Environment Committee on June 10th, 2014

[Marie-Hélène Labrie]

On the thermochemical side, this is a process that breaks down the solid material into a synthesis gas that is composed of carbon monoxide and hydrogen. The process then uses catalysts to convert that syngas into a liquid.

In our process, we first convert this syngas into methanol. Then, through carbonylation and hydrogenolysis, we convert that methanol into ethanol. From the solid waste to the ethanol, our process takes four minutes. The biological process will be a bit longer, as it involves enzymes.

Biological or thermochemical are the two main pathways that you find around the world for second-generation biofuels.

[Colin Carrie, Conservative, Oshawa, ON]

Looking at what you have and what I see in front of me, I think it's phenomenal.

Just a little lower down in the document, Mr. Thurlow, you say that compared with fossil fuels, biodiesel has 99% fewer greenhouse gases and ethanol has 62% fewer greenhouse gases. Especially when you're looking at municipal waste for biodiesel, I've heard that they actually use waste cooking oil or something for that. Could you walk us through the process of how that's being done?

[W. Scott Thurlow]

Yes, certainly. Used cooking oil right now is probably the most popular feedstock because it is the least expensive. Canola oil is another one that's used a lot, but because of the price of canola right now, it's not as attractive as a feedstock.

Every company is going to have a process that's unique to them, but ultimately it's about finding the way to crush the oilseed into a consumable methodology that would allow for the chemical conversion from whatever that oil source or the lipid source of fats is, and that then can be converted into a renewable diesel.

We have technology that can use rendered animal parts as well, which has the greatest GHG potential, because instead of that going into another product and then further decomposing, which would release other GHGs to the atmosphere, we're putting those carbon molecules into a fuel form that can be stored in a much more energy-efficient way.

There are literally dozens of different types of feedstocks, but in Canada your most important ones are used cooking oil, soybean oil, canola oil, and then the rendered animal product.

[Colin Carrie, Conservative, Oshawa, ON]

These different technologies sound really great. Are they economically sustainable on their own, or do you need government assistance? What are you seeing as these roll out around the world?

[W. Scott Thurlow]

This is a point that I really enjoy talking about.

Government support is really about making a strategic investment at the front end of the technological process. These are business risk management tools that financial institutions look to in order to make those investments safer.

For the most part, as Marie-Hélène said, these are disruptive technologies. At the outset, they're not as proven as other displacement fuels that they would be offering to stand in place of.

Lenders need that security, and operating incentives are a form of that security.

Our member companies currently receiving operating incentives will be ready, based on their business model, when those operating incentives expire, as they are supposed to naturally in 2016-17. They will be ready to stand alone at that time.

They are not operating incentives that are needed to make the business viable. They are lending mechanisms.

[Colin Carrie, Conservative, Oshawa, ON]

What is the interest at the municipal level now? I understand, Marie-Hélène, you're opening your first one in Edmonton. How much interest in your technology are you seeing from other municipalities?

[Marie-Hélène Labrie]

We are in discussions with several groups. Many municipalities that have optimized recycling and composting are looking at the next step. Right now the options they have are either landfilling or incineration. We're an alternative to these two options, and we're complementary to all these upstream activities by municipalities. We're in discussion with several groups in North America as well as in the Middle East, Europe, and China.

The City of Edmonton is also attracting a lot of international visitors and municipalities. They have developed a group called RE-solutions, which provides consulting services to municipalities in developed countries to help them further improve their waste diversion activities, and they are promoting that public-private partnership. The City of Edmonton has integrated state-of-the-art technologies and has partnered with the private sector for their kind of ecosystem, where they optimize the new innovative technologies to increase their waste diversion rate.

[The Chair, Conservative, Harold Albrecht]

Thank you.

Thank you, Mr. Carrie. Your time is up.

Madame Freeman.

[Mylène Freeman, NDP, Argenteuil—Papineau—Mirabel, QC]

Thank you, Mr. Chair.

Ms. Labrie, I know that Natural Resources Canada is one of your partners. How does this department contribute to your activities? How does Canada's involvement compare to the United States?

[Marie-Hélène Labrie]

Natural Resources Canada is a partner for our research and pilot projects mainly.

We were not able to benefit from the ecoENERGY initiative for biofuels because the timing of our commercial production was such that we could not apply under this program. We do receive funding for a research project on airplane fuel under the ecoENERGY initiative for innovation.

[Mylène Freeman, NDP, Argenteuil—Papineau—Mirabel, QC]

Your activities are quite focused on research, are they not?

[Marie-Hélène Labrie]

Yes, absolutely.

[Mylène Freeman, NDP, Argenteuil—Papineau—Mirabel, QC]

How do the American and Canadian governments compare in terms of their involvement in this area?

[Marie-Hélène Labrie]

The United States regulates cellulosic ethanol production. Refiners must include a specific percentage of next-gen biofuel in their mix, whereas Canada does not have a position on this type of biofuel. That commitment stimulates investment even further. The United States also gives tax incentives. For every gallon of cellulosic ethanol that is produced, they allow a capital cost allowance of one dollar, as well as an accelerated capital cost allowance.

[Mylène Freeman, NDP, Argenteuil—Papineau—Mirabel, QC]

That is interesting. Those are the kinds of things that make a difference.

I read that the Fonds de solidarité FTQ and the Fondaction CSN invest in your company. How do these kinds of investments help you?

[Marie-Hélène Labrie]

Enerkem is a private company and is not publicly traded. We are supported by private investors. Some of those investors are Quebec investors, for example Cycle Capital Management, a clean technology fund. We also have investors from the Cleantech Group fund, in New York.

[Mylène Freeman, NDP, Argenteuil—Papineau—Mirabel, QC]

Is the idea to create jobs in Quebec?

[Marie-Hélène Labrie]

These are investments in the company and in job creation. Approximately six years ago Enerkem had 25 employees and there are now 170.

[Mylène Freeman, NDP, Argenteuil—Papineau—Mirabel, QC]

I read in several articles that there are some questions about how profitable your process and finished product is. Can you talk about what kinds of complications there have been with this technology, and can you tell us where you stand today?

[Marie-Hélène Labrie]

You are probably referring to an article written by the reporter Hélène Baril, and unfortunately this was used in a smear campaign against Enerkem by 3 of the 189 suppliers with deal with.

These suppliers would like to be paid extra. These construction businesses use dishonest practices. I would like to first put this in context. These people are pipefitters and they were saying that there was a fouling problem in one of our pipes. The problem was caused by a method that we used in our demonstration plant but we have changed methods. The purpose of a demonstration plant is actually to make those last checks before building the plant on a larger scale. That is what the supplier was referring to. Unfortunately, the article led to some confusion.

The key to success for any breakthrough industrial innovation like this one lies within a rigorous approach to scaling up. Enerkem went through all the stages: pilot project, demonstration plant, and hours of validation. We are supported by Sustainable Development Technology Canada's Next-Gen Biofuels Fund, and they did a thorough technical review.

It is very important to go through this process in order to get to the last stage. No stages should be skipped. Sometimes people want to go too quickly. We take the time to go through each stage. We have a very solid team. Many of our people have petrochemical expertise, which is very important to us. We think a rigorous approach is the key to success.

[Mylène Freeman, NDP, Argenteuil—Papineau—Mirabel, QC]

Yes, research is very important. That is what was stated in the beginning.

Could you tell us again how the Government of Canada could support you so that you will be in a position to increase your profitability and help the sector grow?

[Marie-Hélène Labrie]

There are several important aspects to this.

First, there has to be continued support for the commercialization of innovation. It is very important to be involved, and not only at the research and development stage. It is very important to make sure that those innovations that have the potential to be profitable be able to get through what we call in finance the “valley of death”. The venture capital sector in Canada has not always been very strong. It is therefore important to complement and stimulate private investment at all stages. This is very important.

Second, we would like the government to create a 10¢ excise tax exemption for cellulosic biofuels, as a way of supporting the second wave of growth in Canada's domestic biofuel industry. The second wave is going to come from these new technologies that can take on a large variety of biomass types, including municipal waste. It is important to provide incentives and to be competitive with other jurisdictions in the world, otherwise the plants will be built elsewhere. Biofuels will then be exported and greenhouse gas emission reductions will also take place elsewhere, outside Canada.

My last point would also be that there is currently a tax incentive in the renewable energy sector but it focuses on the production of renewable energy for electricity, and excludes biofuels. I am referring to the accelerated capital cost allowance.

Thank you.

[W. Scott Thurlow]

Could I just add one sentence to that?

Marie-Hélène's point is very well taken as it relates to the differences between the types of ethanol that are out there. Right now Canada imports one billion litres of American ethanol. We do that because it's very inexpensive. By removing the excise tax on the cellulosic fuel, we'll be shrinking the differences between that American imported product, which is coming all the way from Iowa, Kansas, or further, and replacing it with a homegrown product.

Very small incremental steps can make a difference, but when you're buying at 10 million litres at a time, that will make a very big difference.

[Mylène Freeman, NDP, Argenteuil—Papineau—Mirabel, QC]

Do I still have time?

[The Chair, Conservative, Harold Albrecht]

No. Good try, though....

Mr. Sopuck, you have seven minutes.