Evidence of meeting #7 for Agriculture and Agri-Food in the 39th Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was plant.
Conservative
James Bezan Conservative Selkirk—Interlake, MB
But there is a logistics problem when you start hauling rendered product back and forth between where you might locate biodiesel facilities.
Director, Marketing and Business Development, Maple Leaf Foods Inc.
They need to be near one of our rendering facilities. Sixty-five per cent of the material that comes in is water, and you can't haul water very far profitably. So it will need to be near our rendering facilities.
We have six facilities, starting in Manitoba and moving out to the Maritimes. So logically, we will be somewhere close to our rendering plants, because we want to add value to our own products rather than having to buy raw materials.
Conservative
James Bezan Conservative Selkirk—Interlake, MB
I'm a cattle producer myself. One issue we've always talk about in losing profitability, since the BSE crisis, has been the by-product value. Have you looked at what the return is to producers now that you're starting to move into the biodiesel market, as to increase in the overall value of an animal? Is it a couple of bucks an animal? Is it $50 an animal?
Director, Marketing and Business Development, Maple Leaf Foods Inc.
Right now, it's more cost avoidance. Because the value of the by-products since BSE have dropped so dramatically, all we're doing is trying to maintain the values. It is probably $1 a pig that's staying in the value of those by-products rather than being taken out of farmers' pockets.
Another thing I didn't mention, and that's helping us decide where to put these plants, is incentives. Right now the incentives are very provincially based. For example, we see that Ontario, Quebec, and Manitoba are now giving incentives by removing our road taxes. Those vary quite dramatically from 16.2¢ a litre in Quebec to 10.9¢ in Manitoba. Those are examples of what's going to help make business decisions about where those plants are going to go.
We need some kind of stable, level playing field that helps make everywhere in Canada available to the biodiesel business. So we would encourage the committee to look at incentives and make sure that all jurisdictions are treated similarly, so we can make logical decisions about where to place those plants.
Conservative
James Bezan Conservative Selkirk—Interlake, MB
Kory, you were talking about the review you're doing right now, the consultation process that your organization is undertaking. But you're not going to be in a position to report until sometime this summer. Are you going to be reporting the recommendations your industry comes up with directly to the minister?
Executive Director, Canadian Renewable Fuels Association
We will report to several ministers, not only to Minister Strahl but also to Minister Ambrose and Minister Lunn, who are playing very important roles in developing what this process is. The actual regulation itself is likely to be part of Minister Ambrose's work, and primary agricultural producer involvement is something I know Minister Strahl is very focused on. We're working closely with him on that portion, and then with Minister Lunn on some of the interprovincial tax and trade issues that Ron just mentioned, which are very important. So we're reporting to all three.
We actually have our discussion paper here; it came out yesterday for the meetings we're holding in Montreal. We'll have a second set of meetings in Saskatoon in a few weeks. So we're travelling the country.
Everyone here today is participating in that process, plus many others, such as the Canola Council and another rendering company, West Coast Reduction, which also has a very interesting take on all this.
Anyway, we're continuing our work. We'll be reporting in. We're happy to share the outcome with all the committee members as well.
Conservative
James Bezan Conservative Selkirk—Interlake, MB
As a government, we want to be moving forward rather quickly in bringing forward the policy and regulatory changes to make the 5% policy announcement, which we made throughout the campaign, a reality.
Lionel, you said that 5% is very doable and we should be striving for 10%. I don't disagree with you, although I have heard recently from some people within the industry that the capacity to build plants is going to be somewhat limited in the upcoming years because of plants going up, not only in Canada but also in the U.S., and there are only so many companies out there building these facilities. Do you see that as a problem or a restriction? How do we get around that, so we can hit the 5%, and hopefully the 10%, mark?
President, The Saskatchewan Ethanol Development Council Inc.
Thanks for the question. You're absolutely right, there are four technology providers in the U.S. that provide the technology to build plants. We went a couple of steps forward in Saskatchewan, where we've gotten access to a particular technology that we've licensed, and we're working with the construction community in Saskatchewan very aggressively to focus on building that capacity.
Just for your own information, the queue right now in the U.S. is about three years. If you want to build a plant today, there's about a three-year wait to get started. We don't want that to happen in our part of the world, and clearly we want to use western Canadian people, western Canadian technology, and western Canadian engineering to build that technology.
So we're aware of that problem.
Bliss Baker Vice President, Business Development and Government, Corporate Affairs, Commercial Alcohols Inc.
I would like to comment on that as well. We've got one project under construction and two in the pipeline, and we've opted to do the same thing, which is that we've licensed U.S. technology but we're using Canadian construction know-how to build our plants, particularly in Quebec, where it's SNC-Lavalin. That's a major international company, as you know, that is certainly anxious to build more plants in Canada. We've opted to go with Canadian construction know-how because of that problem you've talked about.
Conservative
James Bezan Conservative Selkirk—Interlake, MB
My final comment is on the dry distillers grain. It's the one thing that I see as cost prohibitive in the production of ethanol. My thought process has been that we should be moving more and more to feed and wet cake coming right out of the plant, similar to what they do at Lanigan. I'm wondering if that's going to be in the plans in the expansion of the ethanol facilities, knowing that as natural gas continues to increase in cost, it's going to make the distillery grain more and more prohibitive.
President, The Saskatchewan Ethanol Development Council Inc.
At the Ethanol Development Council, we're well aware of the Lanigan plant and the uniqueness of that plant. We have been told for some time about this economies of scale debate and how you can't build a plant of that size and be profitable. We weren't sure of that, so we commissioned an engineering team using some of the best knowledge in North America. This is not a public document yet, but this is the result of that effort. Clearly, this particular plant and this particular model of a 20-million-litre ethanol plant producing static 20,000 head at one time--so it produces about 40,000 head a year--is about a $45 million company; it has a payback of about 5.7 years, using 70¢ as a price point for ethanol. By the way, it's trading at $1.10 Canadian today, also owning half of the livestock in the pen. That's a tremendous model; that's part of the piece.
The other part of the piece is just dry distillers grain. There are some unique things going on at our university, taking dry distillers grain, mixing it with a by-product from biodiesel, which is glycerine, and opening a brand new market in the hog industry. You haven't seen the report yet because it has to be peer reviewed because it's so bold, but there are some great things going on with dry distillers grain.
Executive Director, Canadian Renewable Fuels Association
One of our members, who isn't present here, Okanagan Biofuels, based in Kelowna, is looking at biodigesting in distiller grains. There are numerous technologies and different things that are going on in that. Having the flexibility to do some wet, do some dry, having more options, is only going to help your business case. So I think letting the market bring its resources and its innovation to bear on that issue is going to yield some very innovative solutions. Time will tell which ones are the best.
Vice President, Business Development and Government, Corporate Affairs, Commercial Alcohols Inc.
I have one final comment. You're very right about the wet cake being more important in the future. Our Quebec project has a very aggressive wet distillers grain marketing program that we're getting ready to roll out. And the dairy industry, as you all know, is very important to Quebec, and they are waiting anxiously for our plant to get going so they can buy wet distillers grains for their dairy cattle.
Conservative
NDP
Alex Atamanenko NDP British Columbia Southern Interior, BC
Thank you very much, gentlemen, for being here.
On a personal note, I find this quite exciting, and I'd like to have a chance to visit one of these plants if the opportunity ever arises.
My questions will be at two levels. One is a general philosophical question and a couple are specific questions.
Should we--and it's interesting coming from me--be looking at the American model? Should our government be looking and working closely with those in the American government to really see what the differences are between the way we do things and the way they do things? Obviously there are models that work; there's no need for us to reinvent the wheel. In other words, should we be in close consultation, coming up with ideas and then trying to implement them as far as the government goes? That's the first question.
The other general question is on this whole debate about fossil fuel energy and subsidies. Should we be doing a gradual shift of subsidies in our energy sector from fossil-fuel-based industry to the biofuels in one area?
I'll just start off with those two general questions.
President, The Saskatchewan Ethanol Development Council Inc.
You're right. With Minister Easter previously, Minister Strahl, and others, our particular group is supplying a tremendous amount of information regarding the American model. Some of the very specific programs in the American model have been very successful. With all due respect to the elected officials and the bureaucracy, I think they've done a good job of looking at it.
There's also been an interesting debate about states, what role states have played in the U.S. market and how proactive they have been. There was a comment made on what has happened provincially in Canada in regard to biodiesel, as an example.
There is an interesting anomaly in the states. Montana probably has the most aggressive ethanol program of all of the United States, and yet there is not one ethanol plant in Montana. Correspondingly, the state that probably has the leanest program is South Dakota. The last time I checked, they were the third largest producers of ethanol in the United States.
There's a little mission over there to indicate that it has always been federally driven in the U.S. The State of Minnesota was the first to mandate it, but other things related to MTBE banning and so on have really been the catalyst for the growth of that particular industry.
Executive Vice-President, Iogen Corporation
First of all, let me say that the whole committee is invited to a tour of the plant. Iogen has a facility right here in Ottawa. If you want to come and see the site of an ethanol demonstration plant, many of your colleagues have been on tours in the past.
To the question on subsidies to conventional fossil versus so-called subsidies for new energy sources and renewable energy, whether it be ethanol or anything else, governments have to ask themselves what their policy goals are and then tilt the playing field in the direction of achieving those policy goals. I have been told by many political staffers in the past that after 20-odd years of subsidies to conventional fossil fuels, the only way to level the playing field would be if you tilted it in the direction of renewable energy in order to have the same playing field over the course of the next number of years.
As a government, ask yourselves what your policy objectives are. The biggest instrument that the federal government has at its disposal is tax policy in terms of driving towards goals and policy objectives.
In terms of following the Americans, Mr. Easter didn't ask this question, but he alluded to it when he talked about a competitive environment. I'll speak to the question of cellulose, because you don't have a cellulose ethanol industry anywhere in the world. You don't have it in the U.S. and you don't have it in Canada, so we're beginning from the same starting point.
Who is the biggest supporter of cellulose ethanol in the world today? It's the President of the United States, a Republican, a Texas oil man, who said in his state of the union address that we have to get ethanol not only from conventional sources but from new sources of ethanol such as corn stocks, wood chips, and switchgrass, all of which are forms of cellulose.
What are they doing in order to achieve that? As I said, no plants have been built in either place, but they have R and D support, which Canada has, and grant money, which Canada does not have. They've gone to a tax system using loan guarantees as a means to cover private sector risk. They have actually put a set-aside in place by 2013. They want a billion litres of cellulose ethanol in the market by 2013.
Canada hasn't taken any of those types of steps. We have to ask ourselves how we want to launch this industry.
As to income to farmers, people say that you can't get them to sell straw. We tested that. We went to the farmers in Idaho, Alberta, and Saskatchewan. They're getting $10 an acre of added income in their pockets before they get paid for baling and trucking the material. They get $10 for the stuff sitting in the windrow.
Did that appeal to them? Well, we signed up 600 farmers in Birch Hills, Saskatchewan.
To Lionel's comment about small communities, what's the population of Birch Hills? Is it 3,000?
President, The Saskatchewan Ethanol Development Council Inc.
It's maybe 300.
Executive Vice-President, Iogen Corporation
Well, there you go. That's a small community. The next biggest community is Prince Albert, which is 15,000 or 20,000 or so.
Farmers are signed up and willing to sell us their straw, but you now need the government to take the lead in terms of policy instruments.
NDP
Alex Atamanenko NDP British Columbia Southern Interior, BC
I'll move on while I still have some time.
I am encouraged by what's happening in Saskatchewan, Mr. LaBelle. I think we have to do whatever we can to keep our rural communities going. I see this as one exciting way to keep those farmers producing and to keep all of the things happening in the communities that you've been talking about.
We obviously need some kind of an aggressive federal policy. I am encouraged by the current government. I think we have everything in place to do that.
I have another general question.
We all like to talk, and we like to listen and discuss things. What should we be doing not next month but yesterday? What should we be doing now to get this off the ground, so that we in fact do something and we don't just do a study and put it on a shelf somewhere?
President, The Saskatchewan Ethanol Development Council Inc.
We asked Minister Strahl this. We were recently in Ottawa and we clearly articulated what we thought he should do, and that was immediately announced, that there will be a renewable fuel standard in Canada and that we're going to move forward and the details will follow.
We also said we should grandfather anybody who wants to start building an ethanol plant today that falls into the specific criterion of producer ownership; otherwise we're going to completely miss the 2006 construction season. So that was our first position: let's start; let's move forward. That's the first part.
The second part, obviously, is that the devil is in the details. We'll argue clearly that producer ownership is a critical part of this piece. We don't for a moment suggest that 100% of all the plants in western Canada will be owned by farmers, but the American model is getting pretty close to 50% of the buildings. We think that's a reasonable target to try to hit, and we think that should be reflected in policy.
Clearly we have a strong opinion that it should be policy, and not a program, so that political interference doesn't get involved in that equation, or the presumption of political interference.
Conservative
The Chair Conservative Gerry Ritz
You're out of time, Alex.
Does somebody else want to add to that point? Mr. Wardrop.
Director, Marketing and Business Development, Maple Leaf Foods Inc.
When you talk about what you can do today, about 95% of our present production is going to the U.S. because of the blenders tax credit. The way they've chosen to support biodiesel production in the U.S. is working very well. Plants are springing up all over the place and production is going very quickly, and demand is also being driven by that.
Our production--almost all of it--is literally going to the U.S. What you can do right away is level that playing field and get the incentives in place that will bring demand into the market by making renewable fuels a very similar price to fossil fuels. It is working in the U.S.