Agriculture Committee on May 12th, 2014

[The Chair, Conservative, Bev Shipley]

I'd like to call our committee to order, please, as we continue with our study of innovation and competitiveness.

For the first hour, we have the Canadian Renewable Fuels Association, Scott Thurlow, president.

By video conference from wonderful warm Windsor, Ontario, we have from the Ontario Greenhouse Vegetable Growers, George Gilvesy, the general manager. Welcome, George. With him is Leanne Wilson, science coordinator.

Because we have had the odd freeze on the videos from time to time, we will start with the greenhouse. Then, if we get an interruption, which I hope we don't, we can repair it and go to Scott.

With that, I'm not sure who's going to make the presentation, but I would open it to the Ontario Greenhouse Vegetable Growers.

Welcome to our committee.

[George Gilvesy, General Manager, Ontario Greenhouse Vegetable Growers]

Thank you, Mr. Chairman.

My name is George Gilvesy. I'm the general manager of Ontario Greenhouse Vegetable Growers. With me is Leanne Wilson, who is our science coordinator.

As far as the freezing, that's pretty symbolic of greenhouse growing because we do things in a controlled environment; it's perhaps appropriate that we're on the video screen.

I'll give a little background to the committee about the Ontario greenhouse vegetable sector. It accounts for 63% of the $1.24 billion in farm cash receipts attributed to the Canadian greenhouse vegetable sector. Ontario boasts one of the largest greenhouse vegetable regions in North America, with 2,398 acres of greenhouse tomato, pepper, and cucumber production. These vegetables are also produced on a significant scale in British Columbia, Alberta, Quebec, and the Maritimes. The Ontario greenhouse vegetable sector is also a significant part of the rural economy, accounting for some 10,000 jobs annually.

The Ontario Greenhouse Vegetable Growers, or OGVG as we call it, is headquartered in Leamington, Ontario. it is the grower organization for all tomato, pepper, and cucumber greenhouse farmers in Ontario. Our mandate is to provide market access for producers and ensure the opportunity for economic success.

Mr. Chairman, our sector is one of the fastest growing agriculture sectors in Canada. The scope and growth of the Ontario greenhouse sector is relatively unknown outside of our growing region, as few people understand Ontario's market dominance position across North America. This market dominance extends from eastern Canada, down through the southern United States, principally east of the Mississippi, and is maintained through the months of April to November. There is approximately 70% of our production that is exported to the United States.

Leamington has experienced an increase in gross domestic product of some 10.6%, during the period of 2011 and 2012. Leamington's economic development manager has attributed this growth in jobs and GDP primarily to the 205 acres of growth of the local greenhouse vegetable sector. At close to $1 million per acre, this private investment in high-tech greenhouse production facilities has been a real boost to the economy. The growth of the sector is expected to continue.

The goal of the Ontario greenhouse vegetable sector is to achieve sales of some $1 billion within 10 years. This goal will only be achieved by investing with government and other stakeholders in innovative R and D policies, to drive the production of year-round environmentally sustainable greenhouse produce that is safe, fresh, and at a quality that meets the needs of our growing customer base.

As far as enhancing agricultural sustainability, greenhouse vegetable farming is one of the most sustainable and productive forms of agriculture in Canada. We are able to produce 10 times more food per square metre than field producers because of our nearly year-round production under controlled environment conditions. That helps us to maximize production of high-quality produce. The controlled nature of our production system also allows us to efficiently utilize typical agricultural inputs, for example, water and nutrients, as well as other inputs which aren't as easily used in field production, for example, bumble bees for pollination, CO₂ to increase photosynthesis, and good bugs to do the job of pesticides. Overall, greenhouse vegetable production allows Canada to maximize the production of healthy food while minimizing the strain on Canada's finite agricultural resources.

With regard to investment in innovation, that is critical to our sector's global competitiveness. Our farmers face stiff competition from other high-tech greenhouse farmers, as well as low-cost producers. OGVG and our members are therefore committed to investing in innovative research and development initiatives in order to enhance our global competitiveness.

Government plays a critical role in innovation by supporting R and D projects that are applicable to the agriculture sector. OGVG is very grateful for the R and D support that the government has provided the greenhouse vegetable sector in the past. In particular, we are appreciative of the $2.7 million in support through the agri-innovation program, for our project, Advancing the Ontario Greenhouse Vegetable Sector: Global Competitiveness Through Innovation. During the past five years a total of $8.3 million was invested in projects to benefit Ontario greenhouse vegetable farmers.

On challenges and barriers to innovation, given the nature of our production system, our sector relies heavily on the use of experimental greenhouse facilities to conduct our innovative research, in particular the Agriculture and Agri-Food Canada Greenhouse and Processing Crops Research Centre in Harrow. We greatly value the accessibility to this facility and the world-class researchers within, and strongly request that the federal government ensure there is continued support and investment in greenhouse research facilities and researchers.

Access to research funding is a challenge. It becomes increasingly challenging to maintain a research program for our sector when government programs only allow for projects of four to five years, and transition between programs, for example, Growing Forward 1 and 2, often results in a significant gap in funding and a loss of research capacity. The flexibility within these programs is also very limited and can often stifle innovation. We strongly encourage the government to engage with stakeholders early on in the planning of Growing Forward 3, for example, so that constructive feedback can be provided to ensure a smooth transition, and an effective and transparent program can be initiated.

On another topic, improving food security, one of the most important components of food security is providing Canadians with reliable, safe food. Ontario greenhouse vegetable farmers are committed to food safety, with each farm being required to undergo an annual third party food safety audit. Many of our growers have also implemented advanced traceability systems that allow produce to be tracked from the consumer back to the exact section of the greenhouse where the produce was harvested. Through our sector’s food safety and traceability programs, we are well prepared for any potential food safety incidents.

In September 2012 the Canadian Horticultural Council’s greenhouse committee wrote letters to the Minister of Agriculture and Agri-Food and the Minister of Health to convey our concerns regarding the government’s level of preparedness in the event of a food-borne illness incident. These letters were written in response to the highly publicized and devastating 2011 E. coli outbreak in Germany from European sprouts. This event taught us many things, including the openness of the global food system, for example: a Europe with no borders; the importance of industry and government being prepared with spokespeople and a crisis management plan; and most important, the value of a comprehensive traceability system.

Canada is recognized globally as having a world-class food safety system, and it is this reputation that needs to be maintained through the development and implementation of an innovative crisis management plan that takes the needs of the government, consumers, and the agricultural sector into account. We encourage our government to review Canada’s planning so as to minimize the negative impact of a situation similar to what Europe experienced.

As far as new markets and market access are concerned, greenhouse vegetable farmers operate in a fiercely—

[The Chair, Conservative, Bev Shipley]

Excuse me, George. You're well over the time. I'm going to give you 30 seconds just to wrap it up, if you would, please.

[George Gilvesy]

I thought I had seven minutes, Mr. Chairperson.

[The Chair, Conservative, Bev Shipley]

Yes, but you're at almost nine.

[George Gilvesy]

Really? I didn't realize that.

Nevertheless, we're doing a fair bit of work in developing new markets. One of the things we're looking at is developing the Pacific Rim. We're going to investigate new markets and we ask that the federal government continue to provide financial and/or policy support for these endeavours.

In conclusion I just want to say that the greenhouse vegetable sector is investing in innovative new processes, practices, and products to ensure the sustainable production of safe products that meet the needs of our various customers.

With that, we have left you the presentation, Mr. Chairman, and look forward to the committee's questions.

[The Chair, Conservative, Bev Shipley]

Thank you very much.

I want to now go to Scott Thurlow from Canadian Renewable Fuels Association.

[Wilson Scott Thurlow, President, Canadian Renewable Fuels Association]

Thank you very much, Mr. Chair.

[The Chair, Conservative, Bev Shipley]

For seven minutes.

[Wilson Scott Thurlow]

I actually thought in greenhouses things got shorter.

[Voices]

Oh, oh!

[Wilson Scott Thurlow]

I'm very happy to be here today on behalf of Canada's biofuels industry to talk about innovation in the agricultural sector.

Canada's domestic biofuels industry, one that takes homegrown agricultural products and converts them into clean-burning renewable fuels, is the very definition of innovation. Founded in 1984, the Canadian Renewable Fuels Association is the country's leading advocate for the economic and environmental benefits of biofuels, and represents the full spectrum of Canada's domestic biofuels industry.

Across the country, Canada's renewable fuels plants are generating gross economic benefits in excess of $3.5 billion per year to the Canadian economy, and have created more than 14,000 direct and indirect jobs.

l am also very proud to be here with the Ontario Greenhouse Vegetable Growers, especially knowing that one of our member ethanol plants is now pumping carbon dioxide into a greenhouse adjacent to their operations in Chatham. Soon they will be pumping waste heat into the Truly Green greenhouse complex as well. Biofuels producing tomatoes, healthy local tomatoes with a low carbon footprint, encapsulates both the spirit and necessity of Canadian innovation in agriculture.

l could easily use my time here today just reading out a list of all the sustainable, value-added co-products that CRFA members are currently producing. Instead, l will give you all cookies of one of these co-products, biodiesel-based glycerine, from the processes we have in Hamilton where we can take corn oil off of an ethanol plant, spin out that corn oil, turn that corn oil into biodiesel, take the glycerine off of the biodiesel, and turn that glycerine into the cookies that I presented to you earlier today, or I could just list all the other things we are doing and move on.

In seriousness, our industry is at the forefront of that very innovation this committee is seeking to study. Just two weeks ago Mr. Joe Preston, the member for Elgin—Middlesex—London, rose in the House of Commons to talk about one of our members, IGPC, which produced its billionth litre of ethanol in Aylmer, Ontario, right in the middle of Ontario's corn country. IGPC is now looking at expanding its ethanol refinery so as to produce ethanol from more sources, as well as recycling the refinery's carbon dioxide into vegetable oils.

This farmers cooperative is one example of how, through chemistry, our members are innovating their processes to make more than ethanol and dried distillers grains. CRFA members are producing a wide array of products that form the feedstock for many other industries: food, pharmaceuticals, alcoholic spirits, chemistry, personal care products, soaps, fuel additives, sugars, and the automotive sector, to name just a few. There can be no doubt that Canada's renewable fuels industry is truly expanding from biofuels to the bioeconomy.

Recognizing this, CRFA launched our industry's new vision and action plan, “Evolution and Growth”, last month here in Ottawa. I believe all committee members received their copies in advance of my testimony. This is the first comprehensive plan on renewable fuels in Canada for several years, and it sets a clear pathway forward for continued growth and expansion of biofuels use and production. It also showcases first-hand the exciting work being done by our members.

More than anything else, our industry was designed as a business risk management tool for farmers so that when there was a downturn in commodity prices, farmers would have a guaranteed local market for their products. This year, this winter, the original goal of the renewable fuels regulations and the renewable content requirements have never been so acute. We had a bumper crop across the country and we couldn't get it out to market.

Biofuels production was again shown to be a welcome value-added process for these grains, spurring local investments in rural areas and creating fuel with significant environmental benefits.

One area where we haven't seen the development we'd like is in the advanced fuel sector. This year we will finally see commercial developments in North America for cellulosic biofuels. One of our member companies, Enerkem, will be making cellulosic biofuel in Edmonton on a commercial scale, and it will be made from garbage. Other facilities opening in the U.S. will be using agricultural residues as their feedstock.

Ladies and gentlemen, these processes are no longer visions of a distant future. They are happening now. The time has come for us to do more. Canada needs more renewable fuels and the waste and GHG-saving benefits that biofuels provide.

The question is this: what do we need to do in order to spur additional innovation so that these products are made and used here at home in Canada? Our report, “Evolution and Growth”, answers this with six policy recommendations, all of which fit hand in glove with innovations in the agricultural sector.

CRFA's policy recommendations would create a fair value for greenhouse gas reductions, support innovation and investment in Canada, increase renewable diesel content from 2% to 5%, deliver modern fuel blends to consumers at the pump, increase domestic production and use of advanced biofuels, and finally, recommend building a comprehensive bioeconomy strategy for Canada.

These recommendations are interwoven with one another and can all be reflected as individual policies to further drive innovation and biofuels production in Canada.

I would like to take a few moments to highlight a couple for you now, but I am happy to answer questions about all of them.

Business support programs have been an incredible business risk management tool for building our renewable fuels industry like we have in Canada. They also attract investment like a beacon, and with that investment comes innovation.

Before 2008, there were very few plants to speak of in Canada. Because of programs like eco-energy for biofuels, we helped share the risk with investors, biofuels innovators, and government to ensure that private investment was there to expand this industry. When this program expires, our first generation biofuels producers will be well positioned to stand on their own and compete in a global biofuels market.

Programs like the government's Growing Forward 2 program and the agri-innovation program under Growing Forward 2 are also extremely important. Our members have supported them from the outset. As my friend said, we need to see flexibility in these programs to ensure that innovation in the agricultural sector continues.

AIP needs to provide applicants with that flexibility, which will allow innovation to flourish.

As a national association and as a member of Canada's bioeconomy network, the Canadian Renewable Fuels Association supports the creation of a national bioeconomy strategy or framework going forward.

Our largest trading partners in Europe and in the United States already have detailed strategies in place and are investing billions in their bioeconomy sectors through direct capital grants and procurement policies. Today, Canada lacks such a framework to coordinate policy and that is deterring innovation and delaying approvals for new products and technological upgrades to existing facilities.

Canada competes fiercely with the United States' biofuel producers whose approval processes for new technology are much faster than our own. U.S. producers export significant amounts of product into Canada and will continue to do so. While Canadian companies are left waiting for technology approvals, our U.S. competitors are benefiting from this technology and then selling their product into Canada.

Ultimately, with the exception of the convenience of transportation, Canadian producers have higher costs to access the Canadian market than our direct competitors from the United States.

Simply put, as an industry and as a country, we cannot afford this to continue.

Thank you. I would be happy to answer any of your questions.

[The Chair, Conservative, Bev Shipley]

Thank you very much, Scott and both of our witnesses.

We will now go to questions from our committee.

I'll go to Madam Brosseau, for five minutes, please.

[Ruth Ellen Brosseau, NDP, Berthier—Maskinongé, QC]

I'd like to thank our witnesses for their presentations today and also for the cookie, which will be useful later because we have 17 votes, so we might need a snack in the House.

Mr. Thurlow, you mentioned the eco-energy for biofuels program. Can you give me examples of where the program was successful and where it needs improvements?

[Wilson Scott Thurlow]

Absolutely. I think the successful side of the equation is the ethanol side of the eco-energy program. We saw plants created from scratch as a result of having strong government support, and we've seen those plants flourish in Ontario, Manitoba, Saskatchewan, Alberta, and Quebec.

Where we haven't seen the same success was on the biodiesel side of the equation. Again, we're not pointing fingers, but the program was set up and a lot of applicants put forward submissions and they were granted, but shovels never got into the ground. That's unfortunate. I think a couple of factors influenced that. The first was the global recession. Let's be clear that people who had great ideas prior to the global recession saw their capital tighten significantly.

Two years ago we had been seeking changes to that program so when projects stopped moving forward, the capital that had been directed toward those facilities could be redirected within the program. The Minister of Natural Resources at the time chose not to follow that course of action, but as a result, we are in a situation right now where we could have seen more biofuels expansion.

[Ruth Ellen Brosseau, NDP, Berthier—Maskinongé, QC]

I've heard about fuel pumps that can dispense fuels with an 85% renewable content. In the United States, they have about 30,000 of them. Do we have any here in Canada?

[Wilson Scott Thurlow]

We have four. It takes a long time to get you 85% in Canada.

The reality though is that our fuel markets are very different. There are far more independent owners in the United States so they're more willing to try different fuels, different combinations. We would like to see more pumps that can dispense higher level blends of ethanol, absolutely. We'd like to see that number go up, and it's particularly important that we have these pumps in place by 2017. In 2017, new fuel economy standards will be in place for vehicles for the entire North American footprint. Those vehicles will need a higher octane fuel. There is no cheaper or cleaner source of octane than ethanol. We think consumers should have the choice at the pump to choose those higher octane blends to make the technologies they purchase in 2017 and beyond meet the fuel needs they have.

[Ruth Ellen Brosseau, NDP, Berthier—Maskinongé, QC]

What is the primary source of funding for innovation in your sector?

[Wilson Scott Thurlow]

The primary source of funding for innovation in our sector would still be the private capital markets—there is no doubt about that—but business support programs like AIP, for example, act as a beacon to attract that investment to Canada. Other programs like Sustainable Development Technology Canada's Tech Fund and eco-energy are all programs that are very successful at drawing international capital to Canada so that it can redouble on private investment and ensure that long-term stable investments happen in Canada.

[Ruth Ellen Brosseau, NDP, Berthier—Maskinongé, QC]

I'll move on to OGVG.

You guys mentioned some challenges with programs as they are right now, such as the significant gap—four to five years—in funding. Both of you agree that's not very flexible. Could you go into more detail regarding those statements? Also, could you comment on what you're doing regarding food safety and traceability?

[Leanne Wilson, Science Coordinator, Ontario Greenhouse Vegetable Growers]

Sure. I'll comment on the first part, and then maybe George will comment on food safety and traceability.

In terms of the programs, I guess the issue we've had in the past has just been with the time it takes for different programs to start up. In the case of Growing Forward 1, by the time it actually got running and applications were sent in and approved, there was usually a lag of about six months to a year before we would actually get the program started. The funding usually ends up running out before the end of the program, and then there's a gap. When Growing Forward 2 started, we put in applications right away, but then it was six months to a year before those applications were actually approved.

You end up having gaps of six months to a year between research programs, during which time you don't know whether or not you're going to be funded. Those gaps create a lot of problems with continuity and with getting research scientists, who will move to other sectors or industries, as well as with research technicians and people you have to hire on a contracting basis. They will move to other jobs, and then by the time you actually get funding, you will be in a gap and you'll be delayed again just trying to find people to replace them.

Programs that are supposed to be for five years end up getting cut down to more like three and a half to four years which, even if you get funding, makes it more difficult to transition to longer-term projects. You end up having to do short-term projects because you are not able to secure the resources necessary for those longer-term issues.

In general, those are some of the issues we've seen with the programming.

[The Chair, Conservative, Bev Shipley]

Thank you very much.

We'll now go to Mr. Dreeshen for five minutes, please.

[Earl Dreeshen, Conservative, Red Deer, AB]

Thanks to our witnesses.

Perhaps, Scott, I could go to you first.

This study is on innovation and competitiveness. One of the things you spoke about was the new technologies that are out there in order to produce biofuels and how the byproduct from one stage of the operation becomes the feedstock for the next. Whether it's the use of cookies or any other type of process we have, I'm wondering if you can talk about some of the innovations we have in that area so we can concentrate on that part of the study.

[Wilson Scott Thurlow]

Absolutely.

As I said in response to the last questions, the core funding that we were able to attract allowed our companies to reinvest in research and development. I think the capital that was deployed from Sustainable Development Technology Canada was also very helpful in driving those things.

Now, asking in which direction we're going is like asking a scientist what they are going to invent next. We know we can spin off corn oil, and it can go either into food products or into biodiesel. We know we can fractionate corn germ and create personal-care emollients and cosmetic products. We know we can take waste heat and steam and pump them into greenhouses and improve the productivity of our friends who make greenhouses. Beyond that, who knows? We have scientists who are working on these types of things all the time.

Our number one priority is to improve yield so that we have that additional capital to deploy into research and development. That pivots back to one of our recommendations, which is to ensure that we can get these new available products approved for use either through the CFIA or through Environment Canada so that we can benefit from these technological developments as quickly as possible.

[Earl Dreeshen, Conservative, Red Deer, AB]

The other aspect of course is how grain prices compare to ethanol or biofuel prices. I'm not sure whether people are quite aware of how those fit together when you are taking the grain and moving it from one stage to another and you have byproducts to deal with.

I wonder if you could give us an idea of how the price structure ties into the availability of those dollars for people to do the extra research.