Bill C-206 (Historical)

An Act to amend the Greenhouse Gas Pollution Pricing Act (qualifying farming fuel)

This enactment amends the Greenhouse Gas Pollution Pricing Act to extend the exemption for qualifying farming fuel to marketable natural gas and propane.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

Okay.

If Bill C-206 doesn't pass, how will that prevent you from rotating your crops? You'll stop growing certain crops because they won't be cost-effective and will be used solely for rotation purposes. Is that correct?

[Lyne Bessette, Liberal, Brome—Missisquoi, QC]

Thank you.

My question is for Mr. Annau.

You said you'd also like to see the exemption expanded to include activities such as heating, livestock pens and irrigation. As my colleague Mr. Drouin said, that change may be beyond the scope of Bill C-206, but I nevertheless wanted to ask you whether greener options exist for heating and irrigation.

[Christian Overbeek]

We've already begun discussions with Quebec government representatives to ensure fairness between Quebec growers and other Canadian producers.

So far, we're the only ones paying a tax. If Bill C-206 passes, we'll be looking at another tax, but one that, in a way, will be rebated to us. We'll be resuming our talks with Quebec authorities to secure fairness between Quebec growers and other Canadian producers.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

The Supreme Court of Canada recently upheld the constitutionality of the federal carbon tax. I believe that has provided some impetus to provincial governments to start formulating their own carbon pricing schemes. Is that going to make your job harder? Have you already had conversations with provincial governments on trying to use what Bill C-206 is trying to achieve federally to apply to possible future provincial models in some of the prairie provinces?

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

Okay.

With the $100 million announced in budget 2021, are you still firmly committed to having Bill C-206 passed by this Parliament?

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

Thank you so much, Chair.

Thank you to our witnesses for helping to guide this committee on this journey with Bill C-206.

It appears to me from reading budget 2021 that the government actually paid Mr. Lawrence a big compliment by devoting a good section to the costs of grain drying, with $100 million in refunds in that first year, and also by devoting $50 million specifically for more efficient grain dryers.

My first question is for the Grain Growers of Canada. I really want to dig down into what alternatives to propane and natural gas are available.

I've been looking on the Internet and there is a company called Triple Green Products that has a BioDryAir dryer, which uses crop residue as a fuel to help dry their grain. They're exempt from the carbon tax because they're using residue that comes from their own farm. Is this a viable technology? Is this the kind of place we want to start investing that $50 million in trying to find that efficiency? If we leave the carbon tax aside, farmers are still paying a lot of money just for the propane and natural gas itself. I just want to find out from you where this technology will go in five to 10 years from now.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

That's the part we don't control at all. We've already discussed this together, and I understand you're nevertheless in favour of Bill C-206, based on that principle and provided it comes into force.

Some say there aren't any other options. What about biomethanization, biomass and geothermal facilities, for example? Have those kinds of options been explored? I know the costs are currently prohibitive.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

Okay, and just to manage expectations, that's a discussion our committee's going to have, but we're not sure if we can do that, because Bill C-206 seeks to amend the eligible fuels and not necessarily create that exemption in another part of the law. That's a discussion we will have to have because that an amendment could be deemed inadmissible. Your point is taken, but I would like to manage expectations and tell you right away that this could be the case. It's not a partisan issue; it's simply a matter of procedure in the House, just so you know.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

Thank you very much, Mr. Chair.

I want to thank my colleagues because I know these speakers very well.

I'll begin with Mr. Overbeek.

You're a Quebec farmer. You know that Bill C-206 wouldn't apply to your region. Do you understand that?

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

All right. You are of the same belief as me and the parliamentary drafters, namely, that grain drying is included in Bill C-206.

[Frank Annau, Director, Environment and Science Policy, Canadian Federation of Agriculture]

Thank you so much.

I'm just checking.... Can everyone hear me okay? Perfect.

I'll leave my video off to give myself some more bandwidth here to accommodate my audio.

Good afternoon, everyone. Thank you to the chair and the committee for inviting us to appear today.

My name is Frank Annau. I'm the director of environment and science policy. Our vice-president, Keith Currie, should be joining us shortly.

We greatly appreciate this opportunity to provide testimony on Bill C-206, an act to amend the Greenhouse Gas Pollution Pricing Act (qualifying farming fuel). The CFA is Canada's largest general farm organization, and we represent approximately 200,000 farmers and farm families nationwide. We are dedicated to promoting best management practices that reduce on-farm emissions to help Canada meet its goals under the Paris Agreement.

However, the carbon tax has significantly increased farmers' cost of business. As price takers, farmers cannot pass on these costs to customers or to the national market. To that effect, our members greatly support the bill's goal to extend the exemption for qualifying farming fuel to marketable natural gas and propane.

As everyone is aware, Bill C-206 arose largely in response to the 2019 wet harvest, when extreme rainfall put increased burden on grain drying, which is made even more expensive by the carbon tax. The Western Canadian Wheat Growers Association has reported that some farmers paid over $10,000 in carbon taxes on their grain drying bill that fall alone.

These price hikes led the Green Party and the Conservatives to both comment that carbon tax relief for farmers was justified and necessary and [Technical Difficulty—Editor]. During the bill's pandemic hiatus, the government released a report estimating that the carbon tax had only increased grain drying costs by an average of $210 to $774 in 2019. The CFA did not endorse this downplaying of impacts, as the low range estimates were provided by the Government of Alberta, a province that was not under pollution pricing for the 2019 harvest and had no real-world data to contribute to the report. As such, this report does not rebut the need for exemptions under Bill C-206.

The Liberals have since raised a very valid concern that the bill might not provide the intended relief for grain dryers, as dryers are not considered eligible farming machinery under the Greenhouse Gas Pollution Pricing Act. To ensure that the bill provides the intended relief for farmers, the CFA is recommending that it cover exemptions not only for grain drying but also for machinery used for livestock heating and cooling, and for irrigation as well. The rationale is that these tools are critical for mitigating the increasing on-farm impacts of climate change.

Canada's changing climate report shows that annual precipitation has increased in all regions since 1948, especially during the fall and winter seasons, the very months that harvesting and grain drying take place. With each passing year, this trend results in a higher risk of conditions similar to or even worse than what we saw in 2019. The same report further states that temperature extremes have also increased since 1948, which will raise the severity of heat waves and droughts and will bring a higher risk of crop damage and livestock heat death. While extreme heat has yet to have its carbon tax watershed moments, it is only a matter of time.

When that time comes, farmers should not be penalized for relying on tools needed to mitigate these impacts. We, instead, believe that the money paid in carbon surcharges would be better spent on participating in programs that increase fuel efficiency, such as those announced in yesterday's budget. While the CFA is currently analyzing the budget, these programs do appear to offer avenues to obtain these efficiencies. However, it must be noted that these avenues are often administered as cost shares, with farms required to contribute up to 50% of expenses.

As such, it is in the best interest of government to ensure that farmers have the cash needed to invest in and deliver these programs. While the carbon tax's driving up grain-drying bills to $10,000 does add incentive to reduce emissions, it also reduces the amount of cash that farmers have to buy into these cost shares. That is the reason why the exemption is still required. As it stands now, carbon surcharges have the very unintended effect of taxing the very mitigation measures needed to respond to droughts and extreme rainfall.

As an incentive to drive down emissions, the tax is an added and unnecessary burden. Even with exemptions for natural gas and propane, the price of those fuels is still scheduled to increase under the clean fuel standard in 2023. This, combined with cost savings from fuel-efficiency programs, is more than enough incentive to reduce emissions.

In closing, the CFA shares the government's vision of a future with zero-emission energy sources that are scalable and adopted by the agri-food sector. Until then, the upward trend of climate impacts will place continued strain on even our most innovative fuel-efficiency gains. That is why the exemption for natural gas and propane must be applied to grain drying, irrigation, and livestock heating and cooling.

Thank you, again, for this opportunity to engage. We welcome any questions that you may have.

[Jonothan Hodson, Director, Grain Growers of Canada]

Hello, Mr. Chair and honourable members. Thank you for the opportunity to appear before you today.

My name is Jonothan Hodson. I am a member of the board of directors of the Grain Growers of Canada. On that board, I am a representative of the Manitoba Crop Alliance, a producer group representing wheat, barley, corn, sunflower, flax and winter cereal growers across Manitoba. I am joined today by the Grain Growers of Canada executive director, Erin Gowriluk.

I farm near Lenore in southwestern Manitoba. Our family farm is fifth-generation. We have a diverse crop rotation of corn, spring wheat, barley, canola, soybean, peas and forages as well as a cow-calf operation.

I'm here today to express our support for Bill C-206. This legislation would expand the existing exemption from the price on pollution for qualifying farm fuels to include propane and natural gas. The expansion of this exemption is critical to grain farmers like me, because we often need to dry our grain prior to marketing it.

In yesterday's budget we were pleased to see the government's intention to return a portion of the carbon tax collected back to farmers in backstop jurisdictions beginning in 2021-22. We look forward to additional details. However, we continue to support the passage of Bill C-206, as it remains the most straightforward, cost-efficient way of providing a full exemption for grain drying where no alternative fuel source exists.

Canada is truly blessed with a large agricultural land base right across this country, but many areas have to deal with a short growing season in combination with a changing climate. We are increasingly feeling the impacts of wet harvests and early snowfall. When we experience a lot of moisture and unpredictable weather, we have no choice but to dry our grain to make it suitable for the markets who rely on us, both at home and abroad.

Canadian producers grow and market some of the best-quality grain in the world. In many regions of Canada, one of the tools we use to ensure that quality is the grain dryer. The reality is that putting grain with too high a moisture level in the bin isn't an option for us. It needs to be dried to the correct level or we risk losing part of, if not the entire value of, that product. When compounded by the rising carbon tax, this represents a real blow to the profitability of my farm.

A couple of years ago, we made a significant investment of over $100,000 to upgrade to a more efficient grain-drying system. There were no programs available. Just like many other farmers, we spent the money ourselves to improve our drying efficiency. If there was a grain dryer that ran off something other than fossil fuels, we would look at upgrading again, but that option just does not exist right now.

Each year our farm spends between $15,000 and $25,000 in propane to dry our grain. Of our total expenses, this is not the largest, but as a necessity after harvest, money spent on drying my grain is money out-of-pocket. Each year the carbon tax goes up, that is more money straight off my bottom line. As a farmer, I am a price-taker, not a price-maker. Unlike other businesses, I cannot pass on these extras costs to the consumer. However, the increased costs of production for my inputs and equipment and the rising rates for rail and road transportation do get passed on to me.

This legislation is not a remedy for the increased costs that the carbon tax adds for us. However, it is an important recognition that the spirit behind the carbon tax cannot be achieved in this instance. The desired purpose of the price on pollution is to drive a transition to alternative fuel sources, but in the case of grain drying, there are simply no viable alternatives available.

There are other environmental considerations beyond just taxing unavoidable emissions. Certain crops that are common across all of Canada, such as corn, are generally harvested with high moisture and must be dried. Corn has become a valuable part of my crop rotation, which in and of itself is a critical tool in the environmental sustainability of our operation. Crop rotation provides many benefits, including improved soil health, reduced erosion and disease prevention. If the costs of drying become too high and eat away at potential profits too much, that will be one less crop available for our rotation and a potential loss of those environmental benefits.

We were very encouraged to see support for this legislation from the Bloc Québécois, NDP, Green Party and a number of independent MPs. It is important to recognize that where the carbon tax is ineffective in its aim, changes like those proposed in Bill C-206 should be made. I hope this legislation will receive unanimous support to pass through this committee and be on a path to become law in time for this year's harvest.

Thank you, Mr. Chair. We would be happy to answer any questions the members may have.

[The Chair, Liberal, Pat Finnigan]

Good afternoon, everyone, and welcome.

I'll call this meeting to order.

Welcome to meeting number 26 of the House of Commons Standing Committee on Agriculture and Agri-Food. Pursuant to the order of reference of Wednesday, February 24, and the motion adopted by the committee on March 9, the committee is resuming its study of Bill C-206, an act to amend the Greenhouse Gas Pollution Pricing Act (qualifying farming fuel).

Today's meeting is taking place in a hybrid format pursuant to the House order of January 25, and therefore members are attending in person in the room and remotely using the Zoom application. The proceedings will be made available via the House of Commons website. Just so that you are aware, the webcast will always show the person speaking rather than the entirety of the committee.

I would like to take this opportunity to remind all participants that screenshots or taking photos of your screen is not permitted.

To ensure an orderly meeting, I would like to outline a few rules. Before speaking, please wait until I recognize you by name. If you are on the videoconference, please click on the microphone to unmute yourself. Those in the room, your microphone will be controlled as usual by the proceedings and verification officer.

A reminder that all comments by members and witnesses should be addressed through the chair.

When you aren't speaking, please mute your microphone.

We'll now start with the witness list.

Perhaps I'll start with the Producteurs de grains du Québec, but I don't know if they're here yet.

With us we have the Canadian Federation of Agriculture, with Mr. Keith Currie, vice-president, and Frank Annau, director of environment and science policy. From the Grain Growers of Canada, we have Erin Gowriluk, executive director, and Mr. Jonothan Hodson, director. From the Producteurs de grains du Québec, we have Monsieur Christian Overbeek, president.

Let's begin with the Producteurs de grains du Québec.

Mr. Overbeek, you have the floor for five minutes. We are listening.

[Marie-Claude Bibeau, Liberal, Compton—Stanstead, QC]

Actually, the AAFC is not the right department to gather that data.

I know that the committee will be studying the issue around Bill C-206. We will be interested in getting that data from all of the different organizations or groups that will be studying the subject.

[Dave Epp, Conservative, Chatham-Kent—Leamington, ON]

Thank you, Mr. Chair.

Minister, it's good to see you again. The last time we had a chance to interact, we talked about the carbon tax and its impact on our farm community. We talked about the figures that came out. The charges were between $210 and $819 per farm, which are fairly low, and those were the average costs reflected in the federal backstop of $50 a tonne.

I do note that at our last meeting we had our colleague Philip Lawrence here talking about his bill, Bill C-206, which would further exempt some carbon costs on some farm fuels. I also note, for the record, that the Liberal Party voted against that bill. If it's a minor cost, perhaps it's understandable. I wonder if I could ask this, then. Why would the government consider a fairly expensive and bureaucratic rebate program if the cost to the average farmer is so small?