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Canadian Renewable
Fuels Summit |
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Canada Rides Renewable The first Canadian Renewable Fuels
Summit drew hundreds of biofuels stakeholders to Toronto in early December
as the nation prepares for a major ramp-up in production and use of both
ethanol and biodiesel. The hosts of the event, Kory Teneycke, executive director of the Canadian Renewable Fuels Association (CRFA), and Christine Paquette, executive director of the Biodiesel Association of Canada (BAC), set the tone for this milestone event. The summit was held at a key moment, a time when renewable fuels production and use in Canada is, according to some expert assessments, on the precipice of a major, extended surge. Despite the fact that severe winter weather hit Toronto on the day of the event, attendance at the summit topped 300. The summit drew eager participants from across Canada: producers, future producers, suppliers and service providers, as well as representatives of government, trade associations and academia. Joe Jobe, executive director of the U.S.-based National Biodiesel Board (NBB), set the stage with his comments, illustrating that while the United States is among the world’s most advanced biofuels-producing nations, Canada is making strides of its own. Jobe detailed new developments with the American Jobs Creation Act of 2004, which opened new opportunities for biodiesel in the United States; he also talked about the success of the NBB’s quarterly newsletter, which targets the petroleum industry. Jobe said that now is the time to move forward—a time for Canada and the United States to work together as a single industry with a common mission. The economics of biofuels An economics panel at the summit was comprised of Don O’Connor, president of S&T Squared Consultants; Gene Gebolys, president of World Energy Alternatives; and Brian Kelly, president of Kelwin Management Consulting. The panel discussed numerous topics, including the so-called “energy balance” of ethanol production. O’Connor stated that industry data overwhelmingly shows significant positive energy gains from the production of ethanol. The panel discussed three provinces, Saskatchewan, Manitoba and Ontario—that have adjusted taxation rates for renewable fuels. The three provinces were held up as examples of what could be done across Canada. However, the panelists said the question goes beyond the different biofuels taxation rates—the larger questions revolve around trade. In many cases, it is easier to import and export ethanol across the U.S./Canada border than across provincial lines. The inter-Canada trade issue is an ongoing debate that will require extensive consideration and won’t be solved overnight. Government perspectives In a taped video presentation, Eric Cline, Saskatchewan’s minister of Energy and Resources, said Saskatchewan is a leader in the renewable fuels industry and will mandate ethanol use in 2005. The province will require 2 percent ethanol in gasoline by May and 7.5 percent ethanol in gasoline by November. Jeff Kraynyk, energy policy analyst for Manitoba’s Department of Energy-Science and Technology, discussed some of the challenges facing both the ethanol and biodiesel industries in Manitoba. Generally speaking, industry skepticism is a major hurdle; as a result, there is an ongoing effort to expand the education of potential users and create better consumer awareness of renewable fuels. Kraynyk noted that, despite challenges, Manitoba has the advantage of being situated above Minnesota, where many of the challenges of education, distribution and market acceptance have been overcome. Being near public policy in Minnesota has likely made Manitobans slightly more accepting of the alternative fuel. In a videotaped message, Walter Chomiak, Saskatchewan’s minister of Energy, Science and Technology, stated that the province passed the BioFuels Act, which allows for 10 percent ethanol in 85 percent of fuel sold in the province with an eight-year tax preference, but this mandate will only come into effect once there is sufficient domestic production to meet the demand. Chris Johnstone, director of the Ethanol Expansion Program (EEP) for Natural Resources Canada (NRCan), explained that the EEP, a federal renewable fuels program which was announced last August, is a joint effort with NRCan, and Agriculture and Agri-Food Canada to boost ethanol production in Canada. The two primary goals of the program, which falls under the climate change program for Canada, are to expand ethanol production and use across Canada and to reduce transportation-related greenhouse gas emissions. The program’s selection criteria reflect those goals. Under the EEP, there was $100 million in funding to be distributed to qualifying ethanol projects in two funding rounds—the first round was announced in October 2003 and the second round proposal deadline was announced on Dec. 6, 2004. The eligibility requirements are based on project readiness, and the evaluation process is based on those that need the least amount of support per liter of ethanol. The program allows for an eight-year repayment schedule based on the plant’s profitability. “The program is a combination of many factors helping to make this expansion possible,” Johnstone said. Steve Peters, Ontario minister of Agriculture and Food, stated that agriculture needs to adapt to survive. The recently announced renewable fuels standard for Ontario is a reasonable way to meet the objective of ethanol by constituting a 5 percent blend in all gasoline by 2007 as announced by Premier Dalton McGuinty. “Ontario has a future that embraces renewable fuels as the norm rather than the alternative,” Peters said. Investing and financing This discussion panel presented a diverse spectrum of information provided by Robert Gallant, president and CEO of Commercial Alcohols Inc.; Mike LeClair of Integrated Asset Management; and Randy Schwake, director of business development for AgMotion Inc. Gallant talked about the unique experiences encountered in operating the company’s ethanol plant. “The learning experience doesn’t stop, and education is of key importance,” he said, adding that even though Canada has a great ethanol industry with a bright future, it’s not an industry for the faint of heart. It was noted that with an Ontario ethanol mandate, the finance story changes. Having a provincial renewable fuels standard does not eliminate risks, but it does change them. In addition, there was general agreement that even with Ontario’s mandate, a so-called “Ethanol Manufacturer’s Agreement” (EMA) is still needed. However, the form of a would-be EMA under a mandate may now take a different shape, Gallant said. The EMA would be a separate agreement made between the ethanol producer and the Ontario government that provides continued fuel tax abatement for a period of 10 years, should the provincial government elect to eliminate the tax abatement provision contained in the current law. LeClair explained that the lenders are moving from the traditional 60 percent/40 percent equity-to-debt ratio to a 50/50 ratio. “The fact remains that technology is continually moving forward, we have learned from the mistakes, and lenders are slowly overcoming their biases through education,” he said. Schwake noted that lending is different in the United States than it is in Canada. In the United States, there is seemingly an eagerness on the part of lenders to finance viable projects. In Canada, there is still a general sense of skepticism on the part of lenders. Referring to the unpredictable price of corn and crude oil, and also the unexpected events that may occur in the development of a project, Schwake said, “Never say, ‘That will never happen.’ Why is there so much interest in ethanol? It’s cool, it’s an important energy strategy, and it’s a great economic development project. As a result, people want to invest.” In closing, Schwake said, “Risk mitigation must be in place, but you need someone who will not only advise but execute the strategy.” Environmental and agricultural benefits Gordon Surgeoner, president of Ontario Agri Food Technologies, reiterated that the announcement of a renewable fuels standard in the province, which sets a goal to be achieved over the next 25 months, will create a contentious period—a “kerfuffel period” as he referred to it—with lots of fuss and commotion among suppliers, and corn and ethanol producers. The next 25 months, during which ethanol production in Ontario is expected to quadruple in order to meet the new provincial standard, will be a hectic time; keeping an open dialogue will be important, Surgeoner said. The ability to communicate and especially listen to one another will be crucial. As Ontario works toward the mandate, stakeholders in the province need to be able to demonstrate that they have done due diligence and have a common set of criteria. “Everyone is working on the same common goal,” Surgeoner said. “We want to say it isn’t a policy based on change, but a policy based on sound economics—based on the environmental good and the public good.” David Andress, president of David Andress & Associates, provided a detailed technical look at the reduction of greenhouse gas emissions that can be achieved from the use of ethanol. The energy used in ethanol plants has changed significantly over the years. Agri-economic changes in how people use land, different crops and carbon content all have an effect on the environment. “Ethanol blends have a significant impact on the reduction of greenhouse gas emissions,” Andress said. “Because of the carbon uptake of the corn plant, ethanol blends are the only liquid fuel that has a net positive benefit.” He went on to say that even more greenhouse gas reduction benefits can be achieved through the use of cellulosic feedstocks for ethanol production. “Air quality is a key driver in the use of ethanol in the United States,” Andress said. “The effect on greenhouse gas emissions, as well as ethanol impact on the reduction of other toxic components in gasoline, will be a major driver in Canada.” Political priorities The final panel of the day began with a brief overview of the panelists’ companies and how they see the industry moving forward. A key point was raised by panelist Bliss Baker, vice president of Commercial Alcohols Inc. Referring to the final development of Ontario’s renewable fuels standard, Baker said, “We have a huge opportunity to make an impact, not only in Ontario, but right across North America—if we get it right.” Brad Hanmer, chairman of the BAC, said the association’s goal is to continue to foster alliances. BAC plans to take its message across Canada and “do more business in energy,” Hanmer explained. Jeff Passmore, executive vice president of Iogen Corp., reiterated that transportation of feedstocks is a major area of concern. Being able to utilize feestocks available in all regions of the nation is crucial and “that’s what cellulosic ethanol brings to the table,” he said. Education was a major focal point of the panel discussion. A need for education, it was generally agreed, extends far beyond the general public and into the lending industry. Panelists agreed that many Canadian lenders do not fully understand renewable fuels and as a result are not particularly excited about financing ethanol and biodiesel projects. Another issue raised was inter-provincial trade. Given the fact that there are no federal laws that require open trade borders between provinces, this could pose a problem for the transshipment of ethanol between provinces. This could have the effect of isolating ethanol producers from taking advantage of ethanol and biodiesel tax incentives in other provinces. It might also prevent sufficient production to meet the demand. Finally, since the federal government has no authority to mandate the use of renewables nationwide, it is up to the provinces to do so. Several panelists felt that the renewable fuels standard being developed in Ontario could potentially serve as a model for provinces across Canada to follow. As the day came to a close, Paquette emphasized that the interest and enthusiasm for biodiesel in Canada extends from coast to coast. “It is a national issue,” she said. “While the renewable fuels standard is being established in Ontario, each province is looking at what is best for its jurisdiction as well as working with stakeholders to ensure the process is consultative.” Teneycke said, “Biofuels roots are in the social, economic and environmental benefits they provide. Let’s work together in energizing the biofuels industry in Canada.” The event was coordinated for the CRFA and the BAC by BBI International and BBI Biofuels Canada. EPM
Sigrid Villeneuve is manager of BBI Biofuels Canada. She can be reached by e-mail at sigrid@bbibiofuels.com or by phone at (519) 576-4500. Be a part of the exciting growth of the biofuels industry in Canada!
The Summit involved key decision makers and addressed:
Who Attended:
Also, the renewable fuels industry in Canada came together to celebrate success at the first annual Green Fuels Awards dinner, Monday evening, December 7. For more information on becoming a future summit sponsor to promote your company with a corporate display, and capitalize on valuable advertising opportunities, please contact Kory Teneycke, Canadian Renewable Fuels Association at 416-304-1324 or kteneycke@greenfuels.org . The Canadian Renewable Fuels
Summit was hosted by:
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By
Sigrid Villeneuve