Natural Resources Committee on March 19th, 2013

[The Chair, Conservative, Leon Benoit]

Good afternoon, everyone.

We're here today to continue our study on innovation in the energy sector.

We have four witnesses today, and all here in person. That's something this committee doesn't often have. We do a lot of teleconference things, so it's great to have everyone here in person. Thanks to all for coming.

From the Canadian Renewable Fuels Association, we have Scott Thurlow, president; from the Canadian Natural Gas Vehicle Alliance, Alicia Milner, president; from Biothermica, Guy Drouin, president; and as an individual, Warren E. Mabee, a Canada research chair in renewable energy and an assistant professor in both the Department of Geography and the School of Policy Studies at Queen's University.

Welcome.

I want to remind members that we do have a half hour at the end of the meeting today for future business of the committee. We'll deal with future business at that time.

To take maximum advantage of our time, let's start right now with witnesses. Following the order in which witnesses are listed on the agenda, we'll start with Mr. Thurlow, president of the Canadian Renewable Fuels Association.

Welcome again, and thank you for being here. We look forward to your presentation—hopefully of seven minutes or less.

[W. Scott Thurlow, President, Canadian Renewable Fuels Association]

Mr. Chairman and the committee members, I would like to thank you very much for the opportunity to discuss innovation in our energy sector, an important issue that is closely linked to biofuels development in Canada.

Domestic renewable fuel production strengthens our economy, protects the air we breathe, and plays a key role in securing and diversifying our energy future. It also speaks directly to the value of continued innovation in Canada, both on the science and technology frontier as well as in modernizing the market options for the products grown on Canadian farms.

CRFA members create a suite of innovative fuels including traditional corn-based ethanol; biodiesel from canola, spent cooking oils, and rendered animal residues; and the next generation of biofuels, notably feedstock agnostic cellulosic ethanol, which can include wood waste, forest biomass, and reclaimed municipal solid waste. At the same time, our members are continuing to improve energy efficiency in the production of first-generation ethanol and biodiesel. This includes developing new processes and value-added co-products to advance Canada’s place in the emerging bio-economy.

When looking at innovation in the energy sector, ours is the place where some of the most exciting work in the world is being done right now. We are an industry built by innovators. Our innovation started with the first-generation technology. There is no doubt that ecoENERGY for ethanol was a smashing success. The program allowed for the construction of several new facilities, and, depending on seasonality, we are now able to meet our mandate of 5% renewable content in all gasoline through domestic production. The government also established a 2% mandate for renewable content in diesel. These mandates are the best way to make sure that renewable fuels are part of our transition to Canada's role as a clean energy superpower, and ensure that the significant economic and environmental benefits accrue for Canadians where it matters most, right here at home.

Cornfields are, in essence, nature’s solar panels. They not only produce energy, but they can store it to be used when we need it. I have a board member who says that if someone invented corn today, they would be given a Nobel Prize for all the benefits that can be derived from it. In addition to the traditional uses for corn, our industry makes ethanol, which is derived from its starch. Ethanol is not only a fuel, but a natural octane enhancer that reduces GHGs and other harmful emissions, like benzene. The remainder, dried distillers' grains, is a protein-rich feed for Canada’s farmers.

As our industry has evolved with the advent of new technologies we are looking to do even more with our crops, including the production of biopolymers, nutraceuticals and other advanced foodstuffs, industrial plastics, and the next generation of biofuels like cellulosic ethanol. Programs like the government's AgriInnovation program, established under Growing Forward 2, are vital to this type of development.

Today, next-generation renewable fuel companies are establishing commercial plants that can produce biofuels from an array of new sources. They are developing cutting-edge technologies and first-of-kind projects that prove the future of fuel is, in many ways, already here.

Reflecting on the importance of these innovators, the CRFA created a new committee and classification of membership specifically for next-generation biofuel producers. You have already heard from one of these companies, Enerkem, earlier in the committee's work. Biofuel plants, like these next-generation pioneers, contribute almost $1.2 billion every year to our economy, and generate almost $240 million a year in federal and provincial tax revenues.

It goes without saying that in addition to the economic advantages, clean burning biofuels are proven to significantly reduce greenhouse gases and other emissions. Depending on the fuel in question, we can reduce our GHGs by up to 99% in the process when compared to traditional fossil fuels. The government’s transportation sector strategy for GHG emission reductions, of which biofuels are an integral part, cut carbon emissions by 4.2 megatonnes. This is equal to removing 1 million cars from the roads. These benefits are even greater with next-generation cellulosic ethanol, which requires less energy to produce than traditional gasoline, and can reduce GHGs by as much as 60%.

We also have next-generation biofuels made from non-recyclable and non-compostable municipal solid waste. These carry a dual benefit, in that they reduce GHGs while also recycling waste that would otherwise be dumped into the ground. It is a nice double hit: we reduce waste to landfill while simultaneously creating energy.

However, in order to reach and capitalize on this innovative potential, we must first plan for our success. As was the case with first-generation biofuels, the next generation of biofuels needs both capital and operating support in order to successfully commercialize their technologies. To do this, policy certainty and stability to attract private investment are crucial.

One such program is the NextGen Biofuels Fund administered by Sustainable Development Technology Canada. This important fund attracts private investment needed in the first years of operation.

As I submitted to the House of Commons Standing Committee on Finance, the CRFA supports preserving the current funding available—

[The Chair, Conservative, Leon Benoit]

Excuse me, Mr. Thurlow. Could you speak just a little more slowly? The interpreters are having trouble keeping up.

[W. Scott Thurlow]

No problem—

[The Chair, Conservative, Leon Benoit]

But still get done within the seven minutes.

[Voices]

Oh, oh!

[W. Scott Thurlow]

I'm just so excited about the next generation of fuels that I can't contain myself.

As I submitted to the finance committee, the CRFA supports preserving the current funding available and maintaining the existing eligibility criteria for the applicants under this fund.

I was happy to see that as recently as this morning, Minister Kent, the Minister of the Environment, recommitted to SDTC and the next generation for biofuels fund, noting that it is a catalyst for building sustainable development technology infrastructure and is a significant driver of environmental—

[Carol Hughes, NDP, Algoma—Manitoulin—Kapuskasing, ON]

Excuse me. You do have to give them a chance to catch their breath. You're going too quickly.

[The Chair, Conservative, Leon Benoit]

Go ahead, Mr. Thurlow.

[W. Scott Thurlow]

It's a significant driver of environmental innovation in Canada.

We would welcome government announcements under the NGBF and look forward to collaborating with the government to make these a reality in the immediate near term.

On the biodiesel side, our industry remains committed to ensuring that the Prime Minister's stated objective of 600 million litres of domestic biodiesel production is met. Our members currently have operating capacity of 110 million litres of production, and we have a new plant coming online this year that will add 250 million litres of production in Lloydminster.

Like ethanol, the most important piece of the puzzle is the mandate. Again, the government has demonstrated a lot of leadership in this regard. These mandates must be maintained and even grown. Our association has been steadfast in its position that mandates drive investment, and the CRFA is calling for progressive increases to the renewable diesel mandate to make it up to 5% by 2020.

Our country is blessed with a bounty of natural resources, but we cannot and should not rely on this wealth alone to meet all of our energy needs. I want to be very clear about our support for oil and gas exploration in Canada. The development of Canada's energy sector will drive consumption of all products, including ours.

I would point out to this committee, however, that every litre of biofuel we make and consume in Canada is one litre of petroleum-based fuel that we can export into the global market and hopefully sell at a global market price. The simple fact is that we, like other countries around the globe, are facing real challenges in terms of our climate and our environment. Diversifying our fuel mix and promoting the development of innovative renewable fuels is the government's single best policy option for addressing all of these environmental and energy challenges.

For your part, ensuring policy stability and maintaining market access through the federal mandate will turn our industry's innovations into Canada's successes.

Thank you. I look forward to answering your questions.

Again, I apologize if I was going too quickly.

[The Chair, Conservative, Leon Benoit]

Thank you very much, Mr. Thurlow.

We'll go now to Alicia Milner, president of the Canadian Natural Gas Vehicle Alliance.

Again, welcome. Go ahead with your presentation, please.

[Alicia Milner, President, Canadian Natural Gas Vehicle Alliance]

Thank you, Mr. Benoit, and thank you to all the committee members.

It's a privilege to appear before you today to discuss the innovation within the natural gas vehicle sector and how there is a broader spectrum of opportunities opening up, both on-road and off-road, for natural gas in North America.

Canada has long been recognized as a leading technology innovator when it comes to natural gas for transportation. Canadian companies have achieved several global firsts over the last three decades, in part because of collaboration among the public sector, private sector, and academia.

The track record of our Canadian achievements includes developing the first natural gas transit bus in the world—in the 1980s, in Hamilton. We developed the first home refueller for passenger vehicles. There was significant leadership from Canada in the eighties and the nineties on the development of codes and standards for compressed natural gas use. We developed the first heavy engine to match the efficiency of a diesel engine. We also developed the first heavy engine to meet EPA 2010 emission requirements.

This is a track record that both industry and Canadians can be very proud of. It also provides a solid foundation for our Canadian companies as they look to leverage their advantages in the global marketplace.

With the supply outlook for natural gas starting to change in the last few years, thanks to the unconventional natural gas resources, given this technology head start we are well ahead in terms of other countries and in competing for opportunities in this space. Our companies in Canada are the market leaders when it comes to heavy engines in North America, selling to 20 different truck and bus manufacturers. We own this part of the market. We also have a very strong presence in biogas upgrading to make renewable natural gas or green gas.

When we look back over the last 30 years, while the market development in Canada was not that successful, we actually had an outcome that no one expected, which was to create a number of very strong leading technology innovators in Canada that are very well positioned as we look forward.

With these strong credentials, you can understand why, when the gas supply outlook changed and the industry started to work with Natural Resources Canada, we didn't start with the technology road map, which is a very common starting point. Instead, we started with deployment: how do we actually get this technology used in this country? That was the real question of this work.

The outcome of it was a report that's been very helpful in terms of focusing both government and industry effort. It has also led to the ecoENERGY for alternative fuels program, a $3-million, five-year program, that's really removing barriers—technical barriers and education barriers.

Going back to innovation, which is the focus of the committee's work, I'm pleased to advise that because of these early investments, as mentioned we have a very significant Canadian advantage going forward. First and foremost with respect to innovation is Canada's Westport Innovations. Westport is well known in Canadian clean tech circles. It's the company that developed the first heavy engine to match the efficiency of a diesel engine. This engine is now used in just under 200 natural gas highway tractors in Canada, and in about twice that number in the U.S. We do expect that demand for Westport's products will grow considerably with the build-out of LNG refuelling stations that's now under way in the U.S.

Second, is Cummins Westport. This is a joint venture between Westport and Cummins Diesel, which is a very large American company. This is the company that developed the first engine to meet the EPA 2010 standards, but because of the cleaner burning qualities of natural gas, this technology now has an advantage over diesel. There is no need for a particulate filter and no need for an SCR system, both of which add cost and complexity. All diesel vehicles now need that exhaust after-treatment.

With regard to the type of growth that Cummins Westport has seen for their products over the last few years, there has been more than 50% growth in demand for their engines, primarily into the North American market but some offshore. They've sold more than 10,000 engines into the truck and bus market. They're going to be bringing a larger version of their engine to the market this year, and that is widely anticipated, based on their success to date.

The third company I'd like to highlight in terms of innovation is Xebec Adsorption. They're based in Blainville, Quebec, near Montreal. They manufacture natural gas dryers as well as upgrading equipment for biogas. They have 15 biogas upgrading installations around the world. They essentially take biogas from waste sources—agricultural, municipal, or landfill—upgrade it so that it's renewable or green natural gas, and then it can be used either directly in vehicles or put into the pipeline. Their installations are in Korea, Switzerland, Austria, Canada, and the U.S.

Now, looking forward, there are tremendous opportunities, given the kind of technology portfolio that we do have here in Canada. Where we see new opportunities opening up is off-road. These are in the areas of rail, marine, and heavy horsepower mining trucks.

Westport has a propriety technology, their high-pressure, direct-injection gas technology, and it's the focus of an engineering partnership with Electro-Motive Diesel , as well as with Caterpillar, so two very major players in the heavy, off-road equipment space.

For locomotives, as many of you may know, there's already a pilot project under way between Edmonton and Fort McMurray, with CN and refuelling from Encana, with an LNG locomotive operating on a regular route there. In addition to this pilot, there's some from-the-ground-up technology development work funded by SDTC, involving Westport, Gaz Métro, CN, and Electro-Motive, essentially to develop an LNG, purpose-built locomotive engine.

You may have also seen within the last couple of weeks the announcement that BNS—and that's of course the Warren Buffett-related announcement—is now testing LNG locomotives as well. They're obviously a very major player in this space, so that's also very encouraging to see.

On the heavy horsepower mining trucks, these are probably about three years off from being commercial, but Westport is actively working with Caterpillar on this technology. From Caterpillar's perspective, there's a nice quote that I want to share with you, from their director of strategy, as follows, “...we see a global market long term. Large engines are going gas. It's not debatable; it's our conclusion.” Caterpillar has essentially said they're going all-in on natural gas.

So Westport is extremely well positioned to benefit from this new direction, as Caterpillar adds natural gas across its product portfolio. As mentioned, we do expect there'll be some commercial technology there by about 2017, so that's very much of interest to some of our members like Shell, which would like to also use natural gas for the heavy off-road equipment.

Just in closing, as the global transportation sector seeks affordable, lower emission alternatives, there'll continue to be great opportunities for Canada's natural gas vehicle industry, given the kind of expertise and knowledge from the industry. We would very much welcome the opportunity to explore with the federal government how to further leverage our substantial innovation advantage in this area.

Thank you.

[The Chair, Conservative, Leon Benoit]

Thank you, Ms. Milner.

We go now to Guy Drouin, president of Biothermica.

Welcome again, and go ahead with your presentation.

[Guy Drouin, President, Biothermica]

Thank you for inviting me to give testimony before the Standing Committee on Natural Resources.

My presentation will be very practical in the sense that I am going to tell you about three of our projects. I am also going to conclude by telling you about changes and approaches that I think our legislators should consider in order to improve, increase and speed up the development of technologies with a view to fighting greenhouse gases.

I founded Biothermica 25 years ago to recover methane from landfill sites and, later on, from underground coal mines. Since 1987, our company has invested more than $150 to $200 million in projects. It has developed over 12 active patents linked to those technologies. All the things we do today did not exist 25 years ago.

Today, our company owns infrastructure. We are a private producer of landfill gas power. I set up the first landfill gas power plant in Canada, which is actually the largest. The power plant is called Gazmont and it is in the City of Montreal, on the landfill site formerly known as the Miron quarry. This plant generates 25 MW of electric power.

For four years, we have been connected to TOHU, a Cirque du soleil subsidiary. We bring them hot water so that they can heat all their facilities with green energy. Soon, we will be connected to Cirque du soleil's head office to replace the one million cubic metres of natural gas that their head office is currently using in Montreal. They will simply use the heat generated by our turbine that produces electricity from biogas.

This company that I have created belongs to my family. We were able to develop technologies especially because of the research and development tax credit program. I would really like to thank the Canadian government because our company would not exist if it weren't for this Canadian program that was implemented in the 1980s and followed by Quebec. This program is extremely and fundamentally important for any company that wants to develop green technologies.

Fortunately, last year, the Jenkins report provided some very positive recommendations. There have been some cuts to the program, but the key aspects of the program have been kept. This program is one of a kind in the world.

As an entrepreneur, I encourage you to keep this program and to improve it because it is fundamental. Why? If we compare it to grants, the program has continuity over time. As business people, we are able to create long-term R and D programs because we know that the program will exist in 5 or 10 years. With a grant program, if the government changes, the program can disappear. So we cannot develop a long-term technology. Developing technologies does not happen in a year; it takes 10 years.

We specialize in methane. Last week, I was in Vancouver for the largest conference in the world on the Global Methane Initiative. The conference was sponsored by the Canadian government, Environment Canada and U.S. EPA. Canada's Minister of the Environment opened the conference. The conference brought together 70 countries, the stakeholders of which are all methane emitters, be it methane from coal mines, landfill gas or oil refineries.

At that conference, since we are world-renowned in the field, Biothermica had an opportunity to present two projects that are unique in the world. The first project was in Alabama where we are the first company to recover methane from underground coal mines.

Let me say a few words about methane. Fifteen per cent of the world's greenhouse gases are emitted through methane and the increase rate of methane emissions is twice as high as that of CO₂. Methane has an impact that is 21 times stronger than that of CO₂. In other words, every tonne of methane emissions is equal to 21 tonnes of CO₂.

Canada, with the United States and 30 other countries, launched the Global Methane Initiative in order to help private companies develop technologies to reduce methane emissions, whether from waste, biogas, underground coal mines, manure—animal excrement, that is— or rice plantations, which abound in China.

Still from a practical perspective, Biothermica has developed three methane-related projects. The first one is Gazmont, which I have talked about. We were the first to recover more than 15,000 m³ of biogas. At the beginning of Gazmont, we were generating 25 MW of electricity, enough to power 30,000 homes. Today, we power 6,000, since the curve is slowly dropping.

That was a pilot project and, since it was our project, we funded it. We are talking about $38 million. We put in $7 million as equity and we had a debt of $30 million. This project became a technology showcase for Biothermica. It allowed us to carry out a similar project in El Salvador that we registered under the Kyoto Protocol in 2006 through the clean development mechanism.

The Canadian government had ratified Kyoto. It gave us a letter of approval, except that, afterwards, since Canada did not create a greenhouse gas registry, we signed an agreement with Luxembourg to be able to sell the carbon credits that we were generating in El Salvador to the Grand Duchy of Luxembourg. As a result, we didn't have to go through Canada's greenhouse gas registries. That project won first prize in infrastructure in Latin America in 2008, for its technical quality and especially for its technological success. Today, we have a 6 MW power plant. The project is still running with revenue from electricity rather than carbon credits, because the price of carbon has dropped tremendously in Europe.

The second project is in Alabama. We were the first to set up a plant using our VAMOX technology that recovers methane from one of the largest underground coal mines. This underground methane creates explosions. The project was registered under the Climate Action Reserve. The state of California is currently telling us that it will recognize those carbon credits in the California carbon market that was created. Quebec has been linked to that market through a liaison initiative since last month. Clearly, we will be able to deploy the VAMOX technology as a result of a regulated carbon market being established between California and Quebec.

To conclude, Biothermica is a company that has always been profitable. The development of green technology is a source of wealth. In addition, we have come to the conclusion that legislators must consider the fact that, every time we use a cubic metre of clean air to create energy, whether it is for cars to move by burning gas or for burning coal and natural gas, we should put a price on this cubic metre that we are taking away from the environment and that becomes “a little dirty”. If we put a price on a cubic metre of clean air, the way we do for each cubic metre of wood or water, we will send a message that it is limited. That is economics 101. As a result, we would pay attention and use clean air rationally. I have always wondered why, politically, we have a hard time putting a price on a cubic metre of clean air.

It is one of our planet's resources, just like a cubic metre of wood, water or gravel. So that is our message to you. As legislators and policy makers, you have a role to play so that we can eventually put a price on it. It is your job to decide whether the price will be added through a carbon market or as a carbon tax. Once there is a price on every cubic metre, we will do our job as technological entrepreneurs. We will develop technologies and, as a result, we will create wealth, a cleaner environment and a sustainable planet.

Thank you.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Drouin.

We have, as an individual, Warren Mabee, chairholder of the Canada research chair in renewable energy.

[Dr. Warren Mabee, Chairholder, Canada Research Chair in Renewable Energy, Assistant Professor, Department of Geography and School of Policy Studies, Queen's University, As an Individual]

Thank you, Mr. Chairman, and my thanks to the members of the committee for allowing me to be here today. It's a real pleasure.

First, I'll try to describe a little bit of the mix of renewables available to us. We have three real sets of needs. We have needs for industrial and home heating. We have a need for personal and mass transit. We have a need for electricity generation. Different renewables match different needs in different ways. Biomass is really the only renewable energy source that can meet all of those needs. It's perhaps for that reason that we haven't taken advantage of it as much as we might, because there are competing interests in using biomass for energy right across Canada.

Currently, biomass for energy only takes up about 2% or 3% of our total primary energy supply. In China, biomass accounts for up to 10% of the total primary energy supply. Even the United States uses more biomass for energy than Canada. That speaks to an opportunity for this country. We have biomass. We have a lot of it. There are opportunities for us to do more with it, to meet our own energy needs and perhaps the energy needs of others.

As for renewable electricity generation, China produces more than any nation right now, about 645 terawatt hours as of 2009. The U.S. is at about 464. Canada is at about 375. It's terrific. We have 35 million people. We are producing more renewable power than any other nation on a per capita basis. That has made us complacent. I think that we can look at ourselves and say it's a job well done. We have done a great job of developing renewables. Almost all of our renewable power is hydroelectric. Very little of it comes from any other source. Compare that with the situation in the United States or any other country, where other forms of renewable power have been developed to a much greater extent. There is a great opportunity here. There are many things that we can do.

Renewable electricity breaks down across Canada without hydro. Every single province, every region, is doing different things. We have a multiplicity of approaches in our country, and that reflects our loose federation. It reflects the power of the provinces to determine how they might put together their electricity portfolio. It means that we might be able to do better by harmonizing our approach to renewable electricity generation.

One place that Canada falls down is in the generation of renewable heat. In this department, Sweden is the big leader with 127 petajoules, followed by Finland, with 54 petajoules. China generates 12 petajoules. Canada generates only 2 petajoules. We are not grabbing everything that we could from the biomass that we're consuming, even for electricity generation. We are losing an opportunity. This is a piece of low-hanging fruit. I know that we have tried in the past to implement programs to support renewable heat or biomass to heat. I think there are more opportunities we could work on in the future.

Biorefining is a complex subject, with many technologies. We've heard a bit about the biorefining approach from some of my colleagues here. We've heard about biomethane and how we might be able to go after different forms of energy.

All I wanted to show you is that this is a really complex area. There are a lot of options, a lot of technologies are being developed—opportunities but also challenges because we are not a big country and everything will be very difficult for us to develop.

I've drawn some little dotted boxes around some of those technologies. They really represent different technology pathways that different Canadian companies are pursuing. We have champions pursuing each of these different boxes. The committee has heard from Enerkem, which is a terrific example of a Canadian company pursuing the gasification catalysis and ultimately liquid fuel pathway with quite a bit of success.

We have some opportunities to work within these different boxes. Canada has a lot to provide on the value chain side of things. We are good at handling biomass. We have a long tradition of it in the forest sector and the agricultural sector. We can capitalize on that.

I'd like to thank the government for the establishment of BioFuelNet, which is a new network of centres of excellence. It was funded last year, and we're now working toward the end of our first year of programs. We have research programs going on in all these areas. Over the next five years we will be identifying some of the real opportunities, and we will be linking them to market opportunities. The technology is moving forward, and we're excited to say that.

As we move forward there are a few places where the government can really play a key role. There are ways we could use heat better, and it is a low-hanging fruit. It is an easy win, so to speak, if we can start to capture some of that, and it will support deployment of the biorefinery because it will add more value to the energy generation/fuel generation side of things.

We can build on our strengths. We have a number of pulp and paper mills. We have capacity that is underused or is in danger of being shuttered. Certainly we have had lots of capacity shuttered over the past decade or two. We might be able to use that capacity to support new initiatives. We will need help to move from the lab scale, from the pilot scale, into those facilities. We're looking forward to being able to do that.

I'm going to echo something Scott said earlier, which is that we would like to consider new mandates in the future for renewal content in chemicals and fuels. It is not to say that we have to keep ramping up ethanol content in gasoline. We could look at other fuels like aviation fuels.

Lately I have got excited about the idea that we might be able to link mandates to our oil and gas sector. Could we use a mandate that would direct the industry to use a certain proportion of renewable power in the development of conventional energy resources to develop infrastructure and capacity that could help move forward other Canadian sectors as well? I think we could do that without crippling the conventional sector. We could do that and build on some of our strengths.

Something we are going to need—and the last speaker addressed this to some extent—is clarity on metrics of success. Are we aiming for greenhouse gas emission reductions? Are we aiming to create jobs? Is this all coming down to cost? Are we looking for the dollars or the megawatts that are being delivered?

We can optimize systems to do each of these things. It would be good to have a better sense of what our metrics of success should be.

With that I will wrap up. Thank you very much, committee members.

[The Chair, Conservative, Leon Benoit]

Thank you very much for your presentation, Dr. Mabee.

Thank you all.

We'll go now directly to questions and comments from members, starting with Mr. Leef. We also have Mr. Julian and Mr. Hsu in the first round.

Go ahead.

[Ryan Leef, Conservative, Yukon, YT]

Thank you, Mr. Chair.

Thank you to all our guests today. It's tough when we have four witnesses all at once. It doesn't help us narrow down our range of questioning, but what it does do is highlight what's out there and the options that exist.

That leads me to my question. I'm the member of Parliament for the Yukon so, obviously, the territory is a small market. Canada in some sense—it's reflected in a couple of these presentations—is a small market with 33 million people. How do we go about identifying that product?

As Mr. Mabee pointed out, there are really three areas that we're looking at here but, if we're talking about a transportation sector and a home-heating sector, how does an option rise to the top? It would seem to me, from the Yukon perspective, that the cost of developing this is so intensive that you can't give every option to all the consumers in such a small market. If you do that, then... I can't imagine pulling up to a gas station in the Yukon and having a LNG option, a biomass option, a fuel option, a diesel option, and having any one of those actually be viable, because the costs to implement those are so tremendous. That's at the Yukon scale, and it's probably not a much better picture at the national level.

I don't know if you have an exact answer for that, but maybe you have some comments on how we shape that so that the options can exist but, at the same time, we narrow our focus down so that we actually get a product on the market that's going to achieve the goals that you've set. I think that was a good point. We have to define what our metrics are going to be, and maybe that would partly answer it.

We'll start at your end and work our way down.

[W. Scott Thurlow]

Sure, and certainly I'm going to defer to Alicia here because that's part of the mandate of the document that she spoke to.

In Canada we focus on the creation of the fuel as opposed to the delivery to the customer. It's up to the obligated parties to take advantage of their street corner locations and create their own market niches for one another, but what I will tell you is that in the United States, particularly in the Midwest, you have seen tax credits for pump turnover, you have seen drivers of technology that can be easily communicated to consumers at the pump so that they themselves can make those types of fuel choices in the gasoline market.

But you're right on the nose. Ultimately, if we want fuel diversification, there is going to be an upfront capital cost to implement all of these different fuel choices.

[Alicia Milner]

Yes, I guess from the natural gas for transportation perspective, what this was really all about was we got a lot of bumps and bruises the first time we tried natural gas because we tried to do it across the spectrum. So let's be smart about it as government and industry and figure out what the right niche is.

The conclusion, of course, was the return to base—medium and heavy vehicles and regional corridors—but there's got to be sort of an ongoing collaboration. Certainly on the natural gas side, we see no role for government spending on infrastructure, but we absolutely see an important role to define, to create a period of certainty, so that we see that private sector investment in Canada.

I think the interesting thing, especially in a jurisdiction like the Yukon, is that we're starting to see more and more off-grid, off-pipe opportunities because of LNG, and that's going to open up. We've got to be very aggressive and opportunistic about it so that, if there is an LNG opportunity, that can then open up both local heat as well as transportation, but more on a one-off basis depending on the nature of the opportunity. Certainly from my comments, it's probably pretty clear that we are very much targeting the high fuel consumption applications—and that's a space too where there really are very few options to reduce emissions—and one of our fastest growing sources, heavy diesel vehicles.

[Guy Drouin]

In relation to liquefied natural gas or ethanol from cellulose or corn, it's a different ball game. I was involved in both of these technologies before I founded Biothermica. I was the owner of the alcohol plant in Gatineau on the other side, and we did a lot of R and D on cellulosic ethanol through hydrolysis. There's the other way through gasification like Enerkem.

I think that the option to utilize biogas or natural gas in the transportation system is short term; it's a no-brainer; it will happen. The U.S.A. has an immense reservoir of shale gas. There is more and more shale gas on the market, and you have seen a collapse in the price of natural gas, going from $10 per gigajoule to $3 or $4. That will have two consequences. First of all, that will push natural gas in the transportation sector, and later on push the ethanol from cellulose because it's quite a bit more expensive than natural gas.

So the shale gas paradigm in North America has been changing the ball game for the last two years, but cellulosic ethanol has a role to play, not for tomorrow, but maybe the day after tomorrow.

That is my personal view.

[Dr. Warren Mabee]

One idea that I would like to put out is that a way to break this problem down is to consider the country by region. In the east we have a lot of people, we have chemical processing capacity, and we have big markets. This might be the place where we work towards a biomass to a liquid fuel or a biomass to chemical option. In the west we have a big conventional energy industry. They have big needs for heat. Maybe that's where we work towards renewable heat. In the north I would argue that electricity—particularly as you move into the off-grid communities—becomes an overriding concern. Maybe we look at different ways of generating renewable electricity in those zones.

So we might end up working on three pathways rather than 50, but it would give us a way to bring things down to a more cohesive form.

[Ryan Leef, Conservative, Yukon, YT]

Thank you.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Leef.

We go now to Mr. Julian, for up to seven minutes.

Go ahead, please.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Thank you very much, Mr. Chair.

I would like to thank all the witnesses for joining us. As Mr. Leef said, it is hard to choose who to ask questions because you have all raised many interesting aspects.

I would like to start with you, Mr. Drouin.

In my view, you spoke very passionately about having a long-term vision. That includes having a carbon market. We have often criticized the government for withdrawing from the Kyoto Protocol and for not putting a price on carbon, which is essential according to many people in the industry and according to you as well.

What is the best approach for the government? Of course, we will prepare a report and make recommendations for the government to set a price on carbon so that these types of businesses are profitable and so that we safeguard our environment. In your view, what steps should the government take?