Evidence of meeting #17 for Agriculture and Agri-Food in the 40th Parliament, 2nd session. (The original version is on Parliament’s site, as are the minutes.) The winning word was fuel.
A recording is available from Parliament.
Conservative
Randy Hoback Conservative Prince Albert, SK
You're in committee here, Wayne, so don't waste their time.
Liberal
Liberal
Wayne Easter Liberal Malpeque, PE
That's a fact. We have a minister who cannot appear before this committee and come prepared.
Now, with regard to the first set of witnesses, Gordon, how much impact will lower petroleum prices have on the ethanol industry? The trigger to feedstock into the ethanol industry and to have them profitable is really what the price of that feedstock will be, so for us in the agricultural arena it's a catch-22. If you're in the ethanol industry, low prices are certainly going to hurt you. It's been seen to hurt a lot of operations in the United States, which have a more cooperative style than they have in Canada. On the other side, if prices are low, the primary producer is taking the hit. So how much impact do petroleum prices have on the ethanol industry in total?
President, Canadian Renewable Fuels Association
As Tim alluded to, Mr. Easter, it has a significant impact. I mean, it is the fact that we haven't seen that decoupling of price between ethanol and petroleum taking place, because the market we are talking about, when we talk about a 9 billion, 10 billion, 10.5 billion gallon market in the United States, is relatively small. On a global basis we're less than 5% of the global transportation fuel pool.
In a world in which we continue to be linked, your description is a very accurate one. In a world in which ethanol producers three or four years ago could look at a stable price of corn at $2, which we all agree they could not make money on, and then depending on the fluctuation of the price of petroleum, determine the profitability of ethanol producers....
Because we had the stability of feedstock pricing, last year became a very interesting year, obviously, for the industry. We saw corn as high as $8 a bushel. We saw hedge funds in the United States controlling upwards of 60% of the entire wheat market, and it distorted quite dramatically the whole pricing mechanism. It's only now in the sort of sober second thought world of that price speculation and price spike coming down that we can look statistically at what our world can look like going forward, because the price of corn right now is upward in the $3.60 to $4 a bushel range, where we suspect it will stay for some time.
It's the size of the market over time of biofuels expanding that will ultimately get us to that price decoupling. When we can see that happening it will make it a little bit more predictable for producers.
Liberal
Wayne Easter Liberal Malpeque, PE
I want to turn to the Canadian Petroleum Products Institute, but this is for you to think about in the meantime. In terms of the research and development into bioproducts as feedstock, which is a real concern, especially for the hog industry, where are we at?
This is for both Peter and Tony. Peter, you talked about the great concern about the absence of regulatory contracts, and Tony, you mentioned this new development coming out of Environment Canada. Why are we having a patchwork quilt?
The government has made lots of announcements on ethanol. They are great at making announcements, no question. But they're not great on a national vision, and of course they're opposed to regulation. The problem, as I see it, is that even at the central level you have Environment Canada doing one thing, Agriculture Canada doing another, industry doing another. This town operates in silos, and that's not a partisan comment. Whatever government is in power, it works in silos that way.
Is that part of the problem in terms of our getting to where we have to go in a straightforward fashion, so that you have the certainty and can make decisions on your end of the equation?
Vice-President, Public and Government Relations, Canadian Petroleum Products Institute
Mr. Easter, you quite rightly described the city of Ottawa, but I'll offer a couple of observations.
This has an agricultural dimension to it. It has an energy dimension to it. It has a climate change dimension to it. It has an air quality dimension to it. And there's no shortage of debate, not just within Canada but around the world.
I can't give you the specific reasons for why we were not able to engage with Environment Canada officials as the NOI intended back in 2007, so that we could be ready for 2010. I can tell you, though, that we are busy with Environment Canada on air quality intentions and climate change intentions. They're a very busy department, and I'm not in a position to suggest which priorities officials should be working on there. I do know that they've been professional, just not as timely as we would have liked.
It is the responsibility of Environment Canada to develop the regulations, because the Canadian Environmental Protection Act is the enabling legislation under which regulations are going to be developed.
There's another element to regulatory design that is going to be needed, and that's in respect of section 147 of CEPA, which prescribes the circumstances under which waivers may be needed on a going-forward basis, as we frankly complicate the fuel supply system in this country. But I don't fault any particular department. I don't think it's because of a lack of interdepartmental cooperation. I think it's a function of a very heavy agenda at Environment Canada.
Conservative
Brian Storseth Conservative Westlock—St. Paul, AB
On a point of order, Mr. Chair, I'd just like to set the record straight, as many members weren't at the subcommittee meeting last night. The facts are that the minister offered Mr. Easter a translated version at a later date. Mr. Easter declined.
The second fact is that Mr. Easter argued for more time with the minister and then proceeded halfway through his second round to say he had no more questions for the minister.
I think it's important that the facts are set straight.
Liberal
Wayne Easter Liberal Malpeque, PE
Yes, it is. I don't like misinformation being tabled with the committee. I said I had lots of questions, but--
Conservative
Conservative
Liberal
Wayne Easter Liberal Malpeque, PE
Mr. Chair, you just said nothing that Mr. Storseth said was misinformation. There was. Go to the record and look. You cannot make that kind of judgment, Mr. Chair.
Conservative
The Chair Conservative Larry Miller
I can if I believe it to be true, and I think what he just pointed out--
Liberal
Wayne Easter Liberal Malpeque, PE
Well, you go to the record and look, and apologize to me next week.
Conservative
Pierre Lemieux Conservative Glengarry—Prescott—Russell, ON
Thank you very much, Chair.
First of all, thank you for your presentations today.
I think there are some really good aspects to what we're discussing today. The first is that I think this is good for farmers. The farming sector is a big user of fossil fuels, and if we can put pressure to bring the cost of fossil fuels down, that's beneficial to farmers. That's a big input for them.
It's also beneficial to Canadians. We spoke about the environmental side, the air quality side, and the economy side. It's good for our environment as well.
I want to ask a question about first generation and second generation. Right now, first generation is quite marketable. However, second generation is where we move away from grains into agricultural residues, perennial crops, etc. I'd like to get a sense from you as to where we are in the timeline, the transition from the first generation being marketable here in Canada--because that's where it concerns us most--to the second generation being marketable here in Canada.
Executive Vice-President, Iogen Corporation, Canadian Renewable Fuels Association
As many of you may know, Iogen Corporation has a demonstration plant here in Ottawa.
By the way, Mr. Chair, any members of the committee are more than welcome to come out for a tour. It is the largest and only operating cellulose-to-ethanol demonstration plant in the world. We've been making fuel since 2004. We fuel, for example, Government of Canada fleets. We have our own E85 fleet that we run.
It's amazing to me every day. I drove here today in a cellulose E85-powered Chevy Impala. I'm always amazed that the fuel I drive my car on came from straw.
There are complicated scale-up questions and cost questions associated with going from demo to commercial. Where are we on the time scale? It is our hope that we can come to a final investment decision towards the end of this year or early 2010, and then there would be a two-year construction period. So we'd be looking at some time in the spring or summer of 2012, if we can meet that January 2010 investment decision hurdle. By 2012, we would be looking at the first commercial plant.
President and Chief Executive Officer, Biox Corporation, Canadian Renewable Fuels Association
BIOX is currently a second-generation plant. We use agricultural residues. To Mr. Easter's point, we actually are using pork byproducts as the fats. The things that are not edible we turn into fuel and put in people's cars. So we're already there.
We're looking to build some more. We have some locations in Hamilton, and another in place in Montreal, one in Quebec City, one in B.C., and one in Alberta that we are actively looking at.
It is about getting the certainty. Speaking to Mr. Boag's point, we actually agree on the political certainty; we just don't agree on the timing difference that is required. The great thing about democracy is that we're allowed to agree on—
Conservative
President and Chief Executive Officer, Biox Corporation, Canadian Renewable Fuels Association
Our point is that we are there now in biodiesel. The next big breakthrough in biodiesel will be algae, of which 50% by weight is fat. Fat is what you make biodiesel out of. Algae is being researched. We're heavily involved in research into algae and the separation of the fat. I think you're going to find some big breakthroughs as far as that's concerned, and it will add a lot.