Vol. 144, No. 14 — April 3, 2010

Regulations Amending the Gasoline Regulations

Statutory authority

Canadian Environmental Protection Act, 1999

Sponsoring department

Department of the Environment

REGULATORY IMPACT
ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Executive summary

Issue

The Regulations limit the concentration of lead in gasoline that is produced, imported or sold in Canada. Since 1990, the Regulations have significantly reduced lead emissions from gasoline, with 99.8% of gasoline now lead-free. The original Regulations, and subsequent amendments, have provided exemptions for specific, limited uses of leaded gasoline, when a transition to non-leaded fuels was not technically and economically achievable. An exemption of indeterminate length was therefore provided for aircraft, and temporary exemptions have been provided for competition vehicles (see footnote 1) since 1994. The Regulations allowed the use of a higher maximum concentration of lead in gasoline in farm machinery, boats and trucks over 3 856 kg, from 1994 to 2008.

The latest temporary exemption for competition vehicles expired on December 31, 2009. Although the dependence of the racing sector on leaded gasoline appears to be decreasing, a transition to non-leaded fuels remains unachievable for large Canadian events that are organized by sanctioning bodies in the United States, that sanction the use of leaded gasoline. If the exemption is not renewed, socio-economic impacts will begin to accrue at the outset of the 2010 racing season. These impacts will include reductions in race track revenue ($51 million to $103 million in 2010), profit ($1 million to $3 million) and employment (650 to 750 jobs), and the potential for negative spinoff effects for affiliated businesses and in local communities.

The use of leaded gasoline by competition vehicles may, however, contribute to the overall exposure to lead of people attending or living in the vicinity of race tracks featuring these vehicles.

Objectives

The objective of the proposed Amendments is to prevent significant negative impacts on Canadian race tracks, affiliated businesses and local communities.

In keeping with the broader policy goal of reducing lead emissions from gasoline, the Government would work with international stakeholders, including the U.S. EPA, to encourage a continued transition to non-leaded fuels by U.S. sanctioning bodies, would initiate a dialog with domestic stakeholders to promote a transition by Canadian competitors, and would review the decision to exempt within five years. This review would assess any new U.S. policies on this issue, industry progress towards reduced leaded gasoline use, new developments on the technical and economic feasibility of a transition to non-leaded fuels, and any new information regarding the health impacts of lead exposure at Canadian race tracks. The willingness of industry stakeholders to work proactively toward a transition to non-leaded fuels would be a factor in the review.

Description

The proposed Amendments

The proposed Amendments would provide an exemption for the production, import and sale of leaded gasoline in Canada for use in competition vehicles for an indeterminate period. Record-keeping and reporting requirements for producers, importers and sellers would remain in effect.

The proposed Amendments would come into force on the day on which they are registered.

Background and context

Lead has historically been added to gasoline to prevent engine damage due to the auto-ignition of gasoline (or knocking). Over the past several decades, evidence of the impact of lead exposure on human health has motivated actions to reduce lead emissions from many sources, including gasoline.

When the Regulations came into force in 1990, they limited the concentration of lead in gasoline produced, imported or sold in Canada, with an exemption of indeterminate length provided for leaded gasoline used in aircraft. The Regulations allowed the use of a higher maximum concentration of lead in gasoline in farm machinery, boats and trucks over 3 856 kg, from 1994 to 2008.

Since implementation of the Regulations, there have been significant reductions in lead emissions from gasoline, and the widespread use of unleaded gasoline has enabled new technologies (e.g. catalytic converters) to be adopted that significantly reduced releases of smog-causing pollutants. It is estimated that 99.8% of gasoline is currently lead-free.

The Regulations were amended in 1994 to add a two-and-a-half year exemption for leaded gasoline produced, imported or sold for use in competition vehicles, in response to evidence of the adverse economic impacts of the Regulations on the activities of some race tracks and communities. This exemption was renewed in 1997, 1998, 2003 and 2008. In 2008, the Regulations were strengthened by no longer allowing the use of leaded gasoline in farm machinery, boats and trucks over 3 856 kg.

Stakeholders

Race tracks

There are an estimated 165 race tracks operating in Canada, hosting racing events featuring dragsters, stock cars, motorcycles and other vehicles. (see footnote 2) All race tracks are considered small- or medium-sized enterprises. (see footnote 3) In 2007, the spectator sports subsector (NAICS 7112) which includes race tracks, had revenues of $2.4 billion and a 1.9% profit margin ($2.2 billion and 3.5% in 2006). (see footnote 4) Revenues from non-local sources (individuals living outside the local community, in other Canadian cities or in other countries), attributable to competition vehicles using leaded gasoline, were estimated to be between $52 million and $91 million in 2006. The broad industrial sector (see footnote 5) had a compound annual growth rate (CAGR) of gross output between 2002 and 2008 of 1.02%. (see footnote 6) Canadian race tracks employed an estimated 1 084 FTE employees in 2006. (see footnote 7)

A 2002 study estimated that 42% of Canadian race tracks faced a “serious risk” of closure, or were “very likely” to close (see footnote 8) should the leaded gasoline exemption expire. A similar study in 2007 estimated that this share had decreased to 28%. (see footnote 9)

Affiliated businesses

A range of affiliated businesses depend to some extent on economic activity generated at Canadian race tracks, including racing fuel (including leaded gasoline) importers, vehicle engine and parts manufacturers, tool and parts retailers, promoters, advertising agencies, and Web site design firms. Many of these stakeholders operate in the same communities as the race tracks hosting events featuring competition vehicles using leaded gasoline, while others operate in other Canadian communities or outside Canada.

The affiliated businesses with the greatest direct dependence on events featuring competition vehicles using leaded gasoline are leaded gasoline importers. In 2008, 1.17 million litres (see footnote 10) of leaded gasoline were imported into Canada for use in competition vehicles. (see footnote 11) This volume represented just 0.003% of all gasoline (including non-leaded) in commerce in Canada in 2008, and 2% of Canadian leaded gasoline imports, with the remaining 98% used for aviation. As shown in Table 1, imports of leaded gasoline into Canada for competition vehicle use have been relatively stable since 2005, with a CAGR of imports between 2005 and 2008 of –0.7% (+3.06% using a 2006 base year).

The overall trend in the racing industry in North America is a transition away from the use of leaded gasoline. The National Association for Stock Car Auto Racing (NASCAR) fully converted to unleaded from leaded gasoline at the beginning of the 2007 racing season. The Indy Racing League’s Indy Pro Series also converted from leaded gasoline to non-leaded alternatives over the 2006 and 2007 seasons.

Table 1: Leaded gasoline imports for competition vehicle use, 2002–2008

Year	Leaded gasoline imported for competition vehicles (L)
2002	869 978
2003	1 341 172
2004	1 887 170
2005	1 203 685
2006	1 069 290
2007	1 131 204
2008	1 170 423

Local communities

As indicated above, there are an estimated 165 race tracks in Canada, located from coast to coast. Table 2 identifies a subset of those race tracks that are expected to benefit most from the proposed Amendments, as hosts for events sanctioned by large U.S. race-sanctioning bodies that mandate the use of leaded gasoline.

Table 2: Canadian race tracks hosting events by large
United States sanctioning bodies, 2009

Race track	Community	Local population (see footnote12)	Sanctioning body (see footnote 13)
NL’AKAPXM Eagle Motorplex	Cache Creek, British Columbia	1 037	NHRA
Mission Raceway Park	Mission, British Columbia	34 505	NHRA
Medicine Hat Dragstrip	Medicine Hat, Alberta	68 822	NHRA
Castrol Raceway	Edmonton, Alberta	1 034 945	IHRA
Saskatchewan International Raceway	Saskatoon, Saskatchewan	233 923	NHRA
Grand Bend Motorplex	Grand Bend, Ontario	11 150	IHRA
St. Thomas Dragway	St. Thomas, Ontario	36 110	NHRA
Cornwall Motor Speedway	Cornwall, Ontario	58 485	DIRTCar
Brockville Ontario Speedway	Brockville, Ontario	39 668	DIRTCar
Luskville Dragway	Aylmer, Quebec	5 238	NHRA
Napierville Dragway	Napierville, Quebec	3 352	NHRA
Autodrome Granby	Granby, Quebec	68 352	DIRTCar
Autodrome Drummond	Drummondville, Quebec	78 108	DIRTCar
Trois-Rivières Circuit	Trois-Rivières, Quebec	141 529	IMSA

Leaded gasoline is also used at many other Canadian race tracks, by professional and amateur competitors alike. As indicated in the analysis below, the benefits of the proposed Amendments for these communities are expected to be less than for those identified in Table 2, given that spectators and competitors at other race tracks likely include significantly more local participation, and spending by these individuals could shift to alternative forms of entertainment (substitutes) within the local community.

A 2007 economic impact assessment (see footnote 14) estimates that each non-local or non-Canadian spectator spends $184 at the track and in the local community, for food and beverages, accommodations, entertainment and transportation. This estimate is consistent with a U.S. study (see footnote 15) which estimated spectator spending of $169.04 in the race track community, including $76.13 for accommodations, $81.51 for food and beverages, and $11.40 for miscellaneous retail. (see footnote 16)

Race-sanctioning bodies

The type of fuel used at racing events is dictated by the rules of the sponsoring race-sanctioning bodies, such as the International Hot Rod Association (IHRA), the National Hot Rod Association (NHRA), DIRTCar, and the International Motor Sports Association (IMSA), bodies that sanction the use of leaded gasoline. At least 14 Canadian race tracks, located in British Columbia, Alberta, Saskatchewan, Ontario and Quebec, host events sanctioned by these and other bodies. Indy Racing League and Formula One vehicles do not use leaded gasoline. (see footnote 17)

High octane, non-leaded fuels exist, and some competitors have indicated that a transition would be technically and economically feasible, if not for the leaded fuel requirements in some race sanctioning body rulebooks. Leaded gasoline is also used at many other Canadian race tracks, by professional and amateur competitors alike. Some amateur competitors have indicated in the past that technical changes necessary to convert to non-leaded fuels would be prohibitively costly for many amateurs.

Spectators and competitors

Every year, thousands of Canadians attend racing events featuring competition vehicles using leaded gasoline. Of these spectators, 53% were estimated to be local residents, 44% were non-local Canadians, and 3% were U.S. or other foreign visitors. For those communities with very low local populations, including some of those identified in Table 2, nonlocal spectators would comprise a larger share of special event attendance.

Many Canadian and foreign competitors participate in racing events in Canada. Of these participants, 64% were estimated to be local residents, 25% were non-local Canadians, and 11% were U.S. or other foreign residents. As with spectators, for very small communities the non-local share of competitors is expected to be much larger.

Based on industry submissions and a review of the available literature, Environment Canada estimates that between 75% and 89% (see footnote 18) of spectators and competitors are male, and most of these individuals are over the age of 18.

Actions in other jurisdictions

Environment Canada has taken into consideration actions taken in other jurisdictions with respect to leaded gasoline and competition vehicles, including the United States, the United Kingdom and Australia.

The United States is not currently planning to ban or restrict the use of leaded gasoline in racing events. The U.S. Clean Air Act prohibits the use of leaded gasoline in on-road vehicles, but specifically exempts fuels for “competition use vehicles.” The U.S. Environmental Protection Agency (EPA) has been working with the racing industry to effect change through voluntary means, and there have been voluntary transitions to non-leaded fuels by some U.S. race-sanctioning bodies, as indicated above (e.g. NASCAR).

The United Kingdom’s Motor Fuel Regulations 1999 allow up to 100 000 tonnes (about 139 million litres) of leaded gasoline to be distributed or sold, including for use by vehicles.

Australian federal regulations limit lead in gasoline but approve leaded fuel to be sold and used in competition vehicles. Such approvals are restricted to a limited number of government-approved motor and water sport organizations and their members.

International coordination

The racing industry in North America is integrated between Canada and the United States, with U.S. competitors participating in Canadian races and vice versa. Canadian race tracks tend to be located near the U.S. border and benefit from the participation of U.S. competitors. For many race tracks, events sanctioned by U.S.-based race-sanctioning bodies tend to draw the largest audiences. These events draw international competitors and spectators, and can account for a significant share of a facility’s annual revenue. Given the high degree of integration between the Canadian and U.S. markets, an approach that aligns Canada’s Regulations with similar provisions in the United States is preferred.

Regulatory and non-regulatory options considered

Several options, including no further action (exemption expiry), and exemption renewal of varying durations, were considered as means of addressing the issues identified above.

Taking no action

One of the objectives of government action is to preserve economic activity at race tracks featuring competition vehicles using leaded gasoline, and in local communities hosting these events, until a transition to non-leaded fuels is technically and economically achievable. No further action by the government would result in exemption expiry, and the production, import and sale of leaded gasoline for use by competition vehicles would no longer be allowed in Canada.

For many competition vehicles, a transition to non-leaded gasoline is not technically and economically achievable at this time, and impacts associated with this prohibition would begin to accrue at the outset of the 2010 racing season. Impacts would include the cancellation of racing events dependent on leaded gasoline, with concomitant direct and indirect impacts on race track revenue and employment, and in local communities. Although this option would eliminate all lead emissions at Canadian race tracks, it would do so while causing significant negative impacts for many Canadian businesses, communities and racing enthusiasts.

Given these considerations, this option was rejected.

Regulatory measure

Temporary exemption

A temporary exemption would protect race tracks, affiliated businesses and local communities from the negative impacts of exemption expiry for the duration of the exemption, with a risk of negative economic impacts accruing thereafter should a transition to non-leaded fuels not materialize. In the past, temporary exemptions have been used as a means to encourage the industry to transition away from the use of leaded gasoline. However, for some competition vehicles, a transition to non-leaded alternative fuels has not materialized, notwithstanding positive trends as several large U.S. race-sanctioning bodies no longer sanction the use of leaded gasoline.

A temporary exemption of a specific length may not be sufficient to enable stakeholders to transition to non-leaded alternative fuels, mitigate the impacts of exemption expiry, and preserve economic activity at Canadian race tracks and in local communities. Further, prior to the expiry of another temporary exemption, a state of considerable uncertainty could exist, given that extensions have been provided on four previous occasions. Given these factors, providing another temporary exemption was rejected.

Indeterminate exemption

An indeterminate exemption with record-keeping and reporting requirements would align Canada’s regulation of competition vehicle fuel use with provisions in the United States, and preserve economic activity associated with competition vehicle racing. An indeterminate exemption would normalize the status quo of the past 16 years, with reduced uncertainty for race tracks, affiliated businesses, communities, and racing enthusiasts (spectators, fans and competitors).

In the past, long-term or indeterminate exemptions have been rejected given expectations that the popularity of racing, and the associated potential for human exposure to lead, were increasing. In recent years, several U.S. race-sanctioning bodies have transitioned away from leaded gasoline, and Canadian race tracks are reporting a reduced dependence on leaded gasoline, from 42% of tracks to 28% between 2002 and 2007. Although importers have reported small increases in leaded gasoline imports between 2006 and 2008, imports are still 38% below their 2004 peak. An indeterminate exemption, with ongoing record keeping and reporting, and a five-year review, would ensure that a decision to ultimately remove the exemption takes into consideration U.S. policies on this issue, industry progress towards reduced leaded gasoline use, new developments on the technical and economic feasibility of a transition to non-leaded fuels, and any new information regarding the health impacts of lead exposure at Canadian race tracks. This option was therefore selected.

Benefits and costs

Environment Canada conducted an analysis of benefits and costs to assess the impacts of the proposed Amendments on stakeholders, including race tracks, affiliated businesses, local communities, spectators, race track employees, competitors, and government. This analysis follows a cost-benefit approach; however, where monetized information is unavailable, un-monetized quantitative and qualitative analyses have been provided.

Fundamental to this approach is the concept of incrementality, whereby the impacts of the proposed Amendments are considered relative to a baseline scenario. The following section provides an overview of the baseline and exemption scenarios, and underlying assumptions.

Baseline and exemption scenarios

Under the baseline scenario, the Regulations are not amended. The exemption for competition vehicles expires and the production, import and sale of leaded gasoline for use by these vehicles are no longer allowed in Canada. Under the baseline scenario, it is assumed that, following cancellation of leaded gasoline events, some race tracks would hold substitute events featuring competition vehicles using non-leaded fuels, or find other alternative means of generating revenue, a substitution effect described in the analysis below. Notwithstanding the incremental reduction in racing activity under the baseline scenario, it is assumed that the remaining activity, as measured by revenue and profitability, will reflect the historical growth rates estimated above.

Under the exemption scenario, an indeterminate exemption is provided, preserving the use of leaded gasoline in racing events for the duration of the analysis period. This scenario assumes that revenue and leaded gasoline import growth between 2006 and 2019 will reflect the historical growth rates estimated above.

Assumptions

A number of assumptions underlie the calculation of impacts.

• In the absence of detailed race track profit data, Environment Canada has estimated race track profits using a proxy variable: the profit margin for the spectator sport subsector in 2006 and 2007, 2.6%.
• The annual growth rate in revenue, attendance and leaded gasoline imports is estimated to be between 0.70% and +3.06%, a range that covers the CAGR for leaded gasoline imports and the CAGR of gross domestic product in the broad performing arts, spectator sports and related industries sector (1.02%).
• Revenue estimates include only revenue from non-local and foreign spectators and competitors. It is assumed that this revenue would be lost should the exemption expire. Conversely, under the baseline scenario, it is assumed that spending by local spectators and competitors would be transferred to other local, substitute entertainment.
• All present value terms below have been calculated using a discount rate of 8%.
• The period of analysis is 10 years, from 2010 to 2019 inclusive.

Benefits

The proposed Amendments would ensure that races featuring competition vehicles using leaded gasoline, including those events sanctioned by large U.S. race-sanctioning bodies that sanction the use of leaded gasoline, can continue at tracks and in communities identified in Table 2.

In 1997, 2002 and 2007, Environment Canada commissioned economic impact assessments of exemption expiry. These studies estimated the loss of direct, indirect and induced revenue and employment that would follow exemption expiry. Environment Canada has used these data, supplemented with other stakeholder information, to estimate the benefits of the proposed Amendments for race tracks, with a qualitative analysis of impacts on affiliated businesses, race track employees, local communities, government, spectators and competitors.

Impacts for race track revenue and value added

Annual revenue at race tracks consists primarily of ticket sales, participants’ fees and sponsorships acquired in the context of racing events featuring competition vehicles using leaded gasoline. By allowing the continuation of these racing events, the proposed Amendments would have an immediate and direct impact on race tracks hosting these events. An estimate of revenue from 2006 events, based on a small sample, indicates that total revenue attributable to leaded gasoline racing was between $52 million and $91 million. (see footnote 19)

As indicated above, the analysis uses a profit margin estimate of 2.6% to calculate profitability. Annual profit attributable to leaded gasoline racing is therefore forecast to be between $1.3 million and $2.7 million in 2010 (depending on the growth forecast, between -0.7% and +3.06%). The sum of the present values of a 10-year stream of profits is estimated to be between $9.3 million and $21.8 million. These estimates are summarized in Table 3.

Table 3: Impact of exemption expiry on revenue and
profit of Canadian race tracks

Annual growth in revenue from events featuring competition vehicles using leaded gasoline		- 0.70%	+3.06%
2006 Revenue	Low	$52,000,000	$52,000,000
	Mid	$65,500,000	$65,500,000
	High	$91,000,000	$91,000,000
2010 Revenue	Low	$50,559,217	$58,662,950
	Mid	$63,685,167	$73,892,754
	High	$88,478,629	$102,660,162
2010 Profit	Low	$1,314,540	$1,525,237
	Mid	$1,655,814	$1,921,212
	High	$2,300,444	$2,669,164
2010–2019 Profit	Low	$9,272,578	$12,466,824
	Mid	$11,679,881	$15,703,403
	High	$16,227,011	$21,816,941

The benefits of the proposed Amendments would decrease should competitors continue to shift away from the use of leaded gasoline, a trend that is not explicitly captured in the analysis. However, this trend would have an offsetting impact on the costs of the proposed Amendments as well.

Substitution of non-leaded racing events under baseline

The proposed Amendments would preserve economic activity associated with events featuring competition vehicles using leaded gasoline, with a value added impact estimated above. However, under the baseline scenario (exemption expiry), some of this economic activity would be replaced with activity generated by non-leaded events, diminishing the incremental benefit of the proposed Amendments. Given the importance of revenue from high-profile events sponsored by U.S. race-sanctioning bodies, it is expected that for some race tracks (identified in Table 2), opportunities for substitution would be low, and the benefits of the proposed Amendments would be greater. As indicated above, the analysis assumes that local spectators and competitors would find substitute spending opportunities under the baseline. Spending by non-local and foreign spectators and competitors is assumed to be lost without the proposed Amendments.

Impacts for affiliated businesses

Affiliated businesses include leaded and non-leaded fuel importers, race-sanctioning bodies, body shops, tool and parts manufacturers and retailers, paint shops, marketing agencies, etc., that are directly affiliated with the activities of the racing sector. It is assumed that economic activity at affiliated businesses would be correlated directly with economic activity at race tracks featuring competition vehicles using leaded gasoline. However, considerable uncertainty exists with respect to the magnitude of direct and indirect impacts on these stakeholders.

For example, the proposed Amendments would preserve economic activity for leaded gasoline importers. Annual sales of leaded gasoline to Canadian and non-Canadian competitors were estimated to be $3.1 million in 2006. (see footnote 20) However, since all leaded gasoline is imported, much of this revenue may accrue to the U.S.-based fuel suppliers. Of the surveyed importers (representing an estimated 83% of all leaded gasoline sales), leaded gasoline represents 90% of total sales, and the proposed Amendments would therefore result in a significant benefit for these businesses, notwithstanding the continued need for record keeping and reporting of import and sales volumes.

Given the prospect that leaded gasoline events could be replaced by non-leaded events under the baseline scenario, it follows that some leaded gasoline imports would be replaced by production or import of other fuels. Notwithstanding the potential for some substitution, overall the proposed Amendments are expected to result in a small benefit to leaded gasoline importers and other affiliated businesses.

Impacts for race track and affiliated business employees

By preserving economic activity at race tracks, the proposed Amendments would have a direct impact on jobs, in particular in small rural communities where alternative employment may be relatively scarce. The proposed Amendments are expected to save jobs at race tracks, for leaded gasoline importers and other affiliated businesses, and in local communities. As indicated in the sector profile above, the Canadian racing sector employed an estimated 1 084 FTE employees in 2006. For communities with a diversified economic base, many workers could likely find alternative employment under baseline conditions over the course of the period of analysis. However, for small, rural communities including many of those identified in Table 2, opportunities for alternative employment may be substantially reduced, and the associated benefit from the proposed Amendments increased accordingly.

Similar impacts would accrue for employees of affiliated businesses, with increased benefits for those businesses that are more dependent on the racing industry (e.g. racing fuel suppliers, repair shops, parts manufacturers).

Impacts for local communities

Economic impact assessments conducted for Environment Canada, assessments conducted for proposed and existing race tracks in the United States, and anecdotal evidence from Canadian stakeholders, consistently show the benefits of high-profile racing events in small communities. Communities likely to benefit most from the proposed Amendments, due to their dependence on events featuring competition vehicles using leaded gasoline, are identified in Table 2, in particular those very small communities where a single event may make a relatively significant contribution to the local economy, and where non-local spectators make up a more significant share of attendance. These events typically take place over a weekend, and result in significant increases in revenue at local hotels, campgrounds, restaurants and retail outlets. The increase in part-time employment attributable to these events can also result in continued induced spending in the community, as employees spend money earned at the event.

Using estimates of spending in local communities provided in the discussion of stakeholders above, a single event that attracts between 10 000 to 20 000 out-of-town spectators (typical of large, U.S.-sanctioned events) would generate revenue for the race track and local community in 2010 of $1.8 to $3.7 million (assuming $184 per spectator), including an estimated $0.8 to $1.5 million for accommodations, $0.8 to $1.6 million for food and beverages, and $0.1 to $0.2 million for miscellaneous retail (assuming $76.13, $81.51 and $11.40 per spectator, respectively). Full estimates are provided in Table 4.

Table 4: Spectator spending at race track and in local community for one
event with 10 000 to 20 000 out-of-town spectators

Spending	2010	2019	2010–2019 (present value)
Total spending, including race track ($184 per spectator)	$1.8M to $3.7M	$1.7M to $4.8M	$13M to $30M
Accommodations	$0.8M to $1.5M	$0.7M to $2.0M	$5M to $12M
Food and beverages	$0.8M to $1.6M	$0.8M to $2.1M	$6M to $13M
Miscellaneous retail	$0.1M to $0.2M	$0.1M to $0.3M	$0.8M to $2M

Impacts for Government

The proposed Amendments would result in negligible avoided compliance promotion and enforcement costs for Environment Canada.

Impacts on spectators and competitors

Spectators and competitors are both considered “consumers” of races featuring competition vehicles using leaded gasoline, and enjoy attending and/or participating in races as a pastime, hobby or livelihood (for some competitors). A nation-wide community of racing enthusiasts derives value from continued racing activity, activity and value that would be preserved by the proposed Amendments.

Costs

Impact on leaded gasoline imports and lead releases at race tracks

Based on leaded gasoline import data identified in Table 1, Environment Canada estimates that 973 kg of lead were released at Canadian race tracks in 2007 (see footnote 21) and are estimated to represent 0.3% of Canadian lead emissions, with over 300 000 kg of emissions in 2007 from all sources (see Table 5).

Table 5: Lead emissions in Canada, 2007 (see footnote 22)

Source	Quantity released to air (kg)
All sources	307 415
Industrial sources	254 738
Air transportation	44 088
Competition vehicles	973

It is assumed that the volume of leaded gasoline imports (and emissions) will grow between -0.7% and +3.06% per year between 2007 and 2019. Lead emissions from competition vehicles in Canada in 2019 are therefore forecast to be between 932 kg and 1 405 kg.

As indicated in the stakeholders section above, between 2002 and 2007 there is an apparent decrease in the expected impact on race tracks should the exemption expire, with race tracks impacted significantly decreasing from 42% to 28% of race tracks. As under the analysis of benefits, it is expected that this trend reflects a shift away from a dependence on leaded gasoline, and should this trend continue, imports of leaded gasoline would likely also decrease over time. Environment Canada would continue to monitor this trend.

Impacts on health

Health Canada recognizes that the use of leaded gasoline by some competition vehicles can result in increased lead levels in the air during races and lead content of soils. A health impact assessment, conducted in 1997, concluded that lead levels in the vicinity of race tracks were acceptable when compared to the World Health Organization’s (WHO) recommended provisional tolerable weekly intake (PTWI) level for lead.

However, since that time, scientific evidence has become available which demonstrates that adverse health effects may occur at lead exposure levels previously thought to be without harm, with children, toddlers and pregnant women being the most vulnerable. (see footnote 23)

A thorough review by Health Canada of the current body of toxicologic literature for the purpose of evaluating the health effects of lead exposures has indicated there is evidence of adverse effects associated with chronic elevated blood lead levels for several body systems: neurological, cardiovascular, reproductive, blood, immune and kidney. Developmental neurotoxicity and cardiovascular toxicity are the outcomes with the greatest relative weight of evidence for adverse effects at low blood lead concentrations.

Health Canada recognizes that the use of leaded fuels can increase people’s exposure to lead; however, the Department is focusing its current efforts and resources on reducing exposure to lead in ways which can make the most difference for population health over the long term, for example, by making regulatory changes to lower concentrations of lead in consumer products. Based on the latest science, Health Canada is finalizing a comprehensive lead toxicological assessment and will be developing a revised lead risk management strategy which will identify priority areas for action in reducing exposure to lead.

Accordingly, Health Canada will support Environment Canada in the conduct of a five-year review of the proposed exemption by ensuring that any new health information is shared as it becomes available.

Impacts on the environment

Lead particles emitted in competition vehicle exhaust can remain airborne for several days, be transported and dispersed far from the original source, and eventually deposit to soil and water. Lead deposited to soil and water can remain available for uptake by plants, animals and humans for long periods of time. Inorganic lead may bioconcentrate in some aquatic animals, such as bottom-feeding fish and shellfish. Some crops can also become contaminated with lead by exposure to exhaust in the air or lead in the soil. (see footnote 24) Although the proposed Amendments would result in estimated incremental emissions of lead between 932 kg and 1 405 kg per year, there is no evidence that these emissions would have a significant impact on the environment.

Impacts on Government

The proposed Amendments would result in negligible incremental costs associated with compliance promotion and enforcement activities, and the continued administration of the Regulations, specifically the maintenance of the database of leaded gasoline production and import data.

Distributional analysis

Distributional considerations become particularly relevant when considering the impacts of the proposed Amendments on small, rural and/or remote communities. Benefits to these communities may bring a significant amount of direct, indirect and induced spending into local economies, notwithstanding that this spending — on a national level — may be a transfer from one Canadian to another, with little net impact.

The proposed Amendments would preserve economic activity at race tracks, and likely reduce demand for the products or services of competing firms. For example, a local movie theatre could continue to experience reduced attendance on race night. The proposed Amendments would also, by preserving demand for leaded gasoline, result in an incremental reduction in demand for non-leaded fuels, with impacts on suppliers of these fuels.

Cost-benefit statement

Benefits and Costs	2010	2010 to 2019	2019
Benefits
Quantitative and monetized
Benefits for race track revenue	+$50.6M to +$102.7M	+$356.6M to +$839.8M	+$47M to +$134.8M
Benefits for race track profitability	+$1.3M to +$2.7M	+$9.3M to +$21.8M	+$1.2M to +$3.5M
Benefit for a local community hosting event that brings in 10 000 to 20 000 out-of-town spectators, in terms of total spending at race track, and for accommodations, food and beverages, entertainment, transportation, retail, etc.	+$1.8M to +$3.7M per community	+$13M to +$30M per community	+$1.7M to +$4.8M per community
Quantitative
Benefits for race track and affiliated business employees	648 to 752 preserved FTE jobs	6 275 to 8 644 preserved FTE jobs	608 to 987 preserved FTE jobs
Qualitative
Benefits to affiliated businesses	Preserved economic activity for leaded fuel importers, automobile parts manufacturers, tool and parts retailers, promoters, advertising agencies, Web site design firms, etc.
Benefits to local communities	Preserved indirect and induced spending in local communities. Benefits would be most significant for small, rural and/or remote communities, and those communities with race tracks hosting large events, identified in Table 2.
Benefits to spectators and competitors	Racing enthusiasts, including spectators and competitors, derive value from continued racing activity as a leisure/recreational activity. This value would be preserved by the proposed Amendments.
Avoided government compliance promotion and enforcement costs	Negligible avoided costs.
Costs
Quantitative
Leaded gasoline imports for competition vehicle use	1 154 094 L to 1 243 390 L		1 083 389 L to 1 632 292 L
Releases of lead to air at Canadian race tracks	1.0 T to 1.1 T		0.9 T to 1.4 T
Share of total Canadian releases from all sources	0.3% in 2007
Qualitative
Impact of lead on the health of spectators, employees, participants and local residents	There is evidence of adverse effects associated with chronic elevated blood lead levels for several body systems: neurological, cardiovascular, reproductive, blood, immune and kidney. Developmental neurotoxicity and cardiovascular toxicity are the outcomes with the greatest relative weight of evidence for adverse effects at low blood lead concentrations.
Impacts on Government	Regulatory administration due to continued imports of leaded gasoline, specifically the maintenance of the database of leaded gasoline import data.

Rationale

Since 1994, temporary exemptions from the full provisions of the Regulations have permitted the continued use of leaded gasoline by competition vehicles. In that time, although many stakeholders have successfully transitioned to non-leaded fuel, a full conversion has not materialized, nor is one technically and economically achievable at this time. The proposed Amendments would extend the exemption for an indeterminate period, preserving economic activity at race tracks, for affiliated businesses and in local communities, and allow the Government to work with domestic and international stakeholders to encourage a transition to non-leaded fuels. For race tracks alone, the proposed Amendments would preserve an estimated $9.3 million to $21.8 million in profit between 2010 and 2019, sustain 608 to 987 FTE jobs in Canadian communities, and have a particularly significant impact on small, rural and/or remote communities hosting events featuring competition vehicles using leaded gasoline that are sanctioned by large U.S. race-sanctioning bodies. Incremental revenue preserved in a typical community is estimated to be between $13 million and $30 million between 2010 and 2019.

The proposed Amendments would also benefit the many Canadian racing enthusiasts who, as spectators or competitors, continue to enjoy racing events, and have expressed broad support for the proposed Amendments during the stakeholder consultation process described below.

Health Canada remains concerned with the health impacts of lead exposure. Although lead emissions from competition vehicles represent 0.3% of Canadian lead emissions from all sources, recent scientific evidence shows that adverse health effects may occur at lead exposure levels previously thought to be without harm. Environment Canada, with the support of Health Canada, therefore intends to conduct a five-year review of the proposed exemption, and is prepared to revisit this decision as new health, technical and socio-economic information becomes available. Environment Canada also intends to work collaboratively with domestic and international stakeholders to encourage a voluntary reduction and phase-out of leaded racing fuel.

Consultation

Public consultations were held with the release of a discussion paper in December 2009, for a three-week public comment period. Comments were received from 34 parties, including race-sanctioning bodies, associations, racing fuel importers and distributors, race track owner/operators, engine builders, competitors and private citizens. An offer to consult with the Canadian Environmental Protection Act, 1999 National Advisory Committee was made on December 14, 2009. To date, no provinces have taken up the offer to consult on the proposed Amendments; however, one province has indicated support for the proposed indeterminate exemption.

In general, there was broad support for the proposed Amendments from all but one stakeholder. This individual indicated that, with an indeterminate exemption, warning notices should be posted at race tracks and affiliated businesses where vulnerable individuals could be exposed to lead from competition vehicle fuel.

Health Canada recognizes that adverse health effects may occur at lead exposure levels previously thought to be without harm and the use of leaded fuels can increase people’s exposure to lead. As stated in the Discussion Paper posted on the CEPA Registry, (see footnote 25) Health Canada is focusing on reducing lead exposures in areas where there will be the greatest health benefits over the long term. In addition, the progress made by this segment of the racing industry in transitioning away from the use of leaded fuel will be a consideration in the five-year review of the proposed Amendments to the Gasoline Regulations. Accordingly, posting of signs is not being considered at this time.

Implementation, enforcement and service standards

The proposed Amendments would provide an indeterminate exemption for the use of leaded fuels in competition vehicles, extending the exemption that has existed since 1994. Development of an implementation plan and service standards is therefore not necessary. A compliance strategy already exists for all federal fuel regulations, including the Gasoline Regulations.

Environment Canada is in the process of developing a Performance Management and Evaluation Plan that will set out the actions it would take to encourage a transition, and explain the process it would follow — and the data it would collect — for the purposes of completing the five-year review.

Contacts

Leif Stephanson
Manager
Fuels Section
Oil, Gas and Alternative Energy Division
Environment Canada
Gatineau, Quebec
K1A 0H3
Telephone: 819-953-4673
Fax: 819-953-8903
Email: leif.stephanson@ec.gc.ca

Markes Cormier
Senior Economist
Regulatory Analysis and Instrument Choice Division
Environment Canada
Gatineau, Quebec
K1A 0H3
Telephone: 819-953-5236
Fax: 819-997-2769
Email: markes.cormier@ec.gc.ca

PROPOSED REGULATORY TEXT

Notice is hereby given, pursuant to subsection 332(1) (see footnote a) of the Canadian Environmental Protection Act, 1999 (see footnote b), that the Governor in Council, pursuant to sections 140 and 330 of that Act, proposes to make the annexed Regulations Amending the Gasoline Regulations.

Any person may, within 60 days after the date of publication of this notice, file with the Minister of the Environment comments with respect to the proposed Regulations or a notice of objection requesting that a board of review be established under section 333 of that Act and stating the reasons for the objection. All comments and notices must cite the Canada Gazette, Part I, and the date of publication of this notice, and be addressed to the Chief, Fuels Section, Oil, Gas and Alternative Energy Division, Energy and Transportation Directorate, Department of the Environment, Gatineau, Quebec K1A 0H3.

A person who provides information to the Minister of the Environment may submit with the information a request for confidentiality under section 313 of that Act.

Ottawa, March 25, 2010

JURICA ČAPKUN
Assistant Clerk of the Privy Council

REGULATIONS AMENDING THE GASOLINE REGULATIONS

AMENDMENT

1. Subsection 3(2) of the Gasoline Regulations (see footnote 26) is replaced by the following:

(2) These Regulations, except for sections 2 and 11, do not apply in respect of gasoline for use in competition vehicles.

COMING INTO FORCE

2. These Regulations come into force on the day on which they are registered.

[14-1-o]

Footnote 1
A competition vehicle is defined in the Regulations as “a vehicle or boat that is used exclusively for competition and does not include a vehicle that is used on a highway or a vehicle or boat that is used for recreational purposes.”

Footnote 2
For example boats, personal watercraft, snowmobiles and go-karts.

Footnote 3
Enterprises with fewer than 250 employees and less than $50 million in total revenue.

Footnote 4
Statistics Canada, CANSIM Table 361-0013, and Statistics Canada — Catalogue No. 63-246-X. This subsector includes many other facilities and enterprises not relevant to this analysis.

Footnote 5
Performing Arts, Spectator Sports and Recreation (NAICS 711).

Footnote 6
Statistics Canada, CANSIM Table 379-0027.

Footnote 7
TNS Canadian Facts, “Economic Impact of Expiry of the Exemption for Lead in Racing Fuels,” 2007.

Footnote 8
ARC Applied Research Consultants, “Economic Impact of Eliminating the Exemption for Lead in Racing Fuels,” 2002.

Footnote 9
TNS Canadian Facts, “Economic Impact of Expiry of the Exemption for Lead in Racing Fuels,” 2007.

Footnote 10
The import volume data are compiled from annual reports received by Environment Canada pursuant to the reporting requirements of the Gasoline Regulations.

Footnote 11
Leaded gasoline is not produced in Canada for use in these vehicles.

Footnote 12
Census data from Statistics Canada Census 2006 Community Profiles, www12.statcan.ca/
census-recensement/2006/dp-pd/prof/92-591/search-recherche/frm_res.cfm?Lang=E.

Footnote 13
Race tracks and affiliated sanctioning bodies were identified from public Web sites.

Footnote 14
TNS Canadian Facts, “Economic Impact of Expiry of the Exemption for Lead in Racing Fuels,” 2007.

Footnote 15
Weinstein, B. L., and Clower, T. L., Center for Economic Development and Research, University of North Texas, “Economic Impact Analysis of Proposed Autoracing Complex in Immokalee, Florida.” September 2000.

Footnote 16
These values have been converted from 2000 American dollars to 2006 Can- adian dollars using a 2000 exchange rate of US$1 = C$1.4852024, and an inflation conversion of C$1(2000) = C$1.13(2006).

Footnote 17
Indy cars run on ethanol, Formula One cars run on unleaded gasoline.

Footnote 18
Confidential business information, from a large Canadian race track.

Footnote 19
TNS Canadian Facts, “Economic Impact of Expiry of the Exemption for Lead in Racing Fuels,” 2007.

Footnote 20
TNS Canadian Facts, “Economic Impact of Expiry of the Exemption for Lead in Racing Fuels,” 2007.

Footnote 21
1 131 204 litres imported, average of 1.1473 grams of lead per litre. 75% is released as lead aerosol, the remainder stays in the engine and/or motor oil.

Footnote 22
Results for all sources, industrial sources and air transportation are from the National Pollutant Release Inventory, www.ec.gc.ca/pdb/websol/emissions/ap/ap_result_e.cfm?year=2007&substance=pb&location=CA&sector=all&submit=Search. Results for competition vehicles were calculated as described above.

Footnote 23
U.S. Environmental Protection Agency 2007, U.S. Centers for Disease Control and Prevention 2007, and Ontario Ministry of Environment 2008.

Footnote 24
U.S. Department of Health and Human Services, Public Health Service, Agency for Toxic Substances and Disease Registry, August 1999, www.atsdr.cdc.gov/toxprofiles/tp13.html.

Footnote 25
www.ec.gc.ca/CEPARegistry/documents/regs/leaded_gasoline/index.cfm 

Footnote a
S.C. 2004, c. 15, s. 31

Footnote b
S.C. 1999, c. 33 

Footnote 26
SOR/90-247 

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