPG Taxi Scheme. He, however, was worried that there might not be sufficient incentives for the taxi trade to switch from diesel to LPG, particularly at the initial stage of implementation when the network of LPG filling stations, maintenance workshops and vehicle mechanics compared less favourably with those for diesel taxis. Under such circumstances, replacement of diesel with LPG taxis could be a slow process. Owing to the slow growth of LPG taxis, oil companies and vehicle workshop owners might be unwilling to expand supporting facilities for LPG taxi operation. A vicious cycle would be created, seriously affecting the implementation of the LPG Taxi Scheme. Mr HO therefore supported the call to provide financial incentives to the taxi trade to speed up the conversion process. He said that once a demand was generated, investors would be motivated to set up supporting facilities which, in turn, would expedite the switch.

17. Mrs Sophie LEUNG shared the views of Mr Edward HO. She suggested that the Government should explore the feasibility of providing a cash grant to the initial 500 to 1,000 taxi owners who were willing to switch to LPG. A second round of cash grant could be offered, if necessary. She recalled that a similar arrangement had been made in the past to encourage motorists to replace their old vehicles.

18. In response, DS/PEL(E) advised that the PEL Bureau, the Economic Services Bureau, the Transport Bureau and the Finance Bureau were looking at the economic and financial arrangements for the LPG taxi scheme. As fuel cost was an important cost element for taxi operation, it was of paramount importance that sufficient number of LPG filling facilities should be made available at strategic locations and the price of auto LPG should be kept at a reasonable level. Without an initial agreement with oil companies in these respects, it would be difficult to assess whether it was necessary to introduce other types of financial incentives to encourage the switch. The Administration was now concentrating its efforts in negotiating with oil companies before considering the need to introduce other types of financial incentives. DS/PEL(E) expected that the pricing formula for auto LPG could be settled shortly. The Administration would revert to the Council and the taxi trade in due course. He would also provide written information in this regard. DS/PEL also took note of Mrs LEUNG's view and undertook to provide the statistics on the number of drivers who had made use of the financial incentive scheme to scrap their old vehicles.

Admin

19. Mrs Miriam LAU commented that the provision of the supporting facilities seemed to dictate the pace of the switch. This explained why the switch was expected to take five years to complete. She reiterated that the Government had to provide some forms of financial incentives to the taxi trade to speed up the switch. With the expeditions growth of LPG taxis, market force would lead to the provision of supporting facilities and the switch could be completed within one to two years.

20. DS/PEL(E) shared Mrs LAU's concern and said that it was also the Government's intention to speed up the conversion process. However, the essential thing to start with was to ensure the provision of a comprehensive LPG filling network and of LPG at a reasonable price.

Fuel price

21. Mr LAU Kong-wah pointed out that the price of auto LPG would be subject to market fluctuation and a situation might arise whereby the taxi trade would be unwilling to switch to LPG when its price exceeded that of diesel. Mr CHAN Wing-chan also expressed concern about the ways to ensure the pricing of auto LPG price at a low level on the part of the Government.

22. DS/PEL(E) advised that concessions to the oil companies were subject to the fulfillment of the conditions by oil companies as set out in paragraph 16 of the information paper. In fact, the Administration would not focus on the absolute price movement of diesel or auto LPG but arrangements would be made to ensure that auto LPG sold in Hong Kong would remain attractive relative to the price of diesel. DS/PEL(E) also said that there might be occasional peak of LPG price within a year. But over a longer period, the price of auto LPG relative to diesel remained constant. As regards the fuel cost of taxis running on diesel vis-a-vis auto LPG, PAS/PEL(E) advised that during the trial, auto LPG was duty free and the cost was $4.68/litre. Before the cut in diesel tax, an LPG taxi spent $0.05 less in fuel per km. After the temporary reduction of diesel tax, the fuel cost of a diesel taxi was $0.04 less per km as compared with that of a LPG taxi. As the oil companies later offered a rebate to LPG taxis, the prices of diesel and auto LPG became comparable.

Maintenance cost

23. Ir Dr Raymond HO enquired whether the maintenance cost of LPG taxis would be higher than that of diesel taxis. The Principal Environmental Protection Officer (PEPO) advised that the trial had shown that LPG taxis and diesel taxis had comparable maintenance requirements and thus maintenance costs. This was also confirmed by the vehicle suppliers.

24. Noting that the total repair cost of used LPG taxis was more than that of the new LPG taxis, Mr CHAN Wing-chan expressed concern about the high maintenance cost of LPG taxis in the long run. PEPO advised that according to the data provided by the two vehicle suppliers and the fleet managers, the total average repair cost of a new LPG taxi was $17,723 per year, while the total average repair cost of diesel taxis used in the trial was $31,492 per year. Apart from the 20 taxis which were brand new, ten other used LPG taxis were used in the trial and their average repair cost was $27,543 per year. Since the mileage of used LPG taxis was higher, the repair items were more than that of new LPG taxis. It should be noted that the LPG taxis used in the trial were maintained by the vehicle suppliers and the costs were thus higher than those charged by local vehicle workshops. The maintenance cost of LPG vehicles could be lower when the number of local LPG vehicle workshops increased in the long run.

Performance of LPG taxis

25. Referring to a previous submission of Hong Kong Automobile Association, Ir Dr Raymond HO enquired about the performance of LPG taxis in particular when going uphill. PEPO advised that LPG taxis, like diesel taxis, were reliable and suitable for operation in very demanding driving environment Hong Kong. Feedback from taxi drivers and fleet managers had indicated overwhelming support for the introduction of LPG taxis. The rated output and rated torque in respect of diesel and LPG taxis were comparable.

26. On the level of emissions, PEPO advised that the trial had also confirmed that LPG taxis were virtually free of smoke but diesel taxis were prone to excessive smoke emission. In addition, it was clear in the monthly emission checks of the LPG taxis that their superior emission control performance could sustain the intensive use in Hong Kong.

Obstacles of implementation

27. Mr Martin LEE expressed support to the LPG Taxi Scheme. He sought information on the problems that might be encountered in the course of implementation. DS/PEL(E) said that a monitoring committee had been set up to steer and monitor the trial of LPG taxis. Although LPG taxis had been demonstrated to be technically suitable for use in Hong Kong, their use on a large scale would depend on the sufficient provision of LPG filling stations. In this regard, the Administration would continue to search for additional sites. Up to now, no insurmountable problems had been encountered. The Administration would make every effort to deal with unexpected problems which might arise in the course of implementation.

28. Given that LPG taxis could be allowed on a voluntary basis between now and the end of 2000, Miss Emily LAU called on the Administration to provide adequate supporting facilities to promote the switch. DS/PEL(E) advised that the four temporary filling stations could support up to about 200 LPG taxis during peak hours. Other new LPG filling stations and maintenance facilities were expected to come on stream in the next one to two years. There were now 132 LPG taxis. The Administration believed that more taxis could be allowed to use LPG on a voluntary basis between now and the end of 2000, provided that the supply of LPG and vehicle maintenance could be met in a satisfactory manner.

Emission of vehicles

29. Miss Emily LAU expressed grave concern on the air quality in Hong Kong. She enquired how the problem of smoky vehicles could be controlled with the use of dynamometers for testing emissions. DS/PEL(E) said that in order to abate air pollution arising from the emissions of poorly maintained diesel vehicles, a series of measures had been introduced to tackle the problem including launching the LPG Taxi Scheme and strengthening inspection and enforcement against smoky vehicles. PEPO added that to help improve the maintenance standard, an advanced smoke test by means of dynamometers would be introduced for light duty diesel vehicles. This would eliminate the possibility of simply tampering with the fuel system of the vehicle for the purpose of passing a smoke test.

30. Given the introduction of a more revealing smoke test to enable drivers to know the state of maintenance of their vehicles, Miss Emily LAU opined that the level of fines for smoky vehicles could be increased. DS/PEL(E) said that amongst other measures to improve air quality in Hong Kong, the Administration would later introduce legislature proposals to increase the level of fines for smoky vehicle offences.

31. Dr TANG Siu-tong enquired whether the Government would extend use of the LPG to other types of vehicles. DS/PEL(E) said that the Administration was exploring the possibility of introducing LPG public light buses. Having regard to the capacity constraint in the related supporting facilities, it had no plan to extend the LPG scheme to light duty vehicles at this stage. Notwithstanding, the Administration would introduce suitable measures to control the emissions of other diesel vehicles, such as introducing cleaner diesel for heavy duty vehicles.

The Way Forward

32. Members agreed to further discuss the LPG Taxi Scheme after the Administration had completed negotiation with the oil companies on the pricing of auto-LPG. The meeting also agreed that in the meantime, members who had any questions about the information paper were requested to forward them to the Clerk for onward transmission to the Administration for a co-ordinated reply.

III Any other business

33. There being no other business, the meeting ended at 10:45 am.

Legislative Council Secretariat
20 October 1999

Legislative Council

LegCo Panels on Transport and Environmental Affairs

LegCo Panels on Transport and
Environmental Affairs