Producers say the money won't mean much until the Canadian industry becomes more competitive with its U.S. counterpart. For that to happen, they say, the federal government must match tax incentives now offered south of the border.
"I'm not sure that that program is really worth anything unless we get tax parity with the States," says Tim Haig, CEO of Oakville, Ont.,-based BIOX Corp., which operates one of only two biodiesel plants in Canada. "It's kind of irrelevant."
Prime Minister Stephen Harper's Conservative government has boosted funding for the biofuels for producers initiative (BOPI) program to $20 million from $10 million.
The program provides individual projects with up to $300,000 to assist in the hiring of technical, financial and business-planning advisers; launch feasibility and other studies that support business proposals and play key roles in companies' ability to obtain financing; conduct pre-commercialization research; and gather information that helps increase biofuels production capacity.
Introduced last July, BOPI is geared largely toward farmers who produce the grains and other edibles that serve as the feedstock for biodiesel and ethanol. Farmers are required to invest at least 25 per cent in the total cost of a project.
A spokesman for federal Agriculture Minister Chuck Strahl says Ottawa doubled the BOPI funding because of higher-than-expected demand.
"The program, as announced last year, was over-subscribed," says Conrad Bellehumeur. "There were more producers who requested funds to innovate in that biofuels opportunities package than there was money available."
He says the funding is "a tremendous opportunity for producers" and will help the Tories meet their goal of having ethanol account for five per cent of conventional fuel by 2010 and two per cent of biodiesel by 2012.
Haig, who is also vice-chairman of the Canadian Renewable Fuels Association (CRFA), says boosting supply is the key to raising demand, which will come primarily from vehicle-fleet operators.
BIOX's Hamilton-based plant now sells its maximum of 60 million litres of annual biodiesel production exclusively to U.S. customers, because the firm can take advantages of tax incentives that total about US31 cents per litre.
The American tax incentives reward companies that blend biofuels with conventional energy, and small producers that turn feedstock into fuel. The government programs enable producers to make and ultimately sell their fuel at lower prices.
"There's no point (selling in Canada) if (a rebate is) 30 cents a litre and you can get (the fuel) into the States," says Haig. "I think it only costs us four or five cents a litre to get it there. Why wouldn't we take it there?
"If (the federal government) wants to create a market in Canada, then it's going to have to do it."
Haig says conventional oil and gas companies must be the ones to sell biofuels. Otherwise, biofuel producers will just be niche players.
Canadian biofuel producers were expecting the Tories' March 19 federal budget to help them level the playing field.
"Any other funding package, really, is meaningless unless we have the same tax parity with the States - or we're just not going to get production built in Canada," says Haig.
Rothsay Biodiesel, a Ville Ste. Catherine, Que.-based subsidiary of Maple Leaf Foods Inc., is the only other large biodiesel producer in Canada. Conventional major producer Husky Energy operates an ethanol plant near the Alberta-Saskatchewan border town of Lloydminster and has a second one under construction in Manitoba.
Kory Teneycke, CRFA executive director, says BOPI is a good program that will help farmers determine whether a proposed project is viable.
"But BOPI in and of itself is not going to lead to more biofuels production. You're really talking about a very small program that's designed for (assessing) site feasibility."
There is no significant biofuel production in Canada because U.S. has more extensive government requirements for blending biofuels with conventional fuels, and the same tax incentives simply do not exist on the Canadian side of the border.
"Unless we achieve something close to parity, particularly in the tax programs, there will not be a very good business case for having biofuels facilities of any description built in Canada," says Teneycke.
But he says Ottawa and the provinces are addressing the issue of getting major oil and gas producers involved by requiring conventional fuels to be blended in part with biofuels.
Similar programs are being adopted in most other countries, including the U.S.
Ontario requires conventional gasoline to contain at least five per cent ethanol while both Manitoba and Saskatchewan have more stringent requirements of 7.5 per cent. The B.C. government's new energy plan calls for gasoline to contain five per cent ethanol in the future.
"It's becoming the norm to have a renewable fuel-content requirement, and it's also the norm that that requirement is increasing quite rapidly," says Teneycke.
New federal rules will grow the Canadian market and boost annual production to three billion litres per year by 2010 from the current 525 million.
Doug Hooper, CEO of North Vancouver-based Canadian Bioenergy Corp., whose firm received $300,000 in BOPI funding to advance its proposed biodiesel plant near Fort Saskatchewan, Alta., says the funding boost will ease pressures on the program.
He says BOPI is "a good program that's well-timed with the impact of the market."
"It will advance the prospects for biodiesel production," says Hooper, who also sits on the boards of the Canola Council of Canada and CRFA.
Hooper, who also calls for more tax parity with the U.S., expects Prairie provinces to produce most of the feedstock for biofuels. Ontario will serve as the centre for production facilities while some plants will also be built in the West.
With BOPI and other federal incentives, the Alberta biofuels program announced last October and the recent B.C. energy plan, "Canada is about to come of age in the renewable fuels market," Hooper adds.
But Gary Tomlinson, president of Agri-Green Biodiesel Inc. in Sparwood, B.C., says he won't build his proposed plant in Canada because financial incentives are better elsewhere.
Tomlinson, who has been manufacturing and distributing his product on a small scale to customers in B.C. and Alberta for about a year, says his firm qualified for BOPI funding, but he couldn't find any farmers willing to invest.
Still, he calls BOPI a good idea that could benefit farmers.
"If the big agri-companies come in, it's going to be business as usual," says Tomlinson. "They're going to give the farmers as little as they can get away with. But as far as the increase from $10 million to $20 million, it's not a lot of money. It's a drop in the bucket."
Dennis Rogoza, head of the BC Biofleet program, which includes a cross-section of agencies and vehicle fleets, seeks to expand the province's biodiesel use, agrees interest in biofuel use is high.
"The issue is more, at this point, on the production side," says Rogoza. "At this point in Canada, we don't really have wide biodiesel or, indeed, ethanol production. In Western Canada, unfortunately, there's very little production at this point. B.C. imports most of its biodiesel from the U.S."
