The federal government has been told that the best thing it could do in its March 19 budget to help develop a biofuel industry in Canada would be to announce tax breaks for ethanol and biodiesel produced in locally owned plants.
Gerald Tumbleson, president of the National Corn Growers’ Association in the United States, said the ethanol industry took off in his home state of Minnesota because of favourable support policies under the U.S. farm bill and favourable federal and state tax policies.
“The tax structure in your country will determine what is built,” he said. “I think it is necessary that your government give a tax advantage to locally owned plants if this industry is to grow.”
Read Also
Canola oil transloading facility opens
DP World just opened its new canola oil transload facility at the Port of Vancouver. It can ship one million tonnes of the commodity per year.
In Minnesota, a key government decision was a 20 cent US per gallon tax break on the first 15 million gallons of production, a clear advantage to local small plants.
It worked out to a tax break of approximately $3 million per plant per year for a decade. Since a small local plant cost $35 million to build, the government tax break helped investors raise the required capital knowing that the tax break would be worth $30 million, he said.
He also said construction of a plant near his home town created $350 million in economic activity for the community and its businesses.
“That’s a good investment,” he said.
In an earlier breakfast speech at an event organized by the Canadian Co-operative Association, Tumbleson extolled the virtues of local or farmer ownership in ethanol plants and the key role of government policy in making it happen.
“Government sets up an opportunity for local ownership,” said the conservative farmer with strong views against government ownership.
Tumbleson, who operates a corn, soybean and hog farm and has a stake in several small ethanol plants, was a driver in developing government support rules that allowed the ethanol industry to grow in Minnesota and then spread throughout the United States.
He said the first step was when farmers realized in the 1990s that low-price corn surpluses were not going to make money as long as they were sold as a commodity.
Significant investment in research showed a potential to turn corn into a product that America needed – energy.
Boosters convinced the Minnesota legislature to pass a requirement that fuel sold in the state eventually be 10 percent biofuel.
The next step was to work out the tax break on production and then farmers in his area decided they would benefit more if they owned the plant rather than allow large agribusiness firms to develop the industry.
Approximately half the ethanol plants being developed in the U.S. are co-operatives or farmer owned.
“The ownership of these plants has to be in the region where they are located,” he said.
Meanwhile, provincial and territorial ministers responsible for renewable energy said the March 19 budget will be key to how much, where and under what structure the Canadian biofuel industry develops.
Several of the ministers and representatives from all jurisdictions met Feb. 21 in Gatineau, Que., to fret about delays in creating the government policies needed to attract investment decisions.
The provinces “voiced their common concern that the development of Canada’s renewable fuel strategy is falling behind the advances of other jurisdictions” in a communiqué issued after the meeting.
The United States is vowing to expand production five-fold, and China has announced a goal of 20 percent biofuel by 2020.
“We are asking the federal government that as it designs its strategy, to look at what has been happening elsewhere,” Saskatchewan agriculture minister and conference co-chair Mark Wartman told a news conference.
