Agriculture Committee on Oct. 24th, 2022

[Tim Louis, Liberal, Kitchener—Conestoga, ON]

Thank you for that.

Would you be in favour, then, of working together with the government on some programs that would incentivize taking these measures to lower emissions?

[Todd Lewis]

Absolutely. Farmers, our producers, are, as I said in my previous answers, interested in being more efficient, because of course any improvement puts money in farmers' pockets.

[Tim Louis, Liberal, Kitchener—Conestoga, ON]

Thank you for that.

You also mentioned, Mr. Lewis, that agriculture in Canada is wide and varied. Those are your words. The federal price on pollution is being applied only to provinces that don't have their own price on pollution. Any province or territory can design their own system that's tailored to their needs, geographically or otherwise. Most provinces have done so.

What kind of advocacy or conversations has the Canadian Federation of Agriculture had with the four provinces that have not taken action? Have you had meetings? Have you asked for more localized solutions from the provinces?

[Todd Lewis]

Farmers really can't be involved in the negotiations between the provinces and the federal government. It's between the provinces. We all want to see co-operation between governments.

It's important to remember that the four provinces that don't have those agreements really represent a vast percentage of the agriculture in this country. We're caught, in agriculture, in a spot where we don't have those agreements. We don't see the co-operation, and farmers are caught in the middle now, paying this tax. We're hoping to see the provinces and federal government work it out, but it's really a difficult spot for farmers to be caught in. It has cost us money out of our pockets.

When we compare it to the provinces that have agreements in place, it creates an unlevel playing field. It's difficult for farmers. This country is vast, and we are competing not only with farmers in other jurisdictions but across the nation. The farmers who are paying the carbon tax feel the pinch. It's a competitive issue for many of those producers.

[Tim Louis, Liberal, Kitchener—Conestoga, ON]

Would you see an advantage to working within a province to try and specialize needs within that province?

[Todd Lewis]

Absolutely. That's a good and practical solution, but for farmers to try to get provincial and federal politicians to co-operate is a big ask.

[Tim Louis, Liberal, Kitchener—Conestoga, ON]

I understand, and I appreciate your advocating for me.

I had more questions, but I'm out of time.

Thank you.

[The Vice-Chair, Conservative, John Barlow]

Thank you very much to our witnesses, as well as to my colleagues for some great questions today.

We will now recess for a few minutes to switch up our witness panels. Everybody can take a bit of a break. I know my Apple watch is telling me now to stand up.

To our witnesses who are here by video conference, Mr. Lewis and Mr. Annau, thank you very much for all your testimony. Your knowledge is much appreciated. Thank you very much for being here.

We'll take about a five-minute break.

[The Vice-Chair, Conservative, John Barlow]

I call the meeting back to order.

We are going to be able to extend the meeting until about a quarter to six, so we'll be able to have an extra 15 minutes to try to get the two rounds in, if possible. We have four witnesses, which makes it a bit tighter for time, but we wanted to make sure we could get all of these people who wished to be a part of this study. We'll try to move things along as quickly as possible.

I apologize to my colleagues, because I know they have heard this many times, but for the benefit of our witnesses, today's meeting is in a hybrid format. The proceedings will be made available via the House of Commons website, and the video will always show the person speaking, rather than the entirety of the committee. Screenshots and photos of your screen are not permitted during the meeting.

Members and witnesses, you may speak in the official language of your choice. Interpretation services are available. If interpretation is lost, I will, unfortunately, interrupt and cut you off until we can get it back up and running and resume the proceedings.

Before speaking, please wait until I recognize you by name. If you are on the video conference, please click the microphone icon to unmute yourself. For those in the room, that will happen automatically.

When speaking, please speak slowly and clearly for the benefit of our translation team. As a reminder to all the witnesses and, of course, my colleagues, please direct all of your questions and comments through the chair.

I would now like to welcome our witnesses for today. Appearing today via video conference, we have Mike Medeiros, president of the Canadian Mushroom Growers’ Association. He's joined by Ryan Koeslag, the executive vice-president and chief executive officer. We have from Mountain View Poultry, Hessel Kielstra. From the Ontario Federation of Agriculture, we have in person Peggy Brekveld. From the National Cattle Feeders' Association, we have James Bekkering, also via video conference.

I'm sure most of you know most of these folks. We've met many of them before, and we thank them very much for taking the time to be back with us today.

To keep things moving, I will start with our first presenter. For those of you on video who have never been with us before, I will put my hand up when you have about a minute left, to give you that minute warning to end your presentation. You each have five minutes.

We'll start with the Canadian Mushroom Growers' Association and Mr. Medeiros and Mr. Koeslag. I'm not too sure who's going to be giving the presentation—it's Mr. Koeslag. Thank you. I know we're having some issues with Mr. Medeiros's sound, so we may have to interrupt if we cannot ensure that it is working for translation.

Mr. Koeslag, please go ahead. Your five minutes start now.

[Ryan Koeslag, Executive Vice-President and Chief Executive Officer, Canadian Mushroom Growers' Association]

Perfect. Thanks very much for the invitation to appear today and speak in favour of Bill C-234.

My name is Ryan Koeslag, and I am joined today by Mike Medeiros, president of the Canadian Mushroom Growers' Association and a mushroom grower. Our association is a member of the Agriculture Carbon Alliance and the Canadian Federation of Agriculture.

For those who are not aware, Canada has a strong, adaptable and high-tech mushroom sector that contributes over a billion dollars to the Canadian economy. Canada grows over 150,000 tonnes of mushrooms annually, and mushroom farms are a big job creator in Canada, creating over 6,400 jobs with competitive wages. Although robotic technologies are being explored, almost all mushrooms are currently picked by hand, and we experience some of the greatest labour shortages in agriculture.

Canadian mushrooms grow 24-7, 365 days a year, supplying nearly all of the fresh mushrooms found in grocery stores across Canada all year round. We export 40% of what we grow to the United States.

Let's think about that for a moment. How many crops in Canada are grown 365 days a year? To grow crops in Canada during the winter, growing rooms must be heated. The carbon tax is adding additional costs to our farms for uniquely growing food in this country during the Canadian winter. Although mushrooms are grown indoors in climate-controlled buildings just like greenhouses, mushrooms were not exempt from the carbon tax. The Canada Revenue Agency has been unable to provide real reasons for why the greenhouse exemption that has been in place for a couple of years now wasn't applied to mushrooms, as the mushroom sector experiences some of the same cost factors as greenhouses, and large concentrations of mushroom farms are located right next to the major greenhouse growing regions in Canada.

With no alternative fuel sources currently available, our farms are unfairly penalized by the carbon tax. We support Bill C-234 for items like the heating of agriculture facilities for growing purposes, and see the carbon tax increasing the cost of production in areas like heating, transportation and other inputs.

I'll pass the floor over to Mike Medeiros, the president of the Canadian Mushroom Growers' Association and a grower at Carleton Mushroom Farms, located just south of Ottawa.

[Mike Medeiros, President, Canadian Mushroom Growers' Association]

I would like to thank everyone for inviting us here today as well.

I'm the president of Mushrooms Canada, and I operate a mushroom farm about 30 minutes south of Ottawa, near the village of Osgoode.

Ours is a second-generation family farm, where I farm with my brother and other key family members.

My farm currently pays carbon tax in excess of $150,000 a year. We have examined the rebates offered, and we have been unable to access any rebates, or we found them too little to offset the costs.

With a new tax here, and a difficult year, with costs over and above the increasing heating and inflation costs—transportation and compost have doubled in many cases—as farmers we are expected to absorb all these expenses because we're price-takers, unable to pass on the cost to the retailer and consumer.

The carbon tax is added directly to our farm inflation costs, not to mention the ongoing precautionary COVID-19 measures. Mushroom farms are extremely efficient and sustainable, with a low carbon and water footprint. We know this through a study conducted in partnership with the Mushroom Council in America, which places mushroom growing as having one of the lowest carbon footprints for food sources.

Mushrooms are an extremely healthy and nutritious food source grown in Canada, and we use recycled material such as straw and poultry manure to turn into compost.

Again, our industry supports Bill C-234, and we are happy to answer any questions you may have.

Thank you.

[The Vice-Chair, Conservative, John Barlow]

Thank you very much.

We will now move on to Mr. Kielstra for five minutes, please.

[Hessel Kielstra, Mountain View Poultry Farms]

Thanks, Mr. Chair, for allowing me to speak to the committee. I will just read through what I sent earlier.

I strongly support Bill C-234. As you are reviewing the impact of the carbon tax on various farm industries, I would like to point out that it challenges the very viability and sustainability of our poultry operations in the province of Alberta.

In particular, I struggle with the application and impact of the carbon tax on the natural gas we use in our farming operations as we raise broiler chickens.

It increases the cost of raising broiler chickens, and we can recover these increased costs partially with price increases, but really, most of them won't be recovered. It is a burden on our operations. It is also at cross-purposes with the intent of the carbon tax. If I understand the intent and philosophy behind the tax, it is meant to reduce the use of fossil fuels.

Herein lies the conundrum for us. We need to use a certain amount of natural gas to heat our barns to a certain temperature, 30°C to 31°C, and sometimes even higher in order to raise chickens and get them into the food chain. If we follow the intent and philosophy behind the carbon tax and reduce the needed temperatures for raising chickens by cutting back on natural gas, we will have chickens that suffer. Most of them will die because of lack of proper temperatures. This in turn would leave us vulnerable to charges of animal cruelty, so we obviously will not and cannot reduce our consumption of natural gas.

As a committee filled with intelligent individuals, you all will understand that we cannot follow the full intent and spirit of the legislation.

Please change the legislation via Bill C-234, and remove the carbon tax on natural gas that we and other farmers specifically use on chicken broiler farms. We have always felt honoured to be in the position to provide Canadian consumers with quality chicken meat, and we wish to continue to do so.

As for financial viability, we face the following. Every $10 per tonne of carbon tax costs us significantly more each month, and when the cost goes to the intended level of $170 per tonne, our cost will rise to an average of approximately $40,000 per month, or approximately $480,000 per annum.

These levels of carbon tax will destroy the viability of our chicken operation and many other operations in the chicken industry. This definitely was not the intent of the architects of the carbon tax. These are the unintended consequences that can occur even with the best intentions and that must be subsequently corrected and fixed.

Hopefully this helps you in your deliberations. If necessary, I'm available in a number of different forms. I also took a page to show what we paid in the last year. We paid in the last 12 months $106,000. At the projected price of $170 per tonne, that will come to $475,000.

It's a problem for us and for many others. I think most of it speaks for itself, but we can dive into more particulars in other ways. We would love to see this removed. Always remember that no matter what we do, we still have to pay the bill for the utilities we consume. This is just an extra tax on us of $475,000 in some years to come—but right now it's at $106,000.

[The Vice-Chair, Conservative, John Barlow]

Thank you very much, Mr. Kielstra. I'm glad we were able to fit you in on this committee, and we appreciate your testimony.

Now we'll go to Ms. Brekveld for five minutes please.

[Peggy Brekveld, President, Ontario Federation of Agriculture]

I'm happy to be here in front of the committee again, this time to speak in favour of Bill C-234.

The OFA and its 38,000 members strongly support this bill and the amendments to the Greenhouse Gas Pollution Pricing Act. We are confident that expanding the list of qualifying farm fuels to include natural gas and propane, as well as amending the definition of eligible farm machinery to allow those fuels to be used to provide heat to dry grain and raise or house livestock, will make a difference.

This will have an immediate positive impact on the livelihoods of Canadian farmers and their ability to respond to the greenhouse gas reduction targets.

You have heard a lot about the negative impacts of the fuel charge on grain drying from both the provincial and national organizations. We're going to leave it there. We agree with their comments.

Today I would like to focus on the impacts on indoor livestock operations. The fuel charge has placed a significant and disproportionate financial burden on indoor livestock farmers in Canada. Similar to grain drying, livestock farmers, like poultry, swine and aquaculture operations, have limited ability to pass these added costs to the consumers. You heard that from someone else as well. They also have limited technology alternatives to reduce their consumption of fossil fuels without compromising growing efficiencies and animal welfare. I think the animal welfare one is pretty key.

I'll provide this example. This year, the fuel charge added just under $10,000 to one turkey farmer's cost of production. That's significant to him. It's not an old and inefficient operation. In fact, he's already insulated the walls and ceilings of the barn and sought out energy efficiency where it makes financial sense. Why did he make those changes? It was primarily because government incentive and cost-share programs allowed him to meet the threshold for change, and the return on investment was reasonable. With $10,000 this year and a projected $32,000 per year by 2030, those amounts of fuel surcharges will significantly impact his ability to do any further efficiencies that might exist.

Farmers are very good at math. If a new technology is available and the payback is appropriate, they will adopt it. With an incentive over a penalty, that uptake will be even faster. Making changes in a low-margin, high-risk business environment takes incentives, not penalties.

There are alternatives—you have talked about some—but farmers have concerns. Are they easy to fix? Are there established and robust supply chains for parts? Are there repair technicians in every part of the country that can come out at 10 p.m. to fix it? If there aren't, quality can be damaged and animals may suffer. Also, do they have a return on investment that farm businesses can work with? Are they any better or are they simply shifting the carbon emission to something else?

These are questions that farmers have. That's why we say there are currently no significant viable alternatives. There needs to be a transition.

The nature of agriculture production means that farmers are always looking for ways to reduce costs and improve efficiencies. However, most technologies do not eliminate the need for fossil fuels in agricultural production. In the agricultural sector, the cost of energy alone, without the fuel surcharge applied, is already a significant price signal that drives improved efficiencies and reduced consumption.

As I indicated earlier, incentives are powerful and proven mechanisms to help accelerate the pace of technology adoption in the agricultural sector compared to penalties. Removing the fuel surcharge will free up capital that can be leveraged with cost-share programming to invest in innovations that can reduce emissions from the farm.

The last thing I'd like to add is that the point of a fuel surcharge is to change behaviour. Farmers must heat or cool their barns. Completely changing this behaviour is not a realistic option. In fact, when the pricing actually drives the price margin down to nothing, it drives people out of business.

Last week I was here talking about global food insecurity. You can't have both. Farmers still have to make a profit, otherwise they will just stop farming. We have to be careful with that. If Canada has a desire to impact global food insecurity or even feed our domestic markets, that isn't the change that anyone wants to see happen.

Again, we support the bill, and we look forward to further conversation on this.

[The Vice-Chair, Conservative, John Barlow]

Thank you very much, Ms. Brekveld. I appreciate your testimony.

Now we'll go to Mr. Bekkering for five minutes, please.

[James Bekkering, Board Chair, National Cattle Feeders' Association]

Thank you, Mr. Chair.

On behalf of the National Cattle Feeders' Association, thank you for the opportunity to appear before the committee on Bill C-234.

The National Cattle Feeders' Association is the voice of Canada's cattle feeders. We work to improve the growth, sustainability and competitiveness of the beef sector in Canada so as to provide a safe, high-quality and accessible beef supply to Canadians.

My name is James Bekkering. l am the current board chair of the National Cattle Feeders' Association. I also own and operate a cattle feedlot in Taber, Alberta. My feedlot includes a feed mill where I steam flake grains for cattle.

Cattle feeders are a critical part of the beef value chain. As a feedlot owner, I receive cattle from cow-calf operations when the animals are between 400 and 800 pounds, and then feed the cattle a high-energy diet to promote weight gain. When the cattle reach a weight of 1,300 to 1,600 pounds, they are sent for processing.

Canada's cattle feeders are global leaders in sustainability, producing more pounds of beef using less land and less water and emitting fewer GHGs. Environmental stewardship is a critical component of the beef industry's sustainability.

Canadian farmers compete globally and require governments to maintain a business environment that fosters success. Canada's regulatory policy and taxation requirements must track alongside those of our international competitors. As such, the NCFA has followed Bill C-234 with interest and strong support.

The NCFA encourages the government and the opposition to expedite the passage of Bill C-234, given the importance of this bill to Canada's agriculture industry. The agriculture sector is currently facing unprecedented challenges driven by supply chain barriers and rapidly escalating inflation, affecting energy and input costs.

The financial relief that the passage of Bill C-234 would provide is of the utmost importance to the beef sector and to the entire agriculture sector. Today's modern cattle-feeding operation uses more than motive fuel, such as gasoline and diesel, both of which are currently exempt from carbon pricing when used on farm. Of equal importance are fuels not currently exempted, such as natural gas and propane.

Bill C-234 would extend the exemption to include on-farm use of these fuels, which are required for day-to-day farming activity, including the heating of processing barns, medical care buildings and equipment shops. These fuels are also used for irrigation and to prepare and process cattle feed, such as steam flaking feed corn, wheat and barley.

Currently there are no viable alternative energy options for farmers to operate these essential elements of their farming activity. In fact, the processing of grains through these methods, such as steam flaking, can create feed efficiencies that in turn deliver environmental benefits. Taxing farmers on these methods of delivering feed efficiency will serve to discourage investment in new technologies—the opposite of where we should be going.

The exemption proposed within Bill C-234 addresses what we consider was a simple but significant oversight when the Greenhouse Gas Pollution Pricing Act was put in place. The act always should have included on-farm use of natural gas and propane as it did diesel and gasoline.

The passing of Bill C-234 will ensure that dollars remain with our Canadian farmers to make innovative investments in their operations. This is not a time we want to be pulling away capital from our Canadian farmers due to legislation that was originally misguided on the use of fuels on farms.

With food prices skyrocketing, we need to return to the farm gate to look for solutions on how to address costs to farmers and thus costs to consumers. The passing of Bill C-234 will signal an important step in that process.

Farmers and ranchers are stewards of their land, adopting the best environmental practices whenever possible. However, to be able to continue to invest in innovations, they need to remain competitive and have the available working capital to do so.

I understand there has also been extensive discussion at the committee table on a sunset clause to the exemption. This supports a mutual goal that we all share toward moving to more renewable and clean energy. However, we ask that any sunset clause contain flexibility for an extension in the case that no viable alternatives are available at the end of the sunset time frame.

Once again, thank you for the opportunity to appear today to contribute to the committee's deliberations on Bill C-234. We look forward to seeing this bill move forward through the remainder of the process.

Thank you.

[The Vice-Chair, Conservative, John Barlow]

Thank you, Mr. Bekkering. I appreciate your testimony. I'll now move on to questions.

The first round will go to Ms. Gladu from the Conservatives for six minutes, please.

[Marilyn Gladu, Conservative, Sarnia—Lambton, ON]

Thank you, Mr. Chair, and thank you to all the witnesses for being here today. At a time when food security in the world is under threat, what you do is important. It's up to all of us to do everything we can to make you successful in continuing that.

I'll start my questions with the mushroom growers.

Currently, greenhouse operators are exempt from the carbon tax on propane and natural gas at 80%. I understand from your testimony that this exemption doesn't apply to you. The Liberal government is very fond of continuing to say that people receive back more money from the carbon tax than they pay. I just received my climate action rebate for $102.57, when the Parliamentary Budget Officer says the average Canadian is paying somewhere between $1,500 and $3,000.

I'm interested to know how much you paid in the carbon tax in your business this year and how much you got back.

[Mike Medeiros]

For this upcoming year, it's not complete yet, but last year we paid just over $150,000 for the year in carbon tax. There was no rebate for us whatsoever.

A couple of years ago, when the greenhouse growers received their exemption, which was up to 80%, I reached out to CRA and wondered why the mushroom industry wasn't included in this as well, considering that when we do our taxes we're in the same code as that for greenhouse growers. Basically, they're saying that because we don't have glass roofs with our facilities, we're not exempt. I know that some of the pot producers don't use glass roofs—they're indoors, like we are—and they're exempt from the carbon tax, so I was disappointed with that. I guess if you're a hydroponic grower, as a greenhouse as well, you'd be exempt, even though you don't have a glass roof.

I made those points with CRA, and they still wouldn't accept my thoughts on being exempted for the carbon tax.

[Marilyn Gladu, Conservative, Sarnia—Lambton, ON]

It's so surprising, sir, to hear that the government is favouring cannabis producers and discriminating against mushroom producers.

I'll move along to the National Cattle Feeders' Association.

My understanding is that your sector would benefit from the bill as it relates to steam flaking. Can you explain why this is necessary and how much the carbon tax is costing your sector?

[James Bekkering]

We are one of the few feedlots in our sector so far that does a steam-flaking process, because we utilize a lot of corn on our farm and it's a more efficient way of processing that grain.

There's been some increase in that as well, and it's essentially adding efficiency to the grain that we're feeding, thus making the cattle more efficient. I just pulled up the numbers and, in our last six months, since our last increase to the carbon tax, our farm in that process alone has paid $14,000, which equates to 75¢ per tonne of grain that we produce.

[Marilyn Gladu, Conservative, Sarnia—Lambton, ON]

Did you get more back in your rebate than the federal government took?

[James Bekkering]

No, we did not.

[Marilyn Gladu, Conservative, Sarnia—Lambton, ON]

It's surprising. This seems to be the consistent story all the way around.

I'd like to go now to the Mountain View Poultry Farms.

You said that the carbon tax you paid was $106,000 and it's going to be $475,000, so the government will be taking half a million dollars.

Are you receiving more back in rebate than you're paying?