Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue 30 - Evidence - Meeting of February 26, 2013
OTTAWA, Tuesday, February 26, 2013
The Standing Senate Committee on Agriculture and Forestry met this day at 6:14 p.m. to examine and report on research and innovation efforts in the agricultural sector (Topic: Coordination between federal and provincial governments, and the private sector to fund research and innovation in the agriculture and agri-food sector).
Senator Percy Mockler (Chair) in the chair.
[Translation]
The Chair: Honourable senators, I call the meeting to order.
[English]
I welcome you to this meeting of the Standing Senate Committee on Agriculture and Forestry. I would like to introduce myself and ask all honourable senators to introduce themselves.
My name is Percy Mockler and I am a senator from New Brunswick and chair of the committee. I would now ask the other senators to introduce themselves, please.
[Translation]
Senator Robichaud: Fernand Robichaud from Saint-Louis-de-Kent, New Brunswick.
[English]
Senator Callbeck: Catherine Callbeck, Prince Edward Island.
Senator Plett: Donald Plett from Manitoba.
Senator Duffy: Mike Duffy, from Prince Edward Island.
Senator Eaton: Nicky Eaton, Toronto.
[Translation]
Senator Maltais: Ghislain Maltais from Quebec.
[English]
The Chair: The committee is continuing its study on research and innovation as per our order of reference.
Today we have with us Mr. Ken Magnus, Executive Director of the Atlantic Council for Bioenergy Cooperative.
[Translation]
We also have with us Jeff Schmalz, President of Soy 20/20.
[English]
Mr. Schmalz and Mr. Magnus, thank you very much for accepting our invitation and for sharing with the committee your views and your experience in going forward with agriculture for Canada.
The first presenter will be Mr. Schmalz, to be followed by Mr. Magnus, and then senators will be asking questions.
Jeff Schmalz, President, Soy 20/20: Thank you. I appreciate the opportunity to speak. I am glad to be here today after several attempts by Kevin Pittman. He finally managed to get a date when I was not travelling. I thank him for his perseverance.
I would like to speak about a couple of things today in a fairly short time. First, I want to talk about our company and what we do to provide context to the discussion. Second, I would like to offer my thoughts on agricultural innovation and what it means to our company and to me in particular.
Our company is a not-for-profit private corporation and we have been in business since 2002. Our mission is to develop new bioscience opportunities for Canadian soybeans. The emphasis really is on Canadian. We are funded through Growing Forward, a federal-provincial-territorial initiative, as well as through private business, with one of the funders being the Grain Farmers of Ontario and other private companies. Private funding for us is very important. It signifies the support of innovative Canadian farmers and businesses.
Our organization works in three areas. First, we endeavour to create a climate of innovation, we coordinate research and most frequently we work with private sector companies in the pursuit of commercializing new agriculture-based opportunities. We work in two areas, namely the soy food industry and what I would refer to as the burgeoning oilseed bioproduct industry. We have created long-term strategic plans in both of these business areas. These plans guide our focus of effort, ensuring that we target opportunities that make the most sense for Canada. Virtually all of our efforts revolve around opportunities that will directly create new and incremental wealth for Canadian farmers.
On the food side of the business, we manage a group of Canadian stakeholders representing the entire soybean value chain all the way from seed and trait developers right through to consumers. With this initiative, called the Canadian Soy Food Marketing Council, we have 25 member companies at our table. Our mission there is to grow the soy food business in Canada by developing demand for specific purpose-grown varieties of soybeans in this country. Typically when we grow specialized varieties there is more margin and profit for farmers.
On the bioproduct side of the business — a very interesting business — we endeavour to replace components of petroleum derived chemicals with those from Canadian soybean oil and proteins. There exists quite a body of applied research in this area that we are now commercializing. Some of it is Canadian; some of it is not. We are working with many companies to develop new, innovative bio-based businesses in Canada. The same rules apply for us in this sector. We generally focus our effort on purpose grown varieties that will yield greater margins for our producers.
There are too many opportunities to speak to today in terms of what we work on; however, a few of the more relevant areas include bio-based lubricants, waxes, polymers and surfactants.
We have recently co-developed a new bio-based spray lubricant with one of our clients. This is an example of it here. If anyone would like to take a look, there is a can for each of you. This product is superior to the petroleum equivalent now on the market and we believe it has the potential to be a significant brand in the category. We are now working on several other products in this area, many of which will hit market shelves in the next two to three years. We are actually working on behalf of a number of clients in Canada and help them take products typically from idea right through to commercialization.
In our pursuit of new wealth for farmers, we have close relationships with all of the major public and private soybean breeders. As such, we are aware of most of the new innovations in what we refer to as ``the pipeline'' and seek to commercialize new varieties to the ultimate benefit of producers. It is not really a commodity play; it is more of a specialized play.
Also it should be noted that we are directly responsible for and quite involved in two current major investments in the agricultural processing sector. One will be a world scale crushing facility, the products of which will be exported globally. This will be about a $500-million business annually and projected to break ground this year. The other is a new oilseed innovation centre, the purpose of which is to enable a suite of new food and bio-based businesses to be developed in Canada through right-sized specialty processing. We are very excited about both of these major projects, which in total will exceed new investment to Canada of $250 million.
On the subject of agricultural innovation, we have been pretty pleased with the Agriculture Canada Growing Forward policy framework and now GF2, with its focus on innovation, competitiveness and market development. The new agricultural innovation suite of programs will result in new industry-led research, as well as new inventions and products being commercialized.
In our view this is where the federal government should focus its funding. It is our opinion that Canadian third party delivery organizations that work very closely with industry and are focused on commercialization of research and new business development should be supported by programs like GF2. In our view the program is working.
We do recommend that Canadian policy incorporate longer term visioning, out at least 15 to 20 years. Policy decisions in countries like Finland and Denmark, who are out to 2050 with GHG policy, are a couple of examples of government-developed long-term visioning. I spent most of my business life in the private sector where typically it is not unheard of to have 12- to 15-year strategic plans. Our policy developers would be well served to plan in increments beyond five years and continue to fund research, third party delivery and businesses that understand and embrace the government's long-term vision.
In the exciting grains and oilseeds sector that we work in, there is really nothing but opportunity. The biggest issue we have is making sure that the opportunities we work on make sense for Canadian farmers and that there really is wealth in them. It is not easy and it takes time, but we need to envision what we want the future to look like and set about to realize this vision. We have had visions back to 2005 with our group. We are gradually delivering on that.
The Chair: Thank you very much.
Mr. Magnus, will you please make your presentation?
Ken Magnus, Executive Director, Atlantic Council for Bioenergy Cooperative: Thank you and good evening, Mr. Chair and honourable senators. I am here on behalf of the Atlantic Council for Bioenergy Cooperative, ACBC. I am the executive director.
As you know, we have been asked to present regarding agricultural activities and the necessary coordination required between federal and provincial governments and the private sector. In order to assist the discussion on that topic, I feel it necessary to give you a quick overview of our industry association and our current deliverables.
We are a relatively new industry association. We were founded in December of 2010 and had a press lease in February the following year. It is roughly a little over 24 months. We are establishing ourselves now as the voice of development for advancing bioindustry in Atlantic Canada.
Today's topic is very fitting because we truly are an interprovincial industry association. We are affiliated hands-on with Nova Scotia, New Brunswick and P.E.I., as well as stakeholders in Newfoundland.
We work with national organizations on a regular basis in the three streams that we represent, which are fuel, gas and mass. We keep our members informed. We attend and participate in bioenergy events throughout Atlantic Canada. We communicate with media and stakeholders. We try to dispel myths and correct misinformation.
Essentially, our mission is to educate and promote the development of sustainable bioenergy in Atlantic Canada, and our vision is a vibrant, sustainable bioenergy industry producing in Atlantic Canada.
Our membership is under a cooperative structure, so we have one member, one vote. All our members currently pay the same annual membership fee, and everyone has the same value of contribution at the table as far as board of directors.
As I mentioned, we clearly identify as an industry association who you are and what you represent. You cannot be all things to all people, so in our umbrella we have identified biofuels, biogas and biomass. Currently, we are working in those orders of priority. Biofuels is our major thrust at the moment. A lot of things are going on in the biofuels community, especially in relationship to Atlantic Canada. We are moving into biogas and mass in due course.
The point there is that because Atlantic Canada, in our opinion, is a relatively unique circumstance on the biofuel side, we have taken it upon ourselves, in collaboration with our membership base and through a project in collaboration with ACOA, to put together an 18-month program that spells out what we are doing, why we are doing it and where we are going. It will provide the information and credibility of our recommendations that are ultimately the result of that report. I will address that briefly.
It is a six-stage process. In stage one, we regionalize asset inventory. We know who the players are right from proponents to producers to academia to research to refineries to distributors. We built a relationship in depth that a lot of people assumed did not exist. We did a complete analysis of the region as far as industry development. We have done the research on the feedstock. We know what exists, what can exist, what the future might be, what is immediate, what is in the near future and what is in the long-term.
We have created a financial economic model. We can take information, depending on what type of feedstock you might want to use, whether it is soybeans, canola, wood waste or whatever it might be, and put the financial model together based on Atlantic Canada numbers and business opportunities and give results to proponents and policy- makers to give some idea of what the opportunities may or may not be.
Next is an economic impact analysis. Since we first got this industry association under way, there has always been discussion about what this means in dollars as far as economic opportunity. There have never been any facts to say, ``Here are the numbers and this is what it means.'' We will provide that. That has been an expensive and major tool here. That will be completed days from now and it will be very interesting. We are optimistic about what the numbers will be.
Number five is, ultimately, recommendations. We need to decide what is best for Atlantic Canada. How does it work for us differently than in other parts of the country or other parts of the world? What are the unique pieces we need to build the industry for us? Those will be interesting pieces.
Ultimately, the communication strategy to deliver that message will come out around June 1, give or take a few weeks.
We believe that under the right circumstances, with the right policy and consideration and the wealth of membership and commitment that we have, the potential is there for a $200 million to $500 million economic opportunity in Atlantic Canada that does not exist today. We expect that to develop in the next one to five years. We are pretty excited about that opportunity, but we have to get things right. There are a few levers that have to be pulled and some work to do, but the potential is there. Beyond that, there is certainly expansion for export markets in the near term.
Part of our message today talks about part of the reason you wanted us to be here, which is federal-provincial relations and how that works as far as industry development. It is absolutely key. We have been in a lot of desks, and a lot of people are wondering why not start out with a provincial association, or why not marry up to the national association that already exists? We have a great relationship with them and with other associations.
We took it upon ourselves to have an interprovincial industry association. We are working with three different provincial governments and with the federal government. There is a lot of GR going on — good things. At the same time, I referred to it as one-stop shopping. A lot of governments at many times have talked about it, and they all feel the opportunity is there and what can exist. We are saying, ``Take the next step.'' One-stop shopping would be an ideal circumstance for an industry like ours to be able to have those discussions at the interprovincial and federal level. It is not an easy task. I know what it is like to work within departments with one government let alone multiply that by three or four governments and three or four departments, but it is doable. It changes the game in the sense that industry can develop through direct assistance as long as the clout, the resources and the will within an interprovincial, single-desk government option is there. It would streamline things to maximize opportunities. I think our association and where we are headed is a good example. I will certainly give more detail about that in the Q and A, if you wish.
Before I close, I think it is our responsibility to address a current issue that is of great importance to the biofuels industry in Canada and in Atlantic Canada in particular. We feel one of the most important things that government has done in the development of renewable fuels in Canada is the creation of a national mandate for ethanol and biodiesel. As you know, surprisingly, on December 31, the Minister of the Environment announced a decision and intention to reduce the mandate for the requirement of home heating oil and extend an 18-month delay in Atlantic Canada for an additional six months. Both of these actions will have an adverse impact on the growth of our sector in Atlantic Canada. The decision is proposed in the name of costs. In our opinion, no real apparent economic case justifies that discussion. I think it is important that we address that.
On the home heating side, Environment Canada did its homework prior to the implementation of the recommendations, the regulations and the current RFF. What has changed? The homework has been done. Why not carry on? Again, there is just no justification to change in midstream. Without the home heating fuel in Atlantic Canada, it reduces the production by almost 50 per cent. The opportunity drops dramatically. It works in other parts of the country and other parts of North America.
We have to remember that mandates are here to drive economic investment in an important area, to diversify Canada's energy mix, to provide a business risk management to farmers and to reduce pollution, inclusion GHGs. Atlantic Canadians have the same goals. Our association and the national association, which previously presented in front of this committee, are opposed to anything that shrinks Canada's commitment to renewable fuels. If anything, we should be talking about growing these mandates, not reducing them.
Thank you. I am happy to answer any questions, if I can.
The Chair: Thank you, Mr. Magnus.
Senator Plett: Thank you, gentlemen, for being patient while we listened to a wonderful dissertation in the chamber.
Mr. Schmalz, you said that part of your funding is Growing Forward and Grain Farmers Ontario. What other industries would be your members?
Mr. Schmalz: We have a couple of bioproduct companies. We have a company that is going to build a large oilseed crush facility that I talked about. We will have funding from them to help them get that built. There is farmer money, private industry money and Growing Forward as well.
Senator Plett: You talked about purpose-grown soybean variety. Explain that to me.
Mr. Schmalz: That is the future. Soybean is a commodity traded on the Chicago Mercantile Exchange. If you want a price, you can find it on the web 15 seconds later. Soybean is a commodity. There is innovation in the sector in that new varieties are coming down the pipeline. What we endeavour to do and what we will endeavour to do in the future is get more of those varieties planted in Canada. We work in two areas: One is creating market pull for opportunities and the other is making sure we get the feedstock grown. If there is a new oilseed variety that works particularly well in a product like that and if we grow it, there is anywhere from $2 to $4 a bushel more net revenue for a farmer. If you can expand production of that dramatically, there is a huge wealth creation opportunity for farmers. Our focus of effort, particularly in soybean, which is not a huge crop in Canada at over 4 million acres, is converting the existing feedstock we have, which is more commodity oriented, into value added.
Senator Plett: There are 4 million acres of soybean in Canada.
Mr. Schmalz: That is correct. There were 4.2 million acres last year; and there will be more this year.
Senator Plett: Is that mostly in Ontario?
Mr. Schmalz: Probably 80 per cent of it is Ontario and then Manitoba. We have 200,000 acres to be grown in Saskatchewan this year, which is great news for us, and there is Quebec. Essentially, we have Quebec, Ontario, Manitoba, Saskatchewan and a bit in P.E.I.
Senator Plett: Not all soybeans would be good for this product.
Mr. Schmalz: That is correct. We are working with a large germplasm developer — a large seed company. We just signed our third annual NDA with them. We are helping them to launch an oilseed variety in Canada that will be utilized there. One of the stumbling blocks we historically have had in the sector is that we do not have the specialized crush capacity to be able to turn that into a value added product from the farm. We have world scale crushers. This innovation centre that I talked about building will have the ability to take smaller unique acreages of oilseed varieties, crush them and use the material in a whole suite of value-added businesses that are on the radar but we cannot attract to Canada at this time because we cannot produce the feedstock. We will grow it and crush it. There is a whole suite of bioprocesses in the oilseed crush business, from refining, bleaching, and deodorizing. We are looking much beyond that and how to take that oil and fractionate it into its subcomponent parts used in products like that.
We analyze sectors. We have analyzed the whole biolubricant sector. Some oilseed varieties are ideal for it and we are bringing them into Canada.
Senator Plett: I am sure you have heard this many times, Mr. Magnus: In 2050, we want to feed 9 billion people in the world. Food is competing with fuel. I would like to have some of your opinions and comments on that.
We were in New Brunswick, among other places, just a few months ago. We saw a biogas facility where they were using waste. Certainly, we would all be supportive if that is doable. You are talking about more than just using waste. If we are using the grains that we need to feed 9 billion people and turning it into fuel at maybe not even cost recovery, how do we justify that?
Mr. Magnus: That is a fair question. There have certainly been conversations around that for a while. The short answer is that there is a combination of feedstocks. Things have evolved.
My first experience around the ethanol file was in Saskatchewan more than a decade ago. As you know, primary or first generation ethanol was corn-based and wheat-based. We have evolved since then. Atlantic Canada in particular has an opportunity as we move into this industry to take advantage of some technology development that has occurred in the last three to five years. Yes, some specific crops will be used, but there is also wood waste, a current reality. Cellulosic is much closer now than it was before. In fact, some of our recommendations will go down that path.
However, I have to admit that our research for our report, and I talked about feedstocks and land base, shows a lot more farmland in Atlantic Canada than many people would assume. A lot of farmland is considered underutilized or used to be farmed and is no longer farmed. I have done the research on that and it will come in our report. My point is that when you get the Government of Nova Scotia's agricultural department suggesting that there are 100,000 acres of farmland not being used for crop, we see that have a long way to go. We could use that underutilized land to produce energy crops. To take the equation about food versus fuel, that land is not being used to grow food.
Senator Plett: Could it be used to grow food?
Mr. Magnus: At this time, it is not, and no one is doing it. If it goes back into energy crops, it will bring the land back into shape so that when the time comes to grow food on it, it will be much more likely to produce better yields.
Senator Callbeck: Mr. Magnus, how many members does the Atlantic Council for Bioenergy Cooperative have?
Mr. Magnus: We currently have 11 members. Our goal has never been to be more than 10 to 20 members. When we started out 24 months ago, our goal was 15 members within the first two years, so we are almost there. We do not have a large association with a newsletter. We have hands-on proponents that want to develop the industry.
Senator Callbeck: What are your membership fees?
Mr. Magnus: They are $5,000 per year.
Senator Callbeck: That makes up your budget, does it, or do you have other sources?
Mr. Magnus: It does not run the railroad, but it is a good start. The membership fees generate probably half the money that we need to operate, so we look for other sources.
Senator Callbeck: What are your other sources?
Mr. Magnus: Currently, we have an ACOA project that has some funding that comes through to us. Other than that, we look for any support we can find. Even if we grow the thing to 20 members, it will not be quite enough. However, taking the national model once we evolve in Atlantic Canada from proponents to producers, then our membership structure likely will change. It will be based, then, on so many litres of production and the membership dues will go up considerably.
Senator Callbeck: You mentioned the project — you outlined it here — that ACOA is helping to fund. Is it on line to be completed by the end of May?
Mr. Magnus: Yes, that is our target.
Senator Callbeck: I notice that number 5 is recommendations.
Mr. Magnus: Yes.
Senator Callbeck: Do you have an idea of your major recommendations, or is that too far ahead?
Mr. Magnus: No, we have not clarified or developed those. We have had some great discussions. As you well know, putting 15 people in a room to deliberate on what those recommendations will be is quite interesting.
However, to answer your question, I will give you my personal opinion. This is not a board position because we have not formalized it yet.
If you look at the industry throughout Canada, North America or the world, for that matter, the three things that have driven the industry are a mandate with equal market, capital cost incentives and production incentives. The Government of Canada has done a superb job in all three categories. We have some tweaking to do in Atlantic Canada because there are gaps within the national mandate, and we are in a discussion right now about a further delay. It is very difficult for an industry to step up and compete unless we are competing on a level playing field, and we are not there. Until we get this mandate sorted out, it is difficult for us to put policy in place like capital cost incentives, production incentives or whatever it may be. We need to put those tools together. If you look at Canada alone, these three tools have been key to successes throughout Canada, from New Brunswick to Vancouver Island.
Senator Callbeck: Have you had positive comments from the provincial governments and the federal government that, once you get this project done, your recommendations will be looked upon favourably?
Mr. Magnus: That is a good question, and the short answer is yes.
Back to the topic at hand, the interplay between three governments provincially and one government federally is quite interesting. However, as this project has evolved — and it is no small task — I know that there is great anticipation from Ottawa and from three premiers' offices about what the message will be because this work has not been done with an Atlantic-specific delivery before.
Senator Callbeck: Soy 20/20 is a not-for-profit corporation —
Mr. Schmalz: That is correct.
Senator Callbeck: — to develop new bioscience opportunities for Canadian soybeans. I notice your funding is federal-provincial-territorial and from the Grain Farmers of Ontario.
Mr. Schmalz: Yes.
Senator Callbeck: You mentioned Prince Edward Island there.
Mr. Schmalz: P.E.I. has a small business. They are growing. However, our funding only comes from the Grain Farmers of Ontario, plus some company funding, on the private side.
Senator Callbeck: Are you looking to get the other provinces involved?
Mr. Schmalz: We do by osmosis. For instance, one of the big proponents of soybean growth in PEI, a private individual, David Hendrick, is on our board. He has his tentacles down there and is doing a lot of good things in soybeans in P.E.I., so we are well aware of what is happening. Yes, it is a great developmental product for the province. It is growing.
Senator Callbeck: Growing tremendously.
Mr. Schmalz: Yes, it is.
Senator Callbeck: I think it is around 50, 000 acres.
Mr. Schmalz: Yes. One of the things being worked on there is a lot of unique varieties of food-grade soybeans for export. We do a wonderful job in this country, and our farmers are set up really well to grow specific varieties for the food business. We are replicating it in the bioproduct space today.
Senator Eaton: To follow up on Senator Callbeck's remarks, I am really interested in trade and commercialization. I have to congratulate you, Mr. Schmalz, for finding ways of taking innovation and commercializing it, which is a huge obstacle, as we have been learning on this committee. Who are your main competitors outside of Canada? Do you have countries that you compete against?
Mr. Schmalz: We are seventh in the world in production, so we are relatively small. The countries ahead of us would be: the U.S., Brazil, Argentina, India, China and Paraguay.
Senator Eaton: Are we more specialized, or are they more specialized?
Mr. Schmalz: We are way more specialized. Our vision has us being more specialized. We have about 4 million acres of soybeans in Canada, 80 per cent of which are in Ontario. We have a well-developed food-grade business, where we export beans to Japan and to other countries. They want our product. They pay extra for it. In fact, our farmers get anywhere from three to four; a couple of years ago, they were getting $4 premiums per bushel. The more revenue for specific varieties we are growing —
Senator Eaton: Because you are with what we call a niche provider? I say that in the best sense of the word; you grow specialized things.
Mr. Schmalz: That would be fair: high quality. We have a program called CIPRUS, which speaks to the way we grow specialized varieties, from the farm right on up, and market them. We are internationally known for our ability to grow and segregate that material very well. If you are on-farm and have storage and you are growing one kind of variety and another kind of commodity and lumping them all together, that is not what we do. We do a good job of growing specific varieties and isolating those.
Senator Eaton: For specific customers.
Mr. Schmalz: For specific customers.
Senator Eaton: When we go into our free trade deals, which we are now dealing with the EU and hoping to do with Japan or the Pacific, do you see this as opening more markets for you? Do you see hidden trade barriers? How do you see our trade?
Mr. Schmalz: I do not see hidden trade barriers. We know all of the organizations that are exporting, that are doing the business today. They are private companies. They do a fantastic job of doing their own thing. That market is growing, and Canada has a sterling reputation, I would say, for what we call IP varieties — ``identity-preserved'' varieties — of beans for specific uses.
Senator Eaton: Do customers come to you and say, ``This is what we would like?''
Mr. Schmalz: Yes.
Senator Robichaud: Mr. Magnus, if you were to go to the general public, especially the people who live in my area, and say that, with biofuels and what you are proposing here, you could offer an alternative to shale gas exploration and fracking, you would find a lot of people to support you.
Mr. Magnus: I agree.
Senator Robichaud: There is quite a discussion right now, and the people are not very happy. Maybe it is misinformation, but they are truly worried about the prospects of shale gas.
You say that there are lands that are not being used.
Mr. Magnus: Yes.
Senator Robichaud: You say that this could be used to grow specific crops. What would those crops be?
Mr. Magnus: For example, one of our founding members has a genetically designed sugar beet. It has come a long way. It is non-edible. Energy beet is the specific name for it. They have invested considerable dollars and time in the development of this specific beet. Like other crops, it would grow better in better land, but if there is available land that can be used, it can grow that specific crop and generate feedstock. That is an example.
There is certainly some being done and, again, technology has changed. As I said, 10 years ago this discussion was way out there. Some day we will make energy out of willows. We are getting very close to that. Willow is a crop that is being researched in considerable depth in Atlantic Canada. It certainly could be grown on marginal lands specifically for energy production that will not take away from food production.
Senator Robichaud: What was that plant?
Mr. Magnus: Willow.
Senator Robichaud: I believe we saw that when we visited the other side of the river here.
Mr. Magnus: The University of Cape Breton has a willow program. I would not have said this five years ago, but I believe we are close enough now, under the right circumstances and with the right tool kit, for woody biomass to be on the table.
Senator Robichaud: That would grow almost anywhere, would it?
Mr. Magnus: It is pretty easy to grow.
Senator Robichaud: Can you tell us who your members are?
Mr. Magnus: We started out with four founding members. Atlantic Co-op is one. The Vice-President of Atlantic Co- op is our board chair, as a matter of fact. They have been a great asset from the beginning. As you know, they have three streams: groceries, agriculture and fuel. It is a pretty good fit.
Ron Coles is the Vice-President of Atlantec BioEnergy Corporation out of Prince Edward Island. They are the sugar beet fellows. Through the SDT process they have designed a pilot scale plant in Cornwall, P.E.I., and we expect big things out of them. They have a technology that did not exist a few years ago and they have tweaked it several times. I think they have the potential to be a technology provider that will be unique to not only Atlantic Canada but North America. It is pretty exciting.
We also have members on our board and association that are in academia and research. One of our founding members was the New Brunswick Community College. Kevin Shiell has been a proponent of biofuels for a long time. I should not speak for him, but I know Kevin has been thrilled to be working with an Atlantic organization that has a larger-volume discussion and is now accessing three provincial governments and Ottawa to have the discussion on how Atlantic Canada can participate.
Before the association existed, I believe the common phrase was ``Atlantic Canada cannot do it.'' We are here to prove that we can; we know we can. It is not about feedstock. There is enough feedstock, whether it is wood waste or agriculture or a combination of municipal waste. The list goes on and on. It is the tool kit that has not been solidified in Atlantic Canada and we are hoping to fix that.
Senator Robichaud: How is the farming community reacting? Are they aware of what is happening with what you are doing?
Mr. Magnus: That is a very good question. One of our most recent members joining the association is the New Brunswick Soil & Crop Improvement Association. They have been a huge asset to the discussion around the table about where we are going with all this and whether they want to grow soybeans or other feedstock and whether they want to get into new technology or new products like willow.
Having said that, part of the delivery of our report will include a communication strategy. Yes, we will come up with recommendations. I know it was quick, but one of the big tools in our five pieces here was the financial modelling. We can go into an agricultural town hall meeting, have the New Brunswick Soil & Crop Improvement Association or the P.E.I. Farmers Association in a town hall meeting, and put the numbers on the chart. If they become a participant in this industry and a supplier of feedstock, or perhaps fall into a program like ecoABC and become an owner of their own energy company, they can pay themselves to grow X amount of product for X amount of dollars and be profitable, where will that take them?
We are not reinventing the wheel here. That has been done before. The ecoABC program was excellent, and I would like to think an Atlantic flavour is certainly a potential in our recommendation.
Senator Robichaud: I hope you have a lot of success. We need something like that to happen where I live.
I have just one more question because I have used up my time.
Senator Plett: Do you mind if I ask a supplementary on your other question first? I appreciate your kindness.
In answer to Senator Robichaud's question, you talked about a certain company deciding whether they wanted to grow feedstock or soybean. Does that mean the two of you are competitors?
Mr. Magnus: No. That is a good question, though.
Senator Robichaud: Good question, short answer.
Mr. Schmalz, you were saying that you have two major investments and one is a world-scale oilseed crush facility.
Mr. Schmalz: That is correct.
Senator Robichaud: Would you explain that? You say the products will be exported globally.
Mr. Schmalz: That is correct.
Senator Robichaud: Will you need more land to produce the seeds that you will put through that?
Mr. Schmalz: No. Essentially, there is not more land. We are in a position in Ontario where we have our own acreage and are very intensive. We have all of the feedstock we need that we can import into the country without a problem. There is Ohio and several other states. We have the capacity to import what we need for commodity products. We have been working for over two years on this crush facility with some investors. It will be essentially a commodity crush.
The good thing about it is, irrespective of where the soybeans come from, we are creating value-added products there and exporting them. That just does not happen in agriculture often enough. We are thrilled by it. The net effect is that it will take the cash spot price for soybeans in Canada up by 20 cents a bushel — 20 cents a bushel, 40 bushels an acre, 8 bucks an acre, 4 million acres. There is incremental wealth there right across the board on all soybeans.
In actual fact, today we are net importers of soybeans in Canada. When we create opportunities for new use, our vision is to import commodity soybeans and grow specialty soybeans. We have a defined acreage that we are gradually turning into real value-added feedstock like the food million acres that I talked about. That is value-added. It commands a premium. Farmers make more money on it. They want to grow it. We have markets developed. We are taking our acreage and turning it into value-added. For a large oilseed processor like these guys, we already have contracts for them set up with Ontario suppliers. If we need to, we will import more feedstock.
Senator Robichaud: What percentage of the products will you be processing that will be imported?
Mr. Schmalz: I do not know.
You have to understand the whole sector here. In the immediate trading area of Ontario there are three major crushers. There is one in Hamilton, one in Windsor and there will be another one but I cannot divulge its location. What may happen is all three of those companies may import a little more soybean. When there is finite acreage that is the reality of the market. The good thing about this situation is we will increase prices for farmers. We will develop a value-added business in which we are not going to export just soybeans; we will export value-added products, oils and meal.
Senator Buth: Mr. Schmalz, did you say Soy 20/20 has been in existence for about seven years? I thought it was much more.
Mr. Schmalz: Since 2002. I have been with them for seven years.
Senator Buth: I am quite familiar with Gord Surgeoner, so I get to ask some of the tough questions.
Mr. Schmalz: My office is right beside Gord's, and it has been for seven years.
Senator Buth: You have clearly had some funding from the federal government and from private partners. You mentioned the food grade soybeans. Can you give us an idea of how many products you would have commercialized in that time, or assisted in the commercialization?
Mr. Schmalz: At least 40 or 50, maybe more. We spend a good chunk of our time in the food business and developing isolates and concentrates. More and more, we are working in the bioproduct area. It is very interesting. The play there for us is germplasm-specific varieties for specific uses.
Senator Buth: Specific oil profiles?
Mr. Schmalz: Definitely oil profiles, yes. We spend a fair bit of time working in different fatty acid profiles. You know the canola business well. There is a beautiful fatty acid profile for human consumption, fantastic, with saturated fats low. We work with a lot of the major seed companies, and we are aware of what is in the pipeline. We are extremely interested in fatty acid profiles as they relate to the markets we are interested in.
Senator Buth: Would you have done a calculation in terms of what your return on investment would have been to the industry?
Mr. Schmalz: It is growing. I have not done that. It would be an interesting thing to calculate. All I can tell you is that we have been reasonably successful in attracting businesses coming into the door. Our model is not to hang our shingle out but to analyze markets and go after companies. In our stable of companies that we work with, there would be 30 or 40 at least. We will grab a market and analyze it to see if it makes sense for Canada. Typically, we stay away from them if they do not have a way for farmers to make money in it, just typically variety specific for specific uses.
Senator Buth: This crush plant that you are talking about, what would the size of it be?
Mr. Schmalz: It would be 2,200 metric tonnes per year, which is fairly large.
Senator Buth: How do you work with private companies in that area? There are two major ones.
Mr. Schmalz: Yes. There is a third one now. These are private investors, Canadian citizens. How do we work with them? We are a not-for-profit, so we do well when we create new opportunities. We do not invoice them for our time, but we work closely with them. In the future, the stage two is the innovation centre that I was talking about, which is a separate for-profit business. We will likely be hiring some incremental staff paid for by that organization to help grow new opportunities.
Since we are a not-for-profit, we work pro bono. Our vision is to create opportunities for Canada. If we have to spend our time, talent and energy and not be compensated for it, we are fine with that as long as, at the end of the day, there are new opportunities being created. It is a model that the grain farmers of Ontario continue to fund. We just signed another three-year deal with 50 percent more money for the next three years. They like what we are doing.
Senator Buth: Mr. Magnus, can you talk a bit more about the mandate for biofuels and what is happening in the Maritimes in terms of the delay and the heating oil component of that?
Mr. Magnus: I am glad you asked that question. It is really a key piece for us. As you know, we are a relatively young association. We are 24 months in. If you turn the clock back, the national mandate for biofuels was implemented 18 months ago, or almost 24 months ago. For the first time, Atlantic Canada, with the lack of a provincial mandate, looked to the national mandate.
We thought the timing was good to put our organization together and start driving industry to develop. Then the first delay came along for an 18-month delay for Atlantic Canada. Yes, that is a different discussion, but it is partly the same answer. Yes, it is somewhat chicken and egg. There is no one in Atlantic Canada producing biodiesel now, so it would be difficult to force distribution because it has to be imported. However, if the four of us are to build a biodiesel plant and there is no mandate, it is difficult to get that done. We are saying, ``Come on, let's get on with this.'' Another six-month delay will not change anyone's lives. We already had an 18-month delay that everyone took a deep breath on and said, ``Okay, Atlantic Canada will wait.'' We will do our project. We will start putting our recommendations out there. We will organize, and we will find out who the proponents are. There are people in Atlantic Canada who will build biodiesel plants to meet the numbers that are required if the tool kit is right. We are very frustrated about the six- month delay. I have some meetings tomorrow while we are here to have that same discussion.
On the home heating side, as you know, Atlantic Canada per capita is the largest consumer of heating oil in Canada. Again, as I mentioned in my presentation, the federal government did an excellent job in doing their homework prior to putting their renewable fuels regulations in place. All that research has been done. Other corporations have delivered in all parts of Canada except ours. If you take home heating fuel out of the equation for us, the potential for our industry development in Atlantic Canada is almost cut in half. Up until only weeks ago, we were intending to build an industry to meet the number that we expected.
Senator Buth: Are you aware of the ecoENERGY for Biofuels Program support for the biodiesel industry and that that program will not be moving forward anymore?
Mr. Magnus: That is unfortunate.
Senator Buth: Thank you very much.
[Translation]
Senator Rivard: We know that finding investors to commercialize the fruit of your research efforts is tough. Have you considered ways to encourage more of them to invest in commercialization once you have developed a new market? Do you have any suggestions in that respect? I will let you answer and then I will tell you about a Quebec experience in the 1980s.
[English]
Mr. Schmalz: We work with a lot of researchers in Canada. We are familiar with many of them. We have our tentacles into universities. A lot of our work is with feedstock breeders and soybean breeders. We frequently introduce them to industry and get them working together. That is one of the things that we do in serving our mandate, namely help commercialize researchers and new varieties.
We also are networked quite well with what I would call applied researchers who work in the bioeconomy and bioproduct area, for example the University of Waterloo, University of Guelph, University of Western Ontario, University of Windsor, University of Ottawa. They have world-class scientists and research chairs working in very targeted areas. We do work very closely with them. Our vision there is to link up private industry with them.
[Translation]
Senator Rivard: Perhaps I did not make my question clear. I would like to know whether there are businesses in the private sector, say, that could commercialize the products you develop through your research.
Every decade or so, an economic crisis hits, as we know. In the 1980s, the economy was worse than it is today, and the Quebec government established a stock savings plan, which gave taxpayers the opportunity to invest in a business and to deduct that amount from their taxable income.
The government made up for it later through the capital gains tax, once the shares were resold. When it did not work well, the amount the taxpayer had invested was tax deductible. There was a tremendous fiscal cost involved. Today we are looking for a way to convince Canadians to invest in businesses that bring the fruit of your research efforts to the market.
[English]
Mr. Schmalz: We help the companies we work with to commercialize products to get them to market. We try to help finance them by finding money for them. We are linked with a corporation in our office called Bioenterprise Corporation, who professionally finds money in the market to fund some of these new businesses. We work almost exclusively with companies in private industry to help commercialize opportunities. We help them from the ground up — from the idea to the commercialized product. This is a great example. As I said to Senator Buth, that is one out of probably 50 to 60 products that we have worked on. We will endeavour to find capital for them. It is difficult because many of these businesses are fledgling and they take capital to start-up. We ensure that they are successful.
I am not sure I answered your question properly.
Senator Duffy: This is an exciting area, and I am sure Canadians will find it interesting to hear all the things that are looming just over the horizon in this area.
Mr. Magnus, I would like to ask you first about home heating oil. In Prince Edward Island some people are concerned about the cost of heating their homes this winter, which has been a big topic of conversation. What would the addition of biofuels to home heating fuel do to the price for Atlantic Canadians?
Mr. Magnus: I am glad you asked that question, senator. That has been part of the debate or discussion around this whole piece.
As we all know, you can make statistics say different things, but you do the simple basic math. The commodity prices at the Chicago Board of Trade or the New York Stock Exchange, or wherever it might be, of biodiesel and diesel fuel are relatively the same, although they fluctuate. Sometimes it is a little higher on one side and a little lower on the other, while next week it might be different. The argument might be made that it will drive the price up because our association has not delivered yet on someone producing this product and, therefore, it has to be imported. Well that is another number that you simply need to fit into the equation. Whether you are importing it from Montreal or wherever, it is already being produced and you are supplying the product through a distribution network, going into the United States where the product already exists to comply with U.S. circumstances. Again, it amounts to pennies. I look at it this way: When I drive up to the pumps in my diesel fuel pickup truck that holds 100 litres of fuel and the price is $1.05 for diesel fuel and $1.05 and a bit for biodiesel, I combine that. For the 2 per cent blend in my truck, I have to go to the fourth decimal point past zero to make any difference in the price. The same applies to home heating fuel — in fact, to a greater degree because the costs are lower.
To answer your question, senator, the Canadian Renewable Fuels Association website has facts and figures on this. We can provide the same information. The math is there.
Senator Duffy: You are telling us that consumers should not fear that. Given all the various energy players in Atlantic Canada, I am surprised that we are not producing it in our region already. However, you say that is what your association is trying to do.
Mr. Schmalz, I would like to thank you for telling us so much about what your members are doing in areas related to specialty product lubricants but also to food. Some of us are worried about heart health. We want food that is more heart healthy. Is that part of what your members are looking at?
Mr. Schmalz: That is a great question. It is 100 per cent of what we are looking at. We are leading a health claim right now. We submitted a health claim application one year ago December that deals with protein-rich soy foods and their effect on cholesterol reduction. That application is before Health Canada, but these things take three years. It takes a long time to get through the system. I experienced one with the vegetable oil industry of Canada, and we got one done a couple of years ago.
Specifically on heart health, we endeavour to put more vegetable proteins into the diet. That is what we are working on. The efficacy, quality and amino acid profile of the protein that come from soybean are superb. It is as good as meat. Now, I love steak as much as the next guy, but in our own house we put vegetable soy proteins in the diet a lot more frequently than a few years ago. Our vision is to grow that to the benefit of Canadians for sure.
The Chair: As both of you pointed out, developing your markets internationally and domestically must be applauded.
I have one question to ask. Perhaps you could respond through the clerk of the committee. It is about the challenges that you have with intellectual property, if any. ``It'' being a not-for-profit organization, we would like to see the stream level of intellectual property if and when it impacts the private sector.
Mr. Schmalz: I can talk a bit about that. We work with many private companies. We do not own any IP. We will assist them, work on projects and help them to develop products. If there is any intellectual property, typically it is owned by the private sector.
The Chair: Mr. Magnus, do you have any comments on that?
Mr. Magnus: No.
The Chair: With that, I thank the witnesses very much.
Senator Robichaud is looking at the content of the can that you have distributed and has one final question.
Senator Robichaud: Is that on the market?
Mr. Schmalz: Yes.
Senator Buth: Why does it not say so?
Senator Robichaud: I am impressed. It is non-toxic and ecological. How does that compare with petroleum-based lubricant?
Mr. Schmalz: It is much more environmentally friendly. There are no noxious chemicals in it.
Senator Robichaud: What about the price?
Mr. Schmalz: We hired AC Nielsen to study this. Consumers will typically pay between $2 and $3 more per can for that than they would pay for the petroleum equivalent. That was part of the business development plan for the client. The retail price will shake out at least $1 to $2 more. We have it in front of a bunch of major retailers today. We are selling a lot of it off the website on behalf of our client. It has a bright future. We have six or seven more products behind that one ready to go.
Senator Robichaud: Good.
The Chair: Thank you very much for sharing your comments and vision and for showing us that you are developing new markets.
(The committee adjourned.)