Good afternoon. My name is Camil Lagacé and I am the President and Chief Executive Officer of the Conseil québécois du biodiésel.
First of all, I would like to thank you for inviting us here today to comment on Bill C-33.
Generally speaking, we support the proposed amendments to the act. We support the overarching principle. In that regard, we are not here to challenge the exercise that is underway. However, we would like to make a few points that, in our opinion, could be beneficial when the time comes to provide guidance for the actions that will come from making these changes to the act.
As far as establishing a minimum average biofuel content, it is not enough to create a biofuel market that is real, that can quickly and easily be integrated into the existing distribution infrastructure of petroleum products and that will readily convince users to choose biofuels.
In the case of biodiesel, the proposal for minimum average content is contingent on its being proven feasible. This being the case, it is important that this be demonstrated as quickly as possible, for every segment of the market in which biofuels might be used, whether it be in the transport sector, for roads, and for other applications such as rail, shipping, agriculture and heating. Moreover, this demonstration must be made with the participation of a greater number of partners representing various potential users. Current conditions and regional differences must also be taken into account.
The use of petroleum products and the logistics regarding their distribution vary considerably from region to region in Canada. As far as introducing a national biofuels strategy is concerned, such a uniform approach could run into problems at the regional level that would slow down deployment. Market conditions must be promoted that would truly contribute to the sustainable development of the biofuels industry or the renewable fuels industry, that is to say that rules must be put into effect that will allow the Canadian industry to compete with products from elsewhere.
I will give you an example. Currently, the mechanisms in place in the United States ensure that all of the Canadian biodiesel production goes through that country, in order to take advantage of tax incentives, such as the blender's credit, which allows those making blends to bring a subsidized product to market, which is therefore cheaper and more attractive to the customer. Parameters must be defined for the development of biofuels production subsidiaries between the first, second and third generations using quotas for suppliers and feedstock, as the Americans are currently doing, and as are some European countries including England, France and the European Union.
I will give you an example. We want to implement regulations in Canada. If we are discussing corn ethanol versus cellulosic ethanol, it must be decided which regulations will deal with the biofuel production subsidiaries. In the case of biodiesel, it will be a question of determining what proportion of the biofuel will be produced from dedicated crops, on the one hand, and residual feedstock on the other.
As far as non-compliant products are concerned, it is critical that within the framework of the implementation of biofuels regulations, we ensure that only products that meet quality standards will be used, and not product substitutes that do not meet any standard.
I will now address the issue of aid programs for biofuels, whether they are aimed at developing markets or creating demand. In the United States, biofuel plants are currently working at only 40% capacity because they are having difficulty getting a foothold in the distribution system and connecting with users. In this context, the Conseil québécois du biodiésel wants to organize a project called BioRoute-BioHighway next spring in the Quebec-Windsor corridor. The objective is to actively work on creating a market for biodiesel by connecting users to producers and to biodiesel distributors in Quebec and in Ontario. We are running into obstacles in terms of funding the project because it does not fit into programs set up by the federal government under regulations intended to impose a minimum average content for biodiesel by 2012.
In other words, we like the idea of the project, which closes the production and product-use loop, except that there is no program to help make this a reality. Today, several departments believe that imposing a minimum content will be sufficient to automatically create demand.
Following a study on the distribution of biodiesel in Canada, it will be important to adapt in an intensive way the biodiesel distribution network throughout the industry. To achieve this, we will need different types of support. The U.S. Biodiesel Blender Federal Excise Tax Credit is an eloquent example. It combines products, but it also benefits from accelerated depreciation to help absorb the costs to adapt infrastructure.
The two last points deal with regional development and the production of biofuels. Though seemingly interesting at first glance, small-scale production of biofuels with a production capacity of less than 5 million litres per year is risky, because production plants may not be viable. This is partly due to the cost of quality assurance, as well as the minimum amount of biofuel which the distributors of oil products would want to purchase. A smaller production plant will not necessarily be profitable in the long term.
Lastly, with regard to the providers of raw materials, particularly in regions where volumes are generally smaller, such as canola production in Quebec, we should not rush any decision to invest in the production of biodiesel because it is a hot issue or because it can benefit from government support, especially if we are talking about small-scale production. It would be much wiser to wait and consider the use of this biomass in combination with other available biomasses in the region which could potentially be processed into value-added materials at the biorefinery.
Thank you.