Over-blending said to be the cause but opinions differ on the reason — gov’t says it’s cheaper, industry credits efficiencies
Canada continues to import vast amounts of U.S. ethanol, some of which is being used to meet federal and provincial mandates.
A record 1.32 billion litres of the renewable fuel flowed across the border in 2018, a seven percent increase over the previous year.
Canada’s five percent mandate amounts to a blending requirement of 2.25 billion litres of ethanol, so it would appear that a lot of foreign ethanol is being used to meet the mandate.
However, that is not necessarily the case, said Andrea Kent, a spokesperson for Renewable Industries Canada.
“In Canada, oil and gas companies habitually blend ethanol beyond the mandated requirements,” she said in an email response.
“It’s well understood that oil and gas voluntarily choose to blend in more ethanol, often because of ethanol’s lower price and higher octane value compared to traditional gasoline.”
A lot of the U.S. ethanol is brought in to meet that excess demand. Canadians used 3.15 billion litres of ethanol in 2018, according to Statista, which is well beyond the mandated amount.
Peter Boag, president of the Canadian Fuels Association, takes issue with Kent’s comments.
“The allegation that suppliers do it because it is cheaper and because of the higher octane value is a myth and completely unfounded in Canada,” he said in an email.
Boag said the most recent official renewable fuel standard data from 2017 shows the overall ethanol blending level that year was 7.5 percent.
“The current over-blending is a result of optimizing the supply chain and maximizing efficiencies and the substantial investments the industry has made in the last 10 years to comply with renewable fuel blending mandates,” he said.
Cost efficiencies favour investing in large volume terminals and blending at the E10 level to comply with the “patchwork” of provincial and federal mandates.
Boag said most of the U.S. ethanol imports occur in Atlantic Canada, Quebec and British Columbia where there is limited or no local ethanol production facilities.
Canadian firms produced enough ethanol in 2018 to supply about 85 percent of the federal mandate, according to Renewable Industries Canada.
In 2019, the association expects Canada to be 90 percent self-sufficient due to the expansion of the IGPC Ethanol plant in Aylmer, Ont.
Canada is the second biggest importer of U.S. ethanol behind Brazil, accounting for 20 percent of total U.S. exports.
That may explain why the U.S. ethanol industry was eager to weigh in on Canada’s proposed Clean Fuel Standard (CFS).
Growth Energy, the U.S. Grains Council and the Renewable Fuels Association jointly submitted comments to Environment and Climate Change Canada on its regulatory design paper for the standard.
“We support the laudable and achievable goal to reduce the carbon intensity of the liquid fuel stream by 11 percent, ultimately leading to a 23-megaton reduction in greenhouse gas emissions by 2030,” said the submission.
“We believe that by using low carbon biofuels such as ethanol, Canada can succeed in its own greenhouse gas reduction goals.”
The U.S. ethanol groups suggested that Canada should expand its minimum blending requirement for ethanol to 10 percent from five percent.
Renewable Industries Canada is also pushing for a doubling of the mandate through the Clean Fuel Standard.
The Canadian Fuels Association does not support expanding the mandate.
“The CFS will likely increase the demand for both ethanol and biodiesel. But it should be an option rather than a mandated requirement,” said Boag.
He said a 10 percent mandate would constrain the ability of fuel companies to innovate and pursue the lowest cost compliance options for the CFS.