Agriculture Committee on April 20th, 2021

[The Chair, Liberal, Pat Finnigan]

Good afternoon, everyone, and welcome.

I'll call this meeting to order.

Welcome to meeting number 26 of the House of Commons Standing Committee on Agriculture and Agri-Food. Pursuant to the order of reference of Wednesday, February 24, and the motion adopted by the committee on March 9, the committee is resuming its study of Bill C-206, an act to amend the Greenhouse Gas Pollution Pricing Act (qualifying farming fuel).

Today's meeting is taking place in a hybrid format pursuant to the House order of January 25, and therefore members are attending in person in the room and remotely using the Zoom application. The proceedings will be made available via the House of Commons website. Just so that you are aware, the webcast will always show the person speaking rather than the entirety of the committee.

I would like to take this opportunity to remind all participants that screenshots or taking photos of your screen is not permitted.

To ensure an orderly meeting, I would like to outline a few rules. Before speaking, please wait until I recognize you by name. If you are on the videoconference, please click on the microphone to unmute yourself. Those in the room, your microphone will be controlled as usual by the proceedings and verification officer.

A reminder that all comments by members and witnesses should be addressed through the chair.

When you aren't speaking, please mute your microphone.

We'll now start with the witness list.

Perhaps I'll start with the Producteurs de grains du Québec, but I don't know if they're here yet.

With us we have the Canadian Federation of Agriculture, with Mr. Keith Currie, vice-president, and Frank Annau, director of environment and science policy. From the Grain Growers of Canada, we have Erin Gowriluk, executive director, and Mr. Jonothan Hodson, director. From the Producteurs de grains du Québec, we have Monsieur Christian Overbeek, president.

Let's begin with the Producteurs de grains du Québec.

Mr. Overbeek, you have the floor for five minutes. We are listening.

[Christian Overbeek]

Thank you very much, Mr. Chair.

Good afternoon. My name is Christian Overbeek; I am a farmer from Saint-Hyacinthe and the owner and sole shareholder of a family business. My main crops are corn, soy and wheat, which I grow non-commercially to improve the quality of my soils, as well as a few cover crops and intercrops such as ryegrass, clover, fall rye, radish and others.

To give you a brief description of our sector in Quebec, we grow grain on more than 1 million hectares across Quebec. Those crops are maintained by 9,500 families, who produce more than 5 million tonnes. As you can see, this is extremely diversified farming. We grow a broad range of grain crops across Quebec.

As per our normal farming practice, we must first of all ensure that we can cultivate our fields through sowing, crop maintenance, harvesting and tillage operations. In the past few years, we have obviously added farm-based grain drying and conditioning as well as storage. All that requires energy consumption. Consequently, if we want to stay competitive in the grain sector, it is important for us to have access to cheap energy that is not overtaxed by different aspects of various government programs.

Product quality is extremely important for us grain growers because consumers in local, provincial, national and international markets still want top-quality grain. Knowledge acquired in recent years has shown that we must harvest at slightly higher humidity levels than what the market expects, condition our grain on the farm and then market it guaranteeing the high level of quality that has made the reputation of Canadian grain in Canadian and international markets.

Any additional tax will thus increase our production costs and make us less competitive with other farmers around the world.

I understand that Quebec is currently subject to a carbon pricing system that may be different from what's being done in other Canadian provinces. Ultimately, we want to be sure we are operating on a fair and equitable basis with all farmers around the world.

To sum up the situation, the carbon tax of $23 per tonne for a medium-sized Quebec farm currently has an average financial impact of more than $2,000 on every farm in Quebec and thus an extremely significant effect on our sector's competitiveness.

We very much want this tax to be fully refunded to us through various Canadian government measures or simply for the government not to tax propane, diesel or natural gas in the first place.

Those are the essential points I wanted to make today given the short period of time we are allotted.

I will be pleased to answer your questions.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Overbeek.

I believe Mr. Hodson is here, so we'll give the Grain Growers of Canada five minutes to make their statement.

Thank you.

[Jonothan Hodson, Director, Grain Growers of Canada]

Hello, Mr. Chair and honourable members. Thank you for the opportunity to appear before you today.

My name is Jonothan Hodson. I am a member of the board of directors of the Grain Growers of Canada. On that board, I am a representative of the Manitoba Crop Alliance, a producer group representing wheat, barley, corn, sunflower, flax and winter cereal growers across Manitoba. I am joined today by the Grain Growers of Canada executive director, Erin Gowriluk.

I farm near Lenore in southwestern Manitoba. Our family farm is fifth-generation. We have a diverse crop rotation of corn, spring wheat, barley, canola, soybean, peas and forages as well as a cow-calf operation.

I'm here today to express our support for Bill C-206. This legislation would expand the existing exemption from the price on pollution for qualifying farm fuels to include propane and natural gas. The expansion of this exemption is critical to grain farmers like me, because we often need to dry our grain prior to marketing it.

In yesterday's budget we were pleased to see the government's intention to return a portion of the carbon tax collected back to farmers in backstop jurisdictions beginning in 2021-22. We look forward to additional details. However, we continue to support the passage of Bill C-206, as it remains the most straightforward, cost-efficient way of providing a full exemption for grain drying where no alternative fuel source exists.

Canada is truly blessed with a large agricultural land base right across this country, but many areas have to deal with a short growing season in combination with a changing climate. We are increasingly feeling the impacts of wet harvests and early snowfall. When we experience a lot of moisture and unpredictable weather, we have no choice but to dry our grain to make it suitable for the markets who rely on us, both at home and abroad.

Canadian producers grow and market some of the best-quality grain in the world. In many regions of Canada, one of the tools we use to ensure that quality is the grain dryer. The reality is that putting grain with too high a moisture level in the bin isn't an option for us. It needs to be dried to the correct level or we risk losing part of, if not the entire value of, that product. When compounded by the rising carbon tax, this represents a real blow to the profitability of my farm.

A couple of years ago, we made a significant investment of over $100,000 to upgrade to a more efficient grain-drying system. There were no programs available. Just like many other farmers, we spent the money ourselves to improve our drying efficiency. If there was a grain dryer that ran off something other than fossil fuels, we would look at upgrading again, but that option just does not exist right now.

Each year our farm spends between $15,000 and $25,000 in propane to dry our grain. Of our total expenses, this is not the largest, but as a necessity after harvest, money spent on drying my grain is money out-of-pocket. Each year the carbon tax goes up, that is more money straight off my bottom line. As a farmer, I am a price-taker, not a price-maker. Unlike other businesses, I cannot pass on these extras costs to the consumer. However, the increased costs of production for my inputs and equipment and the rising rates for rail and road transportation do get passed on to me.

This legislation is not a remedy for the increased costs that the carbon tax adds for us. However, it is an important recognition that the spirit behind the carbon tax cannot be achieved in this instance. The desired purpose of the price on pollution is to drive a transition to alternative fuel sources, but in the case of grain drying, there are simply no viable alternatives available.

There are other environmental considerations beyond just taxing unavoidable emissions. Certain crops that are common across all of Canada, such as corn, are generally harvested with high moisture and must be dried. Corn has become a valuable part of my crop rotation, which in and of itself is a critical tool in the environmental sustainability of our operation. Crop rotation provides many benefits, including improved soil health, reduced erosion and disease prevention. If the costs of drying become too high and eat away at potential profits too much, that will be one less crop available for our rotation and a potential loss of those environmental benefits.

We were very encouraged to see support for this legislation from the Bloc Québécois, NDP, Green Party and a number of independent MPs. It is important to recognize that where the carbon tax is ineffective in its aim, changes like those proposed in Bill C-206 should be made. I hope this legislation will receive unanimous support to pass through this committee and be on a path to become law in time for this year's harvest.

Thank you, Mr. Chair. We would be happy to answer any questions the members may have.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Hodson.

We will now go to the Canadian Federation of Agriculture, and Mr. Frank Annau and Mr. Keith Currie.

You have five minutes for an opening statement. Hopefully, the sound will be okay. I believe they didn't have time to run the checks. I just want to advise the committee that although we do have that requirement as a motion, they did not have time. Hopefully, things will work out great.

Mr. Annau, you can start your statement.

[Frank Annau, Director, Environment and Science Policy, Canadian Federation of Agriculture]

Thank you so much.

I'm just checking.... Can everyone hear me okay? Perfect.

I'll leave my video off to give myself some more bandwidth here to accommodate my audio.

Good afternoon, everyone. Thank you to the chair and the committee for inviting us to appear today.

My name is Frank Annau. I'm the director of environment and science policy. Our vice-president, Keith Currie, should be joining us shortly.

We greatly appreciate this opportunity to provide testimony on Bill C-206, an act to amend the Greenhouse Gas Pollution Pricing Act (qualifying farming fuel). The CFA is Canada's largest general farm organization, and we represent approximately 200,000 farmers and farm families nationwide. We are dedicated to promoting best management practices that reduce on-farm emissions to help Canada meet its goals under the Paris Agreement.

However, the carbon tax has significantly increased farmers' cost of business. As price takers, farmers cannot pass on these costs to customers or to the national market. To that effect, our members greatly support the bill's goal to extend the exemption for qualifying farming fuel to marketable natural gas and propane.

As everyone is aware, Bill C-206 arose largely in response to the 2019 wet harvest, when extreme rainfall put increased burden on grain drying, which is made even more expensive by the carbon tax. The Western Canadian Wheat Growers Association has reported that some farmers paid over $10,000 in carbon taxes on their grain drying bill that fall alone.

These price hikes led the Green Party and the Conservatives to both comment that carbon tax relief for farmers was justified and necessary and [Technical Difficulty—Editor]. During the bill's pandemic hiatus, the government released a report estimating that the carbon tax had only increased grain drying costs by an average of $210 to $774 in 2019. The CFA did not endorse this downplaying of impacts, as the low range estimates were provided by the Government of Alberta, a province that was not under pollution pricing for the 2019 harvest and had no real-world data to contribute to the report. As such, this report does not rebut the need for exemptions under Bill C-206.

The Liberals have since raised a very valid concern that the bill might not provide the intended relief for grain dryers, as dryers are not considered eligible farming machinery under the Greenhouse Gas Pollution Pricing Act. To ensure that the bill provides the intended relief for farmers, the CFA is recommending that it cover exemptions not only for grain drying but also for machinery used for livestock heating and cooling, and for irrigation as well. The rationale is that these tools are critical for mitigating the increasing on-farm impacts of climate change.

Canada's changing climate report shows that annual precipitation has increased in all regions since 1948, especially during the fall and winter seasons, the very months that harvesting and grain drying take place. With each passing year, this trend results in a higher risk of conditions similar to or even worse than what we saw in 2019. The same report further states that temperature extremes have also increased since 1948, which will raise the severity of heat waves and droughts and will bring a higher risk of crop damage and livestock heat death. While extreme heat has yet to have its carbon tax watershed moments, it is only a matter of time.

When that time comes, farmers should not be penalized for relying on tools needed to mitigate these impacts. We, instead, believe that the money paid in carbon surcharges would be better spent on participating in programs that increase fuel efficiency, such as those announced in yesterday's budget. While the CFA is currently analyzing the budget, these programs do appear to offer avenues to obtain these efficiencies. However, it must be noted that these avenues are often administered as cost shares, with farms required to contribute up to 50% of expenses.

As such, it is in the best interest of government to ensure that farmers have the cash needed to invest in and deliver these programs. While the carbon tax's driving up grain-drying bills to $10,000 does add incentive to reduce emissions, it also reduces the amount of cash that farmers have to buy into these cost shares. That is the reason why the exemption is still required. As it stands now, carbon surcharges have the very unintended effect of taxing the very mitigation measures needed to respond to droughts and extreme rainfall.

As an incentive to drive down emissions, the tax is an added and unnecessary burden. Even with exemptions for natural gas and propane, the price of those fuels is still scheduled to increase under the clean fuel standard in 2023. This, combined with cost savings from fuel-efficiency programs, is more than enough incentive to reduce emissions.

In closing, the CFA shares the government's vision of a future with zero-emission energy sources that are scalable and adopted by the agri-food sector. Until then, the upward trend of climate impacts will place continued strain on even our most innovative fuel-efficiency gains. That is why the exemption for natural gas and propane must be applied to grain drying, irrigation, and livestock heating and cooling.

Thank you, again, for this opportunity to engage. We welcome any questions that you may have.

[The Chair, Liberal, Pat Finnigan]

Thank you very much, Mr. Annau.

Now we'll go to our round of questions, starting with a six-minute round for Mr. Philip Lawrence.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Thank you, Mr. Chair.

It is a pleasure to be back out in front of the agriculture committee.

Also, thank you to the witnesses.

I just have a brief comment here, if you'll indulge me.

I think one of the untold stories of the pandemic is the sacrifices our farmers have made. They've been working through all the challenges with the lockdowns to make sure that we haven't had disruption in our food supply. They work every day, tirelessly, even before the pandemic and then with the additional obstacles.

A big thank you, I'm sure, on behalf of everyone here—and all Canadians—for everything that you and your members have done for Canada in keeping us well-fed during these difficult times.

Let's go on to our questions. First of all, I just want to go round the table with all of the witnesses to hear what the impact of the carbon tax is on their members. Could they comment on whether the credit provided by the government is substantial, or whether in fact the majority, if not all, of their members are actually in a loss position because of the carbon tax?

I'll start with the Grain Growers of Canada, if that's okay, Mr. Chair.

[Jonothan Hodson]

I'll ask this back: Which credit do you mean?

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Well, according to the government, the carbon tax is revenue neutral, in that Canadians receive back more in credits than the amount they're paying. Is that true for your members?

[Jonothan Hodson]

I would disagree with that. There are a lot of negative consequences.

I know that as producers we're grateful that the exemption on farm fuels is where it's at right now. Most of it is covered, but there are a lot of negative consequences, because obviously all the people who provide us with inputs and everything are not covered, so their costs go up, and those costs are passed on to us. There are consequences for us on the carbon tax and, obviously, as it goes forward, with the forecast for how much it's going to increase, their costs are going to go up every year.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Perfect. Thank you very much.

Now, for the CFA, are your members fully compensated by the credit provided in the greenhouse gas pollution act for the carbon tax?

[Frank Annau]

That wouldn't be, I believe, the opinion of our stakeholders and members. Obviously, the statement that the carbon tax is revenue neutral for the majority of Canadians, I believe, could potentially apply on a citizen-to-citizen basis, but obviously our farmers do rely on a number of inputs and processes that are not exempt from carbon fuel charges.

We saw recently within the last year that the greenhouse gas exemption was further applied for greenhouses, for example. What we'd be looking for is for a similar actual application to be applied to grain dryers and other machinery, including for irrigation and livestock heating, to ensure there's a full exemption. Without that, we have received reports that there are mounting impacts in terms of the costs affecting our our farmers' bottom lines.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Mr. Annau, would you say that a grain dryer is a piece of industrial machinery?

[Frank Annau]

That's a very good question. That's where the actual basis of the issue, I believe, kind of stands. Our understanding is that the government was interpreting it as being machinery used to heat and cool a building. In our engagement with them—I believe it was with the Grain Growers of Canada—the government believed it was actually an industrial process and that it basically shouldn't be subject to exclusion for eligible farming machinery. I think they've been provided with a lot of very updated information since then. This is an ongoing conversation between us and the Canada Revenue Agency.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

To the Grain Growers, would you say that a grain dryer is a piece of industrial machinery?

[Jonothan Hodson]

No. It's farm equipment.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

It's farm equipment, and at least some of the grain drying would be done on a farm, correct?

[Jonothan Hodson]

That's correct.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

All right. You are of the same belief as me and the parliamentary drafters, namely, that grain drying is included in Bill C-206.

[Jonothan Hodson]

That's correct.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Perfect. Thank you very much.

Mr. Overbeek, when you have additional costs added to your grain or to farming in general, does that make you less competitive in the market?

[Christian Overbeek]

It definitely makes us less competitive, for the same reason as the others have cited. The grain market is based on international reference points, and, if I have to pay additional costs that other farmers in other countries don't, I'm automatically less competitive, and that can jeopardize my operation.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Perfect.

If I have time, Mr. Chair, I'd just like to—

[The Chair, Liberal, Pat Finnigan]

You have 40 seconds.