Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources
Issue 11 - Evidence - June 19, 2008
OTTAWA, Thursday, June 19, 2008
The Standing Senate Committee on Energy, the Environment and Natural Resources, to which was referred Bill C- 33, An Act to amend the Canadian Environmental Protection Act, 1999, met this day at 8:33 a.m. to give consideration to the bill.
Senator Tommy Banks (Chair) in the chair.
[English]
The Chair: Good morning, ladies and gentlemen.
I will impose on our guests for a moment to do a little bit of business having to do with our agenda before proceeding. By the way, the Senate sat until 11:45 p.m. the night before last. We all started at 8 o'clock yesterday morning and the Senate sat until 10 o'clock last night. I am grateful for you all being here this morning.
Late last night, after the Senate adjourned for the evening, I sent you emails, which you may not have received. It has to do with this morning's agenda. I have copies, but they are only in one language because it is a copy of the email I sent last night. May I distribute it to you and ask you to review it, please?
This is self-explanatory. Senator Spivak, in addition to what you are now reading, there will be a very short meeting of the steering committee on the question of further witnesses on Bill C-33 immediately at the conclusion of today's meeting. We have many other requests to see. The steering committee has selected some witnesses, and I want to tell you who they are, who have been contacted and who have been able to accept. That will only take a few minutes.
Senators, I think you may have all read this. Has Senator Brown seen email? If you are agreeable to my proposal to amend the agenda, we would require a motion to do that. Is there such a motion?
Senator Nolin: I so move.
The Chair: The deputy chair, Senator Nolin, moves that we amend the agenda according to the message I have given you today. Are all in favour of that motion? Opposed to the motion? Thank you. The motion is carried. That is the new agenda.
Thank you, gentlemen; I appreciate your patience.
It is my pleasure to welcome you to the Standing Senate Committee on Energy, the Environment and Natural Resources, which is here to consider Bill C-33. I am Tommy Banks, the chair, and I am from Alberta.
I would like to introduce the members of the committee who are present: Senator Trenholme Counsell who represents New Brunswick; Senator Mitchell, from Alberta, who is the sponsor of this bill in the Senate; Senator Brown, also from Alberta; Senator Cochrane, who represents Newfoundland and Labrador; Senator Sibbeston, who represents the Northwest Territories; and Senator Spivak, who represents Manitoba.
To my immediate right is the distinguished deputy chair of this committee, Senator Nolin.
We are joined by Mr. Gordon Quaiattini, President of the Canadian Renewable Fuels Association; Mr. Tim Haig, President of the BIOX Corporation; and Mr. Bliss Baker, Vice-President of Corporate Affairs for GreenField Ethanol.
Gentlemen, thank you for taking the time to appear here today. We would appreciate if you would make opening remarks as briefly and concisely as possible to allow time for questions.
We have read the testimony given by you and others to the House of Commons committee on this bill. We would be grateful if you directed your particular attention to aspects that may be new in those respects.
Gordon Quaiattini, President, Canadian Renewable Fuels Association: Mr. Chair, with your indulgence, I will make a presentation on behalf of my colleagues and leave the remaining time for questions from senators.
Thank you for having us this morning and giving us the opportunity to appear before you with respect to Bill C-33. As the president of the Canadian Renewable Fuels Association, CRFA, it is a great pleasure to come to speak to you to this legislation, which will help Canada diversify its fuel supply, reduce greenhouse gas emissions and revitalize rural economies across Canada.
Coupled with the federal government's $1.5-billion federal ecoENERGY for Biofuels Initiative and the $500-million NextGen Biofuels Fund, which you heard about from the minister on Tuesday evening, Canada is about to emerge as an important and major biofuels producer. In short, this new legislation will allow Canada to grow beyond oil, with a vibrant, new homegrown ethanol and biodiesel industry.
As this committee well knows, energy and the environment are the defining issues of our time. Together, they are driving massive change in consumer behaviour, commercial expansion and activity, and public policy development. At the same time, the emergence of the bio-economy is no longer pure speculation. It is a reality for renewable fuels, biodiesel and ethanol, in particular. This adds up to increased demand, greater opportunity and steady expansion.
Biofuels are also the biggest change to take hold in the agriculture industry in at least a generation. Over the next generation, it will also emerge as the biggest change to take hold in our energy sector. In fact, it is becoming increasingly clear that the bio-revolution taking place today will prove to be every bit as fundamental and far-reaching as the information revolution that began in the early 1980s.
The opportunity, therefore, is to gain entry to this sector now as the benefits of its upside potential are just beginning to take full shape. Ethanol and biodiesel stand at the meeting place between the two most powerful trends at play within our world today. I am speaking about the permanent rise of expensive oil and the global effort to combat the effects the climate change.
These two trends not only define the here-and-now, they are set to shape the way of the world for at least the next two decades, resulting in far-reaching changes to our energy use, industrial growth and consumer activity. As we speak, not only has oil already broken the once-unthinkable $100-per-barrel threshold, it is now above that figure and sits around $135 a barrel. This morning, it is trading at just over $137 a barrel.
Oil companies are recording the largest corporate profits of any industry in history. This realty is unshakeable and unchallenged. Cheap oil is gone for good. Contrast that fact with another report from the International Energy Agency that tells us that global energy demands are set to rise by at least 50 per cent by 2030.
This is all on top of the fact that our limited and very expensive remaining oil is coming from the ever-increasing, non-democratic and unstable regions of the globe. Dr. Kent Moors, the executive managing partner of Risk Management Associates, International, LLP, a leading expert in world energy, estimates that there are about three decades left of the sustainable, conventional crude oil market-based system. In the future, oil will be prohibitively expensive.
The ranks of the emerging middle class in China, India and Brazil, combined with stark failure to discipline consumption in developed nations such as our own, render the challenge clear as day. An expensive gap exists between what we need and what we have; between supply and demand.
It is within that gap that ethanol, biodiesel and next-generation renewable fuels find their place. In a future where demand will exceed supply, biofuels are both necessary and financially viable. Again, the International Energy Agency recently reported that more than 1 million barrels of additional crude oil would be required to replace the volume of biofuels currently in the world marketplace. Absent biofuels, this new crude demand would force prices significantly higher, further exacerbating the food prices and stretching food aid budgets even thinner. I know that was a topic of great interest for the committee when the minister appeared on Tuesday evening. We look forward to talking further on that subject this morning.
One estimate by a London-based commodity specialist from Merrill Lynch estimates that, without biofuels, world oil prices would rise by an additional 15 per cent. On balance, the benefits gained from lower oil prices exceed the minimal costs associated with increasing biofuel production from grains.
Here in Canada, we have come to realize that the time for action is now. As you know, Bill C-33 will make the necessary changes to law to ensure the federal government meets its goal of an average renewable content of 5 per cent ethanol and 2 per cent biodiesel in Canadian gasoline and diesel fuel.
These regulations guarantee a future market of about 3 billion litres of biofuels in Canada. The reality is that the energy policy will only increase the emphasis placed on ethanol, cellulosic ethanol, biodiesel and further generation of biofuels here in Canada and, particularly, in the United States.
It is important to note that carmakers are also taking up the challenge. All major car companies already warrant the use of E10 — or 10 per cent ethanol. Already, 6 million cars and trucks in North America can use up to E85 ethanol. This year, General Motors announced another major boost for ethanol with a new plan to make half of their new vehicles E85 by 2012, which is only four years away.
Biodiesel in Canada is equally promising. This winter more than 60 trucks were put to the ultimate cold weather test by Climate Change Central, an Alberta government-public-private, not-for-profit organization focussing on greenhouse gas reductions and new environmental technologies. The demonstration that is taking place in Alberta, in particular during Alberta's winter cold, is providing hands-on, cold-weather experience for fuel blenders, distributors, long-haul trucking fleets and drivers. Most manufactures warrant up to B20 — or 20 per cent biodiesel. Of course, these developments are not only driven by oil pricing and production but also by the concerns around energy diversity and security of supply.
The U.S. President never fails to give a speech on energy that does not highlight the fact that 60 per cent of U.S. oil comes from foreign sources, including over 3 million barrels per day from Saudi Arabia and Venezuela. Even in Canada, an oil exporting nation, we import about one half of the crude oil that we use for transportation. That is not a well-known fact among Canadians.
The second defining trend of our time is climate change and a challenge that also highlights the valuable benefits of biofuels. Crude oil is not simply expensive and in increasingly short supply, it is a major source of greenhouse gas, GHG, emissions. By way of contrast, biodiesel and ethanol are truly clean sources of energy that avoid the release of carbon and other pollutants. As governments struggle with measures to lower our collective addiction to carbon, there are few better or more practical options than the adoption of biofuels.
According to Natural Resources Canada and other sources in government and academia, corn-based ethanol could reduce per litre GHG emissions by as much as 40 per cent to 60 per cent, depending on the feedstock, and biodiesel GHG emission reductions by 70 per cent to 95 per cent. Biofuels provide a clean way to power automobiles, trucks, tractors, heavy equipment and marine vessels. The automobile is a specific critical battleground in the fight to combat climate change.
Adherence to a 5 per cent renewable fuel standard for ethanol and a 2 per cent renewable standard for biodiesel amounts to the equivalent of 4.2 mega tonnes of reduction in greenhouse gases or the removal of 1 million cars from our nation's roads each and every year.
Of critical importance to Canadian grains and oilseeds farmers is the fact that it will revitalize farm and rural communities across the country, from wheat and canola farmers in the West to corn and soybean farmers in the East. Stronger global commodity prices are triggering a market response from farmers worldwide, creating new opportunities for rural areas in developing countries. Higher grain prices are already providing farmers with new incentives to produce. Farmers will increasingly adopt the technologies necessary to become even more productive and efficient. As farmers increase their planting, prices already have begun to weaken — although, as we have discovered in the last couple of weeks, there are anomalies to that issue with respect to what is happening in the United States on corn-pricing and the impacts of the current rainfall.
Our industry has long recognized the importance of growing crops for both food and fuel and the need to improve sustainability. The biofuels industry and many governments across the world are investing in the development of new methods and technologies to convert wood chips, farm waste, switch grass, municipal waste and other cellulosic materials into biofuels. This subject was of particular interest to the committee on Tuesday. The very same industry leaders — two of whom have joined me here today — who pioneered the first generation of biofuels produced from grains, are leading the investment and development for these exciting second-generation processes.
New world-class bio-facilities in Canada will be built generating over $1.5 billion in new investment, resulting in some 14,000 construction and related jobs in rural communities across Canada. Once built, this industry will create 10,000 direct and indirect jobs and will generate some $600 million in annual economic activity. Bill C-33 will provide a new market for over 200 million bushels of Canadian's grains and oilseeds.
On a global perspective, Bill C-33 will position Canada in a global transition to biofuels that include our major competitors in the United States, Brazil and Europe. Bill C-33 will help us to compete on a level playing field and will ensure that we enjoy the same economic benefits of this new and dramatic growth area.
Senators, please know that Canadians overwhelmingly continue to support the development of a dynamic biofuels industry in Canada. A national public strategies poll, conducted between April 23 and 27, shows that 74 per cent of Canadians support the 5 per cent national standard for ethanol and the 2 per cent national standard for biodiesel. A further 67 per cent support increasing that national renewable fuel blends to 10 per cent and 5 per cent respectively.
The work being undertaken by this committee is timely. Biofuels enjoy broad multi-party support, and it is our hope that legislators in the Senate will move swiftly to pass Bill C-33. Quick passage will ensure continued growth of a domestic industry and allow for the introduction of biofuels into the Canadian fuel supply in a timely manner.
Thank you for your time and efforts, and for creating the conditions that will allow us to grow beyond oil, thereby reducing greenhouse gases and revitalizing rural communities across Canada. We would be pleased to take your questions.
The Chair: Thank you, Mr. Quaiattini. I must correct my earlier words. When I introduced you to Senator Mitchell, I suggested that he was the sponsor of the bill but, of course, the sponsor of the bill is Senator Brown, which, I am sure, you already knew.
We have been joined by Senator Adams, from Nunavut, and Senator Kenny, from Ontario.
Mr. Quaiattini, you talked about mitigating prices; and Mr. Baker, in a letter that you wrote to me on June 5, you talked about mitigating prices at the pump. I live in Alberta where 10 per cent ethanol, not 5 per cent, has been retailed widely in Alberta since, I believe, the late 1980s. I have put nothing but 10 per cent ethanol in my current car for as long as I have owned it and in my previous car.
Ethanol gasoline costs more than non-ethanol gasoline costs. How will you change that to mitigate prices at the pump?
Bliss Baker, Vice President, Corporate Affairs, GreenField Ethanol: Each day we follow Nymex and Chicago Board of Trade, CBOT. In last few weeks, ethanol has been trading at 70 cents to $1 per gallon below Nymex gasoline. It is cheaper today by a significant amount.
The Chair: If I may, it always has been but the cost is in the blending process.
Mr. Baker: It has not always been cheaper. Historically, it has been more expensive. However, with the rise in gasoline prices and with the huge efficiencies in the ethanol industry over the last 10 years, ethanol prices have been coming down and gasoline prices have been going up.
The Chair: We can count on the price at the pump being reduced.
Mr. Baker: On a macroeconomic level, absolutely, yes. Globally, we are adding one million barrels per day to the fuel supply. On the basis of simple supply and demand economics, the price will go down.
The Chair: Thank you. You are right, it was your letter.
Senator Kenny: I have had a passing interest in alternative fuels for awhile. I was concerned about the danger of oil oversell. The presentation today was quite aggressive. The price of biofuels will inevitably go up, just as the price of oil will inevitably go up. For example, we have seen the price point of ethanol spike when farmers have used it to dry crops, and we have seen the supply of ethanol for the drivers' market almost dry up.
We hear comments, such as a famous economist saying that we will be out of reasonably priced oil in a few years. There are huge supplies of oil; it simply depends on what you want to pay for it. The likelihood of running out of oil is relatively small. It is simply whether the economy is prepared to pay the rate.
The amount of material to make biofuels is also finite. Its availability to Canadians will change drastically as we have more vehicles accepting it and as we move from 5 per cent or 10 per cent to 85 per cent ethanol. Suddenly, there will be a land rush among people trying to get into the business, but it will be expensive.
You are making fairly sweeping statements about the economics of this new, important, cleaner fuel, which I think we all concede should be part of the mix of fuels. However, I have a sense that if you oversell it now, you will experience a great backlash when Canadians suddenly discover that they have an alternative that is a little cleaner, but they will have to pay through the nose for it. My sense is that you can pay now or pay later, but we all will have to pay a lot more for transportation regardless of what the fuel is, whether it is the one you are talking about today or something else.
Your comment that this will be equivalent to removing 1 million cars per year from the roads struck me as interesting. I know you are not in the business of removing cars from the road, but someone should be. You will recall, Mr. Chair, on a visit we made not too long ago, California had a program where if you could get an old clunker to the gas station, they would pay something like $500 for it, and they felt that was worthwhile.
If I was coming before a parliamentary committee, I would give it a good pitch. I do not argue that you are giving it a good pitch, but give me a bit of balance or a bit of the downside. What is the other side of the story?
Mr. Quaiattini: I appreciate your comments this morning. The industry in Canada has been very balanced in its approach in not overselling the important contribution we can make.
Let us put in perspective what we are seeking from Bill C-33. We produce about 1 billion litres of ethanol in Canada today and about 100 million litres of biodiesel. This bill will see that market increase to a little more than 2.5 billion litres of ethanol and about 500 million litres of biodiesel for about 3 billion litres in total. That compares to a total pool of transportation fuels in Canada of about 60 billion litres annually.
Therefore, I do not think my industry is overselling the impact we are having. This is a modest, but important step to bring, as you said, an alternative fuel into the marketplace. We are not here to suggest that we are on the cusp of replacing petroleum-based products as the principle transportation fuel that Canadians and the globe will continue to rely upon.
I agree we will not run out of oil tomorrow. However, when you look at where the trends in price and supply are headed, we are, in part, talking about the economic system that sustains oil production, as you read in the comments that I presented to you today. As you rightfully pointed out, that system is about to become prohibitively expensive to maintain. Therefore, governments, consumers, industry and others will have to make important choices when we consider the impact that that will have across our economy.
I do not believe my industry in Canada is trying to oversell. We are simply saying that Canadians want an alternative. My industry is poised to begin the process of providing that alternative but in a measured and balanced way. We are not talking about targets and thresholds that are exceedingly high.
We want to take the right approach to build the industry within Canada. Understand that as we build the industry, we will transition from grain-based technology in ethanol production, for example, to next-generation biofuels using feedstocks such as wood waste or municipal waste and other products. I do not know that Canadians would agree with you that we do not have enough garbage in Canada to do that. We produce an inordinate amount of garbage now, and we could find value in that garbage by using gasification technology to turn it into fuel.
Senator Kenny: I did not say that about garbage.
Mr. Quaiattini: No, in fairness, you did not. However, you talked about other feedstocks that would be challenged in the future.
Senator Kenny: You suggested that you did not know whether Canadians would agree with me about garbage. I did not say anything about garbage.
Mr. Quaiattini: I will correct my position there. However, when we consider the abundance of feedstocks, we need to look at waste products generally that are a viable part of what we can do.
Senator Spivak talked about methane. However, we can actually use gasification technology to convert ethanol into a transportation fuel from municipal waste and that technology is poised to be commercialized very soon in this country.
Senator Kenny: Thank you for that clarification. It was helpful.
Could you talk to us briefly about the knock-on effects that you referred to in the previous meeting when the minister was here?
We understand garbage and wood chips. As we see increased demand and as farmers see economic opportunities in that, can you give us your sense of the impact in the growth of ethanol on corn prices?
Mr. Baker: There is no question that it has had an impact on corn prices. The intent of some of the U.S. legislation was to boost corn prices so that farmers could finally make a living growing corn. We know at $2 and $3 per bushel no investment was going back into the farm. Farms were at risk of going under, and many did because they could not make a living at that price.
The ethanol industry has had an effect on corn pricing, but many other factors have a greater impact than what we are doing to the grain industry right now in boosting prices. Asian demands and speculation, as you all know, are huge factors in the commodities markets.
In addition, energy pricing is impacting everything. I had a banana for breakfast that came from Costa Rica. It was grown in the interior, transported to the coast, put on a boat, transferred to Philadelphia, put into a container, shipped to the port in Toronto, put on a truck and driven to my local Loblaws store. That is one banana. Energy prices have a huge impact on food and on all things.
Senator Kenny: They would save money if they shipped more than one at a time.
You talked about the survey you had showing that ethanol is a very popular fuel. We are dealing with a public that is on a steep learning curve. They are "discovering'' some these new options. We have a responsibility to give them a complete picture of the new options.
I do not say that as an opponent of what you are doing. My record demonstrates that I am not an opponent of what you are doing. However, it is important that if we suggest that alternative fuels are a good idea — and there is a high level of support for that — it is incumbent on us to also inform consumers of some of the other things that will happen to them when they move to the alternative fuel route.
I am not asking you to argue against your own case, but I am asking you to assist us in giving the people watching on television a more balanced perspective of what other things will happen. The public is very interesting in the way it reacts; people become very much in favour of something and then if they discover adverse effects that they did not anticipate, they swing very quickly in the opposite direction.
Can you give a couple of minutes on that?
Mr. Quaiattini: You raise some excellent points. Again, if you look at the whole industry — and Mr. Haig can speak more eloquently with respect to biodiesel development and the work his company does — they actually use a waste product in the development of biodiesel today. They are not using a food-grade feedstock in that production. When you look at biofuel production within Canada and what we need to share with Canadians, it is important to educate them on the fact that we are not speaking only about ethanol; we are also speaking about biodiesel in the sense of using a waste product. I will let Mr. Haig comment about his fuel.
Tim Haig, President, BIOX Corporation: Biodiesel is a diesel replacement, as ethanol is a gasoline replacement. Much, if not most, of our product is delivered by diesel; that banana that came all the way on a very small boat and ended up at Loblaws was driven by diesel.
We have a 93 per cent greenhouse gas reduction with the products we are using. We use waste vats of oils; we use waste restaurant greases. The next generation of biodiesel will be algae. Algae, by weight, is 50 per cent fats and the balance is almost all starches, which could be used to make ethanol.
Most of us do not like eating pond scum, so algae is the next generation that could do that. Everyone talks about the Amazon forest being the biggest carbon sink, but algae in the ocean is the biggest carbon sink that captures carbon dioxide out of the atmosphere. Therefore, algae, with its rapidly growing cells, will become — and we are working actively on that right now — the next feedstock for biodiesel, which could be quite significant.
You made a comment earlier saying that we are a little cleaner. I sort of take offence to that because 93 per cent is a huge impact on greenhouse gas reduction. We are also 50 per cent less in particulate matter with biodiesel over conventional petroleum diesel. The particulate matter in diesel is one of the leading contributors to childhood asthma. Therefore, we have a huge impact on the environment when we talk about biodiesel and the effects that could happen and the sustainability. Algae grows fast. If you have a pool, you know it is easy to grow algae.
We have to concentrate on the sustainability aspect. I think the question you are asking is how we ensure that we stay sustainable. I would ask, compared to what? We are asking the renewable fuels industry to be sustainable, which we are doing.
The point is, compared to what? Is oil sustainable? Is the big oil and gas infrastructure to which we have all grown accustomed and with which we are rather casual sustainable? I would argue that that is questionable given that we are using 87 million barrels a day and produce 86 million. To some extent, it does not matter how much is in the ground, but how much we can get out and refine. How sustainable is that?
We will get to about 5 million barrels a day of production out of the oil sands in Canada. That is huge; but at the same time, we use 87 million barrels a day right now. I am also part of the National Round Table on the Environment and the Economy, and we have shown that there will be a 42 per cent increase in use of energy by 2030. Those 5 million barrels will not make a big impact on that ever-increasing demand.
We have to come up with alternatives. It is an obligation on this industry, which we take seriously. We will be maintaining the sustainability of this. A lot of comments have been made about food, but we are moving to the next generation. You cannot get to the next generation without the first one, and that is what we are asking this committee to do. Help us get Bill C-33 through so that we have access to the market, and we can do that next generation. Algae will be our next project, and I am sure Mr. Baker can talk to sustainability on the other side.
Mr. Baker: It is companies such as ours that are invested in the industry right now. Bill C-33, and U.S. legislation for the American industry, builds a platform on which we can build the next generation.
We are investing millions of dollars in next-generation cellulose ethanol technology right now. We have joint ventures with Canadian companies, homegrown technology, to commercialize cellulose ethanol projects, using sorted municipal waste to convert to syngas and then to alcohol as a fuel.
It would not have happened if we did not have a market and the infrastructure for ethanol in Canada, just as we would not have had a plasma television without the first colour television and before that, the first black and white television. Bill C-33 provides our industry with that solid platform on which we can develop the next technology.
That platform is a very good one. Bill C-33 is a measured approach; it does not go too far. It will encourage investment in our industry and encourage companies such as ours to develop that next-generation technology. It is an important piece of legislation for us. Without it, there would not be a market for our ethanol to produce the next generation of cellulose ethanol, so it is critical for us.
On the issue of sustainability, the industry welcomes this with open arms, as long as a starting point for this debate is that oil is not sustainable. For example, in Quebec, we are imposing sustainability criteria on corn farmers. They have strict criteria that we negotiate with the farmers' union and the provincial government that says that they have to meet certain sustainability criteria in order to sell corn to our plant in Quebec. These are factors such as setbacks from rivers and nitrogen usage. If they do not meet those criteria, we do not buy their corn. That is the type of powerful impact you can have if the industry is doing things responsibly, which I believe we are.
There is a way to do this sustainably. There is no question that some unsustainable actors are out there, but that is the case in any industry. The Canadian approach, and much of the American approach, has been very progressive, particularly on sustainability.
Mr. Quaiattini: You asked the comment about the viewing public and giving them some information. You raised the issue briefly of food. I would agree that it is important to give Canadians that information and perspective.
Obviously, the largest ethanol market right now is in the United States. It is primarily driven by corn-based ethanol today, although they are transitioning. As you know, the energy bill in the United States has a target for 2022 of 36 billion gallons, of which 15 billion is capped at corn-based ethanol. By law, they are not allowed to exceed that growth.
If you look at it in today's context, the total bushels of corn were 14.4 billion bushels in the market in the United States last year. Of that, 42 per cent was dedicated toward animal feed and the livestock industry; 22 per cent was dedicated toward ethanol production; export was 17 per cent; other domestic uses were at 9 per cent; and there was a 10 per cent surplus.
The present flooding in Iowa will produce some challenges this year with the potential impact on the crop season. However, when you put in perspective the growth of the industry today, I think we are being very responsible in informing the public that as demand and multiple uses for corn has grown, so has supply. Mr. Baker touched on that.
For the first time, farmers in this country are benefiting from higher commodity prices and the government, in return, is actually reducing, for the first time, income support payments to grain farmers. Statistics Canada reports that, over the last 12 months, income support payments have been reduced by $1.3 billion in Canada due to the higher commodity prices farmers are receiving. In the United States, that relief is somewhere in the order of magnitude of $7 billion in the last year.
The good news is that, when you look at the additional impacts of biofuels production, which you have asked me to comment on, the positives that have come from the program are, first, grain farmers are benefiting from it and, second, governments are now paying less to farmers in terms of income support and, therefore, have the capacity to use those dollars for other public policy priorities that governments have.
Senator Spivak: There is no question that Canadians would cheer if all ethanol and biodiesel were made by algae, bugs, waste, et cetera. However, you just spoke of 200 million bushels of grain. That is what you think will be used.
Also, in terms of farmers, food in China and India will be in huge demand. It is not only fuel that is raising the price of corn and grain, it is the demand. I believe the high price of grains would come anyway.
The minister said, yesterday, that it would take 10 or 15 years before second-generation facilities are available. He also said that you cannot convert grain-based facilities into cellulosic facilities.
I want to know when you talk about a bridge, et cetera, how long that will take.
Also, how much of production — both of you — is based on the grain; how much are you using? What are the subsidies that you are receiving? I believe the subsidies cease when you receive a 20 per cent return. I would like to know the size of that.
In the United States, some facilities are going under; they cannot continue because the margin of profit is not there. Therefore, in the United States, there will be a crisis, I am sure. It is already happening according to newspaper reports in terms of the ability to use grains.
My most important question is about the amount of food grains that you will be using. When you talk about 200 million bushels, what percentage is that of all the grains that are grown in Canada?
Mr. Quaiattini: You raised a question with respect to timing around the next-generation facilities and the comments made by the minister. We are confident that the time frame we are looking at in terms of commercial-scale plants being built using next-generation, cellulosic feedstock will be within the next three to five years.
Senator Spivak: Is the minister wrong?
Mr. Quaiattini: It is not for me to correct what the minister did or did not say. In one of his comments, I believe he said that he was referencing replacing the entire volume of biofuels by next generation. That, of course, will take some time.
We are talking about building plants that will be in the order of magnitude of between 40 million- to 90 million-litre facilities. Grain-based facilities in Canada now can average between 150 million and 200 million litres. The capacity to scale up and commercialize that technology is underway today. We are confident that, in the next number of weeks, senators will hear some very promising announcements about facilities being built in Canada, which we are quite excited about.
With respect to your question about existing infrastructure, the answer is, yes; you can, in fact, convert existing grain-based ethanol facilities to have next-generation feedstock. You are talking about adjustments at the front-end production facility of these plants.
Senator Spivak: Strike number two for the minister.
Mr. Quaiattini: It is my responsibility to give you the facts.
The Chair: We heard specific testimony at the last meeting — and I refer you to the minutes of that meeting — that said that you could not convert grain-based plants to other feedstocks without starting over again from the beginning.
Mr. Quaiattini: That is not the case. Mr. Baker can talk to you about, for example, the demonstration facility that they have near their plant in Chatham that currently runs streams of both cellulosic and grain-based materials. That is ongoing as we speak as part of demonstration facility in terms of the work they are doing. I will let him comment on that issue.
Senator McCoy: To be clear, the minister was not quite that black and white. He said that by the time you get it into some liquid form, you could use the refining facility. Just to be fair, chair. However, I defer to the experts.
Mr. Baker: I do not know the context of the minister's comments, so I will not correct them.
Senator Spivak: That is okay.
Mr. Baker: Right now, we have a bio-plant in Chatham, Ontario using multiple feedstocks to make cellulosic ethanol. I usually carry a vial of it with me to show people that this ethanol was made from corn stover and this ethanol was made from wood chips. It is being done today.
We have a commercial-scale plant being developed right now. We have not announced it yet. It uses municipal- sorted waste. We have a partnership with a Quebec-based company Enercam Dynamotive. We are developing two commercial-scale plants as we speak. They have a pilot plant that has been running since 2003 at the University of Sherbrooke that is using sorted municipal waste and wood-construction waste.
Senator Spivak: I want to put the minister's comments on record. He said:
Converting a grain-based ethanol facility to the new generation or cellulosic ethanol is not currently possible without new technology to break it down into a liquid state to finish it off. That problem is still being worked on.
Mr. Baker: I think the minister is talking about two different things in that statement. First, it certainly has not been done yet. Companies are looking at it. We are looking at the engineering to convert the Tiverton, Ontario, plant to a cellulose plant as we speak.
Second, the minister also referred to the enzymes that are being developed today to break down the treated biomass into sugars, which is what Iogen Corporation is working on, here in Ottawa. Those enzymes are under development and not commercial as yet.
Senator Spivak: I take your point. However, I want to have an answer to the 200 million bushels and also about the money. Give me an answer about those.
Mr. Quaiattini: Looking at a typical grain ethanol plant today — let me use the GreenField Ethanol plant being built now in Johnstown as an example — it will be a 200 million-litre facility. On an annual basis, it will take 20 million bushels of corn to produce the 200 million litres of ethanol.
From that, you can then look at the total production of where these plants will go, and you will arrive at your number in terms of how much grain will be used. To put that into context, Canada typically produces just over 50 million tonnes of grain on an annual basis.
Again, if you then look at not a 5 per cent but a 10 per cent ethanol mandate, if we are, as Senator Kenny talked about, looking at increasing over time, what does that mean?
That would be an increase from today's usage of grain-based ethanol — and you have heard that we are moving to transition away from that, but let us assume that it was only met by grain-based technology — that would require 8 million to 9 million tonnes of the 50 million tonnes we produced. Of that 50 million tonnes of grain produced on annual basis, we export more than one half. We are doing our part in global trading to make that grain available to the market. From a growth-source perspective, one acre of land would yield on average approximately 70 bushels in a typical growing trend 20 years ago. Today, that number is approximately 150 bushels per acre, and within the next decade or so, projections suggest that the yield will grow to 300 bushels per acre. We can use technology and innovation to produce more grain over time to allow us to address the issue of that growth and not actually put another acre of land to use.
Senator Spivak: That is helpful. Would you deem it a good idea to use the American example and say that by a certain date, if we were to amend this bill, we want to have a certain amount of cellulosic ethanol?
Mr. Quaiattini: The proposed legislation does not allow you to do that, but those thresholds will be met in regulation. I understand that.
Senator Spivak: Is this a good idea?
Mr. Quaiattini: Sure. You have heard from the industry today that clearly it will be a priority for us as we grow beyond the targets that are set within this bill and the commitments made by the government. Therefore, if we are looking at a world of 5 per cent or 10 per cent ethanol, which we are not asking for, assuming that over time we build the industry and the capacity, we would be looking at those thresholds and saying that the next generation should come from that next-generation biofuel.
On the question of subsidy, as you know the ecoENERGY for Biofuels Initiative is a $1.5-billion, producer- payment program that came into effect in April 2008. It is a nine-year, one-time program, of which a facility can benefit for a seven-year period. It is just coming online and has not paid out any support to any biofuel producer to date. Payment will be delivered on a quarterly basis, and existing producers are beginning to apply. Payments are up to 10 cents per litre for ethanol and up to 20 cents per litre for biodiesel. A formula will determine how much a producer will receive such that a facility might not receive the full 10 cents for ethanol or the full 20 cents for biodiesel depending on market conditions and a number of other factors that feed into the government formula.
In talking about the program, you used the term "subsidy,'' but I prefer the term "investment.'' In fairness, the economic return to industry will be about $600 million per year. The program will more than pay for itself in a short period of time. By way of comparison — and I do not say this in judgement of where government invests — $44 billion has been directed to oil sands development in Western Canada. The amount being directed to the biofuel sector is modest in comparison.
Senator Cochrane: How many employees do you have, and how many employees will you expect to have?
Mr. Baker: We have 200 employees and that is expected to double over the next four to five years. We are investing $452 million from our last round of financing in Ontario and Quebec and expect to raise another $200 million to $300 million to invest in next-generation technology over the next 10 months.
Mr. Haig: We have 50 employees and expect to grow to 100 over the next two to three years. We have invested about $140 million in Canada and are in the process of raising $150 million. This is all equity for four more plants, two of which will be based in Canada and two overseas. We have great Canadian technology from the University of Toronto — a great Canadian success story. We are the next generation. We are only using waste. I like to pat us on the back for that one.
Senator Cochrane: I appreciate that.
Senator Mitchell: This is most interesting. I know there is controversy about this, but for many reasons we are on the precipice of breaking through on those three issues. I have three observations: First, if ethanol production is pushing up food prices, which I do not accept necessarily, I find it interesting that at about the time farmers begin to get a good price for their product, we tell them to lower their prices. We do not go to oil companies and tell them to lower their prices. We do not go to the fertilizer companies and tell them to lower their prices. We put the onus on the farmers. I say that it is not the farmers' responsibility to solve the problem of high food costs and to subsidize the food problem in the world. It is the world's problem.
Second, dealing with climate change is hugely complex and difficult but less difficult than we think it is. We have to start somewhere, and each time something big is undertaken, there is huge criticism of it. We have to encourage industry to get us somewhere with climate change, and I believe that industry is actually doing something.
Third, dealing with climate change is not an economic cost or economic problem. Rather, it is the next industrial revolution, which will be clean and sustainable.
What are the economics of the other technologies? How much more expensive is it to produce biodiesel for cellulosic ethanol than to produce its grain-based alternative?
Mr. Haig: Currently, we are cheaper than a seed-oil-based biodiesel facility and biodiesel product. It depends on the commodity trading price. I want to answer the question very simply in one other way. Bill C-33 is important and ties into the subsidy issue because it allows us to have a supply and demand that is predicated on our feedstock basis. Currently, we are selling against an oil product. We have a commodity at one end and a commodity at the other end, and we are selling against that. The investment is required to ensure that the industry is sustainable in its early stages. Once Bill C-33 comes into effect and drives the demand, there will be a decoupling. Coming back to your question specifically, we will be in a position in Canada because we are a great seed-oil producer, and we have a great deal of rendered material and other lipids that go into making biodiesel.
We have a great opportunity to be a low-cost provider in the world market, just as Brazil is a low-cost provider of sugar cane. Bill C-33 is a real cornerstone on this because it allows these two industries to decouple, and then the price will be set by the commodity price at the front end and not at the back end. The argument has been that it will be more expensive, but that is patently not true. I do not know where the cost of oil will be by the year 2010, but we have a good understanding of where the seed price will be because of the ability to buy forward on grains and seed oils. Therefore, we have an opportunity to be lower in price, and that subsidy or investment aspect will become part of the whole and be phased out. It is important to allow the industry to drive down the commodity cost, and with this bill we have opportunity to do that.
Mr. Baker: The first plant we develop next year will likely have a higher cost in corn ethanol, but we expect it to come down after that. It depends on the feedstock being used. If we use sorted municipal waste, which is the non- recyclable part of landfills, then the economics will be much better than if we use biomass feedstock; and that provides an additional benefit.
One other side benefit of using waste is that we have approached several municipalities about supplying municipal waste to us for future plants, but we cannot take it unless it is sorted. Therefore, several municipalities said that they should start sorting it because this is a huge opportunity for the municipality to get rid of the portion of the waste that is not recyclable.
Senator Mitchell: Given that food prices follow fuel prices, if ethanol is cheaper and reduces fuel prices, it could contribute to reducing food prices.
With respect to water usage, there is some criticism about the use of water in producing ethanol. Of course, a very large amount of water is used in oil sands plants, but could you comment on its usage in ethanol production?
Mr. Quaiattini: Senator Spivak raised the issue of water with the minister and did not get a clear answer on Tuesday evening.
Unfortunately, senators, in this debate around biofuels, some fairly outrageous numbers have been thrown about. A popular video running on some anti-biofuels sites talks about it taking anywhere from 1,000 to 9,000 litres of water to produce one litre of ethanol. This is an outrageous statement.
In reality, it takes about three litres of water to produce one litre of ethanol. One third of that water is used as part of the drying process for the feedstock as it is going into the facility.
Senator Spivak: The figures come from the U.S. Department of Energy.
Mr. Quaiattini: Those are the figures you cited, senator. My data comes from the actual facilities that record the volume of water they use. They are required, in fact, to record it, and they have to pay for the water.
The Chair: Mr. Quaiattini, the figures include not only the water used directly in the process but also the water included to grow the grain.
Mr. Quaiattini: This is a life-cycle analysis that I am referencing. As I think you can appreciate, when you talk about some of these large numbers that are thrown out, one must put those numbers into context.
If you look at the U.S. market, 85 per cent of the corn produced in the United States is not irrigated. It does require water to grow. The water comes in the form of rain and that rain will land on a corn field as much as on the roof of this building and on the asphalt outside this morning. It simply is there. You will appreciate that there is not a single acre of corn used in biofuels production in Canada that is irrigated. We simply do not irrigate corn in this country.
The water that we use to grow the grain falls from the sky. The beauty of using corn is that it absorbs and on a disproportional basis returns more to the atmosphere based on that cycle. Therefore, producing more corn on our agricultural land is a positive for our environment.
To put that into context, the production of a barrel of oil requires about 7,000 litres of water. That number is growing as are the impacts that is having. The production of a tonne of steel takes over 230,000 litres of water.
I would suggest that there are clearly competing demands on a number of fronts for the use of water. That is something my industry takes seriously. One third of the water used in the biofuels production facilities in Canada is recycled, returned to the facility and reused. Unfortunately, the usage that takes place in the oil sands, as you know, ends up in tailing ponds.
Senator McCoy: Do not talk about that, I do not think you have your facts right. However, carry on; you are making a good case for biofuels.
Mr. Quaiattini: I simply want to make a comparison because of the suggestions that have been made about the use of water in the biofuels industry, and the data I have shared has put that into perspective.
Mr. Baker: To summarize, many of the complaints and criticisms of our industry over water usage comes from areas where the aquifers are stressed, there is not a lot of ground water and many concerns exist about water supply, which is a valid concern.
We do not draw water from the aquifer to grow corn in North America. Except for a small percentage, the corn grown is not irrigated; it is produced using rainfall. If we are accused of using large amounts of rainfall, we are guilty as charged.
Senator Spivak: Yes, but there is wheat and canola.
Senator Mitchell: One of the big problems with carbon capture and storage in major electric plants and oil sands plants, I understand — I am not an engineer — is getting a sufficiently concentrated stream of carbon dioxide to capture it. There are processes to do that, which are apparently very expensive. However, with algae, you simply take the effluent that contains carbon dioxide, bubble it through water and the algae will do the separation for you. Is that right?
Mr. Haig: Absolutely. I am a proponent of other energy sources too. For example, with clean coal, the idea of bubbling coal effluent through algae beds. It is highly efficient, resulting in about a 50 per cent capture. It captures only when the sun is out and not at night. That is why it is only 50 per cent. It is wildly effective.
As I said, alga is a brilliant little organism. Of what we can use for biodiesel, half of it is fat by weight; about a third of it is starch that we can use for ethanol; and the balance is a protein that is a very good feed. It will be the next generation.
I recognize one of the criticisms we will get is that algae needs a lot of water. Algae, generally, is best grown in saline water. Therefore, the best place to put this would be near coasts to capture saline water so that we are not experiencing the same criticism.
I am sure you will hear similar arguments over time that cellulose will be using acreage that could be used to grow food. That is true to some extent, but these are marginal lands. It is about sustainability. That is the question that keeps coming up.
However, alga is a magnificent little organism. No one is working with it on a grand scale now. We are working hard to do that, and much like cellulose use, we are not 10 to 15 years away from this. We are only three to five years away. We will get this. It is significant.
Senator Mitchell: Imagine if you could grow algae in oil sands tailing ponds. You could pump it through the ponds.
Senator Spivak: Are you kidding?
Senator Mitchell: I am not.
Senator Spivak: It is toxic stuff.
Senator Mitchell: It may not be as impossible as you think. Not to be Pollyanna about this, but once we start putting people's focus and energy on this issue, we will solve it, I believe, much more quickly.
Mr. Haig: Having an industry allows investment. That is why it is important to get this bill through. It allows people like us to have an industry, to have an income to invest in great ideas.
Senator Mitchell: Finally, one irony in this food for fuel debate is that if we have climate change, that will damage food production hugely, and it is already reducing food stocks probably more than ethanol ever could — if ethanol does reduce food stocks.
Could you give a general sense of a carbon tax versus other alternatives?
We were talking about the national round table that is advocating a carbon tax — and good for them. That discussion allows the market to make the billions of decisions that have to be made to make this work rather than a cap-and-trade system, which is regulatory intensive, intrusive and government-driven.
Is there any difference from the point of view of ethanol production?
Mr. Haig: First, the National Round Table on the Environment and the Economy has not taken a position on the carbon tax versus a cap-and-trade system. I want to be clear on this as I happen to be on the executive board of the national round table.
The Chair: For the record, because there are a number of national round tables, describe which national round table you are referencing.
Mr. Haig: The National Round Table on the Environment and the Economy is coming up to its twentieth year of operation. We are looking at different things and one is a-cap-and-trade system or a carbon tax.
What does it mean for us as an industry? What everyone needs to understand is that the cap-in-trade system gives a certainty on carbon reduction because you can regulate the amount of carbon reduced, and the tax issue gives a certainty on cost, so they both have benefits. I do not believe they are mutually exclusive, but that is just my view; it is not the national round table's view.
For us, as an industry, it does not really matter. For biodiesel, we represent a 93 per cent to 95 per cent reduction in greenhouse gases. There is a revenue stream that we have not been able to realize in our modelling because we do not have either cap-in-trade or a tax system. Either would be beneficial.
Senator Mitchell: You could sell credits.
Mr. Haig: Yes, or it would go to offset the price of fuel; therefore, either is beneficial. Let us get the carbon credit done too, but Bill C-33 is more important for us at this stage.
Senator Brown: To clarify one thing, you were talking about three litres of water for one litre of ethanol. There was some discussion about very large amounts of water being used for corn. I think, unless I am wrong, the water consumption that was referred to by the United States Department of Energy is water use for irrigation. The water use for irrigation mostly goes back into the atmosphere.
The plant does not really use the water; it borrows it. It takes it through its system and evaporates it back into the atmosphere. The figures are very misleading if we use the word "use'' and think the plants actually made that water disappear. They borrow the water in the growing process and then let it evaporate into the atmosphere again.
I think what you are doing is very beneficial for the environment, industry and farmers, in that we are trying to develop a way to use up waste of every type. I applaud that.
I wonder why there is such a big difference between what people are saying about cellulosic and what you are saying. I assume it is because right now you are in sort of a lab experiment producing cellulosic. Therefore, you need some time to prove that you can make cellulosic work on an economic or grand scale.
Mr. Baker: I would say part of that is right. We are well beyond the lab bench. We have two small pilot plants running, one in Chatham, Ontario and one in Quebec. A 10-million-litre-per-year demonstration plant is under construction today and will be operational in October.
The Chair: Does Iogen Corporation have a rather large one?
Mr. Baker: Yes, here in Ottawa, and they are looking at building their first large-scale plant. Enercam Dynamotive has their plant under construction in Westbury, Quebec, right now; it will be operational in October. They will be making syngas; and by about December, they will be converting that syngas to methanol or alcohol. Then, by the first quarter of next year, they will be making ethanol from wood waste.
In fact, it is the deal we did with Hydro Quebec. They have a hydro-pole recycling program. They recycle thousands and thousands of tonnes per year of used telephone poles and hydro poles. That plant will be consuming all of those used telephone poles on an ongoing basis for the next 10 years. That is marvellous technology, and it is under construction today.
We are very much past the lab bench, but you are right; we need a little more time to get that to a full, commercial- scale large plant.
Senator Brown: With respect to one of the senators' questions about the cost of biofuels being more right now than conventional fuels, will it not always be true that when you are developing a new product, the price eventually will be driven by whether you can produce a surplus in the market? That is what drives the price down.
It is always when we have more than we need that the price goes down. That is true of oil as well. We had oil increases in the 1970s that caused gas station line-ups for blocks, and then we produced more than we needed.
I applaud the idea of developing the biofuels industry because competition always keeps the marketplace in check.
Mr. Baker: You touched on something we have not talked about today, which is competition. Currently, the oil industry has a monopoly on your gas tank. You do not have the option to fill it up with anything but gasoline or diesel fuel.
With Bill C-33, we are talking about introducing competition for gasoline and diesel fuel into the marketplace. When that happens on a large enough scale, you will see downward price pressures on gasoline. It is a 100-year-old monopoly, and having competition for gasoline at a time when it is $135 a barrel has to be a good thing.
The Chair: Sorry, that is true in parts of the country, but it is not true in Alberta. We have had 10 per cent ethanol in Alberta for decades, and we have been using it.
Mr. Baker: That is true, but you need to have significant volumes. Senator Kenny asked a question that none of us wanted to answer, but I will answer it now. He was referring to what some of the challenges or problems are that we are facing; he wanted us to critique our own industry.
Our biggest challenge is making enough of it fast enough. Senator Kenny had his Bill S-7 many years ago, which was very forward thinking. However, there was not enough ethanol around at the time to supply the fleets. Part of our challenge is to get enough market penetration so that we can show some benefits fast.
Senator Brown: I wanted to back up what Senator Kenny said about not overselling the ability of this alternate fuel. If we do, a lot of sceptics will come out in a big hurry.
That is the good thing about the bill. Right now, it is suggesting 5 per cent ethanol and 2 per cent biodiesel. The United States is already reacting to what may have been hysteria in producing too many plants suddenly and then coming head on into a world food crisis.
A lot of hysteria is happening over whether America caused the food crisis in the world, which is simply not true. Most of the countries that need food need rice, not corn. Most of the U.S. corn grown is not for human consumption anyway.
That is why I think Senator Kenny's suggestion was very apropos. We should not oversell it.
Mr. Quaiattini: I value those last comments.
Again, my industry, in partnership with my counterparts in the United States and Europe, responded positively to what came out of the World Food Summit in Rome. As you are aware, the United Nations has asked for governments to do additional studies on the medium- and long-term impacts of biofuels — the contributions they can make to the developing world in terms of growing sustainable agriculture development. That is something we take seriously, and we applauded wanting that additional work to be done.
As I said in my opening remarks, what the government has seen fit to put forward in this bill is the balanced approach that my industry proposed. We need to build production capacity within Canada. We may not be doing it as fast as some would like, but we think this is the right approach for Canada.
I meet on a regular basis with my counterparts across the world. We take that responsibility of looking at those medium- and long-term challenges and opportunities very seriously.
Senator McCoy: I will ask a question rather than try to give testimony from here.
I am not sure whether we got this the other night. You will correct me because you will remember better than I whether we got the number for acres of arable land that are not under production. That is the first question.
Second, how many acres of arable land have been lost in the last reasonable period of time to urban sprawl? That does not seem to be a number that has been brought forward. I think it is a significant number. Do you have that?
Mr. Quaiattini: I do not have an urban sprawl number. I am sorry. I can share with you, again, data from the Food and Agriculture Organization of the United Nations, FAO. Within the world currently, we have approximately 41.1 million square kilometres of arable land available, so about 42 million square kilometres of arable land, of which current production is about 15 million square kilometres. Therefore, we are not using all of the arable land available to us. Of the land being used, approximately 0.1 million square kilometres, or slightly less than 1 per cent of that land, can be attributed to grain-based crops directly for the purposes of biofuels development. We are a very small portion of the global demand being used.
I could be corrected by Agriculture and Agri-Food Canada data, but I believe in Canada we have about 3 million hectares of currently unused arable land, again, for obvious reasons. Grain farmers, up until only the last 14 or 15 months, could not afford to economically plant the grains and oilseeds they were putting in the ground, so there is arable land available.
If you look at the trends I talked about earlier in my presentation with respect to where yields are going using new technology, you can meet what the UN has called for with respect to the 50-per-cent increase by 2030 of world food production. We have the available land and the technology innovation that allows us to do more with less, and we are using 21st century practices. We are using no-tillage practices in Canada, proper crop rotation and trends in terms of fertilizer use and nitrogen input into agriculture has been trending down.
Senator McCoy: In the interests of time, my other question is to Mr. Haig. In terms of BIOX Corporation itself, how many litres of biodiesel are you producing?
Mr. Haig: We are producing about 70 million litres a year right now.
Senator McCoy: Where is the plant?
Mr. Haig: It is in Hamilton, Ontario, Pier 12, if you would like to come and take a look.
Senator McCoy: We did a source study for biodiesel in Alberta two or three years ago and concluded that we could not supply the demand with used vegetable oil or the renderings from beef packing plants, both fat sources, and for different reasons. It was difficult to set up a collection system that went to every ma-and-pa fish and chip shop to get their used fat; and only so much fat was coming out of the rendering plants, but in any event someone had it all sewn up.
Mr. Haig: I will break down the economics of that quickly. There are two reasons why you would have come to that conclusion. One being that there has not been, before BIOX Corporation, a technology to turn that into biodiesel in an effective way. There is approximately a 20 per cent yield loss, so take the yield loss out of that.
Senator McCoy: That was not a factor in our study.
Mr. Haig: That is one of the studies I have seen.
In Canada, we are looking for a 500- to 600-million-litre demand under this bill. In waste fats and oils — and I put the rendered material into that — we probably have 400 million litres worth of feedstock available, so the balance would be made from seed oils or algae.
Senator McCoy: I want to know how you are getting yours.
Mr. Haig: It is a very sophisticated industry, actually.
Senator McCoy: I want to know how you are getting your lipids.
Mr. Haig: We buy them from rendering facilities. That is why we will only locate our type of technologies in heavy industrial areas where these fats and oils are picked up. You would find it very difficult to pick it up in Alberta because the population is not there where the waste fats and oils are. In the Toronto area and in the Vancouver area quite a sophisticated system exists.
I do not know when your study was done. We pay for our feedstock. Even though we like to glibly call it waste, it is not. We are paying $600 or $700 a tonne for this feedstock. They pick it up, clean it and bring it to our facility.
Senator McCoy: Is it being used in food establishments, food frying oil?
Mr. Haig: Yes.
Senator McCoy: From industrial processes?
Mr. Haig: Yes.
Senator McCoy: It is a mass-scale operation.
Mr. Haig: It is also ma-and-pa shops. I am not sure about this study, but that study said that they would not be able to pick it up because it was only about $120 a tonne. Now it is up to $800 a tonne. You would be surprised the industry that is picking up at the ma-and-pa shops. Higher price creates an industry that otherwise was not there. Because they are legislating against disposing of this into our sewage system, ma-and-pa shops are now arranging for pick-up, and you will find greater demand than the 400 million litres I was talking about.
Senator McCoy: Is there someone else who wants to ask a question?
The Chair: There is, but you still have the floor.
Senator McCoy: No, I would just get into debate, so I will not. I will defer to the next person.
The Chair: I wish all senators were that judicious in their choice of what to do next, Senator McCoy. Thank you very much. I am about to make a lecture in that respect.
Senator Trenholme Counsell: Gentlemen, this has been a very stimulating wake-up. I would not want to debate with you, Mr. Quaiattini.
I have listened and learned this morning, and many of my questions have already been asked. I want to ask about Atlantic Canada and the use of land as well as algae production. We do not have much urban sprawl — some but not much. We have lots of land. It is a great place to live. I would not want anyone to think that we would be competing with forests. We have billions of trees.
Have you looked at Atlantic Canada and the opportunities there for grain production? Because we are surrounded by water, what is the potential for Atlantic Canada to benefit when it comes to algae production? You said that you wanted salt water. Well, we have it.
Mr. Haig: You have a lot of salt water. I cannot speak directly to the algae at this stage. Clearly algae will be key, and we will find ways to grow algae where the salt water is available and where the sunlight is available, and I am sure it will do well. Interestingly enough, you have a small island called P.E.I. that is big in potatoe production, and they fry those potatoes. It would be interesting to do crop rotations with canola to grow the oil to fry those potatoes and take in the waste fats and oil and make biodiesel. That sustainability quotient would, I believe, generate about 20 million to 30 million litres of production just from frying potatoes. It is an interesting thought as far as that is concerned. We are looking at studies and have been in contact with the P.E.I. government. They need to rotate their potato crops better than they are doing now. They also need to put canola into the rotation, which is a very good crop for frying potatoes. It would be an interesting rotation and idea.
Senator Trenholme Counsell: It is fine as long as you do not take all the potatoes away from Prince Edward Island because they are second only to Anne of Green Gables. It is very beautiful to drive through the island and see those potatoes.
I think of places in New Brunswick where there is a lot of land and farmers are trying crops such as blueberries and cranberries. I hope you will look seriously at Atlantic Canada, at our land and water — only, protect our trees.
Mr. Quaiattini: We have been considering it. A few weeks ago, I had the pleasure of speaking in New Brunswick at a bio-energy conference. There were a number of representatives from all aspects of the forestry and agriculture sector. The promise for Atlantic Canada is in that next-generation biofuels production; it is in the agriculture residue that is, in fact, created.
For example, in P.E.I. and other parts of Atlantic Canada, you can use sugar beet. It is a potential feedstock on the ethanol side. However, the true promise for Atlantic Canada is on the agriculture residue side.
We have had discussion with a number of farm organizations who have reached out to us to talk about opportunities, and we will continue to do that. Prince Edward Island is pursuing a bio-energy strategy as we speak. The New Brunswick government is also having discussions with respect to the potential for biofuels within that marketplace.
We continue to engage those governments in discussions and continue to engage those on the ground interested in building up the industry. As I said, the promise is truly in the next-generation phase of ethanol development.
Senator Trenholme Counsell: When you say "next generation,'' is that 5 years hence or 10 to 15 years?
Mr. Quaiattini: No, that is within the time frame we have talked about — within the next 3 to 5 years. That would be using agriculture residue. Atlantic Canada will be part of this national standard. There will be an obligation under the national standard that Irving Oil will have to look at blending ethanol into the gasoline pool in Atlantic Canada.
Therefore, the economics that make most sense, as I think you have heard this morning, is to have those facilities located as close to the refining centres as possible because the transportation costs are limited. People are looking at the potential there both from the gasoline and diesel blending aspect. That would be in the next 3 to 5 years, not 10 or 15 years.
Mr. Baker: The forestry sector also offers an opportunity. It may not be 3 to 5 years; it may be a little further out. Anywhere you have biomass, you have an opportunity. The forestry industry down East is hurting just as in the rest of Canada. Therefore, we have an opportunity to create some value added for the forestry secretary sector.
However, I do not want to mislead anyone. It will be a few years before an ethanol plant can be put next to a pulp mill to make pulp, fibreboard and ethanol.
However, that is where the industry is headed. If you read any of the trade publications in the forestry sector, they are all looking at biofuels as a value added to be brought to that sector.
Mr. Quaiattini: Our industry and governments are presently focused on bio-refineries. I know that Natural Resources Canada and its provincial counterparts are looking at the concept around bio-refineries based on some input from the forestry sector. In many cases across Canada, infrastructure exists in small, rural-based communities that is no longer being fully utilized. Alternatives are being considered to make those more viable. The concept around a bio-refinery and investments in the integrated processing that Mr. Baker talked about is what governments and industry are seized with to see where the potential is on a go-forward basis.
Senator Trenholme Counsell: I want a more full answer on the question of algae.
Mr. Haig: Algae will be significant, and I cannot see any reason why Atlantic Canada would not be a great location to do that. It comes back to this bill: Motivating a company such as Irving Oil to blend in their refinery will allow people such as us to be able to ask what the economics are to do something in a location such as Atlantic Canada. It provides the opportunity to do so.
I cannot see any reason why it would not happen there as well or better than other locations. You have the sun and the water. It would be impossible to say when, but this bill goes a long way to motivating that to happen sooner.
Fish residue is being turned into biodiesel now by a company called Ocean Nutrition Canada in Atlantic Canada. They extract the omega fatty acids, and the waste-like material at the end is turned into biodiesel.
Senator Trenholme Counsell: I would make a strong plea for you to look at that closely.
Mr. Haig: It relies on this bill passing, too.
Senator Trenholme Counsell: You may want to buy a holiday home. You will make enough money for retirement. You can have a second home in Atlantic Canada.
Mr. Haig: I wish.
The Chair: Gentlemen, you may have a handle that we do not on the nature of the regulations that are about to promulgated under this bill. This bill, in effect, empowers the government to make regulations having to do with biofuels. Mr. Quaiattini has talked about national standards, and we have also heard about the logic of placing plants that produce biofuels from various feedstocks in the places closest to where the feedstocks are.
On the face of it, that will work some hardships on some parts of the country. If, for example, I were the proprietor of a small refinery in Newfoundland, the prospects of my being able to gain easy and cheap access to grain-based or any other type of biofuels is remote.
Would you agree either that the national standards ought to require that all of the purveyors of gasoline and diesel fuels — when they contain biofuel components — in all parts of the country, whether they are big national companies or smaller local companies, ought to be held to the same standard or, in the alternative, that some parts of the country ought to be exempted from some of the regulations that will come forward under the bill?
Mr. Quaiattini: There are provisions to look at exemptions for small blenders within the provision of the policy.
The Chair: I am not talking about blenders that small — 400 a year. I am talking about medium-sized purveyors and retailers of motor fuels.
Mr. Baker: The intent of the renewable fuels standard, RFS, is to have a flexible national average; therefore, a 5 per cent biofuel content on average. In other words, the oil company can decide where to put that ethanol. For example, Imperial Oil may decide to put 10 per cent ethanol in Ontario and Quebec and nothing anywhere else. Another company may decide to put it all in Quebec because of a certain infrastructure there. Those decisions were asked for by the oil industry in the consultations in the run-up to this bill.
Therefore, it is an average content.
The Chair: I will return to my hypothetical example: I am a small refinery in Newfoundland and Labrador. I am also a retailer of motor fuels in those places. If I am susceptible of an average, I have zero chance of being able to compete reasonably with the access to biofuel components that I need to put in my gasoline by comparison to Irving Oil or Esso.
Mr. Quaiattini: The averages are based on wholesale level, but I suspect that during the regulatory development process over the next 12 or 14 months, issues such as that will come up for discussion. We do not have a policy within Canadian Renewable Fuels Association looking at where that comes into effect. We agree that the industry should have some flexibility in their capacity to meet those.
In addition, you look at what is under discussion. As I said in response to Senator Trenholme Counsell's question, there are provincial governments looking at regional policies related to biofuels blending. You made the reference to Alberta and British Columbia moving ahead with the standard of E5 and B5 for 2010. Manitoba, Saskatchewan and Ontario already have standards in place. The national policy out of Bill C-33 is, in fact, on top of that. Again, you could envision a world in which, if provincial governments want to take the additional step, they could do so.
Our preference as an industry, however, is to see an increase in that national standard over time so that we do not have a series of patchwork fuels created across the country. It makes it more challenging when you look at the economics and the blending that does take place within the oil industry. They swap and trade fuel amongst themselves all the time to meet certain production challenges that may come up within a particular year.
You raise a valid point with respect to a province such as Newfoundland and anomalies that could exist. That is open for discussion during the regulatory process. We would be open to look at that and address those concerns so that Canadians and in particular Newfoundlanders and Labradorians are not at a disadvantage.
The Chair: That would apply to the small producer as well.
Mr. Quaiattini: Yes.
The Chair: You will no doubt be consulted by the government in respect to designing these regulations.
Mr. Quaiattini: That is correct.
The Chair: I hope you will take into account the hypothetical example that I have just given in order that there are not unfairnesses visited upon Canadians in various parts of the country.
Mr. Quaiattini: I could not agree with you more.
Mr. Baker: As an industry, from day one when this process started, we have said that it is important for the oil industry to have flexibility to blend where it makes most economic sense and to provide flexibility for those companies that may be landlocked into the situation. The last thing we want is for this bill to not work.
The Chair: We do not want to put anyone out of business.
Mr. Baker: Exactly.
Senator Grafstein: I apologize for coming late. I was at our caucus listening to the policy of the green shift, which is being announced now. It is a massive change in the way we look at these issues.
There is good news in it for your association because there will be a massive investment in new energy.
Several weeks ago, I was in Santa Fe, New Mexico as an invitee and was allowed to inspect the U.S. Department of Energy's research centre, which deals with all the alternate fuels. Most surprising was the talk of algae, which I had not heard of before and understand you have given testimony on it. I was told that the existing algae available, if it was properly geared up and focused, could provide enough energy for the entire vehicular transportation system in the United States. I understand it is not just salt water algae but algae in ponds, rivers and so on. It is water and sun. It is guck that can be turned into fuel.
What priority has been given in your association to look at this? This would seem to answer the questions of ripping up farmlands for alternative fuels because this would not affect anything at all.
The Chair: Senator Grafstein, I am sorry, we have to deal with your bill. With respect, that question has been asked and answered at some length.
Senator Grafstein: I will read the transcript. I apologize for the question.
The Chair: We will now proceed to consideration of Bill S-206, An Act to amend the Food and Drugs Act (clean drinking water).
We have heard senators speak on this bill over many years. Is it five years, Senator Grafstein?
Senator Grafstein: It is seven years.
The Chair: We can say without reservation that this bill has received careful scrutiny over that time. If I recall correctly, this bill is before us in exactly the same form that it has existed in for those seven years. It is a very simple bill. It has the effect of putting drinking water that comes out of the end of our taps under the Food and Drugs Act.
This committee has passed this bill twice before. It has been passed by the Senate and sent to the House of Commons previously, and it now comes before us again.
Therefore, it is in that context that I ask whether it is agreed that the committee now proceed to clause-by-clause consideration of Bill S-206, An Act to amend the Food and Drugs Act (clean drinking water). Is that agreed, senators?
Hon. Senators: Agreed.
Senator Kenny: Would it be reasonable, since we have all done this before so often, to do it one motion?
The Chair: We can do that. Senators, we can, as Senator Kenny has just suggested, saving a little time and allowing us a few minutes before the next part of the meeting proceeds, if we wish, entertain a motion to do this all in one fell swoop.
Hon. Senators: Agreed.
Senator Nolin: It will be on division; so whether it is one vote or ten votes, it will be on division.
The Chair: What would be the appropriate motion to make if we do it all in one fell swoop?
Senator Kenny: Some people can say, yes, and others say, on division.
The Chair: Senator Kenny, would you make a motion to the effect that the bill in its entirety shall carry?
Senator Kenny: I move that the bill and its title shall carry. Does the clerk have words he would like me to use?
The Chair: No, those are the words.
Senator Kenny: I move that the bill and its title shall carry as writ.
The Chair: Any questions and debate on the motion? The motion before us is that the bill, including its title, in all respects and in its entirety as now before us, shall carry. All those in favour of the motion?
Hon. Senators: Agreed.
Senator Cochrane: On division.
The Chair: Opposed to the motion?
The motion is carried, on division, by a vote of six to three.
Senator Sibbeston: The next motion is whether you should report the bill.
The Chair: Thank you, Senator Sibbeston.
Shall I report the bill to the Senate on Thursday, June 26?
Senator Kenny: Report it at the earliest opportunity.
The Chair: It is moved that we report the bill at the earliest opportunity. Is it agreed?
Some Hon. Senators: Agreed.
The Chair: Opposed? The motion is carried on division.
Senator Grafstein: Thank you for not listening to my speech because I am sure I would have antagonized most people here.
I want to thank the committee for its thorough review of the bill. The more we review it and educate the public, the better it is. I hope we can proceed now in the Senate and get it over to the other place.
The Chair: Thank you, Senator Grafstein for your perseverance.
We are here at the meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources to consider Bill C-474, referred to us by the Senate yesterday by order of reference.
Before us is the author of the bill in its original and present form, the Honourable John Godfrey. Mr. Godfrey, I hope you will tell us what you think we need to know about this bill and will be open to questions from senators in its respect.
John Godfrey, Member of Parliament for Don Valley West, sponsor of the billl: Thank you so much.
First, I wish to express my deep gratitude to the Senate. Of course, I have been a big fan of the Senate ever since my father sat in it. My only reservation was that I was in favour of changing the method of nomination to the Senate to hereditary principle, going to the eldest son; a position not shared by my sisters.
In fact, this is the second Senate committee I can recall sitting before. The first involved my father, which was a very odd experience, I can tell you.
This is one of those extraordinary moments of serendipity. Your committee, on Tuesday, June 11, passed its ninth report in which you reiterated the Commissioner of the Environment and Sustainable Development's October 2007 report. Much like your committee's June 2005 report, you urged that the government develop a clear federal sustainable development strategy. Such a strategy would reaffirm the government's commitment to sustainable development and help all federal departments in preparation of their own sustainable development strategies and, perhaps most importantly, offer a common vision for a sustainable future. That is this bill. Your wish is our command.
I wish we could always move as fast.
It is a remarkable conjuncture, if I may say so, a coming together of a common view across all parties. The current way of doing business — since 1995 — is having individual departments put forward sustainable development strategies that in no way connect at the top, that are not part of a larger vision, with no common metrics of success or failure, and that give the impression that every three years they are given to some junior person to fill in and just get it done. It was very pro forma.
All the recent Ministers of the Environment — Stéphane Dion, Rona Ambrose and John Baird — have recognized this failure. Successive commissioners of the environment, whether Johanne Gélinas or the interim commissioner, Ron Thompson, have recognized this. The Green Ribbon Panel on the future of the Office of the Commissioner for Environment and Sustainable Development made exactly the same point.
Everyone is in agreement, and indeed the government itself had ordered a study within Environment Canada to look at this and come back with a recommendation in the fall.
Therefore, it was in the spirit of meeting a problem that everyone agreed was difficult. Producing a common vision for the Government of Canada driven from the centre by a cabinet committee thereby allowing individual departments and agencies to make their contribution in line with an overall strategy and to be measured overall, and to have the homework checked, so to speak, by the Commissioner of the Environment, is what lies beneath Bill C-474. It originally came to us as a model bill, or a template, if you like, from the David Suzuki Foundation and was based on a study of other countries, such as Sweden, that already have this overarching vision, a national sustainable development strategy.
Speaking well to the parliamentary process in the House and to the committee process, despite all the differences we may share with colleagues that sometimes spill over and have side-swiping effects in committees, such as the environment committee, we were able to work cooperatively with the Conservative Parliamentary Secretary to the Minister of the Environment, Mr. Warawa. We worked cooperatively with the Bloc Québécois and with the NDP and listened carefully to the objections that were raised at second reading.
We compromised. For example, we originally had an independent Commissioner of the Environment. That is something many of us still support, someone outside the Office of the Auditor General. However, that would have entailed a Royal Recommendation and the expenditure of new funds. Therefore, we said that we would work with the lawyers, the Commissioner of the Environment and the Auditor General to make the current system do the job because that is what we have in place. That was a major change from the original bill, which refers to an independent commissioner.
The original bill contemplated what we called a national sustainable development strategy. The complication was that this immediately brought us into areas where there was a question of joint jurisdiction, where provinces might say that it is really their business.
We were advised, even by past and present commissioners of the environment, that we would be better advised to refer to this, as you have, as a federal sustainable development strategy, which would look at the operations and policies of all federal government departments and certain agencies that are spelled out in the annex to the bill so that we were clearly operating within our own realm. That proved to be a strong and compelling point for the Bloc Québécois. They came around and supported us on that.
Rather unusually, when we went into committee, I produced a sort of second informal draft version that specifically incorporated the comments that I had heard from all sides of the House to show the spirit of compromise and collaborative behaviour. People were not wasting their time on aspects that I agreed were not worth fighting over.
I must pay tribute to the government, and specifically to the parliamentary secretary, for the goodwill that characterized the amendment of the bill and its passage through the House of Commons. This represents a tremendous amount of collaborative effort with the commissioner's office, their lawyers, the legislative council and the minister's office.
I am happy that the bill has reached this stage, as I am about to make my farewell from this stage. I understand, of course, that you have your duties. It would be improper for me to in any way suggest that if you are uncomfortable with anything you see here, that you not do what you are here for, which is to provide sober second thought and reflection and to pick up errors that I know occur in House of Commons bills. It would be totally inappropriate to expect you do anything other than your duty, which is to take this matter seriously and not in any way to rubber-stamp it or not give it the scrutiny that it deserves.
However, I will say that the bill certainly was the product of intense negotiations and scrutiny within the government. I am delighted that from all sides of the House we received unanimous consent to get it moved on Friday last, through various stages, so that you might have a chance to at least think about it before you break for the summer.
I hope that gives you a bit of a sense of the history of the bill, the spirit in which we have come to this point, and I hope the spirit that will take us forward to the next point.
The Chair: Thank you, Mr. Godfrey. I want you to understand, as I know you do, that were it not for the fact that this bill is precisely consistent, as you have pointed out, with what we have been asking for for years, and, to be honest, were it not for the fact that it was you who brought this forward, this committee would not be giving consideration to this bill now. There are other matters, including government bills, that are before us that have priority and that require that they be dealt with before the recess begins. I mean that as a great compliment to the bill and to you personally, sir, because we are all in your debt with respect to your efforts having been made on the environment.
I want to give you a bit of context of background with respect to the reference you made to occasional errors of omission in the House of Commons — and sometimes commission; we find them too, occasionally.
One issue that you will hear about from senators and about which we are concerned is one that I have, in the past — so you will know this is not new — been quite obstreperous about when it comes to legislation, particularly environmental legislation, coming forward from the House of Commons and from the government — and I mean to include the previous government as well as the present government — is omitting, as this bill does, for example, on page 7, in proposed new sections 23(2), (4) and (5), references to the reports of the commissioner being sent to the House of Commons only and not to parliamentary committees. The deputy chair was talking about that with us before we began. This is just so that you will understand the context in which some of the questions will come.
Senator Nolin: Thank you for accepting to appear before us. I will piggyback on what the chair just mentioned. When reading the first draft of your bill, the first reading and the final result that was adopted by the House of Commons, there is quite an evolution in a few areas, the first being the new bureau that will be created under clause 7 of the bill entitled the "Sustainable Development Office.'' That office will produce a progress report — in clause 7(2) — and that progress report will be sent only to the House of Commons. Why only the House of Commons?
Mr. Godfrey: I absolutely agree that this report obviously should come to the Senate as well. There is no reason that should not be so. I suppose that when we were drafting this, we were trying to focus on things within our own realm of responsibility. However, you are quite right; it would be a most incomplete activity if it was not also reported to the Senate at the same time. You are absolutely spot-on.
Senator Nolin: I have a similar comment with respect to the draft of the federal sustainable development strategy. At clause 9(3), it says that the draft — or "version préliminaire'' in the French version — will be sent only to the House of Commons and then to the House of Commons standing committee that deals with the environment. Do you have the same comment?
[Translation]
Mr. Godfrey: I have the exact same reaction as you. To improve the plan, we need to submit this to both Houses, one way or another. A second review can only make the plan stronger and better.
Senator Nolin: I understand the official version of the plan will be distributed to both Houses of Parliament.
Mr. Godfrey: That is correct.
Senator Nolin: I have a question about clause 11 which refers to Schedule I where the agencies are listed. Why does this provision apply solely to agencies that report to the federal government? Why are all bodies under federal jurisdiction not included?
Mr. Godfrey: We did discuss this matter at some length. I must admit that the agencies listed in the Schedule are already required, by regulation, to prepare and present a sustainable development strategy. Originally, there were six agencies on a list, and two more were added later, pursuant to the regulations. So then, this is the current list of agencies required to have a sustainable development strategy.
We discussed, for example, whether or not Crown corporations should be included. Ultimately we determined that Crown corporations were covered by virtue of the fact they reported to departments that had already been identified. We talked at length about who to include, and who not to include. I believe this list corresponds to what is included in the Auditor General Act of 1995, A few changes have been made since then, further to the regulations.
[English]
Senator Nolin: I understand clause 12, but I would like you to explain "performance-based contracts.''
Mr. Godfrey: I will try to explain the intent. However, first, I iterate how appreciative I am of the government for allowing us to do something rather unusual in that this process should be driven by a cabinet committee. Cabinet committees are part of the machinery of government and the responsibility of the prime minister of the day, and they do not like being told how to organize their affairs. However, you will notice that the bill proposes a committee of the Queen's Privy Council for Canada, which is the language that has been chosen to represent the term "cabinet committee,'' that will oversee the development and implementation. Another piece of legislation does this: the Financial Administration Act, which, by an act, created the Treasury Board of Canada Secretariat. There is a small precedent, but it was not done by a private member's bill.
Part of the challenge was to devise a system of machinery that sent a very strong signal not only to the departments but also to those chiefly in charge of those departments. The performance-based contracts in clause 12 provide an incentive, as we provide to deputy ministers, down to a certain level to see this as part of their duty. If they are negligent in fulfilling their obligation under the law, it will be included in the review of their contracts. Unlike the previous exercise of those individual departmental sustainable development strategies, which were not taken seriously because no consequences existed for the department, the intent was to say that with Bill C-474, not only will we drive the process from the centre and create a particular board within Environment Canada to supervise it and have it checked by the Commissioner of the Environment and Sustainable Development, but also there will be consequences for the senior leadership of departments that do not comply.
The bill does not say what the strategy is, but we do say that departments must have one that is real and measurable by outsiders. Allow me to say something that I should have said earlier. This will be part of an interim process in that it will not be the last word, by any means, in creating a federal sustainable development strategy. This is step one. As we learn more about environmental challenges and factors that we did not worry about 20 years ago, that knowledge will have to be built into the indicators in the future.
This is very much a work-in-progress. It will never be done because our understanding of environmental matters will always be deeper as we discover new horrors and new ways of solving problems.
The Chair: The green lens, to which the deputy chair referred with respect to performance-based contracts, is already sort of in place as a philosophical agreement. For example, the infrastructure fund currently requires measuring up to the bar, does it not?
Mr. Godfrey: That is right, but there has never been an overall strategy. When I was the infrastructure minister, I came upon a situation where our existing programs were becoming greener with each iteration. We used to say that when we had to make choices between the various proposed projects, we would go for projects such as clean water or public transit. However, it did not relate to any overall plan and was based on the sense of the moment. My conviction was that sustainable development was the way to go.
A similar case applied to the gas tax in that we said that it had to go into sustainable municipal infrastructure and that measures had to be taken after five years on how those investments faired at cleaning up the air and water and reducing greenhouse gases. As well, at the end of five years, there had to be an integrated community sustainability plan for everyone receiving the gas tax. Unfortunately, it was not part of a bigger idea.
The Swedish model moves forward as a society and so the elements connect. With infrastructure, you deal with transportation, and you want all of your policies to move in the same direction and not countermand each other.
The Chair: Precisely.
Senator McCoy: I congratulate you on bringing the bill forward. I sympathize with you in the number of compromises you had to make in order to bring the bill forward. In particular, I commend clause 5, which states:
The Government of Canada . . . acknowledges the need to integrate environmental, economic and social factors in the making of all decisions by government.
That is truly what sustainable development is all about as opposed to the more popular statement about ensuring that future generations have it. At least you have that piece preserved; and I say, well done for that.
I thoroughly agree with clause 12 on performance-based contracts, because there is probably no other single strategy in the bill that will make more difference than that one.
I would simply concur with the comments made on reporting to the House of Commons more often rather than Parliament.
I am trying to puzzle out in my mind the timelines in here. That is something that we should look closer at as well. Clause 9(1) sets up a two-year time frame for an initial federal sustainable development strategy, developed by the minister. The draft of that gets taken to the sustainable development advisory committee and to the Commissioner of the Environment and Sustainable Development and to the Governor-in-Council, which is to say cabinet, and to the House or the Parliament as it may become.
It keeps repeating within the time frame mentioned in clause 9(1). I do not know if you can explain your intent there.
Mr. Godfrey: The challenge was to give enough time to do the job properly and for us not to get locked in on something that, on deeper reflection, would be problematic. We needed a draft document after the first two years that would allow many people to scrutinize it and get back to it. It is similar to issuing draft regulations. I had better be careful how I put that. We wanted enough pressure to get something out the door for people to comment on, then to come back with the amendments and improvements and have it go out the door again, and then be monitored in its operation as it moved forward. We consulted quite carefully. Originally, the draft bill had things happening in a year, which was ridiculous.
We attempted to get from the commissioner what was a reasonable timeline to put out drafts, come back and review based on their experience of these things — even the ineffective ones. We also did the same with the government itself, understanding that this would involve a cabinet committee.
In addition, once you have the "chapeau piece,'' this overall arching strategy, then of course the individual departmental strategies have to plug into that. It has to then create a framework within which they operate. However, they cannot do that until they know what the plan is. Meanwhile, they keep submitting these plans as they are required to since 1995. Once the big plan is in place, then the individual departmental and agency plans plug in, and they in turn get reviewed by the commissioner and so on. Therefore, it is an interlocking, stepped function that we have developed without just imposing artificial limits but with enough pressure to get the process going.
Senator McCoy: It will be tight. You keep talking about three months, or 120 days, but they will be simultaneous, I presume.
Mr. Godfrey: Yes, in some cases, as they finish one step, they go to the next. The 120 days was a negotiated figure that everyone thought was acceptable. They thought, on the one hand, that it was not an unreasonable demand, and, on the other, it did not let it go forever.
Senator McCoy: The advisory council in clause 8(3) refers to the fact that they will serve without remuneration and without reimbursement for expenses. Do you think this will be a practical impediment to people of substance agreeing to serve on the council?
Mr. Godfrey: I will give you the origins of that. It was one of the arguments raised about the possibility of this requiring a Royal Recommendation because, once again, the moment there was any thought of reimbursement or remuneration of any type, then that was a money matter, and I was out of luck. Therefore, we have agreed that this organization will probably meet, I will not say virtually but through teleconferencing and so on. We hope to attract the right people to it but to ask them to do this as an act of public service. It is not necessarily the way I would proceed in an ideal world, but if I did not make it quite clear that there was no expenditure of new money, I would find myself in Royal Recommendation-land, a place I did not want to go.
It would also be carbon neutral, of course, if they met that way.
Senator McCoy: A huge difference exists between this and your original bill in terms of actually describing what would be included in a sustainable development strategy, national or federal, which is regrettable. That was one of the gems of your original bill, frankly, because it gave, I thought, some very useful guidance as to what these might be. I do not want to say, "How do you feel about this?'' I do not want to be like the media.
Mr. Godfrey: That sounds like my "Oprah moment.''
Senator McCoy: How will we preserve the impetus behind those sections in your original bill to ensure that the minister, and I suppose the cabinet committee — about which I have less confidence than you — will actually bring forward something that is substantive and not, as you say, inconsequential as so many of the existing sustainable development strategies have been?
Mr. Godfrey: Establishing cabinet responsibility, and reporting to Parliament forces the minister — now it is the Minister of the Environment whose neck is on the line — to develop this plan, and this person does not do it solo. The minister must do it working with cabinet colleagues on a cabinet committee, so you pin the tail on the donkey, so to speak. There is a direct line of responsibility, where it was very diffuse with these individual departmental plans.
Senator McCoy: I grant you that, but it is the substance of the strategy.
Mr. Godfrey: We lost a lot of aspirational language. For example, the original bill had a certain amount of poetry, if I may say so. We had specific goals of being a world leader in living in a sustainable manner and protecting the environment by making efficient and effective use of energy and resources. We had a schedule; the original schedule to the bill was very ambitious. The first item was the goal, generating genuine wealth. It is hard to measure, actually. The second was improving environmental efficiency in shifting to clean energy and reducing waste and pollution and protecting air, all of which we could agree to but none of which had a legal meaning because they were aspirational. They are aspects that a government would want to consider as the list of indicators, objectives and goals.
Since we cannot have it both ways, we are saying to the government that they have to do this. Here are some ideas, but they are not bound by these ideas. They are not restricted or compelled to follow this list. These are some things we think are important.
We have to — I do this as a historian — make a historical bet that we will not go backwards on environmental awareness, that sustainable development is an ever-evolving project, if you like, but it is moving in one direction. We will not be less aware of these matters.
It would have been nice to have all of that in the bill, but it does not change the principle, namely, that we need an overarching plan whatever the government of whatever political persuasion. Different governments will choose to accelerate this and emphasize different measures, and we cannot anticipate that. This is our challenge. We just know that we have to take the first step. It would have been great to have all that in there. I had some ideas in there from the Natural Step Canada, which is one of my favourite organizations, but it is more important to get this going and to recognize that this will evolve. It must evolve through this whole critical process. If we do not take the first step, we will never get there.
Senator McCoy: There are examples of legislation that include such goals and make clear that it is not an exhaustive list. In the spirit of moving things forward, you gave that up for the moment. Then it would seem all the more important that those of us who are employed to think in depth and in long terms — such as the Senate and senators — are brought into the process here. It is this sort of committee that will probably pick up and maintain that list as a way of measuring whether the goal that we all hope will be reached with your bill is in fact being brought forward by whatever minister of the day it is. Thank you, and well done.
Mr. Godfrey: Thank you.
Senator Kenny: Welcome, Mr. Godfrey. This is an admirable piece of work that I know appeals to me and, I am sure, the committee. The comments you have heard about the Senate, think one of us, think all of us; that is something that would have to change before the bill could go forward.
The question that goes through my mind revolves around clause 5. I would like to go back to the Mulroney government. You will recall that just before they fell out of love Mr. Mulroney appointed Mr. Bouchard as the Minister of the Environment. It was quite a remarkable appointment inasmuch as — to an outsider, at least — it appeared that he was making Environment Canada a central agency of government. You very much had the impression that to entice his friend into being more active at the federal level, he was saying that he would give him a department that has the powers of finance or the powers of Treasury Board. One anticipated that every piece of legislation would, in fact, go before Environment Canada, and until Mr. Bouchard's signature was on that bill, it would go no further.
You have not gone that far here, but you have gone a fair way toward that. You are, if you like, creating a foundation along those lines.
You were around when that romance cratered, and you must have observed with some interest the new nature of the department which, as soon as Mr. Bouchard left, reverted to its almost invisible role within the bureaucracy.
When you thought about this while working with this piece of legislation, what trade-offs did you have in mind, or did you consider the template that Mr. Mulroney and Mr. Bouchard created between them? If you did contemplate it, why did you not go that way but this way instead?
Mr. Godfrey: That is a terrific question. Again, being both a former historian and a departing Liberal member of Parliament, I am on the cusp of being able to be more candid than I might normally be.
With respect to your description, the great green moment was in the late Mulroney government. Any reasonable- minded person recognizes that the minister was given huge authority, the green plan of the day and the development of indicators; all of the things we are now coming back to.
You raise an interesting question about how to get the Environment Canada out of its ghetto. If you look at what we originally envisaged in the bill, it resembled more a green war cabinet or something similar. The original plan for the bill would not have put so much authority back into Environment Canada because it tended to get minimalized. How does Environment Canada tell the Department of Finance Canada to change its regulations on oil and gas?
We were trying to balance using the central authority of the Privy Council Office, recognizing, being the political reality of the day, that we have actually gone backwards in terms of environmental surveillance, if I can put it that way. We were now recovering ground.
This is a private member's bill, I am in the opposition, there is a government of the day and that is where we are. What is it that the government of the day, the opposition and the other parties can all agree on, at a minimum, to get the process going?
If it were my world, I would of course have something that would look similar to Treasury Board or a central agency that would actually do that, but it is not my choice. I find myself in a historic moment.
It was difficult enough to disentangle this sustainable development act from the whole foofaraw about Kyoto and climate change. Of course they are related, but I did not want to get caught in traffic on that. Do not forget that the House environment committee, as you will well recall, was riven by disputes over two other private member's bills: the Kyoto Protocol Implementation Act, Bill C-288, of Pablo Rodriguez and Jack Layton's Bill C-377. That struck me as unproductive.
One may support the principles of those bills, as I did, but the actual doing of it was deeply destructive. Our committee found on the targets bill, Bill C-377, of Jack Layton, that a filibuster was happening. We could not even resolve it for ourselves. We had to boot it over to the House in order for them to solve certain amendments that we were not even planning to consider.
If I have learned anything in my 14 years here, it is that you have to be a realist. You must understand how to work with the forces that are present. Again, because I do believe that the history of these national sustainable development strategies is that they are always in evolution — recognizing new realities, perceptions and new science — it was more important to take the first step, always reminding myself of Voltaire, that perfection is the enemy of the good here. What good would it do me to put forward a perfect bill and not have it get to at least this stage? That was my perception.
If I were king for a day, I might go back to where Mr. Mulroney and Mr. Bouchard were. However, I am not. I am just a back-bench MP, trying my best to kick-start the process.
Senator Nolin: To correct the presentation made by my colleague, Senator Kenny, I was close to the government at that time.
Senator Kenny: He was the handmaiden of the plans.
Senator Nolin: It was much more than the bills; it was all the government spending. It was a replica of the Treasury Board but with the environment perception. Two authorities needed to be given before a dollar could be spent.
You are right: The relationship between the two individuals and the instruction or the authority that was given to the Minister of the Environment was almost of the authority of an agency. It was quite effective. Of course, all the other ministers did not like the process, but that is the nature of being a prime minister.
Senator Mitchell: Mr. Godfrey, my congratulations. It is really a thrill to see this accomplishment. You have worked for so long to earn it.
You have heard concern here about the lack of contemplation of the Senate of this bill. That is a continually raw spot, and you have responded very well to that.
My concern is that it could lead to us amending this bill and sending it back.
Mr. Godfrey: That is the problem.
Senator Mitchell: I used an analogy earlier: You are winning the race and the dog bites you. You stop to kick the dog. You feel satisfied for a few seconds, but you lose the race.
I would like to see us avoid that.
Senator Kenny: Senator Mitchell is comparing the Senate to a dog, and I have a problem with that.
Mr. Godfrey: The dog is not named Kyoto.
The Chair: We are a Saint Bernard in the scheme of things.
Senator Mitchell: I am barking up this tree.
Mr. Godfrey: As long as that is all you are doing to the tree.
Senator Mitchell: In any event, I was struck by Senator Nolin's analysis earlier in our informal discussion — maybe you alluded to it in your comments in French — that, in an earlier version of the bill, there was a contemplation of the Senate.
The Chair: The committees of Parliament.
Senator Mitchell: Yes, leading us to wonder whether it was a compromise that resulted in an amendment; a compromise to meet some concern of some interest in the House of Commons.
Mr. Godfrey: I am trying to find the narrow route between candor and diplomacy. The amendments that removed those references came from the government. I guess they chose their reasons.
I completely understand why you would want to correct that, but, at the same time, I am wondering if there is a fix that does not require an amendment. The challenge I have as a resigning member is that, if the bill gets amended in the formal sense, it would then go back to the House and would require unanimous consent for a new sponsor of the bill to be chosen.
Having gone through this exercise as recently as Friday, I can tell you that trying to achieve unanimous consent on the slowest day of the week in the House is difficult. We tried three times until we finally arrived at private members' business, and, in the glow of goodwill and the fact there were only three people in the House, we managed to move it through.
I would be all for a way of doing this that did not trigger that whole process and thereby endanger the bill. When we came to second reading, there was unanimous consent to send it to committee except for one chap on the government side who dissented, and he did not have anything against me. He is a nice fellow. However, he felt uncooperative and while it did not need unanimous consent to be voted on, he simply decided to do that. That is the risk. If the bill has been de-sanitized a bit, those are government amendments.
Senator Mitchell: It was part of the process.
Mr. Godfrey: Yes. I would not attribute motive.
Senator McCoy: That is another discussion.
Senator Kenny: I really do not mind if it is deliberate or not. It is a principle and one on which we must be consistent. Only by being consistent will we ensure that the Senate functions as it should.
Having had a private member's bill move through the system, I am very sympathetic to picking the right timing and the right Friday to move something forward. I understand the challenges. However, having said that, we do want to send a message to anyone, the government included, that, if they are contemplating a bill with reporting back, that the reporting comes to both Houses. That stands for both good and bad bills.
The Chair: I want to remind senators that in a meeting that we had among senators and Mr. Godfrey before we began, we made that point to drafters, ministers and senior bureaucrats repeatedly. The senator is right: Somehow the point must be made.
However, we must examine matters, as Senator Mitchell has suggested, on the balance of things. We will do that to ensure that somehow it is done before we report the bill next week.
Senator Mitchell: I share the concern. I deeply care about these institutions, the Senate amongst them, and I know you do.
I am driven by the argument of principle, but there is a principle in getting this bill done. I have argued that, if we do not, it may never get done; we come back in the fall, it falls off or there is prorogation or whatever. That would be really unfortunate because we need to move along, but we just do not have time.
Mr. Godfrey: I seem to recall somewhere in the back of my mind that there is a process whereby you can append a commentary when you return a bill. First, you can make the point that there are two Houses; they both need to be treated with respect. Second, perhaps there is some way in which, earlier in the process, there is agreement — why should the Senate not take up the study? It will not be a private document. It might be useful for that process to happen, even if it is not spelled out here and ordered, that by courtesy or some other method you might find a way around that.
The Chair: A number of processes will be consider, that being amongst them.
Senator Kenny: On that topic, the Auditor General reports only to the House of Commons. Having said that, she does write to us and give us a heads-up if it is something coming out shortly that may be of interest to us. She does consult with us regularly. She even audits us once a year. Therefore, there are these vehicles. Whether they will satisfy our colleagues is another question.
Senator Mitchell: This idea of a sustainable development strategy — and you may have touched on this — may be difficult for many people to understand and grasp.
Could you give a concrete indication of what that would be?
Clearly, it is two parts. You have explained very well the relationship between a federal department and how it needs to link into that overall strategy. However, if you were writing it — now that you have all this time on your hands — would you see it with sections, for example, on climate change, water, toxic emissions and arable land use and setting land aside?
Would it be that, and then government would establish a series of policies first, objectives and then markers — in each section? Is that how it would look?
Mr. Godfrey: I think that it the case. Part of the challenge is that sustainable development in the broadest sense does not limit itself to the environment. The definition, to which, I think, Senator Kenny referred, the basic principle of sustainable development is the one taken from the international forum in Rio de Janeiro. I think it is also embedded in the Canadian Environmental Protection Act, 1999. The thought was that we would get to some common language there.
In the lost schedule from the first draft of the bill, I had mentioned briefly that we were thinking about air quality, water quality, healthy food, restoring nature and all the rest of it. Ultimately, these aspects have to be measurable. For example, the National Round Table on the Environment and the Economy has done work on those sorts of indicators.
We have to recognize that in certain areas, we know an awful lot more than we do on others at this point. For example, we really know about sustainable cities and carbon footprints and so on. If you go back to the Auditor General Act in 1995, which created the Commissioner of the Environment and Sustainable Development, it was anticipated that it would not simply be about the environment, but also about social, economic and, I would argue, almost cultural and heritage matters and their interconnection.
By the way, that is what we were trying to do on the new deal for cities. We talked about four pillars of sustainability. It is just that we are so far away from understanding what some of that means, and the difference between what is sustainable from a natural point of view — how do we restore nature? — as opposed to a social point of view.
In society, we are not trying to sustain poverty; we are trying to eliminate it. We are not going back in time to a purer state of nature, as we would with the environment; we want to move forward.
All of that is to say that is why this will be an endlessly fascinating, evolving topic. We have to start on things that we can absolutely measure, such as greenhouse gas emissions, water quality and species at risk — how many salamanders there are and so on. However, this discussion will not end in our lifetime. It will become a more complex and integrated conversation, and we will always be trying to balance out the good of jobs and mobility with all the issues being brought on right now by the energy crisis — all of those arguments and social justice. It is a work of a lifetime, and we are just tiptoeing into this field with this bill.
The Chair: Could you not argue that something more general, broader — and, therefore, subject to an interpretative statement later as events change — is in some sense better than a list? A list becomes exclusionary; something happens that is not on the list and then a question arises.
Mr. Godfrey: That is right. However, it does say that verifiable indicators and measures are necessary. The commissioner has to assess the fairness of the information as it is presented. That obviously depends on sector to sector and indicator to indicator.
Senator Adams: Thank you for coming here, Mr. Godfrey. I remember your father very well in the Senate. Not too many of us are left in the Senate who remember him.
Mr. Godfrey: I am glad you do.
Senator Adams: My question refers to clause 8 of the bill. I know you mentioned the territory and Aboriginals and the environment, but not our government. We have three territorial governments. Would the federal minister oversee this without input from the territorial governments? Could you explain that a little bit?
The Nunavut government has a sustainable development department. I would like to know what it means with respect to being outside the three territorial governments. Would you just appoint an individual?
Mr. Godfrey: The challenge was to move forward in a way that was respectful of governments at the provincial and territorial level. Because of the nature of the federation, if we are to have an effective strategy in the end, we have to coordinate our efforts with what each of those governments is doing. They control so much of the story in terms of what our environmental outcomes will be.
We want them to at least feel they are part of the process, although initially we are not measuring what they are up to. I suspect, in a future universe, we might expect that there would be provincial and territorial equivalents of the Commissioner of the Environment and Sustainable Development; and that the collection of those commissioners, along with the federal commissioner, would capture the system. You could imagine that being the future.
Right now, however, there are provinces or territories that do not have anything that resembles that. We are trying to leave it open-ended enough to anticipate that; but we also wanted to ensure that no one could say that they were not at the table to have the point of view of their government heard. That was really a respect for Confederation.
The next part, which deals with civil society, was to recognize the various vested interests — those who were the stakeholders one way or another. Obviously, it could be a very unwieldy process if we went limitlessly on this. We did try to capture that in a way that gave at least a broad-stroke reference to Aboriginal people, to trade unionists and to environmental organizations.
After all, this is an advisory council — not paid, as you noticed. As always, these things are a compromise. You try to be as inclusive as possible without being completely unwieldy. Those are the tradeoffs.
We tried to make a distinction, for example, between territorial governments and Aboriginal people. We did not assume that one necessarily spoke for the other. We needed to capture that — because there are three representatives from each — in a way that would be meaningful. Obviously, people of the North will be hugely important in this because they are the people most affected right now.
Senator Adams: With anything environmental that had to be studied, most of the time government appoints the scientists and such people. I want to know how that will work. More and more people have been hired for sustainable development jobs. We have not had any sustainable council up there for quite a while, even though we have quite a few people involved with the climate change issue. Perhaps you have heard about that. I was wondering if it would be more powerful to have people there studying the effects of the environment on Aboriginal people.
Mr. Godfrey: I take your point. Again, this is an attempt to be prescriptive but flexible. We recognize that these following groups need to be represented, but if we start getting into micromanagement by specifying which environmental groups or Aboriginal people, we would never get out of that. Again, it is a compromise.
The Chair: It does not say that representatives of labour, business and business organizations are not Aboriginals.
Mr. Godfrey: No, absolutely not.
The Chair: Given the way things are, particularly with respect to Nunavut, the likelihood is that there would not be three Aboriginals sitting on this, there would be at least four if not more.
Mr. Godfrey: That is an excellent point.
The Chair: Mr. Godfrey, we are thrilled by this bill except for some of the misgivings you have heard. We have undertaken to report this bill to the Senate on the afternoon of Thursday, June 26. What that report will say or recommend, I cannot tell you now.
However, we will be taking into account in our deliberations all the things you have heard, including the concept that Senator Mitchell and others raised, that we must not allow the perfect to stand in the way of the good. The end goal is not to stand in the way of the first few steps. As you have pointed out, this bill is those very important first steps.
Mr. Godfrey: May I ask a question? I am, of course, entirely at your disposal. Do you think you will need to see me again?
I am quite prepared for that. However, I will leave it with you if you need to get in touch with me. I want to thank you. I know this is a terrible time of year for everyone, particularly the Senate. The House of Commons keep throwing bills at you and say, "We are out of here, you carry on.'' I know that is not respectful.
Senator Kenny: We get time and a half.
Mr. Godfrey: I am glad. I hope it is performance-based.
The Chair: Everything is performance-based here.
Mr. Godfrey: Thank you for inviting me to participate. I know your agenda is crowded. I understand the point entirely of the omission of appropriate references to the Senate. Senator Kenny may be onto something. We could use the ingenuity of the Senate to include, perhaps, the function of the Commissioner of the Environment and Sustainable Development or other such arrangements that will accomplish the task even if it is not properly set out by law.
The Chair: In response to your question about seeing you again, do you plan on being in Ottawa for the next week?
Mr. Godfrey: Yes, I do. My only consideration is that I may have to take my child to camp on Thursday morning, but I could get back. I will do whatever is needed.
The Chair: We can probably track you down if needed.
Mr. Godfrey: I will be here.
The Chair: Our process is that we are meeting on other matters on Wednesday, June 25, and on the morning of June 26. However, we will do a clause-by-clause consideration of this bill before four o'clock on Thursday, June 26, and we will try to devise means to serve the interests of the country in that respect.
Mr. Godfrey: I am very grateful to all of you.
The Chair: Thank you, Mr. Godfrey.
The committee adjourned.