Agriculture Committee on May 16th, 2006

[Tyler Bjornson]

If you take a look right now at where construction is for the industry in both the EU and the U.S., I think the EU is several years ahead of the U.S., and the U.S. is probably at least two years ahead of us. Brazil has been in the game for a very long time, so I can't really comment on that.

The interesting thing with the EU--just as an aside--is that when we looked at the French commodity exchange, the MATIF, since 2004 when biodiesel came on stream, we've seen, in comparison to the Winnipeg commodity exchange, a $60-a-tonne premium for canola as a result of the impact of biodiesel. So in the short time they've been doing this, we're already seeing quite a large price impact at the farm gate level because of biofuels.

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

Okay. I want to get into that, but just going back to Brazil for a second, do you know what percentage of biofuels they're using out of their whole energy usage? Do you have any idea?

[Justin To]

I'm not sure, but I know 80% of their vehicles are flex-fuel vehicles, so they can use up to 85%. But I'm not sure of the exact percentage.

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

Thank you.

Lastly, we know that the benefit to agriculture has been potentially huge here. What are we looking at on a dollar basis, in today's dollars? What percentage of acres or hectares, whichever figure you want to use--I still go by non-metric--are we looking at as far as a benefit to agriculture there is concerned that could potentially supply the biofuel industry for Canada's needs, without exports?

[Tyler Bjornson]

I'll speak to biodiesel and Mr. To will touch on ethanol.

On biodiesel, as I indicated before, a 5% mandate is roughly 1.3 billion litres of biodiesel. When you take a look at how much canola would be required to meet that, it's roughly 2.5 million tonnes. This past year we had a 2.5-million-tonne carry-over of grain sitting in the bins and terminals. So even today we have the capacity to meet a large-scale biodiesel demand.

If we project out to 2015, we know our industry is going to increase acres for canola, it's going to improve the varieties that are available as far as yield and oil content are concerned, and agronomics are going to improve the ability to rotate the crops more efficiently and effectively in comparison to disease and a number of other factors. We think biodiesel will mean roughly one-fifth of our market demand in 2015 just from canola. So we can meet the demand.

[The Chair, Conservative, Gerry Ritz]

Thank you, Mr. Miller.

Mr. Atamanenko, for the final five minutes.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

Thank you very much for appearing.

We had discussed this before. I think the climate is ripe, and as somebody mentioned, it is an exciting time. It's my understanding that the minister is behind this, that he's promoting this. Here's a chance for us to not only get this industry moving forward, but to assist in preserving our rural values and our communities. The potential is huge.

You have a lot of specifics. Specifically, how do you see the farmers, the producers, getting involved? As we know, they're the ones who are being hit the hardest in this whole chain of production. It's obviously important for them to see a gain here, so that will help them, apart from just selling the canola , in this case, or other crops.

Also, if you had the power to do whatever you could, what would be the first, second, or third steps you would take to really get this off the ground? We often have a tendency of talking a lot and discussing, and it's good on paper. But specifically, starting today, what should be done by the government, in cooperation with you, to really get something off the ground? That's what I would like to see.

[Justin To]

In terms of the top four needs, they're very similar to what Mr. Bjornson is saying here: renewable fuel standards to create that demand draw; parity with the U.S. in terms of tax incentives for processing and blending on the excise tax for fuel to further incentivize and create an environment of profitability and ability for that; and the creation of a stable environment for capital investment, which also provides the incentives for primary producers to invest, whether that be through loan guarantees, equity match programs, support for Iogen cooperatives, and that kind of stuff. The producer doesn't have to own all of it--although we would like that--but at least a portion of it, so they're part of that value-added and so they're part of growing beyond just pure raw commodity. The last need would be continued research, demonstration projects, and commercialization of our research achievements.

We have some world-class technologies, but we're not very good at commercializing them. Build a demonstration plant with Iogen so that we can demonstrate that this is a viable business, and people will invest. They will see that, and then the capital venture will be there. People will go where the money is, not only on the processing side, but on the raw commodity side, with energy-specific varieties and so on and so forth that help producers diversify beyond feed into nutraceuticals and other bio-economy products. This provides another avenue to drive up their commodity prices, move into these niche markets, and also have ownership in the contract.

[Tyler Bjornson]

I would just reiterate that I did talk about the four points that we thought government needed to be involved in. I can circulate to the committee some documents from the canola industry on reviews about these. They provide a little more detail on some of the issues as well for your reference.

[The Chair, Conservative, Gerry Ritz]

Thank you.

Mr. Atamanenko, you still have a minute and a half.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

I think it's there. I think we have our work cut out for us. Now let's just get down to work.

[The Chair, Conservative, Gerry Ritz]

Mr. Bjornson, will you circulate those documents you had?

Mr. To, do you have a final word?

[Justin To]

I have one more comment.

In this process from top to bottom, from feedstock all the way to retail, inevitably in any strategy we come up with there will be problems, and things are not going to be perfect. I think the policy also has to be nimble. If we see a roadblock here, or there are not enough fuelling stations, or there is a roadblock between partnerships at the blending level and that kind of stuff, then we deal with it as it comes with the understanding of the big picture, asking ourselves how we address each point and make sure that product flows through smoothly. I think if we do that, we can be very successful.

[The Chair, Conservative, Gerry Ritz]

Thank you, Mr. To.

Mr. Anderson, you have one point?

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

You've been asked a couple of times about the kind of commitment you are looking for from the government. You've given kind of a roundabout answer. I'm just wondering whether either of you has done any work on the kind of commitment your organization believes the government is going to have to make in order for this to be successful or to be in parity with the United States?

[Tyler Bjornson]

At this point in time I don't have a specific figure that I can share with you. Our industry is doing some analysis to determine what specifically might be considered by Canadian governments in order to put us on par with the United States. I think there are a number of different measures that we're looking at, because at the end of the day it has to be a Canadian approach that will necessarily be different from that taken in the United States. That's why I don't have a figure for you. But I think I basically said that the $1 per gallon incentive in the U.S. is the big one out there. If we take a look at how many billion litres we're going to need from the biodiesel side, that will be the rough figure that will be required.

[The Chair, Conservative, Gerry Ritz]

Mr. Steckle, do you have one last point?

[Paul Steckle, Liberal, Huron—Bruce, ON]

Just very quickly, I'd say we've had a lot of discussion on the whole issue of government support for the manufacturing or the upside of the industry. As for the production side of canola and corn--and we have a good example of that in Ontario--most of the corn in the ethanol industry in Ontario is coming from south of the border.

I'm sure the primary producers are watching what we're saying this morning. I'm sure, going to go back to the federation, that would be a message they would want you to leave here this morning. We need to give protection and give some guarantees that farmers can make money producing this stuff. We can produce all the canola and all the corn in the world and give it to these plants based on a very low-valued product today, but there has to be that primary production, because down the road, unless we have that component, we're going to be buying our stuff from the States.

[Tyler Bjornson]

I would just say that the biodiesel industry is a bit different from the ethanol industry, because Canada is the world's largest exporter and trader of canola products worldwide. We are 75% of the world's trade in canola and we export 75% of our production, so the situation is a bit different. Because Canada is a net importer of corn, there is a different dynamic there, and I think it would be prudent to differentiate in that case.

Thank you.

[The Chair, Conservative, Gerry Ritz]

Mr. To.

[Justin To]

One point on this is that in any investment you always want to have an assurance of stable supply. If you don't have that, you're not going to be very successful in your investment. So if we are to invest in ethanol plants, let's say in Ontario, we need to ensure that they have stable supplies in that region. And certainly we don't want to import all that stuff; we would like to have that domestic production used.

It's difficult to mandate this, as there would be some problems involving national treatment under NAFTA and WTO rules and that kind of stuff, but what we can do is make our production as competitive as the U.S.'s. That can be done through targeted support, I believe. We would have to take some amber hit, but we have some amber cap space and some amber room, and it doesn't have to be trade-distorting, because we're not going to be exporting that production at first or for a long time anyway.

And if we continue to do research in processing and energy-specific values, I believe we can be very competitive and can use that domestic production by making our producers the best in the world and the most competitive. We don't have to import that product.

[The Chair, Conservative, Gerry Ritz]

Thank you, gentlemen, for being with us here today and being flexible, as we had to move through extra witnesses who appeared. Thank you so much for that.

This meeting will be adjourned at this point. Thank you.

Oh, Madame.

[Claude DeBellefeuille, Bloc, Beauharnois—Salaberry, QC]

Mr. Chair, I was somewhat disappointed upon my arrival this morning to find that there were no briefing notes on biodiesel. I am a new MP and a new member of this committee. I hope that this will be a one-time occurrence, and that at the next meeting, I will have the documentation I need in order to better take part, as a parliamentarian, in the committee's work.

[The Chair, Conservative, Gerry Ritz]

Absolutely. Thank you so much for your understanding.

The meeting is adjourned.