by Allan S. Bronstein with the assistance of Sonu Dhanju, student-at-law
The Federal Government has been hard at work creating programs geared towards reducing transportation-related greenhouse gas emissions that contribute to global climate change. These efforts seem to be bearing fruit as domestic biofuels production has increased, resulting in increased opportunities for Canadian farmers and the agricultural sector.
The following two programs have been established to help the federal government achieve its goal of reaching an average 5 per cent renewable content in gasoline as of January 1, 2010 and an average 2 per cent requirement for renewable content in diesel fuel and heating oil by 2012. This will add nearly 2.7 billion litres of renewable fuel being produced in Canada annually by 2012, drastically increasing the size of the biofuels industry.
EcoEnergy for Biofuels Program
Natural Resources Canada has established the EcoEnergy for Biofuels Program (EcoEnergy) which will invest up to $1.5 billion from April 1, 2008 to March, 31, 2017 to boost Canada’s production of renewable fuels. The program expects to make investment in production facilities more attractive by partially offsetting the risk of high feedstock prices and by providing low fuel prices for plants that are built.
Specific parameters have been established for EcoEnergy and are subject to finalization. Upon finalization the parameters will be sent to the Treasury Board for approval which is expected sometime in the fall of 2007. The program will require that eligible facilities be constructed before March 31, 2011, with each facility receiving incentives for a maximum of 7 years. The program will also have volume limits of 2 billion litres of renewable alternatives to gasoline and 500 million litres of renewable alternatives to diesel. These limits may increase, subject to funding availability. Producers can expect incentive rates of up to $0.10 per litre for renewable alternatives to gasoline and up to $0.20 per litre for renewable alternatives to diesel for the first three years of the program, declining over the following 6 years. Each funding recipient will have a cap of 30 per cent of the program volume. A minimum production volume per eligible facility will be proposed as well as certain thresholds for, and reporting of, environmental performance.
EcoAgricultural Biofuels Capital Initiative
The EcoAgricultural Biofuels Capital Initiative (ecoABC) is a federal initiative designed to help agricultural producers and rural communities benefit from new market opportunities in the biofuels industry. The four-year initiative will provide repayable contributions of up to $25 million per project for the construction or expansion of transportation biofuel production facilities.
Funding is provided for projects that use agricultural feedstocks to produce biofuels and that have new agricultural equity investments in the projects equal to a minimum of 5 per cent of the total project costs; however, a maximum of $1 million will be recognized per individual agricultural producer. The program has been funded with $200 million, delivered on a first-come, first-served basis, with a maximum of $50 million per province or territory. Each facility must produce a minimum of 3 million litres per year for biodiesel facilities and 5 million litres per year for fuel ethanol facilities. Contributions are not made until after the plant reaches design capacity. Contributions must be paid back at a rate of 25 per cent of the profits made over $0.20 per litre for a 7 year period after start up.
The current federal government seems intent on making additional funds available to allow producers greater involvement in biofuel production. With the current level of support provided by the federal government, Canada is well on its way to reaching its goals.
Torkin Manes Cohen Arbus LLP, Barristers & Solicitors, is a full service, Toronto-based law firm, committed to providing personalized and high-quality legal services. For more information about the firm, its areas of practice and its lawyers, please visit http://www.torkinmanes.com.
Allan Bronstein is a lawyer at Torkin Manes and a member of the firm’s Business Law group. He can be reached at (416) 777-5369 or abronstein@torkinmanes.com. Sonu Dhanju is a student-at-law in the Torkin Manes’ Business Law group.