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.

[Brian Chorney]

Our view on the biodiesel side of it is that as canola oil has been recognized as being a very healthy oil, our premium market is the food market, and we absolutely recognize that. Our hope is that the biodiesel industry and the biofuels policies that we're looking for in this bill that is being pushed forward will lower the limits that our price will fall. I'm hoping we'll never see $5 canola again. I understand that $13 canola is a good return from a producer's perspective, but these things happen in cycles, as you're well aware, and our view and our hope is that this biodiesel strategy that is part of Bill C-33 is a step forward in reducing the bottom end of our cycle.

[Larry Miller, Conservative, Bruce—Grey—Owen Sound, ON]

Thank you, Mr. Chairman.

I'd like to thank all the witnesses for coming here today.

We've heard, for the most part, a reasonably balanced approach to Bill C-33.

Mr. Friesen recognized that there are some problems in there. I liked your comments that we have to look at the whole picture. I think that was good.

Mr. Sigurdson, I'm not just sure how many days or weeks you spent trying to drum up every negative thing you could find on the biofuel industry, but I would just suggest that, as a farmer myself, maybe you should concentrate on the whole approach for your members. Farmers have to be diverse and learn to change and adapt with the times. I'd suggest that might be a more balanced approach.

One thing that has come out here today is a comment I've heard before that one of the reasons for the increase in grain prices is biofuels. I think that's probably a fair statement. It certainly has had some impact. But we all know that the grain prices seem to have hills and valleys.

Something I'm hearing out there more and more, and I'd like some comments on this, is that a lot of people seem to think that maybe the biofuels industry may take some of those hills and valleys out over time. Are there any comments out there, Mr. Phillips, Mr. Quaiattini, or Mr. Chorney?

[Carol Skelton, Conservative, Saskatoon—Rosetown—Biggar, SK]

We're talking about Bill C-33. Mr. Haig, what would you like to see changed in this bill? Is there anything to be changed, or is it fine to go ahead? If we went through it today clause by clause, would it be--

[Carol Skelton, Conservative, Saskatoon—Rosetown—Biggar, SK]

I take exception to that, because we've always been called the breadbasket of the world. I think that as a producer in your area you would be sticking up for western Canada too.

That was just my comment. I wanted to make sure that Canadians know that western Canadian producers are some of the most environmentally friendly and most productive producers we have in all of Canada. We have exceptional rural Canadian farmers, and I just want to stick up for them by saying that.

We're talking about Bill C-33 today, gentlemen. The minister was before our committee last week. We have a concern in western Canada because of the way grain prices are right now, and I asked him...because we're trying to get a bunch of plants up and running and we're having trouble getting producers to invest in these plants.

I would just like to have comments, Mr. Chorney, from you. What would you tell western Canadian farmers especially? We've gone through many years out west of really low grain prices, losing a lot of smaller farmers with difficulties because we just couldn't make a living at that time. Could I have your comments on that, please?

[Bob Friesen, President, Canadian Federation of Agriculture]

Thank you very much, Mr. Chair.

Let me begin by saying that I agree with everything Mr. Chorney and Mr. Phillips have just said with regard to biofuels, and I certainly will try not to be repetitive.

Suffice it to say that we applaud in principle almost any regulation and/or legislation that helps, first of all, environmental sustainability and at the same time creates a revenue stream for farmers or helps farmers reduce their costs. When we talk about that, we can include almost any form of bio-energy; we can talk about wind power or solar power.

I was talking recently to a fruit grower in B.C. who is going to be powering his entire fruit operation, his irrigation system, his cooling shed, his house, everything, with solar power. We think that's an excellent form of bio-energy as well. Whether it's biodigesters, whether it's creating a revenue stream from carbon credits, or whether it's using waste material to generate biofuels—I know Quebec has done some research on using SRM, and I was recently talking to a cattle producer from Saskatchewan who was concerned about the high cost of disposing of SRM—or whether we use switchgrass that has been grown on buffer zones, which of course, as you know, is another very important environmental initiative, we can create a real integrated policy in the whole approach to environmental sustainability.

Specifically to Bill C-33, for us to support this bill is a no-brainer. We think it's an important step toward facilitating the whole biofuel initiative that we think has a lot of potential for the farm gate and for additional industry in Canada. In fact, if you look at how close we are to the U.S., and if you look at the list of countries where the U.S. is currently importing ethanol from, Canada isn't even on that list. So we have the potential, first of all, to fill our own market requirements and then to possibly export it as well.

People have said this bill is merely administrative. Whether it's administrative or whether it's more, again, we think it embodies the whole initiative of creating a revenue stream for farmers and at the same time doing something important for the environment. That contribution to the environment, while it creates a revenue stream for farmers, also creates a very important crosswalk between the Canadian public and the farm gate in that the public sees that farmers are making an important contribution, and it's a win-win-win for everybody.

I've already talked about the revenue stream, and I also mentioned the fact that we can use waste products in many cases. Has the science gone far enough? No. We believe we can continue to pursue science and make the industry even better and even more efficient. We also believe it contributes to rural development, especially if we make sure we create a lot of sites across Canada that produce either biofuel or ethanol. We think it contributes greatly to rural development.

On the revenue stream, it's very important that we develop very competitive policy with the U.S. As everybody around this table knows, Brazil is way ahead of us on this, the U.S. is far ahead of us on this, and we need to make sure we develop competitive policy within Bill C-33. It's an administrative bill to facilitate this initiative, but make sure we develop further competitive policy around it. If we're going to create a demand in Canada, let's make sure we produce the biofuel, let's make sure we produce the feedstock, and let's also make sure we create opportunities for farmers to be involved at the manufacturing level.

The reason why this is very important is because we all know the U.S. biofuel industry was built on the backs of some very high subsidies, and we know their industry currently is very strong as a result of it. We know, in talking to farmers who were involved at the manufacturing level as well, that they were able to pay for the bricks and mortar of a manufacturing plant in a year's time, so their industry is very strong. We're going to have to make sure we create a strong industry alongside that as well.

I already talked about the potential for rural development, and of course having many sites across Canada doesn't only create rural development, it also reduces transportation in transporting the biofuels to end-use locations.

It also goes very well with the co-op investment plan that CFA has proposed, where creating investment capital for co-ops could allow farmers to be even more involved at the manufacturing level. Of course, and I think I may have mentioned this around this table before, looking at Quebec as a model, where $6 million resulted in $36 million of direct investment in co-ops and a further $100 million of investment in rural development, we again think this fits very well, in an integrated way, with our whole plan to move towards the potential that we have in biofuels. It has a potential, as I mentioned earlier, to give us a value-added component to waste material, whether it's wheat straw, SRM, or anything else. Again, it's a revenue stream for farmers where otherwise they would have no revenue stream.

Are there some concerns? Yes. We would like to make sure that any repeal of excise tax does not apply to farmers as they're making this important contribution to the environment. We would want to make sure that any incentives that have been talked about stay around long enough for the industry to get a very solid footing. We would not want to see any repeal of incentives. Let's make sure we get this industry on a totally solid footing before we repeal incentives.

Is the increase in feed prices a challenge to the livestock industry? Of course, but we would argue that the increase in feed prices, first of all, is not solely as a result of the biofuel industry. We've had problems around the world, but we also have to figure out a way for grain producers to get what they deserve to get for their production and for livestock producers to make money at the same time. So if you look at, say, the hog industry, record slaughter numbers in the U.S. and our strong dollar contribute more to the crisis in the livestock industry than an increase in feed.

The concern for food prices has been raised. I can assure you that any stress at the retail level on food is not as a result of farmers getting paid more for their production. In fact, if you look at the market share a farmer has at the retail level, even doubling the corn price doesn't have to result in any perceptible change of price at the retail level. If you look at 2007 figures over 2006 figures, our increase in the grocery basket was a mere 0.6%. So we don't believe that food prices are an argument against this very important initiative.

As I mentioned earlier, can the science get better? Yes. I mentioned this last time: let's make sure we do as Wayne Gretzky used to say he did. Let's go where we think the puck is going to be. Let's not go where the puck already has been or is; let's go where the puck is going to be.

Can we become more efficient? Of course we can become more efficient, but let's do it together as we pursue this very important initiative.

Thank you.

[Richard Phillips, Executive Director, Grain Growers of Canada]

Thank you.

He touched on the biodiesel part from the Grain Growers; I'll just touch on some ethanol thoughts.

I have five brief reasons why we are happy to see an ethanol industry develop and why we would support Bill C-33.

Number one—and I'm speaking more from a western Canadian perspective—it reduces our dependency on foreign grain markets; in western Canada we're heavily dependent on exporting, and when you're exporting your grain offshore, you're vulnerable to tariff, non-tariff barriers, currency fluctuations, labour disputes, and ocean freight rates. The more grain we process locally, the more we avoid those issues.

Secondly, it reduces our dependence on shipping grain by rail. I've been before the committee before and I've talked about Bill C-8 and the need to get some shippers' provisions in dealing with the railways. In western Canada, the two main railways haul about 65% of the grain we produce, so anything we can ship to local production and local value adding will reduce our dependency on those railways. We hope you have followed up with your Senate compatriots and encouraged them to put Bill C-8 through quickly.

Thirdly, it provides us with another local option for marketing our grain beyond some of the feedlots and the other smaller value-adding processors that we do have out there. As we've seen in the corn, canola, oat, and pulse sectors, there's nothing like local buyers of grain to support local prices. From our perspective as producers, the more competition for our grain, the better.

Fourthly, it creates jobs and economic activity in rural areas. It's not just the truckers hauling in the grain, but it's the electricians who have to service the plants and the plumbers who provide the water. There's a lot of work and a lot of services needed to keep an ethanol plant running. That all spins off into other jobs in the communities as well.

On the environmental aspect, even leaving aside the arguments of some of the studies, the fact that we're not using fuel to haul our freight all the way to port to get to overseas markets--we're just taking it down the road to a local ethanol plant--that alone is a huge environmental savings, in my mind.

What are the challenges that we see? Number one, keeping producer ownership where there's a strong interest in investing. My father and I have put a fair amount of money into our local ethanol plant. It's a challenge because there are people coming in. Some day if we're successful there will be a takeover bid, I'm sure. So whatever structures can be put in place to encourage and enhance local producer ownership in the plants, we think, is critical to the long-term success in western Canada.

On keeping our livestock sector strong, I know there are some challenges out there with the feed prices right now. Whatever we can do, beyond even the dry distillers grain that is going to come out of these ethanol plants, the livestock sector is an important market for our feed grains.

I have three or four quick suggestions. We think if the committee is looking at what they could do in addition to Bill C-33, there is research into the feedability of these dry distiller grains to the beef, and especially into the monogastrics like hogs--what are the maximum rations we could use? There is also research into the component parts of wheat and corn that could be removed even before the ethanol process, like the germ. Besides the DDGs, there are many other enzymes and products in kernels of corn that could be used for other purposes. Lastly, there's research into wheat and corn varieties that are best suited to ethanol production. Let's do what we can to improve upon the formula of one unit of energy in and 1.4 units out in ethanol. Those are a couple of suggestions.

I look forward to the questions. Thank you.

[Brian Chorney, Vice-President, Canadian Canola Growers Association]

Thank you.

Good morning. My name is Brian Chorney. I'm vice-president of the Canadian Canola Growers Association and I'm a farmer from East Selkirk, Manitoba. I am here today as a member of the Grain Growers of Canada.

We support Bill C-33, and I would like to focus on the biodiesel aspect of renewable fuels and why we need Bill C-33.

This legislation will provide provisions for the regulation and renewable content in diesel fuel, and it is required to create the market for biodiesel. Biodiesel is good for the environment, good for investment opportunities, good for rural development, good for value-added and the diversification of markets. This legislation, in conjunction with other government programs, will allow primary producers the opportunity, if they so desire, to become involved in a value-added opportunity.

Canola will be a key feedstock for producing biodiesel. Canola-based biodiesel has excellent cold flow properties due to canola oil having the lowest saturated fat content of any other feedstock--which is an important consideration given the cold weather Canadian climate. It exhibits good oxidative stability and a very positive energy balance, and it can meet both the U.S. and EU quality standards.

I don't have a copy with me, but Don O'Connor did a good job of reviewing energy balances at the CRFA convention in Quebec city in December, and I would like to refer the committee to his presentation. There are many energy balance studies out there, all of which are very positive for biodiesel, but that will give you a very good background on energy balance calculations.

I could go on and on about the benefits of canola-based biodiesel, but I want to express two key points in my presentation to you today: one, we want a renewable fuel standard for diesel fuels set at 2% by 2010, increasing to 5% by 2015; and two, farmers in Canada will be able to supply the feedstock necessary.

The first one is self-explanatory, so I will expand a bit on how we plan to have canola meet the new demand for biodiesel. A 2% inclusion will require about 1 million tonnes of canola and a 5% inclusion will require about 2 million tonnes to 2.5 million tonnes of canola.

Can we do it? The answer is yes, we can.

We have historically had a canola carry-out of anywhere from 1 million tonnes to 3 million tonnes, so a substantial amount could be covered by our excess production. However, we know that we can't run an industry on a zero carry-out, so in addition, we foresee advances in technology increasing canola supply, particularly the higher-yielding varieties.

We are just in the process of using hybrid seed varieties, and the genetic potential is enormous. Yields per acre are increasing substantially, and canola production will continue to grow as farmers switch to the new hybrids. In addition to higher yields per acre, we see a potential for increased acreages of canola, as drought-tolerant varieties could significantly expand the growing region in Canada.

Finally, we see agronomic improvements in planting and harvesting technologies, which can have a tremendous impact on yield and quality--i.e., oil content. Pod shatter-resistant varieties will also increase harvested yields.

Our canola industry has set a target of 15 million tonnes of production for 2015. We are confident that we can achieve that. As part of this strategy for production, we are relying on the Canadian biodiesel market to create new demand for our seed. The potential is there. We need to seize the opportunity and make it happen now. To do that, we need Bill C-33 enacted and the renewable diesel fuel standards--at 2% for 2010 and 5% for 2015--put in place.

Thank you for the opportunity to appear before the standing committee today.

[Gordon Quaiattini, President, Canadian Renewable Fuels Association]

Thank you, Mr. Chairman and members of the committee, for giving us the opportunity to appear before you this morning.

I'm pleased to be joined by Tim Haig, the chief executive officer of Biox Corporation, Canada's largest biodiesel producer. Mr. Haig also serves as the Canadian Renewable Fuels Association chair. I am also joined by Bliss Baker, vice-president of corporate affairs for GreenField Ethanol, Canada's largest ethanol producer.

As president of the Canadian Renewable Fuels Association, it is a great pleasure to come to speak with you about Bill C-33, legislation that will help diversify Canada's fuel supply, reduce greenhouse gas emissions, and revitalize rural economies. Coupled with the $1.5 billion ecoENERGY for Biofuels initiative and the $500 million NextGen Biofuels Fund, Canada is about to emerge as a major biofuels producer. In short, this new legislation will allow Canada to grow beyond oil, with a vibrant, new, homegrown ethanol and biodiesel industry.

Energy and the environment are the defining issues of our time. Together they are driving massive change in consumer behaviour, commercial expansion, and public policy. At the same time, the emergence of the bio-economy is no longer pure speculation; it's a reality.

For renewable fuels--biodiesel and ethanol in particular--all this adds up to increased demand, greater opportunity, and steady expansion. Let's be clear that biofuels is no fad or passing fancy. It is certainly an industry that is here today--and it is the future.

Biofuels is also the biggest change to take hold of agriculture in at least a generation, and over the next generation it will also emerge as the biggest change to take hold in our energy sector. In fact, I think it is becoming more and more clear that the bio-revolution taking place today will prove to be every bit as fundamental and far-reaching as the information revolution that began in the 1980s.

The opportunity, therefore, is to gain entry to this sector now, as the benefits of its upside potential are just beginning to take full shape. Ethanol and biodiesel stand at the meeting place between the two most powerful trends that play in our world today. I am speaking of the permanent rise in expensive oil and the global effort to combat the effects of climate change. These two trends not only define the here and now, they are set to shape the way of the world for the next two decades at least, resulting in far-reaching changes to energy use, industrial growth, and consumer activity.

As we speak, oil has already broken $100 per barrel once and will do so again. Oil companies are recording the largest corporate profits of any industry in history. This reality is unshakable and unchallenged. Cheap oil is gone for good. Contrast that fact with another recent report from the International Energy Agency that tells us global energy demands are set to rise by at least 50% by 2030. All of this is on top of the fact that there is limited and very expensive remaining oil coming from ever-increasing, non-democratic, and unstable regions of the globe. Dr. Kent Moors, executive managing partner of Risk Management Associates, International, a leading expert in world energy, estimates that there are about three decades left of a sustainable, conventional, crude oil-based market system. Oil will be prohibitively expensive in the future.

The ranks of the emerging middle class in China, India, and Brazil, combined with the stark failure to discipline consumption in developed nations like our own, render the challenge clear. An expensive gap exists between what we need and what we have, between demand and supply. It is within that gap that ethanol and biodiesel and next-generation renewable fuels find their place. In a future where demand will exceed supply, biofuels are both necessary and financially viable.

Here in Canada we have come to realize that the time for action is now. As you know, Bill C-33 will make the necessary changes in law to ensure that the federal government meets its goal of an average renewable content of 5% ethanol and 2% biodiesel in Canada's gasoline and diesel pools. These regulations guarantee a future market of three billion litres of biofuels in Canada.

The reality is that energy policy is going to increase the emphasis placed on ethanol, cellulosic ethanol, biodiesel, and future generations of biofuels here in Canada and in the United States. It is important to note that car makers are also taking up the challenge. All major car companies already warranty up to E10, or 10% ethanol. There are already six million cars and trucks in North America that can use E85, or up to 85% ethanol. Last week General Motors announced another major boost for ethanol, with a new plan to make half of their new vehicles 85% by 2012. That is just four years away.

Biodiesel in Canada is equally promising. This winter over 60 trucks are being put to the ultimate cold weather test by Climate Change Central, an Alberta government public-private non-profit organization in which the Canadian Renewable Fuels Association is involved, focusing on greenhouse gas reductions and new environmental technologies. The demonstration, which is taking place in the Alberta winter cold, is providing hands-on cold weather experience for fuel blenders, distributors, long-haul trucking fleets, and drivers. Most manufacturers already warranty up to B20, or 20% biodiesel.

Of course, these developments are not driven only by peak oil but also by concerns related to security of supply. In the United States, the President never fails to give a speech on energy that doesn't highlight the fact that 60% of U.S. oil comes from foreign sources, including over three million barrels per day from Saudi Arabia and Venezuela. Even Canada, an oil-exporting nation, imports about half of the crude oil we use for transportation.

The second defining trend of our time is climate change, a challenge that also highlights the valuable benefits of biofuels. Crude oil is not only expensive and in increasingly short supply; it is a major source of greenhouse gases. By way of contrast, biodiesel and ethanol are truly clean sources of energy that avoid the release of carbon and other pollutants.

As governments struggle with measures to lower our collective addiction to carbon, there are few better or more practical options than the adoption of biofuels. According to Natural Resources Canada, in addition to other sources in government and academia, corn-based ethanol could reduce per-litre GHGs by as much as 40% to 60%. Biodiesel GHG emission reductions are 70% to 95%, depending on the feed stock.

We are a clean way to power your automobiles, trucks, tractors, heavy equipment, and marine vessels. Your automobile specifically is a critical battleground in the fight to combat climate change. Adherence to a 5% renewable fuel standard for ethanol and a 2% renewable fuel standard for biodiesel amounts to the equivalent of 4.2 megatonnes of GHG reduction, or the removal of one million cars from our national highways each and every year.

Of critical importance to you as members of the Standing Committee on Agriculture and Agri-Food, biofuels will revitalize farms and rural communities across the country, from those of wheat and canola farmers in the west to those of corn and soya farmers in the east. New world-class biofuel facilities will be built, generating over $1.5 billion in new investment and resulting in 14,000 construction and related jobs in rural communities across this country. Once built, this industry will generate 10,000 direct and indirect jobs and generate $600 million in annual economic activity in Canada.

Bill C-33 will provide a new market for over 200 million bushels of Canadian grains and oilseeds. Put in a global perspective, Bill C-33 will position Canada in a global transition to biofuels that includes our major competitors in the United States, Brazil, and the European Union. Bill C-33 will help us compete on a level playing field and ensure we enjoy the strong economic benefits of this new area of dramatic growth.

Members of the committee, the work you are undertaking is very timely. Biofuels enjoy broad multi-party support, and it is our hope that legislators in the House of Commons and the Senate will move swiftly to pass Bill C-33. Let me emphasize, quick passage will ensure the continued growth of a domestic industry and allow for the introduction of biofuels into the Canadian fuel supply in a timely manner.

Thank you for your time and your efforts. Thank you for creating the conditions to allow us to grow beyond oil, to reduce greenhouse gases, and to revitalize rural economies across Canada.

[The Chair, Conservative, James Bezan]

We're going back to our first order of business, which is a continuation of our study on Bill C-33.

We welcome to the table, from the Canadian Renewable Fuels Association, Gordon Quaiattini; from Biox Corporation, Tim Haig, who's going to be presenting with Gordon; from Grain Growers of Canada, Richard Phillips, who is no stranger here; joined by Brian Chorney from the Canadian Canola Growers Association; and from the CFA, we have Bob Friesen, the president; and from the National Farmers Union, Ken Sigurdson.

Welcome, all of you.

I would just remind everyone to keep their opening comments to 10 minutes, and then we will have a lot of time for discussion afterwards.

With that, Gordon, perhaps you can kick us off.

[Ken Boshcoff, Liberal, Thunder Bay—Rainy River, ON]

Honourable minister, with your workload on Bill C-33, I just wonder how you find the time to issue directives to muzzle the employees of the Canadian Grain Commission and their ability to comment on the carnage being planned for them.

[Gérard Asselin, Bloc, Manicouagan, QC]

Mr. Chairman, I have a small technical question.

If you look at Bill C-33, in subsection 2(1), it says that the portion of subsection 140(1) of the Canadian Environmental Protection Act (1999) before paragraph (a) is replaced by the following: “The governor in council may, on the recommendation of the minister, make regulations for carrying out the purposes of section 139 [...]”

However, subsection 2(7) of the bill indicates that subsection 140(3) of the act is replaced by the following: “The governor in council may, on the recommendation of the minister, make regulations exempting from the application of subsection 139(1) [...]”

I would like an explanation for this, because section 139 of the existing act is the first section in question. On the one hand, it says “The governor in council may, on the recommendation of the minister, make [...], and on the other hand, it says: “The governor in council may, on the recommendation of the minister, make regulations exempting from the application of subsection 139(1) [...]”, whereas section 139 is the main section of the bill.

[The Chair, Conservative, James Bezan]

I would say we are talking about Bill C-33, Minister. You don't have to talk about the other bills that Mr. Boshcoff has alluded to. We're talking about this process and moving it forward from here.

Mr. Boshcoff should keep his comments about Bill C-33 and the way forward and the attributes of the bill.

[The Chair, Conservative, James Bezan]

The point is correct, Mr. Boshcoff. We are talking about Bill C-33, and we are talking about Bill C-33 moving in a very expeditious manner since it's been tabled.

[The Chair, Conservative, James Bezan]

Minister, you don't have to answer these questions, since they're not relevant to the day's agenda. We are here to talk about Bill C-33.

There are three minutes left, Mr. Boshcoff.

[Gerry Ritz, Conservative, Battlefords—Lloydminster, SK]

To your point about two drivers, my wife always tells me I drive better when she's in the car, so sometimes two drivers are better than one.

Bill C-33 is part of a broader strategy. This dovetails with our whole....

Wayne is agreeing. He needs three drivers just to keep him on the straight and narrow and keep him from veering to the left.

The good news in Bill C-33, with Agriculture Canada involved, is that producers are involved. They will benefit from the biofuels industry in this country. As I said, it's part of a broader strategy. The overall effectiveness of the bill I think is better served by having both Environment Canada and producers involved, so that we make sure producers on the ground share in the profitability that ethanol and biodiesel will have for us.

I'll turn the floor over to Mr. Owen to speak to the administration of the bill.