Natural Resources Committee on Feb. 26th, 2013

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Perhaps you could provide it to the committee. I think I'm out of time.

[Marie-Hélène Labrie]

Yes, sure.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

If you wouldn't mind—how the process goes—that would be wonderful. Thank you.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Allen.

We go now to Ms. Liu for up to five minutes.

Go ahead, please.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

Thank you, Mr. Chair.

Thank you to our witnesses. I will begin with Marie-Hélène Labrie.

Thank you for being here. I think your sector has an exciting history. You mentioned that you raised $200 million in venture capital. It is a sector that is also profitable and creates jobs.

Regarding the project in Varennes, can you specify the number of jobs at that location?

[Marie-Hélène Labrie]

Our plants are standardized. At each plant, we expect to create 40 direct permanent jobs. We are talking about engineers, technicians, operators and, of course, administrative employees. Currently, we are seeing it at our plant in Edmonton. We have hired 15 to 20 people so far. It is the same plant everywhere, whether it is in Edmonton, Varennes or Mississippi. They follow our model.

We also expect that the Varennes plant will create 50 indirect permanent jobs. Regarding construction work, we expect about 200 jobs, as is the case in Edmonton.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

That is impressive. Have you compared this with the oil sector to see if it is better to invest in one sector than in others in terms of job creation?

[Marie-Hélène Labrie]

We haven't done that comparison. However, regarding synergies and different types of expertise, what we are looking for is very similar. For example, we need chemical engineers and plant operators. We have even hired people who had worked for Shell in Montreal and had lost their job. There are great synergies because our technology is a springboard for biorefinery development in Canada. There are good synergies with our petrochemical sector; it is very complementary.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

That's excellent.

In your presentation, you mentioned the report by the Conference Board of Canada. I know it is available online, but if you send the report to the committee, it will be part of our evidence and we will be able to study it in more depth.

Our committee has heard from Écotech Québec representatives. I know you are on the board of directors. Unfortunately, they weren't able to appear, but they sent a document in which they propose expanding the innovation tax credit to cover expenses related to commercialization. How would that tax credit work? Can you explain this initiative and why this mechanism is necessary for this sector?

[Marie-Hélène Labrie]

In fact, the purpose of this idea is to support the financing chain and to help companies move from demonstration to commercialization.

The SR&ED program works well. It has helped a lot of SMEs developed their technology. Often, during the commercialization phase, they lacked tools. The idea then is that companies that have already followed the process could request a commercialization credit for which commercialization expenses would be accepted. There would be continuity. It is at this stage that government can really reap all of the economic advantages. It is really a crucial stage and it is often the stage on which we need to work.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

I have heard other people in your sector or in the green energy sector talk about the risk of losing these energies if the money isn't there, if they don't have the capital to commercialize these technologies. Do you share their concern?

[Marie-Hélène Labrie]

For an innovation to succeed, it has to be possible to close the financing loop. Unfortunately, often good ideas don't make it out of a garage, or are bought by others and go elsewhere. We have to be able to close the financing loop for our green technologies. To do so, the technologies have to be technically proven, they have to have the financial tools, and they need a viable business plan.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

Thank you.

I think I have time to ask just one more question, and it will be about reducing greenhouse gases.

If the Canadian government respected its international commitments to reduce greenhouse gases, could that have a positive impact on your sectors?

[Marie-Hélène Labrie]

Yes, that would be the case. Of course, our sector provides a solution for reducing greenhouse gas emissions by replacing part of the oil, and in our case, by preventing methane that comes from landfills. In that respect, I think we have an important role to play. Our plants will help reach Canada's goals.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

Thank you.

[The Chair, Conservative, Leon Benoit]

Thank you, Ms. Liu.

We go now to Mr. Trost, followed by Mr. Gravelle and then Mr. Anderson.

Go ahead, please, Mr. Trost.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

Thank you, Mr. Chair.

I'm looking at some of the testimony of Mr. Hemstock. You talked about regulatory uncertainty as a major challenge to innovation. Then in the notes that I have here, you say that industry requires reasonable regulatory certainty. You're fairly clear on where it is, and you give an example about carbon dioxide emissions.

I'm wondering whether that is something the other players here have also found to be a difficulty. Regulations and taxes tend to be the two areas in which government gets most involved.

I'll start with Mr. Egan.

When it comes to regulatory uncertainty, how does it affect innovation in the particular industry that you represent? Does regulatory certainty going forward assist innovation, and what sorts of regulatory changes from a federal perspective could assist innovation in your industry?

[Timothy Egan]

My member companies are downstream utilities. They tend not to be in resource extraction or large-scale movement of resources. Much of the regulatory reform that has occurred under the federal government over the last year or so has affected our counterparts midstream and upstream rather than our activities.

That said, although there hasn't been a direct impact, there is clearly an indirect impact, because regulatory certainty provides a signal to investors to move resource projects forward. In our case, that makes a commodity more affordable and available for customers, which delivers affordable energy to end-use customers and saves money for Canadians. So there's a direct connection in terms of affordability.

Likewise in terms of innovation, what it does by triggering investment in a value chain like ours.... Triggering investment means some capital on the ground for new project applications, and that means innovation in the end use of energy technology.

So there's a clear benefit.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

To Ms. Labrie, how has regulation impacted the growth of the business since 2000? In what ways has regulation helped or hindered the growth of your technology?

[Marie-Hélène Labrie]

In our case, regulation drives demand because the renewable fuel standard actually gives us access to a market by creating a demand. So the 5% ethanol blend is a regulation that is not for us, but it provides a market for us.

There is an opportunity to drive innovation by considering increasing the RFS. Today we have a 5% RFS. There is an opportunity to increase it. Today we're almost meeting this RFS with actual production for first-generation ethanol.

If we want to stimulate innovation, we need to have demand for next-generation biofuels as well, so I think we should consider in the next years increasing the RFS.

In the U.S. they are already blending 10%, and the E15 is now approved by the EPA .

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

Let me throw that one back to you.

If we do regulation in that respect, to drive demand to your product, that drives it away from another product. How do we know that the regulation is not merely switching demand from a product but actually causing innovation? Every innovator, every industry that's been in front of us, has asked for things to help them.

We're not so much interested in helping you individually; we're interested in the generality of it. We're not interested in helping natural gas versus coal.

Explain to me how we can do regulatory changes that do not pick winners and losers. It's fine with biofuels and all that—

[Marie-Hélène Labrie]

Yes, I understand.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

—but what I'm hearing is,“That would help us.” I'm glad you're doing well and I'm glad this would be helpful, but how do we help everyone through regulatory changes? There's some new, innovative technology that could be coming out of nowhere, and I don't want to disadvantage that and advantage another technology. I want to be technology-neutral and let the innovators just go at it.

[Marie-Hélène Labrie]

As I said, the RFS opens the marketplace and it provides options for consumers. The energy market today is not an open market, so the RFS would lead, from our perspective, to opening the marketplace. It provides more options for consumers. There are more competitive options and more competitiveness in the marketplace.

I think that's the primary role of the RFS, and that's why I said that to stimulate innovation we need to continue to open the marketplace. We have an opportunity to increase the RFS, given that we can have more biofuel in our current fleet of cars.

Ethanol, in the last two or three years, has been cheaper than gasoline, so it provides a competitive option for consumers.

I think in the infrastructure we need more options. We need to open the marketplace by having more options at the pumps. This is really to provide options to customers. It's really in that sense that I think regulations can play a role in our market and stimulate innovation.

The reason we have Enerkem today is that it's been driven by the demand that the RFS has created in both Canada and the U.S. Without opening that market, I don't think you would have stimulated innovation as much as you have today.

[The Chair, Conservative, Leon Benoit]

Thank you.

Thank you, Mr. Trost.

We go now to Mr. Gravelle for up to five minutes.

Go ahead, please.