The Canola Council of Canada says a two percent renewable content mandate is a good start for a biodiesel industry that lags behind the ethanol sector.
On Dec. 20 the federal government announced it intends to regulate a five percent renewable content in gasoline by 2010 and implement a two percent renewable content requirement in diesel fuel and heating oil by 2012.
“The biodiesel industry needed to have a market access entry point and we’ve secured that,” said council president Barb Isman.
But according to Saskatchewan Canola Growers executive director Judie Dyck, nothing has been secured because the federal government used the term “renewable content” instead of “biodiesel mandate” in announcing the diesel standard.
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That opens the door for oil companies to fill the mandate through hydrocracking, a process that mixes vegetable oil with crude oil, bypassing the need to add the expensive blending and transportation infrastructure associated with biodiesel.
The Canadian Petroleum Products Institute has stated that hydrocracking is a more efficient way to meet the renewable fuel mandate. While the process is in its infancy, it could conceivably be in place by 2010.
Dyck said hydrocracking is a looming threat to the biodiesel sector and to farmers in general because producers won’t own the plants and while canola is the fuel of choice for biodiesel, any kind of cheap vegetable oil could be used in the hydrocracking process.
She wonders where the federal government’s vague renewable content mandate leaves biodiesel proponents.
“It’s going to be very difficult to develop any kind of industry if we don’t have access to the domestic market,” said Dyck.
Isman doesn’t foresee the same doom and gloom scenario. She is taking the petroleum industry at its word – that subject to biodiesel passing quality tests, it will be incorporated into their fuel supplies.
If that doesn’t transpire there is always a chance to rectify the problem through provincial biodiesel-specific mandates, making changes to the federal mandate, implementing tax incentives that only apply to biodiesel projects or expanding the federal mandate to five percent to accommodate multiple alternative fuel technologies.
Over the long term, Isman thinks hydrocracking represents more of an opportunity than a threat to the canola industry because Canadian petroleum companies will need a steady supply of vegetable oil and Canadian farmers seeded 13.15 million acres of canola last year.
Jim Caughlin, chair of the Saskatchewan Canola Development Commission, also downplayed the threat of the hydrocracking industry. He doesn’t care if a hydrocracking plant replaces a biodiesel plant near his hometown of Tisdale, Sask., as long as it still employs his children and buys his canola.
“That’s OK with me,” he said.
Caughlin applauded the federal Conservatives for following up on their election promise to establish a national mandate for renewable fuel but cautioned that their work isn’t over.
“We still need some tax incentives to create a level playing field so that this industry doesn’t develop somewhere else,” he said.
Isman echoed that sentiment.
“Without government incentives that put Canada on par with the U.S. there is no biodiesel industry in Canada. We need to ensure this piece of the puzzle is in place as soon as possible or the opportunity for Canadian farmers and the economy will be lost.”
She hopes those tax incentives will be in place early in the new year.
While the biodiesel industry is “quite a bit further behind” in the commercialization of its product than ethanol, Isman is confident it will catch up.
Once the industry completes a project designed to ensure that biodiesel meets the petroleum industry’s performance standards under Canada’s harsh winter conditions, she added, there will be nothing holding biodiesel back. That project should wrap up in 2008.
“The government can then put biodiesel on the same schedule as ethanol,” said Isman, noting that the industry should be capable of meeting its two percent biodiesel requirement by 2010, two years ahead of the government’s 2012 deadline.
