Natural Resources Committee on April 20th, 2010

[Voices]

Oh, oh!

[The Chair, Conservative, Leon Benoit]

Thank you very much.

Here is an unpaid public announcement by Mr. Harris, to use the last of the time.

[Dick Harris, Conservative, Cariboo—Prince George, BC]

Thank you, Mr. Chair.

I know that FPAC has been to UNBC in Prince George, and they know that our university is playing a leading role in new technology for the alternate use of the pine beetle wood.

I know that Mr. Passmore just forgot when he said UBC. He meant to include UNBC.

[Jeff Passmore]

Yes. Thank you very much.

[Catherine Cobden]

We're both partners in this project.

[The Chair, Conservative, Leon Benoit]

Mr. Anderson, do you have something?

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

I just want to ask one short question, Mr. Chair.

You talked about trying to get this all to commercialization. Has the SDTC played a role in bringing some of that technology to commercialization? Has that been an important...?

[Catherine Cobden]

We would hope so.

[Jeff Passmore]

They're very anxious--

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

To play a role.

[Catherine Cobden]

We really hope so.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

They have not in the past?

[Jeff Passmore]

With respect to NextGen?

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Yes. The new technologies that you're talking about bringing to commercialization--has SDTC been part of that in the past?

[Jeff Passmore]

There is a $500 million fund for the commercialization of NextGen technologies. That fund has been made available. It hasn't been used, or not at the moment, but that's not SDTC's fault. They're ready to help contribute. It's just a matter of the proponents getting all their ducks in a row.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Thank you.

[The Chair, Conservative, Leon Benoit]

I'd like to thank you all very much for your presentations here today. They've been very helpful to us in our study.

We will suspend for two or three minutes as we get the video conference set up and get the next witnesses to the table.

Again, thank you very much.

[The Chair, Conservative, Leon Benoit]

We will resume the meeting now with the new group of witnesses.

I'd like to welcome all of you here. First, from the Canola Council of Canada, we have JoAnne Buth, president; from Enerkem Inc., Marie-Hélène Labrie, vice-president, government affairs and communications. Not at the table, but at the back, we'll have Bliss Baker, president of Bentham and Associates, and if anyone wants to direct questions to him, that could be handled, I believe. And from Resource Efficient Agricultural Production, or REAP Canada, we have Roger Samson, executive director.

Welcome.

We have, by video conference as an individual from the University of California in Davis, California, Professor Daniel Sperling.

Welcome to you by video conference, Professor Sperling. Can you hear us all right?

[Professor Daniel Sperling, Professor and Director, Institute of Transportation Studies, University of California, Davis, As an Individual]

I can hear very well. Thank you.

[The Chair, Conservative, Leon Benoit]

It is great to have you with us. I understand you got back from a trip to China, so you may be a little jet-lagged, but welcome.

[Prof. Daniel Sperling]

I am a little bit, and it's a little early in the morning here too.

[The Chair, Conservative, Leon Benoit]

All right. We will have the witnesses in the order that they appear on the agenda, starting with the Canola Council of Canada.

JoAnne Buth, please go ahead with your presentation.

[JoAnne Buth, President, Canola Council of Canada]

Thank you very much to the standing committee for the invitation to the Canola Council of Canada to provide our perspective on the ecoENERGY for biofuels initiative and the federal biofuels policy and programs.

Overall, the biofuel story in Canada is a very positive one, with very good environmental and economic development benefits. We believe ecoENERGY is playing a key role in establishing a sustainable biofuels industry.

There is a notable exception: so far the level of development in canola-based biodiesel has not kept up to expectations. While we believe ecoENERGY is helping to establish a sustainable biofuels sector, we believe the federal government can take concrete steps to ensure that sizable-scale canola biodiesel projects move ahead.

First of all, the government can ensure that canola biodiesel projects are supported in the final round of applications for ecoENERGY, which is under way right now.

Secondly, changes that the industry has recommended to the Department of Agriculture and Agri-Food's ecoABC initiative should also be implemented to facilitate investment in biodiesel production.

Before going into more details on biofuels and the ecoENERGY and ecoABC programs, I'd like to provide some background information on canola and the work of the Canola Council of Canada.

Canola is the world's only made-in-Canada crop. Developed in the early 1970s, canola is unique in the world for its nutritional profile for food. Low in saturated fat, with an excellent balance of polyunsaturated and monounsaturated fats, versatile and light in taste, canola oil is the oil of choice for consumers, food processing companies, and restaurants.

Canada is a leader in canola production. In 2009, about 50,000 Canadian farmers produced 11.8 million tons of canola. It is Canada's most valuable crop, generating $4.9 billion in farm cash receipts. Canola is crushed into oil at 11 processing plants in four provinces. The economic activity following from Canada's canola sector generates almost $14 billion annually to the Canadian economy.

The Canola Council of Canada is a value-chain organization that promotes the production and promotion of canola. The council includes seed developers, growers, processors, handlers, and exporters. Our primary focus is canola for food. However, the interest in biofuels is also a huge opportunity for Canada and for canola growers. It's of great interest to the canola sector because of environmental benefits, economic benefits, rural community support, and better returns to growers.

Biofuels provide the opportunity to lower Canada's harmful greenhouse gas emissions from transportation fuels. Detailed modelling of the impacts of biofuel production and use in Canada shows that two billion litres of ethanol per year would reduce greenhouse emissions by 2.8 million tonnes of CO₂ equivalent, and 500 million litres per year of biodiesel would result in greenhouse gas reductions of 1.4 million tonnes, the combined equivalent of removing one million cars from Canada's highways each and every year.

Approximately 30% of Canada's climate change gases come from transportation. We see Canadian-made canola biodiesel as a smart green transportation fuel that will reduce greenhouse gas emissions.

Life-cycle analysis shows that canola biodiesel can reduce GHG emissions by 75% to 85%. It has the energy balance of any commercially available liquid fuel, providing over three times the energy output than the inputs required to produce it.

There are also reductions in particulate matter and hydrocarbons. Canola growers also use less tillage, which means less carbon released. Importantly, canola does not require irrigation for production.

We also know that canola is the best feedstock for biodiesel. With its exceptional cold weather performance and improved engine lubricity, canola is the feedstock of choice for Canadian-made biodiesel. This is related to the saturated fat content of canola that is made into biodiesel.

Biodiesel blends using 2% canola-derived renewable diesel have been proven effective in formal cold weather testing in Alberta and many years of road use across Canada. Blends using 5% to 20% of canola-derived biodiesel have been effective in spring, summer, and fall in numerous applications.

Biodiesel blends of 5% to 20% are approved for use by engine equipment manufacturers, and canola biodiesel meets stringent ASTM, EN, and CGSB biodiesel specifications.

In terms of economic benefits, the economic stimulus impacts of implementing the 5% and 2% renewable fuel standards are considerable. So far there are 14 ethanol and 8 biodiesel plants in operation and more are being built. Together, these refineries are employing thousands of Canadians, mostly in rural communities.

The industry has expanded in recent years to build capacity in anticipation of the Canadian renewable fuel standards being implemented. There are more projects in the planning stages, and they are relying on Natural Resources Canada's ecoENERGY for biofuels initiatives and also Agriculture and Agri-Food Canada's ecoABC programs to assist with start-up support.

Renewable fuels present exciting opportunities for higher incomes and more stable prices for Canadian farm families. Canada is the third-largest producer of canola and rapeseed, with about 20% of the world's production, but we account for 80% of global trade. We are highly dependent on often unpredictable international markets. We are vulnerable to borders shutting down because of tariffs and non-tariff trade barriers.

Like the professor, I also recently returned from China, where I was accompanying Agriculture Minister Ritz, because last fall China blocked canola exports due to a non-tariff trade barrier.

A canola biodiesel industry in Canada will provide fundamental, long-term support for the rural Canadian canola sector by creating inelastic demand that's needed in our trade-dependent commodity. Made-at-home canola biodiesel will stabilize seed demand and expand the value-added activity in Canada in anticipation of increased use of canola in North America.

Canada's canola production is growing year over year. From a production level of 9.1 million tonnes in 2006, Canadian farmers have increased production to 12.6 million tonnes and 11.8 tonnes in the last two years respectively. We expect that growers will continue to grow the profitable crop on more acres with more production.

The canola industry's Growing Great strategy has a target of 15 million tonnes of sustained market demand and production by the year 2015. The 15 million tonnes is an important goal for us because it is a large enough amount that we'll continue to attract investment in the crop. Of that 15 million tonnes, we anticipate that 2.5 million tonnes will be used for biodiesel.

We are encouraged by the Government of Canada's progressive policy on biofuels development as a way of lowering unhealthy emissions from conventional transportation fuels. We welcome the recent gazetting of our vast regulations, a necessary step to the implementation of the renewable fuel standards. However, the biodiesel industry is still waiting for cabinet to set a date for the 2% mandate specifically for biodiesel or other renewable diesel fuels. We encourage the government to address this outstanding matter.

The primary benefit of the ecoENERGY program so far is to reduce the price risk inherent in volatile commodity markets. It also addresses the competitiveness of Canadian production with imported biofuels and further allows Canadian production plants to get established and position themselves to compete successfully in the global markets after incentives disappear.

Agriculture and Agri-Food Canada's ecoABC program is also important. It offers repayable capital contributions to biofuel projects that secure a minimum level of farmer investment. This program is critical to address tight equity capital and debt markets and address competitiveness for the emerging Canadian biofuels industry. The program has been underutilized by the biodiesel industry to date. Only 2% to 3% of program funding has gone into the biodiesel sector, and none of this has supported canola-based biodiesel plants.

The Canola Council and many industry colleagues have asked the Minister of Agriculture and Agri-Food to review the program criteria to make sure ecoABC robustly supports canola-based biodiesel projects. While ecoENERGY and ecoABC have served to encourage investment in biofuels production, they have not led to the significant build-out of biodiesel production capacity. Since the announcement of the eco programs in March 2007, no new moderate-scale--by that I mean greater than 40 million litres per year--biodiesel plants have been commissioned. Indeed, biodiesel production capacity, approximately 100 million litres per year, remains well below the industry and government expectations and far below the volumes required to fulfill federal and provincial mandates of approximately 700 million litres per year. This means greater reliance on imported biodiesel.

While several small-scale animal fats-based biodiesel plants have been built in the past few years, no global-scale--greater than 114 million litres per year--vegetable oil biodiesel projects have moved from planning to construction.

In short, the ecoENERGY and ecoABC programs have yet to create the domestic biofuels production capacity necessary to meet our industry's goals for canola utilization. This represents a significant gap in program results, which still needs to be addressed.

Right now we're in the final phase of building Canada's first-generation biodiesel production capacity. EcoENERGY closed its final application window on March 31 of this year, and there are canola biodiesel projects in the queue. These projects are counting on ecoENERGY to provide the necessary support.

Looking several years out, no future projects will be able to compete against plants that receive the ecoENERGY contribution. This is a time for important decisions.

The Ministry of Natural Resources Canada is working through the final application review procedure. We understand that in this final review the department has sufficient remaining funds and allocation for renewable diesel to support the full spectrum of biodiesel development and to rectify the imbalance in program utilization to date.

Specifically, we wish to ensure that the spirit of the ecoENERGY program changes that were recommended by the Canola Council of Canada and our industry colleagues, which were announced in December 2009, will be reflected in these final allocation decisions. We encourage the Government of Canada to support projects that can be competitive in the long term and sustainable in a post-subsidy global market, that can produce high-quality biofuels that meet the harsh Canadian climatic conditions, and stabilize and support utilization of one of Canada's most important domestic crops: canola.

To summarize, these are our observations and recommendations for the committee. The ecoENERGY initiative is playing a key role in establishing a sustainable biofuels industry. There is a notable exception: canola-based biodiesel production. To address this shortcoming, the government should ensure that canola biodiesel projects are supported in the final round of applications for ecoENERGY that are under review right now and also review the program criteria to make sure that ecoABC robustly supports canola-based biodiesel projects.

There is no doubt the focus of our industry will continue to be food. However, we have a unique and immediate opportunity to develop a biodiesel market for canola utilization, and there are very important reasons for doing this.

Market access for canola is currently challenged in the U.S. in terms of meal, in China in terms of seed and oil, and in the EU in terms of seed and oil and meal.

Now is a time for deliberate action. Canola biodiesel is right for the environment. It provides a new value-added market opportunity. It supports rural economic development, and it provides long-term market stability for the farmers of Canada.

I'd like to thank you for the opportunity to be here today.

[The Chair, Conservative, Leon Benoit]

Thank you, Ms. Buth.

We go now to Marie-Hélène Labrie, vice-president of government affairs and communications for Enerkem Inc.

Please go ahead with your presentation, and really try to keep it to eight or 10 minutes.

[Marie-Hélène Labrie, Vice-President, Government Affairs and Communications, Enerkem Inc.]

Thank you, Mr. Chair, and thank you, members of the committee.

Thank you for this opportunity to be with you here today.

Enerkem is a world leader in the development and production of new generation transportation fuels.

The company manufactures, owns, and operates advanced biorefineries based on its proprietary thermochemical technology developed in-house in Quebec since 2000.

Enerkem's unique technology converts residual material, such as non-recyclable municipal solid waste, forest residues, and agricultural residues into second-generation cellulosic ethanol. It is the only Canadian company that is able to produce ethanol from municipal solid waste.

Enerkem is a growing Quebec company that now has 70 employees. It was founded in 2000 and currently operates two plants in Quebec: a pilot plant, since 2003, which is used to test technology with more than 20 types of raw materials, and a commercial plant in Westbury, near Sherbrooke, which uses telephone poles as its raw material.

Enerkem will soon start the construction of the world's first municipal waste-to-biofuel commercial plant in Edmonton, Alberta. The company has signed an agreement with the City of Edmonton for this project. The company is also developing a similar project in Mississippi, where the company has received $50 million from the U.S. Department of Energy.

In addition to meeting our renewable fuel standard and reducing greenhouse gas emissions, Enerkem contributes to reducing waste landfilling and provides a great opportunity to transform our forest industry by using forest residues to produce clean transportation fuels. By using a wide variety of feedstock, Enerkem's plants can be located in both rural and urban areas.

Building a strong domestic biofuels industry so that Canada can lead the world in the development of next-generation biofuels requires the right combination of public policy instruments. It must include:

1) A federal renewable fuels mandate to create a stable market. The government has mandated a renewable fuel content of 5% in gasoline by September 2010.

2) A capital program to help finance the construction of biofuels production facilities across the country. The government has created the NextGen fund managed by Sustainable Development Technology Canada.

3) A producer incentive to support the domestic production of renewable fuels. The government has implemented the ecoENERGY for biofuels program, which provides the 10¢ per litre. The ecoENERGY for biofuels program has largely benefited the first-generation biofuels sector and has created a solid foundation for a strong domestic biofuel industry.

The first generation of biofuels has paved the way for the next growth phase, which will involve the commercialization of next-generation technologies that are being developed here in Canada, like the one Enerkem has developed.

These technologies enable us to produce renewable fuels from a broad range of biomass, forest residues and even domestic residual materials. It also enables us to even further reduce our greenhouse gas emissions.

According to Natural Resources Canada, there is currently $473 million available within the program budget for the ecoENERGY for biofuels program. The program has received 68 new applications, representing approximately $2 billion. The government is now in the unenviable position of having to decide which programs are acceptable based on predetermined criteria. This demonstrates the success of this program but also its limitations, as the government is now faced with having to select winners.

As a producer of next-generation ethanol, we have not yet benefited from this program, as our facilities are just starting to be built and operated. We submitted our applications for two commercial plants, the one in Westbury and the new one in Hamilton.

We strongly believe that this program is essential in order to build a strong domestic biofuels industry. It is also a program that provides a certain level of parity with the United States, which also has a producer incentive for its biofuel producers. The U.S. program is more generous, as it provides cellulosic ethanol companies a total of 20¢ U.S. per litre instead of 10¢ per litre.

In conclusion,

I would like to say that, if Canada wants to take advantage of the platform it has created with first-generation biofuels and continue to promote the creation of green jobs and economic recovery with the green energy sector, this program must continue.

Specifically, this producer incentive in the ecoENERGY for biofuels program is of high importance in order to continue to build a competitive and strong domestic biofuels industry. The ecoENERGY program has built first-generation plants across the country, which is a solid foundation on which to build next-generation biofuels plants, like the Enerkem facilities. The ecoENERGY program is an important program that will ensure that future generations of clean energy technologies that we often refer to as “clean tech” are developed at home, in Canada, as opposed to abroad.

Thank you for giving us the opportunity to participate in the ecoENERGY for biofuels program hearing.

Merci.