Word is out that Canada’s biofuel industry won’t receive the top up it needs in the upcoming federal budget to become competitive with the United States.
“We’re hearing that what the government is considering under the budget falls short of what the industry is asking for, which is tax parity with the United States,” said Tyler Bjornson, the canola industry’s Ottawa lobbyist.
It is not known how short the draft spring budget falls from the industry’s request for a refundable tax credit of 10 cents a litre for ethanol and 20 cents a litre for biodiesel.
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“It doesn’t matter if it is a couple of cents below or five cents below. The fact is it isn’t what is needed to give us tax parity,” Bjornson said.
“We’re not terribly concerned how far it’s short, it’s just that it is short.”
Without that critical piece of policy, the proposed ethanol and biodiesel mandates will be rendered useless, said Jim Caughlin, chair of the Saskatchewan Canola Development Commission. He contends a tax incentive shortfall would chase biofuel production south of the border.
“You’d be better off to go to the Dakotas and build (plants) there with the intention of shipping the finished product of either biodiesel or ethanol back to Canada,” said the canola producer from Tisdale, Sask..
Caughlin is especially concerned about what will happen in Saskatchewan.
Alberta has announced a nine to 14 cent per litre production tax credit for plants producing biodiesel in the province between April 2007 and March 2011.
Manitoba has eliminated the 11.5 cents per litre road tax on biodiesel.
But Saskatchewan is waiting for a federal announcement before it does anything.
Biodiesel proponents contend they need a minimum combined federal and provincial tax credit of 30 cents per litre. If that doesn’t happen investors won’t build.
“You simply don’t put a shovel in the ground,” Coughlin said. “You don’t invest your first dollar because you know in the immediate term you have no place to go except go broke.”
Bjornson said if the federal government stuck with the status quo policy of waiving the 10 cents per litre excise tax on ethanol and the four cents per litre excise tax on biodiesel, it would cost the government an estimated $2.1 billion in foregone revenue over 10 years at the proposed mandate levels.
Industry’s request to convert those exemptions into production incentives would cost $2.7 billion over that same time frame, or an extra $600 million. Bjornson said that policy change would encourage the development of a domestic industry rather than allowing foreign interests to take advantage of the excise tax exemptions.
But the industry appears to be facing an uphill battle in Ottawa, where there are many other interests competing for federal budget dollars.
“I’m not sure what more influence, short of a baseball bat, that you can have on the situation,” Caughlin said.
Earlier this month, canola industry officials from the three prairie provinces met with western MPs to voice their concerns. The MPs were sympathetic and expressed support for the proposed tax credits, but most are backbench MPs with limited influence on government policy.
The canola industry is making one last-ditch attempt to sway the minds of politicians, calling on growers to launch a letter-writing campaign, telling key politicians that tax parity with the U.S. is a must. The Saskatchewan Canola Development Commission has posted a letter on its website that growers can e-mail to prime minister Stephen Harper and finance minister Jim Flaherty.
Bjornson said only a few weeks of arm-twisting likely remains before the budget is announced. But even if the upcoming budget falls due to an election call, he said it will set the benchmark for future budgets and give financial institutions and investors confidence in the industry.
