Canada’s newly minted biodiesel mandate and associated policies have failed to deliver on the government’s promise of a new processing opportunity for canola, say grower and biofuel groups.
Last week, Ottawa set a July 1, 2011, start date for a two percent national mandate that will require an estimated 600 million litres of biodiesel to be consumed by Dec. 31, 2012.
The biodiesel sector praised the government for moving on the mandate, but warned that it won’t be met by Canadian-made canola biodiesel, which was one of the original policy objectives.
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Canada has 206 million litres of annual biodiesel capacity, 49 million litres of which are canola based. More capacity is in the works with a number of plants either planned or under construction.
The biggest proposal is a Canadian BioEnergy Corp. project to build a 265 million litre canola biodiesel plant in Lloydminster, Alta., in conjunction with Archer Daniels Midland’s existing crushing plant.
But the project is on hold because the company failed to secure a production credit through the ecoEnergy for Biofuels program.
“There were a number of well developed (canola biodiesel) projects across Western Canada that did not receive contribution agreements,” said Canadian BioEnergy president Ian Thomson.
He said that’s a shame because the ecoEnergy program was sold to Canadian taxpayers as a vehicle for creating new opportunities for farmers.
“I think there is general agreement within the government and certainly within the agricultural community that the ecoEnergy plan did not fulfill that,” he said.
A spokesperson for Natural Resources Canada said the program was not designed to focus on any particular feedstock. Companies that demonstrated advanced readiness and ranked the highest on the merit criteria, including financing, environmental performance and technology, received contribution agreements.
Federal agriculture minister Gerry Ritz said the mandate will pay dividends to farmers.
“We hope that these new regulations will encourage private investment in the processing industry and in the meantime canola growers will benefit from an expanded market for biodiesel,” he said.
The Canola Council of Canada hopes the mandate will create a one million tonne market, but where it is processed remains to be seen.
Canadian oil companies have expressed their preference for canola biodiesel because of its superior cold weather properties.
However, the council said that unless the government acts quickly, the fuel will be supplied by the Archer Daniels Midland canola biodiesel plant in Velva, North Dakota, and the Imperium Renewables plant in Seattle, Washington.
“We’re going to send canola to the U.S. They’re going to make it into biodiesel and then they’re going to send it back to us,” said council president JoAnne Buth.
“It’s already happening in B.C. where they’ve got a mandate.”
The proposed Canadian BioEnergy Corp./ADM plant in Lloydminister would consume 600,000 tonnes of canola annually.
“A singular project could have significant impact on domestic demand for growers,” said Thomson.
Both companies are still eager to build the plant.
However, they say they can’t proceed unless Ottawa quickly addresses the shortcomings of a production incentive program that ran out of money and left well developed projects standing on the sidelines.
Buth said some companies reconsidered their plans because of the shrinking margin between biodiesel prices and feedstock costs, a failure to secure the required permits or problems with financing.
However, other viable canola biodiesel projects are ready to go and the council has asked the federal government to create another incentive program for them.
“It doesn’t need to be a complicated program. Use the same criteria EcoEnergy used,” she said.
It typically takes 18 months to build a biodiesel plant, so time is of the essence if Canadian canola biodiesel plants are to contribute to the mandate’s first compliance period.
“We need it right away,” said Buth. Thomson agreed that sooner is better because it will be tough to compete if they are slow getting out of the gate.
“If imports become well established into Canada, it becomes harder for a start-up Canadian production plant to elbow its way into established supply contracts,” he said.
The Natural Resources Canada spokesperson said the government has reviewed its clean energy programs. Decisions regarding the next phase of clean energy initiatives will be made before the end of March.
In the meantime, the council and the federal government are taking steps to ensure U.S. biodiesel plants can use Canadian canola.
