Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources
Issue 15 - Evidence - December 2, 2010
OTTAWA, Thursday, December 2, 2010
The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 8:09 a.m. to study the current state and future of Canada's energy sector (including alternative energy).
Senator W. David Angus (Chair) in the chair.
[English]
The Chair: Good morning colleagues, witnesses, and our viewers on the CPAC network, the World Wide Web and on our special website dedicated to this study. This is a formal meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources, as we continue our study of the energy sector, with a view to finding a way forward and developing a framework for a new way of managing our energy supply in Canada and elsewhere.
We are privileged this morning to have representatives who we have seen here before, sometimes in a different guise. From the Canadian Petroleum Products Institute, CPPI, we have Mr. Peter Boag, President; and Mr. Gilles Morel, Director, Fuels.
My name is David Angus. I am a senator from Montreal and the chair of the committee. Our deputy chair, Senator Grant Mitchell, is unavoidably absent this morning, but we have a full complement.
Here today are our researchers from the Parliamentary Library, Mr. Marc LeBlanc and Ms. Sam Banks; the clerk of the committee, Ms. Lynne Gordon; my predecessor, Senator Tommy Banks, from Alberta; Senator Robert Peterson, from Saskatchewan; Senator Linda Frum, from Toronto; Senator Richard Neufeld, from British Columbia; Senator Judith Seidman, from Quebec; Senator Paul Massicotte, from Quebec; Senator Daniel Lang, from Yukon; and Senator Bert Brown, from Alberta.
This morning, we will probe a little deeper into the issues before us. I understand, gentlemen, that you have been following our proceedings with interest. Hopefully today you can reassure us that we are on the right track and give us your input in that regard, and also talk about your own particular issues.
CPPI is the national association of major Canadian companies involved in the refining, distribution and marketing of petroleum products for transportation, home energy and industrial uses. Mr. Boag has an 18-year track record of successful public policy advocacy and industry association leadership. He was appointed the president of CPPI in 2007, having previously been the president and CEO of the Aerospace Industries Association of Canada.
As a civil engineer with Imperial Oil for 32 years, Mr. Morel brings a track record of successful project management in marketing and distribution and refining, including the implementation of fuels quality programs.
Mr. Boag, I believe we have seen you in your other capacity of being a member of the framework initiative, is that correct?
Peter Boag, President, Canadian Petroleum Products Institute: That is correct, yes.
The Chair: You might refer to that in your opening remarks, which I believe you have, and we will listen to with interest. Then we will go to the question and answer period.
Mr. Boag: Thank you very much and good morning all. We appreciate the opportunity to appear before you here today and to participate in what we see as a critically important discussion and examination of Canada's energy future. I hope our remarks today and our engagement in questions and answers with you after our remarks will be helpful in what is, I think, a very thoughtful examination of Canada's energy future by the committee.
CPPI represents the downstream sector of the oil industry. We are the refiners and distributers of, among other products, gasoline, diesel and aviation fuel. We produce and market the transportation fuels that, in a very real way, keep Canada moving.
Our members include Chevron Canada Limited, Husky Energy Inc., Imperial Oil Limited Products and Chemicals, North Atlantic Refining Limited, NOVA Chemicals (Canada) Limited, Parkland Income Fund, Shell Canada Products, Suncor Energy Products Inc. and Ultramar Limited. These companies collectively operate 15 refineries that supply some 12,000 retail sites through a network of 21 primary fuel distribution terminals and 50 regional terminals right across the country.
The Chair: You mentioned that your membership includes these organizations. Are there other members as well, or is that the full complement?
Mr. Boag: We have one other member who is primarily in the asphalt business, which is different than what we are talking about today. That company is Bitumar Inc., based in Montreal. Their business starts with crude, but it is a refining process that is geared to a different product.
If I could leave you with one overriding message today, it would be the following: We certainly can achieve a more sustainable energy future for Canada. Indeed, our members are committed to this goal and are working hard and investing significant amounts of money to achieve this vision. However, wishful thinking alone will not get us there. We must proceed with knowledge, reason, science and fact.
In this context, there is absolutely no question that alternative fuels, alternatives to the products that our members produce today, can and will play an increasingly important role in meeting Canada's energy needs. Given the growing demand for energy, we will need all the energy resources we can muster.
In fact, it may surprise you to learn that our members, the conventional fuel producers, are among the leaders in the global drive to develop and deliver alternative energy sources for transportation. Some of our members today are the largest producers of conventional ethanol in Canada. Others are working to develop advanced biofuels using feedstock such as straw and biomass. Still others are exploring the production of liquid transportation fuels from algae. They are at the leading edge of the efforts to find new, clean, sustainable fuels that can power our cars, trucks, railways, ships and aircraft well into the future.
The refiners and marketers of conventional transportation fuels know that it will require a great deal of money and time to develop commercially viable alternatives — fuels that can compete with conventional fuels on cost, reliability, safety and performance. A number of emerging technologies some day may deliver on the promise of a secure supply of affordable, efficient, environmentally friendly new fuel. However, we are not there yet.
In the meantime, our members will continue to invest in their traditional product lines as well. Canada's refiners will work to ensure that the needs of their customers are met and that gasoline, diesel and other conventional fuels are continuously improved.
We believe that a parallel track of pursuing new fuel alternatives and maintaining and improving the existing supply is a wise course. It is the energy strategy we recommend to this committee.
We need to ask ourselves some difficult questions in formulating a plan for a sustainable energy future. When it comes to transportation fuels, what can we realistically achieve? How long will it take? What kind of investment are we looking at; and along the way, how do we continue to meet the transportation needs of this country? How do we ensure that goods continue to be shipped efficiently, our trade with the U.S. and other countries is not disrupted, food arrives at the grocery store, airlines meet their schedules, people get to work and kids get to the hockey rink or the soccer field? The bottom line is really how do we fuel a cleaner, more sustainable transportation system and maintain continued reliability of fuel supply at an affordable cost to Canadians?
At CPPI, and within our industry segment, we are becoming increasingly concerned that some policy-makers believe there is an easy fix; that there is a magic silver bullet solution; that we can get off oil by simply mandating alternative fuels; that all we need to do is put in place regulations that, in the words of Captain Jean-Luc Picard, "make it so."
We are here today to tell you that if such a magical solution were available, it is likely that our members would already have brought it to market. While they have made good strides in new innovations and technologies, they can only push to the limits of what chemistry, engineering and financial capacity can deliver.
An example of wishful thinking exceeding the reach of the achievable is the push to mandate a national standard of 2 per cent biodiesel in what we consider to be an unrealistic time frame. It is too short to address the significant technical feasibility issues associated with the introduction of this product.
A draft regulation establishing the start date and duration of the first compliance period has not yet been published. However, public expressions of intent indicate to us that we could be faced with an unworkable start date that could put the country's fuel and transportation systems at risk.
The technical feasibility issues stem principally from the fact that, unlike ethanol that is a simple chemical that has been in use in Canada and around the world for decades, biodiesel has some unique challenges, principally associated with our cold Canadian climate. Under colder temperatures, it thickens and becomes a solid. Obviously, its flow and useful properties in vehicles are significantly degraded.
This creates the need for significant new blending infrastructure to ensure that consumers receive a consistent high- quality fuel that is fit for use. It requires the development and promulgation of appropriate standards that define critical fuel properties in a variety of on- and off-road applications, and it requires an adequate supply of biodiesel suitable for use in Canadian climatic conditions.
It also requires a different biodiesel blend stock to compensate for the degraded cold-flow properties of biodiesel. While the blending of biodiesel currently entails the adding of anywhere from 2 per cent to 5 per cent biodiesel to regular diesel or conventional fuel, it is important to understand that blending that 2 per cent to 5 per cent requires major changes to the other 95 per cent to 98 per cent. It is not just an addition of the 2 per cent to 5 per cent into the existing fuel; those existing fuels ultimately need to be altered.
We have consistently advised that three years from the date of regulatory certainty is typically required to complete the investments necessary for this kind of new product introduction. Work completed under the government-led National Renewable Diesel Demonstration Initiative, NRDDI, confirms this. Requiring refineries and marketers of diesel to proceed too hastily with a renewable diesel mandate could increase reliance on foreign sources of renewable diesel, increase the risk of supply disruptions and increase the cost of compliance to the sector.
I do not want to dwell on this issue, but it serves as a timely illustration of the dangers of implementing policy without due regard for implementation practicalities and unintended consequences. Government has to get it right. Policy decisions are not made in a vacuum; they have a very real impact on real people in the real world. Fifty-five per cent of all gasoline and diesel produced in Canada now is used in business activities. Our jobs, standard of living and competitive position in the world depend on these fuels.
That is why CPPI is concerned about myths and misinformation that are increasingly accepted by some as fact. There is a growing voice that gasoline and diesel are past their useful life, that they can be replaced by alternative energy sources virtually overnight and that new fuels are more environmentally friendly, cheaper and offer the same energy equivalent.
Let us step back and consider some of these assumptions.
Gasoline and diesel have served us well for over a century. Their reliability, affordability, safety and convenience have allowed us to build a great country, enjoy an enviable standard of living and remain competitive in international trade. Today, Canadians, whether as individuals or as businesses, consume some 75 billion litres of gasoline, diesel and aviation kerosene every year.
Are these conventional fuels past their useful life? I would say, hardly. Today, gasoline and diesel continue to meet most of our on- and off-road transportation fuel requirements. Currently, less than 2 per cent of passenger vehicles are fuelled by alternative sources of energy, such as electricity, natural gas, propane and renewable fuels.
According to the International Energy Agency, IEA, biofuels provide less than 2 per cent of the world's transportation fuels. That is a 2008 statistic. Even 40 years from now, by 2050, IEA predicts that biofuels may account for only 25 per cent to 30 per cent of the world's road transportation fuel mix. Hydrocarbons, traditional fossil fuels, will still be needed to meet most of the world's transportation fuel demand.
Why have gasoline and diesel dominated over this last one hundred years? Put another way, why have other energy sources not replaced them as our primary transportation fuels?
Essentially, it comes down to chemistry. Gasoline and diesel are energy-dense; that is, they store large amounts of energy in a relatively small space and are therefore ideally suited for mobile use. By comparison, and as one example, ethanol, the most widely used alternative energy fuel today, contains only two thirds of the energy content of gasoline when viewed on a volume-to-volume basis. Gasoline and diesel are reliable, safe and convenient, and they deliver on a demanding set of expectations related to both engine and environmental performance. On a cost-equivalent basis, no other alternative fuel can come close to providing the transportation energy we need — at least not today, and likely not for some time into the future. In fact, much of the effort underway today to develop new fuels from various feedstocks is aimed at ensuring that they can emulate the performance characteristics of gasoline and diesel.
Do gasoline and diesel pollute? Yes; when we use them in our cars and trucks, we produce tailpipe emissions. However, Canadian refiners have spent billions of dollars and made great progress to clean up these fuels. Lead has been eliminated. Sulphur levels have been reduced by over 90 per cent. Benzene has been cut by more than half. Those are some examples of progress made.
Through a combination of fuel quality, fuel improvement and new vehicle technology, we have made impressive environmental gains. According to the Canadian Vehicle Manufacturers' Association, CVMA, our automotive counterparts, you would have to drive a 2005 or newer sport utility vehicle fuelled by today's low-sulphur gasoline around the world 37 times to equal the same emissions you would produce by burning a cord of wood in your fireplace this winter. That is over a 90 per cent reduction in emissions since 1993.
The processes by which these fuels are produced have also been substantially improved. For example, from 1993 to 2008, atmospheric emissions of nine of the ten most commonly emitted substances declined by amounts ranging from 61 per cent to 89 per cent. This was achieved at the same time that product output from our refineries grew by 20 per cent.
Since 1996, refinery CO2 emissions — greenhouse gas emissions, or GHG — which are the ones that are very significant in much of the debate today — have been reduced by nearly 10 per cent. This has happened, again, at the same time that we have increased production.
Can we switch to alternative energy sources easily and quickly? Even if a reliable and affordable substitute were available — which is currently not the case — we would have to spend billions of dollars in rebuilding and retooling the complex production and distribution infrastructure that ensures Canadians have access to the right fuel at the right time at the right place. Such massive investment will take years, even decades, to complete. It can be done, but it is a question of pace.
We must not overlook that, with only minor exceptions, our fuel and vehicle standards are harmonized with those of the United States. Canadians reap significant economic benefit from this integrated market, which facilitates trade and provides significant economies of scale. We could pay a heavy price if Canada's fuel mix and standards were to diverge too far from those in the U.S.
What about claims that the alternative fuels are more environmentally friendly than gasoline and diesel? We need to be careful about generalizations, and we need to compare environmental impacts of various fuels over their life cycle, from production right through to consumption — what we call a well-to-wheels comparison.
A recent study highlights this issue.
The Institute for European Environmental Policy, IEEP, reported last month that, if EU countries proceed with planned increases in conventional biofuel use, between 27 and 56 million tonnes of carbon dioxide will be added to the environment over the next 10 years as a result of additional lands being cropped to meet the feedstock requirements.
This would be equivalent to putting 12 to 26 million additional cars on Europe's roads. According to the report, promoting the use of biofuels with no consideration of indirect land-use change has the potential to increase greenhouse gas emissions beyond those that would arise from continued fossil fuel use. Now, admittedly, there is still a lot of uncertainty around the issue of land-use change in life-cycle analysis. However, this is a good example of the need to get the science right before we make major decisions.
Certainly, next generation biofuels made from non-food crops and waste biomass and even algae offer significant promise for reduced GHG emissions, but commercial viability on a large scale is more than a decade away, perhaps longer.
Let us not ignore the costs. The federal government's own cost-benefit analysis for its recently implemented 5 per cent ethanol mandate determined that this single regulation could result in motorists paying an additional $3 billion in fuel costs to drive their cars over the next 25 years.
What about electricity and electric cars? Electricity as a fuel for vehicles is only as green as the source they plug into. In North America, hydrocarbons are still used to generate much of that electricity. We are better off in Canada, where we have a higher ratio of renewable energy, but we still operate in the context of the North American market. Therefore, the environmental impacts from much of that electricity really move the emissions from vehicle use out of site — from the highways to the power generation plants.
The promise of an electric car — one that is cost competitive, meets the performance expectations of Canadian motorists and reduces the environmental impact of driving — is still years away. The technical and economic barriers are significant. Even automotive industry leaders acknowledge that only a tiny fraction of drivers will switch to battery-powered vehicles in the next decade.
A recent report by J.D. Power and Associates further highlights this. It forecasts that combined global sales of hybrid electric vehicles, HEVs, and battery electric vehicles, BEVs, are expected to total just 7.3 per cent of the 70.9 million passenger vehicles forecast to be sold in that year. That is 10 years out from now.
I want to be clear: I am not here today to champion gasoline and diesel to the exclusion of all other transportation fuels. As I said earlier, alternative fuels can and will play an increasingly important role in meeting the needs of Canadians in the years to come. However, we need to ensure that the pace of change is realistic and that we reach for what is achievable. Wishful thinking will not get us there. We must let fact, science and reason steer our decision making.
It will take time, money and innovation before we have alternatives that can achieve large-scale commercial viability that can deliver the same benefits as conventional fuels at a comparable cost. There are no shortcuts. You cannot just order up new technologies and infrastructure and expect them to be delivered according to an impossible timetable. A good case in point is the regulatory experiment in California in 1990s, in which legislators tried to force zero-emission vehicles, ZEVs, onto the market, which was a good example of a failure and, in the end, was an exercise in wishful policy-making. We need to avoid that.
Therefore, when it comes to moving our planes, trains, automobiles, trucks and ships into the future, gasoline and diesel will continue to do much of the heavy lifting. We should not overlook the contribution that smarter, more efficient use of existing fuels can make to a sustainable energy future for Canadians. Using less fuel is by far the most cost-effective way of reducing vehicle emissions of air contaminants and greenhouse gases. Save fuel, save money and save the environment.
I look forward to your questions and a productive discussion.
The Chair: Thank you very much, Mr. Boag. Will we have a statement from Mr. Morel as well?
Mr. Boag: No, I think we covered off the statement. Mr. Morel is my technical expert who is here to help us answer some of the questions you may have that he may be far more qualified to give an appropriate answer than me.
The Chair: We have many questions. I should point out, colleagues, that next Tuesday at our five o'clock meeting, we have the people from the Canadian Renewable Fuels Association, CRFA. It is important that we make these comparisons.
I would like to ask a question at the outset, in the absence of our deputy chair. You expressed a big concern, I sensed, in the early part of your remarks when you said that perhaps we are slipping into a belief that there is an easy fix and that certain things are being done without the proper consideration.
According to the deputy chair, and others, one of the few things that this government has been doing is emission control regulations and various things pertaining to the trucking industry and the transportation sector generally. We are lead to believe that these steps are being taken only after close consultation with our American neighbours and that there has been an effort to harmonize the efforts to have cleaner fuel and cleaner use of energy in the transportation sector.
I want to clarify from the beginning what you have said because you are candid in your remarks. You have repeated at least twice that we have to watch out for wishful thinking and must proceed with knowledge, reason, science and fact. You have used that phrase at least twice.
Has something been done that is stupid or wrong or on which you have not been consulted? I can imagine there is nothing worse than getting a bunch of regulations imposed on you, without consultation, that might be similar to trying to put a square peg into a round hole. I would like to hear your comments on that.
Mr. Boag: It is not a question of not being consulted. In all the regulatory development that has application, both direct and in some cases indirect, there is good engagement with governments, both at the federal and provincial level.
Yes, we do have some issues and concerns with primarily the implementation pace of some regulatory issues. I refer specifically to the example of the 2 per cent federal biodiesel mandate. We are and have been on the record for five or six years as supporting the federal renewable fuel initiative and federal renewable fuel standard.
It has always been our position that we should ensure we get it right by providing enough time to do a proper implementation and putting adequate infrastructure in place. Ultimately, we must ensure that we maintain consumer confidence in the products. Whether those people are business consumers or personal consumers, they must be confident that when they go to fuel up their vehicles that the fuel will be there, will meet the right quality standards, be fit for use and still be at an affordable price.
The Chair: Do you feel you are not being heard?
Mr. Boag: As I said on the specific issue, and I used that only as an illustration, I did not come here to talk specifically about and be critical of the federal biodiesel implementation; it is an example of the issue of doing things at an appropriate pace that allows for sensible implementation.
Quite frankly, I am not sure we are being listened to. We continue to hear a date of 2011 implementation. In less than a month, we will be into 2011. Clearly, in our view, that does not provide the industry with an adequate amount of time to put principally the blending and distribution infrastructure in place that recognizes the technical feasibility issues around biodiesel — the fact that when it cools below certain temperatures it turns into a solid. I liken it to a bottle of olive oil. When olive oil sits in your cupboard at room temperature it is a liquid. If you put that bottle of olive oil into the refrigerator, it becomes a solid.
Perhaps Mr. Morel could pass around the picture of a number of different biodiesels sitting in a refrigerator. What is the temperature, Gilles?
Gilles Morel, Director, Fuels, Canadian Petroleum Products Institute: It is minus 9 degrees, which is what most of our cities experience in the winter. This shows, for example, what happens to the biofuel in our system during that period. Our challenge is to accommodate those properties where we are dealing with essentially a semi-gel product, and it must still be able to flow at minus 9, minus 10, and if you are in Edmonton, probably minus 35 degrees.
We have to put in our product 2 per cent or 5 per cent of one of those three products pictured here. The customer expects that the result will be a clear and bright product so that when they turn on the ignition in the morning, the car or truck will work. I will circulate that picture.
Mr. Boag: Another technical feasibility challenge occurs in the case of biodiesel as compared to ethanol. Whether the ethanol comes from corn, wheat or sugar cane, at the end the ethanol that is produced is just ethanol. There is no difference among any of those products. When you produce biodiesel, depending on the feedstock from which it is produced, it has different properties. There is no one single biodiesel product. They also have different temperature characteristics. When you start to blend biodiesel into regular diesel, it becomes a complex issue to meet the technical requirement to make your vehicle will work.
Beyond the issue of blending infrastructure, there is also the issue of standards development. Our pace of standards development is such right now that we will probably not have the appropriate standards in place for these new products until late next year, perhaps even into 2012. Again, around the issue of consumer confidence, consumers should expect the products that they are purchasing to comply with standards that are appropriate to the Canadian environmental and climatic circumstances. There is a whole host of issues around ensuring we get this right and that ultimately consumers have confidence in the product they will buy.
In answer to your question, I do not think we are being heard. We continue to repeat those messages. We are concerned that, in the end, it is ultimately not the biodiesel producers that are the regulated parties under this regulation; it is the fuel suppliers. Our member companies are the regulated parties. When things go wrong or compliance issues start to surface, the problem ultimately rides with our members and, ultimately, consumers as well.
The other challenge is that these regulations are made under the Canadian Environmental Protection Act, CEPA. It is not a question of just paying an administrative fine if you do not comply. CEPA is founded in the Criminal Code, so it is a criminal offence. There are major issues around this.
Again, let me say that we support the mandate. We have gone on the record publicly for a number of years supporting both elements: the ethanol and the biodiesel element of the federal mandate. It is a question of implementation timing to ensure that we can get it right.
The Chair: As I suggested, you have couched your presentation carefully and in diplomatic language, but I sense there is a stronger message there and a concern. I just want to make sure that you do not feel constrained here at this committee. We want to hear what you really think.
Mr. Boag: I use that only as an example. However, we are concerned about the growing voice that we need to get off oil and that we can get off oil quickly, without understanding all the issues. It is not that that will not be possible sometime in the future, but it is long into the future. We need to get the pace around that correct. We need to ensure that policy development is not made on the basis of this lack of understanding of the challenges we face and that we do not put ourselves down the wrong road.
The Chair: Do these comments apply to the Americans as well, given that there is this so-called harmonized approach? It is cold down there, too, in the winter. I am sure your members drive trucks in Montana in January, when it is getting below minus 9 degrees.
Mr. Boag: These comments apply universally. The off-oil agenda in the U.S. is driven by different drivers than in Canada. The whole issue of energy security and reliance on imported oil is a driver that is not at play in Canada. However, there still is a general view and a lot of rhetoric around that off-oil agenda that does not reflect the reality and practicalities.
Senator Lang: I want to follow up on this question of biodiesel and the mandate presented to you by the federal government.
Have you asked for an extension, as an organization, for the implementation? I gather these are regulations that are in effect.
Mr. Boag: The implementation date has not yet been set. The final regulations implementing the federal renewable fuel mandate came into effect on September 1 of this year. The first compliance period for the 5 per cent renewable content in the gasoline pool, which is substantially about ethanol, begins on December 15.
The government has not set the start date or the duration for the first compliance period for the biodiesel mandate. That will come in a regulatory amendment, which we expect to see certainly within the next four to six weeks, perhaps within the next two to three weeks. We will go through the normal gazetting process, where we will see the Canada Gazette Part I draft amendment to the regulation that will establish the first biodiesel compliance period. Then we will go through the normal 60-day comment period before a Canada Gazette Part II final amendment will be tabled. That will probably be sometime late in the first or into the second quarter of 2011.
We have not asked for an extension because we do not yet know what that date will be. However, we have been making our presentations around this issue for more than five years now, namely, that the time required from regulatory certainty is about three years.
When the government announced its intent to implement this renewable fuel standard — and, in particular, the biodiesel component — they originally set the date as not before 2012, subject to demonstration of technical feasibility. A lot of work has gone on around the issue of technical feasibility under the NRDDI. A number of those projects, at least one in particular, focused on the issue of infrastructure requirements. The report for that study has not yet been released. It has been completed since early September. The government has not seen fit to release that report yet.
From our understanding of early drafts that were shared with stakeholders back in the spring, it supported our view that the infrastructure requirements to achieve that 2 per cent mandate, and the volumes required to achieve that 2 per cent mandate, would take about 30 to 36 months to put in place after the regulations are finalized. We believe there is actual information, through logical, rational, reasoned study within the government that supports that.
Senator Massicotte: I am trying to understand. You are basically saying the government is not hearing you. I suspect they do not agree. However, what happens if this is implemented? What is the consequence to your company, to the consumers and to the Canadian economy?
Mr. Boag: I can tell you in generalities what we think would be the consequences. It poses risks to the quality of the fuel that is provided; it poses potential risks to supply; and it poses issues around potential costs that are imposed on the sector.
It is difficult for me to talk about specifics because individual companies will have their own plans. In the context of being a trade association of competitors, we are careful to ensure that we are in strict compliance with the requirements of the Competition Act. That kind of commercial information is never discussed around the table at CPPI meetings. I am not privy to, nor should I be privy to, individual members' plans.
Senator Massicotte: Is it money only? If the government gave you $2 billion or $4 billion or $1,000, could it be remedied?
Mr. Boag: I do not think it is a question of money. It is a question of time. We need to develop, build and complete new blending facilities that will be constructed in a way that deals with the issues of the poor flow properties of biodiesel. That means the facilities need to be heated; we need to have heated storage. We need to look at that other 95 per cent to 98 per cent. Some of our studies have found that to address the addition of biodiesel, we need to switch the base blend stock. Now it is conventional diesel.
To address the issues of poorer flow properties of biodiesel, we will have to substitute much of that blend stock with aviation kerosene. Aviation kerosene is a middle distillate, like diesel; I do not want to get into too many of the details, but it has some different properties that make it more conducive to accepting biodiesel and maintaining the flow properties and the pour point requirements that we need to meet for biodiesel.
We are already a net importer of aviation kerosene. That means one of the things we will have to do is import more aviation kerosene to do that. In addition, because of our low-sulphur requirements for road and on-road diesel, that will have to be ultra-low-sulphur aviation kerosene, and there is not much of that around.
That has certain implications. Where do we find it? Do we make investments in our refinery infrastructure to refine more ultra-low-sulphur kerosene in Canada, or do we look at increasing our imports? That means changes to import facilities and storage facilities.
These are some of technical details that individual companies need to face in terms of what will their own individual compliance plan be? I am not privy to that. If we move too fast, clearly they will need to make some different kinds of decisions, even around the issue of biodiesel.
We understand that a significant rationale for this regulatory requirement is to stimulate and facilitate growth in the biodiesel production industry. I take no exception to that. If that is a government policy and goal to build a stronger renewable fuels industry in Canada — so be it.
The Chair: It is not any different than what they are doing in Europe or in other countries.
Mr. Boag: Yes, that is right. However, moving too fast is difficult because of the technical feasibility challenges. Talking about this in a hypothetical context, one way to deal with that is to bring in a fuel that does not have those technical feasibility issues. It is what we would call a drop-in fuel. You do not have to worry about it; it works and behaves and has all the properties of regular diesel.
There are those types of renewable diesel products available. Right now, they are not made in Canada. They are made largely in Europe and Indonesia. On the policy objective of growing a stronger renewable fuels industry in Canada, one counterproductive element to that, as a result of trying to move too fast, might be that it will cause us to look for imported renewable diesel. Once member companies start importing that renewable diesel, they may find that that is the best solution, and they will continue to do that. That is a hypothetical example, but these are all the various complexities of this file that need to be understood.
The Chair: Your members are concerned.
Senator Banks: Before I welcome our guests, Mr. Chair, I would like to bootleg an announcement to you and Senator Massicotte, who were the only members then present on this committee, I think. However, it was at the behest of this committee that I undertook to write a bill of amendment to the Federal Sustainable Development Act and the Auditor General Act. I am pleased to tell you that after its tortuous route through the other place, it was passed into law at third reading last night at 6:15 p.m.
The Chair: In that other place?
Senator Banks: Yes.
The Chair: Because we had passed it in the Red Chamber.
Senator Banks: We passed it several times in the Red Chamber.
The Chair: Congratulations, Senator Banks.
Senator Banks: Congratulations to us.
The Chair: You might remind colleagues, because it was a small but important point, what the amendment addressed.
Senator Banks: There are two amendments: first, that the reports of the government departments on sustainable development policies will be made to the Senate, as well as to the House of Commons, because the Senate had been cut out of that process at committee stage in the other place; and second, the Auditor General Act is altered to permit the Commissioner of the Environment and Sustainable Development to report to Parliament on more than one occasion a year. The commissioner was constrained from doing that under the previous act, so we amended it. It worked, and it passed third reading last night. I thought you would like to know that because you were both there, and it was at the behest of this committee that we did that.
The Chair: You are a busy legislator. We will see you in this room in about an hour from now. You have many strings on your pole.
Senator Banks: Yes, I do.
Welcome, Mr. Morel and Mr. Boag. It is nice to you again in a different context than last time.
The chair was careful to say that this is a good place to be heard. He wanted to adduce candour from you, so I will throw something into the frying pan that is a bit obstreperous, but I hope you will respond.
Your industry did not find out about this yesterday afternoon. You have known about this for a while. You are not old enough to remember, but I remember what the industry said when the government said, "Make it so. Remove lead from gasoline." There were horror stories about what would happen: It was going to destroy the industry; it would send thousands of people into the streets unemployed; it would shut down refineries; it was impossible to do in the time that was prescribed to do it.
The same situation applied to other fuels, having to do with NOx and SOx and, as you mentioned, sulphur. When the gas industry was told they had to remove sulphur from natural gas, they said that it will shut down the industry, and you will never see any more exploration. Now some of those companies make more money selling sulphur than they do selling gas.
Please answer those who take what you say with a grain, if not a bag, of salt and say, "Nonsense."
In the past, when these changes have been given sufficient notice, the industry has maybe had to work faster and spend more money than it wanted to and divert from other interests than it wanted to, but it achieved those ends. We do not have lead or sulphur in our gas anymore, et cetera. Why can you not just hurry it up?
Mr. Boag: That is a good and fair question. The issue for us is that it is difficult to develop a compliance plan — a compliance plan that may ultimately require a significant degree of investment and diversion of resources from other investments to implement this compliance plan — without knowing the details of the regulation. It is one thing for the government to announce a lofty intention through, in this case, a notice of intent back in December 2006; and it is another to get to the specifics of how they intend to implement that policy through a regulation. The devil is always in the details; that is how I would refer to that.
A good example of that is the first half of this renewable fuel mandate, which was the ethanol mandate. We did not see draft regulations for that ethanol mandate until April 2009. That followed an initial notice of intent in December 2006.
On the basis of the notice of intent, yes, industry and individual members of industry who will ultimately be the obligated parties can start to make some general decisions about where they will need to make investments and the kinds of things they will need to do. However, they can only bring that down to a certain level to start spending large amounts of money.
In the case in point, the ethanol mandate, let us say that they followed your scenario where they knew what they needed to do, they started to make investments in the things they needed to do for infrastructure to blend ethanol and they did that nationally across the country. What came out in the regulation was that Newfoundland and Labrador was exempted from the ethanol requirement. Here we would have had companies investing significant amounts of money and infrastructure to create the capacity to blend ethanol in Newfoundland and Labrador to find out that, in the end, Newfoundland and Labrador was exempted from it. Therefore, they would have stranded a significant degree of investment.
That is just one example. However, it illustrates why industries are unable, on a rational basis, to make investment decisions on a general statement of intent without understanding and knowing the details of the regulation and how the government will implement that policy direction.
Let us go back to the issue of sulphur. This was before my time in this industry, but it has been recounted to me. The implementation of the removal of sulphur from gasoline and diesel through the last decade was one that, today, we would consider a model of how it should be done. It was staged; there was a lot of advance notice; regulations were developed; industry was given adequate time to do it; and there was a good ongoing dialogue with governments and between industry for what was ultimately a seamless process. It was expensive. Industry investment for removing sulphur from gasoline and diesel was somewhere north of $5 billion dollars between 2003 and 2009. It was costly.
However, it was a process whereby there was a staged process for gasoline, on- and off-road diesel, which gave the industry lots of visibility and regulatory certainty with adequate lead time to make sensible decisions that kept that investment at $5 billion. Who knows where it might have been had the process not been what it was.
There is a precedent there in terms of sulphur.
When companies are faced with competing investment requirements, because there is never enough capital to do everything, having regulatory certainty on the details of a regulatory requirement is essential to actually free that money up to be invested for shovels to go into the ground to build infrastructure.
Mr. Morel: Senator Banks, you mentioned that history sometimes teaches us many good things. I was involved in the lead removal, for example; it was one of my first jobs when I joined this industry.
There have been cases where the same argument was discussed, and sometimes there was enough time and sometimes there was not. At the federal level, I can remember regulation where not enough time was given. At the last minute, the government had to rescind or carve out part of the country from the application of that regulation because there were elements out of their control; they could not bring the equipment from Asia back into Montreal and the St. Lawrence Seaway to complete the infrastructure. That was the benzene in gasoline regulations, which caused a request for a one-year delay in Eastern Canada.
With the provincial regulations to introduce ethanol, for example, the Province of Saskatchewan alone changed its regulations six times for the terms of compliance. The percentage changed four times during that period. It creates a large degree of uncertainty. Therefore, it makes it difficult for the refinery that has to provide all the gasoline from Vancouver to Northern Ontario and then also try to make a special cut that will meet Saskatchewan volume. As we were doing that, the level kept changing.
This is what we mean by certainty. We are making modifications to multi-billion dollar investments, and we need to do it right the first time. We cannot afford trial and error because, truly, it will be unaffordable for the industry and the consumer.
Mr. Boag: One thing we have not mentioned is that these kinds of investments in infrastructure also almost invariably face permitting issues at the provincial level, and the municipal level, in some cases. Those permitting periods are sometimes periods of months and years. Building that ethanol tank or some element of a biodiesel blending infrastructure requires permitting.
The timing of those processes is outside the control of the industry. Again, add to part of that challenge that we will need to have significant lead time because we will face some permitting issues, whether at the provincial or municipal level.
Senator Banks: Everyone would agree that we cannot function without the industry that your members operate. We would be in big trouble. We need to cooperate.
However, the examples you have given have been that governments — both orders of government — have reacted practically when something has been ordered to be done that has not been done in time. No one has gone to jail; no one has been fined; and the objects were obtained.
This is a further obstreperous fat-in-the-fire question. Can you think of any one of those improvements in fuel efficiency that would have been made by any of your members had they not been required to do so?
Mr. Boag: If you are talking about fuel efficiency, that is on the vehicle side.
Senator Banks: I mean of the things that you talked about: the improvements in the efficiency of fuel and the fact that we now have greater fuel efficiency. One constraint you did not mention is the kind of engines we are using.
Mr. Boag: That is a key issue. We cannot look at fuel in isolation. It is an integrated fuel vehicle system. The progress we have made, particularly in environmental performance of transportation and passenger vehicles and light trucks, et cetera, has been one of parallel activity and improvements in both fuel quality as well as the vehicle. For example, sulphur needs to be removed to improve and enhance the performance of the catalytic converter. It is a joint thing.
In fact, those standards for fuel and automobiles are generally developed as an integrated process. As I think Senator Angus mentioned, it is a process that is well integrated with what is happening in the U.S. As we move forward over the next number of years with the new regulatory requirements on vehicle efficiency, the U.S. might use that in a miles-per- gallon approach and Canada in a CO2 emissions standard, but ultimately it will be a comparable standard. Those are very much aligned. As we move forward now to develop standards for 2017 and beyond, it will be a harmonized approach with the U.S.
Senator Banks: In short, is it fair for me to say — and please argue — that your guys did those things because they were required to do those things?
Mr. Boag: Certainly, when you look at regulations that have been made under CEPA, lead, benzene and sulphur have been regulated requirements.
Senator Banks: That would not likely otherwise have happened; am I correct?
Mr. Boag: I cannot speculate on that.
Senator Neufeld: Thank you. Senator Banks asked some of the questions I was thinking of asking, and they were very good questions.
Can I expand on the last question that Senator Banks asked? I have had some experience in British Columbia with standards. We gave you three years. As you say in your statement, that is what you need — and you actually got more than three years; you got four. That was with moving it around in British Columbia, so you could use it more in the Lower Mainland than in the North. We did give you over three years to put it in place.
Similar to Senator Banks' comments, most businesses look at their product and say, "How can I improve it so that I have a better product than the next person, and I can go out in the marketplace and actually sell that as a superior product?" In many cases, most people will buy that improved product, even if it costs a cent or two more a litre. I would think most people would be willing to try to improve their product.
Why would that not permeate? Why does it always require government to have to come up with an exacting regulation that might have to be changed four or five times before it is done right? You then say that you will comply but that you need a lot of time.
Why does industry not do that on its own?
Mr. Morel: Our industry has evolved over time. For example, I recall the debate around the lead and benzene in gasoline. We have learned every time. With the sulphur in gasoline, for example, there was a lot competition globally to try to find the right technology because it was so new; it was such a jump to the next level to produce ultra-low-sulphur gasoline. Numerous major researchers in the world were racing against the clock to find the most appropriate technology. This is why you have to match technology development, readiness in the marketplace and availability with engineering, and doing it all together.
We have learned from this process. When the federal government then identified the need to reduce the sulphur in on-road diesel fuel, our industry immediately said, "Yes, we can," and we did it. In fact, we went faster and further than the U.S.
For example, on October 1, we completed the transition for all off-road diesel, except for marine and locomotives. All off-road diesel is now 15 ppm, or parts per million. This is a full two years before the U.S. has to go there. Our industry decided it was probably more efficient for us to invest in one step to tackle sulphur in diesel fuel, as opposed to going through multiple steps over several years. We did this ahead of time in this particular case.
Senator Neufeld: With respect to the removal of sulphur, you exceeded anything that had to be put in place to urge you to do it; would that be correct to say?
Mr. Morel: That is correct. In fact, a report that was made available by the Minister of the Environment in October indicated that, with those activities, Canada, as a country, benefitted from some of the best and cleanest fuel in the world after one year of collaboration with industry. We should be proud, as an industry, as a regulator and as Canadians, of this situation. We are not standing still on this particular issue.
Senator Neufeld: For the city of Vancouver, I cannot remember the exact amount, but I think its whole diesel fleet is 10 per cent biodiesel. Individuals are doing this. I know that in British Columbia, we have a 5 per cent standard. That is pretty tough. However, sometimes you have to put the carrot out there further to get to the 2 per cent.
I do not want to beat that to death. However, I think there is room for the industry to start thinking about how it can be done better. The upstream industry, when I said that you had to cut in half routine flaring and eliminate it by 2016, the world came to an end. However, they have exceeded that. Why could not they do that without government having to tell them? This is to say to the general public that we actually care.
Mr. Boag: I want to give another example while we are on that subject. We have focused on the product today. We have not talked much about the process for making the product and the improvements that companies have made, which have mostly been on a voluntary basis, although there have been some regulatory issues.
I want to look at, for example, the energy efficiency improvements the industry has made. These have been voluntary. When we look at where the industry was in 1996 and where it is today, we have seen a significant improvement in GHG emissions from the industry, in the order of about 10 per cent, at a time when production actually went up. There are examples where the industry has been moving to do things on its own because, in their view, it makes good business sense.
Senator Neufeld: Good business sense and good social sense; those are two things that I think have to go together.
I listened to your presentation closely, and I thank you very much for it. You say that there are a number of emerging technologies that some day may deliver on the promise of secure supply of affordable, efficient and environmentally friendly new fuel. Could you expand on what you mean by that?
I noticed that natural gas hit your pages once. I am not a believer that you can change it by Friday. I know it will be here for a long time, much longer than many people think, and I understand the realities of why we need it, and so forth. However, why was natural gas not part of that, since most of the companies you represent produce a healthy amount of natural gas?
Mr. Boag: I will start, and Mr. Morel probably has a better technical background on this.
A number of renewable fuel technologies are being pursued. Perhaps biofuel technology is the one that most people would know, which is cellulosic ethanol. A lot of investment and work has been undertaken. A number of our member companies are participating in that and are leading that effort.
There is certainly the technology and the promise of cellulosic ethanol that will use non-food crops or biomass to produce ethanol through different processes. That has been a research and development activity that has been happening now for 20 years. It is promising, yet we still have not reached commercial viability for that.
There are technologies around the use of algae to produce fuel. That is even further down the road. However, members of our industry, through their corporate parents, are significant investors in looking at the promise of algae as a product for developing fuel. You can look into other feedstocks, such as jatropha, for biodiesel.
Companies are looking at issues around hydrogen and particularly around vehicles and whether they can design a vehicle that can manufacture its own hydrogen on board.
Those are some of the technologies. It is not an exclusive list.
Senator Neufeld: I thought there was a new breakthrough that you were going to talk about.
Mr. Morel: I have a comment about natural gas. First, let us understand that we represent the petroleum marketing company, so natural gas is generally represented through the other association, the Canadian Gas Association, CGA. We do not want to speak on their behalf. They have their own channel for delivering their message.
With natural gas, it is not a question of putting natural gas in cars, but rather what is the best use of natural gas. We focus a lot on trying to find all manner of sources for transportation fuel, power and diesel. Sometimes we forget the basic question. We need energy, and we are also an energy-rich country. What is the best use of our energy?
The market is a great instrument to take care of that. The market has decided that natural gas is a great fuel to produce power and to displace coal, for example. It is much cleaner. However, to go to the next step requires additional energy and investment that is simply not there right now because not enough vehicles need it.
The focus for natural gas in transportation fuel has been mostly around where there are fleets. In the Vancouver area, for example, many fleets are directly linked to the airport, such as taxis. When I go a Petro-Canada or Husky station near the airport in Vancouver, there will be natural gas because a sufficient volume of cars go there regularly to justify the hundreds of thousands of dollars of investment to provide natural gas.
However, natural gas is not available all across the country. Most of it is used for heating, to make electric power and to displace coal. As a society, we need to ask ourselves what is the best use of the resources we have.
Senator Neufeld: I appreciate that. You made a great pitch for gasoline and diesel fuel. I would like to make a great pitch for natural gas because I think we have a abundance of natural gas. It is much cleaner in the environment than petroleum products today, with the technology we have. That is why I am asking. It is always the same argument: It costs too much. I heard the same argument when we started using propane.
You said that we need to work around the facts. Page 6 reads:
Through a combination of fuel improvement and new vehicle technology, we've made impressive environmental gains. According to the Canadian Vehicle Manufacturers' Association, you'd have to drive a 2005 or newer sport utility vehicle, fueled by today's low-sulphur gasoline, around the world 37 times to equal the emissions caused by burning one cord of wood in your fireplace.
"I am a bit from Missouri, and this dog don't really hunt with me." I guess that would tell me that if we just totally stopped burning wood in Canada, we could put hundreds of millions of vehicles on the road; would you agree with me? I am not a technology guy. However, my gut tells me, from having my feet on the ground for a long time, that that is a bit of a stretch. I have a problem with it. Explain it to me.
Mr. Boag: Here we are talking about the criteria air contaminants, CAC, smog-causing precursors, those kinds of emissions.
Those are indeed the numbers for a tier 2 vehicle, which is 2005 or newer with tier 2 fuels. We have eliminated or reduced traditional CACs from vehicles through technology development both in vehicles and fuels to a level 90 per cent below where they were just 15 or 16 years ago.
Senator Neufeld: Those were the regulations that the government brought in; namely, low sulphur and benzene.
Mr. Boag: Those are the standards development and regulations done in a harmonized way with the U.S. to improve the performance of fuels and vehicles. It is an example of progress that we have made on emissions of criteria air contaminants.
Mr. Morel: I was in a meeting last week with the National Research Council Canada, which has some of the brightest researchers in Canada. Essentially, tailpipe emissions are getting so low now that the air coming out of the tailpipe is cleaner than the air coming in, in some cities. They need to invent new instruments to be able to measure what comes out of the tailpipes of new cars. That is how much we have improved.
We all remember being kids and sitting in a car and smelling fumes on the road on a Sunday afternoon. That is no longer the case with the new gasoline vehicles. As of 2009, this is no longer the case with diesel. The particulate matter, which is a primary precursor of smog, that has been the primary air issue around our large cities, such as Vancouver, Toronto and Montreal, has essentially been resolved by the combination of the new emission control systems and clean fuel.
Senator Massicotte: You said that the environmental impact of burning one cord of wood is equal to that many times around the world by that car, is that correct?
Mr. Boag: Yes; that is for traditional pollutants. I am not talking about GHG emissions but traditional smog- causing pollutants.
Senator Massicotte: I am not an expert, but the impression I got from that statement is that the environmental impact, the impact caused to the world, is that burning one cord of wood equals a car travelling around the world 37 times. Is that accurate?
Mr. Boag: Yes, but we are talking about tailpipe emissions.
Senator Massicotte: Is my statement accurate or inaccurate?
Mr. Boag: It is accurate if you are talking about tailpipe emissions. On a full life-cycle basis, environmental impacts can be larger in terms of the impact of cutting down the wood in the forest. We are not looking at that. We are looking at the combustion impacts of those two activities in the context of traditional contaminants.
Senator Massicotte: Therefore, it does not include the construction of the car, et cetera, just what is coming out of the tailpipes.
Mr. Morel: It is only the combustion, or what we call the particulate matter that is allowed to be emitted at the exhaust pipe. The fine particulates are so low, they are barely measurable.
When you burn wood, for example, you create a lot of smoke. To equal the amount of smoke generated by burning a cord of wood, you will need to drive that car that many times around the world just to collect the same few kilograms of smoke.
Mr. Boag: We were really just trying to put it in perspective.
Senator Massicotte: I am not sure where you want to go, but I am nowhere.
The Chair: I imagine you will not be burning wood this winter.
Senator Massicotte: I burn pollution-free wood from British Columbia.
The Chair: That was to be a question I had. Are all types of wood the same in terms of emissions?
Mr. Boag: I am not a wood expert.
Senator Lang: I feel very badly because I think I burned a cord of wood on our last break. On the other hand, I did not drive around the planet 37 times.
I would like to pursue the process of how we make a decision by regulation to meet an objective, the timing of it and how we work with an organization such as yours. I think it is important that we understand that.
I want to go back to the science. At the outset, I will say that I am quite concerned when I hear about biodiesel being part of our fuel, especially in our part of the world. It can get down to minus 40 degrees, and I do not want to phone up Senator Banks to complain about my problem because the government has brought in a regulation at too early a stage.
You referred to the process that you undertook with the government to remove sulphur from fuel and that it worked very well.
Did you first establish the science to do it? Did you establish how it could be done so that there was no misunderstanding that what you were being asked to do was possible, given the science?
Mr. Morel: With respect to the biodiesel, back in 2006-07, we had discussions with the government people, such as Natural Resources Canada, for example. Industry and the biofuel people worked together to develop a series of diesel demonstration initiatives and research projects to try to understand what the problems would be.
We kept hearing that certain methods worked in Sweden or in the United States. I have a chart showing the winter temperature of Stockholm. It barely gets below minus 6 degrees in the winter in Stockholm. I looked at all our provincial capitals, with the exception of Victoria, and they are all colder than minus 6 degrees in the winter. Essentially, the worst situation in Europe is still better than the best situation in Canada.
When you look at a map, people say that it works in the United States. That is true, but their northern border is where Canada starts; we go from there to all the way up North. We are dealing with extreme temperatures. This was recognized with our government colleagues. Millions of dollars have been jointly spent to try to understand and develop solutions for the key aspects that need to be addressed.
The next step is to translate what we have learned into developing a standard through the Standards Council of Canada and Public Works and Government Services Canada. Our industry, the biodiesel industry, the government regulator and many provinces are involved in ongoing consultation. A group of over 50 experts on biodiesel meet regularly to establish a standard that will protect Canadians and ensure that a truck in Northern Alberta, for example, will start in the morning.
This process takes time. It is a consultative process that needs a lot of research. We are pretty much near the finish line with this process, though.
Due to some resource constraints at some government offices, we will probably not see the finished standard until late 2011 or early 2012. That is when we will have a product standard that will protect the consumer and ensure we have a fuel fit for use.
Any regulation that will force us to put too much of that product in the field beforehand could put the customer at risk. That is what we want to avoid. Good science is important here, and it will get us there.
We know what has to be done and how to do it. Now we need to build the infrastructure to import the kerosene into Canada from Finland and Japan, the biodiesel from Indonesia and Rotterdam and put it all together in big tanks, and then we will be there.
It is not that we do not want to do it or cannot do it. We know exactly what needs to be done. However, we need the time to do it.
Senator Lang: I wanted to get back to the process that was done with sulphur. Was the science agreed upon and proven prior to the decision being made to say that you have three years to comply with the regulations?
Mr. Morel: For the diesel, the science was there. That was easy. The technical solution was known, so when the regulation came in, we knew we could do it and how to do it.
Senator Lang: If I understand you correctly, it sounds to me in this process with biodiesel, the science has not been totally proven or agreed upon at this stage; is that correct?
Mr. Boag: No. Through the work Mr. Morel described, we have done the work to understand what needs to be done and how do to do it. Now it will take time to actually do the implementation to accomplish that.
Therefore, the work accomplished under the National Renewable Diesel Demonstration Initiative — which was a very successful joint initiative involving government and a variety of stakeholders, including producers and consumers — identified through a rational process all of the challenges that need to be addressed and identified the solutions to overcome those challenges. It is now a question of implementing those necessary solutions.
That will take time. From what we hear to be the government's intentions right now, we do not think it will give us enough time to implement the solutions that were developed through that fact-finding process.
Senator Lang: As you know, we are looking at the energy requirements and energy future of Canada. I would like to know your general thoughts on what the Government of Canada should be doing, in consort with the provinces, from your perspective and interest in the petroleum area. What would you recommend the federal government should be doing differently from what we are doing now?
Mr. Boag: Probably the most significant issue would be with respect to a greater degree of alignment and harmonization in fuel standards across this country. We have seen, over the last number of years, a fragmentation of the market as different governments have implemented for different reasons, in some cases, relatively small standards' differences between the product requirements on a province-to-province basis that ultimately become significant issues for the industry to maintain what we would consider to be the adequate resiliency in the fuel system to ensure a sustained security of supply on a national basis.
Renewable fuel is a good example. We have one standard in one province, another standard in the adjacent province and yet another standard in the next province over, all requiring something different in terms of their fuel requirements. However, that fuel is all coming out of one or two refineries in another province.
The refiner — and Mr. Morel referred to this — is forced to refine and produce a product that meets this particular standard in this province, this particular standard in that province and this particular standard in another province. We have refused the fungibility of fuel across borders.
Let us say that each of those provinces has its own refinery, in a hypothetical situation. They are merrily moving along and producing fuel to meet the demands in that individual province. For some unforeseen reason, we have a problem with that refinery. The refinery next door that has the capacity and ability to now supply fuel to that province where the refinery has gone down cannot do it immediately because the fuel in its system does not meet the standard in that province.
We have reduced that resiliency of the system to respond to those types of situations. There are issues around harmonization that are significant. We have encouraged the federal government — in fact, it comes back to why we supported a federal renewable fuel standard.
In the middle of the last decade, when a number of provinces moved forward with provincial fuel standards, we saw the challenge this would represent to industry and ultimately the challenge it could present to consumers. Our view was why not have a federal standard.
We will support a renewable fuel standard at a federal level to cut off the prospect of having this continued boutiquing of the fuel market. Unfortunately, it has taken such a long enough time to get where we are through the legislative and regulatory process for the federal standard that we have seen a proliferation of that provincial activity.
That would be the single biggest issue from a fuel perspective, namely, to achieve a greater degree of harmonization and alignment between fuel standards on a province-to-province basis across this country.
Senator Lang: Are the provinces agreeing with that?
Senator Banks: No.
Mr. Boag: No; and that increases the administrative load on industry. Even where the regulatory requirements may be relatively similar, their measuring and reporting requirements on industry are quite different. British Columbia and Alberta are the only two provinces to date that, other than a straight volume mandate, have introduced a performance component related to greenhouse gas emissions and carbon intensity of those fuels. They are using the same life-cycle analysis model to determine the carbon intensity of those fuels and coming up with different answers as to the carbon intensity of the same fuels.
Senator Seidman: As you represent the refiners, perhaps your visit this morning is quite timely. When I turned on the news this morning, I heard that gas at the pumps had increased to $1.20 per litre, up 4 cents overnight in Toronto.
The Chair: That is not the supreme fuel; that is only the basic fuel.
Senator Massicotte: It is regulated; that is why.
Senator Seidman: They said that this was the biggest overnight increase, and it was blamed on "the refineries."
We hear this often. There are large oil supplies, I believe, and price increases are regularly blamed on the refineries. I would appreciate it if you might comment on that.
Mr. Boag: I am not aware of what specifically happened yesterday. I normally cannot comment on specific price increases, but I can tell you how markets work in general.
First, gasoline, like crude oil, is a commodity. Gasoline is traded on markets. Principally, the New York Mercantile Exchange is the primary place where markets — buyers and sellers and the numbers of transactions over the period of the day — determine the wholesale price for gasoline as a commodity. That wholesale price that is determined on the New York Mercantile Exchange, NYMEX, is largely reflected in the wholesale prices that refiners then use with what they provide to fuel retailers. It is an integrated North American market. There is no unique Canadian market for gasoline and diesel. It is a North American market in which Canada represents roughly 10 per cent of the market.
Ultimately, three markets are involved in this business. There is the global market for crude oil, which, again, is a market-determined price; there is the North American wholesale price for gasoline, which is the market-determined price; and then there is the retail price, the price at the pump. That is ultimately determined by thousands of individual decisions of individual retailers within the context of unique local markets.
From the refiner's point of view, the wholesale price at which that transaction is made between a wholesaler and a retailer is principally determined by a trading activity that happens in markets. In Eastern North America, it is the NYMEX.
Because it is a North American market, there is a fair degree of symmetry between adjacent U.S. and Canadian markets. If you track prices that are traded on the market, Canadian prices cannot get too far out of alignment with what is happening in the larger North American market because fuel retailers would decide that they can go across to the closest adjacent U.S. market to buy at that wholesale price.
Senator Seidman: If I might intervene for a moment, I find it hard to believe that you are telling me that the price at the pump this morning is a result of the price on the stock market or the trading markets last night.
Mr. Boag: I cannot tell you; I am not privy to the individual decisions, nor should I be, of refiners. Therefore, I do not know the specifics as to what underlies that degree of price increase. However, I can tell you, in general, how markets work.
Again, we are bound by the requirement of strict adherence to the Competition Act. We are an association of competitors. That kind of issue and discussion does not happen at CPPI. I am limited in what I can say, so I will stick to talking about the generality of how markets work.
Senator Seidman: I appreciate that, sir, but I am not asking you to comment specifically on this increase overnight. I am using this as an example of a general situation. I appreciate the fact that you cannot discuss a particular increase here, nor should you — nor should you even have that knowledge, likely. I am asking for a more general discussion. I find it surprising that you would not talk about refining capacity, for example.
I know that the Shell Canada refinery in Montreal has announced its intentions to dismantle the refinery, and there has been an awful lot of concern that that will result in higher petroleum product prices in Quebec because of reduced competition, for example.
I am surprised that you have not talked about price regulation. Often we hear talk about oil-refining companies controlling prices.
The Chair: Senator, if I may, we did not invite the witnesses here to get involved in a price-arranging discussion, or any other type of pricing. We asked them to come here to talk about the main subject. That being said, I do not want the witnesses to feel that they have to get into another area.
Senator Seidman: Of course not; I appreciate that. However, I do think that the whole refining industry is a hot subject right now and that one has to talk about capacity and refining capacity in a positive way because it is the case that you have not built refineries over a period of time and perhaps capacity has diminished. I am not sure. However, I would expect to hear something about that, and I would appreciate hearing that.
Mr. Boag: First, we have reduced the number of refineries in Canada over the last 25 or 30 years, from probably 40 or more to 17 operating refineries now. At the same time we have reduced those refineries, we have actually expanded the capacities of the existing ones. Our refining capacity, in 17 refineries, is far larger than it was when we had 44 or 45 refineries 30 or 35 years ago. The refinery capacity has actually expanded.
You also need to look at this in a North American context because it is an integrated North American market. Today in North America, we are seeing a number of refinery shutdowns in the U.S. because there is consolidation and rationalization occurring due to an overcapacity in a North American context. This is in part due to the economic downturn, which had a much more significant impact on demand in the U.S. than it did in Canada.
You also need to look at this in the context that Canada remains a net exporter of refined petroleum products. We actually produce more than our domestic demand requirements, and we are a fairly significant exporter of refined petroleum products, principally gasoline, to the U.S. Some products we both import and export. I think the only product that we are a net importer of is aviation kerosene. I believe we are well served by our refinery capacity.
However, you raise the issue that, yes, this is a market that very much responds to supply and demand issues. Again, supply and demand issues are ultimately perceived by a market, as the global price for crude is ultimately a function of individual traders', purchasers' and sellers' decisions or perceptions with respect to supply and demand, both real and perceived and future, as it is in probably a shorter time context with respect to gasoline that is traded in that market context where supply and demand ultimately is an underlying factor in any market activity.
With respect to the specifics of Canadian refinery capacity, we have more refinery capacity today than we had years ago, even though we have far fewer refineries. That reflects the continued drive for efficiency and the need to achieve economies of scale, particularly with the increased investments that are required in the context of new environmental regulations and the need to do that on a smart, efficient basis. That meant focusing on larger refineries rather than smaller refineries. Today, Canada remains a net exporter of refined petroleum products and, in particular, a net exporter of gasoline.
Senator Seidman: Thank you. That was the point I was trying to get at, so I appreciate that you got there.
Mr. Boag: I would also be more than happy at another time to give you a broader briefing on this subject.
Senator Brown: Thank you for appearing today.
Why is it taking the industry so long to react to the alarms about CO2 in the environment for the last at least four or five years? The industry has not been defending itself or trying to make us feel better about what we are using. We used to have summer diesel and winter diesel, and now we have all-year diesel. That brings me to the comment that we can overcome the problems with biodiesel that you showed us in these graphs here. You can put in small amounts and receive benefits from it.
I cannot understand why the industry has not expanded faster than it has. In your materials, you say that in 40 years we could achieve a 20 per cent reduction in alternate energy and fuels. We were told that at the global conference in Vancouver, and you have exactly the same statistic, which I think is probably a true statistic. However, why is the industry as a whole not doing exactly what you are doing here today, which is defending what has been happening and continues to happen?
Mr. Boag: I am not sure I entirely understand the question, senator.
Senator Brown: There has been no response to the alarmists that have said that the sky is falling and that we will all die of carbon dioxide poisoning — not that it is poisonous to begin with — that we will lose our climate or that the world is falling apart on this whole issue. There has been no response for years from the industry.
Mr. Boag: I will try to address your question from a couple of perspectives. I might not be right on, but I will do my best — and Mr. Morel may have further comments.
First, from an industrial production perspective — and ultimately, refineries are massive manufacturing or production facilities — industry has been focused on improving its energy efficiency and reducing its GHG footprint as a result of that. They have made significant progress. I mentioned that from 1996 to today, we are probably down 10 per cent in our GHG emissions as industrial manufacturers at the same time as we have increased our production. The energy efficiency gain has been larger than that 10 per cent absolute reduction of GHG emissions. We have been working on that.
On the broader aspect of transportation, from a life-cycle basis, when you look at the GHG emissions caused by the consumption of our fuel in a vehicle, about 15 per cent of that signature is from the industrial activities, from the well right through to the pump, and another 80 to 85 per cent of those emissions actually occur within the vehicle.
We need to look at how we can become more efficient in the use of that product. We saw significant energy efficiency or fuel efficiency gains in our vehicle fleet through the 1970s and into the 1980s. That was largely the result of supply issues, principally in the United States, given what was happening in the Mideast. An effort was made to improve the fuel efficiency of vehicles through the 1970s and 1980s, and ultimately some significant gains were made with respect to fuel consumption and GHG emissions.
From the late 1980s to today, on a fleet-wide basis, we have actually made little progress. While engine efficiency and vehicle technology has improved, we have just gone out and bought bigger vehicles — SUVs and minivans, in particular — and we have had higher expectations for vehicle performance and power. While we have been able to continue to advance the actual technology, we have wiped out most of what we could have achieved in better and lower fuel use and lower emissions by our consumer desire for larger and more powerful vehicles.
Governments are moving forward on the next round of regulatory requirements for 2011 and later models. Those regulations are in place to 2016, and new regulations will be developed for 2017 and beyond.
At the same time, industry members are at the leading edge of exploring, developing and conducting the research for fuels that can ultimately supplement and might, to a large extent, replace gasoline and diesel in the long time to come. We talked quite a bit about this.
Certainly the GHG emissions reduction objective is a key component and driver of that work. I think industry is doing lots of work. Maybe it is not as visible as it needs to be.
Senator Brown: I am not making myself completely clear. I agree with your proposal and with everything you are saying. However, why has it taken so long for the industry to get up on its heels and defend what it has been doing? This is the best thing I have seen in a long time on defending the industry, how you can change it and make it better and more efficient. The car companies are doing the same thing.
I listen to alarmists daily about how the world will end here if we do not do something about CO2.
Mr. Boag: You raise a good point, senator. Our members have been quietly going about their business of providing Canadians with the fuel products they need that make this country operate. Their focus has been on ensuring that the fuel is there, that it can be counted on and that it is a high-quality product when you go to the pump, whether you are a businessperson, a consumer or a consumer of home heating oil looking for that truck to be delivered. That has been their focus.
However, I think they have realized that, while that is still their business, there is other work that needs to be done on the issues that you have pointed out, namely, talking about the challenges and what they are doing. That is why we are pleased to be here today to do that.
Senator Frum: I have a response to the earlier comments of my colleagues. I have a recollection that the Province of Quebec was examining legislation to prohibit the burning of wood altogether. I do not find those statistics difficult to believe.
Mr. Boag: Again, I do not want to criticize people who burn wood in their fireplace. Numbers sometimes mean nothing, so I was attempting to put numbers into a context with which people could identify. It was not intended as a negative reflection on anyone.
Senator Frum: I understand. It simply struck me as a very plausible statistic based on that.
On the GHG emissions, you mentioned that you have achieved a 10 per cent reduction in greenhouse gas emissions in the production of biofuels.
Mr. Boag: No; that is in petroleum fuels or refineries.
Senator Frum: We like biofuels because they are renewable and can be made in Canada. However, with greenhouse gas emissions, there is a school of thought that says that they pollute more ultimately than the production of petroleum.
Do you have numbers on that? How much carbon emissions savings would we see with these regulations?
Mr. Boag: There is a lot of uncertainty around the issue of what we call life-cycle analysis. There is no one number for the production of a biofuel. It depends on the feedstock, the energy source used to process that feedstock, how the by-products — distiller's grain, which is another product — are accounted for in terms of the value of that with GHG reductions, and where it is produced. A whole host of issues and factors will determine different answers depending on how those different factors are taken into account or are engaged in a specific biofuel.
For first-generation biofuels, which are grown from feed crops such as corn and wheat, looking across all of the work done on life-cycle analysis, at best we are looking at a modest reduction in GHG emissions. In some cases it can be worse, depending on the fuel or the feed crop. Then if you get into that complex issue of land-use change, particularly the indirect land-use change — and that was referenced in the study by the Institute for Environmental Decisions, IED; the executive summary of which we have made available today — it can fall to be quite negative.
Indirect land-use change is the one issue around which there is the most uncertainty. There is a lot of work happening to try to hone in on that more specifically.
That is for traditional, conventional first-generation biofuels. At best, the savings would be modest. Certainly the cost- benefit analysis done in the regulatory impact assessment for the federal 5 per cent requirement in gasoline would suggest it is a modest reduction.
Mr. Morel: It is less than 1 megaton per year for a 5 per cent biodiesel.
Mr. Boag: That is less than 1 megaton per year. That is one tenth of one per cent of Canada's GHG emissions. That is modest.
The next-generation biofuels that are not commercially viable yet, those from waste biomass and non-feed crops such as switch grass and the cellulosic types of ethanol, offer a much higher potential for GHG reductions. However, we are not there yet with the technology to make those commercially available. They do absolutely offer higher potential.
Biodiesel probably has a better GHG reduction capacity than first-generation ethanol. Therefore, yes, there are benefits, but they are relatively modest at the first generation.
Senator Frum: How would that compare to the carbon capture and storage possibilities with bitumen?
Mr. Morel: That would be another scenario. With bitumen, you capture the entire plant production. However, with biodiesel, you are limited to small amounts of 2 per cent to 5 per cent because of the climate. Even if there was a 50 per cent to 70 per cent reduction, that applies to only a 2 per cent component of the entire blend. You would be much better off to find solutions that will address the emissions from the larger portion of your mix, such as carbon capture and sequestration.
Senator Frum: I think most Canadians and people around this table who are arguing about why we are not moving faster on this are under the impression that this is a greener product from the point of view of carbon emissions. I think I just heard that it is not.
Mr. Boag: That is why I said in my remarks that you cannot make generalizations. You need to get down to the specifics of particular fuel sources, do a thorough examination and ensure you are doing a comparison on an apple-to- apple basis that looks at the whole well-to-wheels examination and not just combustion. For ethanol produced from corn or, in Canada, wheat, the theory of biofuels is that when you combust them, you are only releasing the carbon dioxide emissions that have been sequestered in that plant from when it was grown. Ultimately, on a net basis, it is a zero-emissions fuel.
However, you need to look at what all the emissions were created in the production of that. It goes right down to the fertilizer used in the field, the farm vehicles used to harvest and all those elements. That is why the issue of life-cycle analysis is a complex field, still with much uncertainty.
Senator Frum: If we achieved the targets set out in the federal standard, we could in fact be increasing greenhouse gas emissions?
Mr. Boag: I have no better answer to give than what the federal government has used in their regulatory impact assessment. In that case, their view and analysis was 1 megaton a year. That was with the implementation of the federal mandate and the incremental amount of biofuel used as a result of the federal mandate, recognizing that there are already provincial mandates in a number of different provincial jurisdictions. I have no better answer than that.
Senator Frum: Thank you very much.
[Translation]
Senator Massicotte: Thank you, Mr. Chair. I would like to thank all the witnesses for their presence here today. As matter of fact, my questions were asked by Senators Banks and Neufeld. I share some `Chicken Little' cynicism; we have been hearing about this for a while. Each time something new comes up, it is always very serious, and consequences disastrous. When one looks at your history, it is nevertheless impressive; you have continually adapted to the market on a governmental level, not only in our country in each province, but in the world. Our comments are a bit cynical. We are certain that you will be able to adapt.
Instead of talking to us about possible consequences, tell us what you or what others can do to satisfy the government's target dates.
Rather than saying that you cannot fulfill these obligations, what can you do to satisfy the government's requirements?
Mr. Morel: It is rather hard to say what we can do now, when we are this close to the finish line. We informed the government five years ago when we signed the joint agreement that we supported this policy, that we encouraged the government to develop regulations. Bill C-63, enacted in 2008, provided the authority, the necessary amendments to put this in place. And consultations began at that moment.
Two years passed from the beginning of consultations up to regulations being implemented. During this period, it was impossible for us as an industry to determine what should be done. There were a lot of changes. Every time we asked the federal government if we could consider the discussions going on as complete enough — so as to allow us to start our planning — we were told that regulations were subject to change until their final publication in the Canada Gazette.
As a result, we could not move forward with investments, nor could we run the risk of investing in elements that were not finalized.
Now that it is finalized, it is simply a matter of time for us to build the necessary facilities.
Senator Massicotte: And the regulations that were adopted, are they very different from those adopted five years ago and those adopted in 2008?
Mr. Morel: My colleague mentioned earlier that Newfoundland and Labrador as well as the entire north of 60º latitude region are excluded.
Senator Massicotte: So that is good news for you.
Mr. Morel: The point we are trying to make is that until it was finalized, until the Canada Gazette published it in September, we had no indicators. It could have changed.
Senator Massicotte: I understand, but I am a bit cynical when I say that business management is risk management.
Mr. Morel: Yes.
Senator Massicotte: In 2005, and for a long time now, the whole world has been talking about the need for change as far as climate change is concerned. The Conservative government has said for a number of years now, that we need to move with the United States. It is a question of regulations and not carbon taxes. I understand that there are no uncertainties, but each day, you manage uncertainty. And your oil drilling companies take enormous risks. You are experts in risk management.
To say that you could not move because you were waiting for the Canada Gazette's publication — even if it is a valid excuse — I have a bit of trouble with that. You knew that it would happen and that it would be enforced, as it has on multiple occasions throughout your career on the outside.
Mr. Morel: As you mentioned in the first half of your question, there is always a lot of uncertainty and complications lie in the details. As the saying goes in English, `the devil is in the details'. And these details require a lot of coordination with various partners, with pipeline companies, builders, engineers who do the designing. There is a tremendous amount of coordination. Since there is no certainty in regards to what is required, it is difficult for us to proceed.
I can give you an example. I showed a chart earlier. The three different grades of biodiesel depend on whether the source is made with soy, canola, or with recycled oils. Depending on whether you are in the country's West, in Southern Ontario, or in the Maritimes, you're going to use a different product.
Therefore, depending on how regulations are finalized, we have to manage various products, so adapt our main refinery products in a different way.
This is why we cannot move forward if we are made to use tallow, which is a gel that is not in a liquid state at 15ºC. The technological solution is entirely different if we have to use canola. Unfortunately, no one produces canola in the Maritime Provinces.
It is a bit like you said: the chicken and the egg. We have to know the conditions and expectations before we begin building. Because the solution will be different from one place to another.
Senator Massicotte: In conclusion, I am sure that you will come to a solution because each time we impose something on you, you find one. I wish you the best of luck. We believe in you.
[English]
Senator Peterson: You made reference to Saskatchewan with respect to ethanol and the regulations changing a number of times, which is a good example of public policy getting ahead of reality.
When we got into that, it was partly driven by the fact there was a lot of grain commanding small prices. The government thought it could solve all these problems by mandating ethanol, and there were some generous tax concessions. Then someone realized there was no capacity to deliver that. All the ethanol came from Minnesota, manufactured from corn, so a number of changes had to be made.
You said that the government does not listen to you and that you are having trouble with them. You people have experts, scientists and knowledgeable people, and I am sure the government has the same. Why can the realities not be aligned to get realistic outcomes in terms of policy — or is public policy interfering with this and driving decisions?
Mr. Boag: I cannot speak for the government on what their motivation is, but I think we have had a good consultation. This goes back to the specifics of this issue with respect to a broad stakeholder activity in addressing what was recognized in the government's notice of intent, which was that a number of technical feasibility issues needed to be resolved before a biodiesel mandate could be implemented federally. Throughout that activity, there was general agreement as to how we would characterize those technical feasibility issues.
There were three issues. It is not just about technical feasibility; we can run biodiesel in that engine or another one, and it all works. It is whether we have a system in place to deliver a reliable product so that everyone can count on the quality of the product day in and day out through a nation-wide system. Technical feasibility issues then were defined as adequate supply of biodiesel and petroleum blend stock.
The second issue was marketplace acceptance, which was really about ensuring adequate and appropriate standards were in place. Then the third issue was infrastructure, ensuring there was adequate blending infrastructure in place to deliver the volumes required.
There was general agreement that those were the three issues that had to be addressed. We did a lot of work to identify how those needed to be addressed. Specifically around the issue of infrastructure, we identified the need for 32 blending facilities nationally to meet the 2 per cent requirement.
Some of those blending facilities are already in place in Western Canada because provinces such as British Columbia have biodiesel mandates in place. The challenge is Ontario and east, where there are no biodiesel mandates in place. A considerable amount of new infrastructure for blending facilities needs to be built in Ontario, Quebec and Atlantic Canada.
Where we have a difference of opinion, I think, is around the actual number of facilities that will be needed and how long it will take to put those in place.
Mr. Morel: It is similar to addressing the question of Senator Massicotte earlier. We know what needs to be done, and there is a solution. We said that we could do this; give us 30 to 36 months, and we will do it. That is what we have been saying for the last five years.
Time has passed, and it took two years for the government to translate what it means into a piece of paper. Therefore, it is to be expected that it will take at least a few months for us to translate the paper into reality. For example, when our members wanted to build biodiesel and ethanol tanks, before they could start the construction and before they were allowed to bring workers on site to construct them, there were delays of between 18 and 22 months in Montreal. Some of the projects had to be cut in half because of public consultation and the refusal to have two more tanks and a heated tank in the facility.
That is the kind of pressure we are facing. To move ahead with an environmental assessment, you need to have your system well developed and engineered before you even start the process.
Mr. Boag: The process has started. We have had, for the most part, regulatory certainty since September 1. We know what is required. Companies are moving ahead, developing their plans and starting to work. They are not standing still doing nothing.
The only piece that we do not know now is the start date and the duration of that first compliance period. We are working as fast as we can to get prepared. However, we hear the government continue to talk about a 2011 implementation date. We have only had regulatory certainty since September. That is a long way from the 30 to 36 months that was identified in the joint work done through the National Renewable Diesel Demonstration Initiative.
Senator Peterson: What is the position of your members on the possibility of a carbon tax?
Mr. Boag: Our members have differing views on that. The industry is not a monolith when it comes to climate change policy. It is a challenging file. There is probably a general view among members, and probably among most industry, that a carbon-pricing strategy is a necessary component of a long-term climate change policy. However, carbon pricing can be implemented through different mechanisms. Therefore, I do not think there is a single view on the issue of a carbon tax.
The other broad issue is that Canada is a major trading nation that is competitively exposed. We cannot be put at an advantage, as global traders, without having some degree of alignment moving forward with our major trading partners.
The Chair: You say that you do not think there is a single view as to the means, but is there a single view as to the need for pricing of carbon?
Mr. Boag: I think there is a general view in the industry that carbon pricing is part of the long-term climate change and GHG emissions management solution, yes.
The Chair: Gentlemen, you heard me say earlier that next week we are having the Canadian Renewable Fuels Association appear before us. Do you work with them as well, or are these two totally different outlooks and two different organizations?
Mr. Boag: It is a yes-and-no answer. Certainly, we have had a history of working together. Even before this government, when it was clear that the political winds were moving toward the concept of a federal renewable fuel standard, we jointly, with the Canadian Renewable Fuels Association, put out a policy statement. It was what we considered to be our joint view on what the essential features of a successful implementation of a federal renewable fuel standard would be. One of those key essential features that we agreed on with our colleagues in the renewable fuels industry was the need for adequate lead time of regulatory certainty, and the three years of lead time was a key component of that document.
Since then, there has been a difference of opinion over what "regulatory certainty" means. They are of the view, I think, that lots of information was provided in the original notice of intent; and, as you have heard today, we have a different view of the regulatory details that are required to advance a compliance plan beyond general concepts.
However, I remind you that some of our members are amongst the largest producers of first-generation biofuels in Canada, so some of our member companies are actually members of that association as well.
The Chair: That is really what I was getting at.
Mr. Boag: We continue to dialogue and work with them, but we do not always have the same view on issues. Certainly we did at one point. We have stuck to what our principles were and what we agreed to back in 2006, and there has been some movement on their part as time goes by.
The Chair: Mr. Boag and Mr. Morel, we have had a very good exchange this morning. You have heard from my colleagues how much we have appreciated your paper and how you have elaborated on it during the questioning. I hope you found this useful too. You are getting heard here, and hopefully our audience electronically is also proliferating the message.
If there is no other business, I declare the meeting terminated.
(The committee adjourned.)