Agriculture Committee on Feb. 25th, 2008

[The Chair, Conservative, James Bezan]

I call this meeting to order.

As we planned earlier, we're going to have two groups of witnesses this afternoon. In our first group, to present on Bill C-33, we have by video conference Dr. Esteban Chornet, who will be joining us at around four o'clock. The committee permitting, when Dr. Chornet is able to get away from his class--which I think is what he's tied up with--we'll let him bring his 10-minute opening remarks at that point in time.

Thank you very much.

From the Conseil québécois du biodiésel, we have Camil Lagacé--no, he's going to be at five o'clock.

From Ducks Unlimited Canada, we have Paul Thoroughgood; from the Fédération des producteurs de cultures commerciales du Québec, Benoit Legault and Stéphane Bisaillon; and from Canadian Bioenergy Corporation, Ian Thomson.

I want to welcome all of you to committee. We're going to keep things moving fairly rapidly. I'd ask that you bring your opening comments in less than 10 minutes. We're going to go with five-minute question rounds for the members.

With that, I'm going to ask Mr. Thoroughgood to lead off with his opening comments, please.

[Paul Thoroughgood, Regional Agrologist, Ducks Unlimited Canada]

Thank you very much, Mr. Chairperson, and thank you for the opportunity to speak to you and hopefully broaden the discussion to include habitat as part of the impacts of biofuel strategy.

Ducks Unlimited Canada is a private non-profit organization dedicated to the conservation, restoration, and management of Canada's wetlands and associated habitats for the benefit of waterfowl, wildlife, and people. DU works with many industries, including agriculture and government, to develop and implement land management systems that are both economically and ecologically sound.

DU's first priority in all these efforts is to find land uses that provide improved habitat to grow and sustain continental waterfowl populations. However, DU recognizes that if waterfowl-friendly production systems are going to find their place on the landscape, they also have to make economic sense. In this context DU believes that if executed correctly, a Canadian biofuel strategy could make a significant contribution to meeting North American waterfowl management plan population goals.

DU is the main delivery arm of the North American Waterfowl Management Plan, and this plan identifies species-specific population goals for various waterfowl species in North America. The Canadian Prairies are often referred to as the North American duck factory, as on average approximately 40% of the continental duck population breeds there. Lack of adequate quantity and quality of upland nesting habitat has been identified as the key limiting factor to waterfowl production on the Canadian Prairies.

Upland nesting habitat comes in many forms, including perennial grasses, managed wildlife habitat, native and tame pastures, hayfields, trees and forest areas, annual cropland, and remnant native areas.

Since our inception in 1938, DU has delivered science-guided conservation programs to meet the needs of North America's waterfowl while respecting other users of the land. We endeavour to evaluate and, where appropriate, support initiatives that are environmentally, economically, and ethically sound. Biofuels are a recent example of this. Depending on the feedstock used and the agricultural production system employed, an expanded ethanol production system could either be beneficial or detrimental to waterfowl habitat and to the environment overall.

On making ethanol greener, smarter, and better, increased biofuel production in Canada has the potential to impact waterfowl habitat directly and indirectly. Indirect habitats could include increased risk of contamination of wetlands through intensification of production systems; loss of wetlands, perennial grasslands, and existing native habitat to drainage and clearing to provide additional cultivated acres; and reduced conversion of marginal and annually cropped land to perennial cover.

Direct impacts to habitat could be made through the selection of feedstock for biofuel production. DU has conducted nest searches on thousands of acres of cropland and other habitats to evaluate their use by nesting waterfowl. Based on these analyses, not all land uses are equally valuable from a habitat perspective. Annually cropped land is generally viewed as the least productive nesting habitat for waterfowl. Winter cereals, such as winter wheat, have been found to be the exception to this rule in that they provide both attractive and successful habitats for upland nesting waterfowl. Perennial grasslands, including native prairie and hay, have been found to provide improved nesting habitat for upland nesting waterfowl. An additional benefit from perennial grasslands is also an associated increase in landscape level nest survival.

Among biofuels, ethanol has the greatest potential to provide improved waterfowl habitat in Canada. The following discussion will focus on the potential habitat impacts of grain- and cellulose-based ethanol production.

Corn is the dominant grain used in ethanol production in North America, and as many of you know, on the Canadian Prairies corn is not generally a viable cropping option. Currently spring wheat is the primary feedstock that is locally grown for ethanol plants in western Canada, and as mentioned earlier, spring-seeded cropland provides poor nesting habitat as spring seeding operations overlap with peak nesting initiation, leaving most nests vulnerable for destruction from tillage.

If grain-based ethanol production relies primarily on spring-seeded crops such as corn, wheat, or other cereals, wildlife habitat will remain, at best, status quo. However, if winter wheat and other winter cereals were utilized as the primary feedstock for ethanol production on the Canadian Prairies, there would be an increase in nesting cover available for waterfowl and other upland nesting bird species. These statements do presume that an expanded grain-based ethanol production system would not result in the conversion of existing upland and wetland habitats to annual cropland.

Cellulosic ethanol production could provide for favourable waterfowl habitat, depending on the feedstock that's utilized. If annual crop residue is the feedstock of choice, the waterfowl benefit or disbenefit would be similar to that of grain-based systems.

Perennial crop feedstock alternatives do have the potential to provide improved habitat. The key to the value of this habitat lies in the production system, the land use that would be displaced by that feedstock, and the harvest date and method.

Switchgrass and other perennial grasses hold the greatest promise for concurrently producing ethanol feedstock and waterfowl habitat on the Canadian Prairies. Perennial grasses that are hayed annually, as anticipated in an ethanol feedstock production system, provide the greatest waterfowl habitat value when cutting occurs after the nesting season, which is mid to late July.

Stubble height post-cutting is also important, as most grass species have not begun to grow in late April and early May, when waterfowl initiate their nest, which means the residual cover from the past crop is the nesting cover.

Production systems that include burning during the nesting season would, of course, be detrimental to waterfowl and other grassland nesting birds.

In landscapes where agriculture and forestry interface, there is a potential to use wood fibre as a feedstock. Ducks Unlimited works with many members of the forestry industry to develop best management practices to minimize harvest impacts on waterfowl habitat. If feedstock came from sawmill waste, we anticipate that the effect on waterfowl habitat would be minimal, as no additional lands would be harvested.

In cases where additional existing forested lands were harvested or new woodlots were established to provide feedstock, the waterfowl habitat could be significant. The type of impact is currently unknown, and Ducks Unlimited is undertaking research to understand the relationship between habitat impacts and waterfowl populations in areas such as the southern boreal forest.

Ducks Unlimited believes that, if implemented correctly, a Canadian biofuel strategy could truly provide multi-functional benefits. These benefits could include economic development in rural prairie Canada, reduction of greenhouse gases associated with fuel production and consumption, increase in and extension of Canada's energy reserves, and improvement in wildlife habitat. If feedstock is selected for more than just its ability to produce starch, government and industry can implement a biofuel strategy that provides these benefits.

Ducks Unlimited respectfully recommends that the government take steps to maximize these environmental benefits if overall environmental improvement is one of the government's goals in supporting the development of a biofuel industry.

Specific actions that could ensure multi-functional benefits include the following.

First is providing preferential incentives to those companies that select feedstock that results in additional environmental benefits. We believe sound science is available to support the habitat value of both winter cereals and perennial forage-based ethanol production.

Second is development of a science plan, involving government, industry, and academia, to study the values that accrue from expansion of the ethanol industry in Canada. Ducks Unlimited would be pleased to participate in this effort and provide leadership in areas where we have expertise.

In addition, we recommend that the government further examine the impact of various feedstock productions on net greenhouse gas and energy balances, and impacts on water quantity and quality.

In addition to our professional staff, Ducks Unlimited has nearly 1,000 volunteers committed to fulfilling our mission, along with more than 176,000 Canadians who support us. Development of an alliance between government, the biofuel industry, and Ducks Unlimited could make the industry greener, better, and smarter, and we look forward to pursuing these opportunities to make it a reality.

Ducks Unlimited Canada is grateful for the opportunity to present our thoughts to this committee and welcomes any and all questions.

Thank you.

[The Chair, Conservative, James Bezan]

Thank you, Mr. Thoroughgood.

You did very well, and the time was only six minutes.

Next up, Monsieur Legault.

[Benoit Legault, Director General, Fédération des producteurs de cultures commerciales du Québec]

Mr. Chairman, members of the committee, good afternoon. Thank you for inviting us to appear before you.

The Fédération des producteurs de cultures commerciales du Québec has a keen interest in Bill C-33, an act to amend the Canadian Environmental Protection Act. It is clear that this legislative amendment required for the biofuel policy will have a substantial impact on the competitiveness of the grain sector in Canada and Quebec.

The federation has avoided taking part in the debate up to now on the energy and environmental issues associated with the biofuel industry. However, it remains convinced that the debate must be an objective one based only on scientific evidence. We feel that the citizens of Canada, and perhaps more particularly those in Quebec, have been very poorly informed by the media on these issues up to now.

Our organization is here today to highlight an aspect which it considers important and which seems to have been set aside when the biofuel policy and the legislative measures necessary for it were assessed. That aspect is the negative impact on the grain sector resulting from the lack of a policy or measures aimed at ensuring the sector's success. More generally speaking, our organization believes that it will be vital to develop the processing of commodities into industrial products in order for grain producers in Canada and Quebec to survive.

To begin with, agriculture in Canada and Quebec operates within the North American market context. The grain sectors in Canada and Quebec, which produce 70 and 5 million tonnes respectively, are subject to the realities and the dynamics of a larger market in the United States, our close neighbour.

[The Chair, Conservative, James Bezan]

Monsieur Legault, can I ask you to speak a little bit slower for our interpreters, so they can keep up?

[Benoit Legault]

I apologize.

The grain sector in the United States is huge, producing 450 million tonnes or nearly 20% of the world's grain. Our experience over the past 33 years, which has been shaped by a series of farm bills that continually influence our day-to-day operations, clearly shows that it is difficult, if not impossible, to remain competitive if you are not given the same opportunities. This applies to market development, support for research and expertise, and income protection.

In a world economy faced with shortages of hydrocarbons for energy purposes, but also for industrial production, grains represent a very attractive alternative as a source of carbohydrates and lipids that can be used or processed into various industrial products, including fuel.

For that reason, a lower price can now be set for this natural, renewable raw material. Grain producers in Canada and Quebec can certainly not remain competitive without this kind of protection. Providing this protection and support for the industry will have even better results if producers have access to a share of the income generated by this industry. Having a share of the value added will also stabilize incomes.

The federation views the discussion about giving priority to the use of agricultural commodities for food purposes to be a false debate. The economy being what it is, the main problem surrounding the use of commodities for industrial purposes is simply that carbohydrates and lipids derived from grain are not priced at their proper value.

There will simply be competition between the production of essential goods and the production of less essential goods. In the latter case, the excessively low price for this source of carbohydrates and lipids make them attractive for industrial production and energy use. This is true not just for grain, but also for the resources used in growing grain, such as minerals, energy, farm land, water, financial resources and, of course, the human resources involved in research, know-how and entrepreneurship.

We think that humanity will have to choose and set priorities at some point. This problem is becoming increasingly evident because of economic growth in developing countries. As you know, world grain stocks have evaporated over the past 10 years, dropping form 600 million tonnes to 300 million tonnes, and this happened well before the lastest developments in the biofuel industry in the United States.

The federation is of the view that farm families in Canada and Quebec should not have to pay the price for the refusal by multinationals and urban dwellers to place an adequate value on plant protein and calories for food, even though the available quantity of these nutrients today is limited.

Although cellulose may seem a more acceptable alternative to many people, the same issue arises since the competition between these resources is no longer about how the grain is used but rather how the increasingly limited agricultural land is used. Farmland will always be more productive, given that the most productive land has been cleared to grow food.

This bioeconomy based on farm commodity and farmland is a necessary and inevitable step. We believe that ignoring it will greatly weaken the competitiveness of the grain industry and Canadian agriculture. It is vital that this issue be considered along with the environmental and energy issues. The federation has often been questioned at this committee about why Canada should support its agricultural industry, when doing so seems to help other countries, according to some people.

Our answer has not changed. Support for agriculture through direct subsidies or structural policies like the one on biofuels is tied to a very simple reality. Grains, carbohydrates, lipids, proteins and plant calories that are produced and consumed here or exported have a beneficial impact on the agricultural community and Canadian society in general, but also on all societies in the world.

Whether we are talking about the 70 million tonnes of grain produced by Canada, the five million tonnes in Quebec or the hundreds of millions of tonnes produced in various rural regions of Quebec, this grain production makes a difference around the world. We may be naive about how the world works and the relations between its various peoples, but from our understanding, given that resources are increasingly limited, government support for the grain sector is probably the best opportunity for a humanitarian investment that Canada has had in recent years. That is basically how people see it who have lived off the land for generations.

It is also worth noting that the agricultural policy being proposed for the grain sector, which is based almost entirely on trying to develop industrial demand and sharing in value-added opportunities, will never be successful without adequate protection at the bottom of the chain. That is why the Quebec-Ontario Grain Coalition, of which we are a member, has been calling on the government for nearly 18 months to bring in flexible mechanisms and support to meet the particular needs of the various agrifood or agro-industrial chains of production in Canada.

This new mechanism is based on a so-called AgriFlex approach, which is designed to fit in perfectly with the various federal income support programs proposed by the Conservative government as part of its Growing Foward policy. AgriFlex is aimed at encouraging the provinces and producers to create companion programs to deal with regional disparities in protective measures to deal with the cyclical declines in farm income experienced in the grain sector.

Family farms would necessarily become more viable from a succession standpoint, since they would be able to count on long-term financial planning. Basically, AgriFlex would be funded from a federal envelope provided to provincial governments so that they could fund regional programs such as agricultural income support programs, including the Quebec Income Stabilization Program and Ontario's SRM, which are both aimed at the grain sector. AgriFlex would offer the flexibility required so that the federal funds could be used to partner with these regional income support programs or other regional programs focused on market development or research.

After five years of disastrously low prices, grain prices have risen again recently but remain extremely volatile and vulnerable to a sharp decline at any time. Farm families would like to see less volatility and more predictability. Because the market cannot achieve that goal on its own, we feel that this type of partnership with the government is needed in order to increase predictability and protect the viability of family farms.

In conclusion, the Fédération des producteurs de cultures commerciales du Québec is convinced that the grain industry in Canada has no choice but to tap into the same opportunities as the huge grain industry to the south of us; that the use of grain for energy and industrial purposes and therefore the biofuel policy are part of a necessary and evolving process; and that to achieve this objective we need important regulatory amendments such as those found in Bill C-33.

Finally, the success of this biofuel policy and the development of industrial products in Canada absolutely requires adequate support for the grain sector, which is at the base of the value chain.

Thank you.

[The Chair, Conservative, James Bezan]

Merci beaucoup.

Mr. Thomson, the floor is yours.

[Ian Thomson, President, Canadian Bioenergy Corporation]

Thank you very much, and good afternoon, Mr. Chairman and members of the committee. I am pleased to be before you today to speak on Bill C-33, An Act to amend the Canadian Environmental Protection Act, 1999.

Thank you for this opportunity to tell you why we believe that this bill and biofuels need your support.

I represent Canadian Bioenergy Corporation, a Vancouver-based company currently distributing biodiesel across Canada, with advanced planning for a large-scale biodiesel plant near Edmonton, Alberta. I'm also the president of the Alberta Biodiesel Association, which represents the full value chain of biodiesel interests in Alberta and whose members have the potential to produce a significant portion of Canada's biodiesel supply, based on currently available feedstocks and those non-food feedstocks we are researching and hope to utilize as soon as they are viable.

My statements reflect the experience of five years of working with the leaders of the biodiesel industry in Canada, starting at a time when this smart biofuel was entirely unknown and extending to the situation today where biodiesel is a household word and in use in large fleets across the country. It has accomplished this status because it works; because its benefits are immediate, scientifically sound, and verifiable; and because the farmers, the economy, and the environment benefit when it is used.

During my remarks I would like to make three things clear.

Number one, Bill C-33 is the most direct means by which the government can support the most positive development in Canadian agriculture in the last three decades. Bill C-33 will launch a new industry that will improve our environment, provide market stability in the traditionally challenged agricultural sector, and incent research and development for even more advanced biofuels.

Secondly, timing is critical. Financial markets are looking for certainty of policy in order to step in. They will take the risk, but they will not be reckless.

Third and last, biodiesel produced in Canada is an excellent fuel in terms of operability. It works in the full range of conditions in Canada and in terms of sustainability. It has a clear positive benefit for the environment, which I will describe further.

In the case of Canadian-made biodiesel, Bill C-33 will support a smart, advanced biofuel that reduces greenhouse gases in excess of 75% over those of diesel and improves dirty urban air, reducing respiratory illness in our large cities. It is renewable. Its use will extend available reserves of petroleum for future high-value purposes. It creates a new market. Its use will help smooth out the commodity-driven market swings that have held agricultural producers captive for decades. And it will add value to the agriculture sector. We will do more than just grow and export grains if we have a Canadian biodiesel industry.

Our society runs on diesel engines. Biodiesel is the only currently available and approved biofuel for the diesel engines that move us and the goods we consume. We live side by side with diesel exhaust every day: on transit and school buses, on downtown streets, on trains, in harbours, and increasingly in passenger cars. Biodiesel is an excellent climate change tool, but it is also an excellent local air quality tool.

Agricultural producers are huge supporters of biodiesel. I am told by the members of the canola growers advisory council that assists our company that canola growers know high prices will not last, and when prices do drop, producers will have a new market—biodiesel—to fall back on. This is significant in the context of the billions of dollars spent every year for Canadian agricultural support payments, federally and provincially. In the United States, the USDA has calculated savings in the billions of dollars diverted from historical price support programs as a direct result of federal government incentives for the biofuels industry.

Programs that support direct ownership in biofuels manufacture, such as the ecoagriculture biofuels capital initiative, also known as ecoABC, will ensure that Canadian farmers will be owners in the industry. Our company is very clear that producers must benefit from this industry, and we have structured our company so that they will.

Actions are required now to ensure market demand. Canada will be in good company as it takes steps to ensure renewable content in its fuel pools. OECD countries, particularly the European member states, have had clear biofuels policies for years and continue to expand them. Canada is late to the game but is fast catching up. But time is of the essence. This industry can stand on its own feet only when it has fully established the production capacity to be competitive internationally.

The private capital required to build the biofuels production plants needs clear, long-term commitment to the industry from federal and provincial governments. Without the assured market demand coming from the blend level provisions of the renewable fuel standard, biofuel production plants and supporting infrastructure will not be built in Canada. Delay in passing this legislation risks losing the tremendous biofuels opportunity, especially for the Canadian farmers who stand ready to participate in this new and important industry.

Two decisions must be made to ensure there is sufficient demand to establish this nascent industry. The first decision you can make immediately: pass Bill C-33 without delay. The absence of specific regulations to define how renewable content will be achieved should not delay the passage of this critical bill.

In a few months' time, we will need the second decision you and your colleagues can make, namely, to get biodiesel on the same timetable as that for ethanol—January 1, 2010. What do I mean by this? The original renewable fuel standard timetable developed in the late summer of 2006 pushed biodiesel implementation to as late as 2012. Our industry needs an implementation date of January 1, 2010. Delaying a biodiesel mandate until almost four years from now will, simply stated, kill or significantly delay new plant construction and would be a wholly unnecessary delay, defensible on neither technical nor policy grounds.

We expect in the next few months to successfully complete the most important requirement for a 2010 RFS date, namely a pilot test to confirm full operability of biodiesel in extreme cold weather. In many years and in many millions of kilometres of road tests in Canada, across Europe, and throughout the United States, biodiesel use, when produced and handled to strict quality specifications and guidelines, has established its efficacy and safety so that we can support with confidence the adoption of biodiesel in the Canadian fuel marketplace.

There are no reasons to delay the timetable another two years. British Columbia, where I live, will have a 5% renewable mandate in diesel fuel by 2010, and if B.C. can do a 5% mandated blend, the federal government can most certainly implement a 2% renewable mandate in diesel fuels by 2010. Loopholes, such as renewable credit carryovers, market out measures, or adoption delays, will only harm the establishment of the renewable fuels production industry in Canada. Credible sustained market access for renewable fuels must be observed by the regulatory regime adopted pursuant to Bill C-33.

Canadian biodiesel is a sustainable smart fuel. Biodiesel made from Canadian canola provides an immediate carbon reduction strategy. Canola biodiesel makes the superior cold weather biodiesel required by Canadian climatic conditions, and it is grown in surplus and in abundance in a full life cycle, sustainable manner on non-irrigated, established arable lands across the Canadian Prairies, and in lesser amounts in Ontario and Quebec.

I wish to address suggestions that biofuels can cause environmental degradation and that feedstock cultivation methods in biofuel production processes release more carbon than they displace, through their use as transportation fuel. Canada's largest anticipated biodiesel feedstock, canola, has proven it has significant benefits environmentally. It has greenhouse gas reductions in excess of 75%. It returns three units of energy for every single unit of fossil fuel used to produce it, and it will bring only minimal new land area under cultivation. High biodiversity ecosystems and established carbon sink lands will not be harmed from crop production.

Canadian biodiesel will also not cause food shortages or drive up food prices. Canada grows more than enough canola to fill the federal renewable fuel mandate set out by Bill C-33. In addition, the Canadian Renderers Association has indicated that Canadian-produced fats and rendered recycled greases are also available in substantial volumes for biodiesel production in Canada.

At a 70:30 ratio of canola to fats and oils in feedstocks supplies for biodiesel production in Canada, the federal government's recently announced requirement that 2% of the volume of diesel fuels used in Canada be renewable fuel will require approximately 900,000 tonnes of canola seed. This compares with the carryover of canola seed—that portion of the crop unsold at the end of the year—which is well under that for future years, and has been for the last three years.

With the U.S. and European legislative and regulatory measures, it be will be an important part of the regulatory process under Bill C-33 to ensure that biofuels adopted by the Canadian marketplace do not lead to unsustainable or harmful practices in biofuel production and use. The global biofuels industry is founded on the premise and promise of a better environmental fuel supply. Our biofuel regulations must ensure that biofuels credited toward to RFS requirements do not contribute to more greenhouse gases or air pollutants. We must protect biodiversity, sensitive wetlands, watersheds, and endangered species. The biodiesel produced in Canada will meet the most rigorous international sustainability standards for biofuels, and we must act to ensure that any imported biofuels are certified to meet Canada's environmental standard.

We encourage this committee to support this legislation.

Thank you for giving me this opportunity to appear this afternoon before the committee. I will be pleased to answer all of your questions.

[The Chair, Conservative, James Bezan]

Thank you, Mr. Thomson.

Dr. Chornet, welcome to the committee. First I want to ask you if you prefer receiving the audio from the floor or whether you want it in French or English.

[Dr. Esteban Chornet, Professor, Department of Chemical Engineering, University of Sherbrooke]

To be truthful, I would prefer the audio in Spanish.

[The Chair, Conservative, James Bezan]

No posibilidad, lo siento.

[Dr. Esteban Chornet]

But I can function in both the country's official languages.

If it is appropriate, I would prefer to continue in English.

[The Chair, Conservative, James Bezan]

That's not a problem.

With that, the floor is yours. If you can make your opening comments for ten minutes or less, we'd appreciate it.

[Dr. Esteban Chornet]

Yes.

I was asked to present my views in front of your committee. I'm not accustomed to hearings of this nature. I am a scientist. I am a professor at the university, and I hold the chair in cellulosic ethanol and second-generation biofuels. I also have a large number of activities in the real world outside of the university with the companies I have helped to restructure and function in the area of biofuels and bioenergy.

Since my predecessor made an eloquent pitch for biodiesel, I will skip comments on biodiesel and focus on comments on cellulosic ethanol, preceded by some comments on grain ethanol.

I think it's important that we understand there is a large consensus in Canada, at both the federal and provincial levels, on the need to move towards mandated targets. In the case of ethanol, it's 5% ethanol in gasoline by 2010. Some provinces, like Quebec, say 2012. This is a small argument between the province and the federal level, but I think the focus is to move towards this 5% as quickly as we can. This represents a market, in the case of ethanol, of two billion litres per year in Canada, of which 767 million litres today are produced from grain ethanol. An added capacity of 680 million litres will also come from grain ethanol in 2008 and 2009.

In Quebec, we have GreenField Ethanol, a Varennes plant that produces a little over 120 million litres per year. However, in Quebec there have been voices raised against grain ethanol. The voices indicate that grain ethanol should be capped at some number out of these two billion litres a year and that the next generation of ethanol should come from cellulosic residues. That seems to be not only a Canadian choice, but also a choice in America and Brazil, where gas is going to be used more and more for second-generation ethanol.

And why this second-generation ethanol? It's because there are some constraints in extending the use of grain for carbohydrate for ethanol. We think it will be advantageous if the same companies that are retiring grain ethanol are moving towards cellulosic ethanol progressively to meet the mandates of both the federal and provincial governments.

Cellulosic ethanol is important. It is focused on forest residues, agricultural residues such as corn stover, and on urban residues, which are the residues from municipal solid waste that cannot be recycled. Even with appropriate sorting, there is a limit to what you can recycle.

While we consider cellulosic ethanol as a sector or subsector of the entire ethanol industry, we think these three types of feedstocks will be present in the production of ethanol. You might ask what the technologies are for this. Are they ready? Are they close to ready? Cellulosic ethanol can be produced in two ways. Either you go into the production of sugars and fermentation, which is analogous to the grain ethanol, or you use all the carbon by gasification of the feedstock, producing a uniform gas. This gas is converted by catalytic synthesis into ethanol, by the way. We can also convert it into diesel, if we so wish.

Both routes are appropriate, and both routes are being investigated. Certainly the gasification route is something that is proven, because ethanol and hydrocarbons have been produced in South Africa for over one generation, using coal as raw material and gasification as the technology to convert this coal into a uniform SNG gas.

What we see happening—and I think the federal system has to understand it—is that the options for ethanol are grain and cellulosic. For the cellulosic, the most advanced systems are those that are looking into gasification, which I think can be implemented today. Certainly in the United States and Canada, we have companies that are moving in this direction.

So I'm looking very optimistically to the next few years, because I think we will be able--not necessarily by 2010 but certainly by 2012--to produce whatever is necessary to meet this 5% mandate at a cost that begins to make sense. The cellulosic ethanol produced by gasification will have a cost target that is very similar to today's ethanol from grain. Cellulosic ethanol produced by hydrolysis and fermentation may be a little more expensive, because they use more expensive raw materials than the first one does.

So I think we are committed to this. I see the market, and not only the technology market but the financial market. I think the bills that the federal government is ready to pass will be essential, will be good, and will be appropriate to move Canada a step forward into this international course for biofuels, and I think we are very well positioned to be in the driver's seat, as you say in the English language.

I do not know whether you have any questions to ask. That is the end of my remarks. I may have used less time than expected or than you would have wished, so I will be pleased to answer your questions.

[The Chair, Conservative, James Bezan]

[Chair speaks in Spanish]

We're going to open it up to questions, to the members. We're going to stick to five-minute rounds. We'll try to get in as many as we can before five o'clock.

Mr. Steckle, could you kick us off?

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

This afternoon we've bandied about a number of comments about competitiveness, about importation and finding feedstocks, whether it's in the ethanol creation business or in biodiesel. We know there are many products out there today, and without government intervention in either one of these two fuel industries, we're not going to see us continue. Neither will the Americans, for that matter. I'm just wondering at what point the price of grains is going to make it impossible for governments to continue to support it.

We look at the efficiencies. We know that all of us are aiming towards a goal of a greater, better, and greener environment. That's the ultimate goal. I think all of us would like to see us move into the cellulosic industries as quickly as possible, removing the need for protein-based products as a source of feedstock.

But I was reading a paper this morning about the E85 model. Using that as a model, if we were to go to that extent at some point in time in the future, to any great extent, as I understood it, we would be able to go a 30% shorter distance with the equivalent volume of fuel with an E85 base. Does that same rationale work through the system at the 5% level or 10% level? Or is that a complete fallacy? It created for me some doubt when I read that this morning. In other words, you go a 30% shorter distance with that tankful of E85 fuel than you would with gasoline.

[The Chair, Conservative, James Bezan]

Who wants to answer that one first?

Paul, are you directing this to any particular witness?

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

Perhaps we could hear from Mr. Thomson first. Then I'd like to direct a question to the professor.

[The Chair, Conservative, James Bezan]

Why don't we go to Mr. Thomson first and then Dr. Chornet?

[Ian Thomson]

I do not know ethanol well. I do know that there is a lower energy density and that there is a loss of fuel economy as a result, and I think for low-level blends you would just have to look at the particular chemistry. Biodiesel in its pure form has less energy density, but it has other properties that more than make up for that. So at the low-level blends that we are looking at for renewable fuel standard, there is no difference in fuel economy whatsoever.

[The Chair, Conservative, James Bezan]

Dr. Chornet.

[Dr. Esteban Chornet]

Ethanol does have a lower density than gasoline. Hydrocarbons have the highest density of all the fuels known.

I would not recommend going immediately to E85. I think the main reason that the 5% and eventually the 10% ethanol in the gasoline is proposed is to have some environmental benefits. Certainly with a gas tank full of ethanol, you will go a lesser distance than a gas tank full of gasoline. So I think an increasing movement towards 5% and then 10% makes more sense to me, because it is built upon the existing hydrocarbon industry, which has served the country very well for over a hundred years. We just have to be moving progressively. And cellulosic ethanol will be transformed perhaps into bio-hydrocarbons as a third generation, so everything will be the same type of material pool within 20 years, or 10 years, or 15 years.

Moving prudently towards 5% and 10%, in my opinion, is the way to go.

[The Chair, Conservative, James Bezan]

Monsieur Legault also wanted to comment.

Stéphane, s'il vous plaît.

[Stéphane Bisaillon, Second Vice-President, Fédération des producteurs de cultures commerciales du Québec]

Some people claim that the price of ethanol will be the same as that of gasoline and that it will be 30% less efficient, but we will have to see how much E85 costs for the same number of kilometres. Perhaps people will drive less to save money, but if they put less money in the gas tank it will be better for the environment. What we really need to know is the price of E85.

[The Chair, Conservative, James Bezan]

You have about 10 seconds left.