Fueling the Future: Atlantic Canada’s Bioenergy Opportunities Project

Project Report APRI Project No. 200344

Atlantic Canada’s Bioenergy Opportunities Project

APRI No. 200344

Acknowledgments This report was produced by the Atlantic Council for Bioenergy Cooperative (ACBC) – under the leadership of Ken Magnus, Chief Executive Officer – in partnership with BioAtlantech New Brunswick, with funding from the Atlantic Canada Opportunities Agency.

The project team recognizes the work, cooperation, support, and assistance of: 

ACBC’s Executive and Board of Directors



BioAtlantech



Gardner Pinfold Consulting



Dr. Gerrard Marangoni



Interprovincial working groups in New Brunswick, Nova Scotia and PEI, including their respective departments of Energy, Agriculture and Economic Development.



Atlantic Canada Opportunities Agency (ACOA)

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Cape Breton University Verschuren Centre for Sustainability in Energy and the Environment (CSEE)



Collège communautaire du Nouveau-Brunswick (CCNB)

This report is based on information gathered between March 2012 and May 2013.

Disclaimer: This report is funded by the Atlantic Canada Opportunities Agency (ACOA) under the Atlantic Policy Research Initiative, which provides a vehicle for the analysis of key socio-economic policy issues in Atlantic Canada. The views expressed in this study do not necessarily reflect the views of ACOA or of the Government of Canada. The author is responsible for the accuracy, reliability and currency of the information.

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Executive Summary Introduction & Purpose The biofuels sector provides Atlantic Canada with the opportunity to position its assets wisely, and to use them to build a sustainable biofuels industry in this region. With the development of initial and first generation biofuels production facilities across Canada and elsewhere in recent years, Atlantic Canada can capitalize on those experiences to determine how they may best apply here. With the regulatory push to spur industry at the federal level, the regional innovative capacity, recent and ongoing research, access to academia, and the availability of renewable resources, there is ample room for a large scale commercial biofuels industry development to take shape in Atlantic Canada. Acting in the capacity of Atlantic Canada’s lead bioenergy association, ACBC’s mission is to educate and promote the development of a sustainable bioenergy industry in Atlantic Canada and to establish provincial and federal government policy and programming that will allow for the development of a bioenergy industry in the Atlantic region. ACBC’s vision statement is: a vibrant, sustainable bioenergy industry, producing in Atlantic Canada, for Atlantic Canada, with a near term outlook to export and supply outside of the region to meet the increasing demands of the United States biofuels market. To this end, Atlantic Canada needs both federal and provincial government policy and programming (P&P) designed to meet its needs for growth. With this project, ACBC intends to clarify, assess and reveal the region’s bioenergy; build a business case for a bioenergy sector in the region; identify the economic impact of that sector; and ultimately make recommendations for the necessary policy and programming. This project is ground-breaking. This type of information is not currently readily available in Atlantic Canada; and, data and findings that do exist elsewhere cannot provide a realistic and accurate picture of this region’s potential. This project and its findings will be an instrumental starting point to provide governments and industry players with an understanding of the potential for bioenergy in the Atlantic region and clear recommendations for moving forward to deliver the economic opportunity, jobs and environmental benefit for Atlantic Canadians.

Methodology The information contained in this report is the result of in-person interviews; online surveys; research analysis; engagement and discussion with industry and government stakeholders – provincial and federal, elected and non-elected; and finally, significant analysis, deliberation and recommendation from the ACBC Board of Directors and its members. Its findings are validated through the analytical work of Gardner Pinfold, one of Canada’s leading economic consultants, who were contracted to assess the feasibility of this sector, as well its economic impact. This firm’s background, expertise, and strong reputation for quality research and methodological reporting provide important credibility – and calculated proof – for the arguments and recommendations this project makes.

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This project was delivered through methods including: an asset inventory, research analysis a feasibility model, an economic impact analysis and recommendations.

Assets & Opportunity The biofuels industry in North America is driven mainly by the Renewable Fuels Standards (RFS) introduced by various levels of government in Canada and the U.S. To meet the RFS mandate in Atlantic Canada, the region would have to produce in excess of 250 ML of ethanol and approximately 75 ML of biodiesel. In fact, the potential biofuel opportunity is seen as significantly greater since fuel produced with energy beets and other potential feedstocks specific to this region would qualify as a blendstock under the U.S. RFS2. There is also a substantially larger export market opportunity not defined in this report but that could easily double demand. Atlantic Canada is rich in natural resources and it is these natural resources where the biomass assets lie. The region’s provinces have a long history of agriculture, forestry and marine biomass and consumption. This, combined with the region’s extensive technological research capacity (numerous academic and institutional research organizations) provides the right backdrop for the industry to grow and develop. Agriculturally, there is sufficient crop acreage to produce a number of potential feedstocks – including corn, wheat, barley, soybean, canola and sugar / energy beet – as well as provide farmers the opportunity to develop new crops and rotations, putting underutilized land back into production. An emerging biofuels industry could create demand for suitable crops that are not currently grown, or not grown in sufficient quantities, at acceptable costs, to meet industry requirements. Cellulosic biomass crops (including marine and forestry sectors) also offer potential, once the production technology to support it is commercialized; new technologies and applications present significant opportunity in this region. References in this report to biofuel production volumes in Atlantic Canada are represented by the numbers suggested above and demonstrated in the below table; it confirms that Atlantic Canada has and can produce the necessary feedstock to build a viable biofuels industry, and that stakeholders are ready and capable to support its development and growth, with the proper tools in place.

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L

5% Blend Ethanol

10% Blend Ethanol

2% Blend of Bio-diesel

Motor gasoline

1.195 BL

59 MML

118 MML

Diesel Fuel Oil

889 MML

18 MML

Heating Oil

904 MML

18 MML

Nova Scotia Fuel Energy

New Brunswick Fuel Energy

L

5% Blend Ethanol

Motor gasoline

1.129 MML

56 MML

Diesel Fuel Oil

1.189 MML

24 MML

317 MML

6 MML

Heating Oil

PEI Fuel Energy

10% Blend Ethanol

2% Blend of Bio-diesel

112 MML

L

5% Blend Ethanol

Motor gasoline

230 MML

11.5 MML

Diesel Fuel Oil

132 MML

3 MML

Heating Oil

192 MML

4 MML

Newfoundland Fuel Energy

10% Blend Ethanol

2% Blend of Bio-diesel

23 MML

L

5% Blend Ethanol

10% Blend Ethanol

2% Blend of Bio-diesel

Motor gasoline

670 MML

33.5 MML

67 MML

Diesel Fuel Oil

521 MML

10.42 MML

Heating Oil

611 MML

12.22 MML

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SWOT Analysis Stakeholders have identified a number of internal and external factors that are favorable and unfavorable to building a bioenergy sector in Atlantic Canada. The SWOT analysis is based on the following definitions: 

Strengths – characteristics that provide it an advantage.

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Weaknesses (or Limitations) – characteristics that create a disadvantage

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Opportunities: external factors in the environment that could improve performance (e.g. make greater profits)

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Threats: external factors in the environment that could cause trouble

STRENGTHS • Significant & diverse biomass • Open territory - development, policy and programming • Renewable Fuels Standards • Established lead agency • Strong research and academic community • Existing producers, plants • Interested governments

WEAKNESSES • Lack of awareness, understanding • Perception that region cannot deliver volume • Renewable Fuels Standards • Behind industry pace • Federal funding spent • No strong government champion • Lackof experience as a sector

SWOT ANALYSIS OPPORTUNITIES • Outside investment interest • Cellulosic capacity • Close proximity for export • Shared desire to end imports • Traditional industries (feedstocks) available to support sector • Federal mandate for renewable fuels production • Regional priority for economic development and employment

THREATS • Current reliance on imported biofuels • Global economic challenges • Provincial governments face fiscal constraint • Limited will for provincial mandates, policy and programming • Resistance towards implementing RFS

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Feasibility To understand the true cost and potential return on investment for production facilities in Atlantic Canada, Gardner Pinfold Consultants Inc., were contracted to develop a tool that producers and lending agencies could use to analyze prospective ethanol and biodiesel fuel projects – an Atlantic Biofuels Feasibility Model. The model is designed to help assess the financial viability of biofuels production options in Atlantic Canada, based on six key factors: feedstock types, plant scale, pre-construction and construction costs, financing, operating costs and revenues. After entering information for each of these six areas, the Model calculates production results and financial indicators to assess the potential performance of a biofuel plant. The Model can evaluate up to six plants simultaneously and provide a summary of results for all six on a final comparison sheet, with a profile of the inputs for each plant. A side-by-side comparison gives operators the opportunity to evaluate the performance of plants that might have different feedstocks or different capacity. Additionally, model users could adjust any number of other variables – such as feedstock price, interest rates, % equity, revenue, or capital costs – to different levels, to see how they might impact the overall performance of a plant. This ability to assess the impact of different variables can also help operators identify what they need to make a plant financially attractive to bank lenders or private investors. For instance, a potential plant may initially appear to have an 8-year payback period; but, a combination of variables like low-interest loans, capital cost assistance, feedstock subsidies, and salary rebates could be examined to determine what might bring the payback period down any number of years. This model will allow industry proponents and their associated partners and investors to consider several options that may be applicable to their region, and their particular expertise, to help assess the financial viability of biofuels production options in Atlantic Canada.

Economic Impact The firm of Gardner Pinfold Consulting Inc. was also engaged to assess the economic impact for the biofuels sector in Atlantic Canada, to provide industry and government with a tool to improve the understanding and further the development of a biofuels industry in this region. The study set out to answer the question: “If a bio-fuels industry were to develop in the Maritime Provinces, what would be its impact?” Because current biofuels production in this region is not operating on the scale needed to meet federal ethanol and bio-diesel mandates, there is no basis to document economic impacts. The information in this study will provide prospective investors, lenders and governments with a better understanding of the scale of the industry and how its development and operation would affect the economies of each of the Atlantic Provinces, tracing the direct impacts of the bio-fuels industry itself, as well as the indirect impacts of those industries supplying it with goods and services.

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The main objective of this study was to quantify both the direct and spin-off impacts of developing and operating a biofuels industry in the Atlantic Provinces; to do so, it uses the Statistics Canada Inter-provincial Input-Output Model, because it produces direct, indirect and induced impact results and it produces results at a high level of resolution. Normally, this model uses the gross value of the output, the revenues generated through sales of the final product, to measure economic impact. But, because there is no established biofuels industry in the Maritime Provinces, this study instead uses the value of the commodities used in the production process. The report states that economic impact can be measured by four indicators: GDP, employment, labour income and tax revenue. For the purpose of estimating economic impacts, this study used the above mentioned volumes – 250 ML ethanol and 75 ML biodiesel – as the basis for a biofuels industry in the Maritimes. The study also assumes that biofuels plants have a capacity of 25 ML. Accordingly, this region would require 13 plants to meet the full 325 ML capacity. The analysis shows then, a one-time regional economic benefit of plant construction totalling approximately $373.1 M in GDP, over 5,000 FTEs, an average total income of $256.1 M and average total tax revenue of $81.9 M. Once biofuels plants are operational, the region will see positive economic impact, year over year. Again, based on the operation of 13 plants to meet the full 325 ML capacity in this region, the annual economic impacts will total up to $244 M in GDP, nearly 5,000 FTEs, an annual income of $125 M and an annual tax revenue to federal and provincial governments of close to $50 M. New Brunswick Nova Scotia Prince Edward Island (GDP, Income & Tax in $000s Employment in FTE) 1 Plant 5 Plants 1 Plant 4 Plants 1 Plant 4 Plants

Maritime Provinces 13 Plants

GDP Direct Indirect Induced Total Employment Direct Indirect Induced Total

8,430 8,145 2,804 19,379

41,140 41,855 12,883 95,878

5,845 9,455 2,708 18,008

23,380 37,820 10,831 72,031

7,925 8,710 2,235 18,870

31,700 34,840 8,940 75,480

96,220 114,515 32,654 243,389

15 224 104 343

85 1,210 510 1,805

30 240 95 364

120 959 378 1,457

20 269 99 388

80 1,076 394 1,550

285 3,245 1,283 4,813

930 6,720 1,275 8,925

5,270 35,020 5,865 46,155

1,845 7,055 1,300 10,200

7,380 28,218 5,202 40,800

1,240 7,430 1,020 9,690

4,960 29,720 4,080 38,760

17,610 92,958 15,147 125,715

694 1,744 1,590 4,028

2,774 6,977 6,360 16,111

8,822 22,629 16,782 48,233

Income Direct Indirect Induced Total

Tax revenue Corporate 715 3,532 629 2,516 Personal 1,607 8,308 1,836 7,344 Sales & excise 890 5,850 1,143 4,572 Total 3,211 17,690 3,608 14,432 Source: Tables 2 and 4. Note: NB plants composed of three biodiesel and two sugar beet ethanol.

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Finally, these figures represent annual impacts for an industry with a long-term life expectancy, of 25 years or more. Operating at its full potential, year over year, a biofuels industry will result in significant long-term economic impact for the Maritime provinces. Combining these two identified economic impacts for the region over a 5 to10 year period, including the time and resources to build the plants and the overall operations of the plants could result in a $Billion economic impact, with potentially $300 to $500M in government tax revenue and thousands of jobs.

Recommendations Throughout the duration of this project, ACBC worked with its industry association members, Atlantic bioenergy stakeholders, Maritime Canada production facility proponents, industry producers & refineries, industry distribution companies, research and academic professionals, provincial and federal government officials and bioenergy stakeholders at large. The result, after 18 months of engagement and information sharing, are numerous findings, which lead to most importantly, the proposal of recommendations to support the development of a biofuels production industry in Canada and achieve the economic and environmental impacts the industry holds for this region. They present significant immediate impact, in addition to other short and long-term benefits for Atlantic Canada, demonstrating that support for this sector can result in jobs, economic development and opportunity for multiple other sectors in the region. These recommendations are based on experiences and working solutions from other parts of Canada, North America and the world, with proven track records for government support and industry success, including a demonstrated return on investment. They are an initiative for government collaboration and industry cooperation, seeking commitment from both the Government of Canada and the provincial governments of New Brunswick, Prince Edward Island and Nova Scotia and will require an aggressive and committed plan of action form all parties. The following four recommendations are proposed as the key public policy instruments required to set the stage and drive industry development for Atlantic Canada.

RECOMMENDATION #1 IMPLEMENTATION OF RENEWABLE FUELS REGULATIONS Specifically: 

The government of Canada continue to finalize and implement the renewable fuels regulations as legislated.



The Maritime Provinces adopt complimentary provincial renewable fuels legislation.

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This report repeatedly suggests that a proposed and potentially successful biofuels industry for the Maritime region is based on the indented national implementation numbers, and would provide for an industry production scale of well above 300 ML of biofuels, produced locally, and providing local economic and environmental benefits. Implementing a Renewable Fuels Standard on a provincial basis, that is equal to that already in place nationally, eliminates current gaps in policy, puts an end to the confusion, and solidifies the commitment to succeed in this arena.

RECOMMENDATION #2 NATIONAL & CORRESPONDING PROVINCIAL CAPITAL ASSISTANCE PROGRAMMING Specifically: 

Atlantic Biofuel Capital Development Initiative: The introduction of a Government of Canada capital assistance program for Atlantic Canada creating the opportunity for equity investment by primary feedstock producers in the region.



Provincial Biofuel Capital Initiative: The Provinces of NB, PEI, and NS introduce a corresponding and complimentary provincial capital assistance program, to expand on and to include the opportunity for equity investment by primary feedstock producers and / or other provincial residents, companies or organizations.

ACBC and its membership believe that it is important to create the best opportunity for local ownership of newly constructed biofuels production plants. Local production, in our opinion should be owned by local people whenever possible. Local ownership will help create more local jobs and economic spin-offs for local economies. Capital assistance programming can provide the opportunity for farmers, communities and local residents at large to participate in the value-added biofuel production industry in the region through investment ownership. This recommendation is potentially of little or no cost to governments and tax payers, as this is a repayable loan. Furthermore, these loans could be held by the lenders (provincial and federal) pending the completion of a feasibility study and overall “approved” financial package from its investors/stakeholders and all other lenders, thereby mitigating further government risk. All other approvals and commitments must be in place and both the federal government and the applicable provincial governments could present a set of criteria that must be met prior to approval.

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RECOMMENDATION #3 MATCHING FEDERAL & PROVINCIAL PRODUCTION INCENTIVES Specifically: 

Atlantic Biofuel Production Initiative: The Government of Canada introduces a production incentive program for qualifying regional producers. Program eligibility would expire after a regional production capacity of 325 million litres is met or upon a fixed date of program eligibility applications.



Provincial Biofuel Production Initiative: The Provinces of NB, PEI and NS create and introduce a Provincial production program initiative, with compatible terms, conditions and time lines.

Atlantic Canada’s production of biofuels must be competitive with other production plants throughout Canada and North America. To compete, the region must first be on a level playing field. In order for the industry to succeed in this part of the country, it must be able to provide quality product, at a competitive price, and at a guaranteed production volume. The minimum production for domestic consumption within this region, based upon the blended amounts suggested in recommendation #1 is well over 300 million litres per year. Production incentives can secure the ability for local production to successfully meet its financial obligations, pay back its loans and compete in the marketplace for the long term. Even though the industry here is just now getting its legs, an Atlantic specific program that provided a matching provincial / federal production incentive would be the final piece to ensure industry development in this region. It would result in a direct payout or cost to government; however, as identified through the Gardner Pinfold analysis, the economic impact of a biofuels industry of this scale, in this region, over a 5 year period, has the potential to exceed $1B. The contribution for this type of program would only be utilized if the industry builds to the recommended capacity – suggesting that the anticipated economic benefit of over $1B would be realized by our local communities. This has the potential to be a very good investment with great results.

RECOMMENDATION #4 ESTABLISH A REGIONAL WORKING GROUP COMPRISED OF INDUSTRY, GOVERNMENT AND ACEDEMIC REPRESENTATIVES Specifically, the working group would have the following responsibilities and tasks: 

Primarily, to consider the recommendations of this report and initiate a broader dialogue on the potential for development of this industry in this region; And further, to identify additional opportunities to participate in the national dialogues in this policy area; And continue to build relationships between, and across governments to further examine programs and incentives related to bioenergy.

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

Seek to strengthen coordination, engagement and partnerships between industry, government and academia, in particular with the respect to research and development, and other technological innovation.



Identify other project-specific items on an ongoing basis that could be initiated and implemented through the working group organization.

Atlantic Canada is a small region, both in terms of population and geographic proximity. To build an industry consisting of 8-15 plants, development on a regional scale – versus by individual province – just makes sense. An effective policy for industry development, on a regional scale, must come through collaboration among all players in the region. Interprovincial and federal/provincial relations will be not only valuable, but essential to this region’s success. In this industry, like many others, one of the key pieces in the puzzle is adequate, appropriate, and applicable research and development. This is particularly true for this industry, at its current stage of development. As Atlantic Canada emerges into the biofuels production arena, the region must consider different technologies, feedstocks and overall applications to the future of this industry. The background research required for this report has reinforced ACBC’s understanding that industry and academia must work together in order to progress together. Our members and our stakeholders recognize that R&D is not only important, but essential, and when done in consultation and partnership with industry has the potential to yield impressive and economically beneficial results. This recommendation could in fact be the most important; by bringing together government partners, facilitating research and development, and building a solid foundation for progress, this working group will be the catalyst to eventually drive forward all recommendations in this report and bring the Atlantic Canada biofuels industry to a whole new level.

ACBC and its membership are confident that these recommendations demonstrate the first collaborative effort of an organized and established pan-Atlantic industry group. This report clearly indicates that accepting, approving and implementing all of these recommendations will provide the right circumstances to create exciting opportunities and positive change for this region of Canada.

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Conclusion This report is the result of a comprehensive project spanning 14 months of research, engagement and information sharing to the ACOA team and regional stakeholders. It details numerous findings and proposes four recommendations that hold great economic promise for Atlantic Canada and its stakeholders in the biofuels industry. Together, the recommendations represent the first collaborative effort of an organized and established pan-Atlantic industry group – a long-term, committed and documented interaction with biofuels and bioenergy stakeholders through the New Brunswick, Prince Edward Island and Nova Scotia, as well as national and regional input for an informed and dedicated community of industry leaders and supporters. This report has been prepared by the Atlantic Council for Bioenergy Cooperative Limited (ACBC) in collaboration with BioAtlantech, New Brunswick’s lead bioscience agency, with all reasonable skill, care and diligence, and taking account of the resources devoted to it by agreement with the client. Information reported herein is based on the interpretation of data collected and has been accepted in good faith as being accurate and valid.

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TABLE OF CONTENTS Preface

1

Introduction

2

Methodology

3

Assets and Opportunity

4

Introduction to Bioenergy Feedstock

4

Regional Opportunities for Cellulosic Biofuels

7

Improving Production Costs of Ethanol and Biodiesel via the Integration of other Biodiesel Conversion Technologies

9

Other Second Generation Feedstocks

13

The Agricultural Picture

16

Anticipated Feedstocks in Atlantic Canada

17

Preferred Feedstocks for the Maritimes

23

Consideration of Non-Agricultural Feedstock for the Region

27

Stakeholders in Atlantic Canada

28

Stakeholder Survey Results

28

Bioenergy / Biorefinery Research Network

31

Market Capacity

33

Current Renewable Fuel Facilities across Canada

34

The Potential for Advanced Bioenergy Technology in Atlantic Canada

38

The Atlantic Opportunity – Regional Consumption and Export

43

Research Analysis

47

SWOT Analysis

47

Testing and Analysis for Quality Control

52

Policy and Programming

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Atlantic Canada Biofuels Feasibility Model

67

Economic Impact Study

72

Recommendations

78

Conclusion

85

Appendices Appendix A – Stakeholder Survey – Summary of Results Appendix B – Atlantic Canada Research Network Appendix C – The Case for Cellulosic Ethanol Appendix D – Cellulosic Biofuels Production & Demonstration Facilities in Atlantic Canada Appendix E – Bioenergy Technology in Atlantic Canada Appendix F – Letter to Federal Ministers Appendix G – QA / QC Capabilities and Capacity Appendix H – Provincial / Territory Contacts Appendix I – Atlantic Canada Biofuels Feasibility Model Appendix J – Economic Impact of a Biofuels Industry

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Preface The biofuels industry is an emerging and dynamic industry; it is still, in many respects in the early stages of development. For example, the Canadian Government’s Renewable Fuel Standard (RFS) came into effect only recently. The requirement for 5% ethanol content in gasoline became mandatory across Canada - with the exception of designated regions, including the far north and Newfoundland and Labrador – on December 15th, 2010. And July 1st, 2011 marked the official start for implementing the required renewable fuel content for biodiesel, with a delayed schedule for Atlantic Canada originally set for January 1st, 2013. There remains some uncertainty on the biodiesel implementation schedule for Atlantic Canada, which is likely to now come into force mid-year 2013, and proposed amendments may all together remove the home heating fuel requirement on a national basis. The biofuels sector provides Atlantic Canada with the opportunity to position its assets wisely, and to use them to build a sustainable biofuels industry in this region. With the development of initial and first generation biofuels production facilities across Canada and elsewhere in recent years, Atlantic Canada can capitalize on those experiences to determine how they may best apply here. With the regulatory push to spur industry at the federal level, the regional innovative capacity, recent and ongoing research, access to academia, and the availability of renewable resources, there is ample room for a large scale commercial biofuels industry development to take shape in Atlantic Canada.

Note: This report makes reference to the region, as well as both Atlantic Canada and the Maritimes. The overall picture of bioenergy is applicable to Atlantic Canada as a whole; however, biofuels specific discussions may not reference Newfoundland or remote Northern regions of Canada where they are currently exempt for the Canadian Renewable Fuels Regulations.

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Introduction Acting in the capacity of Atlantic Canada’s lead bioenergy association, ACBC’s mission is to educate and promote the development of a sustainable bioenergy industry in Atlantic Canada and to establish provincial and federal government policy and programming that will allow for the development of a bioenergy industry in the Atlantic region. ACBC’s vision statement is: a vibrant, sustainable bioenergy industry, producing in Atlantic Canada, for Atlantic Canada, with a near term outlook to export and supply outside of the region to meet the increasing demands of the United States biofuels market. To this end, Atlantic Canada needs both federal and provincial government policy and programming (P&P) designed to meet its needs for growth. With this project, ACBC intends to clarify, assess and reveal the region’s bioenergy assets; build a business case for a bioenergy sector in the region; identify the economic impact of that sector; and ultimately make recommendations for the necessary policy and programming. Furthermore, it is the intention of ACBC to be the ongoing liaison between industry and government(s) now and into the future as this industry develops and matures, and to be the authority for future economic development initiatives and job creation opportunities for bioenergy industry development in Atlantic Canada. This project is ground-breaking. This type of information is not currently readily available in Atlantic Canada; and, data and findings that do exist elsewhere cannot provide a realistic and accurate picture of this region’s potential. This project and its findings will be an instrumental starting point to provide governments and industry players with an understanding of the potential for bioenergy in the Atlantic region and clear recommendations for moving forward to deliver the economic opportunity, jobs and environmental benefit for Atlantic Canadians.

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Methodology The information contained in this report is the result of in-person interviews; online surveys; research analysis; engagement and discussion with industry and government stakeholders – provincial and federal, elected and non-elected; and finally, significant analysis, deliberation and recommendation from the ACBC Board of Directors and its members. Its findings are validated through the analytical work of Gardner Pinfold, one of Canada’s leading economic consultants, who were contracted to assess the feasibility of this sector, as well its economic impact. This firm’s background, expertise, and strong reputation for quality research and methodological reporting provide important credibility – and calculated proof – for the arguments and recommendations this project makes. This project is delivered through the following methods: Asset Inventory – to define the region’s existing biofuels market, including an assessment of its current resources (feedstocks), its stakeholders (producers) and its potential for growth (what will work in the future, and when). Research Analysis – to reveal the strengths, weaknesses, opportunities and threats for this sector. Feasibility Model – through contract with Gardner Pinfold, to understand the true cost (what’s needed to build this industry) and potential return on investment for bioenergy production facilities. Economic Impact Analysis – through contract with Gardner Pinfold, to analyse the research and using the Statistics Canada Input-Output Model, calculate the economic impacts of this sector and provide a sliding scale of analysis based on the minimum and maximum potential of the industry. Recommendations - based on the information gathered, to support the opportunity for growth of the bioenergy sector in this region.

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ASSETS & OPPORTUNITY Introduction to Bioenergy Feedstock Bioenergy is energy contained in living or recently living biological organisms, a definition which specifically excludes fossil fuels. Plants get bioenergy through photosynthesis, and animals get it by consuming plants. Organic material containing bioenergy is known as biomass. Humans can use this biomass in many different ways, through something as simple as burning wood for heat, or as complex as genetically modifying bacteria to create cellulosic ethanol – which can be burned as fuel. Since almost all bioenergy can be traced back to energy from sunlight, bioenergy has the major advantage of being a renewable energy source. However, it is important that bioenergy be harnessed in a sustainable fashion. A specific plant or substance used for bioenergy is called a feedstock. Feedstocks are usually converted into a more easily usable form, typically a liquid fuel. Feedstocks refer to the crops or products, like corn, wheat, canola and waste vegetable oil that can be used as or converted into biofuels and bioenergy. Each feedstock has advantages and disadvantages in terms of how much usable material they yield, where they can grow and how energy and water-intensive they are to use. Almost any plant-based material can be an ethanol feedstock. All plants contain sugars, and these sugars can be fermented to make ethanol. Some plants are easier to process into ethanol than others - because starch or cellulose need to be processed in order to provide sugars for fermentation. Some don't require many resources to grow, while others need many resources (inputs), as well as intensive care and support in order to flourish. Some plants are used for food as well as fuel, while others are cultivated exclusively for biofuels or other uses. Even plant-based wastes can be made into biofuels. Climate, soil and inputs all define the types, amounts and costs associated with determining the types of plants that can be grown in different geographic areas. Biodiesel refers to a vegetable oil- or animal fat-based diesel fuel consisting of long-chain alkyl – m methyl, propyl or ethyl – esters. Biodiesel is typically made by chemically reacting lipids –i.e. ., vegetable oil, animal fat (tallow) – with an alcohol producing fatty acid esters. Biodiesel is meant to be used in standard diesel engines, distinguishing it from the vegetable and waste oils used to fuel converted diesel engines. Biodiesel can be used alone, or blended with petrodiesel and can also be used as a low carbon alternative to heating oil. This report will identify regional feedstocks that are most likely to work for Maritime Canada, now and into the future, both in agricultural and non-agricultural feedstock supply. Note: Reference to biomass, for purposes of this report, is not wood or grass-based pellets. The bioenergy pellet industry is a different discussion for a different mandate and time. Biomass for this report is organic feedstocks (resources) for liquid biofuels and biogas. In both cases, the supply and demand for biomass is critical, and we believe there are sufficient amounts available in Atlantic Canada on which to establish a domestic and export biofuels industry. ACBC and this project support and promote the use of Atlantic-based biomass for the development of the biofuels and biogas industry here.

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Ethanol Feedstocks Starch and Sugar-Based Ethanol Feedstock Nearly all ethanol is derived from starch- and sugar-based feedstocks. The sugars in these feedstocks are easy to extract and ferment, making large-scale ethanol production affordable. Corn is the leading U.S. crop and serves as the feedstock for most U.S. and Canadian domestic ethanol production; wheat is the second most predominant feedstock used in Canada Small amounts of energy beets, wheat, milo (sorghum) and sugarcane are also used on smaller scales Cellulosic Ethanol Feedstocks Cellulosic feedstocks are non-food based feedstocks that include crop residues, wood residues, and dedicated energy crops and industrial and municipal wastes. These feedstocks are composed primarily of cellulose and may contain hemicelluloses, and lignin - typically lignin is extracted to provide process steam for production. The complex, rigid nature of these feedstocks makes it much more challenging to release the sugars for conversion to ethanol; this difficulty in converting the biomass to sugars results in a higher conversion cost to corn and wheat based ethanol. Cellulose conversion is technically feasible but as of yet the conversion costs are considerably higher than that of sugar and starch based ethanol conversion processes; however this gap is narrowing and will benefit further from timing and research and development. So, when reports indicate that certain specific cellulosic ethanol is 5 to 10 years in the future, they are not referring to technical feasibility but to improvements in the technology that will provide economic feasibility. Most plants and trees are made of inedible cellulose. Cellulose, in the form of firewood has been used as a basic form of bioenergy for millennia. Recent advances in bioenergy, ranging from the simple biomass pellets to the complex cellulosic ethanol, have created a need for high-yielding feedstocks. The crops under consideration are mostly grasses and trees, which as perennial crops may also provide a range of environmental benefits over annual crops like corn and soybeans. The yields of cellulosic feedstocks are much higher because any part of the plant can be used. Cellulosic feedstocks also don't compete with food; they are seen as the best hope for large-scale, sustainable biofuel production. Crops, like switchgrass and miscanthus, which are grown purely for energy and have no use as food or fiber, are also called dedicated energy crops. Cellulosic technologies that can use these feedstocks include Cellulosic ethanol, biomass-toliquids, gasification, biogas and others. Examples of Grass based energy crops

1. Miscanthus 2. Prairie grasses 3. Switchgrass Examples of Trees based energy crops  Short rotation soft woods (hybrid Willow, industrial hemp, alders, poplar)  Wood waste materials (slash, woodchips, sawdust, MSW – Municipal Solid Waste))

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Other cellulosic feedstocks offer many advantages over starch- and sugar-based feedstocks, including alders and willow, which are currently being explored in the Maritime region. They are more abundant and can be used to produce more substantial amounts of ethanol to meet fuel demand. They are waste products or, in the case of trees and grasses grown specifically for ethanol production, can be grown on marginal lands not suitable for other crops. Less fossil fuel energy is required to grow, collect, and convert them to ethanol, and they are generally not crops that are used for human food. There are challenges with harvesting, collecting, and delivering cellulosic feedstocks, but researchers are studying these challenges in an effort to find solutions. There are many industry producers and proponents of cellulosic biofuels, at several stages of development and delivery. In many cases cellulosic biofuels are being produced, but not considered as profitable as traditional or 1st generation biofuels. The traditional methods of producing ethanol from cellulose involve pre-treatment to break up the fibers to allow the removal of lignin which is an inhibitor of fermentation. The cellulose and hemicellulose are then hydrolyzed to simple sugars using either enzymes, or a strong acid or strong base. The fermentation of the resulting sugars is still often not as efficient as the fermentation of sucrose or starch based sugars due to trace amounts of other chemicals from the biomass that effect yeast growth and metabolism. An alternative method for producing biofuels from cellulose that is being researched by a few groups in Europe, Canada and the USA is the production of biocrude using high temperature and pressure and upgrading this biocrude to diesel or gasoline using catalysts. This catalyst process is identical to the process used by the petroleum refining industry to produce gasoline and diesel from crude oil. As this technology improves and develops it will most likely supersede the current cellulosic biofuels process that is the major focus of many companies in the USA and Canada (e.g. Mascoma, Poet, Iogen etc.). Neste Oil from Finland is using this process commercially to produce green diesel from palm oil. Alphakat (www.alphakat.de/temp.company.php) in Germany and Kior (www.kor.com) in the USA are also developing processes for converting forestry and agriculture biomass. A new company called Cellufuel was recently formed in Nova Scotia and has developed its own proprietary green diesel technology with plans to build a pilot plant in 2013-2014 and commercial plants across Canada starting in 2015. However, this renewable diesel fuel faces the same challenges as biodiesel does in the region with respect to the lack of policy and programming at the provincial level. Government policy and programming, in coordination with research and industry development is, and will be key to the pace and success of cellulosic biofuels production around the world. Commercialization of these processes is a funding priority of the U.S. Department of Energy's Biomass Program, as well as the government of Canada through Sustainable Development Technology Canada (SDTC). However, Canadian funding is not as significant as the U.S. based programs and should be enhanced.

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Regional Opportunities for Cellulosic Biofuels A recent study completed by Halifax Global for ACOA focused on the opportunities for cellulosic biofuels in Atlantic Canada. The report indicates an opportunity for Nova Scotia, Newfoundland and possibly New Brunswick to repurpose idle assets or to integrate with existing mills to produce biofuels. Nova Scotia has the most available wood biomass that is not secured by the industry for pulp and paper or lumber production. The development of a biofuels sector in Nova Scotia focused on using woody biomass would have a significant impact on the rural regions of the province as well as providing a local supply of renewable fuel. However, while the biomass is available, the lack of provincial biofuel mandates and specific programming will make it challenging to establish this sector. The most recent development in Nova Scotia that will help with the development of the conversion technology from forest biomass is the establishment by Innovacorp Inc. of a bioprocessing incubator complex on the former Mersey-Bowater mill site in Liverpool. This site will provide an excellent place for companies developing biofuels process from forest biomass to pilot and demonstrate their processes. It would also make sense that if the process demonstration was to take place in Nova Scotia that the first commercial plant would also be located there. Source: Milley, Peter. 2012. Assessment of cellulosic Biofuels Potential in Atlantic Canada. Example Theoretical Ethanol Yields of Selected Cellulosic Feedstocks Feedstock

Conversion to Liquid Biofuel

Corn Stover (stalks and cobs)

1500 litres/acre; not cellulosic under RFS 2

Straw (Wheat, barley and oats)

280 litres/acre; not cellulosic under RFS 2

Wood Waste

200 litres / Dry Ton

Switch grass

1000 litres/acre based on a yield of 20 tons/acre

Miscanthus

1000 litres/acre based on a yield of 20 tons/acre

Sweet Sorghum

1000 litres/acre

Reed Canary

500 litres/acre

Timothy

300 litres/acre

Willow

420 litres/acre

Poplar

1000 litres/acre

Municipal Waste

400 litres/Dry Ton

Sources include: http://www.oilgae.com/, http://www.fao.org/, https://bioenergy.ornl.gov/, http://www.greenfacts.org/en/index.htm, http://www.greenfuels.org/ Notes: 1) It is still not known whether switch grass, miscanthus, sorghum can be successfully grown in our region and if so, what sort of yield we can expect. There are studies underway in each of the provincial departments of Agriculture. 2) Production acreages and yields are variable based on market demand and agronomic production practices (varieties, fertilizer usage, etc.)

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Example Theoretical Ethanol Yields of 1st Generation Feedstocks (non- cellulosic) Feedstock

Conversion to Liquid Biofuel

Corn

940 litres/acre

Wheat (spring)

430 litres/acre

Barley

361 litres/acre

Oats

220 litres/acre

Rye

186 litres/acre

Triticale

240 litres/acre

Energy Beets

3500 litres/acre Under RFS2 Advanced Biofuel

Potatoes

570 litres/acre

Waste alcohol

190mls/gallon (based on a 5% ethanol w/v waste stream

Sources include: http://www.oilgae.com/, http://www.fao.org/, https://bioenergy.ornl.gov/, http://www.greenfacts.org/en/index.htm, http://www.greenfuels.org/ ACBC Board Members Notes: 1) Estimated supplies of feedstocks may already have other markets and may not be available for use in the production of biofuels. Alternatively, while they might be sold into other markets currently there is nothing to stop suppliers switching markets if they can obtain a higher or competitive price. This also has value for crop rotation. 2) Production acreages and yields are variable based on market demand and agronomic production practices (varieties, fertilizer usage etc.). 3) Ethanol conversion yields litres/acre is based on regional yield averages. In comparing our starch based cereals with other regions of Canada and the USA, our % starch is usually slightly lower and the Atlantic region experiences a lower yield/acre due to our shorter growing season. 4) While the yield of ethanol per acre (for potato) is very high, the value of the potato as a food crop is much too costly to use as a feedstock for ethanol production. However approximately 10% of all the potatoes produced in the region are not able to be sold for food due to appearance, size etc. These are referred to as culls, and these culls can be used for ethanol production. Currently there is no guaranteed market with a guaranteed price for these cull potatoes. 5) Energy Beets – while the substrate used for the production of ethanol from the sugar beets is sucrose, the large yield per acre and low input of energy required to convert the sucrose to ethanol, results in a carbon foot print comparable to the use of cellulosic feedstocks. So while it is does not produce `cellulosic ethanol` it would be correct to say that it produces an ethanol equivalent to cellulosic ethanol.

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Improving Production Costs of Ethanol and Biodiesel via the Integration of other Bioenergy Conversion Technologies Biomass can be converted to a combustible gas by biological processes such as anaerobic digestion (biogas), or a thermochemical process, gasification (syngas). The integration of these processes with ethanol and biodiesel production improves both the economics (allowing a smaller scale) and the environmental sustainability of the process. One of the major challenges facing ALL bioprocessing companies in the region (e.g. pulp and paper) is the high cost of energy in Atlantic Canada, compared to the rest of Canada and to the USA, resulting in a non-competitive price point for the final product. The only solution to high energy costs is the integration of an alternative energy source as part of the process that can reduce energy costs and keep the opex as low as possible over the long term. While the integration of bioenergy to offset energy costs improves the opex, it will increase the initial capex by 20-25%.

Biogas In anaerobic digestion, methane biogas is produced from organic feedstock. The feedstock can be wet organic material such as manure, sewage sludge, industrial effluents, and agricultural and forest residues. Biogas from anaerobic digesters is composed primarily of methane, which can be used to generate the electricity and /or steam heat necessary for processing other feedstocks into ethanol and biodiesel. One of the Atlantic regions primary challenges when it comes to comparing production costs with commercial operations in the USA, Western and Central Canada is the lack of access to low cost electricity or natural gas. In order to be able to competitively produce ethanol and biodiesel in the region energy cost will be a factor. One way of accomplishing this is via the integration of an anaerobic digester producing methane for combined heat and power. This integration of biogas into the process is often referred to as a closed loop production processes where waste streams of the ethanol and/or biodiesel process are used to partially or fully fuel the process. In addition to energy production the anaerobic digester produces a natural fertilizer byproduct that can be used in the crop production, again potentially reducing the cost and carbon foot print of the feedstock being grown. The primary use of biogas is as a local fuel for the generation of combined heat and power (heat and electricity). However biogas is similar in composition to natural gas and can be used as a compressed transportation fuel (requires a natural gas vehicle or a converted diesel engine). Biogas can also be treated using a steam process to produce bioethanol. The biogas industry in Canada is growing rapidly, with over 20 farm digesters in operation across the country and an anticipated 40-plus farm-based digesters in Ontario alone by the end of 2013. The increase in Ontario can be directly attributed the provincial Fee-in-Tariff program in place which offers guaranteed pricing for renewable electricity production from the provincial government. There are currently only two functional commercial biogas digester systems in Atlantic Canada with another two more in development. One of the commercial systems is located at the Cavendish Farms processing complex in PEI where the biogas is used to provide up to 30% of the complex’s heat supply (the remaining 60% is provided with natural gas transported from the Enbridge pipeline in Sackville New Brunswick). The other commercial system is located in St. André New Brunswick on a Dairy Farm. This biogas digester is owned and operated by Laforge Bioenvironmental and uses the biogas to produce electricity and heat (CHP). The current system has a production capacity of 600kwh and will soon be expanded to 1.6 MWH. Laforge is exploring the

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possibility of producing compressed biogas for transportation fuel for use on the farm and in its waste collection vehicles. Atlantic Bioenergy Corp., with its demonstration facility based in PEI, produces ethanol from energy beets. Its proprietary and innovative process has an anaerobic digester as its energy source. It converts all the processing plants by-product streams to energy. Not only does this reduce production costs and produce a fertilizer by-product for crop production, it also results in the ethanol product being classified as an advanced biofuel in the USA (Currently the only advanced biofuel available in the USA is from South America Sugar Cane Ethanol). The biogas sector has the potential to be more economically and environmentally viable than the ethanol and biodiesel sectors. However the policy and programming related to biogas production at both the farm and industrial level are sadly lacking in the region. Nova Scotia is the only jurisdiction with some programming and policy, whereas PEI and New Brunswick have no policy and programming related to biogas production.

Gasification Gasification is a thermochemical process that occurs when biomass is heated in an oxygenstarved environment (containing approximately 1/3 of the air needed for complete combustion) to produce a synthetic gas (i.e. “syngas”), which contains carbon monoxide and hydrogen. Any reasonably dry biomass can be converted to syngas, which can also be used as a fuel for combined heat and power generation. Source www.nrcan.gc.ca . Gasification is most suited to the conversion of lignicellulosic residues that are not easily degraded microbial for biogas production. In regions where forest residues and construction and demolition waste is abundant, the use of gasification power and heat generation can reduce energy costs in the production cycle. Waste materials from the primary process (ethanol and/or biodiesel) can also be converted to energy using gasification. There are currently no projects in the region that use gasification. The Cape Breton University, Verschuren Centre for Sustainability in Energy and the Environment will focus research efforts on gasification and its applications for converting forest biomass to both heat and electrical energy. Again, because Nova Scotia has a Community-Feed in Tariff program and a need for alternative electricity, it is the most likely region to begin developing gasification in the energy sector. New Brunswick, with a large amount of forest residues, could also take advantage of this technology, but a lack of programming and policy are hindering current development.

Biodiesel Feedstocks Biodiesel can be produced from a large variety of feedstocks, including vegetable oils, animal fats and recycled cooking oils (also known as yellow greases): 

Virgin oil feedstock – canola, rapeseed and soybean oils are most commonly used, soybean oil alone accounting for about ninety percent of all fuel stocks in the US and Canada. It can also be obtained from field pennycress and jatropha and other crops such as mustard, jojoba, flax, sunflower, palm oil, coconut, hemp.



Waste vegetable oil (WVO), also called waste cooking oil (WCO).

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

Animal fats including tallow, lard, yellow grease, chicken fat and the by-products of the production of omega-3 fatty acids from fish oil.

 

Algae, which can be grown using waste materials such as sewage. Oil from halophytes such as Salicornia bigelovii which can be grown using saltwater in coastal areas where conventional crops cannot be grown, with yields equal to the yields of soybeans and other oilseeds grown using freshwater irrigation. Mink oil – anaerobic digestion of mink waste carcasses for the production of biodiesel.



Feedstock yield efficiency per unit area affects the feasibility of ramping up production to the huge industrial levels required to power a significant percentage of vehicles. In Canada, the most common vegetable oils are from dedicated crops such as soybean and canola. Since canola has a higher oil content, lower cloud points and pour points, and is in a large net export position compared to soy, it is considered a better feedstock for biodiesel production. Currently, biodiesel produced in Canada is mainly made from yellow grease and animal fats, which are the most cost-effective feedstock, and generate relatively fewer GHG emissions than others. As newer large scale production plants come on line in Canada, for example Archer-Daniels-Midland (ADM) in Alberta and Milligan BioTech in Saskatchewan, canola continues to become a more predominant biodiesel feedstock in Canada. Example Theoretical Biodiesel Yields of Selected Feedstocks Feedstock

Conversion to Liquid Biofuel

Canola

300 – 380 litres per acre

Tallow

Difficult to estimate

Soybean

240 litres/acre

Sunflower

320 litres/acre

Hemp

150 litres per acre

Flax

190 litres/acre

Camelina

235 litres/acre

Mink oil/fat

0.25 kg oil/carcass

Fish oil / waste

0.7 litres/litre of fish oil produced from waste Extracted oil is ~ 11% of total weight of fish waste

Waste Cooking Oil (WCO) or Waste Vegetable Oil (WVO)

Difficult to estimate.

Microalgae

19,000 litres/acre

WVO in the region estimated to be 12 MML/Yr

5000-15000 gal [theoretical laboratory yield]. Extrapolated from the ability to have successive harvests over a year long period. Assumes 100% utilization rate Seaweed

400 litres/acre

Sources include: http://www.oilgae.com/ , http://www.fao.org/ , https://bioenergy.ornl.gov/ , http://www.greenfacts.org/en/index.htm, http://www.greenfuels.org/ ACBC Board Members

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Notes: 1) Canola production in the Maritimes is also increasing. Industry estimates put total acres for Nova Scotia, New Brunswick and P.E.I. at 13,000 acres in 2011, up from 6,000 acres in 2010 and 1,000 in 2006. P.E.I. had 3,000 acres of canola the past few years. 2) Estimated supplies of feedstocks may already have other markets and may not be available for use in the production of biofuels. Alternatively while they might be sold into other markets currently there is nothing to stop suppliers switching markets if they can obtain a higher price. 3) Production acreages and yields are variable based on market demand and agronomic production practices (varieties, fertilizer usage etc.). 4) Because canola is considered by this report to be a very possible first choice agricultural feedstock. It is necessary to make the following comment, in relationship to the above table and the conversion to liquid biofuel of 300 litres per acre.   

300 litres per acres is based on calculations by www.canolainfo.org and the Manitoba Canola Growers, that one bushel of canola will make 11 litres of oil, and that the Canadian Canola Growers estimate an average 35 bushels per acre. So, one acre should produce 385 liters of oil. Recovery of oil to biodiesel is 9.95 percent, so this number could be as high as 380. 300 litres per acre is therefore a reasonable minimum. For purposes of this report we have used a range of 300 to 380 litres, which would be accurate for future discussion purposes.

5) All the waste tallow and cooking oil that could be used for biodiesel production in the region is currently collected and processed by 2 companies: 1) Rothsay rendering and 2) SF Rendering. Both companies have biodiesel production capacity. Rothsay (rendering) has a biodiesel facility producing 1 million litres of biodiesel per week in Montreal PQ. All the collected oil and tallow suited for biodiesel production from the Atlantic Region is shipped to Montreal for conversion and sold into the Ontario and Northern US markets. SF Rendering currently does not produce biodiesel because the price it can obtain for tallow and waste oil in the animal feed market is higher than they can obtain for biodiesel. While the waste fat and oil is collected by these companies for free or a small pickup charge they do not pay for the resource. If the price of biodiesel was sufficient to allow companies to purchase waste oil and fat the resource would belong to the highest bidder. 6) Biodiesel potential yield from microalgae and macroalge are guesstimates as these feedstocks are still in the early stage development. The initial evaluation of these resources indicates that they far out-produce the traditional plant based oil resources.

Waste Cooking Oil Many advocates suggest that waste vegetable oil is the best source of oil to produce biodiesel. Early indication suggests that less than half of the current requirement for biodiesel production in New Brunswick may be supported by waste oil. Production plants would likely have a much lower initial capital cost associated with them, because they would not require a crushing facility like canola and soybean feedstocks. However, the quality of the used oil determines the overall production cost and yields of the biodiesel produced from the oil. Moderately degraded fats and oils tend to be less expensive to produce than heavily degraded materials. Canola Agricultural production of Canola for biodiesel in New Brunswick, Nova Scotia and PEI is a very realistic and immediate potential feedstock for Atlantic biodiesel production. Reference to production capacity of canola in these three provinces, and it’s potential for meeting biodiesel demand for this region and for export, will be identified later in this report.

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Animal Waste and Animal Fats Animal fats are a by-product of meat production and cooking. Although it would not be efficient to raise animals (or catch fish) simply for their fat, use of the by-product adds value to each of these industries (hogs, cattle, poultry, aquaculture). Today, multi-feedstock biodiesel facilities are producing high quality animal-fat based biodiesel. A $5-million dollar plant is currently being built in the U.S., with the intent of producing 11.4 million litres (3 million gallons) of biodiesel from some of the estimated 1 billion kg (2.2 billion pounds) of chicken fat produced annually at the local Tyson poultry plant. Similarly, some small-scale biodiesel factories use waste fish oil as feedstock. An EU-funded project (ENERFISH) suggests that at a Vietnamese plant built to produce biodiesel from catfish (basa, also known as pangasius) with an output of 13 tons/day of biodiesel (produced from 81 tons of fish waste -in turn resulting from 130 tons of fish). This project utilizes the biodiesel to fuel a CHP unit in the fish processing plant, mainly to power the fish freezing production side. Another project currently underway closer to home is Newfoundland and Labrador Marine Institute’s biorefinery demonstration project. This project was started in late 2011 with a target completion date of December 2013. The scope includes processing waste streams from the local and federal fisheries (including salmon, snow crab, shrimp, groundfish) and organic municipal wastes, to produce fish meal products, bio actives (chitin and chitosan), marine oils (for human and animal consumption) and eco energy including biodiesel, as well as electricity and heat through anaerobic digestion. The project received substantial federal and provincial support – to the tune of $800,000- as well as buy-in from 2 major industry partners. The objectives of the project are simple: to demonstrate technical and economic feasibility, promote full utilization of resources and minimize waste and generate eco energy and revenues to support the local sector. Note: The current national renewable fuel standards exempt Newfoundland and Labrador.

Other Second Generation Feedstocks While humans have been growing grasses and trees for millennia, there are completely novel crops being considered as bioenergy feedstocks. Even more than cellulosic feedstocks, developing techniques to cultivate these crops at a scale deemed acceptable for production continues to pose some major challenges. However the utilization of marine biomass for bioethanol and biodiesel production is undoubtedly a sustainable and ecofriendly approach for renewable biofuel production. Using algal biomass as feedstock for bioethanol production is promising, because of the large amounts of carbohydrates embedded in the physiology in algal cells. Oleagenous (oilbearing) algae are a particularly attractive material, because its oil can initially be extracted for biodiesel production, and then its high-carbohydrate residue can be processed for ethanol fermentation. Compared to terrestrial plant biomass (which is also a popular biofuel-ethanol feedstock), algae have exponentially higher growth rates.

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Algae (microalgae) The production of biofuel from algae involves three basic steps: algae growth, biomass extraction, and post processing. In the first stage of large scale algae biofuel production, algae are grown in a network of bioreactors on an agricultural scale. The collected biomass is then processed through several mechanical, drying, and chemical steps to yield the final biofuel product. The finished biomass is suitable as a direct substitute for coal, petcoke and related fossil fuels. Biocrude can also be extracted from the biomass and further processed into biodiesel in the third step through a chemical process that results in biodiesel that meets the appropriate regulatory standards for use in the existing fuel distribution system (for example US ASTM D6751). Note: The NRC research facility in Halifax is the Canadian Centre of Expertise in Microalgae production for oils.

Seaweed (macroalgae) Seaweed to biofuels has an interesting potential application for Atlantic Canada, as promoted recently in the January 2012 edition of Scientific America (http://www.scientificamerican.com/article.cfm?id=genetically-engineered-stomachmicrobe-turns-seaweed-into-ethanol ) where an article demonstrated how an altered version of the E. Coli bacteria had been used to unlock a treasure trove of sugars found in brown kelp. The authors sell how this seaweed, completely devoid of lignin, is capable of ethanol production of 1,500 gallons per acre, which is 50% more than sugar cane and roughly triple that of corn. Seaweed and the technology to unlock its sugar potential has the oil world a buzz with national and multi-national companies working to exploit regions abundant in this natural resource. Bordered by the ocean, Atlantic Canada is a region rich in brown kelp and as technologies to harness this resource become more available, Atlantic Canada is sure to benefit. There is already a commercial market for macroalgae in North America and elsewhere, mainly as food or as feedstock for polysaccharide and hydrocolloid extraction, which is relatively small when compared with the scale of cultivation needed for macroalgae to be considered a significant contributor to the biomass needed to meet RFS production goals. However, the resource potential here is high, and the ability of the world’s oceans to produce marine biomass as a biofuel feedstock supply is still considered largely untapped. This opportunity to produce and process marine biomass is an important opportunity for the Atlantic Region. With the exception of British Columbia we are the region with the greatest access to marine environments. While the use of these marine biomass resources (other than fish processing wastes) will not provide the biomass for biofuel production in the next 5 years (domestic supply) they will definitely be a part of any industry expansion and fuel export strategy moving forward. It is vital that the region invest in the long-term development and use of these resources as it will not only provide additional production capacity to the industry in the future but it will attract research funding dollars, technology investors in the short term, develop a regional expertise that could be of global significance

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and have the longer term potential to provide revenues from intellectual property and production and processing systems manufacturing. Woody Biomass/Woodchips Today’s biorefineries convert crops such as corn, soy, and sugar into biofuels, but current research and development if focusing on the next generation of biofuels, which will be produced from multiple cellulose feedstocks including woody biomass, energy crops, and residuals including agricultural and other wastes. Major breakthroughs in cellulosic conversion and commercialization of these new biorefineries are expected in the short term. Woody biomass has been considered and used as a feedstock for biofuels production throughout many parts of the world. As is the case in many new technologies for biofuel production, prod-cutting fuel from this feedstock is doable, however the questions of profitability still remain an issue. As technologies improve, it is more likely that woody biomass will be used for commercial scale production in this region. Atlantic Canada obviously has easy access to large amounts of woody biomass feedstock, and additionally has biofuels proponents who have the desire, the interest and the resources to convert woody biomass or woodchips in both ethanol and biodiesel or green diesel. One example of the move to commercial scale production in the United States is ZeaChem Inc. (www.zeachem.com) who is phasing in operations of new integrated facility for cellulosic ethanol production as a result of their recent Series C financing ($25Millon). We believe Atlantic Canada also has the potential to move into commercial scale production with the use of this regional feedstock. For example: a) CelluFuel Inc. is a Nova Scotia based company founded by four forestry veterans with experience in industry and finance. Their objective: to become the pioneer in the commercialization of transportation biofuels, based on woody biomass, in Eastern Canada. CelluFuel has already raised $500,000 from a New York buyout shop with strong links to the biofuel industry, and they have licensed proven technology in the most energy-efficient process they could find for producing energy from wood products. CelluFuel is currently establishing a presence in the former Bowater Mersey paper mill in Brooklyn, Nova Scotia to produce biodiesel from wood waste, believed to be the first step in an ambitious plan for 10 plants within the next six years. b) Groupe Savoie has the potential to become a leader in next generation biofuels production in Atlantic Canada. With nine industrial facilities – two sawmills, one pallet plant, one component plant, one pellet plant and dry kilns in St-Quentin, N.B.; one component plant and a dry kiln in Kedgwick, N.B.; one pallet production and recycling plant in Moncton, N.B.; and, one sawmill in Westville, Nova-Scotia – Groupe Savoie has a significant amount of its own woody biomass residuals, which it intends to use to supply feedstock for a commercial scale biofuels production facility in Atlantic Canada. Research and development is currently underway.

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The Agricultural Picture In the Canadian agriculture sector, large farms dominate production, accounting for only 2.5% of farms, but 40% of revenues. In 2007 and 2008, as commodity prices have risen, farm market receipts and net farm income for grain and oilseed farms have also increased. Canada ranks as the second largest in the world for the availability of arable land per person which also accounts for Canada being a large producer and exporter of agricultural products. Canada’s share of land suitable for agricultural production accounts for only a small percentage (5%) of the total land in use without a loss in energy content. Source: http://www.statcan.gc.ca

The agriculture, forestry, fishing and hunting sectors contributed nearly 2.2% to Canadian GDP in 2007, of which crop production accounted for approximately 54.5%. The crop production sector employed nearly 298 844 persons. In 2007, the value of crops exported was nearly $13 billion while imports totaled $6.4 billion with the United States being the largest trading partner, followed by Japan. Source: http://www.ic.gc.ca/eic/site/icgc.nsf/eng/home

In addition to reductions in GHG emissions, one of the key drivers for supporting renewable fuels production and use is the benefit that it can bring to the agriculture sector and rural Canada. Increased renewable fuels production in Canada will result in increased local demand for feedstocks and new markets for Canadian agricultural producers’ crops. For example, biodiesel facilities can provide a market for off-grade canola, which is not suitable for the food or feed market. Providing agricultural producers with the opportunity to invest in and develop profitable renewable fuels projects that use agricultural products as inputs will help to create a positive stream of income that could be more independent of commodity price swings. This would also encourage an approach that goes beyond simple commodity production to focus on new ways to add value to biomass produced on farms. This would also encourage an approach that goes beyond simple commodity production to focus on new ways to add value to biomass produced on farms. Renewable fuel plants would inject additional spending into the local rural economies, broadening their tax base and generating additional jobs at the local level. Further expansion of the renewable fuel industries in Canada is expected to rely on feedstock supplied by the Canadian agricultural sector. However, the projected level of renewable fuel production in Canada is not expected to impair the agriculture sector’s ability to provide agricultural commodities for traditional uses, such as for food production and livestock feed. Consequently, downstream industries such as meat and food processing are not expected to be impacted with respect to production, employment, price and trade. Furthermore, impacts on consumer food prices are not expected.

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Anticipated Feedstocks in Atlantic Canada Stakeholders have identified several biofuels feedstocks in Atlantic Canada: energy beets, canola, feed wheat, corn, soybeans, camelina, barley, alders, grasses, forestry waste, municipal waste, rendering / tallow, fish oil, yellow grease, cellulosic / straw, algae, and more. Basically all feedstocks will work for biofuels production; the question is what is most applicable in this region – for availability, ability to produce, cost effectiveness for production facilities, and acceptability by the industry and the public. Atlantic Canada has ample land base and agricultural ability to produce sufficient feedstock for regional biofuels, based on the Canadian RFS, and also has sufficient land and agricultural resources to supply feedstock to produce biofuels for export. According to Statistics Canada, (2006) the total area of land on farms in NS, NB and PEI is approximately 2.5 million acres, of which just over 1 million acres is cropland. Nova Scotia Agriculture for example identifies that there is 1 million hectares (ha) of land suitable for agriculture – in NS alone. 40,000 ha or 98,842 acres are underutilized (source: www.statcan.gc.ca) and could be available for biofuels production. Although it is difficult to identify the number, it is commonly understood that since 1930 there had been hundreds of thousands of acres of farm land that has come out of agricultural production, and has gone back to unused lands. Some would suggest that number is as high as 1.1 million acres. The Agricultural Biomass Availability for Bioenergy Applications in Nova Scotia report by Michael Main, NSAC May 22, 2008 suggests:     

40-60 thousand hectares or land could be available for biomass crops, providing up to 750,000 tonnes biomass fuels (13,500,000 GJ/y). Manures could provide up to 300,000 GJ/y of biogas Minimal crop residues are available Development depends on strong energy prices and supportive policy Perennial grass or coppice have the greatest sustainable potential

In Atlantic Canada, the discussion regarding food vs. fuel, in our opinion is irrelevant, based on two key considerations: 

Current production facilities in other parts of Canada that use canola, wheat and corn for feedstock, traditionally use non-food grade production of these crops.



Based on the number of acres available for agricultural production in Atlantic Canada, that are currently being cropped, and the large amount of acres that are available for crop, supplying feedstock for energy does not impact food supply. Furthermore bringing agricultural land into production for biofuels, from existing land, will help the agricultural community add an additional crop into their crop rotation strategy, and will add another opportunity for sales of their agricultural commodities.

Bringing underutilized land back into production for biofuels feedstock, creates the opportunity for an emerging industry to develop; it has potential for agricultural value add, and when the value to produce food on these new acres occurs, the land will have been brought back to useable condition in order to grow traditional food crops.

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Prince Edward Island Statistics on Agriculture in PEI Source: www.statcan.gc.ca and provincial departments gathered from engagement of agricultural officials and feedback from the inter-provincial roundtable.

In 2011, Prince Edward Island continued to report the largest area of potatoes in the country with 86,560 acres. Soybean area in Prince Edward Island increased 351.6% since 2006 to 51,116 acres in 2011, making it one of the major field crops in the province. Prince Edward Island accounted for 72.5% of the Maritime province's total in 2011. In the Maritimes, soybean area increased 352.8% since 2006 to 70,492 acres in 2011.



Largest area of potatoes in Canada



Soybean crop on the rise



Total farm area = 594, 324 acres



69.1 % cropland – grains and oilseeds

Farm area: Total farm area in Prince Edward Island (2011) is 594,324 acres; the average area per farm (2011) is 398 acres. Of the total farm area in Prince Edward Island in 2011, 69.1% (410,712 acres) was reported as cropland – the total area in field crops, hay, fruits, field vegetables, sod and nursery. Proportion of cropland, Prince Edward Island, 2011 Composition of cropland

Percent of cropland*

* Totals may not equal 100% due to rounding Source: Statistics Canada, Census of Agriculture, 2011 Field crops

65.0

Hay

31.2

Fruits

3.1

Vegetables

0.6

Sod and Nursery

0.1

The majority of cropland (96.2%) was reported as field crops and hay. The proportion of field crops (including potatoes) increased to 65.0% in 2011. Conversely, the proportion of hay decreased to 31.2%. Increased prices for cash crops coupled with declining beef cattle and pig numbers led to a shift from forages and crops traditionally used for feed to more profitable cash crops. Other crops, including vegetables, fruit, sod and nursery production, accounted for an additional 3.8% of total cropland. Grains and oilseeds are the largest groups of crops grown on PEI. Grains are primarily grown in rotation with potato crops. In 2010, Statistics Canada estimated that there were 99,000 acres of wheat, oats, barley and mixed grain and 44,000 acres of soybeans seeded on the island. Barley accounted for 50,000 acres. Milling wheat is grown for the production of flour. One third of the soybean acreage in 2009 was exported to Japan to be processed into tofu and miso. Canola is being grown and pressed for oil that is used for food and fuel. The remaining grains and soybeans are fed to livestock on the island.

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New Brunswick Statistics on Agriculture in NB Source: www.statcan.gc.ca and provincial departments gathered from engagement of agricultural officials and feedback from the inter-provincial roundtable.



Top 3: Corn, soybeans, canola



Total farm area = 0.9 million acres



37.5 % cropland



Abandoned farmland – 12,000+ hectares available for redevelopment

Corn for grain, soybeans and canola areas: In 2011, corn for grain in New Brunswick accounted for 10,611 acres, soybean area was 10,600 acres and canola area was 9,002 acres. Farm area: Total farm area in New Brunswick (2011) was 0.9 million acres; the average area per farm is 359 acres.

Of the total farmland (2011), 37.5% (351,231 acres) was reported as cropland, the total area used in field crops, fruits, vegetables, sod and nursery. Proportion of cropland, New Brunswick, 2011 Composition of cropland

Percent of cropland*

* Totals may not equal 100% due to rounding Source: Statistics Canada, Census of Agriculture Field crops

40.8

Hay

49.7

Fruits

8.5

Vegetables

0.5

Sod and Nursery

0.4

The majority of cropland (90.5%) in New Brunswick was reported as field crops and hay. Field crops (including potatoes) represented 40.8% of reported cropland. Area Under Crops in NB

Acres

Hay and field crops, 2011 Spring wheat (excluding durum) Winter wheat

3,624

Buckwheat

1,676

Alfalfa and alfalfa mixtures All other tame hay and fodder crops Barley

573 31,988 142,484

Area Under Crops in NB

Acres

Forage seed for seed

108

Mixed grains

945

Mustard seed Oats Other field crops

0 23,324 55

Potatoes

51,814

Soybeans

10,600

Spring rye

485

23,144

Sugar beets

0

9,002

Sunflowers

X

Corn for grain

10,611

Total corn

Corn for silage

6,995

Total rye

690

34

Triticale

0

Canola (rapeseed)

Dry field peas Fall rye Flaxseed

17,606

205 X

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The New Brunswick Department of Agriculture provides estimates between 11,400 and 21,400 hectares of abandoned farmland suitable for redevelopment for modern agricultural purposes. For purposes of this assessment, abandoned farmland was defined as land that has grown up into goldenrod, has sporadic small bushes, or has standing grass not cut and could easily be developed for modern agricultural purposes. Lands that had 50% or more woody species or fields that had completely reverted to woody vegetation were not included in the inventory as they would be considered equivalent to a tree stand or forested area in terms of cost and ability to develop the lands for agriculture. Several factors have contributed to the abandonment of farmland, including: the transition from small family farms to larger mechanized farms; poor soils, poor topography, poor drainage, poor location; and urban sprawl and development.

Nova Scotia Statistics on Agriculture in NS Source: www.statcan.gc.ca, St. Mary’s University and provincial departments gathered from engagement of agricultural officials and feedback from the inter-provincial roundtable.

In 2011, Nova Scotia was the only province in Canada to show an increase in the number of farms since 2006, reporting a total of 3,905 farms and accounting for 1.9% of Canada’s 205,730 farms. Increased area of corn for grain and soybeans: The area of corn for grain in Nova Scotia increased 77.4% since 2006 to 13,701 acres in 2011, while soybean area more than tripled to 8,776 acres. Farm area: Total farm area in Nova Scotia (2011) is 1.0 million acres; the average area per farm was 261 acres.



Corn, soybeans on the rise



Total farm area = 1 million acres



27.6% cropland



90,000 hectares of unused land available for biofuels development

Of the total farm area in Nova Scotia in 2011, 27.6% (280,889 acres) was cropland – the total area used in hay, field crops, fruits, field vegetables, sod and nursery. Proportion of cropland, Nova Scotia, 2011 Composition of cropland

Percent of cropland*

* Totals may not equal 100% due to rounding Field crops

18.8

Hay

58.9

Fruits

18.7

Vegetables

2.4

Sod and Nursery

1.2

Source: Statistics Canada, Census of Agriculture

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The majority of cropland (77.7%) in Nova Scotia was reported as field crops and hay (Table 1). The proportion of hay decreased from 64.7% in 2006 to 58.9% in 2011. Field crops (including potatoes) represented 18.8% of cropland in 2011, up from 15.7% in 2006. Increased prices for cash crops coupled with declining beef cattle and pig numbers led to a shift from forages and crops traditionally used for feed to more profitable cash crops. Nova Scotia agriculture department research identifies that there is approximately 90,000 acres of underutilized land that could be developed for agri-biomass for biofuels production. According to Nova Scotia agriculture about 1 million hectors of land is suitable for agriculture of which 215,000 hectors are currently cleared. A discussion paper for a 2006 agricultural bioenergy policy forum held at St. Mary’s University estimated that 250,000 hectares could be brought into production on the better quality soils not presently farmed. According to Statistics Canada, census of agriculture in Nova Scotia the total area under-crop production in 2006 was approximately 375,000 acres and in 1961 it was just under ½ million acres.

Preferred Feedstocks for the Maritimes Atlantic Canadian growers can clearly produce agricultural feedstock for development of a biofuels industry in Atlantic Canada; it is not a hurdle, but rather an opportunity.



Total farm land = 2.5 million acres

 

Cropland: 1 million acres Potential farmland (unused): Hundreds of thousands of acres



Best bet: canola, soybeans, energy beets, corn

What we know from information and statistics provided by the government of Nova Scotia, New Brunswick and Prince Edward Island is that the approximate total area of farm lands in these three provinces is 2.5 million acres. The approximate current combined acres of cropland is just over one million acres, with a combined potential of an additional amount of underutilized farmland in the range of 100’s of thousands of acres.

Based on what the industry looks like today, and the successes of the production facilities that exist, the short term (then next 5 to 15 years) agricultural feedstocks that will work best in Atlantic Canada are Canola and soybeans for biodiesel, as well as energy beets, non-food grade wheat, and corn. To target Atlantic production in a range of 250 million litres to 300 million litres of ethanol and 50 to 100 million litres of biodiesel the following examples could be used. Notes: based on numbers as of January 2013 from NRCan and Stats Can regarding numbers of litres in the Maritimes, as well as the uncertainty of blending biofuel to home heating oil, therefore adjusting the numbers to a range amount.

Ethanol by energy beet feedstock: 

One acre of beets will produce a minimum of 3500 litres of ethanol.



5 ethanol plants of 50 million litres capacity each would produce 250 million litres of ethanol for Atlantic Canada. Each plant would require feedstock from approximately 14,000 + acres of beets, or a total of approximately 70,000 + acres.

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Biodiesel by canola feedstock: 

One bushel of canola produces approximately 11 litres of biodiesel.



An average yield per acre for canola is 25-35 bushels per acre, depending on conditions, soil and the region. However, due to recent and improved farming practise throughout Canada, average yield per acre and overall production of canola is on the increase.



For purposes of the example we can use an average of 30 bushels per acre. At 11 litres per bushel and average acre of canola should produce approximately 300-380 litres. 50 million litres of biodiesel would require about 140,000 to 150,000 acres of canola produced in Atlantic Canada. Or a 20 million litre plant in each province would require about 50,000 acres each. Source: http://www.ccga.ca/

Biofuels production companies must pay fair market value to producers in order to secure feedstock. The recent history of agricultural based biofuels production plants in North America tells us that this is the case, and that if there is profit in the production of agricultural energy feedstock agricultural producers will grow it. Ultimately, proponents and producers of biofuels will determine the best feedstock to succeed in their production and sales of biofuel. Feedstocks for Ethanol Ethanol production facilities, both operational and demonstration, use the following feedstocks: corn, energy beets, wheat, cellulosic / straw, barley and rye. Most predominantly used are wheat and corn; however, in the past few years and as recently as in the last year, a lot of progress has been made on the development of new strains and technologies for energy beet production in Atlantic Canada. Beets are a good agricultural rotation crop, and are easily grown in this region of Canada. Additionally, beet production per acre is 3 times the amount for wheat in relationship of conversion to ethanol. Energy beets produce 3500 litres of ethanol per acre; so, 10,000 acres of energy beets will produce 35 million litres of ethanol. Corn, at its best, can produce 1600 litres of ethanol per acre and sugarcane runs between 2400-2700 litres per acre. If the entire supply of the Canadian RFS at 5% ethanol for NS, NB and PEI, came from agricultural based supply of beets, just fewer than roughly 70,000 acres would be required. (Source: http://www.cleantechloops.com/energy-beets/) Also, the carbon footprint for energy beets is very minimal. This is important, because in the U.S. the Renewable Fuels Standard 2 (RFS 2) addresses environmental benefits by the carbon footprint of the end use product, and in order to be considered next generation or a cellulosic biofuel product, certain gates or levels must be met. Energy beets currently being produced in Atlantic Canada, at a demonstration plan operated by Atlantec Bioenergy Corporation (ABC), meet the US RFS 2 standard as an advanced biofuel. Under these same standards, corn, barley and wheat along with any by-products from these crops are not considered advanced or cellulosic. It is also important to consider that specific biofuel production plants that meet U.S. standards for Renewable Identification Numbers (RINs) can provide significant additional income and potential for profitability for locally located production plants, making export potential very attractive.

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ACBC believes that energy beets are the feedstock most likely to succeed for ethanol in Atlantic Canada. Atlantec BioEnergy Corporation (ABC) operates a pre-commercial (demonstration) operational processing facility in Cornwall, Prince Edward Island. It opened in the spring of 2010 as part of a Sustainable Development Technology of Canada (SDTC) project which is designed to showcase the various integrated components of the bio-refinery. Feedstocks for Biodiesel Biodiesel production facilities, both operational and demonstration, use the following feedstocks: canola, soybeans, yellow grease, multi-feedstock, tallow, camelina and mustard. Predominant feedstocks are canola and soybean. Canola works, it's proven, and it’s currently grown in Nova Scotia, New Brunswick and Prince Edward Island agricultural production. While the biodiesel from soybean oil is slightly more difficult to process compared to canola oil, it currently makes up a large portion of the American biodiesel industry. The meal that is produced when the canola and soybean seeds are crushed is high in protein and is a highly valued animal feed supplement. The following information is provided from the Canola Council of Canada. Source: http://www.canola-council.org/

In Canada, it makes sense to make biodiesel from canola because of important advantages:      

Proven technology and demand High oil content Superior flow in cold weather Oxidative stability Quality standards Carbon sequestration

Proven technology and demand Canola biodiesel is already widely used in Europe, which is expected to produce more than 7.3 billion liters of biodiesel from vegetable oil in 2012. In the EU, rapeseed and canola are the foundation feedstock for biodiesel. High oil content Canola produces more oil per unit of seed than other oilseeds. That means biodiesel producers realize greater efficiencies from canola than seeds with lower oil contents, notably soybeans. Superior flow in cold weather Canola oil has the lowest level of saturated fat. That helps canola biodiesel perform better in cold weather. Canola biodiesel has a very low Cloud Point (the temperature at which small crystals form in the fuel). Type of Biodiesel

Cloud Point

Edible tallow

19˚C

Soybean

3˚C

Canola

-3˚C

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Oxidative stability Canola oil has a low iodine value, which means it is more stable and less prone to oxidation. This quality reduces the likelihood of corrosive acids and deposits that can increase wear in engine fuel pumps and fuel injectors. The iodine value of canola oil is 114, versus more than 130 for soybean oil. However, it should be noted that oil with an initially elevated iodine value will have lower iodine following the degradation process. Also, the biodiesel pool will ultimately be a blend of different oils and the combined properties could be very different than those of the individual oils. Finally, different conversion technologies and additives can produce a stabilized biodiesel that meets all the required attributes as dictated by ASTM D6751 the specification for B-100. Quality standards All canola varieties grown in Canada meet oil content standards set by the Western Canada Canola/Rapeseed Recommending Committee. This track record is the foundation for developing biodiesel standards that will assure consistent quality to Original Equipment Manufacturers, fuel suppliers and users. Our industry’s commitment to quality will help Canadian biodiesel makers avoid problems that have been experienced elsewhere. Carbon sequestration Making biodiesel from canola helps to reduce greenhouse gases in more ways than one. As it grows, canola helps to sequester carbon in the soil. The amount of carbon released during production is limited by the reduced tillage practices commonly used by growers. As more farmers begin to use biodiesel, the energy balance for canola biodiesel only improves. Canola Supply Requirement Example 1 bushel (24kg) of canola

= 11 litres of oil

~ 60,000 acres of canola would be required to supply 1 province’s need (i.e. Nova Scotia needs) in terms of meeting the legislated RFS requirements at 2%.

Other Feedstocks As previously stated, production facilities will ultimately decide what the most appropriate feedstock is, based on return on investment. When considering policy regarding feedstock it’s best to consider production of biofuels as feedstock agnostic. Mustard and camelina can be grown in the region, but their success as a feedstock will be relative to the desire of production facilities to use them over other feedstock supplies, or perhaps used as options, in multiple feedstock plant designs. Yellow grease and tallow is obviously available in this region. SF Rendering of Nova Scotia (http://www.sfrendering.ca/ ) for example, has a biodiesel

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production facility on site that can make up to 2 million litres per year of biodiesel at the rending plant. Rothsay Biodiesel (http://www.rothsaybiodiesel.ca/our_biodiesel.html ) is another example of an existing biodiesel production facility from animal fats and recycled cooking oil. There are biodiesel proponents in New Brunswick currently considering supply of the 2% content for biodiesel from waste cooking oil. Research on this is currently underway and exact data is not yet available for the production of this report. Continued investment in research regarding possible feedstock for biofuels production is important. For the immediate production facility potential, there are feedstocks that work now that are used by others, proven by others, and provide the best possible return on investment form the point of view of the investors, owners and operators of biofuels production facilities throughout Canada.

Consideration of Non-Agricultural Feedstock for the Region Green Diesel Renewable diesel or green diesel is different from traditional biodiesel where the latter is usually esterified fats and oils and the former is usually produced through hydrotreatment of fats and oils. Green diesel is an option to meet the 2% blend requirement of the Canadian Renewable Fuels Regulations. If green diesel is not produced locally or regionally, refineries have no option but to import green diesel from other parts of the world and blend it here for distribution and sale. Only Neste Oil and Dynamic Fuels are currently producing green diesel at scale (in the US). While biodiesel typically has a co-product (like crude glycerine), which sometimes is a troublesome oversupplied commodity for biodiesel producers, green diesel on the other hand has by-products such as green naptha and LPG (liquefied petroleum gas). In the case of Neste's production, byproducts include biogasoline, biogas and water. One of the advantages of green diesel is that it can be produced at a lower operating cost than biodiesel using a variety of feedstock options (including forestry feedstocks in this region). Aside from having feedstock flexibility for most green diesel producers/developers, the oxidative stability of green diesel is also equivalent to petroleum diesel meaning distributors do not need any special precautions or handling/dispensing to customers. CelluFuel Inc. and Groupe Savoie, both members of ACBC, show specific interests for renewable diesel production facilities in the near future, holding promise for the opportunity of this feedstock in Atlantic Canada.

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Stakeholders in Atlantic Canada As identified through ongoing engagement by ACBC, BioAtlantech and its affiliates, there is a large community of serious and committed stakeholders around biofuels, biomass and biogas in Atlantic Canada. Project managers corresponded with these stakeholders throughout the duration of this project, soliciting information to be used as reference for positions and assumptions in this report, and to support its findings and recommendations. The primary source of feedback was a survey, sent directly to a total of 120 stakeholders throughout Atlantic Canada, made available in both electronic and printed formats, as well as both English and French languages.

Stakeholder Survey Results A total of 49 stakeholders responded to the survey; further examination identified some of the returned surveys were filled out by one representative of a company or organization that actually fulfilled the response of two or more requests for survey response, reducing the number of different stakeholder responses to 43. This equals a 36% response rate, which provides an adequate cross section of information from stakeholders throughout New Brunswick, Prince Edward Island and Nova Scotia, as well as input from Newfoundland. It includes biofuels, biogas and biomass proponents and producers, research, academia, industry affiliates, the forestry sector, agriculture, manufacturers, engineering, fuel distributors, and more. Research tells us, and industry is also very clear, that there is much cross-over and synergy in the three communities of industry – biofuels, biogas and biomass. Survey responses that speak directly and specifically to biogas and biomass are not reflected in this report, but will be accessed at a later date for projects in those fields; the information provided here is relevant to the biofuels industry development and the primary purpose of this report. A list of all surveyed stakeholders and the detailed results are included as Appendix A of this report. In summary, the responses highlighted: 

Areas of interest in relationship to biofuels – namely ethanol, biodiesel and renewable diesel. Survey data shows approximately 11 bioenergy producers/proponents currently operating in Maritime Canada: 2 producers of ethanol, 4 of biogas and 1 biodiesel producer. It’s likely these numbers are low based on a 36% survey response rate. There are several proponents of both biofuel products, and no doubt the desire, ability and will for local/regional producers to deliver the desired quantity and quality that this region can consume and export. These producer proponents are confident that under the right circumstances they will invest and deliver a viable commercial biofuels industry here. The identified “right circumstances” will be highlighted below under Policy and Programming and in greater detail in the recommendations section of this report.



Hurdles & Challenges in relation to the development of a viable sustainable biofuels production industry, including:

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  

 

   

APRI No. 200344

Time and cost for research and development. Lack of regional government knowledge of the industry. Lack of government policy in the region. However, stakeholders recognize that government policy also needs to be driven from industry interest, recommendation and participation. There is no doubt a chicken and egg circumstance here in terms of government policy and industry opportunity. High capital cost for production plants. Financing - funding for renewable energy. Because of the risk and considerable cost involved, traditional lenders do not tend to support clients with new projects that are uncommon in the region. Supply of natural gas, or high cost of energy for production. Feedstock development to commercialization. Is there enough sustainable feedstock?

Policy and Programming (P&P). All participants were asked if they believe government(s) could and should assist in the development of a biofuels production industry in this region. Common responses included:      

Biofuel mandates for NS, NB and PEI to support the new Government of Canada Renewable Fuels Regulations. Nova Scotia, for example, has a current motor fuel tax elimination for biofuel, yet has no mandate. Government assistance for research and development. Need for a level playing field with P&P in other Canadian jurisdictions and abroad. Production incentives. Encourage utilization of forest industry waste. Policies in place regarding government fleet vehicles.

1) Additional quotes and comments of note retrieved through the survey process: 1) “Believe industry holds great promise four our region” 2) P&P “Facilitate development, purchase agreements for bio-energy, create enabling 3) 4) 5) 6) 7) 8) 9)

environment.” P&P “Educate the public on the benefits of bioenergy” Hurdles with “public perception of product value and use”. “Regional / inter-provincial approach” for P&P. “Current policy does not support local production.” “Rally farmers and foresters” “ Absence of strong government commitment to getting off of fossil fuels” “Yes government can assist, sharing the risk of development” grant / loan guarantees, reduced taxes, co-fund capital and R&D projects.

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Stakeholders clearly identified three common themes: 1. Mandate = market. Yes there is a mandate for renewable fuels on a national scale that was believed to blanket all of Canada including our region. However due to circumstances of regional refineries, distribution and unique circumstances in Atlantic Canada, the region is negatively positioned for industry development. Provincial mandates or repair to the national mandate are paramount to ensure success for the producers and proponents of this region. 2. Policy and Programming. We must be competitive with other jurisdictions within Canada and around the world. Capital is a huge hurdle for an emerging industry of this magnitude. In many if not all other jurisdictions where the biofuels industry has developed and succeeded, some type of capital funding or loan option has been made available and utilized by regional developers. Additionally, other jurisdictions have benefited from some type of production or tax incentive, to allow proponents to succeed at producing. 3. Public and government awareness of this industry’s benefits for this region, need to be addressed. 4. Research and development funds need to be focused and committed to the development of current and new technologies, both for production and feedstocks, for now and in the near future.

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BioEnergy/Biorefinery Research Network ACBC, its membership, and BioAtlantech also continue to collaborate with academia and research throughout Atlantic Canada. An informal Biorefinery/Bioenergy research network was established in 2011; to date, there are a total of 51 members who are building momentum for research and development in this sector. A complete list of members is included as Appendix B of this report. It’s evident from this network that there is significant research happening, directly and indirectly, on biorefineries and bioenergy. While each of these researchers currently has adequate laboratory resources to conduct their research, some strategic investments in infrastructure (equipment) could facilitate commercialization efforts, and provide specific research support that currently does not exist. A more complete research capacity and gap assessment survey should be completed within the next year to identify specific needs of ACBC members as well as other bioenergy start-ups. Many of the current research efforts by members of this group are not specifically focused on industry, or if they are, they are not focused on the regional industry’s needs (for example, some researchers are working with large pulp and paper companies not located in the Atlantic Region). Many of these researchers have also been conducting research in isolation of the others in the region, which leads to project overlaps and provincial and federal investments similar projects. The main goal of the research network is to help facilitate collaborations and reduce the duplication of research activities. ACBC also hopes it can help focus research capacity on regional needs and industry developments. There are currently two research centres that have a mandate focused on applied research, specifically for the regional bioenergy industry sector. CCNB Biorefinery Technology Scaleup Centre The Biorefinery Technology Scaleup Centre is an applied research centre associated with the College Communautaire de Nouveau Brunswick. Its mandate is to work directly with the private sector. Its infrastructure capacity and expertise is focused on the pilot scale demonstration and technical support for ethanol, biodiesel and biogas bioenergy processes. The centre has received investments from ACOA ($1.2 million), the Province of New Brunswick ($1 million) and NSERC Community College Innovation Program ($2.2 Million). These investments have contributed to the development of Atlantic Bioenergy Corp of PEI; Maritime Biofuels of Nova Scotia; and Laforge Bioenvironmental of New Brunswick. Each of these companies is also members of ACBC. The centre has also played a major role in the founding of ACBC and the organization of the Biorefinery Research Network. In addition to its own capacity and expertise it assists companies in identifying and obtaining research and technical expertise from other researchers in the region, nationally and internationally. The Centre can access various funding programs both nationally (NSERC and NRC-IRAP) and Provincially (New Brunswick Innovation Foundation) that can assist company research and development.

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CBU Centre for Sustainability Energy and the Environment (Verschuren Centre) Cape Breton University’s Verschuren Centre for Sustainability in Energy and the Environment was established to find innovative and sustainable solutions to energy and environmental issues. The Verschuren Centre is committed to innovative solutions to increase the value of community renewable energy sources, both locally and globally. The Verschuren Centre has a focus on biomass-based renewable energy and bio-products, the combination of which it believes will optimize the socio-economic benefit of available biomass resources. The Centre believes that industrial scale biomass feedstock development is critical to both commercial pathways – renewable energy and bio-products. Such feedstocks include a variety of sources and uses, including:

4) 5) 6) 7)

Municipal Solid Waste (MSW) for biomass combined heat and power generation; Forestry resource to co-produce forestry products and cellulosic biofuels; Non-food agricultural crops for nutriceuticals, pharmaceuticals, and biofuels; and Algae (seaweed) for cosmetic products, food and bioenergy. Cape Breton University is creating a living laboratory for research, development, demonstration and commercial deployment of bio-product and bioenergy technologies and processes, as evidenced by a focus on biomass gasification. They are currently considering the establishment of a biomass gasification commercial-scale demonstration facility, including research and development partnerships with Lockheed Martin and Cape Breton Explorations, that will further the development agenda of the technology and its economic use with various feedstocks. The Centre believes Atlantic Canada has a competitive advantage for bioenergy sector and that policy and legislation can help foster commercial development. Moving forward, the Centre will continue to collaborate with industry, academia and government on commercialization-focused research and development designed to foster the advantages in this region.

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Market Capacity According to the Canadian Renewable Fuels Association (CRFA), there are currently seven commercial-scale biodiesel producing plants in operation in Canada, accounting for approximately 118 million litres per year in production. There are two additional large-scale plants under proposal, however far from completion and production: ADM is proposing a 200 ML plant in Alberta, and Greefields is proposing a 175 ML plant in Quebec. Other plants are under construction, mostly in the Prairie Provinces. When considering all these biodiesel plants, the Canadian biodiesel industry would have a total production capacity of 600 million litres. Sources: http://www.greenfuels.org/en.aspx, Senate Committees Reports http://www.parl.gc.ca/sencommitteebusiness/CommitteeReports.aspx?parl=41&ses=1&Language=E&comm_id=2

CFRA figures show the current Canadian production capacity meets only 85% of those standards, and that Canada’s target number of 600 ML is still well below the anticipated demand of Renewable Fuels Standards. The renewable fuels regulations currently in place, and their forecasted demand, will increase domestic biodiesel production and the demand for renewable fuel, from 583 million litres in 2011 to 858 million litres in 2035. It is assumed that the majority of the renewable fuel demand would be met through domestic production. As that demand increases, it is reasonable to assume that additional production facilities would join the market. The Canadian Environmental Protection Act (1999) states the following in its Regulations Amending the Renewable Fuels Regulations, P.C. 2011-795 June 29, 2011: In addition to the overall environmental benefits, one of the key drivers for supporting renewable fuels production and use is the benefit that it can bring to the agriculture sector and rural Canada. Increased renewable fuels production in Canada will result in increased local demand for feedstocks and new markets for Canadian agricultural producers’ crops. For example, biodiesel facilities can provide a market for off-grade canola, which is not suitable for the food market. Providing agricultural producers with the opportunity to invest in and develop profitable renewable fuels projects that use agricultural products as inputs will help to create a positive stream of income that could be more independent of commodity price swings. This would also encourage an approach that goes beyond simple commodity production to focus on new ways to add value to biomass produced on farms. Renewable fuel plants would inject additional spending into the local rural economies, broadening their tax base and generating additional jobs at the local level. SOR/2011-143 June 29, 2011

The CRFA has also made clear the intention to further increase the requirements of the renewable fuels standards, moving from a 5% blend to 10%, which would double demand. The U.S. is further considering an increase to a 15% blend; if and when that happens, Canada would likely follow in the same direction. There is no current urgency to move to a 10% blend, because industry does not yet have the capacity to keep up, and moving too quickly would only drive the need to import biofuels. Progress must be scaled to the pace that Canadian production capacity can be built.

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To increase the availability of biofuel in Canada, the Federal government initiated an ecoENERGY for Biofuels Program, which supports the production of renewable alternatives to gasoline and diesel, and encourages the development of a competitive domestic industry for renewable fuels. The program, administered by NRCan, is investing $1.5 billion over nine years, to assist with creating biofuels plants across Canada. Funds for this program are currently fully expended. The entire sum of incentives was granted to producers in central and western Canada; Atlantic Canada received zero incentives. But, the CRFA continues to lobby government for continued access to this program, to allow new applications as well as re-applications from proponents originally rejected. Atlantic Canada could significantly benefit from application for this program. In addition to the ecoENERGY program, several provinces in Canada have specific production incentives for biofuel producers. Market capacity can best be determined by actual and future demands, and it is clear that the current production market in Canada does not, and cannot, meet those demands. This market is growing at a significantly fast pace, leaving considerable room for new biodiesel production facilities.

Current Renewable Fuel Facilities across Canada A map of biofuels facilities across Canada provides a picture of the potential for the bioenergy market in Atlantic Canada. The below map indicates the location of all renewable fuels producing companies in Canada, and the corresponding table lists each plant’s nameplate capacity, the type of product produced and the feedstock used is included. Source: http://www.greenfuels.org/en/industry-information/plants.aspx – November 2010

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Biodiesel

In million litres per year (Mmly) Plant Name

City

Province

Feedstock

Capacity

Status

1 Bifrost Bio-Blends Ltd.

Arborg

Manitoba

Canola

3 Mmly

Operational

2 Biocardel Quebec Inc.

Richmond

Quebec

Multi-feedstock

40 Mmly

Proposed Plant

3 Bio-Lub Canada.com

St-Alexis-desMonts

Quebec

Yellow grease

10 Mmly

Operational

4 BioStreet Canada

Vegreville

Alberta

Oilseed

237 Mmly

Proposed Plant

5 Bioversel Sarnia

Sarnia

Ontario

Multi-feedstock

170 Mmly

Proposed Plant

6 BIOX Corporation

Hamilton

Ontario

Multi-feedstock

66 Mmly

Operational

7 BIOX Corporation

Hamilton plant 2

Ontario

Multi-feedstock

67 Mmly

Proposed Plant

8 Canadian Bioenergy Corporation - North Biodiesel Limited Partnership

Lloydminster

Alberta

Canola

265 Mmly

Proposed Plant

9 City-Farm Biofuel Ltd.

Delta

British Columbia

Recycled oil/tallow

10 Mmly

Operational

10 Consolidated Biofuels Ltd.

Delta

British Columbia

Yellow grease

10.9 Mmly

Operational

11 Eastman Bio-Fuels Ltd.

Beausejour

Manitoba

Canola

5 Mmly

Operational

12 FAME Biorefinery

Airdire

Alberta

Canola, camelina, mustard

1 Mmly

Demonstration Facility

13 Kyoto Fuels Corp

Lethbridge

Alberta

Multi-feedstock

66 Mmly

Under Construction

14 Methes Energies Canada Inc.

Mississauga

Ontario

Yellow grease

5 Mmly

Operational

15 Methes Energies Canada Inc.

Sombra

Ontario

Multi-feedstock

50 Mmly

Under Construction

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Plant Name

City

Province

Feedstock

Capacity

Status

16 Milligan Bio-Tech Inc.

Foam Lake

Saskatchewan

Canola

1 Mmly

Operational

17 Noroxel Energy Ltd.

Springfield

Ontario

Yellow grease

5 Mmly

Operational

18 QFI Biodiesel Inc.

St-Jeand'Iberville

Quebec

Multi-feedstock

5 Mmly

Operational

19 Rothsay Biodiesel, A member of Maple Leaf Foods Inc.

Montreal

Quebec

Multi-feedstock

45 Mmly

Operational

20 Speedway International Inc.

Winnipeg

Manitoba

Canola

20 Mmly

Operational

21 TRT-ETGO

Bécancour

Quebec

Vegetable oil

100 Mmly

Proposed Plant

22 Western Biodiesel Inc.

Calgary

Alberta

Multi-feedstock

19 Mmly

Operational

Ethanol

In million litres per year (Mmly) Plant Name

City

Province

Feedstock

Capacity

Status

23 Alberta Ethanol and Biodiesel GP Ltd.

Innisfail

Alberta

Wheat

150 Mmly

Proposed Plant

24 Amaizelingly Green Products L.P.

Collingwood

Ontario

Corn

58 Mmly

Operational

25 Atlantec Bioenergy Corporation

Cornwall

PEI

Energy beets

300,000ly

Demonstration Facility

26 Enerkem Alberta Biofuels - Edmonton Waste-to-Biofuels Facility

Edmonton

Alberta

Municipal solid waste (landfill waste)

36 Mmly

Under Construction

27 Enerkem Inc.

Sherbrooke

Quebec

Various feestocks

475,000 Litre/y

Demonstration Facility

28 Enerkem Inc.

Westbury

Quebec

Wood waste

5 Mmly

Demonstration Facility

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Plant Name

City

Province

Feedstock

Capacity

Status

29 GreenField Ethanol Inc.

Chatham

Ontario

Corn

195 Mmly *

Operational

30 GreenField Ethanol Inc.

Johnstown

Ontario

Corn

230 Mmly

Operational

31 GreenField Ethanol Inc.

Tiverton

Ontario

Corn

27 Mmly *

Operational

32 GreenField Ethanol Inc.

Varennes

Quebec

Corn

155 Mmly

Operational

33 Growing Power Hairy Hill

Hairy Hill

Alberta

Wheat

40 Mmly

Proposed Plant

34 Husky Energy Inc.

Lloydminster

Saskatchewan

Wheat

130 Mmly

Operational

35 Husky Energy Inc.

Minnedosa

Manitoba

Wheat and corn

130 Mmly

Operational

36 IGPC Ethanol Inc.

Aylmer

Ontario

Corn

162 Mmly

Operational

37 Iogen Corporation

Ottawa

Ontario

Straw from wheat, barley, and oats

2 Mmly

Demonstration Facility

38 Kawartha Ethanol

Havelock

Ontario

Corn

80 Mmly

Operational

39 NorAmera BioEnergy Corporation

Weyburn

Saskatchewan

Wheat

25 Mmly

Operational

40 North West Terminal Ltd.

Unity

Saskatchewan

Wheat

25 Mmly

Operational

41 Permolex International, L.P.

Red Deer

Alberta

Wheat, wheat starch, corn, barley, rye & triticale

42 Mmly

Operational

42 Pound-Maker Agventures Ltd.

Lanigan

Saskatchewan

Wheat

12 Mmly

Operational

43 Suncor St. Clair Ethanol Plant

Sarnia

Ontario

corn

400 Mmly

Operational

44 Terra Grain Fuels Inc.

Belle Plaine

Saskatchewan

Wheat

150 Mmly

Operational

* Volumes include industrial alcohol production

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The Potential for Advanced Bioenergy Technology in Atlantic Canada There are several companies with potential for the next generation of biofuels production in Atlantic Canada, already using new technologies – such as wood waste, algae and municipal waste – that could be effective and sustainable opportunities for biofuels industry development. All cities, for example, have municipal waste and are looking for strategic partners to manage and find alternative uses for that waste. Cellulosic or Advanced Biofuels In the United State; according to the summary section of the Congressional Research Service (CRS) Report to Congress, dated October 14, 2010: “Cellulosic biofuels are produced from cellulose (fibrous material) derived from renewable biomass. They are thought by many to hold the key to increased benefits from renewable biofuels because they are made from potentially low-cost, diverse, non-food feedstocks. Cellulosic biofuels could also potentially decrease the fossil energy required to produce ethanol, resulting in lower greenhouse gas emissions. Cellulosic biofuels are produced on a very small scale at this time---significant hurdles must be overcome before commercial-scale production can occur. The renewable fuels standard (RFS), a major federal incentive, mandated the use of 100 million gallons per year (mgpy) of cellulosic biofuels in 2010. After 2015, most of the increase in the RFS is intended to come from cellulosic biofuels, and by 2022, the mandate for cellulosic biofuels will be 16 billion gallons. Whether these targets can be met is uncertain, and on March 26, 2010, the Environmental Protection Agency issued a final rule that lowers the 2010 cellulosic biofuel mandate to 6.5 million gallons. Research is ongoing, and the cellulosic biofuels industry may be on the verge of rapid expansion and technical breakthroughs. However, at this time, only a few small refineries are scheduled to begin production in 2010, with an additional nine expected to commence production by 2013 for a total output of 389 mgpy, compared with an RFS requirement of 500 mgpy in 2012 (a year earlier). The federal government, recognizing the risk inherent in commercializing the new technology, has provided loan guarantees, grants, and tax credits in an effort to make the industry competitive by 2012. In particular, the Food, Conservation, and Energy Act of 2008 (the 2008 farm bill, P.L. 110-246) supports the nascent cellulosic industry through authorized research programs, grants, and loans exceeding $ 1 billion. The enacted farm bill also contains a production tax credit of $1.01 per gallon for ethanol produced from cellulosic feedstock. Private investment, in many cases by oil companies, also plays a major role in cellulosic biofuels research and development. Three challenges must be overcome if the RFS is to be met. First, cellulosic feedstocks must be available in large volumes when needed by refineries. Second, the cost of converting cellulose to ethanol or other biofuels must be reduced to a level to make it competitive with gasoline and corn-starch ethanol. Third, the marketing, distribution, and vehicle infrastructure must absorb the increasing volumes of renewable fuel, including cellulosic fuel mandated by the RFS. Congress will continue to face questions about the appropriate level of intervention in the cellulosic industry as it debates both the risks in trying to pick the winning technology and the benefits of providing star-up-incentives. The current tax credit for cellulosic biofuels is set to expire in 2012, but its extension may be considered during the 111 th Congress. Congress may continue to debate the role of biofuels in food price inflation and whether cellulosic biofuels can

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alleviate its impacts. Recent congressional action on cellulosic biofuels has focused on the definition of renewable biomass eligible for the RFS, which is considered by some to be overly restrictive. To this end, legislation has been introduced to expand the definition of renewable biomass eligible under the RFS.”

The interest, desire and planned development of new technologies or improved existing technologies is an important factor for future industry development in the United States, and around the world. Policy and strategy that evolves in the U.S. will have a direct impact on industry development in Canada While the U.S. recognizes it is currently an economic stretch, they are committed to development to improve its profitability. This same desire exists with SDTC in Canada. Striving towards biofuels production that meets U.S. cellulosic biofuels standards or acceptance for imported Canadian biofuels provides a great opportunity for Atlantic Canada proponents. For further reference, an article supporting the case for cellulosic ethanol is attached as Appendix C of this report. Algae to Biofuels The production of biofuel from algae involves three basic steps: algae growth, biomass extraction, and post processing. In the first stage of large scale algae biofuel production, algae are grown in a network of bioreactors on an agricultural scale. The bioreactor network is designed and constructed to provide the optimal growing conditions, and allowing for efficient harvest of algae at the end of each growing cycle. Pond Biofuels enclosed reactors protect the algae from environmentally adverse conditions and maintain the integrity of the algae crop. Algae are harvested to yield the energy rich biomass, and the aqueous nutrient broth returned to the bioreactor network in a closed loop system. Collected biomass is then processed through several mechanical, drying, and chemical steps to yield the final biofuel product. Biocrude oil may be separated from dry algae biomass, and the biocrude prepared for subsequent processing into biofuel. In either case, finished biomass is suitable as a direct substitute for coal, petcoke and related fossil fuels. If extracted from the biomass, biocrude may be further processed into biodiesel in the third step through a chemical process that results in biodiesel that meets the appropriate regulatory standards for use in the existing fuel distribution system. In July 2010 ExxonMobil and Synthetic Genomics Inc. announced opening of a new greenhouse facility to enable the next level of research and testing in algal biofuels. This new facility will support the evaluation of most productive strains of algae and most efficient production methods and potentially result in economically viable, low net carbon emission transportation fuel. As stated in its release to media: This is an important day in the early stages of our development program as we test the hypothesis that algae biofuels could become commercially viable and make a meaningful contribution to meeting future energy demand… SGI and ExxonMobil researchers are using the facility to test whether large-scale quantities of affordable fuel can be produced from algae.

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In the greenhouse facility, researchers from ExxonMobil and SGI will examine different growth systems for algae, such as open ponds and closed photo-bioreactors. They will evaluate various algae, including both natural and engineered strains, in these different growth systems under a wide range of conditions, including varying temperatures, light levels and nutrient concentrations. They will also conduct research into other aspects of the algae fuel production process, including harvesting and bio-oil recovery operations. Since ExxonMobil and SGI announced the algae biofuel program last July, researchers have made substantial progress, including: 

Isolating and/or engineering a large number of candidate algal strains and developing growth conditions under which these strains could be made more productive;



Identifying and testing some of the preferred design characteristics of the different production systems; and



Initiating life cycle and sustainability studies to assess the impact of each step in the process on greenhouse gas emissions, land use and water use.

An additionally attractive factor for Atlantic Canadian biofuels production is development at Ocean Nutrition Canada (ONC) and a possible spin-off company to produce algae to biofuels. As stated in its 2010 media release… Dozens of companies and academic laboratories are pursuing the objective Ocean Nutrition Canada did not know it had — to cultivate algae, the foundation of the marine food chain, as a source of green energy. But Ocean Nutrition Canada’s prolific grower, experts say, appears capable of producing oil at a rate 60 times greater than other types of algae being used for the generation of biofuels. In view of its discovery, the company will lead a four-year consortium, formed over the past months and funded by the federal not-for-profit foundation Sustainable Development Technology Canada, to develop its proprietary organism into a commercial-scale producer of biofuels. Canada, with its long harsh winter and short summer, would hardly seem to be the ideal place to breed algae for biofuel… Capable of converting sunlight and carbon dioxide into lipids and oils, photosynthetic algae can typically generate 10 to 20 times more fuel per acre than agricultural commodities like corn, used to make ethanol. Moreover, algae do not require arable land and so need not compete with food crops for growth space. And as voracious consumers of carbon dioxide, photosynthetic algae have the potential to abate greenhouse gas emissions… “It’s a big deal for Eastern Canada and a big deal for the country in general,” Mr. Whittaker said. “Because of this particular algae strain and our ability to process it, this can reach a global scale.” Ocean Nutrition is now capable of growing meaningful amounts of the strain — named ONC T18 B — and keeps a stockpile in cryogenic reserve. One of the specific draws is that it produces oil by converting reduced organic compounds, not by conventional photosynthesis. Direct sunlight is not always easy to come by in Canada, and heating indoor ponds could end up consuming more energy than it produces.

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This is a very real and exciting opportunity for Nova Scotia. Maritime Biofuels provided ONC with the technology to convert the majority of this ONC byproduct to ASTM D6751 specification B-100 Biodiesel. Wilson Fuel Co. Limited current leases 5MML of bulk tank storage in their Halifax bulk terminal to MBP. WFC also provide MBP with access to the Barrington Terminal pipeline, which is used to load tankers to move the ONC/MBP product to European markets. Conventional algae are typically photoautotrophic, getting “free” energy from the sun. Because the ONC algae is instead heterotrophic, it draws energy from sugars, which are not a “free” energy source and would result in a higher input cost; but, this is expected to be balanced by the higher conversion rate to oil. Recently, May, 2012 Ocean Nutrition Canada was purchased by a Dutch group, Royal DMS. The future of the proposed biofuels project is unknown at this time, yet the opportunity clearly still exists. Hydrogenated Vegetable Oil Another consideration for biodiesel production in North America is the blending of hydrogenated vegetable oil (HVO) with diesel, through a process called hydro treatment, which makes a diesellike fuel from the hydrogenation and de-oxygenation of vegetable and animal based oils. Hydro treatment typically conducted in an oil refinery. The feasibility of using hydrotreatment to produce renewable diesel is very sensitive to economies of scale. Some argue that the best place to hydrotreat oils is in the refinery itself, which would require the refinery to capitalize the process modifications necessary to produce the product. Environment Canada has this to say: It can also be seen in both the West and the East, that some volumes of HVO would be used. Higher volumes of HVO would be blended in the West, due to greater accessibility of the product in that region. In addition, blenders in the West are already using HVO to meet provincial requirements and therefore already have the necessary infrastructure and planning to deal with HVO. This product is desirable due to its high cetane number and low cloud point relative to biodiesel (can go to –25°C). It is currently produced in relatively low quantities and must be transported long distances (from Singapore, Finland, the Netherlands and the United States to a certain extent), rendering it costly. The volumes of HVO used to calculate the costs and the average differential cost of 35 cents per litre between HVO and diesel fuel were provided by the industry. The total incremental cost of the imported HVO over the 25-year period is estimated to be $764 million. Some fuel producers are or have been investigating the possibility of producing HVO themselves, but have also indicated that the capital costs remain too high. Most producers would prefer to blend with HVO, but current availability and prices of the product render it inaccessible at this time.

Atlantic Canada’s two refineries – Irving Oil and Imperial Oil – have indicated interest in Hydrogenated Vegetable Oil (HVO) and suggest this consideration would help reduce costs for infrastructure and distribution in relationship to diesel. However, they did not provide in-depth feedback, nor did they seemed convinced this is an option of choice in the short term.

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ACBC strongly believes that next generation biofuels are a very real opportunity for the Atlantic region. These kinds of technologies are being used in other jurisdictions, where there is access to capital funding, production incentives and mandates for market supply and demand. (For reference, a list of facilities in Canada, using a diverse group of feedstocks for cellulosic biofuels – energy beets, wood waste, switch grass corn cobs, corn residue, wheat and wheat straw, municipal waste, treated wood and agricultural waste, is included as Appendix D of this report.) Atlantic Canadian companies ready to use technological advancements for biofuels production would benefit from similar policy and programming efforts to help them reach their full potential. Case studies of companies currently operating with these technologies, and the opportunities for future potential, are detailed in Appendix E of this report.

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The Atlantic Canada Opportunity – Regional Consumption and Export Capacity Canadian RFS now require ethanol blends. Based on the standards set in the national mandate, the below chart represents the biofuels production potential for Atlantic Canada. L

5% Blend Ethanol

10% Blend Ethanol

2% Blend of Bio-diesel

Motor gasoline

1.195 BL

59 MML

118 MML

Diesel Fuel Oil

889 MML

18 MML

Heating Oil

904 MML

18 MML

Nova Scotia Fuel Energy

New Brunswick Fuel Energy

L

5% Blend Ethanol

Motor gasoline

1.129 MML

56 MML

Diesel Fuel Oil

1.189 MML

24 MML

317 MML

6 MML

Heating Oil

PEI Fuel Energy

10% Blend Ethanol

2% Blend of Bio-diesel

112 MML

L

5% Blend Ethanol

Motor gasoline

230 MML

11.5 MML

Diesel Fuel Oil

132 MML

3 MML

Heating Oil

192 MML

4 MML

Newfoundland Fuel Energy

10% Blend Ethanol

2% Blend of Bio-diesel

23 MML

L

5% Blend Ethanol

10% Blend Ethanol

2% Blend of Bio-diesel

Motor gasoline

670 MML

33.5 MML

67 MML

Diesel Fuel Oil

521 MML

10.42 MML

Heating Oil

611 MML

12.22 MML

Source: Natural Resources Canada. (Latest statistics 2008 – note average 2004 to 2008 is reasonably constant) Note on Ethanol: Canadian RFS regulate a 5% blend; however, the standard or common blending amount is currently at 10%, therefore assumptions of provincial blending requirements are based on a 10% blend.

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For NS, NB and PEI this represents approximately 253 ML Ethanol and 73 ML Biodiesel & home heating combined, which equals just over 300 ML of product for domestic consumption, in order to meet the regulations set out in the Canadian RFS. Unfortunately, this region is not producing its 300 ML of product, but is instead importing some of that quantity, sending economic and environmental benefits elsewhere. In the province of Nova Scotia, the distribution of fuel is generated primarily through a single refinery, and in this case based on geography and national refinery locations, this refinery can meet its national obligation of blending by doing so in other regions of the country. This makes Nova Scotia the only province in Canada – other than the locations originally exempt from the national standard – that does not blend ethanol in its gasoline pool. This is not strategic or beneficial for Nova Scotian consumers, nor was it likely the original intention of the national standard to provide a circumstance resulting in this kind of regional loop hole. Mandate clearly equals market; this region has the opportunity to build its industry in order to produce the 300+ ML required just to meet nationally mandated standards, and to reap the economic and environmental benefits. Additional export sales would also be available for Atlantic producers. Saskatchewan, for example, only has 1 million people, yet currently produces approximately 350 ML of biofuels to meet both domestic and export needs. It is also anticipated that Canadian blending requirements for both fuels will increase and follow the lead of other jurisdictions like the USA, South America and Europe, moving from 5% to 10% and then 15% for ethanol and 2% to 5% for biodiesel and beyond. Considering all these factors, the potential for biofuels production in NS, NB and PEI, for domestic consumption and export could have a realistic target of over 500 or 600 million litres. A Growing Market According to the CRFA, the industry has invested $2.3 billion towards the construction of new production facilities across the country, generating almost 2 billion litres per year of domestic production capacity. This is a significant amount, though still only 2% of biofuels produced worldwide and only 4% of U.S. production. In other words, there remain tremendous opportunities for growth. Energy can probably be defined as one of biggest challenges of the 21st century. Many experts anticipate global supply will tighten in the years ahead, and that energy prices will inevitably escalate. The International Energy Agency (IEA) is predicting a 40% increase in global crude demand by 2030. The world’s population is expected to grow by approximately 50 percent before stabilizing later this century. The pressures to expand food and energy production while simultaneously reducing our carbon emissions and preserving ecosystem services is expected to create many conflicts concerning land use and agricultural practices. World markets including the U.S. suggest that mandates currently in place provide the when and where of a 60 billion gallon (and up) biofuels market by 2022 – but can the capacity be built?

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In Florida, the Digest released its annual review of biofuels mandates and targets from 52 countries around the world. The bulk of mandates come from the EU-27, where the Renewable Energy Directive (RED) specifies 10% renewables content by 2020 across the entire membership – though 7% of that will come from biofuels, the balance from the electrification of the fleet. The other 21 countries are primarily in Asia. Besides the EU, the major blending mandates that will drive global demand are those set in the U.S. China and Brazil – each of which has set targets – or, in the case of Brazil, is already there – at levels in the 15-20% range by 2020-2022. India’s fast-growing economy also has a 20% ethanol mandate in place for 2017, but the country has a shaky record of implementing mandates, so far. The major biofuels mandates – with some estimates of 2020 consumption, translate into the major drivers of the 60 billion gallons of global biofuels demand that are widely discussed, without addressing the demand for aviation, or the mandates in place in countries such as Canada, Australia, or throughout Southeast Asia. The U.S. continues to push toward a 15% blend for ethanol. Although there have been delays in implementation, new cars, E85 capabilities, and continued effort by the U.S. Renewable Fuels Association will make every effort to make this a reality in the near future. As previously mentioned in this report, the current Canadian production capacity for ethanol in Canada meets only 85% of the RFS demand. Additional capacity is already required to meet provincial mandates that go above the 5% for ethanol and the 2 % for biodiesel, in provinces including British Columbia (5% mandate for biodiesel), Saskatchewan (7.5% mandate for ethanol) and Manitoba (considering 5% mandate for biodiesel). Even the target of 600 ML of biodiesel is well below the RFS demand, leaving considerable room for growth in Canadian biodiesel production facilities. One would likely have to consider that the Canadian Renewable Fuels Association and industry development will follow the lead of the U.S, at some point moving to a 15% RFS in Canada, which would triple the demand and create opportunity for rapid expansion in the industry. The Canadian Canola Growers Association identifies a huge market growth potential for biodiesel, and intend to move from a 2% to a 5% mandate. They offer the following comments on canola feedstocks: 

A cleaner-burning alternative for diesel fuel



Made from canola oil, a natural, renewable resource



Can be used in any regular diesel engine with no modification



Viable alternative for on-road vehicles, from municipal fleets to long-haul trucks, as well as off-road equipment used for mining, forestry, construction, agriculture and marine industries



Can be used in its pure form (B100) or mixed with petroleum diesel



Not the same as ethanol, which is an alternative to gasoline



Would drive the growth of jobs, investment and research, particularly in Western Canada

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

Every $100 million of additional demand for canola generates $83 million in Canadian Gross Domestic Product and more than 730 direct jobs in value-added industries



Used by more than 20 major fleets in Canada and 500 major fleets in the U.S.



3.5 million litres of biodiesel used in Canada in 2004



Canada’s new requirement for 2% renewable content in diesel fuels will increase the need to 600 million litres



A 5% renewable content requirement would push the need to 1.3 billion litres

Despite many recent market changes in North America and around the world, the growth rate for the biofuels industry is expected to be high, and industry will need to develop quickly to keep pace. To complete the concentration of regional and national production and demand, provincial governments in Atlantic Canada will need to work with the Federal Government and Atlantic Canada industry to ensure that the gaps or flaws in the national renewable fuels regulations are repaired in order to provide the maximum market potential for the Atlantic biofuels industry. In August of 2012, ACBC initiated this discussion by way of letters to the Federal Minister of the Environment and the Federal Minister of Agriculture and Agri-Food, with cc’s to all Atlantic Premiers and selected government officials. A copy of this letter is included as Appendix F. It is also important to note, as part of the domestic market discussion, that ACBC continues to engage both of Atlantic Canada’s refineries – Irving Oil and Imperial Oil – who both indicate a preference to receive their supply of biofuels from local, Atlantic Canada producers, rather than import biofuels form outside of the region or Canada, in order to meet the Canadian RFS.

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RESEARCH ANALYSIS The second major component of this project involved research. First, a SWOT analysis, to evaluate the Strengths, Weaknesses, Opportunities and Threats involved in developing a bioenergy industry for Atlantic Canada. Second, a look at the region’s testing and analysis capabilities to support this development, and the existing efforts of both researchers and industry. And third, an analysis of policy and programming specific to this industry.

SWOT Analysis Stakeholders have identified a number of internal and external factors that are favorable and unfavorable to building a bioenergy sector in Atlantic Canada. The SWOT analysis is based on the following definitions: 

Strengths – characteristics that provide it an advantage.

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Weaknesses (or Limitations) – characteristics that create a disadvantage

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Opportunities: external factors in the environment that could improve performance (e.g. make greater profits)

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Threats: external factors in the environment that could cause trouble

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STRENGTHS • Significant & diverse biomass • Open territory - development, policy and programming • Renewable Fuels Standards • Established lead agency • Strong research and academic community • Existing producers, plants • Interested governments

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WEAKNESSES • Lack of awareness, understanding • Perception that region cannot deliver volume • Renewable Fuels Standards • Behind industry pace • Federal funding spent • No strong government champion • Lackof experience as a sector

SWOT ANALYSIS OPPORTUNITIES • Outside investment interest • Cellulosic capacity • Close proximity for export • Shared desire to end imports • Traditional industries (feedstocks) available to support sector • Federal mandate for renewable fuels production • Regional priority for economic development and employment

THREATS • Current reliance on imported biofuels • Global economic challenges • Provincial governments face fiscal constraint • Limited will for provincial mandates, policy and programming • Resistance towards implementing RFS

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Strengths 

Atlantic Canada is open territory for development in the biofuels industry, as well as government policy and programming. With a blank page, this region can lean on the experiences and knowledge of other jurisdictions

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The region has a wealth of diverse biomass resources (crops and waste materials) and good growing conditions for a diverse range of crops – for example, energy beets which have 3 times the output per litres per acre than corn.

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Irving Oil must blend its product to meet current RFS and would prefer to buy from local producers.

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Atlantic Canada is easily accessible by numerous seaports.

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ACBC is well established as the lead Bioenergy Agency for Atlantic Canada; with 11 members, it lends a well-rounded voice to advocate for change in government policy. As a group, they have begun working with both provincial and federal governments to help relay information and provide recommendations that would support policy and programming to benefit the region and the sector.

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This report will be the first to provide actual economic impact analysis in order to facilitate policy and programming decisions

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The region has a strong regional research and academia community available to facilitate research and development to support to the private sector, similar to other regions of Canada. Prime examples include the already established Biorefinery Research Network and the Biorefinery Technology Scale up centre that houses specific infrastructure and expertise in ethanol, biodiesel and biogas production technology.

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Atlantic Canada has existing and experienced producers, as well as qualified suppliers to design and build biofuels plants.

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There are already two existing pilot-scale ethanol plants in Atlantic Canada.

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Government is interested and eager to understand the potential of this sector.

Weaknesses 

Consumers, government, industry and the media are unaware of this sector and do not fully understand its potential.

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A lack of solid, structured government policy and programming around biofuels and bioenergy to allow competition with other jurisdictions. Individual producers have benefited from single policies, but stakeholders feel a need for region-wide policy and programming for this sector.

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Atlantic Canada is perceived as unable to deliver, both in feedstock and policy and programming. Because volumes of crop production and the waste materials is much smaller here than in other jurisdictions such as western U.S. and Canada, many believe there is not enough resources to build an industry.

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Atlantic Canada has unique challenges meeting Canadian RFS.

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Industry development is moving fast, and Atlantic Canada could get left behind. For example, Ag Canada is already on the next phase of biofuels strategies and this region has not yet started.

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Federal programs of significant value already been all allocated and consumed by others.

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There are no national mandates for renewables that provide opportunities for biogas (green electricity or green natural gas) or solid biomass fuel (pellets) and currently no carbon credit or credit trading system for Canada.

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Regional refineries are lobbying against the implementation of renewable fuels regulations for biodiesel.

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Lack of a coordinated strategy and plan.

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No strong government champion for this sector.

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There are currently no large-scale, commercial biofuels producers in Atlantic Canada. (Two bioenergy/biogas plants are operational).

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The biofuels sector, as a whole, lacks experience.

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The region has no formal relationship with the CRFA.

Opportunities 

Outside investors and partners may be interested in investing here.

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Cellulosic is the new thing, and Atlantic Canada has the feedstock and knowledge to use it.

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Open ground is good territory for developing new policy by learning from others.

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A number of traditional “cradle to grave” industries can support this new sector, by supplying feedstocks and acting as consumers for finished product.

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The region’s diverse biomass (forest, agriculture, marine and municipal waste) can provide a wide range of opportunities for technology development as well as production. And, because it is a resource in smaller volumes than the average North American projects – there is opportunity to develop and prove small scale technologies that will be applicable in Europe, Africa and Asia.

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An export market to the U.S. is close and open.

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Small can work.

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Industry, refineries and government all share a desire to stop imports.

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A large and interested academic and research community, unique to other parts of Canada, has the potential to attract highly qualified professionals interested in commercializing bioenergy technology.

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There is now a federal mandate.

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There is an un-served market in this region and an un-met need south of the border.

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Economic development and job creation are high priorities in this region.

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Atlantic Canada can collaborate as a single region for development of this industry.

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More cooperation with the CRFA as the industry grows.

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New policies and programming that are tailored to this region and its needs.

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Environmental opportunities for this region are undervalued, because of difficulty quantifying in dollars.

Threats 

Other jurisdictions continue to build infrastructure and industry, producing and blending biofuels. Relying on supply from imports rather than developing domestic biofuels brings no economic benefit to the region and would instead mean, losing millions of dollars in potential revenues to the natural resources sector (ag, forestry and marine) and opportunities to capitalize on technology development.

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The downturn in the global economy is affecting all players.

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Provincial governments are under fiscal restraint; their level of support is questionable.

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Regional refineries are lobbying against the implementation of renewable fuels regulations for biofuel.

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There is a lack of will for provincial mandates, policy and programming.

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Industry burn-out.

SWOT Conclusion The development and delivery of a sustainable biofuels industry in Atlantic Canada is not an easy or simple task; however, the opportunity to move forward is better than ever. The time is now. This region has the feedstock in multiple applications, as well as desire from proponents and industry, with the knowledge, depth and the ability to build the industry. The are many hurdles to overcome; the key link, as will be explained in this report’s recommendations, is the lack of policy and programming specific to Atlantic Canada, to move the Atlantic biofuels industry to full scale commercialization. Many factors and circumstances, driven by both industry and government, as well as timing, have led to this current situation. The biofuels community around the world is moving at a rapid pace, and industry development in this region is a real possibility. With the recent delivery of the Canadian Renewable Fuels Regulations, combined with the will, and the desire of industry and governments to manage the details and applications of the regulations, and take advantage of the need for rural and regional economic development and positive environmental impacts, Atlantic Canada can compete and succeed on the world stage of this industry. The foundation is here; with the right seeds, it can grow.

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Testing and Analysis for Quality Control Quality control is paramount to the success of a biofuels industry; there are certain minimum standards that producers must meet, in order to ensure quality product. As part of its research, this project took on what ACBC believes is the very important task of identifying what support – analytical, instrumentation and chemical consulting assets – currently exists for quality control, and what would be required to support an Atlantic biofuels sector. To do so, Dr. Gerrard Marangoni, Professor of Chemistry at St. Francis Xavier University and Lab Director at X-Cell Analytical produced a comprehensive report entitled: A look at the current state of QA/QC capabilities and capacity in the Atlantic region included as Appendix G of this report. In summary, Dr. Marangoni suggests that the capacity to support a rapidly growing biofuels sector from a quality assurance and quality control (QA/QC) perspective is limited, and that this shortfall in support capacity could be a secondary opportunity for regional economic development by employing highly qualified professionals, graduating from regional academic institutions, in a new sub-sector of technical expertise. According to the report, only one major corporate player has successfully implemented a quality marketing initiative with regards to biofuels. There are no certified producers in the region, and until recently, the Atlantic Canadian biofuels sector could aptly be described as a collection of “small and young” biodiesel producers, unable to reach full capacity. The report explains that the biggest reason for this “capacity gap” is the lack of expertise in the region required to scale-up “backyard” operations. There are a number of firms capable of excellent plant designs, but significant expertise is required to overcome scale-up issues that arise from a complex combination of chemistry and engineering issues. Dr. Marangoni emphasizes that quality control must be an integral part of the entire production process, which includes the storage and stabilization of the fuels in the postproduction phase before fuel is delivered to the customer. It is imperative that the bio-based liquid fuels are of an equivalent quality standard to the conventional fuels so as to achieve satisfactory operability and emission performance from the vehicles that are utilizing these blends. This in turn requires total compliance with already established national and international fuel quality standards, which will ensure consumer acceptance of these fuels for their vehicles. This requires the establishment of a regional lab and a testing facility that is equipped and able to help suppliers and consumers work through inevitable operability issues and growing pains. The more quickly the industry can tackle QA/QC field issues, consumer acceptance of the fuels will grow. At the same time, appropriate guidelines and quality-monitoring protocols need to be in place to assure quality control in the distribution process (certified marketers) and eliminate issues from the production of blended fuels. In the case of biodiesels, the BQ-9000L system is recognized as the Gold Standard QA System designed for the Biodiesel industry. The BQ-9000 certification is based on the industry standard lab protocol ISO-17025, the standard for most commercial analytical labs around the world. Implementation of this QA system for biodiesels and ethanol is a necessary feature for any lab facility functioning as a biofuels research and development lab.

The report continues, suggesting that with an abundance of high-quality educational institutions, Atlantic Canada can produce numerous technically literate graduates with knowledge that can be applied in the biofuels sector. Dr. Marangoni proposes developing a “Regional Biofuel Production Initiative,” encompassing members of various university and community college institutions, and establishing a Regional Analysis Lab to satisfy QA/QC requirements of biofuels, tax incentives for

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both producers and consumers to embrace biofuels, as well as an education component. Dr. Marangoni believes this initiative would be a significant catalyst to build and grow a biofuels sector in this region. X-Cell Analytical is the region’s only full service lab specializing in the measurement of the physical properties of complex fluids, and there are currently no other university labs capable of offering these services in Atlantic Canada. However, there is capacity to leverage the academic assets we have in this region to establish the required analytical labs and build a centre of excellence. As the industry grows, it would require additional capacity, in both infrastructure and personnel. Dr. Marangoni concludes his report with several key recommendations: 

The Establishment of a Regional Biofuel Production Initiative – as described above.

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The Establishment of a QA/QC Environment - to improve the quality of the goods and services being offered by the Atlantic biofuels industry including and create an attractive industry. This environment would include research and development initiatives, a training centre and university-based labs.

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Inter-Provincial Buy-In and Investment - in the form of tax credits or subsidies to increase the potential for entrepreneurs and investors to get involved with the industry, and provide potential opportunities for industry players to access high quality analytical and service work, benefiting economic development, industry survival and employment rates.

A business assessment of this sub-sector would help identify the funding commitments and timeline requirements to implement these recommendations.

Policy and Programming Alternative Fuels Policy History The first federal alternative fuels policy was the 1975 introduction of the gasoline excise tax in response to the 1973 “oil crises”. Propane and natural gas were exempted from this tax. In 1992, the exemption was extended to ethanol made from biomass and methanol. In 1980, Manitoba introduced tax incentives for ethanol produced from biomass in Canada. The policy drivers were rural economic development and the 1979 “oil crises”. In 1988, Saskatchewan followed with incentives for ethanol production and use. This was followed by a number of other provinces and by 1992, there were tax incentives or tax exemptions in place from BC to Ontario along with the Federal excise tax exemption. Various drivers were used in the differences provinces but they were some combination of Rural/economic development Vehicle exhaust emission reduction Energy diversification. By the end of the1990’s ethanol blends were sold by at least one marketer from Ontario to British Columbia. In the late 1990’s agricultural support payments began to increase significantly as market prices for grains and oilseeds were below the cost of production. Rural economic development became a larger driver and we started to see the “next generation” of biofuel policies.

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Saskatchewan was the first province to consider an ethanol mandate. The legislation authorizing regulations with respect to a mandate was introduced in 2002; however, the mandate didn’t come into effect until 2005. The required blending level was soon ramped up to 7.5% as production capacity increased. The Saskatchewan ethanol industry has grown from 1 to 5 plants and these producers currently export to Alberta and BC. Three plants remain producer owned. Manitoba and Ontario followed with ethanol mandates. Manitoba (8.5%) tied the mandate to local production capacity, and Ontario at 5% - not tied to local production capacity. Ontario coupled their mandate with capital incentives and a variable support program that proved to be very successful. There are now seven plants producing more than the mandated requirements and there is now over compliance in these provinces. In 2006, the Federal government announced their Renewable Fuels strategy. It has four components.    

Increasing the retail availability of renewable fuels through regulation. Supporting the expansion of Canadian production of renewable fuels. Assisting farmers to seize new opportunities in this sector. Accelerating the commercialization of new technologies.

The drivers for the Federal strategy were:

8) Creating new economic opportunities for our farmers and agricultural sector; 9) Advancing the bio based economy; and 10)Reducing GHG emissions. In December 2010, the ethanol mandate became effective and in July 2011, the renewable diesel mandate was implemented. After the Federal announcement, several provinces moved to introduce their own mandates including British Columbia with a 5% ethanol and 5% renewable diesel requirement (effective Jan 2010): Alberta with a 5% ethanol and 2% renewable diesel requirement as of April 2011, and Saskatchewan with a 7.5 % mandate for ethanol. Source: Canadian Biofuel Policies: Don O’Connor (S&T)2 Consultants Inc. Ottawa, June 9, 2011

National and Provincial Policy and Programming More recent national and provincial policies and programming were researched to provide a picture of what’s available across the country to support this sector, as well as indicate areas of improvement for Atlantic Canada. Canadian Federal Programs – From West to East Over the past decade, the Canadian government has made a clear commitment to renewable fuels and advanced green technologies through timely and effective programs and grants. These programs are meant to establish a self-sufficient industry by aiding in initial research, technology development, demonstration projects and feedstock availability. These programs include:

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Environment Canada: Renewable Fuel Regulations

On September 1, 2010, the government of Canada announced the finalization of Federal Renewable Fuel Regulations requiring an average of 5% renewable content in gasoline across Canada. This Renewable Fuel Mandate will come into effect on December 15th, 2010. The full regulations are available online. In addition, the Government of Canada has announced a July 1, 2011 start date for an average 2% renewable fuel content in diesel fuel and heating distillate oil. Agriculture and Agri-Food Canada: Biofuels Opportunities for Producers Initiative (BOPI)

The Biofuels Opportunities for Producers Initiative (BOPI) ended on March 31, 2008. BOPI was an initiative designed to help farmers and rural communities hire experts to assist in developing business proposals and feasibility and other studies that were necessary to create and expand biofuels production capacity by agricultural producers. ecoAgriculture Biofuels Capital Initiative (ecoABC)

The ecoAgriculture Biofuels Capital Initiative (ecoABC) is a four year, $200 million federal program that provides 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 producer equity investments in the projects equal to, at minimum, five percent (5%) of the total eligible project costs. The deadline for the construction or expansion of biofuels facilities funded by ecoABC was September 30, 2012. A total of 23% of the $186,000,000 available to ecoABC has been allocated. Natural Resources Canada: ecoENERGY for Biofuels

The ecoENERGY for Biofuels Program supports the production of renewable alternatives to gasoline and diesel and encourages the development of a competitive domestic industry for renewable fuels. The Program provides an operating incentive to facilities that produce renewable alternatives to gasoline and diesel in Canada. EcoENERGY for Biofuels will invest up to $1.5 billion over nine years in support of biofuel production in Canada. Administered by Natural Resources Canada, the ecoENERGY for Biofuels Program runs from April 1, 2008 to March 31, 2017. Recipients will be entitled to receive incentives for up to seven consecutive years. The final round of funding is now closed. Ethanol Expansion Program (EEP)

The Ethanol Expansion Program (EEP) aims to increase domestic production and use of ethanol, a renewable transportation fuel, and reduce transportation-related greenhouse gas (GHG) emissions.

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The EEP provided contributions, with repayment terms, toward the construction financing of new or expansion fuel ethanol production facilities in Canada. These plants are now built and are producing ethanol at a collective nameplate capacity of approximately 1 billion litres per year. Climate Change Action Fund Biodiesel Research

Before biodiesel can enjoy widespread commercial viability in Canada, more research and development must be conducted to identify cost-effective ways for production and distribution and address on-road performance including cold weather issues. As part of the Climate Change Action Fund, the Government of Canada, through Natural Resources Canada and the National Research Council , helped to fund the construction of a small demonstration plant in Oakville, Ontario which has since been transformed into a full commercial plant in Hamilton at BIOX Corporation. Biodiesel (B-5 and B-20) has been tested in 155 buses in downtown Montréal as part of a demonstration project funded in part by the Government of Canada and the Quebec provincial government. The aim was to study how biodiesel works in real-life conditions, particularly in cold weather, and to determine the feasibility of supplying biodiesel to a mass transit company such as the Société de transport de Montréal (STM) . The project also assessed the economic and environmental impact of using biodiesel. Saskatoon Transit Services is testing biodiesel by running two buses on B-5, along with two "control" buses that run on conventional diesel. Over two years, each bus will be monitored and evaluated for emissions, fuel economy and engine wear. The National Renewable Diesel Demonstration Initiative (NRDDI) supports projects that demonstrate how renewable diesel fuel will perform under Canadian conditions in advance of the proposed renewable fuels regulation that would require an average annual 2% renewable content in diesel fuel and heating oil starting July 1, 2011 subject to technical feasibility. This is a part of the Government of Canada's Renewable Fuels Strategy. Off road components involved, rail, farm equipment and marine. The NRDDI final report was released in October 2010. Alternative Fuels

The Alternative Fuel site has been developed by the Fuels Policy and Programs Division within the Office of Energy Efficiency. Sustainable Development Technology Canada: Next Gen Biofuels Fund

The $500M NextGen Biofuels Fund™ is positioned downstream from the SD Tech Fund™ and bridges the gap between technology and market development. This fund is aimed at supporting the establishment of first-of-its-kind commercial scale demonstration facilities for the production of advanced renewable fuels and co-products. The purpose of the Fund is to encourage retention and growth of technology expertise and innovation capacity for cellulosic ethanol and biodiesel production in Canada.

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This program is able to fund up to 40% of eligible project costs, or to a maximum of $200M. All cellulosic ethanol and new biodiesel technologies, once they have been successfully demonstrated at the pilot scale, are also eligible. This outcome will enable larger volumes of advanced renewable fuels to be produced, helping Canada achieve its current renewable fuel standard using environmentally superior technologies. Advanced biofuels are derived from non-traditional renewable feedstocks, such as corn stocks, wood chips, fast-growing grasses, agricultural residues, and forest biomass. These advanced renewable fuels contribute to clean air, clean water and clean land, which address climate change and improve the productivity and the global competitiveness of the Canadian industry. SD Tech Fund™

The $550M SD Tech Fund™ is aimed at supporting the late-stage development and pilot, precommercial demonstration of clean technology solutions, like advanced renewable fuels. This important one-time investment bridges the gap between development and demonstration that is critical for an emerging industry, such as renewable fuels. Advanced renewable fuels contribute to clean air, clean water and clean land, which address climate change and improve the productivity and the global competitiveness of the Canadian industry. SDTC does not require any repayments of the financial contributions it provides to funded projects through the SD Tech Fund ™. This fund will ensure that Canadian companies can innovate and compete on a level playing field with our international competitors.

Provincial Policy and Programs Provincial and territory contacts – a complete list is attached as Appendix H of this report – were engaged to research the current state of policy and programming for biofuels and bioenergy across the country. British Columbia Renewable Fuels Standard

British Columbia has had an escalating biodiesel mandate that has moved from 2% to 4% and now currently sits at 5%. BC Bioenergy Strategy – http://www.energyplan.gov.bc.ca/bioenergy/ As part of its 2009 BC Energy Plan, the province of BC implemented a Bioenergy Strategy to:   

Establish $25 million in funding for a provincial Bioenergy Network for greater investment and innovation in B.C. bioenergy projects and technologies. Establish funding to advance provincial biodiesel production with up to $10 million over three years. Issue a two-part Bioenergy Call for Power, focusing on existing biomass inventory in the forest industry.

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  

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Aim for B.C biofuel production to meet 50 per cent or more of the province's renewable fuel requirements by 2020, which supports the reduction of greenhouse gas emissions from transportation. Develop at least 10 community energy projects that convert local biomass into energy by 2020. Establish one of Canada's most comprehensive provincial biomass inventories that creates waste to energy opportunities.

Alberta Alternative and renewable energy sources are part of Alberta’s energy portfolio. The Government of Alberta is taking action, through its Nine Point Bioenergy Plan, to support and encourage Alberta’s bioenergy producers. Quick Links: Alberta Biodiesel Association; Canadian Renewable Fuels Association Alberta Innovates: Bio Solutions; Natural Resources Canada; Climate Change Central Nine Point Bioenergy Plan In 2006, the Government of Alberta committed to a Nine Point Bioenergy Plan. This plan includes three grant programs (the Bioenergy Producer Credit Program, the Biorefining Commercialization and Market Development Program and the Bioenergy Infrastructure Development Program) to stimulate bioenergy development in Alberta. Value-Added Opportunities Bioenergy provides value-added development opportunities for Alberta’s forestry and agriculture sectors and is part of Alberta’s commitment to clean energy production. Alberta’s strong livestock, forestry, canola and grain base can provide a consistent feedstock for bioenergy facilities.

Alberta also has 20 million tonnes of annual waste in potential feedstock. Emerging technologies have the potential to convert this waste to bioenergy products, including renewable fuels. Renewable Fuels Standard Alberta’s Renewable Fuels Standard (RFS) will require five per cent renewable alcohol in gasoline and two per cent renewable diesel in diesel fuel. Please send questions about this standard to [email protected]. Bioenergy Grant Programs The Bioenergy Producer Credit Program (BPCP) encourages the development of a wide variety of bioenergy products including renewable fuels, electricity and heat with a credit per litre or kilowatt-hour. Please send questions about this program to [email protected].

News Release - Alberta increases support for clean energy production

(March 24, 2010)

Bioenergy Producer Credit Program (BPCP) Frequently Asked Questions

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Biorefining Commercialization and Market Development Program and Bioenergy Infrastructure Development Program

From 2007-2011, grants were provided through the Biorefining Commercialization and Market Development Program (BCMDP) and the Bioenergy Infrastructure Development Program (BIDP) to encourage the growth of a sustainable bioenergy industry. Grant applications for these two programs are now closed. Saskatchewan Enterprise Saskatchewan website: www.enterprisesaskatchewan.ca/programs Ethanol Fuel Grant Program

The Ethanol Fuel Grant Program supports the development of the ethanol industry in Saskatchewan. The program is intended to: 

promote the development of the ethanol industry in Saskatchewan;



encourage, through corresponding ethanol general regulations, smaller ethanol production facilities and complimentary industries (such as feedlot operations);



address production cost differentials associated with blending ethanol with gasoline; and,



promote the retail usage of ethanol-blended fuels.

The initial mandate was for 1% provincial pool volume beginning November 1, 2005, and increased to 7.5% in January 2007. The ethanol program provides a 15 cent per litre grant to eligible distributors who blend Saskatchewan produced ethanol within Saskatchewan for sale in Saskatchewan. Saskatchewan Renewable Diesel Program

Saskatchewan has introduced a mandate for inclusion of 2% renewable content in the average annual diesel fuel pool for fuel distributors beginning July 1, 2012. In order to allow industry to fully make the transition, the first compliance period will run from July 1, 2012, to December 31, 2014. In anticipation of the mandate, the Saskatchewan Renewable Diesel Program incentive was developed to support production of renewable diesel. The incentive component provides 13 cents per litre of eligible renewable diesel to qualifying producers in Saskatchewan for use in all diesel fuel applications. The incentive program is effective April 1, 2011, and terminates March 31, 2016. The mandate and the incentive were recommended by the Enterprise Saskatchewan Biofuels and Bio-Products Sector Team and the ES Board of Directors. Renewable diesel is defined as a diesel fuel substitute made from renewable materials such as vegetable oil, waste cooking oil, animal fat or fish oil, fungi, algae or other microbes, and potentially

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from cellulosic feedstock consisting of agriculture and forest biomass by way of any acceptable method (i.e. transesterfication, hydrotreating, etc.). For the purposes of this program, this definition excludes traditional and non-traditional petroleum derived products or resources as well as straight vegetable oils (SVO) or fats that are ‘untransformed’ to meet fuel standards. Industry consultations for both the incentive and mandate have been completed and program applications as well as distributor notification forms are now being accepted. The Saskatchewan Renewable Diesel Program Incentives Guidelines and Application Form, as well as the Distributor notification Form, can be found below. There are two components to the Saskatchewan Renewable Diesel Program: 

A mandate for inclusion of two per cent renewable content in the average annual diesel fuel pool in Saskatchewan for fuel distributors beginning July 2012; and



The renewable diesel incentive program, which was developed to support the production of renewable diesel in Saskatchewan.

The incentive and the mandate were recommended by the Enterprise Saskatchewan Biofuels and Bio-Products Sector Team and the ES Board of Directors. The incentive program will run for five years from April 1, 2011, to March 31, 2016. The program begins one year earlier than the provincial mandate (July 2012) to ensure Saskatchewan producers will have the incentive as the federal mandate is implemented July 1, 2011. The program provides an incentive of 13 cents per litre of renewable diesel produced at facilities located in Saskatchewan, sold, and delivered; delivery must occur during the period to which the incentive relates. Renewable diesel which has been toll processed at a facility in Saskatchewan is also eligible under the program. Volumes will be reported on a one hundred percent renewable diesel (also called B100 or „neat‟ renewable diesel) basis and volume corrected to 15 degrees C. The program is capped to support the annual production of 40M litres of renewable diesel, about the amount used to meet the two per cent Saskatchewan mandate. Incentives will be subject to caps. The maximum number of litres of Saskatchewan renewable diesel eligible for an incentive in a fiscal year (April 1 to March 31 of the next year) per producer is 20M litres. The total program incentive cap is set at 40M litres per fiscal year (April 1 to March 31). The mandate of two per cent renewable diesel does not have an end date. However, the incentive program does have an end date of March 31, 2016. Saskatchewan will work collaboratively through the New West Partnership and other mechanisms towards developing a healthy, competitive, and non-subsidized industry beyond that date. Note: 2% provincial mandate in lock-step with Federal mandate to ensure provincial coverage

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SaskBio

The Saskatchewan Biofuels Investment Opportunity (SaskBIO) Program, administered by the Ministry of Agriculture, provides repayable contributions of up to $10 million per project for the construction or expansion of transportation biofuels production facilities in Saskatchewan. Corporations (including co-operatives), individuals or partnerships are eligible to apply for funding. To be eligible, applicants must meet the following requirements: 

Program applicants must have a minimum of five per cent Saskatchewan ownership in their project; and



The minimum annual production capacity of a new facility or the increased capacity of an existing facility must be at least two million litres per year.

Funding is based on a rate that increases with the level of eligible Saskatchewan investment. SaskBIO was created to provide an opportunity for Saskatchewan residents to participate in valueadded biofuel production in Saskatchewan through investment ownership in biofuels facilities. The program will ensure that Saskatchewan is an attractive jurisdiction in which to build a sustainable biofuels industry. Goals: 

To create more jobs and economic spin-offs in rural Saskatchewan.

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To create new markets for Saskatchewan agricultural producers.

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To create increased activity in the Saskatchewan economy.

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To create the opportunity to decrease our impact on the environment.

Deadlines: 

To be eligible for consideration:



SaskBio program applications must be submitted by March 1, 2011.

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Approved projects must be completed and commissioned by March 1, 2012.

Manitoba Manitoba is currently committed to generate $2 billion in revenue through its bioproducts industry. Its current mandate is for 8.5% ethanol and 2% biodiesel. Key highlights of the Manitoba Bio-Products Strategy (http://www.gov.mb.ca/agriculture/pdf/the_manitoba_bioproducts_strategy.pdf) include:

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

Provide incentives to biomass solid fuel manufacturers and to heat users to increase the availability and use of biomass solid fuels in order to reduce coal consumption.

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Form strategic partnerships with technology developers and investors to capitalize on opportunities with advanced biofuels including cellulosic ethanol, syngas, green gasoline and green diesel.

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Continue to participate and support pilot biofuel production and bioenergy demonstration projects, particularly on the use of biomass solid fuels for industrial, commercial and community heating.

Biomass Support Program

The Manitoba Biomass Energy Support Program is intended to provide support to Manitobans in the transition to the processing and use of biomass for heating in place of coal. There are two components to the program: (1) a consumer component to assist coal users to purchase approved biomass and (2) a capital component to assist biomass users and processors to establish or upgrade infrastructure and facilities.

Ontario Renewable Energy Regulations

Contact: Ontario’s Renewable Energy Facilitation Office: e-mail at [email protected] or by phone at 1-877-440-7336 Renewable Energy Approvals Regulations (REA): http://www.ene.gov.on.ca/environment/en/subject/renewable_energy/index.htm This regulation has spurred the growth of renewable sources of energy by streamlining the approvals process for energy developers. Ontario is moving away from fossil-fuel based, non-renewable energy sources, and toward natural sources that generate less pollution and will help improve Ontario's air quality. The Ministry of the Environment is proposing amendments to the Renewable Energy Approval Regulation (O. Reg. 359/09) and revisions to the Technical Guide to Renewable Energy Approvals as part of the response to the Ministry of Energy’s Feed-In-Tariff (FIT) Review. Proposed changes would:   

better align requirements with the environmental impact of the projects increase clarity and allow developers to meet requirements concurrently improve application turnaround times by streamlining the regulatory process

The ministry is also proposing that specific small scale renewable energy projects be allowed to register with the ministry instead of applying for a Renewable Energy Approval under O. Reg. 359/09. Technical papers covering the three activities have also been posted for comment.

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The review confirmed that the FIT Program has been key to making Ontario a leader in clean energy production and manufacturing. The more than 2,500 medium and large FIT projects approved to date will produce enough electricity to power 1.2 million homes. FIT has also attracted more than $27 billion in private sector investment, welcomed more than 30 clean energy companies to the province, created more than 20,000 jobs and is on track to create 50,000 jobs. Ontario’s Feed-in Tariff (FIT) Program was launched in 2009 to create new clean energy industries and jobs, boost economic activity and the development of renewable energy technology, and to improve air quality by phasing out coal-fired generation by 2014. After tracking the program’s progress, consulting within the sector, researching developments in other jurisdictions and providing recommendations for improvements, the report contains recommendations in six strategic areas:      

Continue commitment to clean energy. Streamline processes and create jobs. Encourage greater community and Aboriginal participation. Improve municipal engagement. Reduce price to reflect lower costs. Grow Ontario’s clean energy economy.

The McGuinty Government has accepted the FIT Review recommendations, and through them, the program will continue to contribute the province’s economic and environmental objectives and ensure it provides good value for Ontario families. Quebec Quebec produces 145 ML ethanol and 35 ML biodiesel annually and is committed to reaching a 5% target for ethanol. Key industry policy initiatives include:   

Start-up of a demonstration cellulosic ethanol plant Tax credits for ethanol production – max rate 0.185 $/L, variable according to petrol price and void when barrel is over 65 $US/L Tax rebate on fuels for biodiesel – refund tax of 0.172 $/L on non-colored fuel oil for buying pure biodiesel

New Brunswick Government – both federal and provincial – has invested time and resources into some biofuels and biorefinery projects, as well as research and development, in New Brunswick. But, there is currently no policy and programming to support large scale commercialization of that industry. The province’s Energy Strategy states a need to find ways to ensure the cost of biofuels and ethanol produced in the province is sustainable and competitive before they are required by law.

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Nova Scotia According to the Department of Energy, Nova Scotia is actively engaged in assessing what impact the proposed federal biofuels regulation – which they state are pressing demands for biofuels resources – may have on the development of a biofuels industry in the province. The province is also assessing what opportunities a future biorefinery industry may hold for Nova Scotia. The Nova Scotia government passed a motor fuel tax credit ($0.154/L) for biofuels, but to date it has never been drawn upon. A few individual projects have received government support for early stage development; but, there is currently no policy and programming to support large scale commercialization of the biofuels industry. Prince Edward Island Government – both federal and provincial – has invested time and resources into some biofuels and biorefinery projects, as well as research and development, in PEI. In fact, this funding has led to development of a small-scale pilot facility for biofuels production, using Atlantic Canadian technology and feedstock. However, there is currently no further policy and programming to support large scale commercialization of this industry. The Government of Prince Edward Island established an Inter-Departmental Biofuels Committee (IDBC) in March 2008, tasked to evaluate and advice government on the role bioenergy projects and proposals can play in the province’s energy future. IDBC will consider the economic, environmental and social benefits that may be derived for the people of Prince Edward Island. IDBC will work with proponents of approved submissions to identify applicable federal and provincial government assistance programs. In the province’s energy strategy, PEI identifies a need to consider introducing escalating RFS for ethanol and biodiesel and commits to a provincial E5 and B10 mandate by 2013, with intentions to double that by 2018. Newfoundland and Labrador To date, Newfoundland remains exempt to the Canadian Renewable Fuels standards and as a result there are no policies or programs to note.

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United States Renewable Identification Numbers Program Renewable Identification Number (RIN) is a renewable fuel credit - a serial number assigned to each gallon of renewable fuel as it is introduced into U.S. commerce. RIN credits were created by the Environmental Protection Agency (EPA) as part of the Renewable Fuel Standard (RFS) to track U.S. progress toward reaching the energy independence goals established by the U.S. Congress. Although this is an American program, RINs are important to Canadian producers who may be considering exporting into the U.S. market and may also be a model for developing policies and programs at home. RIN credits are the currency used by obligated parties to certify they are complying with mandated renewable fuel volumes. All fuel produced for U.S. consumption must contain either adequate renewable fuel in the blend or the equivalent in RIN credits. RINs are tracked throughout each link in the supply chain, as title is transferred from one party to the next, until the point in time where the biofuel is blended with petroleum products. Once the renewable fuel is in the fuel, the RIN is separated and is then eligible to trade as an environmental credit. A renewable fuel is defined in the Energy Policy Act as a motor vehicle fuel that is produced from plant or animal products or wastes, as opposed to fossil fuel sources. Renewable fuels include ethanol, biodiesel and other motor vehicle fuels made from renewable sources. The RFS program was created under the Energy Policy Act (EPAct) of 2005, and established the first renewable fuel volume mandate in the U.S. This standard is used by obligated parties (refiners, importers and blenders other than oxygen blenders) to calculate their renewable volume obligation. RFS is based upon the American motorist’s fuel use in any given year. As required under EPA, the original RFS program (RFS1) required 7.5 billion gallons of renewable fuel to be blended into gasoline by 2012. Under the Energy Independence and Security Act (EISA) of 2007, the RFS program was expanded in several key ways: 

EISA expanded the RFS program to include diesel, in addition to gasoline;



EISA increased the volume of renewable fuel required to be blended into transportation fuel from 9 billion gallons in 2008 to 36 billion gallons by 2022;



EISA established new categories of renewable fuel, and set separate volume requirements for each one;



EISA required EPA to apply lifecycle greenhouse gas (GHG) performance threshold standards to ensure that each category of renewable fuel emits fewer greenhouse gases than the petroleum fuel it replaces.

EPA Moderated Transaction System (EMTS) is a database maintained by EPA to handle RIN transfer activities between interested parties. The objective is to eliminate duplicate RINs and other problems associated with the current RIN system by centralizing this aspect of the RFS. The RINAlliance® a web-based renewable fuel compliance service open to all blenders and marketers registered with the EPA. The RINAlliance advantage provides confidential management

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and reporting services on behalf of registered blenders, reports direct to EPA, and aggregates marketable RINs for convenient brokering to refiners and importers. RINAlliance is operated by industry specialists that allow marketers and blenders to share profits of aggregated trading within the RIN market. Further information is available at http://www.epa.gov/otaq/fuels/renewablefuels. Reference: RFS1, RFS2, and EMTS by Ed Burke ACBC agrees in principal with this theory of measurement, and would suggest that consideration for Canadian produced biofuels in relationship to Federal and Provincial policy and programming, should be feedstock agnostic. In Canada, Sustainable Development Technology Canada (SDTC) currently has programs to assist Canadian proponents in the development of next generation biofuels. Both interests by SDTC and US RINs impact investment and industry development, however the approaches are quite different in Canada and the U.S. This report’s recommendations will consider how the best fit for Atlantic Canada producers in consideration of environmental interests and North American policy and programming.

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ATLANTIC CANADA BIOFUELS FEASIBILITY MODEL To understand the true cost and potential return on investment for production facilities in Atlantic Canada, Gardner Pinfold Consultants Inc., were contracted to develop a tool that producers and lending agencies could use to analyze prospective ethanol and biodiesel fuel projects. As leading expert in the field of As one of Canada’s leading economic consultants, with specialized expertise in analysis, assessments and forecasting, Gardner Pinfold’s work calculates the feasibility of this sector in Atlantic Canada. The finished product – an Atlantic Biofuels Feasibility Model (the Model) – is attached in its entirety as Appendix I and summarized here. The structure of The Model relies on 1) a general approach to financial feasibility analysis and 2) specific information for production of biofuel. Costs and revenues are calculated annually over a twenty-year period and summarized according to key production and financial indicators that would be of interest to investors. The financial analysis is based on generally accepted management accounting principles and Gardner Pinfold Consultants Inc. experience with construction and review of similar models for a wide range of projects. The specific information for production of biofuels from a selection of different feedstocks is largely based on published reports for commercial facilities in Canada and the U.S. The model is designed to help assess the financial viability of biofuels production options in Atlantic Canada, based on six key factors: •

• • • • •

Feedstock types and their relevant attributes for biofuels production – for example costs, delivered freight charges, conversion efficiency. There are seven feedstock options: corn, wheat, barley cellulose, canola, sugar beets / other and soybean. Plant scale, in terms of biofuel production capacity, including efficiency over the life of the plant. Pre-construction and construction costs including capital, pre-operating, contingency funds, and working capital needed until revenues begin. Financing options from banks, different levels of government, other sources, and private equity (including interest rates and amortization periods). Operating costs, including a wide range of inputs such as the number of employees, salaries, benefits, and administration costs. Revenues from the biofuel product as well as by-products, including animal feed, heat and power.

After entering information for each of these six areas, the Model calculates production results and financial indicators to assess the potential performance of a biofuel plant. The Model can evaluate up to six plants simultaneously and provide a summary of results for all six on a final comparison sheet, with a profile of the inputs for each plant. A side-by-side comparison gives operators the opportunity to evaluate the performance of plants that might have different feedstocks or different 67

capacity. Additionally, model users could adjust any number of other variables – such as feedstock price, interest rates, % equity, revenue, or capital costs – to different levels, to see how they might impact the overall performance of a plant. This ability to assess the impact of different variables can also help operators identify what they need to make a plant financially attractive to bank lenders or private investors. For instance, a potential plant may initially appear to have an 8-year payback period; but, a combination of variables like low-interest loans, capital cost assistance, feedstock subsidies, and salary rebates could be examined to determine what might bring the payback period down any number of years. An example of what a model comparison output might resemble. Plant Profiles

Plant 1 Product Feedstock Plant capacity (litres) Financing Required funds % Equity Feedstock Crop yield per acre Crop delivered cost per ton Revenues Revenue per litre of product Other revenue per litre of product Total revenue per litre of product

Plant 2

Plant 3

Plant 4

Plant 5

Plant 6

Ethanol (corn) 38,000,000

Ethanol (wheat} 38,000,000

Ethanol (cellulose) 25,000,000

Biodiesel (canola) 10,000,000

Ethanol (sugar beets) 25,000,000

Biodiesel (soybeans) 10,000,000

47,678,147 37%

56,952,164 37%

39,926,709 60%

25,931,068 61%

27,815,818 28%

15,001,068 33%

1.75 254

0.98 304

1.40 131

0.75 660

35.00 50

0.90 508

$0.63 $0.33 $0.96

0.63 0.33 0.96

0.67 0.1 0.77

1 1 2

0.67 0.34 1.01

1 1 2

Key Results Plant 1

Plant 2

Plant 3

Plant 4

Plant 5

Plant 6

Local economic benefits Crop tonnes Crop acres Farm income Transport income

95,000 54,286 $23,750,000 $1,330,000

102,703 104,799 $0 $1,360,811

78,125 55,804 $0 $1,093,750

21,505 28,674 $0 $465,054

250,000 7,143 $0 $1,250,000

50,000 55,556 $0 $650,000

Plant financials Payback period IRR Year 5 net cash flow Year 5 debt:equity Year 5 profit margin

12 5% $4,857,499 65% 13%

At least 20 years Negative ($2,669,620) 66% -7%

13 4% $3,409,567 26% 18%

11 7% $2,722,728 24% 14%

5 21% $7,506,742 78% 30%

At least 20 years Negative ($8,393,323) 76% -42%

Disclaimer: This Model is intended to provide general guidance and a tool for analysis only and is not intended to provide financial advice or to be used as the basis for investment decisions.

Source: Atlantic Biofuels Feasibility Model

To understand how The Model works, the below table shows results based on a set of baseline plant profiles with a scale that would be relevant in Atlantic Canada for a moderate mandate for biofuels production – approximately 25 million litres. Each of the plants uses a different feedstock – corn, barley, cellulose, beets, canola and soybeans – which triggers different capital and operating costs. The Model can assess wheat feedstock, but it is not included here, because it is very similar and actually slightly inferior to the financial performance of a barley plant. Also important is that cellulosic (wood) plant settings are theoretical, because there are no commercial plants in operation to use as a baseline. And, the corn plant is considered theoretical because its scale is below the scale of plants built within the past decade. Results of this baseline analysis suggest a sugarbeet plant is a viable opportunity and that canola and corn are also encouraging. Results for the other types of feedstock plants show lengthy payback periods making them less attractive.

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Table A1: Baseline plant profiles for each feedstock Product Feedstock Capacity (Ml)

Plant 1* Ethanol Corn 25.0

Plant 2 Ethanol Barley 25.0

Plant 3* Ethanol Cellulose 25.0

Plant 4 Ethanol Beets 25.0

Plant 5 Biodiesel Canola 25.0

Plant 6 Biodiesel Soybeans 25.0

Financing Required funds ($M) % Equity

$35.2 30%

$59.4 30%

$68.3 30%

$27.8 30%

$42.2 30%

$37.0 30%

Feedstock Crop yield (t/ha) Conversion (l/t) Delivered cost ($/t)

4.4 400 $254

2.8 325 $214

3.5 300 $156

87.5 100 $54

1.9 465 $624

2.3 200 $404

Revenues Biofuel ($/l) Other ($/l) Total ($/l)

$0.67 $0.34 $1.01

$0.67 $0.34 $1.01

$0.67 $0.34 $1.01

$0.67 $0.34 $1.01

$1.00 $1.00 $2.00

$1.00 $1.00 $2.00

Plant 1*

Plant 2

Plant 3*

Plant 4

Plant 5

Plant 6

62,500 9,615 $1.5 $15.6 $1.5

76,923 28,045 $1.5 $16.2 $1.6

83,333 24,088 $1.2 $12.5 $1.8

250,000 2,891 $1.0 $12.5 $2.3

53,763 29,010 $0.7 $33.3 $1.5

125,000 56,206 $0.5 $50.0 $1.8

15 4% $3.4 70% 13%

>20 -7% $1.7 80% 7%

16 3% $5.7 80% 23%

5 18% $6.4 66% 25%

6 16% $9.1 73% 18%

>20 Negative ($7.6) 71% -15%

Key Results Local benefits Crop tonnes Crop hectares Plant workers ($M) Farms ($M) Transport ($M) Plant financials Payback period (yrs) IRR Yr 5 net $ flow Yr 5 debt: equity Yr 5 profit margin

Disclaimer: This Model is intended to provide general guidance and a tool for analysis only and is not intended to provide financial advice or to be used as the basis for investment decisions. *Note: Commercial scale corn ethanol plants being built today are much larger than 25ML; Ethanol from wood cellulose has not been produced commercially, consequently model results are only theoretical for this feedstock. Source: Atlantic Biofuels Feasibility Model

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By adjusting key variables of plant capacity, feedstock prices, revenues and capital cost, the Model produces results that show their effect on the payback period of these baseline plants. Generally speaking, the payback period moves in the expected direction, which is important when considering these key variables. •

Plant capacity (38 ML and 76 ML) – the payback period declines as plant size increases. This is especially true for corn ethanol plants and the most recently constructed plants are upwards of 200 ML owing to these economies of scale.

•

Feedstock prices (20% lower or higher) – are one of the two most significant drivers of plant viability (along with biofuel product prices). A 20% change in prices can alter the payback period by multiple years for all feedstock types.

•

Revenues (20% lower or higher) – can cause the payback period to change by 3-12 years depending on the feedstock and direction of change (lower or higher prices).

•

Capital cost (20% lower or higher) – has at least 1 year effect on payback period in either positive or negative directions, and this can be up to a three year difference in the case of corn ethanol plants. Although this is not as influential as the feedstock or finish product prices, the significance here is the potential positive effects of technology improvements and capital subsidies as well as the potential negative effects of cost overruns (although contingency funds are included in the Model).

Table A2: Effect of key variables on payback period (years) relative to baseline plants (as in Table A1) Biofuel Feedstock Baseline 25ML Larger plants 38ML 76ML Feedstock prices 20% lower 20% higher Revenues 20% lower 20% higher Capital cost 20% lower 20% higher

Plant 1 Ethanol Corn 15*

Plant 2 Ethanol Barley 20

Plant 3 Ethanol Cellulose 16*

Plant 4 Ethanol Beet/Other 5

Plant 5 Biodiesel Canola 6

Plant 6 Biodiesel Soybeans 20+

10 8

20+ 19

11* 9*

5* 4*

6 4

20+ 20+*

6* 20+*

16 20+

10* 20+*

4 8

3 20+

19 20+

20+* 5*

20+ 12

20+* 8*

20+ 3

20+ 2

20+ 20+

12* 18*

20+ 20+

12* 18*

5 7

5 7

20+ 20+

Disclaimer: This Model is intended to provide general guidance and a tool for analysis only and is not intended to provide financial advice or to be used as the basis for investment decisions. *Theoretical plant design Source: Atlantic Biofuels Feasibility Model

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These results are intended only to provide a general analysis; definitive results would depend on using data specific to particular projects. To fully understand the impact of this feasibility model, proponents will want to spend time using the associated workbook, through ACBC and Gardner Pinfold. This model will allow industry proponents and their associated partners and investors to consider several options that may be applicable to their region, and their particular expertise. Although we do not anticipate that this process will provide a bankable feasibility study of a particular project we do assume that the use of these tools will be suitable in providing accurate information on plant location, feedstock supply, possible partnership involvement with primary producers, financing, operations, return on investment and payback period. This tool can be utilized by stakeholders in the early stage of decision making to assess or determine if an individual or organization wants to move forward with a full-scale business model and feasibility study based on initial research. This Model, designed to help assess the financial viability of biofuels production options in Atlantic Canada, has been validated by the entire ACBC Board of Directors, as well as industry stakeholders from across Canada, to ensure it is applicable for scenarios and situations based in this region.

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Economic Impact Study The firm of Gardner Pinfold Consulting Inc. was also engaged to assess the economic impact for the biofuels sector in Atlantic Canada, to provide industry and government with a tool to improve the understanding and further the development of a biofuels industry in this region. The expertise and credibility this firm carries in the areas of research, analysis, assessment and forecasting is validates the impact this sector could have for Atlantic Canada. The study set out to answer the question: “If a bio-fuels industry were to develop in the Maritime Provinces, what would be its impact?” Because current biofuels production in this region is not operating on the scale needed to meet federal ethanol and bio-diesel mandates, there is no basis to document economic impacts. In terms of methodology, the study offers this important explanation of the demand for feedstock: The level of agricultural production is a function of the feedstock requirements of the biofuels industry. The latter, in turn, is a function of three things: the demand that a Maritime biofuels industry is able to meet; the crop yields per hectare; and conversion factors of each of the crop inputs (energy content in terms of litres of fuel). Of these, biofuels demand is the most significant source of variability in determining impacts. The biofuels industry in North America is driven mainly by Renewable Fuels Standards (RFS) introduced by various levels of government in Canada and the U.S. The RFS requires refiners and importers of prescribed fuels (i.e. gasoline, diesel and heating oil) to blend these with specified volumes or percentages of renewable fuels: 

Ethanol: In Canada, the federal RFS mandate is 5% ethanol for gasoline (through refiners generally blend to 10% because of relatively low ethanol costs), and in the U.S. the mandate is 105 with current consideration for 15% (some provinces/states have higher mandates). In both countries, corn is the main feedstock.



Biodiesel: the federal FRS mandate is 2% in both countries, with some provinces/states mandating a blend as high as 5%. To meet the RFS mandate in the Maritime Provinces (assuming refiners are required to blend locally) would mean a requirement for up to about 250 ML of ethanol and 75 ML of biodiesel. In fact, the potential biofuel opportunity is much greater, since fuel produced with sugar beets would qualify as a blendstock under the US RFS2. This opens up a substantially larger export market that could easily double the Canadian-based demand.

For the purpose of estimating economic impacts, this study used the above mentioned volumes – 250 ML ethanol and 75 ML biodiesel – as the basis for a biofuels industry in the Maritimes. The study also assumes that biofuels plants have a capacity of 25 ML. To estimate the economic impact of meeting the 250 ML ethanol and 75 ML biodiesel demand, we build up the industry in discrete 25 ML increments, with plants located strategically across the Maritime Provinces.

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The main objective of this study was to quantify both the direct and spin-off impacts of developing and operating a biofuels industry in the Atlantic Provinces; to do so, it uses the Statistics Canada Inter-provincial Input-Output Model, because it produces direct, indirect and induced impact results and it produces results at a high level of resolution. Normally, this model uses the gross value of the output, the revenues generated through sales of the final product, to measure economic impact. But, because there is no established biofuels industry in the Maritime Provinces, this study instead uses the value of the commodities used in the production process. The information in this study will provide prospective investors, lenders and governments with a better understanding of the scale of the industry and how its development and operation would affect the economies of each of the Atlantic Provinces, tracing the direct impacts of the bio-fuels industry itself, as well as the indirect impacts of those industries supplying it with goods and services. The report states that economic impact can be measured by four indicators: GDP: an industry’s contribution to Gross Domestic Product represents its broadest measure of economic impact. The domestic product of the biofuels industry captures the value it adds to purchased inputs (e.g. feedstock and utilities) through the application of labour and capital. GDP represents the sum of the value added by all firms in an industry, where value added is composed of the income earned – labour income, and returns to and of capital. Employment: industry employment is important because of the significance generally attached to jobs; from a purely economic impact perspective, the significance lays the economic impact generated through the spending of employment income. The greater the employment and higher the average income, the more significant the industry in terms of its overall economic impact. Unless otherwise indicated, employment is measured in full-time equivalents (FTE). Labour income: this captures payments in the form of wages and salaries earned in an industry. Returns to labour in the form of wages, salaries and earnings form a key component of GDP. Industries paying relatively high average wages and salaries generate a correspondingly higher economic impact than industries paying lower average incomes. Tax revenue: this captures revenues from such sources as federal and provincial sales taxes, as well as excise taxes applied to sales of petroleum products used in production. It also includes estimates of personal and corporate income taxes. And, as the report further defines, economic impacts are generated through direct, indirect and induced demand in the economy: Direct impact: refers to impact generated by the activity of firms in the subject industry (in this case, biofuels). Direct GDP refers to the value added created by biofuels companies, while direct employment refers to the jobs created on site by these companies. Indirect impact: refers to the impacts arising from purchased inputs triggered by the direct activity. For example, biofuels companies buy feedstock from farms, and utilities

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and chemicals from other suppliers. These farms and suppliers in turn buy their inputs (e.g. seeds, fertilizers, fuel, equipment, professional services) from other companies, and so on. Taken together, the process of producing these goods and services creates profits, employment and income generating indirect impacts. Induced demand: refers to the demand created in the broader economy through consumer spending of incomes earned by those employed in direct and indirect activities. It may take a year or more for these rounds of consumer spending to work their way through an economy. The study identifies two key categories of economic impact for a biofuels industry in Atlantic Canada: plant construction and plant operations. First and foremost, this region will benefit from positive economic impact during the 18-24 month construction phase of biofuels plants. The below table shows the impacts on a per plant basis that would occur in each province, for each plant built.

Table 3: Biofuels plant construction impacts New Brunswick

Nova Scotia

Prince Edward Island

(GDP, Income & Tax in $000s; Employment in FTE) Capital cost

42,200

35,200

27,800

17,724 10,128 4,220 32,072

24,992 7,392 4,659 37,043

10,008 2,502 4,475 16,985

346 116 65 526

287 90 60 436

168 48 44 260

14,348 10,972 2,532 27,852

14,432 4,576 2,589 21,597

6,116 1,946 1,668 9,730

1,069 5,013 2,194 8,276

1,261 3,888 1,830 6,979

570 1,751 1,446 3,767

GDP Direct Indirect Induced Total Employment Direct Indirect Induced Total Income Direct Indirect Induced Total Tax revenue Corporate Personal Sales & excise Total

Source: Statistics Canada Interprovincial Input-Output Model 2008 version

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Based on the previously identified projected capacity of 325 ML, and a per-plant capacity of 25 ML, this region would require 13 plants to meet that total. Multiplying the figures in the above table by 13 provides an estimate for the overall one-time economic benefit of plant construction: approximately $373.1 M in GDP, over 5,000 FTEs, an average total income of $256.1 M and average total tax revenue of $81.9 M. Once biofuels plants are operational, the economies in each province will see a positive economic impact. The below table shows the per plant impact for each province, on an annual basis, meaning these figures will continue to provide economic impact year over year. Table 4: Biofuels plants operations impacts New Brunswick Nova Scotia Prince Edward Island (GDP, Income & Tax in $000s Employment in FTE)

(GDP, In

GDP Direct Indirect Induced Total Employment Direct Indirect Induced Total

8,430 8,145 2,804 19,379

5,845 9,455 2,708 18,008

7,925 8,710 2,235 18,870

15 224 104 343

30 240 95 364

20 269 99 388

930 6,720 1,275 8,925

1,845 7,055 1,300 10,200

1,240 7,430 1,020 9,690

715 1,607 890

629 1,836 1,143

694 1,744 1,590

3,211

3,608

4,028

Income Direct Indirect Induced Total Tax revenue Corporate Personal Sales & excise Total

Source: Statistics Canada Interprovincial Input-Output Model 2008 version

Again, based on the operation of 13 plants to meet the full 325 ML capacity in this region, the annual economic impacts shown above will multiply, totalling up to $244 M in GDP, nearly 5,000 FTEs, an annual income of $125 M and an annual tax revenue to federal and provincial governments of close to $50 M.

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Table 5: Long term potential annual economic impact of the biofuels industry New Brunswick Nova Scotia Prince Edward Island (GDP, Income & Tax in $000s Employment in FTE) 1 Plant 5 Plants 1 Plant 4 Plants 1 Plant 4 Plants

Maritime Provinces 13 Plants

GDP Direct Indirect Induced Total Employment Direct Indirect Induced Total

8,430 8,145 2,804 19,379

41,140 41,855 12,883 95,878

5,845 9,455 2,708 18,008

23,380 37,820 10,831 72,031

7,925 8,710 2,235 18,870

31,700 34,840 8,940 75,480

96,220 114,515 32,654 243,389

15 224 104 343

85 1,210 510 1,805

30 240 95 364

120 959 378 1,457

20 269 99 388

80 1,076 394 1,550

285 3,245 1,283 4,813

930 6,720 1,275 8,925

5,270 35,020 5,865 46,155

1,845 7,055 1,300 10,200

7,380 28,218 5,202 40,800

1,240 7,430 1,020 9,690

4,960 29,720 4,080 38,760

17,610 92,958 15,147 125,715

694 1,744 1,590 4,028

2,774 6,977 6,360 16,111

8,822 22,629 16,782 48,233

Income Direct Indirect Induced Total

Tax revenue Corporate 715 3,532 629 2,516 Personal 1,607 8,308 1,836 7,344 Sales & excise 890 5,850 1,143 4,572 Total 3,211 17,690 3,608 14,432 Source: Tables 2 and 4. Note: NB plants composed of three biodiesel and two sugar beet ethanol.

It cannot be overstated that these figures represent annual impacts for an industry with a long-term life expectancy, of 25 years or more. Operating at its full potential, year over year, a biofuels industry will result in significant long-term economic impact for Maritime Provinces. Combining these two identified economic impacts for the region over a 5 to10 year period, including the time and resources to build the plants and the overall operations of the plants could result in a $Billion economic impact, with potentially $300 to $500M in government tax revenue and thousands of jobs. The figures outlined above and detailed in the complete study also do not include the potential for export sales. It has already been established that proponents in Atlantic Canada can be productionready to export, which will further increase production and possibly double the economic impacts. The study summarizes that although a large-scale biofuels industry does not currently exist in the Maritime Provinces, the opportunity for direct and indirect impacts is clearly evident. The emergence of such an industry could create the demand for suitable crops that are currently not grown, or not grown in sufficient quantities at acceptable cost to meet industry requirements. This forms a key underlying assumption of this analysis – that the crops needed to support a biofuels industry are currently grown within the region, and grown within a cost structure that allows both the farms and the biofuels industry to operate profitably. Additionally opportunities may be created for 76

feedstock supply of non-traditional or non-agricultural feedstock that could create new opportunities and impacts for the region. In short, if the biofuels industry develops to its domestic potential to supply regional ethanol and biodiesel needs, this region will experience significant economic impact. Additional impacts could be realized for exports as the industry develops and matures. And, a growing biofuels sector will also realize other important outcomes such as: home grown energy production, a path forward to increased control of energy supply and less reliance on imported energy, a reduction in fossil fuel use, and a cleaner and greener environment. The complete Economic Impact Study submitted by Gardner Pinfold is attached to this report as Appendix J.

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RECOMMENDATIONS Throughout the duration of this project, ACBC worked with its industry association members, Atlantic bioenergy stakeholders, Maritime Canada production facility proponents, industry producers & refineries, industry distribution companies, research and academic professionals, provincial and federal government officials and bioenergy stakeholders at large. The result, after 18 months of engagement and information sharing, are the findings included to this point in the report, and most importantly, the proposal of recommendations to support the development of a biofuels production industry in Canada and achieve the economic and environmental impacts the industry holds for this region. They present significant immediate impact, in addition to other short and long-term benefits for Atlantic Canada, demonstrating that support for this sector can result in jobs, economic development and opportunity for multiple other sectors in the region. These recommendations are based on experiences and working solutions from other parts of Canada, North America and the world, with proven track records for government support and industry success, including a demonstrated return on investment. They are an initiative for government collaboration and industry cooperation, seeking commitment from both the Government of Canada and the provincial governments of New Brunswick, Prince Edward Island and Nova Scotia and will require an aggressive and committed plan of action from all parties. The following four recommendations are proposed as the key public policy instruments required to set the stage and drive industry development for Atlantic Canada.

RECOMMENDATION #1 IMPLEMENTATION OF RENEWABLE FUELS REGULATIONS Specifically: 

The Government of Canada continue to finalize and implement the renewable fuels regulations as legislated.



The Maritime Provinces adopt complimentary provincial renewable fuels legislation.

Rationale for Renewable Fuels Standards: Securing a Local Market and Local Demand Renewable Fuel Standards (RFS) create the market for biofuels and give market certainty to private investors. Through implementation of the Canadian RFS from the Government of Canada, and additional provincial policy and programs for renewable fuel standards (requiring a minimum percentage of blended biofuels, commonly recognized on a national scale as 5% ethanol and 2% biodiesel) the biofuels industry has seen large-scale development from the Pacific Coast through to the Quebec / New Brunswick border. 78

Renewable Fuel Standards also cement a long term commitment from government and industry to drive development, and at the same time they eliminate uncertainty for production and distribution. The mandate further promotes consumer confidence in the acceptance and consumption of biofuels and a better understanding and approval of the domestic benefits. The Canadian Government Renewable Fuels Regulations (RFR) came into effect in December 2010, requiring 5% ethanol content. As such, consumers within most regions of Atlantic Canada have been using gasoline blended with ethanol since that time. Unfortunately, this blended ethanol currently has to be imported from other jurisdictions, in order to meet the requirement. Implementing this project’s recommendations will resolve this issue, allowing local production to meet requirements for the local market. Implementation of the RFR requiring 2 % blend for diesel fuel and heating oil was delayed Atlantic Canada until January 1, 2013; further delay came in December 2012, with a proposed amendment for this region, which could potentially eliminate or exempt blend requirements for home heating oil completely. At the time of this report, that proposed amendment remains under consideration and implementation of this regulation remains under delay. It is our belief that the intention of a national standard was to eliminate a patch work of policy and provide a minimum required standard throughout the country. This also provides market certainty on a national scale, and a level playing field for producers, refineries and distributors. We fully support and commend the Government of Canada for its intent with this national policy. In New Brunswick and Prince Edward Island, gasoline and diesel are supplied primarily by one single refinery, and as a result, the required blend can be met by supplying portions from each province – a practice which causes confusion for both consumers and retailers, and creates a perception of uncertainty around markets and prices, making lenders and investors weary. In the province of Nova Scotia, the distribution of fuel is generated primarily through a single refinery, and in this case based on geography and national refinery locations, this refinery can meet its national obligation of blending by doing so in other regions of the country. This makes Nova Scotia the only province in Canada – other than the locations originally exempt from the national standard – that does not blend ethanol in its gasoline pool. This is not strategic or beneficial for Nova Scotian consumers, nor do we believe it was the original intention of the national standard to provide a circumstance resulting in this kind of regional loop holes. This report repeatedly suggests that a proposed and potentially successful biofuels industry for the Maritime region is based on the indented national implementation numbers, and would provide for an industry production scale of well above 300 ML of biofuels, produced locally, and providing local economic and environmental benefits. Implementing a Renewable Fuels Standard on a provincial basis, that is equal to that already in place nationally, eliminates the gaps in policy, puts an end to the confusion, and solidifies the commitment to succeed in this arena.

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RECOMMENDATION #2 NATIONAL & CORRESPONDING PROVINCIAL CAPITAL ASSISTANCE PROGRAMMING Specifically: 

Atlantic Biofuel Capital Development Initiative: The introduction of a Government of Canada capital assistance program for Atlantic Canada creating the opportunity for equity investment by primary feedstock producers in the region.



Provincial Biofuel Capital Initiative: The Provinces of NB, PEI, and NS introduce a corresponding and complimentary provincial capital assistance program, to expand on and to include the opportunity for equity investment by primary feedstock producers and / or other provincial residents, companies or organizations.

Rationale for Capital Programs This report recognizes several examples as the proposed capital costs for to build biofuels production facility plants. These production facilities are clearly large scale industry projects and are very capital intense. ACBC and its membership believe that it is important to create the best opportunity for local ownership of newly constructed biofuels production plants. Local production, in our opinion should be owned by local people whenever possible. Local ownership will help create more local jobs and economic spin-offs for local economies. Capital assistance programming can provide the opportunity for farmers, communities and local residents at large to participate in the value-added biofuel production industry in the region through investment ownership. Capital programming should be designed to assist proponents to acquire overall financing of their projects and at the same time attract partnerships for local people and their communities. The ecoAgriculture Biofuels Capital Initiative, commonly referred to as ecoABC, was an excellent example of a correct and effective capital program. Though it has ended as of March 31, 2013, the success of this program can be seen throughout Canada, in current production facilities and industry success. This region was unfortunately unable to take advantage of the program because the industry here was considered to still be emerging. There we no established renewable fuels regulations or a fully implemented national regulation to assist in market development and little other policy or programming to support opportunities at the time. The original ecoABC program was a $159 million federal program that provided repayable contributions of up to $ 25 million per project for the construction or expansion of transpiration biofuel (ethanol or biodiesel) production facilities, which included new equity investment by farmers and used agricultural feedstock to produce the biofuel. This recommendation proposes a smaller scale refined version of this program from the government of Canada that would support Atlantic Canada. An “Atlantic Specific” program, that works in unison with a compatible provincial program. The newly introduced national program could be a smaller region-specific lending pool, with a maximum repayable contribution. This 80

proposed program would have the potential to assist the first number of plants built in the Maritimes before the program would be set to expire. Again, this is not a grant or a direct cost to the government; this is a repayable loan, using similar criteria and qualification for application and repayment as the original national program. The complimentary provincial program, something like a New Brunswick/Nova Scotia/PEI Biofuels Capital Initiative (BCI) would be similar in contributions, repayable terms and conditions to compliment the national program – however not limited to agriculture partners. Agriculture partners of course would qualify but so would local corporations, (including co-operatives), individual or partnerships, for example. In the case of both programs, the capital assistance for a repayable loan may be calculated on a sliding scale of ownership. The larger the agricultural or the local ownership, the larger the scale of contribution from the program - up to a maxim contribution. Although this industry at the proposed scale is relatively new to this region, traditional lending for this type of project may require up to 40 % equity and 60 % financing. As a hypothetical example, a production plant that would cost $35M (40% equity) would require proponents to acquire $14M in equity financing. If in this case the proposed production facility was able to acquire the maximum local partnership and applicable eligibility for their project and could apply under both a federal and a complimentary provincial program, the combined loan could conceivably be a significant part of the financial application and process (bankable). This contribution, combined with a proponent contribution would provide the proposed owners with the ability to borrow the balance from a traditional lending source and proceed with the construction and build of their project. This recommendation is potentially of little or no cost to governments and tax payers, as this is a repayable loan. Furthermore, these loans could be held by the lenders (provincial and federal) pending the completion of a feasibility study and overall “approved” financial package from its investors/stakeholders and all other lenders, thereby mitigating further government risk. All other approvals and commitments must be in place and both the federal government and the applicable provincial governments could present a set of criteria that must be met prior to approval.

RECOMMENDATION #3 MATCHING FEDERAL & PROVINCIAL PRODUCTION INCENTIVES Specifically: 

Atlantic Biofuel Production Initiative: The Government of Canada introduces a production incentive program for qualifying regional producers. Program eligibility would expire after a regional production capacity of 325 million litres is met or upon a fixed date of program eligibility applications.



Provincial Biofuel Production Initiative: The Provinces of NB, PEI and NS create and introduce a Provincial production program initiative, with compatible terms, conditions and time lines.

81

Rationale for Production Incentives Atlantic Canada’s production of biofuels must be competitive with other production plants throughout Canada and North America. To compete, the region must first be on a level playing field. In order for the industry to succeed in this part of the country, it must be able to provide quality product, at a competitive price, and at a guaranteed production volume. The minimum production for domestic consumption within this region, based upon the blended amounts suggested in recommendation #1 is well over 300 million litres per year. Production incentives can secure the ability for local production to successfully meet its financial obligations, pay back its loans and compete in the marketplace for the long term. A good example of this kind of program at work is Natural Resources Canada’s ecoENERGY for Biofuels program, commonly referred to as ecoEnergy. Unfortunately as with other programs, this region of Canada was not in the position to take advantage of ecoEnergy when it was available and has missed its opportunity to level the playing field. Similar circumstances prevailed as mentioned in recommendation #2. The ecoEnergy program was designed to support the production of renewable alternatives to gasoline and diesel and encourage the development of a competitive domestic industry for renewable fuels. The program (now closed) provided an operating incentive to facilities that produce renewable fuels. Even if the program was still open, it was only payable to production plants that were producing; this region is only now evolving to committing to build plants that are still 18 to 24 months away from being commissioned and perhaps slightly longer in terms of actual production. Even though the industry here is just now getting its legs, an Atlantic specific program that provided a matching provincial / federal production incentive would be the final piece to ensure industry development in this region. A program of this type might come into play Jan 1st, of 2016 (giving time for plants to be constructed, commissioned and produce name plate capacity volumes), and a recommended time period for completion of the programs would be 5 years from its start. A firm program close/expiry date will encourage proponents to move quickly from construction phase to production phase. Appropriate time would be allocated at the front end to allow plants time to build, but closing it off after 5 years, or a fixed period of time, commits proponents to development, or risk missing the opportunity. Done properly, this region should meet the domestic production capacity suggested in recommendation # 1 in approximately 7 or 8 years. We further recommend that this type of program have a sunset clause and a maximum contribution amount. An Atlantic incentive program would be of far less overall contribution than previous national programming, and would occur over a reduced period of time comparatively. We also would suggest simplifying the strategy, which would be a combined federal / provincial program in order for proponents to receive the maximum contribution opportunity. The program could contribute maximum cents per litre from the federal program, and a match per litre from the applicable provincial program. The program would conceivably max at a fixed number of litres and/or a fixed time line. This is the first recommendation in this project that would result in a direct payout or cost to government. However, as identified through the Gardner Pinfold analysis, the economic impact of a biofuels industry of this scale, in this region, over a 5 year period, has the potential to exceed $1B. The contribution for this type of program would only be utilized if the industry builds to the recommended capacity – suggesting that the anticipated economic benefit of over $1B would be

82

realized by our local communities. This has the potential to be a very good investment with great results.

RECOMMENDATION #4 ESTABLISH A REGIONAL WORKING GROUP COMPRISED OF INDUSTRY, GOVERNMENT AND ACADEMIC REPRESENTATIVES Specifically, the working group would have the following responsibilities and tasks: 

Primarily, to consider the recommendations of this report and initiate a broader dialogue on the potential for development of this industry in this region; And further, to identify additional opportunities to participate in the national dialogues in this policy area; And continue to build relationships between, and across governments to further examine programs and incentives related to bioenergy.



Seek to strengthen coordination, engagement and partnerships between industry, government and academia, in particular with the respect to research and development, and other technological innovation.



Identify other project-specific items on an ongoing basis that could be initiated and implemented through the working group organization.

Rationale for Atlantic-Specific Research and Development Atlantic Canada is a small region, both in terms of population and geographic proximity. To build an industry consisting of 8-15 plants, development on a regional scale – versus by individual province – just makes sense. An effective policy for industry development, on a regional scale, must come through collaboration among all players in the region. Interprovincial and federal/provincial relations will be not only valuable, but essential to this region’s success. In this industry, like many others, one of the key pieces in the puzzle is adequate, appropriate, and applicable research and development. This is particularly true for this industry, at its current stage of development. As Atlantic Canada emerges into the biofuels production arena, the region must consider different technologies, feedstocks and overall applications to the future of this industry. The background research required for this report has reinforced ACBC’s understanding that industry and academia must work together in order to progress together. Our members and our stakeholders recognize that R&D is not only important, but essential, and when done in consultation and partnership with industry has the potential to yield impressive and economically beneficial results. In many ways, this region has an advantage with ready and multiple site access to the ocean (ports), road systems and rail. This region also has a diversity of naturally abundant feedstocks including forestry, agricultural energy specific crops, seaweed, algae and much more. With these, comes a multitude of regional researchers leading the way for new technologies to make the best value of our natural resources. 83

Though listed last in the report, this recommendation could in fact be the most important; by bringing together government partners, facilitating research and development, and building a solid foundation for progress, this working group will be the catalyst to eventually drive forward all recommendations in this report and bring the Atlantic Canada biofuels industry to a whole new level.

Together, the recommendations represent a long-term, committed and documented interaction with biofuels and bioenergy stakeholders through the New Brunswick, Prince Edward Island and Nova Scotia, as well as national and regional input from an informed and dedicated community of industry leaders and supporters. ACBC and its membership are confident that these recommendations demonstrate the first collaborative effort of an organized and established pan-Atlantic industry group. This report clearly indicates that accepting, approving and implementing all of these recommendations will provide the right circumstances to create exciting opportunities and positive change for this region of Canada.

84

Communicating the Results & Recommendations Key to the success of this project is communicating the report – its findings and recommendations – with stakeholders in Atlantic Canada’s biofuels industry. Project managers maintained communication with Federal and Provincial – New Brunswick, Prince Edward Island and Nova Scotia – government officials, and industry proponents, throughout its duration, to keep everyone informed and gather preliminary feedback to the recommendations prior to public release. The findings of this project will presented to stakeholders in June 2013, in conjunction with a media event for public release. Following that, ACBC and its membership will continue to communicate with stakeholders to implement the recommendations and drive industry development. This will include: public meetings for interested communities, potential feedstock suppliers and primary producers, as well as potential investors and lenders; individual or roundtable discussions with government officials and policy makers; and ongoing media relations activities to provide updated information on industry development and correct misinformation. These communications activities are designed to be delivered through ACBC and its Board of Directors, as the representative association for the industry.

Conclusion This report is the result of a comprehensive project spanning 14 months of research, engagement and information sharing to the ACOA team and regional stakeholders. It details numerous findings and proposes four recommendations that hold great economic promise for Atlantic Canada and its stakeholders in the biofuels industry. Together, the recommendations represent the first collaborative effort of an organized and established pan-Atlantic industry group – a long-term, committed and documented interaction with biofuels and bioenergy stakeholders throughout New Brunswick, Prince Edward Island and Nova Scotia, as well as national and regional input for an informed and dedicated community of industry leaders and supporters. This report clearly indicates that accepting, approving and implementing these recommendations will create exciting opportunities and positive change for this region of Canada. This report has been prepared by the Atlantic Council for Bioenergy Cooperative Limited (ACBC) in collaboration with BioAtlantech, New Brunswick’s lead bioscience agency, with all reasonable skill, care and diligence, and taking account of the resources devoted to it by agreement with the client. Information reported herein is based on the interpretation of data collected and has been accepted in good faith as being accurate and valid.

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Atlantic Canada’s Bioenergy Opportunities Project - APPENDICES

APRI No. 200344

APPENDICES Atlantic Canada’s Bioenergy Opportunities Project

Project Report APRI Project No. 200344

1

Atlantic Canada’s Bioenergy Opportunities Project – Appendix A

APRI No. 200344

APPENDIX A – STAKEHOLDER SURVEY – SUMMARY OF RESULTS Company / Entreprise #

Response

1.

SCA - www.suschemalliance.ca

2.

Atlantec BioEnergy Corporation - www.atlantecbioenergy.ca

3.

Genome Atlantic - www.genomeatlantic.ca

4.

Randy Pointkoski -

5.

ADI Group Inc - www.adi.ca

6.

Carl Duivenvoorden Consulting - www.changeyourcorner.com

7.

James McClare Consulting - www.jamesmcclareconsulting.ca

8.

Solarvest (PEI) Inc. - www.solarvest.ca

9.

Co-op Atlantic

10.

Steelcraft Inc. - Clemmer Containment Div, Engineering Products Div, QCI Div. - www.steelcraftinc.com

11.

Nova Scotia Co-opeative Council - www.nscoopcouncil.ca

12.

BioAtlantech - www.bioatlantech.nb.ca

13.

Atlantic Algae Energry

14.

Price Landscaping Services - www.pricelandscaping.ca

15.

New Brunswick Forest Products Association - www.nbforestry.com

16.

AECOM - www.aecom.com

17.

Maritime Biofuels, Inc. - www.maritimebiofuels.com

18.

Ross Scinergy Inc.

19.

Wood Science & Technology Centre (Canadian Bioenergy Centre) - www.wstc.unbf.ca

20.

GreenValue Technologies Corporation - www.greenvalue-sa.com

21.

Atlantic Agri-Food Associates Inc

22.

BioNova - www.bionova.ca

23.

Diversified Metal Engineering Ltd - www.dmeinternational.com

24.

Chaleur Green Energy Cooperative Ltd

25.

Jamestown Lumber Company Ltd.

26.

New Brunswick Federation of Woodlot Owners - www.nbwoodlotowners.ca

27.

PEI Federation of Agriculture - www.peifa.ca

28.

Laforge Bioenvironmental Inc.

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Atlantic Canada’s Bioenergy Opportunities Project – Appendix A

29.

APRI No. 200344

30.

Verschuren Centre for Sustainability in Energy & the Environment, Cape Breton University www.cbu.ca/csee Carleton Ag Fuels Inc.

31.

NBSCIA - NB Soil & Crop Improvement Association - www.nbscia.ca

32.

Montana Microbial Products - www.mtmicrobial.com

33.

Cavendish Farms - www.cavendishfarms.com

34.

Avitas Holdings Ltd.

35.

Wilsons - www.wilsons.ca

36.

BioEnergy Inc. - www.bioenergyinc.ca

37.

CelluFuel Inc - www.cellufuel.com

38.

College Communautaire de Nouveau Brunswick – Biorefinery Scale-up Researech Centre

39.

Coastal Zones Research Institute - http://www.irzc.umcs.ca/flash_content/anglais/plan_site.html

40.

Milco Enterprises Inc.

41.

Viable Energy Solutions

42.

SF Rendering

43.

Groupe Savoie

44.

Complete Senergy Systems

Province Response

Chart

Percentage

Count

New Brunswick/Nouveau-Brunswick

50%

22

Newfoundland and Labrador/TerreNeuve-et-Labrador Nova Scotia/Nouvelle-Écosse

2%

1

30%

13

Ontario

2%

1

Prince Edward Island/ Île-du-PrinceÉdouard

16%

7

Total Responses

44

Brief description of your company or organization : #

Response

1.

Green and sustainable technology investor

2.

ABC is a pre-commerical 300,00 litre closed loop research & development facility which the primary feedstock is energy beets. Genome Atlantic is in the gene discovery business. We help develop, invest in and manage large scale gene discovery projects throughout Atlantic Canada. But not just any ‘gene’ research; we focus on areas that can have solid social and/or economic impact. So, through the efforts of our project teams, we’re looking for: • Genes that will help us find better ways to diagnose and treat illnesses, so we can reduce our health care burden and make our citizens healthier. • Genes that identify healthy fish so our

3.

2

Atlantic Canada’s Bioenergy Opportunities Project – Appendix A

4.

5. 6. 7.

8.

9. 10.

APRI No. 200344

aquaculture producers can raise competitive, sustainable and delicious products. • Genes in organisms that can produce ‘green’ fuel so we can lessen our demand on traditional fuels These are just some examples of the kinds of things we’re interested in. Based on our discussions with industry, government and academic stakeholders, we know that there are many more ways that genomics (i.e. gene research) can help our region – and the world – solve some of its biggest problems. We’re always eager to discuss new opportunities. Agricultural Engineer with Praire Farming Background. Exploring crop production opportunities and systems for Central Cape Breton. Interests include responsible land use, community economic development, alternative energy opportunities and options. Industrial Wastewaste Treatment and Waste-to-Energy solutions Speak, write and consult on environmental and energy issues; help companies and organizations learn how they can save moeny, energy and the environment Chemical engineering firm providing process engineering services to industries, government agencies and others in the processing of biologically based materials. Process design and commissioning, feasibility studies, technology evaluation, process and plant upgrading and improvements. Solarvest is a Canadian owned R&D company focused on developing a process for the production of hydrogen gas and high value proteins from our patented microalgae strain. Solarvest is also involved in developing a sustainable alternative to fish oil from algae through the use of in house algae expertise and technology. Wholesale / retailer of consumer products

11.

Steelcraft has been in buisness since 1923 and is divided up into three (3) Divisions and assoicated with the design and manufactureing of the following items: 1) Clemmer Containment Division - Liquid and drys stroage tanks, pressure vessels, silos, turnkey systems fuel systems, 2) Engineered Products Division pressure/process vessels and reactors, heat exchangers, autoclaves, quick opening doors, 3) QCI Division heavy fabrications and sheet metal components for the heavy equipment manufacturing market. Please view our website at www.steelcraftinc.com Provincial economic development agency for the co-operative and credit union sector of Nova Scotia.

12.

biotechnology support and incubation

13.

Algae to bio fuel processing

14.

We are a landscape design, installation and maintenance company in business over 43 years.

15.

Forest Industry Association. Representing Sawmills and Pulpmills

16.

AECOM

17.

Recycling, Reprocessing and Bio-conversion Technology Developer and Adaptor. Primary focus in on the development and implementation of renewable fuels production technology. This focus is based on economic and environmental sustainability principles. Consulting on technical issues in the bioproducts arena. Primary focus is on emerging algal cultivation and processing technologies. As well, developing novel ethanol fermentation system for biofuel production. The Canadian BioEnergy Centre (CBEC) operates with a mandate to provide technological support to the bioenergy sector in Canada and beyond. Our goal is to promote the sustainable and responsible use of forest and agricultural bioresources for a diversity of goods and services. This is accomplished through: • Research and development • Product testing and certification (e.g. fuel pellets and biomass combustion appliances) • Technology transfer • Training and education GreenValue is in the business of producing value added fractions from biomass. The company has developed a commercial line of high-purity lignin derivatives that are used in green chemistry and animal nutrition and is working also in hemicellulose derived products. Current production and sourcing is outside Canada, but one of the company’s targets is to establish Canadian sourcing and production Agricultural consulting specializing in business planning, feasibility analysis ,technical development and

18. 19.

20.

21.

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Atlantic Canada’s Bioenergy Opportunities Project – Appendix A

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crop production. 22.

30.

BioNova is Nova Scotia’s life sciences industry association representing companies and research organizations in all parts of the province’s bio-economy. Incorporated in 1991 by company President Peter Toombs, Diversified Metal Engineering Ltd.’s roots began in the custom design and fabrication of equipment for Brewing, BioTech, BioEnergy Industrial Food & Beverage, Water Treatment, Decor and Marine Applications. Corporate headquarters are located in Charlottetown, Prince Edward Island where the company typically employs between 40 and 60 full time staff. We are a cooperative that plans to produce hay and wood pellets for the energy market and will explore other markets for our products as well. Operated logging and sawmill business 1974 – 2008. Ceased operations due to collapse of global lumber and pulp fibre trade. Federation representing woodlot owners in NB through the 7 regional Marketing Boards. Central body in liaison with government on issues pertaining to woodlot owners. Administrator of provincial silviculture program. Representative to Canadian Federation of woodlot Owners The PEI Federation of Agriculture represents over 600 farm members with over $400 million in farm gate sales. We also represent 12 commodity organizations across PEI. The Federation of Agriculture is mandated to improve the lot of farmers on PEI. Biogas Plant- Producing Biogas with cow manure, organic waste from commercial industry and converting remaining of waste into an excellent source of fertilizer. Cape Breton University’s Verschuren Centre for Sustainability in Energy and the Environment was established to find innovative and sustainable solutions to energy and environmental issues, one of the foremost challenges of our generation. The Verschuren Centre is developing solutions – through research, innovation and partnerships – while identifying opportunities for commercialization, for the sustainable development of our community. Business Plan stage

31.

We are a not-for profit agricultural association engaged in adaptive research and producer education.

32. 33.

Biological process development and commercialization. Process to produce protein concentrates and ethanol Potato Processing Company.

34.

Bio-industry Product Development

35.

Fuel Marketer

36.

Production and development of renewable energy equipment and products.

37.

CelluFuel Inc. is a Nova Scotia company focused on pioneering the commercialization of renewable fuels in Eastern Canada. Applied Research primarily focused on working with the private sector to commercialize bioenergy and bioprocessing technologies or to implement these technologies with bioresource companies needing to diversify. Examples of research: biodiesel from waste cooking oil; ethanol from sugar beets; ethanol from waste alcoholic beverages; ethanol from waste potatoes; biogas from processing waste and agriculture residues. The Coastal Zones Research Institute Inc. (CZRI) is a private non-profit institution affiliated with the Université de Moncton, Shippagan Campus (New Brunswick). It was incorporated in December of 2002, and has been under the direction of Gastien Godin since April 2005. Logistics, warehousing and recycling of beverage containers (pop, beer, wine, spirits). Contracts with all the major liquor commissions and pop distributors/producers in the Maritimes. Biogas Research Company involved in the design of small scale anaerobic digesters for farms and processing facilities. Our goal is to provide a turn-key biogas plant that is easy and safe to operate.

23.

24. 25. 26.

27.

28. 29.

38.

39.

40. 41.

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Atlantic Canada’s Bioenergy Opportunities Project – Appendix A

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42.

Rendering and related activities. Family owned.

43.

Groupe Savoie is a family business employing over 500 men and women who strive to offer you recognizably superior quality in hardwood products at unbeatable prices. Since 1978, we have nurtured a positive and long-term relationship with many enthusiastically satisfied customers in North America, Europe and Asia. Complete Senergy Systems is a Design Build/Manufacture and Maintenance Company for Biogas Systems (providing components or turnkey systems). Focus on Anaerobic Digesters (mixers, heating); waste handling/waste feeding; power generation (genset); gas upgrading; biogas compression for transportation fuel; nutrient recovery. Also has capacity and experience is manufacturing components for ethanol, biodiesel and biomass energy systems.

44.

What is your Bioenergy area of interest?

Response

Chart

Percentage

Count

Ethanol/Éthanol

57%

25

Biodiesel/Biodiesel

55%

24

Biogas/Biogaz

50%

22

Biomass/Biomasse

57%

25

Other, please specify.../Autre, précisez ....

32%

14

Total Responses

44

What is your Bioenergy area of interest? (Other, please specify...) #

Response

1.

See below

2.

Hydrogen

3.

pressure vessels

4.

all of the above

5.

all of the above

6.

Pyrolysis & Gasification

7.

algae

8.

pellets, briquettes and producer gas

9. 10.

Synfuels from biomass gasification, value added products from biomass Torrefaction, and the establishment of the bioenergy and bioproducts industry are all of interest. hi value protein co-products

11.

Pellets

12.

Torrefaction and Green Carbons

13.

renewable diesel

14.

feed ingredient co-products of fermentation

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Comments: #

Response

1.

We are interested in any area of Bioenergy where genomics could play a role to enable end users/companies to create economic impact for the sector/Atlantic region. Working with two demonstration sites growing Soybeans, Sunflowers, and camillina in Central Cape Breton. Supplimental home heating with Wood. Ethanol, Biodiesel, Biogas all have wastewater treatment applications.

2. 3. 4. 5.

I'm interested in anything that has a favourable life cycle analysis that helps us toward a goal of eliminating the use of fossil fuels We support our members who are interested in all of the bioenergy areas listed above.

6.

See attached brochure for project examples

7.

Ethanol production is at lab scale and so I am not currently a producer and thus skipped pages 3-5.

8. 9.

We are interested in bioenergy as a complement to our interest in production of chemicals and materials from biomass Experience in production and processing of biodiesel and biomass from crop to finished product.

10.

Interested in BioFuels especially those derived from terrestrial and marine plants

11.

Our members traditionally are producers of forest products to mills. (round wood)

12.

Many of our members are interested in the various forms of bio-energy and produce feedstocks that may be applicable to a variety of energy systems. Protein concentrates from barley as the primary value, ethanol as coproduct. Economics superior to conventional ethanol and distillers grains I am an animal nutritionist with expertise in development and nutritional evaluation of innovative raw materials for application in fish feeds. Currently do not produce Biodiesel or Biogas. Have an ongoing interest in their production as economics allow. biomass = waste wood *Laforge Bioenvironmental is a 50% partner in Complete Senergy Systems. Laforge Bioenvironmental is a producer of green electricity form Biogas.

13. 14. 15. 16.

Are you a producer of Bioenergy? Response

Chart

Percentage

Count

Yes

25%

11

No

75%

33

Total Responses

44

What is your product?

Response

Chart

Percentage

Count

Ethanol/Éthanol

20%

2

Biodiesel/Biodiesel

10%

1

Biogas/Biogaz

40%

4

Biomass/Biomasse

40%

4

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APRI No. 200344

10% Total Responses

1 10

What is your product? (Other, please specify...) #

Response

1.

Hydrogen

What is your production capacity for each product? | Ethanol #

Response

1.

0.3

2.

500

| Biodiesel/Biodiesel 2000 | Biogas #

Response

1.

1752

2.

20,000,000 m*3

3.

4380 MWH/hr

| Biomass #

Response

1.

5 cords

2.

experimental

3.

2-3 tonnes per

4.

1500-5000 tonnes

| Other, please specify... #

Response

1.

targeting 30 lbs oilseed for 2012

2.

R&D Scale

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If you intend to increase production capacity, please specify / comment: #

Response

1.

Our intent in fiscal 2012 is to sign a development agreement to begin to construct in 2013 a 25 million litre facility in the Maritime region. as opportunities for commercial development unfold, crop production and processing capabilities will be evaluated. Not possible to expand production capacity due to low sale value of product vs. feedstock cost(s). The feedstock(s) cost more than the product can be sold for. Collecting more organic waste

2. 3. 4. 5. 6.

Our research, development and commercialization program will continue to evolve and expand with time. Please contact me to discuss if you wish. Yes we intend to increase capacity to meet consumer demand

7.

Currently investigation options to increase capacity.

Which statement best describes you? Response

Chart

I intend to become a bioenergy producer Je souhaite devenir producteur de bioénergie I am an academic researcher whose work is relevant to the bioenergy sector Je suis chercheur en milieu universitaire dans un domaine afférent à la bioénergie none of the aboveAucun de ces énoncés

Percentage

Count

27%

9

12%

4

64%

21

Total Responses

33

If you do not intend to become a producer, please describe your interests in the Bioenergy sector: #

Response

1.

Investor

2.

See previous comment on the use of genomics.

3.

Our treatment and waste-to-energy solutions can be intergrated into bioenergy producer's value chain.

4.

I speak and write about developments in the transition to a low or (ideally) no carbon economy.

5. 6.

To provide preliminary process engineering and capital cost estimates and other technical services for clients involved in or intending to be involved in biofuel production. re-seller of atlantic produced energies. ecomomic generator for the region

7.

Support our members who are involved and/or interested.

8.

I believe that it holds great promise for our region.

9.

purely from an personal interest point of view and options for our related industry partners

10.

Many of our members have interest in the sector and potential new products.

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12.

I am also interested in the sector as a consultant.

13.

The Canadian Bioenergy Centre as part of WSTC conducts basic and applied research related to the production, quality and utilization of solid biomass for bioenergy. We also provide certified testing services (we are an accredited lab for PFI and can conduct tests that meet the new EN-Plus pellet standards). We are interested in bioenergy as a complement to our interest in production of chemicals and materials from biomass Consulting on the economics and feasibility of feedstock and competitive position of renewable energy fro primary agriculture. Support of NS companies developing biofuels, if requested.

14. 15. 16. 17. 18.

DME is process engineering supply firm to the biofuels industry. We design and fabricate biofuel pilot plants. Our members are potential suppliers of raw material for the industry.

19.

Our members are the folks that produce energy and the products required for the bio-energy sector.

20. 21.

We would be interested in partnering in the adaptive research necessary to advance the industry and in communication this information to producers. I intend to become a producer in Atlantic Canada as well as the mid-west US

22.

We are a potential marketer of bioenergy

23.

We are currently working on the deployment of a viable next-generation technology converting woody biomass to renewable diesel fuel. Add value to co-products from fermentation plants.

24. 25.

Viable Energy Solutions is a Prince Edward Island company whose purpose is to develop and market a small-scale biogas production plant that can be used by farmers and facilities. This plant will turn agricultural waste into useable fuel for heat and production of electricity.

If you intend to become a bioenergy producer, check applicable product: Response

Chart

Percentage

Count

Ethanol / Éthanol

38%

5

Biodiesel / Biodiesel

23%

3

Biogas / Biogaz

15%

2

Biomass / Biomasse

54%

7

Other, please specify... /Autre, précisez ...

31%

4

Total Responses

13

If you intend to become a bioenergy producer, check applicable product: #

Response

1.

ADI Technology can be intergrated in Ethanol, Biodieasel, and Biogas

2.

n/a

3.

Pellets

4.

renewable diesel

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Intended capacity for each product: | Ethanol #

Response

1.

N/A

2.

Uncertain as yet

3.

7.6

4.

250,000 litres/yr

5.

??

| Biodiesel #

Response

1.

N/A

2.

>20M Lt

3.

??

| Biogas #

Response

1.

1 MW of Electricity

2.

??

| Biomass #

Response

1.

million tonnes planned

2.

6000 Tonnes

3.

not determined

4.

800,000 GMT

5.

>74,000mto

6.

1 MW of Electricity

| Other, please specify... #

Response

1.

No specific target

2.

n/a

3.

6000 to 15000 tonnes

4.

5,000 MT protein concentrate

5.

>74,000mto

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APRI No. 200344

20 ML/Year

Describe your anticipated production facility : #

Response

1. 2.

Steelcraft would provide competitive bids for the design, fabrication of tanks, vessels, mixers, heat exchangers, etc, used in the future production facilities. n/a

3.

Too early in the development phase to be able to address this and subsequent questions

4.

We are planning on 4 small pellet machines each capable of producing between 500 to 700 lbs per hour, depending on density required. This is basically a pilot project and will be replicated in other areas if succesfull. Studies have shown that the pellet mills must be close to the source of raw material, in this case hay. Wood will be used if available in sawdust or shavings form. We do not anticipate owning or operating a facility but could be supply partners. The volume referenced above is the potential volume from woodlots of unutilized material. Electricity generation and drying of feedstock for briquetting (torrifaction) . Future ammonia.

5. 6. 7.

Facility to produce barley protein concentrate and ethanol, first facility 7.6 ML ethanol 5,000 MT protein concentrate, primary protein market in aquaculture feeds. Facility is similar to conventional ethanol plant but with modified process flow and added enzyme treatment steps. -Biodiesel processing from seed oil -Fuel pellets from biomass (proprietary) -Other non-fuel product from waste product demonstration plant 2013 commercial plant(s) from 2014

8. 9. 10.

Waste Conversion: 1) Ethanol recovered from Beer, wine and spirits 2) Biogas from waste pop – combined heat and power (electricity and heat) 3) Combustion of Waste Wood (Construction waste wood) (Electricity and heat) 1) $1 million ethanol 2) $2 million biogas 3) $2 million waste wood We anticipate producing bioenergy in the future with our access to wood waste.

11.

Specify anticipated total investment / capital cost for your production facility: #

Response

1.

0

2.

0.5

3.

3

4.

12.5

5.

180

6.

1

7.

5

Number of Full-time equivalent employees (FTEs) anticipated for: | construction phase: #

Response

1.

0

2.

3

11

Atlantic Canada’s Bioenergy Opportunities Project – Appendix A

3.

3 to 4

4.

20

5.

100 - 150

6.

10

7.

50

APRI No. 200344

| operations phase: #

Response

1.

0

2.

6 plus one supervisor

3.

3 to 4

4.

18

5.

>250 + feedstock supply (>400)

6.

3

7.

15

Briefly describe anticipated timelines for your planned pilot or demonstration plant: #

Response

1.

n/a

2. 3.

1 year Research to validate process at laboratory scale In one year, will be able to assess future timelines for pilot and demonstration scales Late November or early December, 2012

4.

Next 3 years

5.

Pilot operation in Montana completed.

6.

Mid-2013 initial production. Full production Nov 2014.

7.

Currently operating a demo/pilot ethanol plant in collaboration with CCNB-BTSC (funded by NBIF, NRCIRAP) We are looking 2 years out.

8.

Briefly describe anticipated timelines for commercialization of your production plant: #

Response

1.

n/a

2.

See above response. Timelines will depend on partnerships to commercialize production methodology. It is possible that the proposed system will replace existing fermentation systems About 6 months after start-up

3. 4.

Time line dictated by financing. MMP has completed engineering, and could begin construction in Canada with financing and final site selection. Estimated time for construction is 9 to 12 months depending on seasons and start date.

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5.

N/A. (Off-take contracts in place for +70% of product.)

6.

Commercial production of all 3 bioenergy products 2014 (financing, construction and commissioning in 2013) Initially we will use the energy in-house but would like to explore production of ethanol and green diesel.

7.

What is your estimated start date for commercialization of production? #

Response

1.

n/a

2.

See above. Have not built commercialization strategy yet

3.

About 6 months after start-up

4.

Mid-2013

5.

2016

Estimated annual revenue at commercialization phase: #

Response

1.

0

2.

1000000

3.

1500000

4.

10.5

5.

80,000,000

6.

2

Are you a Biomass producer? Response

Chart

Percentage

Count

Yes

27%

12

No

73%

32

Total Responses

44

Do you produce any of the following feedstocks? Response

Chart

Forestry biomass / Biomasse forestière Agricultural biomass / Biomasse agricole Total Responses

Percentage

Count

56%

5

67%

6 9

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What type of feedstocks do you produce? Response

Chart

Percentage

Count

tree thinnings / Éclaircies d’arbres

27%

3

barley / Orge

9%

1

corn / Maïs

9%

1

grasses / Herbages graminés

27%

3

soy / Soja

18%

2

agricultural waste / Déchets agricoles

18%

2

Other / Autre

73%

8

Other / Autre

9%

1

Other / Autre

9%

1

Total Responses

11

What type of feedstocks do you produce? (Other ) #

Response

1.

forestry biomass

2.

dedicated fast growing tree stock, plantations

3.

willow

4.

canola

5.

potato processing waste

6.

waste wood construction waste waste pellets

7.

animal rendering

8.

wood waste

What type of feedstocks do you produce? (Other ) #

Response

1.

waste wood construction waste waste pellets

What type of feedstocks do you produce? (Other ) #

Response

1.

waste wood construction waste waste pellets

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comments... #

Response

1.

We currently have >122,000 m3 of clean, separated piles of biomass stored outside on freehold property, an industrial site with, 600 V. 1600 amp We should not just talk thinnings; we have underutilized species and low quality stems that could be directed to biomass.

2.

Describe your feedstock(s). In what quantities are they produced? #

Response

1.

5.

currently - .5 acres of row crop production (2 sites for seeds 8 acres readily convertable to agricultural production. 90 acres Wood lot land growing natural biomass We make about 1000 tonnes of silage and hay on about 350 acres of land for our livestock and for sale and produce only about 15 % of the 30 cords of wood we use to heat our greenhouse operation We currently have >122,000 m3 of clean, separated piles of biomass stored outside on freehold property, an industrial site with, 600 V. 1600 amp Private woodlots in New Brunswick are 1.73 million ha. From a study done a few years back there is potential of 800,000 GMT of biomass. Barley 360 tons per/year Grass 500 tons per/year Agricultural waste 4000 tons per/year

6.

9 Acres

7.

400 acres of field crops

8.

not willing to share

9.

Waste wood Construction and demolition waste Waste pallets

10.

1500-5000 tonnes per year

11.

20 million FBM (48,000 m3)

2. 3. 4.

If you know the anticipated energy per unit, please provide: #

Response

1.

A tonne of hay pellets produces well in excess of 10 million BTU

Would you be able to increase your biomass production if a market existed? Seriez-vous en mesure d’augmenter votre production de biomasse s’il existait un marché? Response

Chart

Percentage

Count

Yes

91%

10

No

9%

1

Total Responses

11

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comments... #

Response

1.

A lot of farmland now underutilizes or laying idle could be brought in production if a fair price was offered.

2.

3.

Of course the yes is dependent on where the market is. Also as I am sure you know the forestry sector has taken a beating so there may be some capacity issues (human resources) and of course price will always be a factor. we produce for our own consumption

4.

Maybe.

5.

we are looking at increasing our capacity

What do you believe is the biggest hurdle for Bioenergy producers in Atlantic Canada? Response

Chart

Percentages

Count

access to production systems

2%

1

capital cost of production facility

2%

1

competitiveness for our market size

0%

0

financing

7%

3

lack of applied research and development market and price of finished product

0%

0

18%

7

policy

18%

7

supply of feedstock

26%

10

technical aspects for growers and processors time and cost for research development

2%

1

5%

2

#

Response

1. 2.

Access to capital and access to markets; no government support of clean tech/bioenergy as a viable industry sector for the province. Still viewed by most as risky, not commercially viable, or untested – new! Biogas producers lack clean sources of substrate (feedstock). Low prices for power produced using biogas.

3.

Capital cost and a developed market for the end product.

4.

Capital costs related to production.

5.

Commitment

6.

Cost of R&D and engineering support. Skilled labor availability.

7.

Finance for plant construction.

8.

Government policy or lack thereof

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APRI No. 200344

Lack of viable technology for the second generation of biofuel products coupled with lack of defined government support for biofuel projects. Lack of vision + fragmentation (lack of coordination). = inertia. Just my humble opinion.

12.

Support but complacent resistance/ lack of focus by Public sector. Investment climate is not well defined, results in lack of confidence by funds and other large investors. The biggest hurdles are convincing people about the economic and environmental benefits to bioenergy

13.

Time for R&D. Capital costs / financing.

14.

15.

[access to production systems][technical aspects for growers and processors]- timely and cost effective access to Bio energy production systems - A. machinery - preparing, planting, harvesting processing B. what crop to plant c. how to grow? cost and time to access the above [financing][supply of feedstock]Financing

16.

[financing][supply of feedstock]financing

17. 18.

[market and price of finished product]1. Costs to research to get to production scale 2. Market for finished product [market and price of finished product]Market and Price of finished product.

19.

[market and price of finished product]Profitability.

20.

[market and price of finished product]all the above plus cost competitiveness for our market size,

21.

[market and price of finished product]public perception of product value and use. value of product in small engine use. water problems with ethanol products under storage conditions [market and price of finished product][financing][capital cost of production facility][supply of feedstock]There are many challenges to the industry, which are all critical to its prosperity, including: Demographics, including the supply of labour, domestic market, and development of proponents - Capital (particularly with the threat of labour shortages and related high costs, making competitiveness for FDI an issue). - Product-to-market infrastructure and supply base, which is an additional development weight on the shoulders of the few pioneering entrepreneurs and supporters in the industry. [policy]Benchmarking,Logistics, Legislation: How much feedstock is available for Bioenergy companies in the atlantic provinces? This means food waste, ag waste, biomass, available land, etc,...If that was known then companies in the bioenergy sector could make forecast of whether it is econimically feasible at the time. Logistic needs to be facilitated. If food waste, for example, is available, where does it go and how easily can it be diverted to a bioenergy producer. Legislation, must also facilitate benchmarking and logistics ie those who create it must measure it. This would be much easier task for commercial businesses but also possible for residential if a Moncton source separation where done. Legislation around source separation at least at the commercial level start would with a set tipping fee for disposal to a bioenergy producer (tipping fee are already being paid) [policy]Government will and interest. All land in NL is Crown. Therefore it is in the public interest to manage, enhance and develop provincial forests. NL has an AAC of >2,100,000 m3 of softwood fibre. > 80% of forest fibre is unsuitable for solid wood products. The only current alternative outlet is newsprint which consumes 600,000 m3. Most large energy users in NL are public institutions; schools, hospitals, universities. Energy generation is vested in Nalcor, a Crown corporation. Nalcor relies significantly on Bunker C at Holyrood generating station, one of the larger CO2 emitters in [policy]Lack of Government leadership to create legislation appropriate for a new industry.

22.

23.

24.

25. 26.

27.

[policy]Mindset of development, need appropriate sized projects in all regions to assist in the development of the industry. Capital costs are clearly a hurdle, need to address long term pay back and potential savings. Government needs to show leadership. [policy]Obtaining long-term biomass off-take agreements and having access to patient capital. There is a bit of a catch-22 as biomass producers may not want to sign long term agreements with a start-up and capital may want to have those agreements in place in order to reduce risk to investors

17

Atlantic Canada’s Bioenergy Opportunities Project – Appendix A

28.

29.

30. 31.

32. 33.

APRI No. 200344

[policy]The absence of a strong government commitment to getting off fossil fuels. By being early adopters in their own buildings and facilities and putting in place the right incentives, governments could stimulate the market transformation we need. Related: no sense of urgency among the voting public to get off of fossil fuels because status quo is just too easy. [policy][market and price of finished product]Since there are a number of researchers at WSTC/CBEC the following comments are a composite from several individuals: One of the biggest hurdles for bioenergy producers ( especially pellet manufacturers) in Atlantic Canada is a lack of domestic market. Consequently, most producers have to sell in bulk to the European markets which results in low prices obtained (bulk commodity). We do not have the land area to effectively compete with the larger provinces in the bulk commodity markets. There needs to be specific policy directives and if necessary subsidies to promote the domestic market. [supply of feedstock]Available Biomass. And impacts on forest harvest. [supply of feedstock]Biggest hurdle is the classic chicken and egg argument. Initially there is insufficient feedstock available to support a viable commercial start-up. The lead time required to develop the feedstock is a killer for the initial start-up of a plant, unless it can be competitive with imported feedstock. All of which must be undertaken in a competitive market., without a contract. In most cases research and development is not the issue. The knowledge is available and can be transferred and adapted with minimal effort. The problem is with the local or regional academic community, who sees this area as a means to continued employment and often undertake or claim a need to research or re-cycle the known. The R&D community needs to step beyond the technology transfer stage and tackle the real unknowns. [supply of feedstock]Biomass availability

34.

[supply of feedstock]Supply of feedstock, capital costs are high, prices for electricity are low. Cost to produce ag feedstocks vs. forestry. No where near enough volumes of feedstocks annually to run a 250,000 tonne economy of scale plant. [supply of feedstock]Supply of feedstock,Capital cost of production facility,

35.

[supply of feedstock]Supply of feedstock.

36.

[supply of feedstock]Time and cost of research and development Market and price of finished product

37.

[time and cost for research development]Time and Cost for Research and Development

38.

[time and cost for research development]Time and cost for research and development considering any biofuel plant constructed in the Maritimes must should meet the Advanced Fuel requirements under RFS2 in the USA.

What other challenges exist for producers in Atlantic Canada? #

Response

1.

Time Regulatory

2.

Lack of government knowledge of the industry.

3.

Processing resources once crop is produced

4.

It is a small market, an over supply of power.

5.

Sustainable production of feedstock, so we are not just trading one problem for another or creating future production issues. In particular, I think soil nutrient management is important - no net removals over time. Competing with others having economy of scale.

6. 7. 8.

Hurtles associated with GM organisms and the stigma they carry; as well as, access to reliable sources of large scale ingredient supply. obtaining the finacial backing

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9.

land use patterns - many small holdings

10.

support from existing supply chains, refinery adjustments for blending ethanol products

11.

Growing more biomass. Investments in silviculture.

12.

Knowledge

13.

Market acceptance of the finished product.

14.

Relatively low density of feedstock supply, which either increases transportation costs or reduces the size of a production facility. As size matters, smaller facilities are less efficient than larger facilities. There is a lack of coordinated R & D effort in the region. There is considerable competition among academic institutions (and sometimes individuals within institutions) for limited resources. Likewise, the efforts within provincial governments (agriculture vs natural resources departments) and among provinces are fractured and uncoordinated. These ‘sector silos’ need to come down. The reality is, provinces like Ontario have significantly greater resources to work with and as such when they commence a R & D project such as for biomass production systems or even economic feasibility studies, they dwarf our fragmented efforts in Atlantic Canada. (of note the two significant reports recently produced by Ontario a) Report on literature review of agronomic practices for energy crop production under Ontario conditions and b) Literature review and study of energy market alternatives for commercially grown biomass in Ontario . These are very comprehensive studies with considerable relevance on the Atlantic Canada situation. Equally importantly, they illustrate the need for a more coordinated effort here. Scale of production from start-up and even at the commercial production, the market is small. There are too may opinions dividing a very small pie, and therefore it is difficult to get a critical mass. Cutbacks in federal government support for research

15.

16. 17. 18. 19.

In the case of hay biomass for fuel, the appropriate furnaces have to be brought in to eliminate the clinker problem and to handle the higher ash levels Size of our potential market. Other energy sources are still relatively cheap.

20.

• Market size • Research dollars • Climate

21.

Converting Biogas into 98% pure natural gas

22.

There are many challenges – so many that it does no productive good to focus on the challenges. Alternatively, we must look to the opportunities, and the pathways to that opportunity that we can open and guide our industry participants toward development. The cost to hire engineers and the lack of experience in production. Also adequate dry storage space. A narrow window of harvest time. Distance to market and feedstock supply within a short distance. Economy of scale, Finding good workers. Marketing and our small size

23.

24. 25. 26.

Process energy, many potential sites do not have natural gas service. Feedstock in our case barley is produced in different areas so transportation is an important issue in plant sitting. Farming infrastructure financing. Does not relate well to new or modern uses for non-food crop.

27.

Market acceptance, price of product, proven operability, ratability, infrastructure

28.

Size of market and acceptance of renewable energy systems and products

29.

Raising the necessary capital for commercial projects due to associated business risks.

30.

Lack of policy and Atlantic specific programs for producers to access.

31.

Same as above

32.

Small Scale – access to equipment; higher capital and operating costs. Only a few projects can access cheap natural gas (low costs heat/energy source). Increases OPEX. Biomass sources are not the

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traditional ones (significant opportunity but need for technology adaptation – innovation) 33.

Gaining access to feedstock and access to certain technologies

34.

Proper policy to stimulate the use of bioenergy. --- Finding proper technology and the risk that comes with it. Gov can assist with new policies. Programming and Policy - The biggest hurdle for Biogas - Electrical Generation is ability to obtain a power purchase agreement and a fair price for the power. NS is the only province with a feed in tariff program for green electricity. Also traditional banks continue to see these projects as high risk even though they have been replicated many times over in Europe and North America.

35.

Other comments on obstacles to Bioenergy production: #

Response

1.

4.

Find ways to be sustainable while gearing up the production systems. Find ways to support the investment required to gear up productions systems. I think it would be great if the Maritimes could secure a long term user and move forward. Over the years i have received numerious RFQ's for Biofuel facilites in Ontario but only very few small facilites have been constructed. All the larger facilites did not move forward when the Ontario Govnt. money grants were eliminated. relatively short growing seasons, though this is not insurmountable with appropriate species, such as reed canarygrass degree days for biomass production for cellulose ethanol options

5.

There

6.

Economic development planners and thinkers need to recognize the value of import replacement. Dollars spent on energy imports could very easily be shifted to local renewable sources. If biomass fuel pellets could be marketed on the basis of BTU value , they would be worth $100 per tonne more to the producer and still not cost the consumer more for heat than furnace oil. Not enough dry land. Some land available but cost to bring into production is too high ie. Tile, bush and rock removal. Wasted funding on seminars, studies, that could be used to make a pilot plant. We would be competing with large multi-nationals in the forestry and oil industry.

2.

3.

7. 8. 9. 10. 11.

Process energy, many potential sites do not have natural gas service. Feedstock in our case barley is produced in different areas so transportation is an important issue in plant sitting. This is a new/young sector and will require gov support and industry guidance in order to grow to its potential. More provinces (in Atlantic Canada) need to adopt Feed in tariffs for the production of renewable bioenergy

Do you believe government (federal, provincial, municipal) can assist in the development of a strong Atlantic bioenergy industry? Response

Chart

Percentage

Count

Yes

100%

40

No

0%

0

Total Responses

40

20

Atlantic Canada’s Bioenergy Opportunities Project – Appendix A

APRI No. 200344

If Yes how and why: #

Response

1.

Guaranteed loans

2.

Mandate use in every province and at every station.

3.

9.

-Financial Support for inititaives - regulator support for developments - Being active recommender of projects as Stakeholder - provision participation to help secureside funding It is up to the government to help benchmark what is available for feedstock. Should there be enough continuous feedstock to support a bioenergy industry, ethanol, biodiesel, biogas legislate to use of it as it becomes avaialble. Lead by example: be early adopters. Also put in place incentive programs to stimulate market transformation, then stand back and let it happen. Plus: a big role in educating the public on the need to get off of fossil fuels to generate buzz and a sense of urgency. Encouraging development of raw material supplies (oilseeds or utilization of forwst industry waste, for example) By providing tools to small businesses such as market analyses, HR support, and other such services to help start-up companies to develop and grow. Also a transparent view of available funding programs and how they interact so small companies do not need to dedicate personnel and time to navigating the numerous and constantly changing funding landscape. Government(s) must help create the vision and identify the value chain links; then legislate the components appropriately. With uncertainty, potential producers will not take an open ended risk. They can aid in the supply the start-up capital required for Engineering and to begin production.

10.

Enabling legislation, appropriate polices, innovation funding, research

11.

Facilitate development, purchase agreements for bio-energy, create enabling environment.

12.

research and development, marketing and promotion.

13.

Incentives and coordination. Removal of barriers, recognition of green energy sources as higher values

14.

By

15.

Governments should support the Atlantic Bioenergy Industry through the inclusion of incentives to product the products. Atlantic Canada is too small to benefit from the RFS concept that was successful in western Canada. Atlantic Canada can’t operate on the large industrial scale as Western Agriculture. Nova Scotia is unique in that, in the case of Biodiesel, there is an elimination of the Motive Fuel Tax for ASTM specification biodiesel but there is no mandate to use the product. I would remove the Motive Fuel Tax from Ethanol and Biodiesel in all the Atlantic Provinces as well as Provincially mandate that the Provinces conform to the RFS National blending average. By sharing the risk of the development of this industry by grants or loan guarantees, reduced taxes, governments may influence the decision of investors to co-fund capital and R&D projects. A regional approach must be taken – interprovincial approach AND it needs to be resource based (NOT agriculture vs forestry). Create a level playing field for renewable bioenergy with all public incentives and regulation. Don’t pick wind or geothermal over biomass.. Support for R&D, pilot projects, procurement policies.

4.

5.

6. 7.

8.

16. 17. 18. 19. 20. 21.

If our bioenergy industry is based on annually renewable resources, then by necessity they will be small community enterprises and the various government levels must provide impetus to finance these. Policy, Incentives (programs), Investment

22.

Policy Bridge financing Research and Development

21

Atlantic Canada’s Bioenergy Opportunities Project – Appendix A

23. 24.

25. 26. 27. 28. 29. 30. 31. 32.

APRI No. 200344

Yes, by Funding for renewable energy. Because of the risk and cost, the bank does not like to support client with new projects that are uncommon in the region. Government can play a role in public policy and in public-private sector partnerships, thereby helping to shoulder the load for the industry’s development. They have been, and continue to play that role. I believe it is up to industry to determine where the industry should go – what is the vision, what are the policy barriers, and what is both the blue sky opportunity and the pragmatic path to get to that end. Just stop wasting money on seminars and studies and subsidize the capital cost of a pilot plant or plant. Need someone in government to lead the way. Rally the farmers and foresters. They could provide a climate or policy that would advance the industry. They can also fund pilot scale plants to determine the best methods. Support for research, red tape reduction and policies. Compared with US programs, assistance from Canadian government agencies seems more direct and potentially useful. Primary method is to educate the public on the benefits of bioenergy. Promotion of bio-fuels, internally and publicly. Amending legislations to enhance/promote use. Adopting Policy-Of-Use for all Public Vehicles, Departments, and employees. They can but they have not. Energy usually requires policy support. Current policy does not support local production. This needs to change. Converting Government buildings to renewable energy sources such as wood pellets

34.

Developing policy and programs that support the section in Atlantic Canada so we don't compete with other parts of the country. work with industry and academia to develop policies that support the burgeoning sector in this region. similar to how the sector was supported in Saskatchewan 15 years ago. With capital risk investments because the industry needs to share the risk.

35.

Policy, programming and leadership

36. 37.

More government incentives need to be in place in order for this industry to grow along with education for farmers to see the true benefits of on farm biogas production. Increase the use of biomass at gov’t operated facilities.

38.

Developing policies and programming

39.

Policy and Programming – primarily capital assistance programs and policy to create guaranteed markets (mandates) Access to capital and access to markets; no government support of clean tech/bioenergy as a viable industry sector for the province. Still viewed by most as risky, not commercially viable, or untested – new!

33.

If No why not? There are no responses to this question.

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Any additional comments, recommendations and information are welcome. Please provide. Thank you. #

Response

1.

I believe Bioenergy will be a big part of our future energy mix and that's a good thing. My biggest concern is that societal energy demand today is unsustainably high - meaning that, figuratively speaking, we'd need to cut down every tree to be able to keep consuming the way we are consuming. I know it is beyond the scope of this study and this organization, but overall reduction of energy consumption is a huge and essential component of true sustainability. keep up the good work

2. 3.

4.

5. 6.

The region needs an integrated approach to a common bioenergy strategy to create a critical mass of expertise, feed stock and quality product for the market. The by-products of energy production must be adopted by the livestock feed industry to maximize return to the primary producer. MMP sees Atlantic Canada as a key part of the commercialization strategy for the barley protein ethanol business. Our issue has been raising necessary equity capital to get started ether in Montana or Atlantic Canada. Thanks for the opportunity. Complete Senergy Systems is a Design Build and Maintain company for Biogas systems (Digesters; waste handling; biogas purification; electrical generation; biogas fuel compression; nutrient recovery).

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Atlantic Canada’s Bioenergy Opportunities Project – Appendix B

APRI No. 200344

APPENDIX B – ATLANTIC CANADA RESEARCH NETWORK First Name

Last Name

Email Address

Location

Research Focus

Yonghao

Ni

[email protected]

UNB; Limerick Pulp and Paper Centre

Ying

Zheng

[email protected]

UNB Chemical Engineering

Kecheng

Li

[email protected]

UNB Chemical Engineering

Huining

Xiao

[email protected]

UNB Chemical Engineering

Pulp and Paper – Integrated Biorefinery (hemicelluloses, acetic acid, lignin etc.); Separation Technology Green Fuels and Chemicals (Hydro treating; catalysts; membrane separation; chemical conversion of biomass – biocrude) Surface science related to pulp fibres; fibre treatment; mechanical pulping Polymers

Laura

RomeroZernon

[email protected]

UNB Chemical Engineering

Petroleum Biodiesel

Sean

McGrady

[email protected]

UNB Chemistry

Organic Chemistry; Hydrogen Fuel Cells

Marc

Schnieder

[email protected]

Infinity Wood

Lignin based polymers

Muhammed

Afzal

[email protected]

UNB Mechanical Engineering

Wood Pellet and Emissions

Kripa

Singh

[email protected]

UNB Civil and Chemical Engineering

Water based treatment; biogas

Ron

Smith

[email protected]

UNB Wood Science Centre - CBEC

Biomass and bioenergy from woody and other

Thierry

Chopin

[email protected]

UNB Saint John

Biomass Production (Seaweeds)

Andre

Dumas

[email protected]

CZRI

Jacques

Gagnon

[email protected]

CZRI

Alex

Mosseler

[email protected]

Canadian Forest Service

Production of High Protein Fish feed from Ag crops (grains, soybean, canola, camelina etc.) Bioprocessing/Extractive s from fish processing waste stream (nutriceuticals, cosmetics and bioactives) Biomass Crops (fastgrowing native willows as a potential biomass feedstock)

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First Name

Last Name

Email Address

Location

Research Focus

Mike

Price

[email protected]

Biomass Crops

Ben

Forward

[email protected]

NB Department of Agriculture, Aquaculture and Fisheries RPC

Mike

Main

[email protected]

Dalhousie, Agricultural College Campus

Biomass Crops

Claude

Caldwell

[email protected]

Dalhousie, Agricultural College Campus

Grain Crops

David

Alderson

[email protected]

UCCB Verschuren Centre

Tech Transfer

Gerry

Marangoni

[email protected]

St. Xavier

Stephen

O'Leary

Stephen.O'[email protected]

NRC - IMB

Biofuel Analysis and Testing (Biodiesel and ethanol) Algae Oils-Biodiesel

Ross

Guilders

[email protected]

RPC

Sara

Eisler

[email protected]

UNB Chemistry

Organic semiconductors

Om

Rajora

[email protected]

UNB Forestry & Environmental Sciences

Kevin

Shiell

[email protected]

CCNB CESAB

Conservation and sustainable management, bioenergy/biofuel production Biorefinery: Ethanol

Andrew

Swanson [email protected]

Etienne

Mfoumou

UCCB Verschuren Centre Program Director and Distinguished Fellow in Renewable Energy NSCC: Applied Research

Algae, woody and green power

Dalhousie Engineering

Biorefining for sustainability General Biofuels and Bioenergy (Ethanol, Biodiesel, Biogas, Algae) Fermentation of biomass

[email protected] Abdel

Ghaly [email protected]

Neil

Ross

Enzymes

Ross Scinergy

Bioeneryg, Enzyme development

[email protected] Martin

Deepika

Vasantha

Tango [email protected]

Acadia, Biological Engineering

[email protected]

Memorial University – Marine Institute

[email protected]

Dalhousie, Agricultural College Campus

Dave

Rupasinghe

Biorefining for bioproducts and bioenergy Bioproduct from marine waste. Composting and bioenergy Bioproducts from biowaste materials (apples)

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APRI No. 200344

First Name

Last Name

Email Address

Location

Research Focus

Jerry

Viel

[email protected]

UNB Wood Science Centre Canadian Bioenergy Centre

Bioenergy from woody biomass (primarily pellets); combustion analysis; quality analysis

Kenneth

Corscadden

[email protected]

Dalhousie University Faculty of Agriculture (Truro)

Quan

He

[email protected]

Dalhousie University Faculty of Agriculture (Truro)

Biodiesel; Green Fuels – Agriculture and Forest Biomass

Ilhami

Yildiz

[email protected]

Dalhousie University Faculty of Agriculture (Truro)

Micro-Algae Production

Kevin

Vessey

[email protected]

Saint Marys University

Seed and Soil Amendments for Bioenergy Crops

David

Alderson

[email protected]

Cape Breton University Verschuren Centre (CSEE)

Green Power – Gasification; Pyrolysis. Biomass of focus woody and marine

Patrick

McGinn

[email protected]

NRC -IMB

Algae to biofuels

Leo

Cheung

[email protected]

RPC

Pyrolysis

Michael

McDougal

[email protected]

Solarvest

Hydrogen Production from MicroAlgae

Alan

Critchley

[email protected]

Acadian Seaplants

Exploring possibilities of producing bioenergy or biofuels from processing waste

Ang Pee

Keng

[email protected]

Cooke Aquaculture

Exploring possibilities of producing bioenergy or biofuels from processing waste

Sara

Eisler

[email protected]

UNB Chemistry

Organic semiconductors

Justin

Crouse

NSCC: Applied Research

Biomass Resources

Kelley

Hawbolt

Memorial University

Chemical and petroleum engineer. Waste to energy biofuels.

[email protected]

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APRI No. 200344

First Name

Last Name

Email Address

Location

Research Focus

Chris

Pharo

[email protected]

PEI AAFC

Bioenergy Crops (Willows)

Hermant

Pendse

[email protected]

University of Maine

Lignicellulosic conversion to biofuels, bioenergy and bioproducts

Forest Bioproduct Research Institute Adrian

VanHeininigan

[email protected] u

University of Maine Forest Bioproduct Research Institute

Peter

Vanwalsum

[email protected]

University of Maine Forest Bioproduct Research Institute

Peter

McCarthy

[email protected]

ADI

Lignicellulosic conversion to biofuels, bioenergy and bioproducts

Lignicellulosic conversion to biofuels, bioenergy and bioproducts

Biogas and Waste Water Treatment

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Atlantic Canada’s Bioenergy Opportunities Project – Appendix C

APRI No. 200344

APPENDIX C – THE CASE FOR CELLULOSIC ETHANOL by Todd E. Alexander and Lee Gordon, Chadbourne & Parke | Published March 2, 2009 at 2:15 PM

Although current efforts to produce cellulosic ethanol are thought to be near fruition, there remains considerable uncertainty about how fast it will become commercially viable. To date, no company has been able to produce cellulosic ethanol in mass quantities at a cost that can compete with starch- or sugar-based ethanol. Yet, because cellulosic ethanol has the potential to significantly improve profitability and the environmental benefits of using biofuels, efforts to achieve its commercialization continue. In recent years, these efforts have been bolstered by investments in several cellulosic ethanol producers by major oil companies, as well as by a variety of incentives the federal government provides the industry. The effects of these investments and incentives are beginning to show, with several commercial cellulosic ethanol facilities expected to begin construction or operations within the next year. Given the recent confirmation of Tom Vilsack as agriculture secretary and Steven Chu as energy secretary, both of whom have been public advocates for the development of cellulosic ethanol, support for the industry is likely to continue. Thus, despite several technical and financial hurdles remaining, with continued private investment and federal support, the date on which cellulosic ethanol becomes commercially viable should draw increasingly closer. Cellulosic ethanol is produced from feedstock’s that are not typically used as foods, including residual nonfood parts of agricultural crops (corn cobs and sugarcane bagasse), residual parts of forestry and waste products (wood chips and organic garbage), and nonfood crops (poplar and switchgrass). The benefits of cellulosic ethanol are directly related to the feedstocks used in its production. For example, because cellulosic ethanol is produced from abundant nonfood feedstock’s causing only minor changes in agricultural production, it is not expected to directly increase the price of food. In addition, since it can be produced from feedstock’s that are residual or waste products, cellulosic ethanol often has significantly lower lifecycle greenhouse gas emissions than petroleum fuels or starch- and sugar-based ethanol, and has yet to face criticism related to indirect land displacement and the use of chemical fertilizers. Of course, as with many emerging technologies, developers of cellulosic ethanol facilities have also confronted what has been termed the "valley of death" -- the period in the development of a new technology when it is susceptible to failure due to the difficulty in rising additional funding for commercialization. During this period, developers face increasing demands on existing cash to fund development expenses and decreasing abilities to raise additional cash due to an inability to demonstrate a future cash flow. Traditional sources of equity may not be available during the valley of death -- venture capital tends to provide financing once a technology has been shown to be commercially viable, whereas private equity is typically interested in investing in companies that are already operating and established in the market.

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Although several commercial cellulosic ethanol facilities are under construction, until such a facility is built its total construction cost remains unknown. This lack of certainty has led to complications in obtaining standard construction schedule, cost commitment and performance guarantees from contractors. Without such guarantees, it may be difficult for developers to raise additional equity and nearly impossible to raise debt from private lenders. Without access to additional funding sources, developers will likely have to assume some of the risk for increased construction costs. Additional cost issues arise from the uncertainty surrounding operating costs -- until a cellulosic ethanol facility has reached commercial operations, the costs of producing ethanol from specific feedstock’s cannot be fully known. Currently, it is unknown whether such facilities will have reliable access to biomass feedstocks, in particular those derived from crops, and the costs associated with harvesting; sorting and transporting have not been fully quantified. Where operating costs either cannot be determined or cannot be shown to decrease from the high costs associated with current biochemical (where feedstock’s are broken down into sugars through the use of enzymes or chemicals) and thermo chemical (where feedstock’s are broken down by gasification) processes, developers may find it difficult to obtain additional funding to move forward with development. Further, high operating costs put pressure on working capital, which may result in developers being unable to meet debt service requirements. Another risk to commercialization is what has been termed the "blend wall." Currently, most ethanol-gasoline fuel blends contain no more than 10% ethanol (a fuel known as E10) because automakers take the position that using higher percentages of ethanol will void most vehicle warranties. The total current annual market for ethanol in the U.S. is expected to reach the blend wall by 2011 or 2012. The impact of the blend wall on cellulosic ethanol is of particular concern given that most, if not all, cost projections for its production using current processes show that it will not be cost competitive with starch- and sugar-based ethanol for several years. One strategy developers adopted for dealing with the complications related to cost uncertainty and funding shortfalls is to enter into a partnership or joint venture with an established company. However, this requires identifying companies that are both willing to accept the risk associated with the new technology and either have access to sufficient cash to support additional development costs or can guarantee debt financing. Several cellulosic ethanol developers have entered into such arrangements with major oil companies, including BP plc in a strategic alliance with Verenium Corp., Marathon Oil Corp. investing in Mascoma Corp., Royal Dutch Shell plc investing in Iogen Corp., Valero Energy Corp. investing in ZeaChem Inc. and Sinopec (China Petroleum and Chemical Corp.) in a partnership with Novozymes A/S. Arrangements with existing companies build on the significant incentives the US federal government provides to support commercial cellulosic ethanol production, including regulatory mandates, tax credits and depreciation allowances, grants, and loan and guarantee arrangements. The Energy Information Administration estimated that total federal support for all biofuels in 2007 totaled $3.6 billion. Among the most important incentives is the renewable fuel standard, or RFS, a federal mandate that requires increasing volumes of renewable fuels -- including advanced biofuels (fuels produced

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from non-corn feedstock’s that have 50% lower lifecycle greenhouse gas emission than petroleum fuels) and cellulosic biofuels (fuels produced from cellulose, hemicelluloses or lignin that have 60% lower lifecycle greenhouse gas emissions than petroleum fuels) -- be blended into transportation fuel in the U.S. each year. In addition to the RFS, tax incentives play an important role. The two largest of these are the tax credit of $1.01 per gallon for each gallon of cellulosic ethanol produced and a special depreciation allowance equal to 50% of the cost of a new enzymatic process facility in the year that it is placed in service. Various grants, loans and loan guarantees the federal government offers to developers provide another strategy for dealing with cost uncertainty and funding shortfalls. Among these is the biorefinery assistance program, which provides loan guarantees of up to $250 million per project through the U.S. Department of Agriculture to fund the development, construction, and retrofitting of commercial-scale biofuel facilities producing advanced biofuels. Recently, the first loan guarantee was provided under the program -- an $80 million loan guarantee to Range Fuels to assist in the development of its commercial cellulosic facility. Also of note, the U.S. Department of Energy administers a biomass research and development initiative, which provides up to $200 million in grants for the development of biomass crops and the construction of demonstration-scale biofuel facilities producing advanced biofuels, and a biorefinery project grants program, which provides up to $186 million in grants for biomass research and the construction of demonstration-scale biofuel facilities. To date, the U.S. Department of Energy has provided funding for nine small-scale projects and four commercial-scale projects, including an additional $76.3 million to POET to develop a commercial cellulosic facility (after an initial $3.7 million investment). These sources of federal funding increase the probability of commercializing cellulosic ethanol, which offers a greener source for a large portion of our transportation fuels. However, to achieve this goal, increased and continued support from both the private and public sectors will be needed.

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APPENDIX D – CELLULOSIC BIOFUELS PRODUCTION & DEMONSTRATION FACILITIES IN ATLANTIC CANADA

1. Atlantec BioEnergy Corporation, Cornwall, Prince Edward Island GPS Location

44.5894444444,-65.4138888889

Location

Cornwall

Province

Prince Edward Island

Technology

Patent Pending Technology

Raw material

Energy beets

Product

Ethanol, Electricity, Thermal heat, Water and Natural fertilizer by-product

Output

300,000ly

Facility Type

Demonstration

Status

Operating

Start Up

2011

2. Comet Biorefining Inc., London, Ontario GPS Location

42.9794444444,-81.2461111111

Location

London

Province

Ontario

Technology

patent pending technology

Raw material

wood waste, switchgrass, and corn cobs

Product

cellulosic sugar

Output

unknown

Facility Type

demo

Status

planned

Start Up

2010

3. Enerkem Corporation and Greenfield Ethanol, Edmonton, Alberta

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3. Enerkem Corporation and Greenfield Ethanol, Edmonton, Alberta GPS Location

53.5436111111,-113.490555556

Location

Edmonton

Province

Alberta

Technology

thermo-chemical conversion

Raw material

municipal solid waste

Product

ethanol and methanol

Output

36 million

Facility Type

commercial

Status

planned

Start Up

2011

4. Enerkem Corporation, Sherbrooke, Quebec GPS Location

45.4005555556,-71.8836111111

Location

Sherbrooke

Province

Quebec

Technology

thermo-chemical conversion

Raw material

municipal solid waste, wood waste, and treated wood

Product

syngas

Output

0.475 million

Facility Type

pilot

Status

operating

Start Up

2003

5. Enerkem Corporation, Westbury, Quebec

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5. Enerkem Corporation, Westbury, Quebec GPS Location

45.5052777778,-71.6616666667

Location

Westbury

Province

Quebec

Technology

thermo-chemical conversion

Raw material

treated wood

Product

syngas, ethanol, methanol, and biochemicals

Output

5 million

Facility Type

demo

Status

operating

Start Up

2009

6. Ferme Olivier Lépine Inc., St-Alexis, Quebec GPS Location

45.9333333333,-73.6166666667

Location

St-Alexis

Province

Quebec

Technology

bio-chemical conversion

Raw material

Agricultural waste

Product

ethanol

Output

12 million

Facility Type

pilot

Status

unknown

Start Up

2012

7. Greenfield Ethanol Inc., Chatham, Ontario

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7. Greenfield Ethanol Inc., Chatham, Ontario GPS Location

42.4025,-82.1886111111

Location

Chatham

Province

Ontario

Technology

bio-chemical conversion

Raw material

corn cobs, corn residues, and treated wood

Product

ethanol

Output

0.1 million

Facility Type

commercial

Status

planned

Start Up

2015

8. Growing Power Hairy Hill Limited, Hairy Hill, Alberta GPS Location

53.7619444444,-111.976388889

Location

Hairy Hill

Province

Alberta

Technology

anaerobic digestion

Raw material

high-starch wheat

Product

syngas, ethanol, and electricity

Output

40 million

Facility Type

commercial

Status

under construction

Start Up

2011

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9. Iogen Inc., Birch Hills, Saskatchewan GPS Location

52.9847222222,-105.438333333

Location

Birch Hills This project and all if rights are in control by Royal Dutch Shell. As of 2012 this project is on hold. Royal Dutch Shell is still determining a go or no-go as well as consideration of new technology updates prior to commercialization. Location is also being reviewed.

Province

Saskatchewan

Technology

enzymatic hydrolysis

Raw material

wheat straw

Product

ethanol and electricity

Output

70 million

Facility Type

commercial

Status

planned

Start Up

2012

10. Iogen Inc., Ottawa, Ontario GPS Location

45.4116666667,-75.6980555556

Location

Ottawa

Province

Ontario

Technology

enzymatic hydrolysis

Raw material

wheat straw

Product

ethanol

Output

1 million

Facility Type

demo

Status

operating

Start Up

2004

5

Atlantic Canada’s Bioenergy Opportunities Project – Appendix E

APRI No. 200344

APPENDIX E – BIOENERGY TECHNOLOGY IN ATLANTIC CANADA Enerkem is a private company co-founded by Dr. Esteban Chornet and Vincent Chornet in Sherbrooke, Quebec, that develops biofuels and chemicals from waste using proprietary thermochemical technology. Their primary focus is on commercial production of cellulosic ethanol from MSW (municipal solid-waste). Enerkem has 2 operational facilities in Quebec (a pilot plant in Sherbrooke and acommercial demonstration facility in Westbury), and three full-scale commercial plants under development/construction: Edmonton (Alberta),Pontotoc (Mississippi), and Varennes (Quebec). Without Canadian input through SDTC, and the equivalent program in the U.S., Enerkem would not be developing. Similarly, Enerkem is developing in other parts of Canada, because of the policy and programming in place to fit its requirements, which does not exist in Atlantic Canada. Enerkem did not even consider Halifax, for example, as an option, because it would have meant starting from ground zero, when all the requirements already existed elsewhere. ZeaChem is a U.S. based company headquarted in Lakewood, Colorado withsuccessful lab, pilot, demonstration and commercial production.. Their technology involves fermentation, chemical conversion (of forestry and agricultural biomass) and gasification of lignin to ethanol with a production capacity of 10 BDT/d, 1MM LPY at their demonstration biorefinery and 650 BDT/d, 100MM+ LPY anticipated for their commercial refinery, which becomes operational in 2014. ZeaChem’s demonstration plant has created 50 construction jobs and over 25 operations jobs, with an anticipated additional 200 indirect jobs. It is expected that their commercial scale plant will create a value of $14 M in the forestry industry and $75 M in product revenue. Zeachem has a $232 M loan guarantee with the U.S. Government to drive this technology to commercialization. AlphaKat Technology Canada Inc. was formed in early 2012 as a Partnership between Alphakat GMBH, based in Germany, and AGES Green Energy Solutions, based in British Columbia, Canada. AlphaKat uses a technology called KDV – catalytic low pressure conversion to oils, which converts any input material containing hydrocarbons into fuels, including primary Diesel, Jet Fuel and other “middle distillates”. This is achieved at atmospheric pressure and temperatures of between 280 – 320 degrees Celsius, using a patented ion exchange catalyst, which can be recovered again from the ashes after going through the process. It is a completely closed process, with no emissions except from the Genset unit supplying energy to the plant. The only by-products are distilled water and ash, both of which have commercial applications. The process efficiency of the KDV method is unparalleled in the production of bio fuels. On average, 85% of the hydrocarbon content of the input material is recovered, depending mainly on the moisture content of the input material. The process requires no external input of energy and once running, it operates on approximately 10% of the diesel from its own production. The KDV process produces fuel that is different from ethanol and other bio-fuels, which are restricted to input materials such as sugar, starch, and vegetable oil.

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KDV does not compete with food crops, nor does it take up valuable arable land. It also does not create toxic emissions. It is a clean, efficient process. It produces Diesel of a higher quality than the regular Diesel available at gas stations, withaCetane content between 58 to 62, compared to 52 for regular diesel, and 55-56 for premium diesel. The volumetric yield of fuels produced using the KDV method in litres per ha is double that of Ethanol, and 5 times that of other bio diesel. The Energy yield per ha is 4 times that of ethanol, and 5 times that of other bio diesels. The “net energy balance” (energy recovery from input materials) using the KDV process is 5 times better than for ethanol, and twice that of other bio diesels. Even if using numbers from the smallest of the industrial KDV plants, with the least economies of scale (the KDV 500), the production cost per energy equivalent are 42% that of Ethanol, and 51% those of other biodiesels. In the larger KDV units, those numbers improve further. One of the main advantages of the KDV process over other bio fuel processes is the fact that it can utilize most organic matter. No primary product (food crops, clean wood chips, etc) is required, and the waste products of Industrial activity as well as food production are an ideal feedstock; for example: biomass, all kinds of plastics and synthetic materials (PVC, PP, PET), solid municipal waste and industrial waste, waste oil (also contaminated), refinery residues, bitumen, tar and paraffin. Alphakat uses a technology that works, but is not yet proven to be commercially profitable. This concept deserves a serious look for feasibility, which will be explored in the Feasibility Model section of this report. Montana Microbial Products specializes in commercializing technology and products for use in sustainable agricultural and aquaculture systems. The company works with microbial agents and compounds discovered and developed by MMP, licensed from universities or others, and also does contract research and development. MMP operates a fully functional microbiology lab and pilot plant, using core technical competencies including isolation and selection technology, formulation, solid and liquid fermentation, and process design. They are currently working on developing a barley protein and ethanol plan in Atlantic Canada to create a high protein concentrate for the global aquaculture market (fish meal). Fish meal is the largest cost in producing farmed fish and is becoming increasingly expensive with increased demand and depletion of ocean fisheries, now costing $800 to $1,200 per ton with price spikes up to $1,400. In addition to cost and depletion of ocean fisheries, fishmeal also has two additional undesirable environmental issues: pollution from the high phosphorus in the effluent from fish farms, and concentrating organic contaminants into farmed fish. The barley protein concentrate (BPC) is the first plant protein with both the nutritional quality and competitive cost to effectively replace fish meal. The production of PBC also produces ethanol. The patent pending production technology was developed by principals in MMP and the USDA/ARS Fish Culture Experiment Station. Research was supported by the Montana Board of Research and Commercialization. MMP has developed two ethanol production technologies that 1) reduce capital and operating costs for traditional starch (corn) to ethanol plants and 2) enable the efficient conversion to ethanol of low lignin cellulose feedstocks such as corn stover, switch grass, and straw. These two technologies can be combined into an integrated process that reduces feedstock cost and improves operating efficiencies while reducing energy consumption.

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The enabling technology for these processes is MMP’s proprietary fungal solid substrate culture(SSC) technology. SSC allows low cost production of novel fungal derived enzyme preparations designed specifically for use in biomass conversion. These ethanol technologies have been licensed to AE Biofuels (aebiofuels.com) Barley is used in wheat rotations to reduce fertilizer and chemical costs, improve soil productivity, and help break sawfly and cheat grass cycles. Barley acreage has declined recently because of low prices. MMP will pay a premium for barley used in the process, improving farm economics and creating a value added agricultural product. This project is an ideal example of value added consideration. The primary product is feed for the fish industry, however it allows the opportunity of a significant amount of ethanol as a by-product, which interestingly also uses a non-common feedstock that would not work on a standalone basis. This multi-product facility could be a great opportunity for unique circumstances in Atlantic Canada. Maritime Biofuels Inc., located in Martock, Nova Scotia, is dedicated to the promotion and ongoing development of an environmentally sustainable renewable fuels industry. Initial efforts are focused on conventional renewable fuels development such as 1st generation Ethanol & Biodiesel. To date, their technologies include: 2nd generation Ethanol and Biodiesel as well as Hydrogen, Pyrolysis Oils, Biogas and Syngas. Their view is that renewable fuel production developments can be based on a local production and consumption model that takes into account the sustainability of flexible, regionally sized, small-scale facilities. This approach is intended to maximize the benefit locally through job and resource creation while minimizing reliance on the adverse environmental impacts of non-renewable fossil fuels. SF Rendering Ltd. is a CFIA approved, 30 year old company operating in Port Williams, Nova Scotia and St. George, New Brunswick. Historically, SFR specialized in the manufacture of animal feed ingredients, but has diversified by expanding into feeds for the mink / fur industry and pet foods. Currently SFR is manufacturing biodiesel B100, for which the base feedstock is yellow grease (WVO). This feedstock is in finite supply, and the company is currently researching expansion through the development of an oilseed crushing facility. B100 fuels can be blended down to fulfill client needs such as B2, B5, B20. The plant is now completing its pilot phase and moving to commercialization. Cellufuel Inc. is a Nova Scotia Based company that formed with the objective to become the pioneer in the commercialization of transportation biofuels, based on woody biomass, in Eastern Canada. This is a unique opportunity to create a sustainable and renewable diesel product that can be blended with petroleum diesel in varying proportions. After evaluating many technologies that convert woody biomass into various renewable energy products, Cellufuel arrived at a patented technology that was developed originally within a large technology company in Germany. It produces a renewable diesel that has the potential to meet ASTM standards (ASTM D975 & D396). The technology has been deployed on a commercial scale in

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Mexico, United States, Canada, Africa and Europe with new installations underway in Europe and Asia. Cellufuel has an exclusive license in Canada for woody biomass. Many existing sources of biofuels such as ethanol or biodiesel are largely based on raw materials that are grown on crop based acreage. These fuels compete with food crops and require substantial amounts of water, nutrients and fossil fuels to cultivate the lands and remain productive from year to year. Cellufuel is aggressively pursuing the development of CelluFuel Inc. and the realization of a demo and commercial scale projects in Nova Scotia within the next 6-18 months with a focus near the areas of Liverpool (Demo) and Digby – Yarmouth corridor (Commercial) initially, expanding on a facility by facility basis as resource prove sustainable. 2B Green BioEnergy Corp plans on being Atlantic Canada's start in the renewable fuel energy sector, by setting up and operating a $63 million biodiesel facility that will use the most efficient and cost‐effective technology to produce high quality B100 biodiesel, which meets ASTM D6751 standards (EN 14214 in Europe). Their biodiesel plant will have a capacity of 150 million litres per year at the end of the third year. The plant will incorporate agriculture by turning arable land that is not being used into arid land to grow grain feedstocks. Plus, the need for crop rotation, by growing canola or soy which is perfect biodiesel feedstock, will help to balance the fertility demands of various crops to avoid excessive depletion of soil nutrients. They also anticipate using fish waste in the production of biodiesel. 2B Green believes Atlantic Canada to be the perfect location for a biorefinery, because it has a natural competitive advantage for the production of biodiesel.    

Atlantic Canada has deep seaport facilities giving it easy and inexpensive access to European markets and the southern US oil hub. Feedstock such as canola is well adapted to growing conditions in Atlantic Canada and can be introduced into rotation with potatoes which also increase the yield of the potato crop. Rotating canola and potatoes will result in agronomic advantages such as higher yields, as well as higher economic advantages. Eastern Canada is the location of oil refineries which are required to purchase biodiesel.

Furthermore, they believe a biodiesel project will generate economic benefit for northern New Brunswick in Atlantic Canada, creating 30 to 60 direct and up to 600 indirect jobs. Also: 

  

Agricultural Sector - New Brunswick farms contain nearly 1 million acres including approximately 370,000 acres of crop land. There is sufficient acreage of canola grown in New Brunswick and neighbouring provinces to supply the biodiesel plant requirements. It is expected that canola will fit very well into potato locations, offering a more profitable alternative to cereal crops; Fishing Industry - fish plants can sell fish waste as feedstock for the biodiesel facility; Transportation – the company will ship its products by rail, truck and sea; the project will create enough railcar volume to indefinitely rescue the rail lines from abandonment; Environment - a renewable energy industry will help meet the challenges for a clean environment;

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 



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Oil Refineries - Atlantic Canada will have a unique potential to grow its feedstock, produce the biodiesel and sell to major end users located in the Maritimes. New Tax Base - Atlantic Canada can be a leader in the renewable energy industry; and, local production and crushing of canola feedstocks is expected to create a significant competitive advantage for the region including increased profits for farmers, new jobs and tax revenues for governments. Northern New Brunswick will incur increasing economic activity and will become a vital part of the gateway.

This is another example of an Atlantic Canadian initiative that has opportunity for success, but it must be able to move ahead to commercialization on a level playing field, with three essential things other Canadian jurisdictions have had in the past. 1) A mandate for biofuel = demand; 2) Assistance in capital cost, through programs like ECOABC or the equivalent; and 3) production incentive programming like ECOEnergy.

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APPENDIX F – LETTER TO FEDERAL MINISTERS

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APPENDIX G – QA / QC CAPABILITIES AND CAPACITY Kulbir Singh, Ph.D.

(Quality Assurance Manager)

Dr. Gerry Marangoni

(Lab Director)

Phone: 902-867-2324 E-mail: [email protected] Fax: 902-867-2414

Phone: 902-867-5110 E-mail: [email protected] Fax: 902-867-2414

St. F.X. University Physical Science Center 1 West Street PO Box 5000 Antigonish NS Canada B2G 2W5

A look at the current state of QA/QC capabilities and capacity in the Atlantic region A Report Covering Biofuel Analytical Support and Instrumentation and Chemical Consulting for the Atlantic Biofuel Industry. Submitted to: Prepared by:

Per:

Ken Magnus, Atlantic Council for BioEnergy Cooperative D. Gerrard Marangoni X-Cell Analytical StFX University

August, 2012

Signature

Date

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Introduction Atlantic Canada has had a small biofuels industry since the late 1990’s. A major barrier to the growth of this industry (in this region) has been the lack of a dedicated Research and Development lab that would allow biofuel producers and marketers ready access to quality analytical data required to ensure market specifications are met as well as the ability to undertake research projects to allow the development and implementation of regional technologies that may be suitable for export. The purpose of the present document is to provide the Atlantic Council for BioEnergy Co-operative (hereafter ACBC) the rationale behind the establishment of one or multiple regional facility(s) to support and power the growth of biofuel related technologies in the region. From 2006 to the present, support to the Biofuels Industry in the Atlantic region has been limited and consists of only 1 dedicated lab – XCell Analytical. With the lab’s interest in biodiesel services, and with the principal investigator’s (PI) knowledge and appreciation of the unique juxtaposition of “Quality Assurance” and lack of “Operational” or “Field Issues”, X-Cell Analytical has been successful in: 1. Providing analytical and research services to a number of regional customers; 2. The implementation of a Quality System (based on the BQ9000-L standard); 3. Demonstrating a unique, fundamental understanding of the connection between quality monitoring and quality assurance (this is a critical but often overlooked issue in the adaptation of biofuels in transportation and domestic heating situations). The Director of X-Cell (the author of this report) oversaw the implementation of a suite of standardized lab procedures and developed an awareness of the strengths and limitations of administrative and technical practices required for a successful growth of the biofuels industry. It is this experience that forms the basis of this report. The goals of the report are as follows: 

Provide a sampling of the facilities and expertise that exist in the region.



Demonstrate the need for a Regional Biofuels Research and Analysis Centre as an economic driver for: the establishment of a successful biofuel project supporting the biofuels industry in the Atlantic region as it develops and grows.



A demonstration of the capacity and capabilities of X-Cell Analytical – as an example of the facilities required to support this sector and subsequent sub-sector.



Provide a snapshot of the knowledge and the expertise that has been built up by X-Cell Analytical as a full-scale Biofuels Research and Analysis Centre, as a minimum framework to replicate and build upon in support of a biofuel quality assurance/quality control sub-sector.

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Regional Atlantic Canada Assets – The Perspective During the decade 2000-2010, the Atlantic Region has exhibited a dichotomy between a strong regional biofuel production base (mainly two players, SF Rendering in Canning NS and Ocean Nutrition from their fish oil production facilities in Mulgrave, NS), and engineering and technical support being provided chiefly by two parties (FoxCreek Consulting/Maritime Biofuels Limited and more recently, the Biorefinery Technology Scale-Up Research Centre in Grand Falls, NB). SF Rendering (SFR) represents a 2,000,000L capacity plant that was in production from 2006-2010 that was taken off-line when its major local industrial customer ceased operations due to the economic downturn. SFR and Wilson Fuels were both acting upon the same initiative whereby the Domestic Fuel Supply was mandated to be 5% renewable by 2010. Despite the strong academic presence in the region, until very recently there existed only isolated research initiatives from individual professors (i.e., members of the Dalhousie’s Canadian Institute of Fisheries Technology); the majority of the research initiatives from institutions and other regional scientists were geared towards maximizing the payload of highly valuable omega-3 oils from supplement production. Essentially, a single major marketer emerged in the region (Wilson Fuels Limited), with other smaller marketing/commercialization initiatives (through Maritime Biofuels Limited) beginning to take shape. Recent announcements from Cape Breton University’s Verschuren Centre for Sustainability in Energy & the Environment (CSEE), and the New Brunswick Community College’s Biorefinery Technology Scale-Up Research Centre in Grand Falls New Brunswick have demonstrated the importance of this growing sector within the region. Additionally production of biofuels from various sources is nearing the market-ready stage (e.g., Atlantic BioEnergy Corporation, PEI), requiring sector proponents to take a closer look at the region’s capabilities and capacity to support the growth and expansion currently underway. Despite the increased activity, Atlantic Canada clearly trails far behind the other Canadian regions (notably Saskatchewan), the U.S., Brazil and other world leaders in renewable fuels production and consumption, despite the fact that we have the potential feedstocks/waste streams to be among global leaders. The lack of a strong R&D centre for biofuels in the region has to be considered as a significant factor in the slow pace of growth that was seen in the renewable fuels industry during the first decade of the new millennium. Next generation biofuels currently under development (e.g., cellulosic ethanol, biobutanol, biomass conversion, etc.) have a significant amount of potential in the region, and will have a huge economic impact as Atlantic Canada move away from more traditional uses of wood resources and wood waste. However, a number of technical barriers remain that must be resolved through extensive research and development efforts, before progress in the development and commercialization of next generation biofuels in Atlantic Canada (and also in Canada) can be realized. A coordinated, well-funded, and certified Regional Centre for Biofuels Production will assist the industry in a number of ways: 1) Assist manufactures in solving production problems; 2) Working with producers to establish quality-testing protocols; 3) Short and long-term research projects dedicated to the utilization of regional feedstocks in the production of biofuels; 3

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4) An analytical lab that can support quality assurance/quality control (QA/QC) procedures in order to ensure a regional supply of high quality, sustainable, and secure biofuel that could also support pilot plants; 5) Assist in developing vendor operating procedures, including QA/QC regimens, in order to ensure a regional supply of high quality, sustainable, and secure biofuel.

Atlantic Canadian Capacity Although the Atlantic biofuels sector has existed for some time, the recent increase in research, (both applied and fundamental) and projects involving all levels of government, academia and industry combined with the newly implemented federal renewable fuels standards (RFS) demonstrate that the sector is currently growing to meet regional and global demands. The capacity to support this burgeoning sector from a QA/QC perspective has been limited with only a few key players in the field. This shortfall in support capacity should be seen as a secondary opportunity for regional economic development with the opportunity to employ highly qualified professionals (HQPs) graduating from our regional academic institutions around a new sub-sector or spin-off sector of technical expertise. Regionally, biofuels of various types have been produced since the late 1990’s; only one major corporate player has successfully implemented a quality marketing initiative with regards to biofuels. There are no certified producers in the region, and until recently, the Atlantic Canadian biofuels sector could be described as a collection of small biodiesel producers, each with a capacity in the thousands of litres per year range instead of the capacity “sweet spot” in the hundreds of thousands to the millions of litres per year range. The biggest reason for this “capacity gap” is the lack of expertise in the region required to scale-up production operations; this gap is not simply an engineering issue, as there are a number of firms capable of excellent plant designs. Scale-up issues arise from a complex combination of chemistry and engineering issues, and significant expertise in both areas is required to overcome them. From a QA/QC perspective, quality control must be an integral part of the entire production process, which includes the storage and stabilization of the fuels in the post-production phase before fuel is delivered to the customer. Atlantic Canada has an abundance of post-secondary education institutions, and these institutions receive high marks for the quality of the education and training they provide. All these institutions produce technically literate graduates possessing some knowledge that can be applied in the biofuels sector. A significant opportunity in the region could be realized with the establishment of a “Regional Biofuel Production Initiative.” This initiative would encompass members of various university and community college institutions, and would include the establishment of a Regional Analysis Lab in order to satisfy QA/QC requirements of biofuels, tax incentives for both producers and consumers to embrace biofuels, and a significant education component. This initiative would be a significant catalyst for the establishment and growth of a biofuels sector in this region. As an example of projects that would immediately benefit from an initiative of this sort: 1) scientists and engineers in the region could undertake an analysis of various waste streams for inclusion in biofuel production; 2) work with crop scientists to select suitable oil crops and maximize their yield; and 3) educate producers on the establishment of QA/QC procedures, and assist in production scale-up. 4

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This initiative would also mount a public awareness campaign on the substantial benefits of biofuels, and connect with schools and regional science fairs to educate up and coming scientists and engineers on the benefits of working in this industry. Finally, this regional initiative would explore next generation biofuels and work with clean carbon producers already well-established in the region. The benefits of such an initiative are enormous – from significant waste stream diversion and utilization, to the emergence of new markets for current regional resources (for example, resources currently used for the pulp and paper industry could be re-deployed in a green growth industry).

Current Capacity Outside of X-Cell Analytical, the region’s only full service lab specializing in the measurement of the physical properties of complex fluids, there are currently no other university labs capable of offering these services in Atlantic Canada. However, there is capacity to leverage the academic assets we have in this region to establish the required analytical labs and build a centre of excellence. There are also 3 government-funded labs in the country that offer some services in biofuels analysis including: o

Alberta Innovates;

o

Saskatchewan: Saskatchewan Research Council (SRC)

o

Manitoba: Manitoba Hydro:

There are other private-sector labs in Atlantic Canada that offer services in biodiesel analysis including: 

Intertek (Dartmouth);



Maxxam Analytics (4 labs in NS).

It should be noted that in the author’s experience, a number of regional university labs have claimed an ability to undertake biodiesel analyses; however, in all cases these labs were only able to offer analyses based on the availability of one or two pieces of equipment. The difficulty with this approach is that this equipment was not dedicated to biofuels analysis, nor did the labs have the quality control procedures implemented that could assure the regional industry of compliance with established standards. There are no regional labs that can perform all required analytical tests for QA/QC. In fact, even the 'big name' labs mentioned above send samples to other parts of their company’s infrastructure in either Canada or the US for analysis. This can result in long delays in releasing product for sale as a regional lab capable of both quality assurance and sound chemical interpretation can provide invaluable input on processing challenges that could result in additional production delays. Hence, these labs are not in a position to assist their customers in interpreting the results and assisting them with quality issues. A regional facility capable of performing quality analyses and assisting customers with short and long term R&D projects is a must for any regional biofuels industry to grow and succeed. There is a real opportunity here to build on the assets in the region (academic and industry) to support this rapidly expanding sector.

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Future Capacity Requirements Clearly, as the industry grows towards its objective of 100 million to 500 million L of fuel, additional capacity in terms of personnel (lab technicians, scientist positions, project managers, QA managers) will also be required. At the current regional output of 10 million to 20 million L, it is anticipated that the technical capacity and capabilities of the X-Cell lab - with the addition of few HQP and some specific instrumentation - will still be sufficient to ensure quality compliance and get the industry off on the right foot. With the expected growth over the next 5-10 years it should be noted that personnel resources required to support this sub-sector will need to increase proportionately with the increased output of the biofuels being produced. Facilities and Services Given the amount of equipment required for biofuels analysis, and the author’s knowledge of the footprint of individual equipment in a biodiesel research and development lab, the author recommends a minimum of 1500 ft2 of lab space. Approximately 60% of the bench space will be required for the instrumentation listed below, with the remaining 40% dedicated to wet lab space, proper fume cupboards, solvent and cold storage, and a sample retaining system (required for Quality Audits). The lab must be set up to offer the following services to the biofuels industry in the Atlantic region, with the target market being vehicles, home heating, and industrial heating. a) Routine analysis (biodiesel and ethanol quality assurance); b) Short-term applied R&D programs (quality & process issues in fuel production; field operability issues); c) Long-term R&D programs (process development; new products; IP related to fuel storage and stability, biomass utilization). The following tables outline an equipment list required to allow a biofuels research and development lab to operate according to the minimum testing requirements currently required of the BQ-9000 certification,1 ethanol as a transportation fuel,2 biodiesel blends (home heating oil, industrial space heating etc.)3 As it is difficult to completely ascertain future equipment needs (for example, the possible importance of bio-butanol in the region as well as other second generation fuels), the lab operationally needs to put aside enough revenue from its receivables to purchase new instrumentation, and to upgrade existing instrumentation over time.

1

http://www.bq9000.org http://www.astm.org 3 http://www.tpsgc-pwgsc.gc.ca/ongc-cgsb/index-eng.html 2

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Table 1 - BQ-9000 Experimental Protocols, and Required Instrumentation for Biodiesel Analysis4

Property

Protocol

Instrumentation

EN 14538

ICP-MS

2

Metals (Calcium Magnesium, Sodium Potassium, Phosphorus) Flash point (closed cup)

ASTM D93

3

Alcohol control - Flash point

ASTM D93

4

Water and sediment

ASTM D2709

Pensky Martens (Closed Cup) Pensky Martens (Closed Cup) Centrifuge

5

Kinematic viscosity, 40°C

ASTM D445

Viscometer

0.25

6

Sulfated ash

ASTM D874

% mass

139

7

Sulfur (includes req'd density)

ASTM D5453

Sulfur Analyzer

57

8

Copper strip corrosion

ASTM D130

7.3

9

Cetane number

ASTM D613

Corrosion Apparatus Cetane Engine

10

Cloud point

ASTM D2500

11

Carbon residue

12

1

Purchase Price (k$ new only) 225 5 5 10

425 23.6

ASTM D4530

Cloud Point Apparatus % mass

Acid number

ASTM D664

mg KOH/g

14.6

13

Cold soak filterability Free and Total Glycerin

Home Built Apparatus GC

0.45

14

ASTM Annex A1 D 6584

15

D 1160

17

Oxidation stability

EN 14112

Distillation Apparatus Colorimeter (Chart) Rancimat

169

16

Atmospheric equivalent temperature, 90 % recovered Visual Appearance

18

Densimeter

(req’d for Sulfur)

5 Place Densimeter

4

ASTM D4530

4.5

22.6

0.02 45.0 27.2

Shaded columns indicates instrumentation is currently housed within X-Cell Analytical 7

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Table 2 - Experimental Protocols, and Required Instrumentation for Ethanol Analysis2

Property

Protocol

Instrumentation

Purchase Price (k$)

1

Total Acidity as Acetic Acid

ASTM D1613

Titration

11.2

2

Chloride

ASTM D7319

Ion Chromatography

24.2

3

pHe

ASTM D6423

pH electrode

11.2

4

Sulphate

ASTM D7319

Ion Chromatography

24.2

5

Copper

D1688

ICP-MS (See Table 1 Above)

6

Solvent Washed Gum Content

ASTM D381

Jet Evaporator

7

Sulphur

ASTM D5453

Sulfur Analyzer (See Table 1 Above)

8

Aromatics/Benzene

ASTM D5501

Gas Chromatography

38.4

9

Methanol/Ethanol/Denaturants

ASTM D5501

Gas Chromatography

41.6

10

Water Content

ASTM D6304

Karl-Fischer

8.2

11

Density

ASTM D4052

5 place Densimeter (See above)

12

Appearance

ASTM D4530

Colorimeter Chart (See above)

13

Electrical conductivity

ASTM D5512

Conductivity meter

4.5

14

Phosphorus

ASTM D3231

Atomic Absorption

29.0

15

Non-Volatile Residues

ASTM D381

Jet Evaporator (See Above)

16

C3 -C5 saturated alcohols

EN15721

Gas Chromatography

32.0

45.4

The total cost of purchasing new instrumentation to support a new lab set up is in the range of 2.0-2.5 M$, depending on supplier discounts. In the beginning stages, it may be possible to defer the some of the larger equipment purchases and utilize an outside supplier for the provision of certain services (for example, Cetane Numbers can be obtained in a 24-48 hour turnaround from the Alberta Innovates Fuel Analysis lab). Given the impracticality (both in size and economics) of some of these items, a large capital outlay to acquire these pieces may not be prudent during the lab’s start-up phase. The Tables above demonstrate that X-Cell Analytical currently possesses the wet lab capabilities and has established the required QA/QC protocols (with appropriate instrumentation) for biodiesel analyses; no facility exists in the region that can perform the appropriate QA/QC procedures for ethanol as a biofuel, and a significant capital outlay is required to establish a facility that can analyse ethanol as well as additional second generation fuels.

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Quality Assurance Systems – A Minimum Requirement for a Viable Industry Biofuels have been on the radar with a number of government agencies worldwide; they have been fully supportive of the use of bio-fuels that comply with an appropriately determined blending with conventional fuels in order adopt some level of fuel security and sustainability, as well as the social considerations involved with the reduction of greenhouse gases. Bioethanol and biodiesel are two fuels that are currently available as part of an integrated and mandated solution aimed at mitigating some of the energy supply and security risks that have been identified in recent years. The Canadian government, through the implementation of the renewable fuel standard (RFS) for both gasoline and diesel fuels, is endorsing the automotive use of ethanol and biodiesel blends from a fossil fuel conservation and energy security points of view, but are also playing a role in establishing markets for grains and other agricultural goods and waste streams that can be readily converted to liquid fuels. However, it is imperative that the bio-based liquid fuels are of an equivalent quality standard to the conventional fuels so as to achieve satisfactory operability and emission performance from the vehicles that are utilizing these blends. This in turn requires total compliance with already established national and international fuel quality standards, which will ensure consumer acceptance of these fuels for their vehicles. This requires the establishment of a regional lab and a testing facility that is equipped and able to help suppliers and consumers work through inevitable operability issues and growing pains. The more quickly the industry can tackle QA/QC field issues, consumer acceptance of the fuels will grow. At the same time, appropriate guidelines and quality-monitoring protocols need to be in place to assure quality control in the distribution process (certified marketers) and eliminate issues from the production of blended fuels. In the case of biodiesels, the BQ-9000L system is recognized as the Gold Standard QA System designed for the Biodiesel industry. The BQ-9000 certification is based on the industry standard lab protocol ISO-17025, the standard for most commercial analytical labs around the world. Implementation of this QA system for biodiesels and ethanol is a necessary feature for any lab facility functioning as a biofuels research and development lab. Compliance to a recognized Quality Assurance/Quality Control System (for example, the BQ-9000L system for biodiesel1,5) is a must for any analysis lab. For the lab to obtain the BQ-9000L Certification, the lab will have to comply with the quality assurance requirements set forth by NBAC (National Biodiesel Accreditation Commission), and by the National Governing Body for biodiesel and biofuel producers and marketers in Canada (the Canadian Renewable Fuels Association). This means that the lab will have to go through the following rigorous initial quality assurance process in order to serve the biofuels industry. It is important to note that X-Cell Analytical has experience with implementing these QA processes and procedures. 1. Drafting lab protocols and procedures, including, but not limited to a. b. c. d. e.

5

Operating Procedures Calibrating Procedures Training Procedures Internal Quality Audits Data & Documentation

See Appendix for information regarding the Certification and Training Process. 9

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2. Prepare a full BQ9000 Application for Certification (Quality Systems program for laboratory based on ISO17025 Certification and ASTM 6751) since it has now been officially issued by NBAC. 3. The lab must put in place a Customer Service Evaluation System (based on the Continuous Improvement Philosophy of the 17025 Standard); this allows the lab to get constructive feedback from customers on many aspects of its operations (e.g., customer service, reporting, deadlines, and accuracy). These continuous evaluations of its services will ultimately lead to a more focussed and responsive Research and Development Program for the Atlantic Region.

Sales/Revenue - Using X-Cell Analytical as an Example The following chart presents the biofuel revenue and expenditures for X-Cell Analytical from 2006 to 2009. This section has been included to provide an example of what a start-up lab’s revenues may look like for this emerging sector. The percentage shortfall of the revenue based on the projected yearly expenditures is included in the chart for discussion purposes. The author felt it was important to demonstrate the disparity between the revenues and expenditures for a lab supporting this sector to give the reader a clear picture of the timelines and support required to get this sub-sector up and running. 350 300 92%

68%

59%

52%

38%

27%

17%

250 200

k$

Revenue 150

Expenditures % Shortfall

100 50 0 2006

2007

2008

2009

2010

2011

2012

Year of operation

Figure 1 - Biofuel Expenditures and Revenue for X-Cell Analytical (FY 2006-2009)

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Clearly, X-Cell Analytical would not have been able to operate without significant subsidies to its biofuel revenues (mostly biodiesel), especially in its initial two years. Some of the shortfall was covered by XCell undertaking research projects for other companies that were not related to its core Biofuel business, but the majority of the shortfall (mainly occurring on the salary and benefits side) was covered through an AIF project. Expenditures averaged an increase of about 3% per year, consistent with costs of living salary adjustments. The revenue stream increased at a much more rapid rate; the projections shown on the chart for FY2011 and 2012 suggest that X-Cell was indeed heading for self-sufficiency. It is also clear from the chart above that X-Cell would likely not have been able to reach financial selfsustainability solely on the basis of its biofuel revenue alone. If the level of production activity continued at or slightly above the level that was normal in 2009 (where it is currently trending today), it is highly probable that at least 20% of the lab’s expenditures would have to be covered from additional sources (likely short term R&D projects outside of its core biofuel base). However, even a modest increase in production capacity will be more than sufficient to make the lab self-sufficient within a five year window. It should also be noted that like many corporations, a significant percentage of the lab’s expenditures were salary and benefits.; In order to be competitive and to attract the quality of lab personnel required to make the lab an R&D success, these would have to be augmented to ensure the best highly qualified individuals (HQP) were hired. This is the main reasons for the higher expenditure on wages and benefits versus what was dispersed through X-Cell in order to get a working biofuels research and development lab started in this region. In addition to the expenditures side, it should also be pointed out that the cost of the analysis charged by X-Cell, while less expensive versus that charged by comparable government and private R&D labs, was still considered to be ‘too pricey’ for many of the players in the Atlantic biodiesel industry, particularly if customers were considering BQ-9000 fuel certification. As an example, a “full slate” ASTM analysis would cost in the range of $2000-$3000, and BQ-9000 certification requires multiple passes on “full slate” ASTM analyses, as well as semi-annual full testing on production lots. We will return to this topic in the Recommendations section below.

Start-Up Hurdles In this section, we outline some of the issues that a regional lab would have to address during its initial and ramp-up phases. a) Markets – the lab will have to carry out some market research to identify all potential customers. This list of customers would be expected to increase as the industry grows in the region. X-Cell’s current market consists chiefly of biodiesel analysis (~80% of revenues). With the activity in the region increasingly centred on ethanol production, it is likely that ethanol analysis will make up close to 60% of the lab’s business. There are no regional labs, including X-Cell Analytical, currently capable of undertaking ethanol analysis (and biobutanol analysis, as this next generation biofuel becomes important). Clearly a significant investment on the analytical and development infrastructure for ethanol is required in this region for the industry to thrive. b) Revenues - In order to guarantee that the lab reaches self-sufficiency, the lab should endeavour to establish linkages with other industries in order to cultivate relevant research and development relationships. Some other potential market include: a. Oil Analysis; b. Pharmaceuticals; 11

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c. Mining; d. Food Science; e. Waste Water Treatment Most of the potential customers will be small size companies that do not have an internal lab or medium size companies that would be interested in a particular piece of equipment or a particular suite of analyses. These analyses can also generate additional revenue to help alleviate any shortfall that may initially exist. Fortunately, much of the work in these industries uses many of the same instrumentations and operating protocols as those used in the biofuel industry. Since the biodiesel market in Canada is still modest, and as such, extremely sensitive to environmental legislation passed by provincial governments (6 provinces have already imposed a minimum quantity of biodiesel in the fuel with Tax Credits available for marketers and producers). A strategy will have to be designed to approach a large number of potential regional customers (a marketing firm or business students could be hired to help with this). c) Marketing –Customized and strategic marketing targeted at the biofuels industry first and then additional biotech clients second. In the case of X-Cell Analytical, the Atlantic Biodiesel network was the main source of customers. The lab continues to network with stakeholders by attending well targeted events (based on Markets identified). d) Quality Assurance and Compliance – the lab must become & maintain BQ9000L Certification and implement a similar suite of protocols for fuel ethanol! Being certified is mandatory in order to do biodiesel analysis, and there will be significant audit costs associated with this stage (~$6,000 every 3 years). e) Highly Qualified Professionals (HQPs) - The lab will require a Quality Assurance Manager whose primary responsibility will be to develop, maintain, and service the QA system. It is important to note that splitting roles in a QA lab is not recommended and will likely result in protocols and procedures being comprised – thus adversely affecting the reputation of the lab to delivery on its requirements. For example: the lab Director cannot be the QA Manager; these 2 functions must be independent! In addition, hiring a sufficient number technically literate staff able to maintain state-of-the art equipment is essential to the productivity and reputation of the lab. f)

IP and Service Contracts - Most customers or potential customers will be small companies that are not comfortable with service contracts; they do not have the financial resources to be seeking legal advice for contract negotiation.

g) Certificates of Analysis - Certificates of Analysis are required to be delivered to Biofuel customers as per QA/QC requirements. For example, every biodiesel customer requires a BQ9000 C of A for each set of analysis; fuel ethanol customers will require the same. These C of A’s are legal documents that certify the biofuel sample meets a defined quality standard. h) Safety and Environmental Issues – any ISO17025 lab must have a system in place for sample tracking and retains. BQ-9000L requires sample retains for 3 months and then discard them. Biofuels is environmentally friendly and samples are discarded as per standard practice. A system (and infrastructure) for sample retains and disposal has to be implemented. 12

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i)

Equipment Issues – the lab must be prepared to deal with equipment failures since maintaining deadlines is key to success with private sector; any certified lab must have a preventative maintenance system (with appropriate documentation). Also, the lab needs to be able to afford repairs and parts as well as replace equipment when necessary (without interruption of services if possible); the budget presented above includes a Contingency Fund to help deal with this matter.

j)

Certification - A Certified lab requires the lab to implement a Training Program and all its training procedures be documented (as well as Operation, Calibration, Training, Administration, QA procedures).

X-Cell Analytical – A Biodiesel Facility The following pages outline the operational capacity of X-Cell Analytical in its mission to service the biofuels industry in the Atlantic region, and its initial attempts to work towards the rigorous quality assurance protocols in support of the biofuels industry in the region. The following operational description can also be used as a template to grow the capabilities and capacity in the region – with regards to growing a sub-sector specifically aimed at supporting the biofuels industry.

Personnel and Expertise X-Cell Analytical was headed by a Professor (Consultant) + 1 backfill position (for teaching relief) with 4 full time employees. Our experience has demonstrated that our lab was able to function as an R&D lab in addition to providing quality analytical Services to an industry with an average output of 3 000 000 to 6 000 000 L of fuel with six full-time employees. The technical roles of the employees as well as how they connect with any internationally recognized Quality Assurance program is described in some detail below; 1. Director (Professor) – the role of the Director is to oversee the operation of the lab and to ensure that scientific rigor is a significant part of the day-to-day operation of the lab. The Director is the final reporting voice when data is communicated to the outside customer. The Director plays a significant role in all aspects of lab operations, including training, Quality Management, and scientific accountability. Ideally, the director should possess a PhD in Chemistry and must have the ability to interact with Chemical Engineers. 2. Quality Assurance Manager/Project Manager – the project manager/QA Manager (the Manager) serves a dual role within the lab. This individual oversees both the day to day financial side of the lab’s operation as well as function as the Quality Assurance manager in ensuring compliance with external lab certifications. The Manager in conjunction with the Director is responsible for the publication and maintenance of Standard Operating Procedures (SOP’s), Standard Administrative Procedures (SAP’s), and Standard Calibration Procedures (SCP’s). With the director and the lab staff, the QA manager is responsible for identifying and addressing issues identified during both internal and external quality audits. The QA Manager ideally possesses a MSc. Degree and an MBA, and has experience in the set-up and implementation of Quality Assurance initiatives.

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3. Lab Technician x 2 – the lab technicians are responsible for the day to day operational and research functions in the lab. The technicians serve a vital role in identifying and establishing new and improved quality procedures and parameters, implementation of new research protocols, and the initiation and testing of new equipment. The technicians should have a minimum of a two year chemical technology diploma and experience working in a Quality Assurance environment. 4. Research Scientist – the role of the research scientist is to carry out research projects that are beyond those identified as routine analysis. These include, but are not limited to, shortterm R&D projects for external customers, research and development of new testing procedures and protocols, and the development of intellectual property related to fuel production, fuel processing, and fuel stabilization. Ideally, the scientist possesses a PhD in Chemistry and has the ability to interact with commercial partners. 5. Maintenance Technician – this is a critical position to maintain Good Lab Practices (GLPs) and operation excellence. The Maintenance Technician would have a minimum of a two year chemical technology diploma and experience working in a Quality Assurance environment. It should be noted that X-Cell’s staff were all graduates of Atlantic Canadian Institutions, and in fact were almost completely educated in this region. As the industry grows, and is able to employ more and more graduates from our colleges and universities, this will have a significant benefit to the entire region as much desired intellectual capacity will choose to stay here and be part of a green and growing industry. These graduates will establish new technologies and processes, creating jobs and growing the industry’s knowledge base!

Operating Budget The following table is a projected budget over a standard fiscal year –including the director. Table 3 - Projected Yearly Operating Expenditures6 for Biodiesel Analytical Lab

Activity Description Wages & Benefits

Annual Amount $370,000

Equipment Parts & Supplies Travel Miscellaneous

$40,000 $50,000 $15,000 $10,000

TOTAL

$485,000

Description Based on Personnel described above (including Backfill, including Director) Contingency Fund Consumables and instrumental wear parts Conferences, business meetings Laboratory Audits, Marketing, Round Robin Analytical Testing Registration, ASTM and other Standards Subscriptions

6

Depending on where the Analysis lab is housed, the Director’s salary can be significantly offset from other funding streams. 14

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Recommendations The following list of recommendations is based on the author’s experience with X-Cell Analytical and the current and projected future state of an Atlantic Canadian biofuels industry. Note that some of these recommendations apply to a biofuels lab being housed within a university setting (like X-Cell Analytical). a) The Establishment of a Regional Biofuel Production Initiative – This initiative would see stakeholders from universities, colleges, industry and government come together to confirm the needs and requirements of a supporting sub-sector. b) The Establishment of a QA/QC Environment - Establish and maintain a Quality Assurance controlled environment (like BQ9000-L) which will be attractive to the regional industry and will improve the quality of the goods and services being offered by the Atlantic biofuels industry including: a. A high quality research environment that can provide service as well as short to medium terms R&D capabilities that will allow members of the regional industry to provide new goods and services and allow the development of IP within the broader Atlantic biofuels industry; b. A training centre to train lab personnel and producers and marketers in a Quality Control System (e.g., BQ9000)); c. Lab or labs in a university setting in order to maximize the availability of more government programs for revenue assistance in the start-up phase, insurance benefits, infrastructure benefits, and the access to scientific and technical information; It is anticipated that these recommendations could be met by cataloguing and leveraging the strong academic assets that would both contribute to and benefit from the sub-sector. c) Inter-Provincial Buy-In and Investment - Lobby the Atlantic Premiers to establish tax credits or subsidies to increase the potential for entrepreneurs and investors to get involved with the industry, and provide potential opportunities for industry players to access high quality analytical and service work. This will aid in both economic development, increase the likelihood of survival for the agricultural industry in the region, and create and maintain jobs in the Atlantic Provinces both in the fuels and agricultural production.

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Next Steps and Closure The author believes that the next logical step to this analysis is to complete a business assessment of this sub-sector to identify: 1. the monetary commitments required to establish this sub-sector; 2. the programs available to support the recommendations made above; and 3. the timeline required to support those recommendations. It is understood by both parties that all reasonable attempts have been made by D. Gerrard Marangoni to deliver the above work product to ACBC. The suggestions presented in this document provide a reasonable assessment of the work undertaken in the analysis of the current state of the biofuels industry in the Atlantic region with regards to a ‘Full-Slate’ analysis and certification lab. The goal of this document was to provide available facts, identify current issues, and provide a means to facilitate and stimulate discussion of what a comprehensive research and development lab dedicated to the Atlantic biofuels industry might look like

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APPENDIX H – PROVINCIAL / TERRITORY CONTACTS Province/Territory

Contact

British Columbia

Michael Rensing, Manager Renewable Fuels Department: Energy, Mines and Petroleum Resources 205 952 0265 [email protected] Susan Carilisle, Manager, Alternative and Renewable Energy. Department of Energy 780 415 1283 [email protected] Ron Kehrig, Sector Manager, Biofuels and Bio-Products Department: Enterprise Saskatchewan – Resource and Manufacturing 306 933 7244 [email protected] Jeff Kraynk, Manager Department: Agriculture, Food and Rural Initiatives 204 945 5222 [email protected]

Alberta

Saskatchewan

Manitoba

Ontario

Quebec

New Brunswick

Nova Scotia

Prince Edward Island

Newfoundland

Yukon

Northwest Territories

Nunavut

Bob Brennand, Business Development and Project Manager Department: Manitoba Innovation, Energy and Mines 204 945 7392 [email protected] Bill Greenizan, Advisor, Energy Markets Department: Energy 416 326 0548 [email protected] Tammy Tondevold, Sr. Policy Advisor Department: Agriculture, Food and Rural Affairs 519 826 3875 [email protected] Raynald Archambault, Advisor Emeritus, Downstream Sector Department: Natural Resources 418 627 6385 [email protected] Keith Melvin, Business Development Officer Department: Energy 506 658 2172 [email protected] Nancy Rondeaux, Manager, Electricity and Renewable Energy Division Department: Energy 902 424 4458 [email protected] John Hughes, Director, Special Projects Department: Environment, Energy and Forestry 902 368 5884 [email protected] Corey Snook, Policy Program and Development Specialist Department: Natural Resources 709 729 3131 [email protected] Robert Collins, Energy Resources Analyst Department: Energy, Mines and Resources 867 667 5015 [email protected] Dave Nightingale, Director, Energy Planning Department: Industry, Tourism and Investment 867 920 3274 [email protected] Roy Green, Director Community Infrastructure Department: Community and Government Services 867 975 5441 [email protected]

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APPENDIX I – ATLANTIC CANADA BIOFUELS FEASIBILITY MODEL

Bio-fuels production facility business case model Submitted to:

BioAtlantech New Brunswick

Submitted by:

Gardner Pinfold Consultants Inc.

January 15, 2013

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Table of Contents Page Atlantic Biofuels Feasibility Model ......................................................................... 1 1. Notice and disclaimer .................................................................................. 1 2. Overview ..................................................................................................... 1 3. Model information sources .......................................................................... 2 4. Guide to Model inputs ................................................................................. 3 5. Guide to Model outputs ............................................................................... 7 6. Concluding note .......................................................................................... 8 Appendix: Results Tables ..................................................................................... 9 Sources............................................................................................................... 11

Gardner Pinfold

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Atlantic Biofuels Feasibility Model 1.

Notice and disclaimer

The Atlantic Biofuels Feasibility Model (hereafter the Model) is intended to provide proponents and lending agencies with a tool to facilitate analysis of prospective ethanol and biodiesel biofuels projects. The Model as constructed incorporates indicative capital and operating cost data, as well as revenue streams for projects using different feedstocks. It is not intended to provide financial advice or to be used as the basis for specific investment decisions. Specialist advice should be obtained regarding each project-specific investment. The Model was developed by Gardner Pinfold Consultants Inc., in conjunction with the Atlantic Council for Bioenergy Cooperative (ACBC), under contract to BioAtlantech New Brunswick with funding from the Atlantic Canada Opportunities Agency. While every effort has been made to provide reliable and accurate information in the Model based on data currently available, Gardner Pinfold Consultants Inc. does not warrant the accuracy, currency, nor completeness of the Model or any information contained in the Model. Anyone using the Model does so at his or her own risk and no responsibility is accepted by the consultant or sponsoring organizations – ACBC or BioAtlantech – for any losses which might directly or indirectly result from any reliance on or use of the Model.

2.

Overview

The model is designed to help assess the financial viability of biofuels production options in Atlantic Canada. In particular, the model helps to assess the importance of the following key plant design and operation considerations: 1) Feedstock types and their relevant attributes for biofuels production (e.g. costs, delivered freight charges, conversion efficiency etc.). 2) Plant scale in terms of biofuel production capacity including efficiency over the life of the plant. 3) Pre-construction and construction costs including capital, pre-operating, contingency funds, and working capital needed until revenues begin. 4) Financing options from banks, different levels of government, other sources, and private equity (including interest rates and amortization periods). 5) Operating costs including a wide range of inputs such as the number of employees, salaries, benefits, and administration costs. 6) Revenues from the biofuel product as well as by-products including animal feed, heat and power.

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A suite of production results and financial indicators are calculated for assessment of potential biofuel plant performance. The Model contains input and output sheets for six plants so these can be evaluated simultaneously on a comparison sheet. Results for the six plants are summarized on a final comparison sheet (Table 1) to evaluate, for instance, the performance of plants with different feedstocks or plants at different scales.

Table 1: Model results comparison sheet (example only) Plant Profiles Plant 1 Product Feedstock Plant capacity (litres) Financing Required funds % Equity Feedstock Crop yield per acre Crop delivered cost per ton Revenues Revenue per litre of product Other revenue per litre of product Total revenue per litre of product

Plant 2

Plant 3

Plant 4

Plant 5

Plant 6

Ethanol (corn) 38,000,000

Ethanol (wheat} 38,000,000

Ethanol (cellulose) 25,000,000

Biodiesel (canola) 10,000,000

Ethanol (sugar beets) 25,000,000

Biodiesel (soybeans) 10,000,000

47,678,147 37%

56,952,164 37%

39,926,709 60%

25,931,068 61%

27,815,818 28%

15,001,068 33%

1.75 254

0.98 304

1.40 131

0.75 660

35.00 50

0.90 508

$0.63 $0.33 $0.96

0.63 0.33 0.96

0.67 0.1 0.77

1 1 2

0.67 0.34 1.01

1 1 2

Key Results Plant 1

Plant 2

Plant 3

Plant 4

Plant 5

Plant 6

Local economic benefits Crop tonnes Crop acres Farm income Transport income

95,000 54,286 $23,750,000 $1,330,000

102,703 104,799 $0 $1,360,811

78,125 55,804 $0 $1,093,750

21,505 28,674 $0 $465,054

250,000 7,143 $0 $1,250,000

50,000 55,556 $0 $650,000

Plant financials Payback period IRR Year 5 net cash flow Year 5 debt:equity Year 5 profit margin

12 5% $4,857,499 65% 13%

At least 20 years Negative ($2,669,620) 66% -7%

13 4% $3,409,567 26% 18%

11 7% $2,722,728 24% 14%

5 21% $7,506,742 78% 30%

At least 20 years Negative ($8,393,323) 76% -42%

Disclaimer: This Model is intended to provide general guidance and a tool for analysis only and is not intended to provide financial advice or to be used as the basis for investment decisions.

Source: Atlantic Biofuels Feasibility Model

3.

Model information sources

The Model construction relies on 1) a general approach to financial feasibility analysis, and 2) specific information for biofuels production. The general approach to financial feasibility analysis is the same as for most project developments involving construction of a system that will process inputs and produce outputs on an annual basis over time. Costs and revenues are calculated annually over a twenty-year period and summarized according to key production and financial indicators that would be of interest to investors. The financial analysis is based on generally accepted management accounting principles and Gardner Pinfold Consultants Inc. experience with construction and review of similar models for a wide range of projects. The specific information for production of biofuels from a selection of different feedstocks is largely based on published reports for commercial facilities in Canada and the U.S. (see Sources). In some instances there is only information for plants at certain scales, while in a few cases there is sufficient information to assess a wide range of scales (e.g. corn, wheat, barley). Information for assessment of plants using forest biomass (cellulose) as feedstock was available from demonstration and research facilities only, and consequently, the indicative results shown in the Appendix should be considered highly speculative.

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Guide to Model inputs

The inputs sheets have shaded cells for Model Users to make selections and enter information. All other boxed or non-shaded cells should not be manipulated as these contain fixed values and formulas required for the Model to function properly. The six input sheets are the same and contain each of the following main section headings that are described in turn below: 7) Feedstock 8) Plant capacity 9) Construction and pre-operating 10) Financing 11) Maintenance and depreciation 12) Feedstock constants 13) Operating 14) Revenues

4.1

Feedstock

Just before selecting the feedstock, the Model user must indicate whether or not preset data will be used where available. If “yes” then data from published sources respecting commercial plant operations in Canada and the U.S. will be used. In particular, this will draw upon capital and preoperating costs, as well as the number of employees and applicable salaries. It should be noted that even with the use of pre-set data the Model User must also specify many input values (e.g., feedstock prices, feedstock processing and conversion constants, finished product prices). If “no” then the Model user must enter all data regarding the potential plant. It is important for Model users to be familiar with reasonable input values for biofuels plants in both cases (pre-set and user-determined), but especially so when user-determined data are being used. There are seven feedstock options including: 15) Corn 16) Wheat 17) Barley 18) Cellulose (e.g. wood, straw) 19) Canola 20) Sugar beets / other 21) Soybean The sugar beet (or other) option requires custom data entry throughout therefore it can be used for any other feedstock of interest in the future.

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4.2

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Plant capacity

Selecting the plant capacity (litres of production) has a bearing on preset data for the canola and soybean options. There are 6 plant scales with preset data available for canola, and three for soybeans (capacities shown to the right side of sheet). The exact plant scale must be entered in the shaded capacity cell to trigger the use of preset data in each case. Please note – entering a scale that differs even by one litre from these capacities will require custom data entry for the remainder of the sheet. Any capacity can be entered for corn, barley, cellulose, and canola to access preset data, but for sugar beets/other the Model user must enter data throughout. Some plants may be expected to experience declines in productivity over time, or the Model user may wish to examine the effect of production issues that prevent the plant from operating at full capacity. The shaded production % of capacity is where this can be determined.

4.3

Construction and pre-operating

Before the plant begins operations there will be a period of planning, design, project development and construction. This period can be set up to 24 months, and the associated costs may be entered into the Model. The construction costs, contingency funds, and applicable taxes can also be entered. It is most important to verify that reasonable costs are entered according to the feedstock, plant scale, and the plant location (e.g. applicable taxes by province). Note that pre-operating costs and contingency funds are entered on an annual basis, and the Model will convert the annual amounts to the amount for the pre-construction period that is set in months (e.g. 24 month period means double the annual amount will be spent in total).

4.4

Financing

There are commonly multiple financing sources for a biofuel plant and the Model allows for the specifics of each source to be entered. The first cell (not shaded) in the section indicates the total funds that must be raised to move the project forward (e.g. including working capital up to the first revenues from production). Three of the five shaded cells for data entry are labeled “bank loan, “federal loan’, and “provincial loan”, however these can represent any source of funding. The only constraint is that the maximum amortization period accommodated by the model is 20 years (240 months). After loans are entered, the balance is calculated as equity in the un-shaded cell below. Dividends to shareholders may be set as a percentage of cash flows in this section also.

4.5

Maintenance and depreciation

The cost of maintenance and upgrades and the rate of depreciation over the life of the project are entered as percentages. These are applied to the total combined capital

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construction costs, contingency funds and taxes. The plant life expectancy is entered in years, and this determines the period over which all costs (including operations) are calculated. Keep in mind the plant life should not be shorter than the loan amortization periods for a sensible analysis.

4.6

Feedstock constants

The Model requires a series of data inputs according to each of the feedstocks as follows with brief descriptions for each one: 22) Farm yield (t/ha) – this determines the calculated acreage of feedstock required to run the plant at capacity.It is based on Maritime 5-year averages where available, Western Canada 5-year averages for canola, PEI 2012 production for sugar beets, and industry sources for wood cellulose. 23) Price ($/t) - this is the farm-gate price required by growers to induce them to supply the plant with the selected feedstock. Market prices may be entered as long as this basic assumption is satisfied. Actual prices will be the subject of contract negotiations with growers and will consider numerous factors. An appreciation of long-term price fluctuations and key price drivers should be maintained in selecting appropriate values. 24) Freight-in ($/t) – this is the average cost to bring feedstock from producers to the plant. 25) Yield (litres/t) of Ethanol or Biodiesel – this is a conversion constant that must bear in mind the feedstock properties that are assumed at the price entered (e.g. moisture content, crushed or otherwise processed in any way). 26) DDG (%) – based on the assumed feedstock properties at the price entered. 27) Enzyme cost ($/l) – expressed per litre of ethanol biodiesel produced. 28) Yeast ($/l) – expressed per litre of ethanol biodiesel produced. 29) Chemicals ($/l) – expressed per litre of ethanol biodiesel produced. 30) Denaturant ($/l) – expressed per litre of ethanol biodiesel produced. 31) Water ($/l) – expressed per litre of ethanol biodiesel produced. 32) Waste ($/l) – expressed per litre of ethanol biodiesel produced. 33) Natural gas ($/l) – expressed per litre of ethanol biodiesel produced. 34) Electricity ($/l) – this may be entered as a net value (e.g. zero) if electricity or power is produced at the plant to avoid energy costs. This section requires considerable expertise to determine appropriate values with careful regard for the association between values entered. Table 2 shows the baseline feedstock constants entered in the model; deviation from these should only be undertaken with sufficient research and consultation with industry experts.

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Table 2: Biofuels model constants Farm yield (t/ha) Price ($/t) Freight-in ($/t) Yield (litres/t) DDG (%) Enzyme cost ($/l) Yeast ($/l) Chemicals ($/l) Denaturant ($/l) Water ($/l) Waste ($/l) Natural gas ($/l) Electricity ($/l)

Corn

Wheat

Barley

Cellulose

Canola

Sugar Beet

Soybean

6.5 $250 4-5 400 32% 0.017 0.004 0.010 0.008 0.002 0.002 0.002 0.003

2.5 $300 4-5 370 38% 0.020 0.004 0.010 0.008 0.002 0.002 0.002 0.003

2.8 $210 4-5 325 45% 0.025 0.004 0.010 0.008 0.002 0.002 0.002 0.003

3.5 $150 4-5 320 0% 0.000 0.004 0.010 0.008 0.002 0.002 0.002 0.003

1.9 $650 4-5 465 62% 0.030 0.000 0.020 0.000 0.002 0.002 0.010 0.020

87.5 $50 4-5 100 0% 0.000 0.004 0.010 0.008 0.002 0.000 0.000 0.020

2.3 $400 4-5 200 70% 0.030 0.000 0.020 0.000 0.002 0.002 0.010 0.020

Source: Atlantic Biofuels Feasibility Model

4.7

Operating

The operating inputs section gathers the feedstock constants and incorporates them into the annual costs of production. The only additional data entry for Model users is for final product freight, labour, administration, and selling costs. Freight cost is entered on a per litre of final product basis. The number of employees should reflect the plant type and capacity. Salaries are entered in dollars per year and benefits as a percentage of salaries. These may be entered at a reduced rate to examine the potential benefit of salary rebates sometimes available from provincial governments. The model does not allow for a declining salary rebate over time, or a short duration rebate. The salary entered will be applied over the life of the plant (or the twenty year period of analysis whichever is shorter). Administration costs are entered in dollars per year and should reflect the scale of operations. Selling expenses are finally entered as a percentage of sales.

4.8

Revenues

Multiple revenue streams are possible and there are five shaded cells available for Model users to enter values. The first is treated as the main plant revenue (biodiesel or ethanol), and the remaining four are considered by-product revenue streams. All are expressed as $/litre of plant product (biodiesel or ethanol). Other future returns may arise in the form of carbon credits but this is not included explicitly in the model. Most importantly, an appreciation of long-term price fluctuations and key price drivers should be maintained in selecting appropriate values to calculate plant revenues.

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5.

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Guide to Model outputs

The six individual output sheets are described first and then the comparison sheet (as shown in Table 1) is discussed below. The individual outputs sheets contain the following main section headings, and brief descriptions are provided here: 35) Overview – indicates the feedstock selected, required feedstock inputs and acreage of production (not including land for crop rotation and fallow), local income benefits to farmers (farm gate revenue not profits) and transport companies (again revenues not profits), plant payback period, and internal rate of return. 36) Cash flows – Annual cash flows for the twenty-year period are summarized. 37) Balance – Annual balance sheet summaries for the twenty-year period are presented. 38) Financial ratios – a suite of annual indicators is reported including: liquid ratio, sales to working capital, debt to equity, return on assets, profit margin, return on equity, and sales to total assets ratio. Given the complexity of enterprise tax structures for different scales and jurisdictions the analysis does not attempt to incorporate tax requirements. The results should be sufficient to determine the relative feasibility of potential plants and the financial performance characterizing plants over time. The Compare sheet presents a profile of inputs for each of the six plants being analyzed at the same time and the key results for each plant profile. This provides for side-by-side comparisons to make sure inputs are consistent where needed and the differences in plant performance address the key questions being asked by the Model user. Primarily this is useful for assessing different feedstocks at similar plant scales, or for assessing the same feedstock at different scales. However there are many other possibilities, in fact any variable could be set to different levels with all other settings remaining the same in order to examine the sensitivity of overall performance to key input variables (e.g. feedstock price, interest rates, % equity, revenue prices, capital costs etc). Another key question the Model can help address is what will be needed to make a plant financially viable in order to secure a bank loan or the interest of private investors. For instance a potential plant may initially appear to have an 8-year payback period, however some combination of low-interest loans, capital cost assistance, feedstock subsidies, and salary rebates can be examined to determine what will bring the payback period down to 5 years. The Model produces the results presented in the Appendix tables. A set of baseline plant profiles (Table A1) focuses on a plant scale that would be relevant in Atlantic Canada with a moderate mandate for biofuels production (25 million litres). The plant characteristics are all the same except for the feedstock type, which triggers different capital and operating costs. Although the Model can also assess wheat

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feedstock, it is very similar and slightly inferior to barley plant financial performance. It is also important to note that the cellulosic (wood) plant settings are theoretical as there are no commercial plants in operation. The corn plant is also considered theoretical because this plant scale is below the scale of plants built within the past decade. The baseline analysis suggests a sugarbeet plant offers a viable opportunity, with canola and corn also showing encouraging results. Results for the other plants show lengthy payback periods, indicating they are less attractive based on assumptions used. The Model also produces the results shown in Table A2 where baseline plant performance is adjusted according to key variables including: 39) plant capacity (38 ML and 76ML) – the payback period declines as plant size increases. This is especially true for corn ethanol plants and the most recently constructed plants are upwards of 200ML owing to these economies of scale, 40) feedstock prices (20% lower or higher) – are one of the two most significant drivers of plant viability (along with biofuel product prices). A 20% change in prices can alter the payback period by multiple years for all feedstock types. 41) revenues (20% lower or higher) – can cause the payback period to change by 312 years depending on the feedstock and direction of change (lower or higher prices). 42) capital cost (20% lower or higher) – has at least a 1 year effect on payback period in either positive or negative directions, and this can be up to a three year difference in the case of corn ethanol plants. Although this is not as influential as the feedstock or finish product prices, the significance here is the potential positive effects of technology improvements and capital subsidies as well as the potential negative effects of cost overruns (although contingency funds are included in the model). In general the payback period moves in the direction one would expect, and for key variables this is a prime consideration.

6.

Concluding note

The results shown in Tables A1 and A2 should be considered indicative only. Obtaining definitive results would depend on users populating the model with cost and revenue data specific to particular plant design, scale and location.

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Appendix: Results Tables Table A1: Baseline plant profiles for each feedstock Product Feedstock Capacity (Ml)

Plant 1* Ethanol Corn 25.0

Plant 2 Ethanol Barley 25.0

Plant 3* Ethanol Cellulose 25.0

Plant 4 Ethanol Beets 25.0

Plant 5 Biodiesel Canola 25.0

Plant 6 Biodiesel Soybeans 25.0

Financing Required funds ($M) % Equity

$35.2 30%

$59.4 30%

$68.3 30%

$27.8 30%

$42.2 30%

$37.0 30%

Feedstock Crop yield (t/ha) Conversion (l/t) Delivered cost ($/t)

4.4 400 $254

2.8 325 $214

3.5 300 $156

87.5 100 $54

1.9 465 $624

2.3 200 $404

Revenues Biofuel ($/l) Other ($/l) Total ($/l)

$0.67 $0.34 $1.01

$0.67 $0.34 $1.01

$0.67 $0.34 $1.01

$0.67 $0.34 $1.01

$1.00 $1.00 $2.00

$1.00 $1.00 $2.00

Plant 1*

Plant 2

Plant 3*

Plant 4

Plant 5

Plant 6

62,500 9,615 $1.5 $15.6 $1.5

76,923 28,045 $1.5 $16.2 $1.6

83,333 24,088 $1.2 $12.5 $1.8

250,000 2,891 $1.0 $12.5 $2.3

53,763 29,010 $0.7 $33.3 $1.5

125,000 56,206 $0.5 $50.0 $1.8

15 4% $3.4 70% 13%

>20 -7% $1.7 80% 7%

16 3% $5.7 80% 23%

5 18% $6.4 66% 25%

6 16% $9.1 73% 18%

>20 Negative ($7.6) 71% -15%

Key Results Local benefits Crop tonnes Crop hectares Plant workers ($M) Farms ($M) Transport ($M) Plant financials Payback period (yrs) IRR Yr 5 net $ flow Yr 5 debt:equity Yr 5 profit margin

Disclaimer: This Model is intended to provide general guidance and a tool for analysis only and is not intended to provide financial advice or to be used as the basis for investment decisions. *Note: Commercial scale corn ethanol plants being built today are much larger than 25ML; Ethanol from wood cellulose has not been produced commercially, consequently model results are only theoretical for this feedstock. Source: Atlantic Biofuels Feasibility Model

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Table A2: Effect of key variables on payback period (years) relative to baseline plants (as in Table A1) Biofuel Feedstock Baseline 25ML Larger plants 38ML 76ML Feedstock prices 20% lower 20% higher Revenues 20% lower 20% higher Capital cost 20% lower 20% higher

Plant 1 Ethanol Corn 15*

Plant 2 Ethanol Barley 20

Plant 3 Ethanol Cellulose 16*

Plant 4 Ethanol Beet/Other 5

Plant 5 Biodiesel Canola 6

Plant 6 Biodiesel Soybeans 20+

10 8

20+ 19

11* 9*

5* 4*

6 4

20+ 20+*

6* 20+*

16 20+

10* 20+*

4 8

3 20+

19 20+

20+* 5*

20+ 12

20+* 8*

20+ 3

20+ 2

20+ 20+

12* 18*

20+ 20+

12* 18*

5 7

5 7

20+ 20+

Disclaimer: This Model is intended to provide general guidance and a tool for analysis only and is not intended to provide financial advice or to be used as the basis for investment decisions. *Theoretical plant design Source: Atlantic Biofuels Feasibility Model

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Sources Agricorp Ontario. 2012. Fair market values: 2011 Agristability Alberta Government. 2011. Agriprofits: The economics of sugar beet production in Alberta Argus Media. 2012. U.S. Ethanol and Biodiesel Market prices and Analysis: Issue 12-166 BBI Biofuels Canada. 2006. Economic impact study for canola-based biodiesel industry in Canada: Report for Canola Council of Canada BBI Biofuels Canada. 2006. Feasibility study for a biodiesel plant in the Regional Municipality of Durham Doyletech Corporation. 2010. Total economic impact assessment of biofuels plants in Canada: Report for Canadian Renewable Fuels Association Prince Edward Island AgriAlliance. 2012. Cost of crop production Statistics Canada. 2012. Cansim Table 001-0017 - Estimated areas, yield, production, average farm price and total farm value of principal field crops, in imperial units, annual

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Atlantic Canada’s Bioenergy Opportunities Project – Appendix J

APPENDIX J – ATLANTIC CANADA BIOFUELS FEASIBILITY MODEL

Economic Impact of a Maritime Provinces Biofuels Industry

Submitted to BioAtlantech New Brunswick

Submitted by Gardner Pinfold Consultants Inc

March 2013

Gardner Pinfold

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Table of Contents Page Summary.............................................................................Error! Bookmark not defined.

1.

2.

3.

Introduction..................................................................Error! Bookmark not defined. 1.1

Objectives ................................................. Error! Bookmark not defined.

1.2

Outline ...................................................... Error! Bookmark not defined.

Methodology ................................................................Error! Bookmark not defined. 2.1

Selecting options for impact assessment .. Error! Bookmark not defined.

2.2

Key industry assumptions ......................... Error! Bookmark not defined.

2.3

Estimating impacts .................................... Error! Bookmark not defined.

Economic impact results ............................................Error! Bookmark not defined. 3.1

Plant construction...................................... Error! Bookmark not defined.

3.2

Plant operations ........................................ Error! Bookmark not defined.

List of Tables Table S-1: Biofuel plant construction impacts .................Error! Bookmark not defined. Table S-2: Biofuel industry annual economic impact estimates .. Error! Bookmark not defined. Table 1: Maritime Provinces land requirements for renewable fuel production Error! Bookmark not defined. Table 2: Plant characteristics by province .......................Error! Bookmark not defined. Table 3: Biofuels plant construction impacts ........................................................... 74 Table 4: Biofuels plants operations impacts ............................................................. 75 Table 5: Long term potential annual economic impact of the biofuels industry .... 76

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Summary

A large-scale biofuels industry does not now exist in the Maritime Provinces; accordingly, this impact assessment addresses the question of what the impacts would be if such an industry were to develop. The analysis traces the direct impacts, as well as the indirect impacts on those industries supplying it with goods and services – in particular the farming sector that would supply feedstocks. The emergence of a biofuels industry could create the demand for suitable crops that are not now grown or not grown in sufficient quantities at acceptable cost to meet industry requirements. This forms a key underlying assumption of this analysis – that the crops needed to support a biofuels industry are grown within the region, and grown within a cost structure that allows both the farms and the biofuels industry to operate profitably. The development of a biofuels industry would generate economic impacts during construction and operation. The construction impacts shown in Table S-1 are for a single plant (assumes 25 million l capacity) and would be transitory, working their way through the economy largely during the 1824 months it takes to build a plant. Capital costs and resulting impacts vary among the provinces according to the type of plant and corresponding feedstock: New Brunswick – biodiesel/canola; Nova Scotia – ethanol/corn; Prince Edward Island – ethanol/sugar beet.

Table S-1: Biofuel plant construction impacts New Brunswick

Nova Scotia

Prince Edward Island

(GDP, Income & Tax in $000s; Employment in FTE) Capital cost

42,200

35,200

27,800

17,724 10,128 4,220 32,072

24,992 7,392 4,659 37,043

10,008 2,502 4,475 16,985

346 116 65 526

287 90 60 436

168 48 44 260

14,348 10,972 2,532 27,852

14,432 4,576 2,589 21,597

6,116 1,946 1,668 9,730

1,069 5,013 2,194 8,276

1,261 3,888 1,830 6,979

570 1,751 1,446 3,767

GDP Direct Indirect Induced Total Employment Direct Indirect Induced Total Income Direct Indirect Induced Total Tax revenue Corporate Personal Sales & excise Total

Source: Statistics Canada Interprovincial Input-Output Model 2008 version

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The allocation of plants by province shown in Table S-1 is notional; other feedstock and fuel combinations by province are possible and, given the construction industry and supply capabilities of each of the provinces, would yield impacts similar to those indicated. Operations impacts continue annually over the production life of each facility. The total number of plants constructed in the Maritime Provinces is speculative, but if enough capacity were built to meet the ethanol and biodiesel mandates (13 plants), then the impacts shown in Table S-2 could potentially result.

Table S-2: Biofuel industry annual economic impact estimates New Brunswick Nova Scotia Prince Edward Island (GDP, Income & Tax in $000s Employment in FTE) 1 Plant 5 Plants 1 Plant 4 Plants 1 Plant 4 Plants

Maritime Provinces 13 Plants

GDP Direct Indirect Induced Total Employment Direct Indirect Induced Total

8,430 8,145 2,804 19,379

41,140 41,855 12,883 95,878

5,845 9,455 2,708 18,008

23,380 37,820 10,831 72,031

7,925 8,710 2,235 18,870

31,700 34,840 8,940 75,480

96,220 114,515 32,654 243,389

15 224 104 343

85 1,210 510 1,805

30 240 95 364

120 959 378 1,457

20 269 99 388

80 1,076 394 1,550

285 3,245 1,283 4,813

930 6,720 1,275 8,925

5,270 35,020 5,865 46,155

1,845 7,055 1,300 10,200

7,380 28,218 5,202 40,800

1,240 7,430 1,020 9,690

4,960 29,720 4,080 38,760

17,610 92,958 15,147 125,715

694 1,744 1,590 4,028

2,774 6,977 6,360 16,111

8,822 22,629 16,782 48,233

Income Direct Indirect Induced Total

Tax revenue Corporate 715 3,532 629 2,516 Personal 1,607 8,308 1,836 7,344 Sales & excise 890 5,850 1,143 4,572 Total 3,211 17,690 3,608 14,432 Source: Tables 2 and 4. Note: NB plants composed of three biodiesel and two sugar beet ethanol.

Plants are notionally distributed across provinces to provide an indication of potential impacts by province (single and multiple plants). For example, if a single plant were built in Prince Edward Island, then it would generate about $19 million in GDP, and create 388 full-time equivalent jobs paying almost $9.7 million in labour income. Total tax annual revenue realized from the operation of a single plant and supporting industries would be about $4 million.

Draft 13-06-10

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1.

Introduction

1.1

Objectives

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This project, estimating the economic impact of the bio-fuels production industry, aims to provide industry and government with a tool to further the development of a bio-fuels industry in the Atlantic Provinces. The main objective is to quantify the direct and spin-off impacts of developing a bio-fuels industry in the Maritime Provinces. This will provide prospective investors, lenders and governments with a better understanding of the scale of the industry and how its development and operation would affect the economies of each of the Maritime Provinces, including the impact on such key macroeconomic indicators as gross domestic product (GDP), employment, labour income and tax revenues. This analysis traces the direct impacts of the bio-fuels industry itself, as well as the indirect impacts on those industries supplying it with goods and services – in particular the farming sector that would supply feedstocks. We would emphasize that that a largescale biofuels industry does not now exist in the Maritime Provinces; accordingly, this impact assessment addresses the question of what the impacts would be if such an industry did exist. One caveat worth emphasizing is that this study is about the impact of a fully regional biofuels industry. It is not about basing a biofuels industry on imported feedstock (e.g., corn or canola oil). Not only would this eliminate a major source of regional economic impact – growing the crops – it would also weaken the supply security of any local operation. The viability of such a business model would also be open to question, since the alternative of simply shipping the final product (ethanol or biodiesel) is also possible without incurring capital and operating costs for local production.

1.2

Outline

Following this introduction, Chapter 2 sets out the methodology used to estimate economic impacts. It beings with the rationale for selecting specific fuels and feedstocks, and outlines the basis for estimating the land needed to support a biofuels plant under different crop assumptions (including crop yield and conversion factors). This is followed by a discussion of the characteristics of the agriculture industry in the Maritimes and how these characteristics affect the likely scale of biofuel plants. A review of the demand for biofuels in the region follows, with an estimate of the number of plants this regional demand could support. Finally, Chapter 2 sets out the economic indicators used to quantify impacts at the direct, indirect and induced levels. Chapter 3 contains the economic impact results during construction and operation. Impacts are measured on a provincial basis using specified biofuel and feedstock assumptions for individual plants and for a fully built-out industry based on the Chapter 2 demand estimates.

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2.

Methodology

2.1

Selecting options for impact assessment

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Biofuel feedstocks in the Maritimes The challenge for this study is to answer the question, “If a bio-fuels industry were to develop in the Maritime Provinces, what would be its economic impact?” Some firms in the Region engage in the production of bio-fuels on a small-scale basis, but there is no bio-fuels industry on a scale needed to meet the federal ethanol and bio-diesel mandates. Consequently, there is no observable basis for documenting economic impacts. Estimating the economic impact of such an industry in the region, accordingly, must proceed by way of assumption, coupled with details of industry structure and operation elsewhere. Fortunately, much of technical information needed as a starting point for estimating impacts is available from published sources. We have used this information to develop a financial model for determining the financial feasibility of producing ethanol and biodiesel fuels using various feedstocks. That model, including key indicative cost and revenue data, are described in the report, Infrastructure Build-out Investment Analysis, forming one of a suite of studies in this Atlantic Canada Bioenergy Opportunities Project. Several crops can be used as feedstock to produce bio-fuels. Corn, wheat, barley, sugar beet and various cellulosic plants are potential sources of ethanol. Corn is the dominant feedstock in North America (of Canada’s 16 plants, the eight based in central Canada use corn, while the other eight in western Canada use wheat). Canola and soybean are the main feedstocks for bio-diesel, with soybean the main feedstock in North America and canola in Europe (of Canada’s 12 plants, the eight based in western Canada use canola, while the other four in central Canada use mainly animal fats). The production technology for both fuels is well developed. 

Producing ethanol from starchy plants is a matter of using enzymes to convert starches to sugars, and then fermenting the sugars with yeast and distilling the alcohol. The use of sugar beets is a simpler process because it avoids the need to convert starches to sugars. Choice of feedstock comes down to availability, cost and energy content as these affect overall production economics.



Bio-diesel may be produced in one of two ways:  through a chemical process called transesterification where plant oil obtained through crushing reacts with alcohol and a catalyst to separate the methyl ester from the glycerides; the methyl ester (a crude bio-diesel) is further processed into refined bio-diesel, while the glycerides are distilled into glycerol and sold as a by-product. 

through hydrolysis, where a plant oil (canola, soy or palm) is refined by adding a hydrogen molecule to produce a true renewable diesel fuel. This process is proprietary with limited global production, resulting in a high cost fuel.

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The choice of feedstocks is driven largely by crops that are or can be grown, and grown profitably, in the Maritime Provinces. The emergence of a biofuels industry could create the demand for suitable crops that are not now grown or not grown in sufficient quantities at acceptable cost to meet industry requirements. This forms a key underlying assumption of this analysis – that the crops needed to support a biofuels industry are grown within the region, and grown within a cost structure that allows both the farms and the biofuels industry to operate profitably. Conditions in the Maritime Provinces are suitable for several potential feedstock crops including corn, wheat, barley, soybean, canola and sugar beet. Cellulosic biomass crops also offer potential (they contain much higher energy content than oil seeds, for example), but the production technology has not yet developed to commercial scale. For purposes of estimating potential economic impacts, we selected three crops, assigning each to one of the provinces: Nova Scotia – corn; Prince Edward Island – sugar beet; New Brunswick – canola. Factors driving feedstock requirements The level of agricultural production is a function of the feedstock requirements of the biofuels industry. The latter, in turn, is a function three things: the demand that a Maritime biofuels industry is able to meet; the crop yields per hectare; and conversion factors of each of the crop inputs (energy content in terms of litres of fuel). Of these, biofuels demand is the most significant source of variability in determining impacts. The biofuels industry in North America is driven mainly be Renewable Fuels Standards (RFS) introduced by various levels of government in Canada and the US. The RFS requires refiners and importers of prescribed fuels (i.e., gasoline, diesel and heating oil) to blend these with specified volumes or percentages of renewable fuels: 

Ethanol: In Canada, the federal RFS mandate is 5% ethanol for gasoline (though refiners generally blend to 10% because of relatively low ethanol costs), and in the U.S. the mandate is 10% with current consideration for 15% (some provinces/states have higher mandates). In both countries, corn is the main feedstock.



Biodiesel: the federal RFS mandate is 2% in both countries, with some provinces/states mandating a blend as high as 5%.

To meet the RFS mandate in the Maritime Provinces (assuming refiners are required to blend locally) would mean a requirement for up to about 250 ML of ethanol and 75 ML of biodiesel (see Chapter 1, “Fueling the Future”, for a derivation of these volumes). In fact, the potential biofuel opportunity is much greater since fuel produced with sugar beets would qualify as a blendstock under the US RFS2. This opens up a substantially larger export market that could easily double the Canadian-based demand. Although it will be completely up to the proponents and investors/owners of the production facilities, on what feedstock they will want to use, it should be noted that corn ethanol plants are not likely a consideration for the Maritimes. This statement is based on two considerations: that other feedstocks are likely to provide a higher return on investment, and corn ethanol plants would not qualify for export to the U.S. based on the RFS2 requirements.

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For purposes of estimating impacts, we take the 250 ML ethanol and 75 ML biodiesel volumes as the basis for a biofuels industry in the Maritimes. The hypothetical impact on land requirements of meeting these volumes is illustrated in Table 1, with the results indicating that the industry is likely to evolve on the basis of feedstock production spread across all three provinces. For example, Nova Scotia meeting the 250 million litre ethanol demand would tie up about 45% of cleared farmland, not something that is likely to occur. The percentages in the other provinces are also relatively high, suggesting that spreading the requirements across provinces is the more likely developmental path for the industry. This would minimize impacts on existing cropping patterns. Table 1: Maritime Provinces land requirements for renewable fuel production Product Feedstock Biofuel demand (ML) Crop yield (t/ha) Fuel conversion (L/t) Crop (t) Biofuel land area (ha) Total cleared farmland by province (ha) Biofuel potential as % of total land

Ethanol Corn (NS) 250 6.50 400 625,000 96,154 215,000 45%

Ethanol Sugar beet (PEI) 250 87.50 100 2,500,000 28,571 238,000 12%

Biodiesel Canola (NB) 75 1.90 465 161,290 84,890 395,000 21%

Note: see Chapter 1, “Fueling the Future” for regional demand estimates.

2.2

Key industry assumptions

The question of scale is an important one, both from the perspective of biofuel facilities and the structure and capabilities of the agriculture industry. The evidence suggests that for biofuel facilities using conventional technology and feedstock, scale economies improve up to about 100 ML and then tend to remain relatively stable. Farms in the Maritime Provinces tend to be small, typically in the 150 ha range in New Brunswick and Prince Edward Island, and in the 100 ha range in Nova Scotia. Meeting the requirements of large-scale biofuels plants (100 ML) would require a commitment from a sufficient number of farms within an “economic radius” of a plant. By economic radius is meant close enough so that the transportation costs are low enough to ensure an acceptable cost of the feedstock. This would vary depending on crop characteristics and price, but a maximum radius of 50 km is typically cited. Within a radius as large as this, there should be no difficulty meeting the feedstock requirements. For example, at a 150 ha average farm size in PEI, the 75 farms needed to meet the sugar beet tonnage required for one 100 ML ethanol plant (11,425 ha) could be contained in an area with a radius of just over 6 km.7 Following the same approach, the 565 farms needed to meet the canola tonnage required for one 75 ML biodiesel plant in New Brunswick could be contained in an area with a radius of 16.5 km.8

This is derived by applying the formula for the area of a circle: r2 [3.14*(6.03 km)2 = 3.14*36.4km2 = 114km2 = 11,400 ha (@100 ha/km2)]. 8 This is derived by applying the formula for the area of a circle: r2 [3.14*(16.5 km)2 = 3.14*272 2 km =855 km2 = 85,500 ha (@100 ha/km2)]. 7

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As a practical matter, feedstock is likely to be supplied from farms that are fairly widely distributed within the economic radius. This reflects considerations of farm size and characteristics, likely farm cropping patterns, and the constraint imposed by delivery costs. These factors suggest that the evolution of the biofuels industry in the Maritime Provinces is most likely to proceed on the basis of biofuels plants that fall below 100 ML capacity. These smaller plants would nonetheless have to be strategically located in areas of farm density that offer the potential for adequate and cost-effective feedstock supply. There are, of course, numerous successful examples of this “hub-spoke” production model in the region including potato processing, dairies and sawmills. For purposes of this analysis, we assume biofuel plants (both ethanol and biodiesel) have a capacity of 25 ML. This is not only more practical from a feedstock supply standpoint, but also in terms of access to capital by companies in the region. Additionally, new technologies considered in the Maritime Provinces and production facilities that can utilize these technologies (i.e., closed loop facilities) allow smaller plants to be more economical. To estimate the economic impact of meeting the 250 ML ethanol and 75 ML biodiesel demand, we build up the industry in discrete 25 ML increments, with plants located strategically across the Maritime Provinces. A notional allocation of plants by province is shown in Table 2, with estimates of capital and operating costs for each biofuel-feedstock combination. The allocation is notional because it is unclear at this point how market forces would work to distribute the plants. Since it is likely that cost-effective feedstock supply would be a major factor, a more or less even distribution across the provinces makes sense. In any event, since overall impact estimates are built up proportionately from the individual 25 ML plant impacts, it is straightforward to approximate the impacts of a varying mix of plants by province. Table 2: Plant characteristics by province Biofuel type Feedstock Plant capacity Capital cost ($million) Operating cost ($million) Feedstock Labour and other

Biodiesel

Ethanol

Ethanol

Canola 25 ML 42.2 39.8 33.5 6.3

Corn 25 ML 35.2 21.2 15.9 5.3

Sugar beet 25 ML 27.8 18.1 13.5 4.6

Number of plants New Brunswick Nova Scotia Prince Edward Island

3

2 4 4

Note: see Chapter 3, Infrastructure and Build-out Investment Analysis for capital and operating cost estimates.

2.3

Estimating impacts

Impact indicators and types Economic impact arises as industry expenditures work their way through the economy. An company’s spending on inputs becomes the revenue of many another companies, which they in turn they spend on inputs for the goods and services they produce, and so on.

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The sum of this activity, generally referred to as economic impact, is conventionally measured with four indicators: 

GDP: an industry’s contribution to Gross Domestic Product represents its broadest measure of economic impact. The domestic product of the biofuels industry captures the value it adds to purchased inputs (e.g., feedstock and utilities) through the application of labour and capital. GDP represents the sum of the value added by all firms in an industry, where value added is composed of the income earned – labour income, and returns to and of capital.



Employment: industry employment is important because of the significance generally attached to jobs; from a purely economic impact perspective, the significance lies in the economic impact generated through the spending of employment income. The greater the employment and higher the average income, the more significant the industry in terms of its overall economic impact. Unless otherwise indicated, employment is measured in full-time equivalents (FTE).



Labour income: this captures payments in the form of wages and salaries earned in an industry. Returns to labour in the form of wages, salaries and earnings form a key component of GDP. Industries paying relatively high average wages and salaries generate a correspondingly higher economic impact than industries paying lower average incomes.



Tax revenue: this captures revenues from such sources as federal and provincial sales taxes, as well as excise taxes applied to sales of petroleum products used in production. It also includes estimates of personal and corporate income taxes.9

Economic impacts are generated through direct, indirect and induced demand in the economy expressed in terms of industry and consumer purchases of goods and services. 

Direct impact: refers to impact generated by the activity of firms in the subject industry (in this case biofuels). Direct GDP refers to the value added created by biofuels companies, while direct employment refers to the jobs created on site by these companies.



Indirect impact: refers to the impacts arising from purchased inputs triggered by the direct activity. For example, biofuels companies buy feedstock from farms, and utilities and chemicals from other suppliers. These farms and suppliers in turn buy their inputs (e.g., seeds, fertilizers, fuel, equipment, professional services) from other companies, and so on. Taken together, the process of producing these goods and services creates profits, employment and income generating indirect impacts.



Induced demand: refers to the demand created in the broader economy through consumer spending of incomes earned by those employed in direct and indirect activities. It may take a year or more for these rounds of consumer spending to work their way through an economy.

9

The Statistics Canada I-O Model does not report personal and corporate income tax revenue impact estimates; these are estimated independently using applicable personal and corporate rates, with allowances for basic deductions and exemptions. The estimates do not take into consideration the effects of deductions, exemptions and various income tax credits that may be specific to the biofuels industry. Gardner Pinfold 6

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The sum of impacts, particularly at the indirect level, gives the potential economic impact of the Maritime Province’s prospective biofuels industry. Generally, the greater the regional supply capability (multipliers) at each level, the greater will be the economic impact (and vice versa). It should be obvious from the figures in Table 2, that the local supply of feedstocks – by far the main biofuels input – ensures the regional impact will be high. Quantifying the impacts – the Input-Output Model Economists rely on economic models to quantify impacts. Models provide a simplified view of the economy, expressing the many demand and supply transactions in the productive process as a set of coefficients or quantitative relationships. These coefficients, including the level of employment and income generated per dollar of expenditure, are based on empirical measurement of flows in the real economy with data compiled through industry surveys conducted annually by Statistics Canada. This study uses the Statistics Canada Inter-provincial Input-Output Model (2008 version) to generate the economic impacts. The use of an input-output (I-O) model is considered most appropriate for this study because this type of model: 



produces direct, indirect and induced impact results – the direct, indirect and induced impacts, provided it has “open” and “closed” versions. Running the open version allows labour income to “leak” out of the economy, with impacts confined to indirect effects. Running the closed version forces labour income to flow through the economy, resulting in an aggregate measure of indirect and induced impacts. The difference between the two runs represents the measure of induced impact. produces results at a high level of resolution – the I-O model is a matrix capturing inter-industry flows of purchases and sales, thus allowing impacts to be measured and reported at the highest resolution. Other types of models (e.g., general equilibrium and economic base) are structured at an aggregate economic level, lacking the sensitivity to accept industry-specific “shocks” and unable to produce industry-specific results.

Data requirement and sources Ordinarily, quantifying economic impacts would begin with data on the gross value of output for the biofuels industry in each province. Gross value of output means revenues generated through sales of final product – ethanol and biodiesel – as well as any byproducts. The I-O Model breaks down the revenues to specific expenditure categories including purchased inputs, wages and salaries and profit. As these expenditures work their way through the economy (as captured by the I-O Model), they generate the GDP, employment and labour income impacts the study aims to quantify. This study takes a different approach. It uses the value of commodities used in the production process to drive the I-O Model, rather than output value. This alternate approach is necessary because at present there is no biofuels industry in the Maritime Provinces, and therefore no coefficients that capture the demand and supply transactions typical of this industry. Using commodity values gets around this deficiency because the model does specify and quantify commodity linkages. So, for example, by specifying the value of corn feedstock used in the ethanol process, the model quantifies the indirect impact on the farming industry and other industries supplying goods and services to farming. Gardner Pinfold 7

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3.

Economic impact results

3.1

Plant construction

The provinces will benefit from positive economic impact during construction (18-24 months) of the biofuels plants. Impacts on a per plant basis are summarized in Table 3. These impacts would occur in each province for each plant built. For example, each plant built in New Brunswick would generate a direct GDP impact of about $18 million, with an overall impact of almost $30 million when indirect and induced effects are included. The overall GDP impact would be $60 million if two plants were built, and $120 million if four plants were built. The capital costs vary depending on the technology. They are much higher for the canola plant in New Brunswick because cost includes a seed crushing facility. The sugar beet plant, incorporating less complex technology, stands at the low end of the cost spectrum. Construction impacts in each province vary more or less in proportion to the capital cost of the facilities. This would be expected, given the nature of construction projects. Where there are differences in proportionality, they arise because of differences in the structure of the respective economies. This is most noticeable at the indirect level, which reflects the capacity of the provincial economy to supply goods and services. Table 3: Biofuels plant construction impacts New Brunswick

Nova Scotia

Prince Edward Island

(GDP, Income & Tax in $000s; Employment in FTE) Capital cost

42,200

35,200

27,800

17,724 10,128 4,220 32,072

24,992 7,392 4,659 37,043

10,008 2,502 4,475 16,985

346 116 65 526

287 90 60 436

168 48 44 260

14,348 10,972 2,532 27,852

14,432 4,576 2,589 21,597

6,116 1,946 1,668 9,730

1,069 5,013 2,194 8,276

1,261 3,888 1,830 6,979

570 1,751 1,446 3,767

GDP Direct Indirect Induced Total Employment Direct Indirect Induced Total Income Direct Indirect Induced Total Tax revenue Corporate Personal Sales & excise Total

Source: Statistics Canada Interprovincial Input-Output Model 2008 version

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3.2

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Plant operations

Single plant impacts The development of a biofuels industry will have a positive impact on the economies of the Maritime Provinces. The impacts set out in Table 4 show that there is little difference in overall impact amongst the provinces in terms of plant location. This should not be surprising, since the plants incorporate similar technology and depend heavily on the local agriculture industry to supply the feedstock. Table 4: Biofuels plants operations impacts

New Brunswick Nova Scotia Prince Edward Island (GDP, Income & Tax in $000s Employment in FTE)

(GDP, Inc

GDP Direct Indirect Induced Total Employment Direct Indirect Induced Total

8,430 8,145 2,804 19,379

5,845 9,455 2,708 18,008

7,925 8,710 2,235 18,870

15 224 104 343

30 240 95 364

20 269 99 388

930 6,720 1,275 8,925

1,845 7,055 1,300 10,200

1,240 7,430 1,020 9,690

715 1,607 890

629 1,836 1,143

694 1,744 1,590

3,211

3,608

4,028

Income Direct Indirect Induced Total Tax revenue Corporate Personal Sales & excise Total

Source: Statistics Canada Interprovincial Input-Output Model 2008 version

The dependence on the local agriculture industry shows up in the relatively high indirect impact in each province. This is most noticeable with employment and labour income. For example, whereas direct employment in the plants ranges from 15 to 30 persons, indirect employment (mainly on farms) ranges from about 225 to 270, with labour income in the $6.7 to $7.4 million range. Annual tax revenues (federal and provincial) from all sources range between from $3.2 to $4.0 million. Again, these figures quantify the per plant impacts for each province.

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Gross impacts If the biofuels industry develops to its potential to supply the regional ethanol and biodiesel volumes (Tables 1 and 2, above), then the region would experience a multiple of the estimated impacts shown in Tables 3 (construction) and 4 (operation). Assuming the industry reaches its full potential (based on regional demand), the annual impacts could be expected to approximate those shown in Table 5, contributing just over $240 million to GDP, creating over 4,800 full-time equivalent jobs, generating over $125 million in labour income, and over $48 million in federal and provincial tax revenues. Table 5: Long term potential annual economic impact of the biofuels industry New Brunswick Nova Scotia Prince Edward Island (GDP, Income & Tax in $000s Employment in FTE) 1 Plant 5 Plants 1 Plant 4 Plants 1 Plant 4 Plants

Maritime Provinces 13 Plants

GDP Direct Indirect Induced Total Employment Direct Indirect Induced Total

8,430 8,145 2,804 19,379

41,140 41,855 12,883 95,878

5,845 9,455 2,708 18,008

23,380 37,820 10,831 72,031

7,925 8,710 2,235 18,870

31,700 34,840 8,940 75,480

96,220 114,515 32,654 243,389

15 224 104 343

85 1,210 510 1,805

30 240 95 364

120 959 378 1,457

20 269 99 388

80 1,076 394 1,550

285 3,245 1,283 4,813

930 6,720 1,275 8,925

5,270 35,020 5,865 46,155

1,845 7,055 1,300 10,200

7,380 28,218 5,202 40,800

1,240 7,430 1,020 9,690

4,960 29,720 4,080 38,760

17,610 92,958 15,147 125,715

694 1,744 1,590 4,028

2,774 6,977 6,360 16,111

8,822 22,629 16,782 48,233

Income Direct Indirect Induced Total

Tax revenue Corporate 715 3,532 629 2,516 Personal 1,607 8,308 1,836 7,344 Sales & excise 890 5,850 1,143 4,572 Total 3,211 17,690 3,608 14,432 Source: Tables 2 and 4. Note: NB plants composed of three biodiesel and two sugar beet ethanol.

Net impacts The impacts shown in Table 5 are gross impacts. They do not take into consideration economic activity that might be displaced by the biofuels industry. Displacement could arise from competition for inputs, particularly for crops used as feedstock (e.g., there could be less corn for domestic consumption or canola for oil production). As a practical matter, displacement of existing economic activity is expected to be minimal, given that the economics of biofuels production indicates that sugar beet is the most likely source of feedstock. There is no competition for this crop from the food or other industries (e.g.,

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sugar refining). Other potential feedstocks, including the ones assessed in this analysis – corn and canola – are likely to be too expensive at current prices to allow biofuel plants to be viable. Consequently, the gross values shown in Table 5 for sugar beet would be valid as indicators of incremental economic impact. Since crop and ethanol production characteristics would be similar across the provinces, the economic impacts shown for PEI would approximate closely the level of impacts likely to occur in NB and NS.

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