Bill C-33 (Historical)

An Act to amend the Canadian Environmental Protection Act, 1999

This enactment amends the Canadian Environmental Protection Act, 1999 to provide for the efficient regulation of fuels.
It also provides for a periodic and comprehensive review of the environmental and economic aspects of biofuel production in Canada by a committee of Parliament.

Agriculture and Agri-Food

[James Bezan, Conservative, Selkirk—Interlake, MB]

Mr. Speaker, I have the honour to present, in both official languages, the second report of the Standing Committee on Agriculture and Agri-Food.

In accordance with its order of reference of Friday, February 1, 2008, the committee has considered Bill C-33, An Act to amend the Canadian Environmental Protection Act, 1999, and agreed on Tuesday, February 26, to report it with amendment.

[The Chair, Conservative, James Bezan]

We have to be cognizant of the fact that Bill C-33 is amending the Environmental Protection Act, and we have to look at the act as a whole.

Mr. Easter.

[Roger Samson]

It seems to me that the drivers of the bill are greenhouse gas mitigation and rural development. Liquid fuels are not the only way to support farmers. We've worked on this for 17 years, longer than anyone in Canada, to see how to use farmland to mitigate greenhouse gases efficiently and support demand enhancement for the farm sector. We came up with a solution that's eight to ten times more effective than what Bill C-33 is focused on.

I would like you to look at these other options, and look at the budgets you have to spend on biofuels, and perhaps say that we should scale back the two and five to smaller numbers, develop biogas for power, and develop switchgrass pellets for commercial energy. Thermal energy is our biggest energy need in Canada, and it's the lowest-cost solution that we've found in that report.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

Mr. Morel, I'm not sure it's such a good idea to come before the agriculture committee and tell us how fortunate farmers are, compared to others, to pay such high prices for their fuel. We hear from farmers every day and we know that they are feeling the effects of rising production costs, particularly fuel costs. I really don't think it is appropriate to say that farmers are fortunate to see fuel prices advertised at $1.25 a litre, at a time when we are trying to further reduce our dependence on this energy source. In that respect, Bill C-33has the advantage of developing a renewable energy framework.

You also stated in your presentation that providing subsidies for renewable fuel was not your preferred option. It is rather odd to hear this from a person representing an industry that received in the neighbourhood of $1 billion in tax breaks in 2007. We know how much the Conservative government likes the oil companies. Your presentation was hair-raising, to say the least.

[Lloyd St. Amand, Liberal, Brant, ON]

Lastly, I'll turn to Mr. Samson.

You spoke maybe less enthusiastically about Bill C-33 than some of the others. Would it be conceded by you, Mr. Samson, that Bill C-33 is at least a step in the right direction? Even if it's a baby step, in your view, is it not at least a step in the right direction?

[Gene Carrignan, Chair, National Fuels Committee, Canadian Petroleum Products Institute]

Mr. Chair, the last component of our presentation deals with real-time work on biofuels.

In meeting the needs of this policy, we are conducting leading-edge research. On January 22, 2008, Canada's largest cold-weather on-road demonstration of renewable diesel was officially launched in partnership with CPPI, the federal and Alberta governments, and a diverse multi-stakeholder group including Climate Change Central, the Canola Council of Canada, and the Canadian Renewable Fuels Association.

Over 60 trucks of various sizes have hit the roads throughout Alberta, because its climate poses some of the most extreme challenges to renewable diesel use. The demonstration will provide hands-on cold-weather experience for fuel blenders, distributors, long-haul trucking fleets, and drivers. We are proud to be part of this group of stakeholders, working to broaden the understanding of how best to maximize the benefits of renewable diesel in Canada.

In addition, we are working with Natural Resources Canada and Environment Canada on a second proposed biofuel research program. It is designed to understand and address issues with biofuel mixtures under specific Canadian climate conditions. Its design will include low-temperature operability of heavy-duty engines, fuel storage for multiple applications, and thermal and oxidative stability of heating fuel oil under seasonal variations.

The picture in our handout shows a unique cold-weather chamber in Sarnia that will be used in this work. In fact, from this meeting we'll be going directly to another to continue the design of that program.

In summary, Mr. Chair, we at CPPI have some bottom lines that are not negotiable. First of all, we are the face of energy providers at the consumer level. We've heard from producers; we are the ones who actually get the customer complaints if something malfunctions.

We make the necessary investments to meet the public policy objectives on a grand scale. At our core, our collective mission is to ensure that we provide to Canadians the fuels that perform as expected in a safe and reliable manner and that we cooperate actively with government and society to pursue science-based solutions to health and environmental priorities. Our track record in this regard is quantifiable.

Moreover, CPPI seeks to ensure that our collective workforce will convey respect to, and strive to earn the confidence of, the many constituencies members serve, and that Canadians will continue to enjoy the widest variety of fuel choices in a rigorous, competitive market.

As stated earlier, CPPI supports Bill C-33 and encourages its adoption by Parliament. In fact, we want the necessary renewable fuels regulations to be in place as soon as possible, so that we, as the companies that must comply with this policy, have sufficient time to implement the necessary changes to our operations.

We're happy to take your questions.

[Gilles Morel, Director, Eastern Canada Division and National Office, Canadian Petroleum Products Institute]

Mr. Chair, Members of Parliament, and to Canadians who have access to this hearing, on behalf of the members of the CPPI, thank you for inviting us to offer our perspective on Bill C-33, the statutory framework that will permit the enabling of a national renewable fuel regulatory framework in Canada.

Right away, like the three speakers before me, I wish to express our association's support for Bill C-33. As you know, the CPPI is the national association of major Canadian companies involved in the refining, distribution and marketing of petroleum products for transportation, home energy and industrial uses. There are three key points that we wish to highlight with you as you consider Bill C-33.

Firstly, CPPI believes that the only sensible approach to renewable fuel mandates is one that is national in scope. Secondly, CPPI has worked hard with the Canadian Renewable Fuels Association to develop a national approach. Thirdly, CPPI is dedicated to leading-edge research on fuel quality specific to the realities unique to Canada, such as weather and geography.

Canada is a country with immense geography, a relatively small population and an economy fundamentally linked to, and in our case, competitive with the United States.

Movement of product free of economic barriers has been the cornerstone of Canada's success, and as all levels of government focus on how to remove internal trade barriers it is regretful that policies in provincial jurisdictions regarding renewable fuels have had the effect of creating new economic barriers across Canada.

As can be seen on the chart presented in the document, a patchwork of regulation is emerging across Canada. The second chart shows where the main refining centres are located. What is not shown here is that as we speak, there are recent proposals from Ontario and British Columbia to follow in the footsteps of California and introduce further another layer of complexity called the low-carbon fuel standard. The goals are unclear.

One of the benefits of Bill C-33 is that a national framework will emerge, and we congratulate the Parliament of Canada on recognizing the importance of showing federal leadership.

Secondly, regarding the essential feature of a national policy on renewable fuel, CPPI understands the many motivations that underlie public policy attention to renewable fuels. More important, let's remind ourselves that this framework cannot achieve this on its own. While countries like the United States pursue renewable fuel policy based on energy independence and security, this is not the case in Canada, nor is it likely to be the case in the near term. Canada has an abundance of natural resources that with some stewardship and innovation will provide both energy security and value-added jobs and economic growth for the benefit of all regions of Canada.

A national renewable fuel strategy is also not a panacea for the challenge posed by climate change. It may be one day, but for the moment I think we can agree that scientists, engineers, health practitioners, and modelling experts are still working on the real solution to climate change, and we are ready partners in that research.

So why have a renewable fuel mandate? At the very least, it is instructive that the House of Commons has referred this very important piece of legislation to the Standing Committee on Agriculture and Agrifood. As stated in our jointly agreed policy framework with the Canadian Renewable Fuels Association, we have repeatedly taken the position that it is up to government to make the political decision to develop a renewable fuels policy that is in the best interests of Canadians.

Mr. Chairman, Bill C-33is but one building block that will bring a sound renewable fuels framework to fruition. The agenda ahead, if we are truly to succeed, is laid out in our CPPI-CRFA framework, which is attached for your information.

Basically, the framework calls for five things: federal leadership; a competitive environment; technology advancement; policies that induce the ability of renewable fuels to drive down GHG emissions; and open borders.

I wish to inform parliamentarians that the federal government, in the budget, sent some very confusing messages about renewable fuels.

On the one hand, very generous programs will be in place as of April 2008 to provide production subsidies. One of the federal government's announcements concerned the ecoENERGY for Biofuels Initiative, which will invest up to $1.5 billion over nine years to boost Canada's production of biofuels.

Unfortunately, in the 2007 budget, the Excise Tax Act was amended to repeal the tax exemptions for renewable fuels.

In fact, the government brought in a higher tax rate for biofuels. Over the same period of time as the ecoEnergy program, the government has cut $1.5 billion that would otherwise have been used to keep the cost of bioblended fuels in line with regular gasoline and diesel fuel.

From where we stand, this translates into no net new investment in biofuel production.

As has been demonstrated in the U.S., a federal blenders' credit is the preferred method of supporting ethanol production. The equivalent of Canada's federal blenders' credit terminates on April 1 of this year, but in the absence of a comparable arrangement with our largest trading partner, we will fall short of expectations that renewable fuel in Canada will easily compete with the same product south of the border.

Mr. Chair, Mr. Gene Carrignan, chair of the national association, will now conclude our presentation.

[Mark Nantais, President, Canadian Vehicle Manufacturers' Association]

Thanks very much, Mr. Chairman.

Good morning to all the members of the committee. I want to thank all of you for this opportunity to address you today as it relates to Bill C-33.

The Canadian Vehicle Manufacturers' Association is the lead national association that represents Canada's light- and heavy-duty vehicle manufacturers, including Chrysler, Ford, General Motors, and International Truck and Engine Corporation. Together, these companies account for over 70% of all domestic vehicle production, 55% of all vehicle sales, and our member companies support 150,000 Canadian workers and retirees throughout their entire business operations.

Very quickly, I can say that I'm here to lend our unconditional support for Bill C-33 and call for its passage as quickly as possible. You may be surprised, but I think there are many organizations that feel the same way about the quick passage of this bill, and I'll tell you why. The CVMA strongly supports a comprehensive renewable fuel strategy that is backed by appropriate regulation. Efforts to expand the availability and use of quality blended renewable fuels in Canada provide an opportunity to significantly reduce greenhouse gas emissions from the vehicle fleet.

The government has rightly and justifiably acknowledged the advantages of renewable fuels from a life-cycle greenhouse gas perspective in its Canada Gazette notice on renewable fuels, in 2007. This is the first time that the government, under the Canadian Environmental Protection Act, is requiring that a component be added to Canadian fuels.

We believe that the real opportunity exists to ensure success in the marketplace by addressing both the fuel quality and consumer acceptance of these green fuels. Ensuring a seamless and successful deployment of renewable fuels in the Canadian marketplace is critical for the long-term confidence in and acceptance of these fuels by Canadians.

Furthermore, due to the innovative nature of the industry across North America and the Government of Canada's stated commitment to common North American vehicle emission regulations, it is important that the Canadian and U.S. approaches on renewable fuels be consistent, at least to the extent possible.

Since the 1980s, all gasoline-fuelled vehicles produced by CVMA member companies are capable of running on fuels containing up to 10% ethanol. Our members are also industry leaders in providing E85 flexible fuel vehicles. These are vehicles that can run on 100% gasoline, all the way up to 85% ethanol, which is totally transparent to the driver. In addition, our diesel-fuelled vehicles may also operate on biodiesel blends, per manufacturers' recommendations.

It is essential that renewable fuels, both the bio-renewable component and the conventional fuel component, meet appropriate fuel quality standards. Failure to assure fuel quality can result in potential negative effects relative to criteria emissions, suitability for use in extreme cold or hot weather, adversely affect the operation of the vehicle, or could affect the vehicle fuel and emission systems themselves. Accordingly, the bill needs to expressly stipulate the fuel quality requirements to ensure that appropriate and consistent biofuels are available across Canada where they may be offered.

It is also important to acknowledge and recognize the nature of vehicles and fuels as a fully integrated system. That's certainly a concept or a principle that is already acknowledged and accepted in CEPA itself, and now in Bill C-33.

The following issues need, in our view, to be addressed to ensure a successful implementation of renewable fuel regulation whereby it meets the government's stated renewable fuels objectives and environmental improvements. The first issue is fuel quality requirements as expressed in the context of a national fuel quality regulation; second, controls and management of implementation and transition issues related to ethanol storage, compatibility, tank cleanliness, and water management; and third, expansion of the availability of high-level ethanol and gasoline blends, up to 85% ethanol.

I would also like to offer a few comments on the rationale for a federal fuel regulation. A national fuel quality regulation for conventional and renewable fuels would address the developing patchwork of provincial actions to date. We encourage the federal government to work closely with the provinces during the drafting of the legislation and the regulation to ensure consistency and one national approach for Canada covering both renewable fuels and the overall fuel quality, recognizing certain regional and seasonal factors.

It is our understanding that under section 140 of CEPA, the minister has the authority to make regulations that specify fuel quality parameters. CEPA 1999 indicates that regulations that are enacted related to fuels need to show that they do not adversely affect the environment, human life or health, or the operation, performance, or introduction of combustion and other engine technology or emission control equipment.

Therefore, in our view, a practical approach for renewable fuels would be to reference the fuel quality specifications contained in the applicable Canadian General Standards Board or American Society for Testing and Materials standards in a manner similar to that approach taken by the Province of Ontario in its regulation 535, which is their ethanol regulation. This will ensure consistency of fuel quality across the country and demonstrate the government's commitment to ensuring that renewable fuels are implemented in a manner that improves the environment but also avoids any adverse effects or impacts on Canadian vehicle operation, not to mention showing federal leadership in this area.

Although the Canadian General Standards Board, CGSB, is recognized as a credible standard-setting body, their fuel standards have not been consistently adopted or implemented as provincial regulatory requirements across Canada. Currently gasoline quality parameters developed by the CGSB are regulated by three provinces, I believe, quasi-regulated by another, and are partially cited by reference in another, so there is no provincial legislation requiring that all on-road fuels meet current applicable CGSB standards.

A further example of CGSB not being adopted and implemented across Canada is the gasoline detergent specifications. Environment Canada data on deposit control additives indicates that approximately 20% of Canadian gasoline does not contain any deposit control additives that are necessary to minimize fuel system deposits that can lead to increased emissions and affect vehicle performance. I might add that the auto industry and the oil industy are working together on this issue and making improvements in this area to ensure that there is total satisfaction for our mutual customers.

Given this, we believe that a national fuel quality standard as part of the renewable fuels regulation is necessary to address such shortcomings now and in the future.

I'd also like to comment on controls and management of the implementation and transition issues with ethanol storage, compatibility, tank cleanliness, and water management. The use of ethanol in gasoline is permissible at concentrations up to 10%. Due to the nature of ethanol and gasoline blending, the motor vehicle industry suggests that efforts need to be undertaken to minimize co-mingling effects with gasoline that could lead to increased fuel system vapour pressure, increased VOC emissions, and possible vehicle driveability issues.

Significant environmental benefits from high-level ethanol blends--that is, up to 85% ethanol, 15% gasoline--can be realized by taking full advantage of the E85 flexible fuel technology that my vehicle manufacturers have made available in Canada for nearly a decade. The NRCan GHG Genius model shows that E85 fuels, on a life-cycle carbon dioxide emissions basis, can be reduced by 47% to 55% compared to conventional gasoline. One way to minimize issues related to infrastructure, distribution, and management of ethanol blends is to mandate or incentivize a portion of the 5% ethanol objective to be supplied as E85 fuel.

In addition, if Canada is to aspire to increased levels of ethanol use in Canada, as have leading jurisdictions such as Sweden, the U.S., and Brazil, then this will require the use of E85 flexible fuel technology as well as the associated infrastructure that goes with it. Supportive government policy must be given serious consideration in this area. By expanding the availability and use of clean and renewable fuels, government can not only assist consumers but actually accelerate greenhouse gas reductions in Canada.

I'd like to offer a couple of more comments.

In 2007 the CVMA member companies announced and launched a realistic, integrated approach to accelerate greenhouse gas reductions in Canada. Our plan focuses on accelerating the introduction of green technology, expanding cleaner renewable fuels, removing older polluting vehicles from Canada's roads, greening environmental fleets, and changing driver behaviour.

While we are already making progress in some of these areas within the industry's control, we require the support of the federal government and provincial governments to achieve even greater success. For instance, we would suggest that we create a Canadian tax credit incentive similar to the United States alternate fuel infrastructure pump conversion initiative. The United States has a tax credit support model, which provides up to $30,000 per retail pump conversion to E85. Second would be to reinstate the excise fuel tax exemption for E85 fuel. Third would be to continue to support the purchase and use of flex fuel vehicles by governments and private fleets. And the fourth is to continue the existing supporting mechanisms for conventional ethanol and provide additional focus on cellulosic ethanol production in Canada.

Mr. Chairman, I just want to summarize by saying that Bill C-33 is a critically important component to a broader integrated approach to reducing greenhouse gas emissions and achieving our environmental goals, and we hope it will be passed as quickly as possible.

Thank you.

[B. Todd Moser, Vice-President, Alternative Fuels, Rothsay]

Mr. Chairman, members of the committee, thank you for giving me the opportunity to appear before you this morning to share my insights on Bill C-33, an act to amend the Canadian Environmental Protection Act, 1999.

I come to you today as someone with over twenty years' experience in the refining, supply, distribution, and marketing of conventional petroleum products in Canada and as vice-president of Rothsay, a proud member of Maple Leaf Foods and a pioneer in Canada's biodiesel industry. I trust that my practical and commercial experience in both conventional and alternative fuels will be beneficial in today's proceedings.

I would like to impress upon the committee two messages today: first, that alternative fuels like biodiesel hold many benefits for Canada and Canadians; second, and more importantly, that quick passage of Bill C-33 is critical if we are to realize any of these benefits.

Renewable fuels like biodiesel can benefit Canada and Canadians in three ways. First, renewable fuels can address the growing challenge of climate change. Climate change is real, and the environmental consequences of being addicted to carbon-based fuels are a key source of the problem. Renewable fuels like biodiesel can help address these issues by offering substantial environmental benefits over conventional carbon-based fuels. In the case of biodiesel, the environmental benefits are many.

According to Natural Resources Canada, biodiesel greenhouse gas emissions reductions are 70% to 95%, depending on the feedstock. Even a blend of 20% biodiesel with conventional diesel can reduce carbon emissions, on a life-cycle basis, by over 15%. Our Sainte Catharine's plant alone helps eliminate approximately 122,000 metric tonnes of greenhouse gases annually, which is equivalent to taking 16,000 light trucks or 22,000 cars off the road.

Biodiesel is as biodegradable as sugar, and is ten times less toxic than table salt. Biodiesel also has a very positive energy balance. In fact, a new analysis conducted at the University of Idaho in cooperation with the U.S. Department of Agriculture shows that the energy balance of biodiesel is a positive 3.5 to 1, which is to say that for every unit of fossil energy needed to produce the fuel over its life cycle, the return is 3.5 units of energy. This compares very favourably relative to conventional petroleum diesel, which yields less than one.

Second, renewable fuels like biodiesel help address the issue of energy diversity. The $100 per barrel for crude oil is more than enough reason to look at renewable alternatives as a means to diversify our reliance on carbon-based fuels. Not only have crude oil prices climbed but product prices are also at record levels. Over $3 a gallon in the U.S. and $1 per litre in Canada is now commonplace thanks to an aging refining network, minimal spare capacity, and ever-increasing product specifications.

In their most current medium-term oil market report issued in July of 2007, the International Energy Agency, a well-respected source of energy information worldwide, forecasted increasing market tightness beyond 2010 due to OPEC's spare capacity declining to minimal levels by 2012.

In the same report, they indicate that energy demand is not receding any time soon. Expanding economies, particularly those in non-OECD countries--for example, in Asia and the Middle East--are forecast to grow their oil demand by 3.6% per year over the next five years. This is clearly a recipe for continued upward price pressure on both crude oil and petroleum products in the foreseeable future.

Renewable fuels like biodiesel can help diversify our energy supply by adding additional supplies and production capacity for clean, renewable alternatives that are fully compatible with today's engines, can meet the highest product standards, and can be easily integrated into our distribution infrastructure. What's more, these fuels are available now.

The third major benefit of renewable fuels is their positive impact on the Canadian economy. Our Sainte Catharine's facility in Quebec is proof positive of what even a modest investment can mean to local communities.

In terms of employment, we are proud to offer employment opportunities for professionals, skilled and semi-skilled individuals. We have over 25 people directly involved in our biodiesel business. We also spend over $800,000 per year on local services to support our operation and over $15 million will be spent acquiring domestically produced feedstocks.

Our plant contributes to the local tax base supporting municipal, provincial, and federal taxes. In 2007 we also completed a major capital upgrade of the facility and utilized local trades and services during the fabrication, construction, and commissioning phases of this project.

A strong domestic biodiesel industry establishes new markets and price stability for oilseed crops and animal by-products, while diversifying and strengthening rural economies. Clearly these three benefits--the impact on our environment, energy diversity, and the economy--are positive for Canada and Canadians. However, these will not be realized without quick passage of Bill C-33.

Bill C-33 is imperative if Canada is to foster a strong domestic renewable fuels industry and market. Make no mistake, Bill C-33 and a renewable fuel standard will not see appreciable demands in Canada for renewable fuels, which in turn will not contribute to the relatively small investment needed to our supply infrastructure to accommodate these cleaner renewable fuels.

We already see this now, with almost all of our 35 million litres of production from our Sainte Catharine's facility going directly to foreign jurisdictions that have much more developed renewable fuel programs. Today in Canada we have but two commercial-scale biodiesel facilities, while our neighbours in the U.S. have over 130, with another 37 under construction. What's worse is the significant gap that exists for consumers who want to use biodiesel. I'm aware of only two product terminals in Canada that can effectively blend biodiesel, and fewer than a handful of fueling facilities that actually offer biodiesel to consumers.

Quick passage of Bill C-33 will change this by creating the catalyst needed to secure investment in biodiesel plants and the necessary infrastructure to get this clean renewable fuel to consumers. Should Bill C-33 fail to pass, I'm certain that future investment in biofuels will be seriously impaired, if not outright abandoned. This is certainly the case for my organization, which would like to expand our biofuels business but is reluctant to do so, not knowing if a market will even exist in Canada.

In summary, I believe renewable fuels hold great promise and benefits for Canada and Canadians. They address climate change, improve energy diversity, and have an opportunity to add to rural development and Canada's economic growth. Quick passage of Bill C-33 will provide the catalyst needed to spur investment and to help Canada realize the many benefits renewable fuels have to offer.

Thank you for your time and attention.

[The Chair, Conservative, James Bezan]

I call this meeting to order

I want to welcome all of you here to continue our study of Bill C-33, a bill enabling the government to set up our mandate on biofuels.

I want to welcome to the table today Roger Samson, executive director of Resource Efficient Agricultural Production Canada, or REAP Canada; and from Rothsay we have Todd Moser. From the Canadian Vehicle Manufacturers' Association we have Mark Nantais; and from the Canadian Petroleum Products Institute we have Gilles Morel and Gene Carrignan. Welcome to the committee.

I ask that all witnesses make their opening comments in ten minutes or less. I will hold you to that, since we have a tight agenda today.

With that, I'll open it up to you, Mr. Samson.

[The Chair, Conservative, James Bezan]

Before we leave Bill C-33 for the day, we have a motion on expenses that we need somebody to move: that the budget of the committee in the amount of $35,700 for the study on Bill C-33 be adopted.

I need somebody to move that. Paul moves it.

Is there any debate?

[Lucy Sharratt]

Generally we have the concerns that in setting up the mandate itself there's a support for an immature industry—or there are very many scenarios for what the industry will look like, and we don't yet know what the shape of the industry will be, even what feedstocks we will use and ultimately the impact on greenhouse gas emissions—and that the facts are contested at every point.

However, if we're then to look at the details of the bill, we would certainly be very happy to take a look. When it's time for the regulations to be set up and made, we'd be very interested to see what that looks like and, looking at Bill C-33, certainly to see if there was a way to incorporate, too, a stress not only on the adverse effects on the environment from the use of fuel or additives contained in the fuel—health effects, and so on—but that the feedstock also be considered and that this be integrated into those concerns.

Additionally, certainly we would want to see an outright prohibition on the use of genetically engineered trees as a feedstock. Also, of course, our concern is with other genetically engineered crops, but certainly the use of genetically engineered trees for cellulosic ethanol is a very serious concern for us.

[Kevin Bender, Director, Western Canadian Wheat Growers Association]

Thank you, Mr. Chairman.

The Western Canadian Wheat Growers Association welcomes this opportunity to appear before you all today.

I'm a director of the association, and I farm near Red Deer, Alberta. I also sit on the board of directors of the Alberta Canola Producers Commission, and I recently completed a term in the Canadian Canola Growers Association. However, my views here today will be primarily from the wheat growers' perspective.

Joining me today is Blair Rutter, our executive director from Winnipeg.

The Western Canadian Wheat Growers are a prairie-wide voluntary farm organization. For 38 years we've been advocating forward-looking farm policies to improve the profitability and sustainability of our farms. Our board of directors consists of 12 farmers who have a passion for agriculture and the determination to make farming more profitable. It is our optimism about the future of our industry that keeps us energized.

Grain prices are currently strong in western Canada, so that's helping to fuel our optimism. We know, however, that good grain prices can be fleeting, so that's why we're always seeking policy solutions that will help make farming more profitable on a long-term basis. We see biofuels as an excellent opportunity in helping us to achieve that goal.

Bill C-33 makes provision for regulations that would require gasoline to contain a 5% average renewable content by 2010 and diesel and heating oil to contain 2% average renewable content by 2012. The wheat growers support this legislation and urge committee members to give it their full support as well.

Currently, there are five commercial ethanol plants in operation in western Canada and two more that will be opening soon this year. Combined capacity of these plants will be 500 million litres, which would, in total, consume about 1.4 million tonnes of wheat, or approximately 7% of the average wheat production in western Canada. Of course, these wouldn't use wheat exclusively; corn and other cereal grains would be part of that as well.

While ethanol has been produced on the Prairies for more than 25 years, we really are in the infancy stages of a large-scale biofuels industry in western Canada, so it's difficult to predict the full impact. In our view, biofuels and bioproducts represent a great opportunity to create a more sustainable future for our industry. Over the next few minutes, I'll talk to you more about the value of biofuels to prairie grain farmers.

First of all, increased ethanol production will help reduce our dependency on foreign grain markets. There are always a number of risks when you're exporting grain offshore. We're vulnerable to tariff and trade barriers, labour disputes, railway service disruptions, and high ocean freight rates. In the past year, the prairie grain business has been disrupted by two railway strikes and a trucker walkout at the Vancouver port. Having more grain processed domestically helps mitigate the impact of such disruptions.

Another benefit of the ethanol industry is that it would provide farmers with another local outlet for marketing their grain. As we've discovered in the canola, oats, and pulse sectors, local users of grain improve competition and help support local prices. The value of ethanol and biodiesel plants will be particularly evident when grain downgraded by weather or disease is able to be used for biofuel production.

Increased local processing also reduces our dependency on shipping grain by rail. In western Canada, our industry continues to be constrained by service and performance issues in the rail sector. In this regard, the wheat growers were very pleased to see transportation legislation, Bill C-8, passed by Parliament, and we thank all parties for their support of this legislation. It's my understanding that it has been passed by the Senate and is just awaiting royal assent.

The fact remains, however, that in western Canada the two main railways haul about 65% of the grain we produce. In our view, one way to improve rail service and increase competition in grain handling is to increase the amount of grain that is processed locally. Wheat varieties that are well suited to the ethanol industry often have agronomic advantages and so they represent a good rotational fit on many farms. Promoting a biofuel industry also creates more jobs and economic activity in rural areas. For those farmers who invest in these facilities, it also gives them an opportunity to capture a greater share of the value chain.

Finally, processing more of our grain locally helps ease the growing congestion on the rail lines and at ports. Rather than shipping our grain long distances, we think it makes more economic and environmental sense to process it closer to home.

In our view, there's no question biofuel plants provide tremendous value to grain farmers and communities across western Canada. We note that the renewable fuel standards contemplated in this legislation include provision for next-generation feedstocks, including straw and other biomass material. The wheat growers also support these forward-looking provisions.

We recognize and appreciate the concerns raised by the livestock sector with respect to the possible increase in feed grain prices resulting from the development of a biofuels industry. Many of our members also have livestock operations, so we take these concerns very seriously.

We note that studies in the U.S. have shown that livestock operations have flourished around ethanol plants. This is also the case in Canada. In fact, the oldest ethanol plant in western Canada—the Pound-Maker facility in Lanigan, Saskatchewan—is a fully integrated ethanol and feedlot operation. Other ethanol projects under development have a strong livestock component.

We think it's worth noting that many of the wheat varieties that are well suited for ethanol plants are much higher yielding than varieties used in the milling industries. Often, yield per acre is substantially higher than that of milling varieties. If the ethanol industry expands significantly in western Canada, we could see higher production of wheat, corn, and other feed grains. The resulting distiller dried grains, or DDGs, produced from these plants will provide the livestock industry with a relatively lower-cost feed grain supply.

Admittedly, we don't know what the full impact of biofuels on the livestock industry will be. However, we believe that it's too early to assume that the growth of the biofuel industry will be negative for the livestock sector.

The wheat growers want to see the development of a biofuels industry that is sustainable, without the need for mandates or subsidies of any kind. We recognize that some argue that the biofuel industry will not be viable without government intervention or support. We do not share this view. Of course, economic viability will ultimately depend on the price of the oil and the feedstocks. However, we believe that technological improvements in processing and in variety development will be such that biofuel production will one day be economical and sustainable without government intervention.

Regarding wheat variety development, our association would be remiss if we did not comment on this committee's work in recommending the removal of kernel visual distinguishability, known as KVD, as a criterion for the registration of new wheat in western Canada. The removal of this constraint will lead to the development of wheat varieties that have yield and starch profiles that are well suited to the ethanol industry. We applaud your committee and the federal government for your foresight in bringing about this policy change.

Bill C-33 will also help spur the development of new markets and new uses for our crops. For example, the fractionation of wheat, barley, and other grains offers significant opportunity for the development of healthier food, pharmaceuticals, and industrial products.

In summary, the wheat growers support Bill C-33. The legislation will provide Canadian farmers with greater marketing opportunities and will lessen our dependence on export markets. The development of a biofuels industry will lead to greater investment in crop research and development and in processing technology. It also offers an excellent opportunity to create jobs and economic activity in many rural communities. We ask your committee to endorse this legislation and ensure that it is passed in the parliamentary session.

Thank you again for this opportunity to address you. We look forward to any questions you may have.

[Simon Barnabé, Scientific researcher, Added value production from waste materials, EcoNovo Consulting Experts]

Thank you, Mr. Chair.

Dear committee members, you have invited me today to speak to Bill C-33. As a young researcher, I believe I represent the new generation of scientists and professionals, particularly those working in the vast areas of the environment and biotechnology.

First, I noted that under Bill C-33, there will be new regulations on biofuel production; these regulations have not yet been drafted or passed. If the bill encourages the Canadian production of biofuels from green biomass rather than from other sources, there might be serious environmental and socio-economic repercussions, the possibility of which have already been raised by the scientific community, or played down by certain governments, but which strike fear in the heart of environmentalists. Here then are my positions with regard to your bill.

First, the production of biofuels calls for the use of tons of biomass, and one can easily justify using abundant and diversified raw materials such as waste materials. Bill C-33 should be presented to Canadians as encouraging the use of waste materials, and not of green biomass.

Second, the production of biofuels must not supersede the production of other bioproducts. Bill C-33 is currently being presented as supporting the production of biofuel, but what about other bioproducts for which there are potential and growing markets? Does the future of producers only lie with biofuels, or with a greater diversification of agricultural bioproducts?

Third, Bill C-33 is being presented to Canadians as a solution for agricultural producers looking for new markets. However, in my view, the bill is also a solution for the diversification of bioproducts for other industries, and even for municipalities, which have at their disposal a vast variety of waste materials which can be bioprocessed with or without being treated first.

As for my first position, many of us strongly believe that the production of biofuels and other bioproducts must be based, whenever possible, on waste, pretreated or non pretreated biomass which is available locally. Each region, municipality, town or village generates its own diversified waste, such as straw, wood residue, used oils, subproducts or agrifood waste waters. All these waste materials could be potentially biotransformed into biofuels and other bioproducts, including even enzyme cocktails, for instance, which can be used to pretreat lignocellulosic materials to biotransform them.

By making the right technological choices, you can considerably reduce your production costs and the price of bioproducts. You can even save on the treatment and management of waste by using it in value added production. The combination of waste and/or local residues, and the application of mechanical, physical-chemical or enzymatic pretreatments are two great examples of technological choices which widen the scope of possibilities for bioprocessing and increase production performance.

It is even possible to use the scrubbing sludge of waste water. Waste water treatment plans generate a fantastic raw material which the public and some governments still perceive as waste because of its origin and smell. The nutritional potential of sludge is under estimated, but it can support the growth of industrial microorganisms, and the formation of these microbioproducts has potential commercial applications. Scientific research has also shown that it is cost effective to produce biopesticides and enzymes, and eventually bioplastics. The production of biofuels, or of enzymes for the production of biofuels, certainly holds a lot of potential.

As for my second position, I believe that the Canadian government wants Bill C-33 to help agricultural producers. Indeed, the bill in part addresses the need to diversify agricultural bioproducts in Canada. But it is important that future regulations, and any investment made under Bill C-33, not draw our attention away from the production of other bioproducts, such as microbial enzymes and biochemical products for which there are potentials and promising markets. There are so many niches which can be developed, especially giving the diversity of fermentable residues which can be transformed into economic raw materials.

As for my third position, Bill C-33 is presented as a solution to agricultural producers looking for new markets. However, Bill C-33 should also be presented as a solution for every producer of waste wanting to transform it into bioproducts and to benefit from this process. Future regulations and investments made under Bill C-33 will also have to apply to the forest industry, the agrifood industry, and even to municipalities. In my opinion, it is important to encourage the production of first, second or third generation biofuels which are made entirely from agricultural, forest or municipal residues, or even based on materials which are not grown from the soil.

I would like to underscore the fact that Bill C-33 reflects the government's willingness to create biorefineries, and that plants to produce biofuels, bioenergy and other biochemical products would be located in a rural environment. However, I think that we should go further than to simply build biorefineries; we should also build eco-refineries, which would be located in different regions and which would meet the particular needs in biofuels and other bioproducts of that region, based on the availability of waste materials.

Eco-refineries are in fact the logical extension of biorefineries and eco-parks. We will be able to build eco-refineries if we decide to diversify the production of waste-generated bioproducts. Farmers, beef, pork and chicken producers, various industries, recycling centres, municipal dumps and water treatment stations could foster bioproduction in their respective regions. Manufactured bioproducts, such as biofuels, should ideally meet the needs of citizens, farmers, and whatever industries are located in the region. Each town or village could manufacture and distribute to its citizens and to local industries a variety of cheap ecological bioproducts. These eco-refineries would be comprised of various “value added” subsidiaries, which would attract biotech companies to their respective areas and create high-tech jobs.

If you wish, I can provide you with the scientific literature to support what I am saying. I have a few concrete examples. In Quebec, the town of Victoriaville is currently doing a feasibility study on the implementation of a pretreatment and bioprocessing process of sludge into commercial bioproducts. You can also take a look at what my company, EcoNovo, is doing. Its mission is to turn waste into value-added production, and, in particular, to diversify the products we produce. In fact, my company did the feasibility study for the town of Victoriaville.

Lastly, there is the Institut national de la recherche scientifique, which is based in Quebec City, and which has received a grant from the Canadian Foundation for Innovation and the Government of Quebec to build the very first research and development laboratory in the area of bioconversion of urban, industrial and agricultural waste into value-added products. This is a research platform which will provide Canadian researchers and business startups state-of-the-art equipment to pre-commercialize bioconversion technologies.

In conclusion, I believe that Bill C-33 will promote the production of biofuels generated from waste and the enzyme cocktails which are necessary for the pretreatment process, while also maintaining the main objective, which is to diversify the bioproducts generated by all industries—recycling centres, municipal dumps and waste water treatment plants—across Canada. We have access to a vast variety of waste, the advantages of which are still being counted. That is why we must build bio-refineries and eco-refineries in Canada to add value to waste materials.

[Camil Lagacé, President and Chief Executive Officer, Conseil québécois du biodiésel]

Good afternoon. My name is Camil Lagacé and I am the President and Chief Executive Officer of the Conseil québécois du biodiésel.

First of all, I would like to thank you for inviting us here today to comment on Bill C-33.

Generally speaking, we support the proposed amendments to the act. We support the overarching principle. In that regard, we are not here to challenge the exercise that is underway. However, we would like to make a few points that, in our opinion, could be beneficial when the time comes to provide guidance for the actions that will come from making these changes to the act.

As far as establishing a minimum average biofuel content, it is not enough to create a biofuel market that is real, that can quickly and easily be integrated into the existing distribution infrastructure of petroleum products and that will readily convince users to choose biofuels.

In the case of biodiesel, the proposal for minimum average content is contingent on its being proven feasible. This being the case, it is important that this be demonstrated as quickly as possible, for every segment of the market in which biofuels might be used, whether it be in the transport sector, for roads, and for other applications such as rail, shipping, agriculture and heating. Moreover, this demonstration must be made with the participation of a greater number of partners representing various potential users. Current conditions and regional differences must also be taken into account.

The use of petroleum products and the logistics regarding their distribution vary considerably from region to region in Canada. As far as introducing a national biofuels strategy is concerned, such a uniform approach could run into problems at the regional level that would slow down deployment. Market conditions must be promoted that would truly contribute to the sustainable development of the biofuels industry or the renewable fuels industry, that is to say that rules must be put into effect that will allow the Canadian industry to compete with products from elsewhere.

I will give you an example. Currently, the mechanisms in place in the United States ensure that all of the Canadian biodiesel production goes through that country, in order to take advantage of tax incentives, such as the blender's credit, which allows those making blends to bring a subsidized product to market, which is therefore cheaper and more attractive to the customer. Parameters must be defined for the development of biofuels production subsidiaries between the first, second and third generations using quotas for suppliers and feedstock, as the Americans are currently doing, and as are some European countries including England, France and the European Union.

I will give you an example. We want to implement regulations in Canada. If we are discussing corn ethanol versus cellulosic ethanol, it must be decided which regulations will deal with the biofuel production subsidiaries. In the case of biodiesel, it will be a question of determining what proportion of the biofuel will be produced from dedicated crops, on the one hand, and residual feedstock on the other.

As far as non-compliant products are concerned, it is critical that within the framework of the implementation of biofuels regulations, we ensure that only products that meet quality standards will be used, and not product substitutes that do not meet any standard.

I will now address the issue of aid programs for biofuels, whether they are aimed at developing markets or creating demand. In the United States, biofuel plants are currently working at only 40% capacity because they are having difficulty getting a foothold in the distribution system and connecting with users. In this context, the Conseil québécois du biodiésel wants to organize a project called BioRoute-BioHighway next spring in the Quebec-Windsor corridor. The objective is to actively work on creating a market for biodiesel by connecting users to producers and to biodiesel distributors in Quebec and in Ontario. We are running into obstacles in terms of funding the project because it does not fit into programs set up by the federal government under regulations intended to impose a minimum average content for biodiesel by 2012.

In other words, we like the idea of the project, which closes the production and product-use loop, except that there is no program to help make this a reality. Today, several departments believe that imposing a minimum content will be sufficient to automatically create demand.

Following a study on the distribution of biodiesel in Canada, it will be important to adapt in an intensive way the biodiesel distribution network throughout the industry. To achieve this, we will need different types of support. The U.S. Biodiesel Blender Federal Excise Tax Credit is an eloquent example. It combines products, but it also benefits from accelerated depreciation to help absorb the costs to adapt infrastructure.

The two last points deal with regional development and the production of biofuels. Though seemingly interesting at first glance, small-scale production of biofuels with a production capacity of less than 5 million litres per year is risky, because production plants may not be viable. This is partly due to the cost of quality assurance, as well as the minimum amount of biofuel which the distributors of oil products would want to purchase. A smaller production plant will not necessarily be profitable in the long term.

Lastly, with regard to the providers of raw materials, particularly in regions where volumes are generally smaller, such as canola production in Quebec, we should not rush any decision to invest in the production of biodiesel because it is a hot issue or because it can benefit from government support, especially if we are talking about small-scale production. It would be much wiser to wait and consider the use of this biomass in combination with other available biomasses in the region which could potentially be processed into value-added materials at the biorefinery.

Thank you.