Natural Resources Committee on May 7th, 2021

[Dr. Amit Kumar]

Just to give you a perspective in terms of.... I'll focus more on the lignocellulosic biomass like forest biomass. If you look at all of Canada, we are talking about...and this is mostly the residues. About 21 million tonnes of forest residue is available per year. If you think about the production of how much, let's say, ethanol or liquid fuel you can produce, it's generally 200 litres in a tonne.

With these residues that are available today, currently most of the operations are just piled on the roadside and burned to prevent forest fires as part of forest management practices, so these are not currently used. You can look at others, for example, straw. If you look at the whole of Canada, we are looking at about 28 million to 30 million tonnes of straw. There are some other uses, but again, the majority of this is left in the field to rot and it emits CO2. You do have the potential to use these large feedstocks, which are lignocellulosic feedstocks.

Municipal solid waste is another big one where you have about 25 million to 30 million tonnes—

[Dane Lloyd, Conservative, Sturgeon River—Parkland, AB]

Thank you.

I'm sorry to interrupt, Dr. Kumar. I see your point on that with the straw and the forest products. I wanted to focus now on canola and wheat and things like that. We've seen the price of canola double this year. It's quite astounding how much it has gone up. If we were to divert this canola from food purposes or its current purposes and put it into renewable fuels, is it likely we'll see a much higher price for canola?

What do you think the consequences would be for other sectors of the economy?

[Dr. Amit Kumar]

If you look at the evidence—and this is the evidence that exists from the past several years—typically, there would be some increase in the cost. There is a food versus fuel debate all the time in terms of, if you divert it, then the cost goes up. That's why my point is to use the part of the plant that is not used.

[Dane Lloyd, Conservative, Sturgeon River—Parkland, AB]

That's a good point, because I want to flip over to our friend from Covenant Energy.

We're talking about new crushing plants in Canada, but you're a farmer. You know the price of canola has doubled. It would be good for farmers if the price went up even more, but what will be the impact on canola as a food source if more and more of it is being diverted towards biodiesel?

[Josh Gustafson]

That's a good question, and it's one that we certainly felt we had to address right up front.

Early on when we were looking at our project, we hired a consultant who is maybe.... I would consider him the best in Canada, to be frank. We brought him on to look at the feedstocks and what this was going to mean for canola. How much is being produced? What do we have?

I'll just back up a little bit. If you look at what's being produced, you'll see that there were four million tonnes of canola oil crushed in 2019 out of the 10 million tonnes of seed that was crushed domestically. There was about 20 million or 19.5 million tonnes of seed produced in Canada.

The thing that you have to realize is that crushers have been at maximum capacity for the last three years, and they've been sitting there waiting. They've had the opportunity to expand. They've had the seed there to expand, so why weren't they expanding? The reason was that the edible market is only so big and, to be frank, it wasn't demanding enough to signify that they should expand.

Why did we see these three crushers come out just recently with these news releases? If you look at the chain of events, you'll see that Tidewater Midstream, True North Renewable Fuels and Covenant Energy came out with news releases that we were going to get into the renewable fuels production, looking at canola oil as a feedstock. Within one week, Richardson made its announcement. A week behind that—

[Dane Lloyd, Conservative, Sturgeon River—Parkland, AB]

I only have a little bit of time. Are you concerned about the rapidly rising price of canola impacting your operations, if that's going to be your feedstock?

[Josh Gustafson]

Yes, you have to take into consideration all the feedstock options. Obviously, it makes it a lot tougher when canola prices are going up higher.

[Dane Lloyd, Conservative, Sturgeon River—Parkland, AB]

Can you follow up in writing on that?

[Josh Gustafson]

Yes.

[Dane Lloyd, Conservative, Sturgeon River—Parkland, AB]

My last question is for Mr. Angelucci.

I was reading that B100, pure biodiesel, could have a cloud point of 10°C. Obviously, in Canada, a cold country—you referenced Minnesota—it's not feasible for us to have biodiesel that has a cloud point of 10°C. Can you tell us a bit about what's going on with that? How is that going to be mitigated?

[Giovanni Angelucci]

Some biodiesels, depending on the feedstock, do have a higher cloud point, but there are other biofuels that have a lower cloud point. This is part of a transitionary period in alternative fuels. Biofuel doesn't have to be used as a B100, although it can be, but we can use it in varying blends all throughout the year and in different jurisdictions, depending on the temperature.

The only reason I bring up Minnesota as an example is that it's, on average, as cold or colder than some of our provinces, and there they're able to use B20, which has significant reductions for CO2 without any change in infrastructure and without having to go up against the cloud point issue.

[The Chair, Liberal, James Maloney]

Thank you very much.

Thanks, Mr. Lloyd.

Mr. Simard, you're not on mute. You need to put your mute on. Thank you.

Mr. May, you're next for six minutes.

[Bryan May, Liberal, Cambridge, ON]

Thank you very much, Mr. Chair.

Before my questions, I just want to thank all of the witnesses for being here today. As I said in the last meeting, it's amazing to see all these companies from across Canada coming together and recognizing the need to transition.

My questions today are going to be directed to Mr. Thurlow from Dow.

We know that decarbonizing a carbon-intensive sector is not a point of debate for most of us here today. It's something we have to do. The question is how we can find the best way to do it, not whether we should. Can you comment on the approaches that you've heard for addressing emissions reductions?

[W. Scott Thurlow]

Certainly. Again, that is possibly a question that would lead to a Ph.D. thesis. There are quite a few areas that we can talk about.

The first thing that I would say is that we're very happy to see the change in direction by the federal government on the clean fuel standard. When it was originally conceived, it was designed to also apply to industrial fuels. That would have been incredibly complicated, and it would have exposed the industrial sectors in Canada to a significant amount of external trade competition as a result of the increases in costs there.

Another issue that's come up is the prospect of renewable natural gas. Quite frankly, there just isn't a lot of evidence right now that some type of increase in renewable natural gas content in Canada is something that we could either, first, achieve or, second, consider economically. Renewable natural gas, depending on the source, can be up to four times as expensive as virgin natural gas. The other issue is just how much of it we have, and we don't have all that much.

To see the moves that the government made on the clean fuel standard for industrial fuels.... That was a very good idea. The reason is that the output-based pricing system has mechanisms in it to account for competitiveness issues outside of our border.

[Bryan May, Liberal, Cambridge, ON]

You stole my thunder a little bit, sir. You've actually answered three of my questions in your answer to the first question. I definitely wanted you to touch base on the focus of transportation fuels versus industrial.

Do you want to maybe take a moment, though, to elaborate a little bit more on that in terms of whether you believe Dow can help in that area?

[W. Scott Thurlow]

Absolutely. Again, the other thing that I would tell this committee is that the business of chemistry—whether it's Dow or other people in the sector—is going to be incredibly important for achieving Canada's climate change reduction goals.

I would say that it's the innovation of new plastics that leads to lightweighting. It is the ability to have these new advanced materials that will react in different ways under pressure that leads to the significant new GHG savings.

I guess the last thing that I'll say, from an OBPS perspective, is that the recent decision of the Supreme Court of Canada does allow for the provinces to continue to design their own systems. In so doing, they can design a system that is best-in-class for that particular province.

[Bryan May, Liberal, Cambridge, ON]

You touched on this a little bit, as well, in your first answer, but do you want to maybe elaborate a little more in terms of your views on the creation of a renewable natural gas mandate?

[W. Scott Thurlow]

That's a great question. I don't want to say that renewable natural gas isn't a climate solution. It absolutely is a climate solution. I just don't know if it is the climate solution.

As I said, I just don't know if we have the volumes in Canada to get to a significant, mandated requirement. Certainly, the costs would be very significant. There is an issue about whether or not the renewable natural gas will have the same physical and chemical properties as the virgin product from a feedstock perspective. There should be more study in this area. To say that we need a mandate in this area.... I think there just isn't enough fuel in the market right now to create such a mandate.

[Bryan May, Liberal, Cambridge, ON]

With respect to the policies or the plans that you may have heard from both the government and other parties, can you take a moment to compare and contrast what you've heard in terms of those proposed plans on this file?

[W. Scott Thurlow]

There's a long history of renewable fuels policy in Canada. It started under the previous government, and it's continuing under this one. Like I said, the government's decision to move away from the industrial fuels requirement under the clean fuel standard was a good idea. It makes a lot of sense. Nowhere else in the world do we have this kind of clean fuel standard for industrial fuels, so industry is very thankful that decision was made.

Does that shift a very significant burden onto the transportation fuels sector? Possibly. Certainly that's something that an industry like ours is going to have to look very closely at in terms of developing new options to meet those GHG reductions.

[Bryan May, Liberal, Cambridge, ON]

Thank you, sir. I think my time is almost up.

I'll just take the last couple of seconds here to, once again, thank all of the witnesses for taking the time to be here today.

Thank you, Mr. Chair.

[The Chair, Liberal, James Maloney]

Thank you, Mr. May. You were right on time, which is much appreciated.

Mr. Simard.

[Mario Simard, Bloc, Jonquière, QC]

Thank you very much, Mr. Chair.

I have a quick question for Mr. Samray.

Mr. Samray, you mentioned four issues in your presentation. The first was about biomass and about the value put on it. You talked about the importance of establishing a kind of hierarchy of uses. We may come back to that later.

What interests me at the moment is the support the government provides to the ways in which biomass is valued. I'm thinking about biodiesel, bioethanol and biohydrogen. I would like your comments about that.

Is the federal government on board in terms of developing the area?

[Jean-François Samray]

When we analyze a company's record, we see its view of the future in its research and development expenditures.

At the forest industry council, we applaud when we see $35 million over two years set aside for the program called investments in forest industry transformation, or IFIT. It is for the forestry industry to convert and diversify into new products. However, in the budget as a whole, when we compare the amounts allocated to other sectors—you will recall how many billions of dollars have gone to the oil and gas sector—we are disappointed.

In other words, if the government sees any future at all in biofuels, it will have to invest money to support the industry to that end. I feel that all the witnesses today have said so. It's critical. Without money for research and development in order to reach economies of scale, the transition will not happen.

[Mario Simard, Bloc, Jonquière, QC]

So better support is needed.

Last week, we talked at length about hydrogen. You mentioned it briefly in your fourth point about green hydrogen.

What I gathered from some of the witnesses from the department last week is that the strategy was going to focus on grey hydrogen in the short term. I don't want to start that debate again, but what can green hydrogen mean for the forest industry?