ARCHIVED — Renewable Fuels Regulations

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Vol. 144, No. 15 — April 10, 2010

Statutory authority

Canadian Environmental Protection Act, 1999

Sponsoring department

Department of the Environment

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Executive summary

Issue: Greenhouse gases (GHGs) are primary contributors to climate change. The most significant sources of GHG emissions are anthropogenic, mostly as a result of combustion of fossil fuels. The emissions of GHGs have been increasing significantly since the industrial revolution and this trend is likely to continue if no action is taken. Canada’s contributions to global GHG emissions have increased since the 1990s. Historical data indicates that emissions in 2007 were about 26% above the 1990 levels. The Government of Canada is committed to reducing Canada’s total GHG emissions by 20% from 2006 levels by 2020 (or approximately 280 (see footnote 1) megatonnes of carbon dioxide equivalent (MT CO2e) below forecasted 2020 levels).

In 2007, the GHG emissions from the transportation sector contributed around 27% to Canada’s inventory of emissions. Modeling results from Natural Resources Canada (NRCan) indicate that the use of renewable fuels in liquid petroleum fuel can contribute to GHG emission reductions on a lifecycle basis.

Existing Government of Canada initiatives on renewable fuels have had limited success in achieving significant reductions in GHG emissions. In view of the environmental concerns related to climate change, additional actions are required to further reduce these emissions.

Description: The proposed Renewable Fuels Regulations (proposed Regulations) are a key element of the Government’s Renewable Fuels Strategy. (see footnote 2) The objective of the proposed Regulations is to reduce GHG emissions by mandating an average 5% renewable fuel content based on the gasoline volume, thereby contributing towards the protection of Canadians and the environment from the impacts of climate change. The proposed Regulations are estimated to result in an incremental reduction of GHG emissions of about 1 MT CO2e per year over and above the reductions attributable to existing provincial requirements already in place. The proposed Regulations fulfill the commitments under the Renewable Fuels Strategy of reducing GHG emissions from liquid petroleum fuels and create a demand for renewable fuels in Canada.

The Government of Canada is committed to reducing domestic GHG emissions by 20% below the 2006 level by 2020. These proposed Regulations, along with other initiatives such as reducing industrial emissions of GHGs and the development of regulations to limit emissions of carbon dioxide (CO2) from cars and light-duty trucks, would contribute towards achieving Canada’s domestic commitments. The proposed Regulations would promote an integrated and nationally consistent approach to achieve significant reductions in emissions of air pollutants and GHGs to protect the health and environment of Canadians.

The proposed Regulations would require fuel producers and importers to have an average renewable fuel content of at least 5% based on the volume of gasoline produced and imported. The proposed Regulations include provisions that govern the creation of compliance units, allowing trading of these units among participants and also require record keeping and reporting to ensure compliance.

Certain provisions of the proposed Regulations would come into force on the day on which they are registered, while the 5% requirement and provisions for compliance units would come into force on September 1, 2010. The proposed Regulations also include provisions requiring an average 2% renewable fuel content in diesel fuel and heating distillate oil based on annual volumes. This requirement would only be brought into force once the technical feasibility of renewable diesel fuel use under a range of Canadian conditions has been demonstrated.

Cost-benefit statement: Over a 25-year period, the proposed Regulations are estimated to result in a cumulative reduction of 23.8 MT CO2e in GHG emissions (or an average annual incremental reduction of 1 MT CO2e per year). Although it is difficult to quantify and monetize the full range of benefits attributable to the proposed Regulations, and such an exercise does not take into account the broader socio-economic benefits of the full range of elements of Canada’s climate change strategy, it is estimated that on their own the benefits of the proposed Regulations would be $580.8 million using a carbon price of $25 per tonne. Other benefits to the economy would also complement the benefits to the environment from the proposed Regulations, including increased production of renewable fuels and related increased employment and income. In addition, other government initiatives to improve vehicle efficiency and to develop next generation renewable fuel production technologies are also expected to contribute towards GHG emission reductions over time.

The present value of the cost associated with the proposed Regulations is estimated to be $3.2 billion. Gasoline producers and importers would incur costs of $936.2 million, which includes investments needed to upgrade or modify refinery installations and distribution and blending systems; construction cost for renewable fuel plants are estimated to be $264.8 million; costs to consumers are expected to total $2 billion resulting from increased fuel consumption due to the lower energy content of ethanol-blended gasoline; and costs to the federal government for enforcement, compliance promotion and development and maintenance of the electronic reporting system would be approximately $2.3 million. Income from the crop sector is estimated to increase by 0.7%. While the income impacts in the livestock sector are expected to decline by less than 1%, no measurable impacts on downstream sectors are expected.

Business and consumer impacts: The distribution of impacts on industry and consumers would be relatively modest, but uneven across the country in part due to existing mandates in some provinces and the availability of renewable fuels. As a result, the proposed Regulations would have minimal impacts in some provinces or regions (such as British Columbia, Manitoba, Saskatchewan and Ontario) where ethanol-blended gasoline is already available, with most impacts concentrated in regions where renewable fuel requirements are not yet in place.

The total incremental cost to the petroleum refining sector is expected to be 1.3% of industry revenue. Positive impacts in terms of increased sales volume due to lower energy content of ethanol-blended gasoline for fuel producers are expected. These could amount to 10% of the $2 billion in total incremental costs to consumers. The renewable fuel production sector stands to gain the most from the increase in the demand for renewable fuels. Some increase in employment and other economic activities are also expected.

The impact on consumers would be reflected partly as an increase in gasoline demand due to the lower energy content of ethanol-blended gasoline in comparison to conventional gasoline. These impacts would mainly be incurred in provinces (such as Alberta, Quebec and the Atlantic Provinces) where renewable fuel mandates are currently not in place. On a per-vehicle basis, the average annual impact on consumer expenditure on gasoline is estimated to be $34 for 2011.

In addition, consumers may also be impacted by a small increase in fuel price at the pump if the fuel producers pass on their incremental costs down the supply chain. The precise magnitude of the price impact, given differences between regions and across fuel suppliers, is difficult to predict. In the event that all industry costs are passed on to the consumers, it is estimated that average price increase over the 25-year period ranges from 0.07 ¢/L in provinces like Ontario where a provincial mandate is already in place to 0.30 ¢/L in Quebec and the Atlantic Provinces where renewable fuel requirements are not in place. In most cases, such small price increases are likely to be unnoticeable given the usual price fluctuations experienced in the gasoline market.

As the impacts on the agricultural sector’s income and production are expected to be less than 1%, the impacts on downstream meat and food processing sector as well as on food prices are expected to be minimal.

Domestic and international coordination and cooperation: Extensive consultations were conducted with industry, provincial and territorial governments, other federal government departments and environmental non-governmental organizations (ENGOs). The renewable fuel content requirements were developed based on these consultations. In addition, discussions with the United States Environmental Protection Agency (U.S. EPA) were also undertaken to better understand the development process of their rule.

Performance measurement and evaluation plan: The evaluation of the proposed Regulations would be based, among other criteria, on the volume of renewable fuel blended with liquid petroleum fuels in Canada. This would be determined from information and data submitted in accordance with the reporting requirements. The proposed Regulations would also be evaluated based on criteria included in the evaluation plan of Environment Canada’s components of the regulation of renewable fuel content in gasoline, diesel and heating distillate oil. This evaluation plan will be completed in the 2009–2010 fiscal year.

Issue

Greenhouse gases, upon being emitted to the atmosphere, alter its composition, thereby affecting its chemical and physical properties. As a result of human activities, predominantly the combustion of fossil fuels, the atmospheric concentrations of GHGs have increased substantially since the onset of the industrial revolution. This has led to an enhanced greenhouse effect — or global warming — and other climatic changes and represents a global air pollution problem. In view of the historical emissions of GHGs from anthropogenic sources, and the quantity of emissions expected over the century, GHGs as a significant air pollutant are expected to remain the greatest contributors to climate change.

Historical data on GHG emissions indicate that the transportation sector accounts for approximately 27% of GHGs (see footnote 3) emitted in Canada in 2007. Natural Resources Canada, through the use of their GHGenius model (version 3.15) have determined that GHG emissions from liquid petroleum fuels, on a lifecycle basis and under typical Canadian conditions, can be reduced with the use of renewable fuels.

A recent study (see footnote 4) by Health Canada has examined the human health implications due to changes in air quality that may arise from the use of 10% ethanol content in gasoline (E10) in Canada. These health impacts were compared to those associated with the use of conventional gasoline. The results indicate that the ubiquitous use of E10 in Canada would result in minimal changes in the levels of ambient air pollutants. It is estimated that small decreases in atmospheric concentrations of benzene, 1,3-butadiene, and carbon monoxide (CO) would occur along with a slight increase in atmospheric acetaldehyde concentration. The use of E10 was estimated to have almost no impact on nitrogen dioxide (NO2), sulphur dioxide (SO2), ozone and particulate matter (PM2.5) levels. Although the proposed Regulations would require an average of 5% content of renewable fuel in the national gasoline pool, it is expected that companies will generally market E10 to meet the national renewable fuel requirement, so that the expected effects on air emissions would be similar.

Given the continued contribution of GHG emissions from the transportation sector to air pollution, its impact on climate change and Canada’s national and international commitments and interests, actions by government on a number of fronts are required to achieve significant reductions in these emissions. While the Health Canada study found that the ubiquitous use of E10 in Canada would result in minimal changes in levels of ambient air pollutants (such as CO, NO2, SO2 and PM2.5), a substantial reduction in air pollution associated with GHG emissions can be achieved as a result of the proposed Regulations.

Strategic Environmental Screening

In 2006, Environment Canada conducted a Strategic Environmental Screening of the Government of Canada’s intent to require an average 5% renewable fuel content based on the volume of gasoline and 2% renewable fuel content in diesel and heating distillate oil, and the resulting impacts on air pollution. The screening, which was conducted prior to the development of the Renewable Fuels Strategy, considered impacts on GHG emissions and air pollutants as a result of the proposed renewable fuel content requirement.

The screening indicated the proposed renewable fuel content requirement for gasoline, diesel and heating distillate oil is expected to increase use of ethanol over and above the provincial mandates already in place. Emissions reduction factors from the NRCan model (GHGenius) indicated that both these requirements represented a potential reduction of approximately 2.75 MT CO2e emissions per year, more than double the emissions reductions generated by provincial regulations. Since 2006, a number of provinces have established renewable fuel requirements.

With respect to air pollutant emissions (such as NOx, SOx) as a result of a 5% renewable fuel requirement under representative Canadian conditions, test results from the United States were used. The U.S. results suggest that widespread use of 10% ethanol could decrease volatile organic compounds (VOCs) and PM2.5 by 7% and 50%, respectively. On the other hand, increases in NO2 emissions between 0 and 15%, as well as increases in acetaldehyde (a recognized carcinogen) by 100% are also expected. The impacts of biodiesel use were also assessed based on U.S. test results and are expected to be more balanced. The United States test results indicate that use of 20% biodiesel could reduce most emissions, including acetaldehyde (by approximately 7%). However, NO2 emissions may increase or decrease by up to 2%. The preliminary assessment by Health Canada also indicated that there are no expected health impacts associated with ethanol use at blends of up to 10%.

Objectives

The Government of Canada made commitments under the Renewable Fuels Strategy to reduce GHG emissions by introducing regulations to require renewable fuel content based on gasoline, diesel and heating distillate oil volumes. The objective of the proposed Regulations is to reduce GHG emissions, thereby contributing towards the protection of Canadians and the environment from the impacts of climate change and air pollution. The proposed Regulations are estimated to result in a reduction of GHG emissions of about one MT CO2e per year. This represents a significant reduction in air pollution, equivalent to taking a quarter of a million vehicles off the road. This would be achieved through a requirement for an average annual 5% renewable fuel content based on the volume of gasoline produced and imported. These proposed Regulations also support the Renewable Fuels Strategy objective to expand Canadian use of renewable fuels by creating a demand for these fuels in the Canadian marketplace.

The proposed Regulations are part of the Government’s overall approach to reduce emissions of GHGs and air pollutants to protect the health and environment of Canadians. The Government of Canada is committed to reducing these emissions through regulatory measures such as developing regulations to limit emissions of CO2 from cars and light-duty trucks as well as measures to reduce emissions of air pollutants and GHGs from major industrial sources. The proposed Regulations, in conjunction with these measures, are expected to contribute towards achieving the Government of Canada’s commitment to reduce domestic emissions of GHGs by 20% below the 2006 level.

The general approach adopted for the proposed Regulations aligns with the U.S. Renewable Fuel Standard, while taking into consideration specific Canadian climatic and economic conditions.

Description

The proposed Regulations

The proposed Regulations, developed under the Canadian Environmental Protection Act,1999 (CEPA 1999), would require gasoline fuel producers and importers to have an average annual renewable fuel content equal to at least 5% of the volume of gasoline that they produce or import, commencing in September 2010. The requirement for renewable fuel content would be on the basis of the regulatee’s total annual volumes. Compliance is based on the calendar year, other than the first compliance period which is a 16-month period, extending from September 1, 2010, to December 31, 2011.

Renewable fuel content in any liquid petroleum-based fuel would be recognized as contributing towards meeting the 5% renewable fuel content. These renewable fuels can be produced from any type of renewable fuel feedstock (for example corn, wheat, barley, forestry and wood waste), but does not include spent pulping liquor (see footnote 5) (often referred to as black liquor). Renewable fuels produced from municipal solid waste materials would also be recognized, provided the municipal solid waste material has a demonstrated biogenic carbon content of greater than 50% of the total carbon content. Moreover, it cannot contain undesirable materials such as pesticides, paints, petroleum oils, tire material and others, as prescribed in the proposed Regulations.

The proposed Regulations also include a system of tradable compliance units to enable gasoline fuel producers and importers to demonstrate compliance. This would bridge the gap between the point at which fuel is produced or imported and the point at which renewable fuel is blended with gasoline. Renewable fuels are most often blended close to their point of use, at locations downstream of the refinery. Regulatory provisions have been included to allow for the creation and trading of compliance units, which represent litres of renewable fuel. Companies can obtain, through trading, compliance units from others participating in the trading system in situations where they cannot blend renewable fuels in their gasoline, or they may use the compliance units that they have created by blending renewable fuel in gasoline, diesel or other petroleum fuels.

The Renewable Fuels Strategy includes a requirement for an average annual 2% renewable fuel content in diesel and heating distillate oil by 2011, intended to be implemented upon successful demonstration of renewable diesel fuel use under the range of Canadian conditions. The proposed Regulations include provisions for this requirement, but do not specify a coming into force date. The coming into force date for this requirement will be determined at a later date subject to the technical feasibility of renewable content in diesel fuel and heating distillate oil. Natural Resources Canada is currently conducting demonstration projects to assess the technical feasibility.

In addition to the general provisions, the proposed Regulations are divided in three parts. The key elements are summarized in the sections below.

General provisions

The general provisions of the proposed Regulations indicate when specific sections do not apply and address how volumes are to be measured. Specific sections of the proposed Regulations do not apply to persons that only produce or import fuel volumes for special uses (such as exports, aviation, scientific research, competition vehicles, military combat equipment, feedstocks in the production of chemicals, gasoline sold for or delivered for use in Newfoundland and Labrador, the Northwest Territories, Yukon, Nunavut and the part of Quebec that is north of latitude 60° N and gasoline that is in transit through Canada).

In addition, any regulatee that produces or imports less than 400 m3 of fuel in a compliance period is not subject to the renewable fuel content requirements of the proposed Regulations. Persons that produce or import fuels below the 400 m3 threshold or for special uses are nevertheless subject to some record-keeping provisions detailed in the proposed Regulations. A person producing or importing quantities below this threshold level may elect to participate in the trading system by registering as a participant. In this case, all the applicable requirements of the proposed Regulations would apply.

Part 1 of the proposed Regulations: Requirements pertaining to gasoline (see footnote 6)

Part 1 sets out the proposed requirements pertaining to

  • 5% renewable fuel content of the gasoline pool; (see footnote 7)
    Pool refers to the respective total volumes of gasoline or diesel fuel and heating distillate oil that are produced and imported during a compliance period.
  • methodologies for determining the gasoline and distillate pools;
  • compliance units, which are to be used for establishing compliance with the regulations (each compliance unit represents one litre of renewable fuel);
  • calculation methodologies for the determination of required renewable fuel volumes; and
  • registration provisions.

Exclusions

The proposed Regulations allow the following specific uses to be excluded from the pool when calculating the required renewable fuel volume:

  • fuels used for special purposes such as aviation, competition vehicles, scientific research, chemical feedstock, and military combat equipment;
  • fuel used in the Northwest Territories; Yukon; Nunavut; and Quebec, north of the 60th parallel;
  • gasoline used in Newfoundland and Labrador; and
  • fuel exported from Canada or in transit through Canada.

Registration requirements

A one-time registration report must be submitted to Environment Canada by the primary suppliers (as described in the proposed Regulations) upon reaching the 400 m3 threshold for the production or import of gasoline or of diesel fuel and heating distillate oil. The information is required for facilities producing gasoline, diesel fuel or heating distillate oil, blending renewable fuel, using biocrude as feedstock to produce liquid petroleum fuel, as well as the province of import. The details on the type of information to be provided in the registration report are set out in Schedule 1 and 2 of the proposed Regulations.

In the event of a change in the information, the updated information would need to be submitted to Environment Canada no later than five days after the change.

Part 2 of the proposed Regulations: Tradable compliance units system

Part 2 establishes the requirements for a compliance unit trading system for participants which are primary suppliers and others who elect to participate in the trading system.

The regulatory requirements governing the creation and the limits on the creation of compliance units, ownership, provisions for trading, conditions to allow carrying compliance units forward and back between compliance periods, and cancellation of the compliance units are detailed in the proposed Regulations.

Election to participate in a trading system

Primary suppliers are automatically considered trading system participants. Elective participation in the trading system, after submitting a one-time registration report, would also be allowed for persons that

  • blend renewable fuel with liquid petroleum fuel;
  • use biocrude as a feedstock to produce a liquid petroleum fuel other than gasoline, diesel fuel or heating distillate oil;
  • import a liquid petroleum fuel, other than gasoline, diesel fuel and heating distillate oil, that contains renewable fuel;
  • sell neat (pure) renewable fuel to a neat renewable fuel consumer (final user) for use as fuel in a combustion device; or
  • use neat renewable fuel that they produced or imported as fuel in a combustion device.

These persons are referred to as elective participants. If an elective participant chooses to withdraw their participation, they may do so after notifying Environment Canada, submitting any outstanding reports and cancelling their remaining compliance units.

Participants in the trading system would have the option of creating compliance units at the time of

  • blending renewable fuel into liquid petroleum fuel;
  • importing liquid petroleum fuel with renewable fuel content;
  • using biocrude as a feedstock to produce liquid petroleum fuel;
  • selling neat (pure) renewable fuel to a neat renewable fuel consumer (final user) for use in a combustion device; and
  • using neat renewable fuel produced or imported as fuel in a combustion device.

There are two types of compliance units: distillate and gasoline. A distillate compliance unit may be created from any of the above actions with respect to diesel fuel or heating distillate oil (such as blending renewable fuel into diesel fuel or heating distillate oil, or importing diesel fuel or heating distillate oil with renewable fuel content). Gasoline compliance units may be created from any of the above actions in respect of liquid petroleum fuels other than diesel fuel or heating distillate oil (such as blending renewable fuel into gasoline or importing gasoline with renewable fuel content).

Generally, compliance units may only be used to demonstrate compliance in the compliance period during which they were created. Under specific conditions outlined in the proposed Regulations, some compliance units may be carried back into the previous compliance period, and excess compliance units may be carried forward for use in the following compliance period. Distillate compliance units may also be used to establish compliance with the 5% requirement for gasoline.

Part 3 of the proposed Regulations: Records and reporting

Reports must be signed by an authorized official and submitted electronically in the format provided by Environment Canada. In the event that a format has not been provided, paper reports may be submitted.

Reporting, record-keeping and retention of information

The proposed Regulations prescribe specific record-keeping and annual reporting requirements for primary suppliers, elective participants, producers or importers of renewable fuels and sellers of fuel for export, other than participants in the trading system. The submission deadlines for the annual reports are specified in the proposed Regulations.

Auditor’s report

Participants in the trading system and renewable fuel producers and importers must have their records and reports audited by an independent auditor to assess whether or not their practices and procedures are appropriate to demonstrate compliance with the proposed Regulations. The audit report must contain the information set out in Schedule 3 of the proposed Regulations, be signed by the auditor and submitted by the participant in the trading system and the renewable fuel producers and importers by June 30 following the end of a compliance period. The first audit report is due June 30, 2012.

Registration and reports for producers and importers of renewable fuels

A one-time registration report must be submitted to Environment Canada by producers and importers of renewable fuels at least one day before producing and/or importing the 400th m3 of renewable fuel during a compliance period. The registration information, as prescribed in Schedule 6 of the proposed Regulations, is required for each production facility at which renewable fuel is produced and for each province into which renewable fuel is imported.

In the event of a change in the information provided to Environment Canada, the submission of the updated information to Environment Canada would be required no later than five days after the change.

Producers and importers of renewable fuel must also submit an annual report to Environment Canada by February 15 following the end of a compliance period. The first such report is due February 15, 2012. In addition, producers and importers of renewable fuel have record-keeping obligations under the proposed Regulations.

Records and reports for sellers of fuel for export

Persons who sell fuel for export, but are not participants in the trading system, must retain certain records and submit an annual report to Environment Canada by February 15 following the end of a compliance period. The first such report is due February 15, 2012.

Report on measurement methods

Any person who submits a registration report would also be required to submit a one-time report to Environment Canada on the methods used for measuring volumes, as prescribed in Schedule 8. The submission of the report would be required on or before the day on which the registration report is submitted. In the event that the information provided changes, the submission of updated information to Environment Canada would be required no later than five days after the change.

All records or copies of reports and notices, as prescribed in the proposed Regulations, must be kept for at least five years at the regulatee’s principal place of business in Canada.

Coming into force

The proposed Regulations would come into force on the day on which they are registered; however, some provisions come into force later, starting on September 1, 2010. These include

  • a requirement for 5% renewable content based on a primary supplier’s gasoline pool;
  • requirements around the creation and use of compliance units; and
  • reporting and record keeping, with the exception of registration and a report on measurement methods.

The coming into force of the proposed requirements for a 2% annual renewable fuel content in diesel fuel and heating distillate oil would be determined based on the technical feasibility as stated above.

Background

Total GHG emissions in Canada in 2007 were 747 Mt CO2e, which were about 26% above the 1990 levels. Canadian emissions come from a broad range of sources throughout the economy, including industry (47%), transportation (27%), industrial processes (7%), agriculture (8%), and other sources (11%). (see footnote 8) Given the significance of its contribution to Canadian emissions, each sector must play a role in addressing the challenges of climate change.

National context

Since 1980, the Government of Canada has supported development of alternative fuels and has been active in the research and development of technologies and in the implementation of market-based programs (such as fiscal incentives and economic assistance) to encourage the production and use of renewable fuel.

A number of demonstration programs aimed at evaluating and promoting the production and use of renewable fuels have been implemented by the Government of Canada, such as the Biodiesel Targeted Measure and the Ethanol Expansion Program (EEP).

Through the implementation of programs such as these, the Government of Canada has demonstrated its commitment to expanding the production and use of cleaner, renewable biofuels such as ethanol and biodiesel. More recently, the Government of Canada adopted the four-pronged Renewable Fuels Strategy to

  • reduce GHG emissions resulting from fuel use;
  • encourage greater production of renewable fuels;
  • provide new market opportunities for agricultural producers and rural communities; and
  • accelerate the commercialization of new renewable fuel technologies (such as cellulosic).

Subsequently, in support of the Renewable Fuels Strategy, on December 30, 2006, the Government of Canada published a notice of intent (see footnote 9) to develop regulations that would require an average 5% renewable fuel content based on gasoline volumes by 2010 and an average 2% for diesel fuel and heating distillate oil volumes by no later than 2012.

On April 23, 2007, the Government of Canada established the ecoAgriculture Biofuels Capital Initiative (ecoABC) (see footnote 10) for which Agriculture and Agri-food Canada (AAFC) is responsible. This four-year $200 million initiative would provide repayable contributions of up to $25 million per project to help farmers overcome the challenges of raising the capital necessary for the construction or expansion of renewable fuel production facilities.

Another program in support of the Renewable Fuels Strategy is the ecoENERGY for Biofuels Initiative (ecoENERGY) (see footnote 11) managed by NRCan. Announced on December 3, 2007, the ecoENERGY program supports the production of renewable alternatives to gasoline and diesel and encourages the development of a competitive domestic industry for renewable fuels. This program will invest up to $1.5 billion over nine years in support of renewable fuels production in Canada.

The 2007 budget also made $500 million available over eight years to the Sustainable Development Technology Canada (SDTC) (see footnote 12) overseen by Environment Canada and NRCan to establish — in collaboration with the private sector — large-scale facilities for the production of next-generation renewable fuels. Next-generation renewable fuels produced from non-food feedstocks (such as wheat straw, corn stover, wood residue and switchgrass) have the potential to generate greater environmental benefits in terms of GHG emission reductions than traditional renewable fuels.

In addition to these commitments, the 2008 budget provided a further $10 million over two years for scientific research and analysis on renewable fuels emissions to support the development of regulations, and demonstration projects to assess the technical feasibility of biodiesel under Canadian climate and conditions.

The proposed Regulations would further support the use of renewable fuels in Canada and increase the demand for these fuels. Domestic production levels are expected to be influenced by the initiatives in place under the Renewable Fuels Strategy.

Actions in other Canadian jurisdiction

Some provinces have established minimum renewable fuel content requirement for gasoline. The following table summarizes the provincial requirements for gasoline that have been announced or implemented to date.

Table 1: Legislated Provincial Renewable Fuel Mandates for Gasoline

Province

Regulated Level1

Implementation Timeframe

British Columbia

5%

By 2010

Saskatchewan

7.5%

In 2007

Manitoba

8.5%

In 2008

Ontario

5%

In 2007

Source: Canada West Foundation (February 2008), Building on Our Strengths — An Inventory of Current Federal, Provincial, and Territorial Climate Change Policies.

1 The existing mandated provincial percentages are based on the volumes used or sold to end users, rather than on volumes of gasoline produced.

The penetration of renewable fuel for the legislated mandates is expected to be significant. Indeed, projections suggest that provincial requirements currently in force would result in the use of nearly 1.3 billion litres of renewable fuel by 2010, or about 3.2% of the projected Canadian gasoline pool and 67% of the proposed regulatory requirement.

Alberta has announced its intention to introduce a regulation in November 2010 requiring 5% renewable fuel content in gasoline. Quebec has a target of 5% renewable fuel in 2012 based on cellulosic; however, it does not plan to put in place a regulation to this effect.

Actions in international jurisdictions

Global production and use of renewable fuels has long been on the rise for reasons that range from concerns about air quality and climate change associated with petroleum fuels, to rising oil prices and energy security. Renewable fuel requirements have been implemented by various countries, including the United States, Brazil, European Union (EU), Japan and India.

United States

The United States passed the Renewable Fuels Standard (RFS) in 2007 through their Energy Policy Act of 2005. Their initial regulated requirement was set at the volume of renewable fuel in the market at the time, which equated to an annual average requirement of 4.02% ethanol in gasoline. The level has been revised annually based on renewable fuel volumes set out in the Energy Independence and Security Act of 2007 and forecast gasoline consumption. For 2010, their proposed level based on current projections of gasoline volumes is 9.37%. The RFS also includes a credit trading system which allows regulatees to comply with the RFS through the purchase of credits. It also permits renewable fuels that are not blended into gasoline, such as biodiesel and biogas, to be included in the RFS program. The rule defines who generates the credits and under what conditions, how credits are transferred from one party to another and the weighting factor for credits from different types of renewable fuel.

In May 2007, the United States proposed revisions to the national RFS program (referred to as RFS2). The revised requirements establish new specific volume requirements for cellulosic biofuel, biomass-based diesel, advanced biofuel and conventional renewable fuel. Of these modifications, the most notable is the volume standard under RFS2, which has been increased beginning in 2008 from 5.4 to 9.0 billion gallons. Thereafter, the required volume would continue to increase, eventually reaching 36 billion gallons by 2022.

The Energy Independence and Security Act of 2007 also established new renewable fuel categories and eligibility requirements, including setting the first ever mandatory GHG reduction thresholds for the various categories of fuels. For each renewable fuel pathway, GHG emissions would be evaluated over the full lifecycle, including production and transport of the feedstock; land use change; production, distribution, and blending of the renewable fuel; and end use of the renewable fuel. The lifecycle GHG emissions performance reduction thresholds as established by EISA range from 20% to 60% reduction depending on the renewable fuel category.

The RFS2 requirements would apply to foreign producers, in addition to the domestic producers and blenders.

European Union

In May 2003, the EU put in place the Directive on the promotion of the use of biofuels and other renewable fuels for transport (the directive) for promoting the use of renewable fuels for EU transport. The directive stipulated that national measures must be taken by countries across the EU aiming at replacing 5.75% of gasoline and diesel with renewable fuels by December 31, 2010. This rises to a minimum of 10% in 2020. The percentages are calculated on the basis of energy content of the fuel and apply to gasoline and diesel fuel for transport purposes placed on the markets of member states. Member states were encouraged to take on national “indicative” targets in conformity with the overall target.

On January 14, 2008, the EU Environment Commissioner announced that the EU was rethinking its biofuel program due to environmental and social concerns. The resulting Fuel Quality Directive calls for tighter lifecycle GHG savings thresholds for biofuels over conventional fuels, which begin at 35% and rise incrementally to 60% by 2018.

Brazil

Since it was first launched in 1975, the Brazilian Ethanol Program has been one of the largest commercial applications of biomass for energy production and use in the world. In 1976, the government made it mandatory to blend ethanol with gasoline, and the mandatory blend level was originally set at 10%. Mandatory blend levels have increased incrementally since then, and on July 1, 2007, the mandatory blend was raised to 25% of ethanol in gasoline.

In 2004, Brazil also launched the National Program for Production and Use of Biodiesel. The legislation, put in place in 2005, established minimum percentages for biodiesel in diesel fuel. Between 2008 and 2012, the mandatory requirement is set at 2%, increasing to 5% from 2013 onwards.

Japan

The main driver for Japan’s biomass policy is their commitment under the Kyoto Protocol to reduce CO2 emissions by 6% from 1990 levels by 2010. On May 18, 2006, the Ministry of Economy, Trade and Industry introduced a new strategy to decrease fossil fuel dependency by 20% by 2030. This policy would include, among other measures, raising allowable maximum ethanol blending in gasoline from 3% to 10% by 2020.

India

India initiated a national biofuel strategy under which 5% ethanol blending in gasoline is mandatory. India has set an indicative target of a minimum 20% ethanol-blended gasoline and 10% biodiesel-blended diesel nationally by 2017.

Sector profiles

Petroleum refining sector

There are currently 16 refineries under the operation of 9 refining-marketing companies in Canada. The three major companies, namely Imperial Oil, Shell and Suncor market nationally and operate three or more refineries each. For the most part, other companies market locally and only operate one refinery. These facilities employ approximately 7 400 people in the sector. Of these facilities, four are located in Ontario, three facilities are located in each of Alberta and Quebec, two are located in British Columbia, and Saskatchewan, New Brunswick, Nova Scotia and Newfoundland and Labrador have one facility each.

The production capacity of these refineries in 2007 was approximately 117 billion litres. Refineries in Canada are generally operating at 90% of their capacity (95% being considered as the optimum utilization rate, taking into account maintenance shutdowns and other unplanned events).

A total of 108 billion litres of crude oil was sent to refineries in 2007, with imports accounting for 49.9 billion litres. The total production of refined petroleum products was approximately 123 billion litres, of which motor gasoline is the most important refined product, representing about 36% of the total production. Diesel accounts for another 23%. While the total production of refined products varies from year to year, the proportion of each product on the total does not change significantly. In January of 2007, domestic sales of refined petroleum products by region were 32% in Ontario, 20% in Quebec, 18% in Alberta, 11% in the Atlantic Provinces, and 19% in the other provinces and territories in Canada.

Canadian petroleum refining operations and producers of other petroleum and coal products (e.g. producers of petroleum waxes, petroleum jelly, recyclers of used motor oils) contributed an estimated $2.6 billion to Canadian gross domestic product (GDP) and accumulated $68.6 billion in total revenues in 2007. Of the 123 billion litres of refined petroleum products produced in Canada, Canadian refineries satisfied approximately 84% of domestic demand. Canada exported over 25 billion litres of refined petroleum products while importing 16 billion litres. (see footnote 13)

The net revenues in the petroleum refining industry have increased from $0.8 billion in 1998 to $5.2 billion in 2007 or by 20.8% per year on average. In 2007, the growth rate was 16%.

Fuel transportation and distribution sector

The transportation and distribution infrastructure for petroleum-based fuels is primarily dominated by the major oil producers in Canada. Regional fuel producers and independent marketers have a smaller share of the distribution system. The petroleum distribution system caters to both the transportation of crude oil to refineries as well as the distribution of the refined petroleum products to the primary storage terminals. The transportation of refined petroleum product (post-refinery) is done by tanker trucks, rail, marine tankers or pipeline depending on the quantity of fuel and the geographic location.

The Canadian downstream petroleum industry can be divided into three distinct regions: Western Canada, Ontario and Quebec/Atlantic Canada. In the Quebec/Atlantic region, product movements from refineries to terminals occur primarily by ship, except for the products moved to Ontario via the Trans Northern Pipeline (TNPL) and the products moved by rail between Saint-Romuald and Montréal — for which a pipeline replacement is being considered.

In 2006, approximately 80 billion litres of refined petroleum products were moved via pipelines across Canada. In 2007, crude oil and other pipeline transportation contributed approximately $1.4 billion or approximately 0.1% to GDP. The share of total transportation of goods by rail, water and truck transportation to GDP, on the other hand, was approximately $28.5 billion or nearly 2.3% in 2007. Transportation and warehousing accounted for approximately 848 944 jobs in 2007 of which employment in truck transportation was the highest at 288 809, followed by rail transportation at 46 005; water transportation at 13 984 and petroleum, natural gas and other pipelines with 9 632 jobs.

Fuel storage terminals

There are 1 833 storage terminals spread across Canada, comprising of 76 primary terminals, 614 bulk plants and 1 143 cardlock facilities. The majority of these terminals (approximately 67%) are located in the West, with Ontario and the eastern provinces accounting for 16% and 17% of these storage terminals, respectively. Ontario, British Columbia and Quebec account for 66% of the primary terminals in Canada. These primary terminals are owned by the petroleum fuel producers and are shared to optimize efficiency. Primary terminals are, for the most part, located close to major markets and transportation modes. Multiple producers often load petroleum products at the same terminal, where the addition of proprietary additives takes place before distribution to bulk plants or retail stations. Most blending with renewable fuels would typically occur at the terminals (a small amount currently takes place at retail stations as well) and separate tanks are required on-site for renewable fuel storage before blending.

The bulk plants, representing the second level of storage facility, account for 33% of all storage facilities in Canada and are located in areas where retail distribution is not economical. They operate as secondary points of storage and distribution, but also of sales, and as such are typically not shared facilities (unlike primary terminals).

Cardlock facilities provide fuel to commercial truckers such as long-distance haulers and delivery vehicles. These are controlled access facilities, as opposed to retail stations. Diesel is the main fuel offered for sale at these facilities primarily because the principal fuel used by commercial fleets is diesel. In the last 30 years, cardlock facilities have become the principal suppliers of fuel to commercial trucking operations. Due to the lack of availability of total cardlock supply data for Canada, it is difficult to accurately estimate the share of cardlock sales volume. However, it is likely that cardlock operations account for roughly 70% of all diesel demand in Canada.

Gasoline retail sector

Marketing and retailing of gasoline is carried out by many different firms, a significant majority of whom are also involved in retailing diesel. Some of these firms are integrated refiner-marketers who produce the fuel, distribute it and market it through affiliated or licensed operators who own the individual retail outlets. Approximately 28% of retail stations are owned or operated by integrated refiner-marketers. Independent marketers (the remaining 72%) buy their product from Canadian fuel producers or import fuels and tend to be smaller operators.

The number of retail stations has declined steadily from around 20 000 in the late 1980s to less than 13 000 in 2008. Quebec and Ontario had the largest number of gasoline retail stations accounting for more than half of the total, followed by Alberta and British Columbia with 13 and 11%, respectively. The total volume of gasoline sold by the retail stations in 2007 was approximately 37.6 billion litres (and 5.7 billion litres of diesel), with a combined retail sales value of $46.1 billion. By 2008, sales had increased to $53 billion. Total retail trade, including but not limited to gasoline retail stations, in Canada accounted for approximately 6% of GDP in 2007 and accounted for nearly 2 million jobs. In the same year, the marketing margin represented approximately 5.6% of the average total pump price of gasoline, and 5.9% in 2008. Currently, ethanol-blended fuels are available at approximately 16% of the retail outlets across the country.

Renewable fuel facilities

Currently there are 14 commercial ethanol producing plants operating in Canada with a total production capacity of approximately 1.4 billion litres. The ecoENERGY program, an element of the Renewable Fuels Strategy, provides production incentives to renewable fuel producers. Based on the incentives available under ecoENERGY, a number of renewable fuel producers are currently building additional capacity, which would in effect increase the annual production capacity to 2 billion litres of ethanol by 2011–2012.

The Canadian ethanol production facilities are operated by a range of companies in various industry sectors such as chemical sector and food manufacturing sector. While some companies specialize in ethanol production and supply it directly to fuel producers, others are part of integrated petroleum companies. These integrated petroleum companies do not supply unblended ethanol to the domestic market as the ethanol they produce is used within the company’s own distribution channels.

In Canada, corn (in the East) and wheat (in the West) are the primary feedstocks for the production of ethanol. There are also a few demonstration projects currently underway to test the production of the next generation renewable fuels from forestry and agricultural residues as well as municipal organic wastes.

Imports of ethanol have experienced a high growth rate in the last 10 years increasing from 10 million litres in 1998 to 511 million litres in 2007, with exports remaining stable between 14 and 19 million litres during the same period.

Due to lack of publicly available data for the ethanol production facilities, their contribution to GDP, employment and other key macro-economic indicators cannot be determined. However, they are expected to grow in the future and contribute to the Canadian economy directly and indirectly.

Agricultural sector

In the primary 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 is only a small percentage (5%) of the total.

The agriculture, forestry, fishing and hunting sector contributed nearly 2.2% to the 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 totalled $6.4 billion with the United States being the largest trading partner followed by Japan.

Regulatory and non-regulatory options considered

A number of alternatives, including regulatory and non-regulatory options, were considered to achieve the 5% renewable fuel content based on gasoline volumes and the related GHG emission reductions and are discussed below.

Status quo

The option of taking no action to require renewable fuel content was rejected as it would not result in achieving further reduction of GHG emissions that is possible by requiring renewable fuel content based on gasoline volumes. Though there are provincial renewable fuel mandates in place, they would fall short of the level of GHG reductions that can be achieved with a national 5% renewable fuel requirement based on gasoline volumes. With the current provincial mandates in place, the renewable fuel content is approximately 1.3 billion litres, resulting in 1.75 MT CO2e reductions in GHG emissions in 2010. However, with a 5% renewable fuel requirement at the national level, an additional 0.7 billion litres of renewable fuel would be used, resulting in approximately 1 MT CO2e of GHG emission reductions each year. Therefore, to achieve this additional use in renewable fuels and related GHG emission reductions the status quo cannot be maintained.

Market-based instruments

Market-based instruments, which include fiscal incentives, taxes, and fees and charges were given due consideration. Market-based instruments work by providing incentives aimed at changing consumer and producer behaviour. When properly designed and implemented, market-based instruments can promote cost-effective ways of dealing with environmental issues. In addition, they can provide long-term incentives for emission reduction and technological innovation.

Fiscal incentives such as tax exemptions could be used to encourage the blending of renewable fuels in gasoline that would result in GHG emissions reduction. Up until April 1, 2008, renewable fuel purchases were exempted from the federal fuel excise tax. However, this exemption did not yield significant market penetration for renewable fuels. To be successful, tax exemptions would need to be set at a level which is cost-neutral to incent the desired level of renewable fuel blending and associated GHG emissions reduction. This would impose significant costs on the federal government without guaranteeing that further GHG emissions reduction is achieved.

Moreover, other fiscal incentives (such as subsidies, financial assistance, grants) to encourage domestic production of renewable fuel and the commercialization of next-generation renewable fuels as well as expansion of the agricultural market are currently in place under the Renewable Fuels Strategy. These fiscal incentives on their own were considered unlikely to ensure that the desired GHG reductions through blending of renewable fuels would be achieved. Subsidizing domestic production of renewable fuel would not guarantee its blending in Canada. Similarly, the successful commercialization of next-generation renewable fuels through research and development funding by the federal government would not necessarily translate into the use of these renewable fuels in Canada.

Therefore, these types of market-based instruments are more effective in conjunction with regulatory measures rather than as stand-alone.

Voluntary measures

Voluntary instruments such as environmental performance agreements or memoranda of understanding are highly dependent on stakeholder participation and support. Historically, participation by fuel producers and importers in other fuel-related voluntary initiatives has not had significant success. Moreover, during consultations, industry has indicated that it does not favour a voluntary approach. In addition, voluntary approaches lack rigorous quantification and verification procedures that ensure the set objectives are met. As a consequence, it was considered that voluntary instruments would not create the necessary buy-in from all fuel producers and importers and these measures were not considered any further.

Regulations

Regulations controlling fuel quality under the Fuels Division of CEPA 1999 may apply to producers, importers or sellers of fuels. While blending of renewable fuels in traditional petroleum-based fuels typically occurs downstream of production, it would not be practical to design Regulations that would be effective in requiring all persons selling fuel to ensure that their fuel contain the prescribed amount of renewable fuels.

While retailers could be subject to the requirements of regulations, retailers not only are numerous, but placing the regulatory obligation on them would be a significant administrative burden.

Regulations with compliance units

Renewable fuels are generally added downstream of fuel production. Therefore, the use of CEPA 1999 authority to develop regulations for tradable units systems (section 326) was considered in order to address this fact in conjunction with the Fuels Division of CEPA 1999. The provisions regarding tradable units enable a regulatory mechanism providing for the creation of “compliance units” to demonstrate compliance. This would allow units to be generated upon the blending of renewable fuel into traditional petroleum-based fuel. The producer or importer of the traditional petroleum-based fuel would use these units to demonstrate compliance. This approach also provides flexibility to fuel producers that are unable to blend renewable fuels cost-effectively or to importers unable to import compliant blended fuels to obtain, in trade, compliance units to demonstrate compliance with the requirements. This approach is similar to the approach of the United States, with some differences to account for Canadian circumstances.

Given the above, regulation with compliance units has been retained as the preferred option.

Benefits and costs

An analysis of benefits and costs was conducted to assess the impacts of the proposed Regulations on stakeholders, including the Canadian public, industry and government.

Analytical framework

The approach to cost-benefit analysis identifies, quantifies and monetizes, where possible, the incremental costs and benefits of the Regulations. The cost-benefit framework consists of the following elements:

Regions. The costs and benefits have been estimated on a regional basis. The regions are defined as “West,” which includes British Columbia, Alberta, Saskatchewan and Manitoba; the central region, which only includes the province of Ontario, will be referred to simply as “Ontario,” and the “Quebec and Atlantic Provinces” includes Quebec, New Brunswick, Nova Scotia, and Prince Edward Island. These regions have been defined as such in order to preserve the confidentiality of the data collected for this analysis. Since fuel for use in Yukon, Northwest Territories, Nunavut and Newfoundland and Labrador may be excluded from a producer or importer’s pool, these regions have not been included in the analysis.

Incremental impact. Impacts are analyzed in terms of incremental changes to emissions, costs and benefits to stakeholders and the economy. The incremental impacts were determined by comparing two scenarios: one with and the other without the proposed Regulations. The two scenarios are presented below.

Timeframe for analysis. The time horizon used for evaluating the economic impacts is 25 years. The first year of the analysis is 2010, when the proposed Regulations are expected to come into force.

Approach to cost and benefit estimates. Costs have been estimated in monetary terms to the extent possible and are expressed in 2007 Canadian dollars. Whenever this was not possible, due either to lack of appropriate data or difficulties in valuing certain components, costs were evaluated in qualitative terms.

Attempts were made to monetize the benefits associated with the GHG emissions reduction. However, due to the complexity of evaluating benefits associated with climate change, it is difficult to monetize these benefits. However, the cost-of-carbon estimates contained in other studies are used to provide an order of magnitude for these benefits.

The proposed Regulations would result in changes in the level of emissions of criteria air contaminants. However, as these changes are negligible, it was not possible to evaluate the potential impacts on environment and health. As a result, the assessment was limited to a qualitative description.

Discount rate. A discount rate of 8% was used for estimating the present value of the costs, while a discount rate of 3% was used for estimating the present value of the benefits in this analysis. Since not all benefits could be estimated, only the present value of the stream of costs was calculated. A sensitivity analysis of the key variables to test the variability of cost estimates was also conducted.

Cost estimates are based on Environment Canada’s study conducted in 2009, (see footnote 14) supplemented by additional information from other sources. The data has been extrapolated to provide estimates for the Canadian market for renewable fuels.

The estimated costs and benefits of the proposed Regulations are based on the 5% renewable fuel requirement for the gasoline pool.

Business-as-usual scenario

The business-as-usual (BAU) scenario is based on an estimated growth in demand of gasoline over a 25-year period and an estimated growth in the demand for renewable fuels. These growth rates take into account the provincial mandates in place as of October 1, 2009. Provincial mandates have been put in place in four provinces (namely British Columbia, Saskatchewan, Manitoba and Ontario; see Table 1) with varying levels of renewable fuel requirements. These provincial requirements can be met through the existing and planned annual renewable fuel production cap- acity estimated to total approximately 2 billion litres.

Demand volumes for renewable fuels as a result of provincial requirements were calculated by multiplying demand volumes for gasoline by the officially mandated renewable fuel requirements in those provinces. Annual demand for renewable fuel is therefore estimated to increase from 1.3 billion litres in 2010 to 1.8 billion litres in 2034.

The demand volumes for gasoline were calculated for the years 2010–2034 by starting with the actual demand for 2008 and applying a growth rate based on annual increases in demand. These volumes include the renewable fuels component and they are presented in the table below.

Table 2: Estimated Demand for Gasoline and Ethanol under the BAU Scenario (2010–2034)

(Million litres)

West

Ontario

Quebec and
Atlantic
Provinces

Total

Gasoline Demand

440 466

485 462

321 303

1 247 231

Renewable Fuel Demand

15 272

24 273

0

39 545

Average Renewable Fuel Demand

611

971

0

1 582

The estimated reductions in GHG emissions were calculated based on the emission factors (see footnote 15) of 1.19 and 1.47 MT CO2e per billion litres for domestically produced corn-based and wheat-based ethanol, respectively, under the BAU scenario. It was further assumed that given the current and planned production of renewable fuels in Canada, 100% of ethanol production in Ontario and Quebec and Atlantic Provinces would be corn-based, while the West would rely on 100% wheat-based ethanol. The emission factors were multiplied by the renewable fuel volumes required to meet the existing provincial mandates over the 25-year period in order to estimate the total emission reductions attributable to these mandates. The provincial mandates are estimated to achieve approximately 51.3 MT CO2e of GHG emission reductions over a 25-year period (or an average reduction of 2 MT CO2e per year).

Regulatory scenario

The regulatory scenario is based on the implementation of the provisions of the proposed Regulations, taking into account the prescribed requirements and their implementation schedule.

As in the BAU scenario, it is expected that the demand for gasoline would grow at the same annual rates. However, due to the lower energy content of ethanol, the estimated demand for ethanol-blended gasoline would increase to make up for the loss in energy. According to NRCan estimates, the use of E10 increases fuel consumption by an average of 2.2% compared to the consumption of conventional gasoline. (see footnote 16) The total demand for gasoline has therefore been adjusted to account for this lower energy content of ethanol-blended gasoline as a result of the 5% renewable fuel requirement. This would translate into an increase in demand for ethanol-blended gasoline of 4.4 billion litres over the 25-year period. Following the effective date for the 5% renewable fuel content requirement, the demand for renewable fuel is expected to increase over and above the demand that is forecasted based on the provincial requirements. The additional renewable fuel demand is calculated as the difference between the demand to meet provincial mandates and the additional quantities required to meet the proposed federal 5% renewable fuel requirement. The annual demand for renewable fuel, to meet both provincial and federal requirements, is estimated to increase from approximately 2 billion litres in 2010 to 2.8 billion litres in 2034.

The demand volumes for gasoline were calculated for the years 2010–2034 by starting with the actual demand for 2008 and applying a growth rate based on annual increases in demand. These volumes include the renewable fuels component and they are presented in the table below.

Table 3: Estimated Incremental Demand for Gasoline and Ethanol under the Regulated Scenario (2010–2034)

(Million litres)

West

Ontario

Quebec and
Atlantic
Provinces

Total

Energy Adjusted Gasoline Demand

441 776

486 379

323 442

1 251 597

Renewable Fuels Demand

5 954

4 168

9 725

19 847

Average Renewable Fuel Demand

238

167

389

794

Given the current production capacity, it is assumed that the increased demand for renewable fuel would be met through increased production capacity. (see footnote 17) However, some level of imports, primarily from the United States, would be needed while the domestic production capacity expands. This would take place during the first three years of the proposed Regulations coming into force. For the purpose of analysis, the following assumptions are made:

  • Ethanol demand over and above the existing capacity of approximately 2 billion litres (including volumes supported under the EcoEnergy program) would be met from 2010 to 2013 through imports from the central United States.
  • Three ethanol plants, one in Ontario, of a 210 million litre capacity, and two in the West, of a 130 million litre capacity each, would be constructed by 2014. This would add 470 million litres to the existing capacity.
  • The capital costs are estimated to be approximately $92 million for a 210 million litre capacity plant and $70 million (see footnote 18) for a 130 million litre capacity plant.

The incremental reductions in GHG emissions are calculated as a product of the GHG emission factors for domestically produced ethanol (similar to the BAU scenario) and the incremental volume of the renewable fuel required to meet the 5% federal mandate. In addition, as some imports of ethanol (primarily from the United States) would be needed to meet the shortfall in domestic production, the GHG emissions have been adjusted to reflect the emission factor of the corn-based ethanol of the central United States. The GHGenius model estimates the emission factor for corn-based ethanol from the central United States to be 0.74 MT CO2e per billion litres. Once the proposed renewable fuel content requirements are in place, the cumulative reductions in GHG emissions attributable to the 5% renewable fuel requirement under the proposed Regulations are estimated to be approximately 23.8 MT CO2e (or an average reduction of 1 MT CO2e per year). The sensitivity of GHG emission reductions was tested to determine the impact on GHG emissions for two scenarios — incremental renewable fuel demand is met entirely through supplies from domestic production in one case and through imports from the central United States in the second case. If the incremental demand for renewable fuels is met entirely through domestic production, the GHG emission reductions are estimated to be 25 MT CO2e, while GHG emission reductions for renewable fuels imported entirely from the central United States are estimated to be 21 MT CO2e. This variation in GHG emissions is primarily due to the lower central Unites States emission factor.

It should be noted that as some provinces currently have renewable fuel mandates in place, the proposed Regulations would largely impact provinces that do not have renewable fuel requirements currently in place. Therefore, the incremental impacts for Alberta, Quebec and Atlantic Provinces would generally be higher.

The GHG emission reductions attributable to the proposed Regulations account for 32% of the total emission reductions when combining the federal and provincial mandates. Figure 1 presents the estimated emissions trends for 25 years under the two scenarios.

Figure 1: GHG Emission Reductions (2010–2034)

Figure 1: GHG Emission Reductions

Costs to industry

Fuel producers and importers

Fuel producers and importers of gasoline would bear a portion of the incremental cost associated with the regulatory requirements. As the renewable fuel content in gasoline increases with the proposed Regulations coming into force, investments would be needed to upgrade or modify refinery installations and distribution and blending systems. Investments of $107.6 million would be required to produce gasoline blendstock for blending with renewable fuel. In addition to the capital costs, $214.2 million in operation and maintenance costs would be incurred.

Incremental capital costs for terminal upgrades would also be borne by fuel producers, as these are owned and operated by them. Due to confidentiality of the cost data, the information provided by the fuel producers was aggregated for all refinery and terminal upgrades and/or modifications at the regional level. The capital costs for terminals include the building of truck, rail or barge receiving facilities, purchase of new storage capacity, cleaning of existing tanks, installation of blending equipment, as well as the upgrade of lines, pumps, seals and vapour recovery systems.

The details of the incremental costs to fuel producers and importers for the 25-year analysis period are presented in the table below:

Table 4: Present Valueof Incremental Costs to Fuel Producers and Importers (2010–2034)

(Constant 2007 $M)

West

Ontario

Quebec and
Atlantic
Provinces

Total

Capital Costs

56.1

14.8

36.7

107.6

Operation and Maintenance Costs

119.4

2.2

92.6

214.2

Ethanol Costs

75.6

53.0

123.5

252.1

Renewable Fuel Transportation Costs

103.6

72.5

169.2

345.3

Administrative Costs

2.2

2.2

5.6

10.0

Total

356.9

144.7

427.6

929.2

As can be seen, the incremental costs are highest in Quebec and the Atlantic Provinces due to the absence of renewable fuel requirements, quantities of gasoline and renewable fuel demand, and the number of refineries and terminals that would need to be upgraded. In Ontario, despite the provincial mandate, fuel producers are planning to expand the existing infrastructure in the province and blend significant additional volumes of renewable fuel in order to meet the proposed national requirements. Similarly, while a significant portion of the incremental costs could be attributed to Alberta in the West, investments similar to those in Ontario would also be made in other provinces in that region where additional volumes of renewable fuels are likely to be blended.

The fuel producers and importers would also incur an estimated incremental cost of $252.1 million by purchasing the requisite volumes of renewable fuel. The costs are based on the average annual spot market price of ethanol for the years 2005–2009, available from the Chicago Board of Trade, of 48 ¢/L. Due to limited historical data, projections of ethanol prices for the years from 2010 onwards are based on an inflation factor of 2%, resulting in the ethanol price of 78 ¢/L in 2034.

The estimated costs of transportation of renewable fuel are approximately $345.3 million and are based on the information provided by fuel producers. These costs vary depending on the proximity of the refinery to renewable fuel production facilities. Therefore, an approximate average transportation cost of 4.0 ¢/L has been calculated to estimate the total transportation costs. This cost is similar to cost used by the U.S. EPA in the regulatory impact analysis study for its Renewable Fuel Standard. It is unlikely that any new renewable fuel production capacity would be built in Quebec and the Atlantic Provinces; consequently, the transportation costs are higher in these provinces. However, during the initial years, some imports from the United States would be needed to meet the shortfall in domestic production as renewable fuel production capacity is expanded. The imports would primarily be needed to meet the renewable fuel demand in Quebec and the Atlantic Provinces. As the transportation costs were not available and it is not known where the renewable fuel would be imported from, the average transportation cost has been applied.

The administrative costs of $10 million can be attributed to the regulatory requirements of measuring gasoline and renewable fuel volumes, reporting, and record keeping. These costs to meet the specific requirements of the proposed Regulations would be incurred in addition to those of respecting the provincial mandates.

Retail outlets

The incremental costs to fuel retail outlets primarily include one-time capital costs of $6.8 million for retail site conversion, including purchase of new tanks and/or cleaning of old tanks in order to accommodate the new blended fuel. Additional operating and maintenance costs were estimated to be negligible and as a result have not been calculated. The cost data for retail site upgrades was provided by the fuel producers, which sell 90% of the total volume sold through the retail outlets in Canada. The remaining 10% volume is predominantly sold through retail outlets owned by three independent companies in Quebec.

Table 5: Present Value of Incremental Costs to Upgrade Retail Outlets (2010–2034)

(Constant 2007 $M)

West

Ontario

Quebec and
Atlantic
Provinces

Total

Capital Costs

1.8

0.7

4.3

6.8

As can be seen from the above table, the incremental costs to retail outlets are highest in Quebec and the Atlantic Provinces, where there are no renewable fuel requirements. Therefore, the majority of the retail outlets in this region, especially those located in highly populated areas, would have to invest in upgrades to their facilities.

Ethanol producers

As the renewable fuel content in gasoline increases, investments would be needed to build additional renewable fuel production facilities. As stated earlier, two plants of 130 million litres each would need to be built in the West and one plant of 210 million litres would need to be built in Ontario primarily to meet the incremental demand for renewable fuel in Alberta, Quebec and the Atlantic Provinces. The present value of these investments over the 25-year period is estimated to be $264.8 million. The details of these costs are presented in the table below.

Table 6: Present Valueof Incremental Costs to Ethanol Producers (2010–2034)

(Constant 2007 $M)

West

Ontario

Total

Capital Costs

159.8

105.0

264.8

For Ontario, although it is assumed that the additional facility would be built to meet the future demand for renewable fuel in the Quebec and the Atlantic Provinces, it is also probable that part of the excess renewable fuel volumes would be transported to other provinces in the West to cover the shortfall in supply in that region.

Costs to consumers

Due to the lower energy content (see footnote 19) of ethanol-blended gasoline, it is expected that consumers would experience an increase in gasoline consumption. Taking into account the lower energy content, it is estimated that approximately 4.4 billion litres (see footnote 20) of additional gasoline would be required over the 25-year period. As a consequence, the present value of the total increase in consumer expenditure on gasoline is estimated to be approximately $2 billion over the same period. This increase in consumer expenditure was calculated as the product of the incremental volumes of gasoline times a projection of gasoline prices in Canada. Historical gasoline prices (excluding taxes) were increased by the growth rate of gasoline implicit in the 2009 U.S. Energy Information Agency’s Annual Energy Outlook.

Table 7: Present Value of Incremental Costs to Consumers (2010–2034)

(Constant 2007 $M)

West

Ontario

Quebec and
Atlantic Provinces

Total

Total cost of incremental gasoline purchases ($M)

610.0

427.0

996.4

2,033.4

The majority of the increase in gasoline purchases would be incurred by consumers in Alberta, Quebec and the Atlantic Provinces, where renewable fuel requirements are currently not in place. Some of the increased gasoline purchases would also be incurred in other provinces in the West and in Ontario, as fuel producers plan to sell gasoline with higher levels of ethanol content (such as E10), even though renewable fuel requirements are currently in place. Therefore, lower cost increases are expected to be incurred in Ontario and some of the provinces in the West, where the requisite infrastructure is already in place.

On a per-vehicle basis, the average impact on consumer ex- penditure on gasoline is estimated to be $34 for 2011. These costs are not expected to significantly increase the fuelling cost on average, though impacts would vary depending on the ethanol content of fuels offered.

Costs to the Government

Costs to the Government of Canada of the proposed Regulations fall into three principal categories: enforcement costs, compliance promotion costs, and development and maintenance costs for the electronic reporting system. These incremental costs are presented in the following table.

Table 8: Present Value of Incremental Costs to Government (2010–2034)

(Constant 2007 $M)

Incremental Costs

Enforcement

1.3

Compliance Promotion

0.4

Development and Maintenance of the Electronic Reporting System

0.6

Total

2.3

With respect to enforcement costs, a one-time amount of $250,000 would be required to train enforcement officers. Following the delivery of the training, the enforcement costs for five years are estimated to require an undiscounted annual budget of $117,672 for inspections (including operations and maintenance costs and transportation costs), investigations and measures to deal with alleged violations (including environmental protection compliance orders and injunctions). For subsequent years, enforcement costs are estimated to require an undiscounted annual budget of $88,459 for inspections, investigations, measures to deal with alleged violations and prosecutions.

Total enforcement costs for on-site inspections, investigations and measures to deal with alleged violations are estimated to be $1.3 million (present value) over the 25-year period.

Compliance promotion require an annual budget of $303,137 during the first year of coming into force of the Regulations for training, workshops, conferences, meetings with provincial counterparts, preparation and mailing of compliance information material to stakeholders, advertising, etc. In subsequent years, the costs are lower and are mostly related to annual compliance strategy development, data collection and organization. The present value of total compliance promotion costs is estimated to be $0.4 million over the 25-year period.

The total undiscounted incremental cost of $580,000 would be incurred for the electronic reporting system. This amount includes the cost of purchasing the server and peripheral equipment, the cost of setting up the reporting and tracking system, as well as operation and maintenance costs of the system. The present value of total electronic reporting system costs is estimated to be $0.6 million over the 25-year period.

Benefits to Canadians

Use of renewable fuel can offer environmental benefits stemming from reduction in GHG emissions and some tailpipe emis- sions, such as carbon monoxide, benzene and 1,3-butadiene. However, renewable fuel use may result in increased emissions of volatile organic compounds, nitrogen oxides and acetaldehyde.

Emissions of greenhouse gases

Achieving a renewable volume equal to 5% of Canada’s fuel pool would result in an incremental average of 794 million litres of renewable fuel being blended with gasoline each year. This is expected to result in an incremental lifecycle GHG emission reduction of an average of 1 MT CO2e per year. This is a significant reduction in air pollution associated with GHG emissions, which is equivalent to taking a quarter of a million vehicles off the road.

The emission factors, presented in the baseline scenario, were multiplied by the renewable fuel volumes required over the 25-year period in order to obtain a total GHG emission reduction of 23.8 MT CO2e attributable to the proposed Regulations. The largest gains in GHG emission reductions occur in Quebec and the Atlantic Provinces, accounting for approximately 47% of the reductions. This is primarily attributed to the fact that no renewable fuels are currently in use in those provinces.

Estimates of the social cost of carbon (SCC) vary widely and there is no consensus as to precise values to use for a benefits analysis. For example, experts such as Tol, Nordhaus and Hope (see footnote 21) have reported mean SCC values in the range of $10 to $25 per tonne of CO2e, whereas Stern has reported a value closer to $100. In part, this lack of consensus relates to key parameter choices in the estimation of the SCC, for example the appropriate discount rate to use in the calculation. It is generally acknowledged that estimates, even from the same model, vary widely depending on the chosen levels of key variables. In addition, it is widely acknowledged that the SCC would normally increase by about 2% per year. Other benchmarks for the SCC include the price of carbon on exchange markets and target prices announced by key jurisdictions. The price of carbon on the European Climate Exchange (ECX) is currently trading in the neighbourhood of $24. (see footnote 22) The most recent United Kingdom target ranges from $44 to $134. (see footnote 23) Together, the above factors suggest that plausible SCC estimates would normally fall within a range of approximately $10 to $100 per tonne of CO2e.

While research to determine the appropriate price of carbon for use in cost-benefit analysis is continuing, for this analysis a value of $25 per tonne of CO2e has been adopted. This price is consistent with the expected U.S. price of carbon and the current trading value of permits in the European Climate Exchange. Sensitivity analysis on the $10 to $100 range (including a growth rate of 2% per year) was also conducted. Thus, the present value of GHG emission reduction benefits is estimated to be $560.8 million, (see footnote 24) with a plausible range of $327.1 million to $3.3 billion. It is worth noting that these benefits are global in nature; therefore, they cannot be attributed entirely to Canada or to particular regions within Canada.

Table 9: Present Value of Estimated Incremental Benefits of GHG Emission Reductions (2010–2034)

(Constant 2007 $M)

GHG Emission Reductions (Mt CO2e)

Low Estimate $10/tonne

Regulated Scenario Estimate $25/tonne

High Estimate $100/tonne

West

7.6

104.6

180.3

1,046.2

Ontario

5.0

68.5

116.4

684.9

Quebec and Atlantic Provinces

11.2

154.0

264.1

1,540.0

Total for Canada

23.8

327.1

560.8

3,271.2

The incremental benefits from reductions in GHG emissions are estimated to be higher in Quebec and the Atlantic Provinces, since these benefits are primarily attributable to the proposed Regulations. The share of Ontario and the West (with the exception of Alberta) would be lower, as a majority of the GHG emission reductions have already been achieved under the provincial renewable fuel mandates.

Expected benefits from reductions in GHG emissions as a result of these proposed Regulations, in addition to those from other initiatives, would contribute towards reducing the impacts of climate change. In addition, next-generation renewable fuels, such as cellulosic ethanol, are expected to provide greater environmental benefits than grain-based ethanol. Ethanol made from cellulose is projected to emit 60% fewer GHG emissions than gasoline (compared to the 40%–50% reductions that stem from use of grain-based ethanol).

Emissions of criteria air contaminants

The proposed Regulations are expected to result in changes in the emissions of air pollutants. Emissions of criteria air contaminants (CACs) such as benzene, 1,3-butadiene, and CO are expected to decrease while emissions of acetaldehyde would increase. These changes in emissions, although small, are expected to contribute to the health and environmental benefits to be achieved in combination with other initiatives. However, given the level of potential increases and decreases in specific CAC emissions related to the 5% use of ethanol-blended gasoline, the implications for human health and the environment is less certain and remains a challenging area of research.

Health Canada undertook a detailed impact study in order to evaluate the potential risks and benefits to the health of Canadians that might result from the widespread use of 10% ethanol in gasoline (E10). (see footnote 25) The health impacts of E10 were evaluated relative to those associated with the use of conventional gasoline. The Health Canada study focused on two Canadian regions: the East and the West, where the East covers the provinces of Ontario and Quebec, and the West cover the western part of Canada, for a population of eight million.

Using atmospheric modelling to evaluate the potential impacts in 2000 for the East and in 2000 and 2010 for the West, the results indicate that the use of E10 in Canada would result in minimal changes in the ambient levels of air pollutants. Generally, small decreases in atmospheric concentrations of benzene, 1,3-butadiene, and CO were observed, along with a slight increase in atmospheric concentration of acetaldehyde for the E10 fuel scenarios. In addition, the use of E10 had almost no impact on NO2, SO2, ozone and PM2.5.

Translating the changes in emissions into health impacts using 13 health endpoints, (see footnote 26) the study found that differences in pollutant concentrations between use of conventional gasoline and E10 scenarios resulted in various health outcomes across the East and West regions. For the year 2000, the results indicate greater health benefits across all health endpoints for the West region compared to the East. At the regional level, reduced health effects were associated with changes in CO, NO2, ozone, and PM2.5, while a minor increased effect was associated with SO2 for the West. For the East, health benefits were derived for CO, ozone, and SO2, while increased risks were associated with NO2 and PM2.5.

Based on these results, the total value of benefits associated with ozone, NO2, PM2.5, SO2 and CO for all health endpoints was estimated to be less than $4 million in the East and $9.2 million in the West. The health benefit associated with E10 fuel use in 2010 compared to the conventional gasoline use for all endpoints was valued at $6.4 million for the West domain.

The Health Canada study acknowledges that quantifying benefits associated with changes in the emissions of air pollutants across Canada involves complex modelling that requires adequately determining the local distribution of air emissions and atmospheric levels of the pollutant. These are very challenging to estimate as they depend on various factors such as traffic volumes, emission inventory, predominant winds, geography, etc. The health impacts must then be estimated based on the changes in air pollutant levels. Although accepted methodologies exist for the monetization of health impacts in general (willingness-to-pay for reduced mortality and morbidity rates, increased health care costs, etc.), these impacts are difficult to monetize.

Overall, the study concludes that there are no substantial differences in predicted health effects between use of conventional gasoline use and use of E10. This assessment indicates that increasing E10 use in Canada would have neutral effect on human health. Based on these conclusions, it is expected that a 5% renewable fuel content in the gasoline pool would also have no noticeable impact on human health.

Impact on agriculture

Agriculture and Agri-Food Canada (AAFC) conducted an internal analysis of the impact of a 5% ethanol and a 2% biodiesel targets on the Canadian agriculture sector in early 2007, considering all jurisdictions in Canada. The results of this internal analysis were adjusted to reflect the 5% renewable fuel content requirement under the proposed Regulations (accounting for 33% of renewable fuel demand), excluding existing provincial mandates and the federal biodiesel requirement. As a result, 25% of the estimated impacts are assumed to be attributable to the proposed Regulations.

Overall, the federal renewable fuel requirement is expected to have minimal impacts on the primary agriculture sector and no measurable downstream impacts. Based on the AAFC analysis, the agriculture sector would experience minimal impacts. These impacts are discussed in more detail below. In general, it is expected that the Canadian agriculture sector would be impacted to a greater extent from renewable fuel requirements in other countries, such as the United States.

Impact on the crop sector

Based on the AAFC analysis, the impact on income of the crop sector is estimated to be a small increase of less than 2.7%. Adjusting this result to reflect only the federal requirement, the impact represents a 0.7% increase in income. This minimal impact is due to the fact that Canada is a price taker in the world market for crops, and changes in Canadian demand would not have any significant impact on world prices. However, there could be small shifts in local prices as a result of increased demand for renewable fuel feedstock, but no changes are expected in the prices of other crops.

Trade in agricultural crops is not expected to be significantly impacted. Wheat export may experience minor decreases. However, it would likely be low-quality wheat which would be diverted to the production of renewable fuel.

Since 1999, Canada, and in particular Ontario, has been a net importer of corn, largely as a result of the expansion of the red meat industry. Imports are expected to increase in order to meet the demand for renewable fuel feedstock in eastern Canada. However, this would have little impact on the price of corn in the world market.

Impact on livestock

As negligible impacts are expected on crop prices, livestock feed prices are consequently not expected to show any significant change as a result of the proposed Regulations. Based on the AAFC analysis, the net economic impact on the livestock sector is expected to be less than 0.025% (25% of the full impact estimate), given that feed price impacts are expected to be negligible. There may be some changes in the local distribution of livestock feed, but this would have a minimal impact on overall livestock income or operations.

In addition, no changes are expected in the trade of live animals or of meat, or in other related sectors such as poultry and dairy. Impacts on employment in the livestock industry are expected to be negligible.

Impact on land use

The federal renewable fuel requirement is not expected to result in increases or changes in land use. Changes in cropping activities as a result of the renewable fuel requirement are expected to take place within the existing crop land base. Since no significant changes in crop prices or land use would occur, there would be little impact on crop intensification at the national level. However, there could be limited impact in a few regions. There may be small increases in fertilizer use as there could be small regional expansion of corn production, but this is not expected to result in changes on water quality or GHG emissions from the agriculture sector.

Distributional impacts

Fuel producers

The average annual incremental costs associated with the proposed Regulations incurred by the petroleum refining sector represent less than one percent of the net revenues and are therefore not expected to significantly impact the profitability of the sector. Moreover, it is expected that the majority, if not all, of these costs would be passed down along the supply chain through the final retail price. However, due to increased sales of ethanol-blended gasoline, approximately 10% of the total cost incurred by consumers due to the lower energy content of ethanol would contribute to increased revenues for fuel producers. This additional revenue would likely offset some of the incremental costs incurred by the fuel producers as a result of the proposed Regulations.

Renewable fuels facilities

The proposed Regulations could result in a significant increase in renewable fuel production with the demand for renewable fuel expected to increase from one billion litres in 2009 to nearly two billion in 2011–2012. This estimate includes the increase in production capacity due to new facilities and upgrades to existing ones that have received a production incentive under the ecoENERGY program under the Renewable Fuels Strategy. While forecasts of renewable fuel production are somewhat uncertain, it is assumed that the majority of the renewable fuel would be met through domestic production. However, some imports, primarily from the central United States, are expected to compensate for periodic shortfalls while domestic production increases.

An important by-product of renewable fuel production is the distillers’ grain, which is primarily used as animal feed. Revenue from distillers’ grain would contribute significantly to the profitability of renewable fuel producers.

In the longer term, as the demand for renewable fuels continues to increase, it would be reasonable to assume that additional domestic renewable fuel production facilities would come on-line over the 25-year period. The contribution of this industry to the GDP is, therefore, expected to grow over time.

Agricultural sector

The Canadian renewable fuels industry relies on the agriculture sector to provide the necessary feedstocks such as corn and wheat. 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.

Although there are no significant income, price or land use impacts on the agriculture and agri-food sector, production of renewable fuels contributes to diversification of the agriculture and agri-food sector by creating a new market for agricultural commodities. Additionally, the ecoAgriculture Biofuels Capital Initiative, which provides capital support for the construction or expansion of a renewable fuels facility, requires farmer investment in an effort to move farmers into value-added production as opposed to only producing a commodity. Moreover, renewable fuel facilities built in rural locations have yielded benefits for those communities by increasing the number of jobs and manufacturing activity.

Employment

The capital investments to upgrade the refineries, terminals and retail outlets are expected to create employment in the initial years as the industry ramps up to comply with the proposed Regulations. In addition, the transportation of renewable fuels would require expansion of the existing transportation infrastructure which would also have a positive impact on employment. Due to the characteristics of ethanol, the most likely mode of transportation from production facilities to the point where it is blended with gasoline would be through trucking. Some transportation would also be done through rail. However, due to lack of data it is not possible to estimate the specific shares for these modes of transportation. Nonetheless, it is likely that the increase in renewable fuel being transported would also result in increase in employment in this sector.

As demand and, consequently, production of renewable fuels increases as a result of the proposed Regulation, new jobs would be created in the renewable fuel industry. According to an NRCan study, (see footnote 27) an ethanol plant with an annual production capacity of up to 100 million litres would require 30 employees for operations and plants with an annual capacity of 200 million litres or more would create 40 jobs. Taking into consideration these employment numbers and assuming three additional ethanol plants will be built, the renewable fuels production sector would be responsible for a total of approximately 100 direct jobs.

Consumers

Consumers are expected to incur the bulk of the total incremental cost associated with the proposed Regulations. In addition to the direct cost of incremental gasoline purchases, consumers would likely experience an increase in the price of gasoline at the pump as the incremental costs for the petroleum refining sector are passed on to consumers. Assuming all industry costs are passed on to the consumer, regional average cost over 25 years range from 0.07 ¢/L in Ontario to a relatively higher impact of 0.30 ¢/L in Quebec and the Atlantic Provinces.

The magnitude of any increase in fuel price from the cost increase to industry is difficult to predict. In most if not all cases, it is likely to be unnoticeable in the usual day-to-day price fluctuations experienced in the gasoline market. However, short-term price changes could be much higher, such as in cases of temporary shortages of renewable fuel supply. It is probable that higher, more volatile prices may be experienced in the first few years as the supply infrastructure is established.

Competitiveness

The Canadian economy is highly integrated with the United States economy. As the United States has implemented similar requirements for renewable fuel content in gasoline, no international competitiveness impacts are anticipated on the refining industry.

However, domestic competitiveness impacts are expected for fuel producers in the Atlantic Provinces. Fuel producers that only market within the region would face competition from national fuel producers that plan to meet their corporate requirement by supplying renewable fuel blends in other regions. The small domestic market (accounting for approximately 6% of the Canadian gasoline demand) and the lack of regionally sourced renewable fuel further place fuel producers in the Atlantic Provinces at a competitive disadvantage with the national fuel producers. Costs are expected to be an important consideration for these regional fuel producers and their ability to have access to secure and cheap renewable fuels would play a significant role. To remain competitive, they would have to be able to pass on their incremental costs to the final consumers. The Atlantic Provinces are subject to fuel price controls, which may impact the ability to pass the estimated incremental average regional cost of 0.30 ¢/L on to the consumer.

For the renewable fuel industry to be competitive in the domestic market, it will have to supply ethanol at a price that is similar to import prices. Given the current market conditions, federal and provincial incentives currently in place, and revenues from by-product, the Canadian renewable fuel industry is expected to be profitable.

Conclusions

Overall, while imposing costs on industry, consumers and government, the proposed Regulations would also result in benefits from reduced GHG emissions. These costs and benefits are summarized in the table below.

Table 10: Incremental Cost-Benefit Statement (2010–2034)

(Constant 2007 $M)

Incremental Costs and Benefits

Base Year: 2010

2022

Final Year: 2034

Total 10 Year (PV)1 2010–2020

Total 25 Year (PV)1 2010–2034

Average Annual

A. Quantified Industry Costs

Cost to Fuel Producers & Importers

Capital Costs

14.8

0.0

0.0

107.6

107.6

4.3

Operation & Maintenance Costs

18.6

18.6

18.6

149.2

214.3

8.6

Costs to Purchase Renewable Fuels

13.7

25.1

43.5

29.8

252.0

10.1

Renewable Fuel Transportation Costs

26.3

31.5

38.0

54.9

345.4

13.8

Administrative Costs

0.9

0.9

0.9

1.8

10.1

0.4

Sub-Total

74.3

76.1

101.0

343.3

929.4

37.2

Cost to Upgrade Retail Outlets

Capital Costs

0.9

0.0

0.0

1.9

6.8

0.3

Sub-Total

0.9

0.0

0.0

1.9

6.8

0.3

Cost to Renewable Fuel Producers

Capital Costs

0.0

39.5

0.0

205.5

264.8

10.6

Sub-Total

0.0

39.5

0.0

205.5

264.8

10.6

Total Industry Costs

75.2

115.6

101.0

550.7

1,201.0

48.0

B. Quantified Consumer Costs

Gasoline Purchases

102.1

208.9

262.4

1,163.6

2,033.4

81.3

Total Consumer Costs

102.1

208.9

262.4

1,163.6

2,033.4

81.3

C. Quantified Government Costs

Enforcement

0.3

0.1

0.1

0.4

1.3

0.05

Compliance Promotion

0.3

0.0

0.0

0.4

0.4

0.02

Electronic Reporting System

0.5

0.0

0.0

0.5

0.6

0.02

Total Government Costs

0.11

0.1

0.1

1.3

2.3

0.09

Total Costs

177.4

324.6

363.6

1,715.6

3,236.7

129.5

D. Quantified Environmental Impacts

Reduction in GHG Emissions (Mt CO2e)

0.77

0.99

1.00

9.70

23.8

0.95

Benefits of GHG Emission Reductions at $25/tonne

20.5

33.5

42.8

244.7

560.8

22.4

E. Net Cost

(156.9)

(291.0)

(320.8)

(1,470.9)

(2,675.9)

(107.0)

F. Qualitative Impacts

Fuel producers

  • There could be additional costs related to new volume measurement counters if the current measurement methods are inadequate. This could impose costs over and above those identified above.
  • Fuel producers could experience an increase in revenue due to the increased demand for ethanol-blended gasoline as a result of the lower energy content of the blended fuel. This increase in revenue, amounting to 10% of the increase in consumer costs, could off-set some of the incremental cost to fuel producers to supply the blended fuel.

Agriculture

  • There could be some increase in income for the crop sector, estimated to be less than 0.7%.
  • Small changes in local prices of crops used as renewable fuel feedstock are expected as a result of increased demand for these crops; however no impacts are expected in the prices of other crops.
  • As negligible impacts are expected on crop prices, livestock feed prices are consequently not expected to show any significant change. These changes in price are expected to result in less than one percent decline in income from cattle and hog operations.
  • Minimal (close to zero) negative impacts on employment in the livestock industry are expected as a result of the slight increase in the price of livestock feed.
  • Changes in cropping activities are expected to take place within the existing crop land base, with little impact on crop intensification at the national level.

Environment

  • Due to minor regional expansion of corn production, a small increase in fertilizer use could be experienced. This is not expected to result in changes on water quality or GHG emissions from agricultural activities.

Health

  • The use of E10 would have negligible impacts on criteria air contaminants with an overall neutral effect on human health. Therefore, it is expected that a 5% renewable fuel content would also have a similar impact on human health.

Employment

  • Some increases in employment are expected due to increased transportation of renewable fuels, construction of renewable fuel plants, and upgrades to refineries, terminals and storage facilities.

1: PV refers to Present Value

The present value of total incremental costs is estimated to be $3.2 billion. The majority of these incremental costs, accounting for nearly 63% of the total incremental costs, would be borne by the consumers for purchasing additional ethanol blended gasoline to compensate for the loss in energy. The recurring costs (such as renewable fuel purchases, transportation, operation and maintenance) are a significant portion of the total incremental costs to industry, accounting for 88%. Average annual incremental costs are estimated to be $129.5 per tonne of GHG emission reductions.

The average annual reductions in GHG emissions are estimated to be approximately one MT CO2e with an incremental benefit of $560.8 million using a value of $25 per tonne. The proposed Regulations are estimated to result in a net cost of approximately $2.7 billion. Given the high degree of uncertainty surrounding the appropriate price of carbon, the net impact could range from a net benefit of $34,500 (at $100 per tonne) to a net cost of $2.9 billion (at $10 per tonne).

Sensitivity analysis

A sensitivity analysis was carried out to determine the direction and magnitude of changes to the final results of incremental costs and potential GHG emission reductions associated with variations in key variables. This included varying the discount rate, renewable fuel prices and GHG emission factors. The results of the sensitivity analysis did not indicate any significant changes in total incremental costs of the proposed Regulation or in GHG emission reductions. Changes in the incremental costs and GHG emission reductions were directly proportional to the changes in these variables.

Rationale

The Government of Canada is committed to reducing GHG emissions and to increase the use of renewable fuels through a number of regulatory and non-regulatory actions. In order to do so, the Government of Canada has adopted a comprehensive Renewable Fuels Strategy to reduce GHG emissions, encourage the use and production of renewable fuels and promote economic growth and sustainable development. A number of initiatives have been put in place to achieve the objectives of the Renewable Fuels Strategy.

One of the key elements of the Renewable Fuel Strategy was to require 5% renewable fuel in liquid petroleum fuels. In order to achieve this objective, a number of regulatory and non-regulatory options were considered. Given that voluntary and market-based instruments have had only limited success in increasing the use of renewable fuels and cannot guarantee that renewable fuels would be blended in Canada, they were considered unlikely to achieve the 5% renewable fuel content requirement. The use of regulations in combination with a trading system was considered to be an effective way of achieving this requirement. While reducing GHG emissions, this approach also provides flexibility to industry to meet the requirement and ensures production and use of renewable fuels in Canada.

As a consequence, a cost-benefit analysis was conducted for the selected regulatory instrument which indicated that it would result in a reduction of approximately 23.8 MT CO2e of GHG emissions over a period of 25 years. The incremental cost of achieving these reductions is estimated to be $3.2 billion over the same period with associated benefits of $560.8 million or a net incremental cost of $107 per tonne of reduced GHG emissions. Although the bulk of these costs would be borne by consumers in provinces where renewable fuel requirements are currently not in place, the overall impacts are estimated to be less than one cent per litre of gasoline, which would likely to be lost in the day-to-day fluctuations in gasoline prices. Given the GHG emission reductions, the benefits in terms of employment and increased economic activity, domestic and international commitments of the Canadian government, and considering the GHG emission reductions achieved through other measures, the overall impact of the proposed Regulations would be positive.

In addition, consultations with various stakeholders also showed general support for the proposed approach. In response to the various comments and suggestions raised during these consultations, a number of flexibility mechanisms (such as carry forward and back of compliance units and certain exclusions) have been included in the proposed Regulations. These mechanisms have been designed to ensure compliance to the renewable fuel requirement by industry, while ensuring that reductions in GHG emissions are achieved.

Furthermore, Environment Canada also considered actions taken in other countries and undertook discussions with the U.S. EPA on its RFS. The general approach adopted under the proposed Regulations is based on the U.S. RFS with specific design requirements to take into consideration the Canadian context.

As a consequence of the above, the proposed Regulations are considered to be the most effective way of fulfilling the Government of Canada’s commitment outlined in the Renewable Fuels Strategy.

Consultation

The consultation process

Since 2006, Environment Canada organized a number of consultation and information sessions with various stakeholders on the proposed regulatory approach for requiring renewable fuel content based on gasoline, diesel and heating distillate oil volumes, including the following:

  • In May 2006, the Government of Canada announced its intention to ensure that an average 5% content in Canadian motor fuels be made up of renewable fuels, such as ethanol and biodiesel, by the year 2010.
  • Environment Canada, in collaboration with AAFC and NRCan, held a consultation session on September 14, 2006, with various stakeholder potentially affected by the Government of Canada’s commitment to require a 5% average renewable content in Canadian transportation motor fuels by 2010, such as gasoline and diesel. The consultation offered the stakeholders the opportunity to raise any concern and make suggestions.
  • Following the initial consultations, Environment Canada published, on December 30, 2006, the Notice of Intent (NOI) to develop a federal regulation requiring renewable fuels. The NOI sets out the proposed regulatory approach and key design elements.
    Twenty-seven written submissions were received on the NOI. Comments came from various organizations (representing agricultural trade, petroleum and renewable fuel producers, automobile manufacturers and the trucking industry), individual companies (petroleum and renewable fuel producers, and a storage tank manufacturer), and environmental organizations. One provincial department also commented.
  • Environment Canada held cross-country bilateral consultations on the NOI in early 2007. A briefing on the NOI was provided to provincial and territorial governments via the Council of Energy Ministers Working Group. Environment Canada met with 50 parties in total, representing environmental non-governmental organizations, fuel producers, renewable fuel producers, industry associations, aboriginal organizations and other governments.

Through these consultations, (see footnote 28) briefings and information sessions, Environment Canada assured the stakeholders that the concerns raised would be taken into consideration during the drafting of the proposed Regulations. Through these consultations, stakeholders gained an increased understanding of the elements of the NOI and Environment Canada officials were able to gain an in-depth understanding of the various positions and concerns of stakeholders.

In 2009, additional consultations were undertaken:

  • In May, an information session (see footnote 29) was organized by Environment Canada to communicate the key decisions taken by the Government of Canada on developing the proposed Regulations. At the information session, Environment Canada also outlined the next steps in the regulatory development process, which include drafting, consulting and publishing the proposed Regulations in the CanadaGazette.
  • In the summer, in order to ensure the workability of a regulatory design, Environment Canada set up a technical advisory working group comprised of the key stakeholders from the most affected industries. The technical advisory working group reviewed the draft document for the proposed regulatory text, and provided advice on the definitions, workability and technical details. (see footnote 30).
  • At the same time, Environment Canada offered to consult with the Canadian Environmental Protection Act National Advisory Committee (CEPA NAC) on the proposed Regulations respecting renewable fuels. Four provinces, namely Saskatchewan, Ontario, Quebec and New Brunswick, provided comments on the proposed Regulations.

Stakeholders generally expressed support for national Regulations to require renewable fuels. However, there was a wide spectrum of views expressed concerning the various elements of the proposed Regulations and their design.

A summary of the comments and of the concerns expressed on specific issues during these various consultation and information sessions along with Environment Canada’s response is provided below.

Regional implications

  • Some regional stakeholders, particularly in Atlantic Canada, were concerned about the competitive disadvantage regional fuel producers could face in comparison to their national counterparts. In particular, stakeholders were opposed to the use of a compliance unit trading system, within the proposed Regulations, coupled with the use of a company-based limit. They indicated that both mechanisms could result in higher regional competitiveness impacts, particularly in the case of Quebec, Atlantic Canada and Newfoundland and Labrador, since all provinces west of Quebec have already implemented or plan to require the use of ethanol-blended gasoline in advance of the federal Regulations; therefore, they have the needed infrastructure in place. This competitive disadvantage would be further compounded by the short lead time for implementation of the proposed Regulations.
    While acknowledging the cost implications of the proposed approach for Atlantic Canada, Environment Canada clarified that the proposed Regulations would apply at the point at which gasoline is produced or imported. Tradable compliance units are included as the regulatory mechanism for demonstrating compliance. The compliance units would be generated upon the blending of renewable fuel into traditional petroleumbased fuel and then used by the refiner to demonstrate compliance. Fuel producers that are unable to blend renewable fuels economically can purchase compliance units to demonstrate compliance with the proposed requirements.
    A company-wide limit was selected over the use of a facility-based limit as ethanol is added downstream of the point at which it can be regulated. Therefore, a facility limit is not possible. In addition, the use of company-wide limits fits with the implementation of an effective system of tradable compliance units. A system of tradable compliance units on a facility basis would likely result in companies operating multiple facilities averaging these units at the corporate level, resulting in the same effect as a company-wide approach. In addition, this would further increase the regulatory complexity and administrative burden.
  • Regional fuel producers in the Atlantic Provinces were also concerned about the short lead time for implementation of the proposed Regulations, claiming this would further affect their competitiveness.
    The publication of the NOI in December 2006 clearly indicated the Government of Canada’s intent to put in place Regulations requiring renewable fuel content based on gasoline volumes by 2010, and based on diesel fuel and heating distillate oil volumes no later than 2012. Environment Canada is committed to respecting these implementation dates. However, the concerns of industry were taken into consideration during the drafting of the proposed Regulations, which includes various flexibility mechanisms such as an extended first compliance period of 16 months, provisions to carry forward and carry back excess compliance units, and allowing trading of compliance units up to three months after the end of a compliance period. In addition, gasoline used in Newfoundland and Labrador may be excluded from the regulatee’s pool, given the region’s particular situation in terms of geographical location, renewable fuel supply considerations and small market.
  • Regional fuel producers in the Atlantic Provinces were concerned about the limited potential for producing renewable fuels in the region, which would mean that the renewable fuel requirement would need to be met through imports.
    Environment Canada has acknowledged these concerns and has included the aforementioned flexibility mechanisms in the proposed Regulations to alleviate some of the resulting impacts.

Fuel quality specifications

  • The NOI indicates that fuel quality specifications for renewable fuels or the final blended product would not be included in the proposed Regulations. The motor vehicle industry argued that fuel quality specifications for renewable fuels should be included as part of the proposed Regulations. In their view, these specifications would ensure that the renewable fuel and the final blended product are of sufficient quality so that vehicle engine technology is not compromised.
    Environment Canada reiterated the position adopted in the NOI and clarified that renewable fuel quality standards would not be included in the proposed Regulations. The Canadian General Standards Board is the responsible authority for developing fuel quality standards (including standards for renewable fuel quality) through a consensus process with public and private sector.

Labelling

  • Representatives from the motor vehicle industry recommended establishing a cap for ethanol concentrations in gasoline and biodiesel content in diesel fuels. In addition, it was suggested that the quality of renewable fuel blendstocks and finished blends should also be regulated.
    Environment Canada recognizes the need to inform consumers on the use of higher level blends and explored how information on high renewable fuel levels could be provided to consumers under the proposed Regulations. After consideration, Environment Canada has included a provision in the proposed Regulations which stipulates that to create compliance units for higher level blends there must be evidence establishing the nature of the higher blend fuel, either through appropriate labelling on the fuel dispensing pump or documents provided directly to the consumer.

Differential weighting (or biases) for renewable fuels

  • A number of stakeholders favoured an approach where renewable fuels with higher GHG lifecycle reduction potential are assigned a higher weighting towards meeting the renewable fuel content requirement. However, renewable fuel producers opposed the use of biases.
    Environment Canada, after giving due consideration to the issue and taking into account the complexities and controversies around GHG lifecycle analysis, has decided not to include differential weightings for renewable fuels. Differential weightings may be considered in the future once there is a better understanding of the GHG lifecycle analysis of various fuels.

CEPA National Advisory Committee (CEPA NAC) consultations

Environment Canada offered to consult with CEPA NAC members in June 2009. Bilateral meetings between Environment Canada officials and Quebec, Ontario, New Brunswick and Saskatchewan were held in early September 2009. Most provinces support the proposed Regulations, but a few concerns were raised.

  • New Brunswick voiced the concerns that given the absence of local production, renewable fuel will have to be imported resulting in higher cost to consumers and would place local fuel producers at a competitive disadvantage with no commensurate regional benefits. Further more, this would increase security risk with the fuel supply system. Given these challenges, New Brunswick had a study conducted on the impacts of the proposed Regulations on the consumers and the fuel suppliers in their region. The study recommended that a two-year deferral of the proposed Regulations is needed for the Atlantic Provinces in order to allow for the development of a reliable supply of trading unit credits. This should be coupled with a phased approach of a minimum of one year for facilities who have insufficient offsite blending capability outside of Canada. In addition, as an alternative, a carry forward option was suggested. New Brunswick has indicated that they intend to provide an official position.
    Environment Canada has not included a two-year deferral or phased-in approach for the Atlantic Provinces. However, a number of key flexibilities to mitigate the impacts of the proposed requirements on the regional fuel producers have been included. These flexibilities include an extended initial compliance period from September 1, 2010, to December 31, 2011, and the exclusion of gasoline for use in the Northwest Territories; Yukon; Nunavut; and Quebec, north of the 60th parallel; and in Newfoundland and Labrador. The proposed Regulations also include provisions for the carry forward and carry back of surplus compliance units.
  • Quebec raised concerns with the 2010 implementation timeline of the proposed Regulations. They argued that the target of the proposed Regulations and timeline are counter to its goal of encouraging use of cellulosic ethanol by 2012 through non-regulatory means.
    Environment Canada has clarified that the proposed Regulations include flexibilities such as renewable fuel made from a variety of feedstocks (e.g. cellulose, municipal waste) which would be recognized as contributing towards meeting the 5% renewable fuel content requirement.

Implementation, enforcement and service standards

Implementation

For the purpose of implementing the regulatory requirements, Environment Canada would be undertaking a number of compliance promotion activities. These activities would be targeted toward raising awareness and encouraging the regulated community to achieve a high level of overall compliance as early as possible during the regulatory implementation process. This would include the following:

  • Developing and distributing basic compliance promotion material (including explanatory notes) nationally to regulatees and stakeholders;
  • Focusing on those regulatees who would be most impacted by the Regulations within the first few years;
  • Upon request, distributing additional information, industry-specific information or focused information regionally in a tailored approach at a later time; and
  • Training Environment Canada compliance promotion staff in a comprehensive manner to respond to regulatees’ technical or regulatory questions.

As the regulated community becomes more familiar with the requirements of the proposed Regulations, these activities are expected to decline to a maintenance level. Compliance promotion activities would be revisited from time to time to ensure that the proposed Regulations be implemented in the most effective and efficient manner.

Enforcement

Since the Regulations would be made under CEPA 1999, enforcement officers will, when verifying compliance with the proposed Regulations, apply the Compliance and Enforcement Policy implemented under the Act. The Policy sets out the range of possible responses to violations, including warnings, directions, environmental protection compliance orders, ticketing, ministerial orders, injunctions, prosecution, and environmental protection alternative measures (which are an alternative to a court trial after the laying of charges for a CEPA 1999 violation). In addition, the Policy explains when Environment Canada will resort to civil suits by the Crown for cost recovery.

When, following an inspection or an investigation, an enforcement officer discovers an alleged violation, the officer will choose the appropriate enforcement action based on the following factors:

  • Nature of the alleged violation: This includes consideration of the damage, the intent of the alleged violator, whether it is a repeat violation, and whether an attempt has been made to conceal information or otherwise subvert the objectives and requirements of the Act.
  • Effectiveness in achieving the desired result with the alleged violator: The desired result is compliance within the shortest possible time and no repetition of the violation. Factors to be considered include the violator’s history of compliance with the Act, willingness to cooperate with enforcement officers, and evidence of corrective action already taken.
  • Consistency: Enforcement officers will consider how similar situations have been handled in determining the measures to be taken to enforce the Act.

Environment Canada will monitor renewable fuel content in gasoline and compliance with the proposed Regulations.

Service standards

There are no service standards associated with the proposed Regulations.

Performance measurement and evaluation

Measuring the performance of regulatory activities to ensure they continually meet their initial objectives is an important responsibility for the regulating department. With respect to the proposed Regulations, the evaluation and reporting of performance will take place via several regular assessment activities that will vary in scope of analysis and that will be carried out in conjunction with other partners, as required. This section outlines the various assessments and reporting requirements that apply.

A detailed performance measurement and evaluation plan (PMEP) is currently being developed for the proposed Regulations. The PMEP will be available, upon request, from Environment Canada after the publication of the Regulations in the Canada Gazette, Part II. The various evaluations pertaining to the proposed Regulations are highlighted below.

The objective of the proposed Regulations is to reduce GHG emissions by mandating an average of 5% renewable fuel content in most of the produced or imported gasoline, thereby contributing to the protection of Canadians and the environment from the impacts of climate change. The proposed Regulations also support the Renewable Fuels Strategy’s objective to expand Canadian production of renewable fuels by ensuring demand for renewable fuels in the marketplace. It is estimated that the proposed Regulations would result in an incremental GHG reduction of approximately 1 MT CO2e per year.

The proposed Regulations seek to influence primary suppliers and other entities such as blenders or sellers of fuel that elect to participate in the trading mechanism. With the requirement to add at least 5% renewable fuel content to the volume of gasoline that is produced or imported on an annual basis, the proposed Regulations intend to achieve two intermediate outcomes:

  • Increase the volume of renewable content in Canadian fuels; and
  • Achieve an incremental reduction of greenhouse gases from the displacement of fossil fuels.

Performance of the proposed Regulations will be measured through a set of key indicators that reflect the activities that would be undertaken by the government and regulated parties. These indicators would be evaluated to assess whether the immediate as well as long-term results have been achieved.

The results will be measured on an annual basis using data submitted to Environment Canada by the regulated community and the GHGenius model to estimate GHG emission reductions.

A set of immediate outcomes will also serve to track the performance of the proposed Regulations. For example, Environment Canada will measure

  • the awareness by the regulated community of the regulatory requirements;
  • the timely and accurate reporting of data; and
  • the compliance with the renewable fuel volume and compliance unit tracking requirements.

The key indicators to monitor the performance of the proposed Regulations on these immediate outcomes would include

  • the number of information sessions to explain the proposed Regulations;
  • the number of attendees at the information sessions;
  • the percentage of known regulatees that are aware of the proposed Regulations;
  • the percentage of known regulatees that are reporting compliance units on time and accurately;
  • the volume (in litres) of renewable fuels used to create compliance units;
  • the rate of compliance with the volume requirement of a sample of inspected regulatees;
  • the estimated lifecycle GHG emission reductions; and
  • the proportion of primary suppliers that acquired compliance units from other participants in the trading system.

The sources of data for the measurement of these indicators are the electronic reporting system (and submissions in paper format), which will capture the information directly submitted by companies as part of their annual reporting requirements; the compliance promotion activity reports (attendance reports, reply cards, etc.) and the enforcement activity reports, in particular the compliance rates provided through the National Enforcement and Emergency Management Information System (NEMESIS).

The outcomes identified above would be achieved via a series of activities related to the development and implementation of the proposed Regulations. These include developing and implementing the proposed Regulations; incorporating the proposed Regulations into Environment Canada’s existing fuels compliance strategy; developing a compliance and promotion plan; identifying the proposed Regulations under Environment Canada’s National Enforcement Plan; incorporating the proposed requirements into the existing Fuels Regulatory Enforcement Plan; developing and operating an electronic reporting tool for regulatees; and preparing an annual report on the performance of the proposed Regulations.

The performance of the proposed Regulations will be reported through the publication of an annual report on the proposed Regulations. In addition, information pertaining to the proposed Regulations and their implementation will be included in the annual report for CEPA 1999, Environment Canada’s Report on Plans and Priorities (RPP) as well as through Departmental Performance Reports (DPRs). Reporting will also be required under the Kyoto Protocol Implementation Act (KPIA).

In addition to measuring and reporting performance as described above, several formal evaluations of the proposed Regulations and supporting activities will be conducted through different initiatives. These include the evaluation plan of Environment Canada’s components of the regulation of renewable fuel content in gasoline, diesel and heating distillate oil, which may also encompass data from external sources or published materials to support a broader scope of enquiry. The plan for this evaluation will be completed in the 2009–2010 fiscal year, with the evaluation anticipated for 2012–2013.

Other indirect impacts of the proposed Regulations, such as those on the agricultural community, renewable fuels producers and other areas, will be monitored, as appropriate, through the evaluation of other programs supporting the Renewable Fuels Strategy led by AAFC. Specifically, NRCan will evaluate its ecoENERGY for biofuels program and AAFC will conduct an evaluation of its ecoABC initiative in 2010–11 and will coordinate an analysis of the Renewable Fuels Strategy in 2010–11.

Finally, periodic assessments of the proposed Regulations will be conducted as a result of Bill C-33 requirements. This Act requires that a comprehensive review be conducted, one year after its coming into force and every two years thereafter, of the environmental and economic aspects of renewable fuel production in Canada. The Act came into force on September 28, 2009; hence, the first such review could occur as early as September 28, 2010.

Contacts

Helen Ryan
Executive Director
Oil, Gas and Alternative Energy Division
Environment Canada
351 Saint-Joseph Boulevard, 9th Floor
Gatineau, Quebec
K1A 0H3
Telephone: 819-997-1221
Fax: 819-953-8903
Email: Helen.Ryan@ec.gc.ca

Markes Cormier
Senior Economist
Regulatory Analysis and Instrument Choice Division
Environment Canada
10 Wellington Street, 24th Floor
Gatineau, Quebec
K1A 0H3
Telephone: 819-953-5236
Fax: 819-997-2769
Email: Markes.Cormier@ec.gc.ca

PROPOSED REGULATORY TEXT

Notice is hereby given, pursuant to subsection 332(1) (see footnote a) of the Canadian Environmental Protection Act, 1999 (see footnote b), that the Governor in Council, pursuant to sections 140 (see footnote c) and 326 of that Act, proposes to make the annexed Renewable Fuels Regulations.

Any person may, within 60 days after the date of publication of this notice, file with the Minister of the Environment comments with respect to the proposed Regulations or a notice of objection requesting that a board of review be established under section 333 of that Act and stating the reasons for the objection. All comments and notices must cite the Canada Gazette, Part I, and the date of publication of this notice, and be sent by mail to Chief, Fuels Section, Oil, Gas and Alternative Energy Division, Energy and Transportation Directorate, Department of the Environment, Gatineau, Quebec K1A 0H3, by fax to 819-953-8903 or by e-mail to ogaed@ec.gc.ca.

Any person who provides information to the Minister of the Environment may submit with the information a request for confidentiality under section 313 of that Act.

Ottawa, April 7, 2010

JURICA ČAPKUN
Assistant Clerk of the Privy Council

RENEWABLE FUELS REGULATIONS

INTERPRETATION

Definitions

1. (1) The following definitions apply in these Regulations.

“auditor”
« vérificateur »

“auditor”, in respect of a participant or a producer or importer of renewable fuel, means a person who

(a) is independent of the participant, producer or importer, as the case may be; and

(b) is certified, for the purposes of carrying out International Organization for Standardization quality assurance (ISO 9000 series) assessments, by

(i) the Standards Council of Canada,

(ii) the International Register of Certificated Auditors, or

(iii) any other nationally or internationally recognized accreditation organization.

“authorized official”
« agent autorisé »

“authorized official” means

(a) in respect of a corporation, an officer of the corporation who is authorized to act on its behalf;

(b) in respect of any other person, that person or a person authorized to act on behalf of that person; and

(c) in respect of any other entity, a person authorized to act on its behalf.

“batch”
« lot »

“batch” means an identifiable quantity of liquid fuel, with a single set of physical and chemical characteristics.

“biocrude”
« biobrut »

“biocrude” means a liquid feedstock that is derived from renewable fuel feedstock and that is used as a feedstock, with petroleum-derived feedstocks, in a production facility in Canada in the production of gasoline, diesel fuel, heating distillate oil or other liquid petroleum fuels.

“biodiesel”
« biodiesel »

“biodiesel” means a liquid fuel that is

(a) a mono-alkyl ester;

(b) suitable for use in a diesel engine; and

(c) produced from one or more renewable fuel feedstocks.

It includes fuel with alcohol content of less than 10% of the mass of the fuel and fuel that contains substances, including additives, that are not produced from renewable fuel feedstock that combined account for less than 1.5% of the volume of the fuel.

“blending facility”
« installation de mélange »

“blending facility” means

(a) a non-mobile facility in Canada where liquid petroleum fuel is blended with renewable fuel; and

(b) a fleet of mobile facilities in which that blending occurs in Canada, including a fleet of any combination of cargo tankers, railway cars, boats, marine vessels or any other type of mobile facility.

“combustion device”
« appareil à combustion »

“combustion device” means a device in which liquid fuel is combusted to produce useful heat or energy and includes an engine, boiler, furnace and burner.

“competition vehicle”
« véhicule de compétition »

“competition vehicle” means a vehicle, boat or marine vessel that is used exclusively for competition.

“compliance period”
« période de conformité »

“compliance period” means a gasoline compliance period or a distillate compliance period, as the context requires.

“denaturant”
« dénaturant »

“denaturant” means a mixture of hydrocarbons that

(a) has an end boiling point of less than 225°C;

(b) is added to ethanol to make it unsuitable for use as a beverage; and

(c) comprises in volume not less than 0.96% and not more than 4.76% of the volume of the ethanol when combined with the mixture of hydrocarbons.

“diesel fuel”
« carburant diesel »

“diesel fuel” means a liquid petroleum fuel that

(a) is sold or represented as diesel fuel or as fuel suitable for use in a diesel engine; or

(b) is subject to evaporation at atmospheric pressure, boils within the range of 130°C to 400°C and is suitable for use in a diesel engine.

“distillate compliance period”
« période de conformité visant le distillat »

“distillate compliance period” means

(a) the period that begins on the day on which subsections 5(2) and 8(2) come into force and that ends on December 31 of the following calendar year; and

(b) after that December 31, each calendar year.

“finished gasoline”
« essence finie »

“finished gasoline” means gasoline that

(a) is sold or represented as a fuel suitable for use in a spark-ignition engine; or

(b) has an antiknock index of at least 86, as determined by the applicable test method listed in the National Standard of Canada standard CAN/CGSB-3.5-04, Unleaded Automotive Gasoline.

“gasoline”
« essence »

“gasoline” means a liquid petroleum fuel that is

(a) sold or represented as gasoline, as a fuel suitable for use in a spark-ignition engine, or as only requiring the addition of a renewable fuel or oxygenate to make it suitable for use in a spark-ignition engine; or

(b) suitable for use in a spark-ignition engine and has the following characteristics, as determined by the applicable test method listed in the National Standard of Canada standard CAN/CGSB-3.5-04, Unleaded Automotive Gasoline:

(i) a vapour pressure of at least 38 kPa,

(ii) an antiknock index of at least 80,

(iii) a distillation temperature, at which 10% of the fuel has evaporated, of not less than 35°C and not greater than 70°C, and

(iv) a distillation temperature, at which 50% of the fuel has evaporated, of not less than 65°C and not greater than 120°C.

“gasoline compliance period”
« période de conformité visant l’essence »

“gasoline compliance period” means

(a) the period that begins on September 1, 2010 and that ends on December 31, 2011; and

(b) after 2011, each calendar year.

“heating distillate oil”
« mazout de chauffage »

“heating distillate oil” means a liquid petroleum fuel that is

(a) sold or represented as fuel suitable for use in a domestic-type oil burner; or

(b) suitable for use in a domestic-type oil burner.

“high-renewable-content fuel”
« carburant à haute teneur en carburant renouvelable »

“high-renewable-content fuel” means a liquid petroleum fuel whose renewable fuel content is greater than 25% of the volume of the fuel and less than or equal to

(a) 86% of the volume of the fuel, if the fuel is gasoline; and

(b) 80% of the volume of the fuel, in any other case.

“liquid petroleum fuel”
« carburant à base de pétrole liquide »

“liquid petroleum fuel” means a liquid hydrocarbon-based fuel, even if the fuel has renewable fuel content, but does not include renewable fuel.

“military combat equipment”
« équipement militaire de combat »

“military combat equipment” means a vehicle, boat, marine vessel, aircraft, engine or heater that is designed for use in combat or combat support during military activities, including reconnaissance missions, rescue missions and training missions.

“neat renewable fuel”
« carburant renouvelable pur »

“neat renewable fuel” means biodiesel or another renewable fuel if that other renewable fuel is

(a) produced at a facility that uses only renewable fuel feedstock for the production of fuel;

(b) suitable for use in a combustion device; and

(c) chemically indistinguishable from gasoline, diesel fuel, heating distillate oil, or any other liquid petroleum fuel that is suitable for use in a combustion device.

“neat renewable fuel consumer”
« consommateur de carburant renouvelable pur »

“neat renewable fuel consumer”, in relation to a batch of neat renewable fuel, means

(a) if the batch is dispensed from a retail or card-lock facility into a fuel tank that supplies a combustion device, the owner of the facility;

(b) if the batch is dispensed from a facility, other than a facility referred to in paragraph (a), that is operated by the owner of a fleet of vehicles into the fuel tanks of the fleet vehicles, the owner of the fleet of vehicles; and

(c) in any other case, the person who uses the batch as fuel in a combustion device.

“oxygenate”
« produit oxygéné »

“oxygenate” means an oxygen-containing, ashless, organic compound that, when added to a liquid petroleum fuel, increases the oxygen content in the fuel.

“participant”
« participant »

“participant” means a person referred to in section 10.

“pre-distillate compliance period”
« période précédant la période de conformité visant le distillat »

“pre-distillate compliance period” means the period that begins on September 1, 2010 and that ends on the day that is the earlier of the day before the day on which the first distillate compliance period begins and March 31, 2012.

“primary supplier”
« fournisseur principal »

“primary supplier” means

(a) in respect of gasoline, diesel fuel or heating distillate oil that is produced at a production facility, a person who owns, leases, operates, controls, supervises or manages the production facility; and

(b) in respect of gasoline, diesel fuel or heating distillate oil that is imported, the importer.

“production facility”
« installation de production »

“production facility” means a petroleum refinery, or another facility, in Canada at which gasoline, diesel fuel or heating distillate oil is produced, but does not include a blending facility unless the blending facility is part of or adjacent to a petroleum refinery.

“renewable fuel”
« carburant renouvelable »

“renewable fuel” means a liquid fuel, other than spent pulping liquor, that is

(a) produced from one or more renewable fuel feedstocks but may contain

(i) denaturant, if the fuel is ethanol, and

(ii) substances, including additives, that are not produced from renewable fuel feedstock that combined account for less than 1.5% of the volume of the fuel, or

(b) biodiesel.

“renewable fuel feedstock”
« matière première de carburant renouvelable »

“renewable fuel feedstock” means

(a) wheat grain;

(b) soy grain;

(c) grains other than those mentioned in paragraphs (a) and (b);

(d) cellulosic material that is derived from ligno-cellulosic or hemi-cellulosic matter that is available on a renewable or recurring basis;

(e) starch;

(f) oilseeds;

(g) sugar cane, sugar beets or sugar components;

(h) potatoes;

(i) tobacco;

(j) vegetable oils;

(k) algae;

(l) vegetable materials or other plant materials, other than those mentioned in paragraphs (a) to (k), including biomass;

(m) animal or fish material, including fats, greases and oils;

(n) animal solid waste; and

(o) municipal solid waste.

“scientific research”
« recherche scientifique »

“scientific research” does not include research into the preferences of consumers for differing properties of fuels or marketing research.

“spent pulping liquor”
« liqueur de cuisson résiduaire »

“spent pulping liquor” means a by-product of the chemical process of turning wood into pulp that consists of wood residue and pulping agents.

“trade”
« échange »

“trade” means exchange or sell.

“trading period”
« période d’échange »

“trading period”, in respect of a compliance period, means the period that begins on the first day of the compliance period and ends on March 31 of the calendar year following the end of the compliance period.

“triglyceride-derived biocrude”
« biobrut issu de triglycérides »

“triglyceride-derived biocrude” means a biocrude that is a glyceride in which the glycerol is esterified with three fatty acids.

“unfinished gasoline”
« essence non finie »

“unfinished gasoline” means gasoline other than finished gasoline.

Incorporation by reference

(2) A standard or method that is incorporated by reference in these Regulations is incorporated as amended from time to time.

GENERAL

APPLICATION

Non-application threshold — primary suppliers

2. (1) Sections 5 to 25, paragraphs 29(b), (f) and (g) and sections 30 to 33 and 35 do not apply, in respect of a gasoline compliance period or of a distillate compliance period, as the case may be, to a primary supplier who

(a) during every period of 12 consecutive months in the gasoline compliance period, produces or imports, or produces and imports combined, less than 400 m3 of gasoline; and

(b) during every period of 12 consecutive months in the distillate compliance period, produces or imports, or produces and imports combined, less than 400 m3 of diesel fuel and heating distillate oil.

Non-application threshold — renewable fuel

(2) Section 34 does not apply, in respect of a compliance period, to a person who, during every period of 12 consecutive months in the compliance period, produces or imports, or produces and imports combined, less than 400 m3 of renewable fuel.

Non-application — certain fuels

(3) Sections 5 to 25, paragraphs 29(b), (f) and (g) and sections 30 to 33 and 35 do not apply, in respect of a compliance period, to a primary supplier who during the compliance period produces, imports, or produces and imports combined, only gasoline, diesel fuel and heating distillate oil that is described in any of paragraphs 6(4)(a) to (i), or any combination of them.

Non-application — section 28

(4) Section 28 does not apply, in respect of a compliance period, to a person for whom both subsections (1) and (2), or both subsections (2) and (3), apply in respect of the compliance period.

Opting in notice

3. (1) Despite section 2, these Regulations apply to a primary supplier, or a producer or importer of renewable fuel, who sends a written notice to the Minister requesting that the Regulations are to apply to them. The Regulations so apply as of a day that they specify in the notice, which day must be at least one day after the day on which they sent the notice.

Information

(2) The notice must contain the information set out in Schedule 1 or 6, as the case may be.

Rescinding opt-in notice

(3) The primary supplier, or the producer or importer, as the case may be, may rescind the effect of the opt-in notice by fulfilling the requirements described in paragraphs 11(3)(a) to (c).

MEASUREMENT OF VOLUMES

Requirements

4. (1) Subject to subsection (2), any volume that a person is required to record under these Regulations must be determined

(a) by one or more measurement devices that comply with the Weights and Measures Act and the regulations made under that Act; or

(b) in accordance with a measurement standard or method that is appropriate for that determination and is cited in the American Petroleum Institute’s Manual of Petroleum Measurement Standards.

Non-application of subsection (1)

(2) If there is no measurement device, standard or method referred to in subsection (1) that would allow the person to determine the volume in accordance with that subsection, the person must record the volume as accurately determined by another person who is independent of them. They must record the following information obtained from the other person:

(a) the name and civic address of the other person;

(b) the volume, expressed in litres, as determined by the other person and the type of fuel or biocrude that the volume comprises;

(c) the date on which and the location where the determination was made;

(d) the measurement device, standard or method used to determine the volume; and

(e) the type of renewable fuel in the volume, if any, and the volume of that renewable fuel, expressed in litres.

Volumetric correction

(3) A volume referred to in subsection (1) must be corrected to a temperature of 15°C and, in the case of a volume of biocrude, by subtracting the volume of water contained in the biocrude, if any. However, a person who imports a batch of fuel may correct the volume of the batch to 60°F, if the person records that they made the correction.

Volume determination — series of rail cars

(4) If a batch of fuel is dispatched from a primary supplier’s production facility to another facility owned by the primary supplier in a series of railway cars in which the fuel flows between those railway cars, the volume of the batch is to be determined under this section on receipt of the batch at that other facility.

Rounding

(5) A volume of fuel determined under these Regulations is to be rounded to the nearest whole litre, but if the volume is equidistant from two whole litres, to the greater of them.

PART 1

REQUIREMENTS PERTAINING TO GASOLINE, DIESEL FUEL AND HEATING DISTILLATE OIL

PRESCRIBED QUANTITIES OF RENEWABLE FUEL

Gasoline pool

5. (1) For the purpose of section 139 of the Act, the quantity of renewable fuel, expressed as a volume in litres, calculated in accordance with subsection 8(1), must be at least 5% of the volume, expressed in litres, of a primary supplier’s gasoline pool for each gasoline compliance period.

Distillate pool

(2) For the purpose of section 139 of the Act, the quantity of renewable fuel, expressed as a volume in litres, calculated in accordance with subsection 8(2), must be at least 2% of the volume, expressed in litres, of a primary supplier’s distillate pool for each distillate compliance period.

GASOLINE POOL AND DISTILLATE POOL

Gasoline pool

6. (1) A primary supplier’s gasoline pool for a gasoline compliance period is the total volume of the batches of gasoline that they produce at each of their production facilities and that they import during the gasoline compliance period.

Distillate pool

(2) A primary supplier’s distillate pool for a distillate compliance period is the total volume of the batches of diesel fuel and of heating distillate oil that they produce at each of their production facilities and that they import during the distillate compliance period.

Batches produced from other batches

(3) Despite subsections (1) and (2), if a primary supplier produces a batch of fuel at any of their production facilities from other batches of fuel in their gasoline pool or distillate pool, as the case may be, only that portion of the volume of the batch that exceeds the volume of the other batches is counted for the determination of the total volume in their pool. The primary supplier must, under section 29, record this excess portion as if that excess portion were the batch mentioned under that section.

Excluded volumes

(4) Despite subsections (1) and (2) a primary supplier may subtract from their gasoline pool or distillate pool, as the case may be, the volume of a batch, or of a portion of the batch, of fuel in their pool if they make, before the end of the trading period in respect of the compliance period, a record that establishes that the volume was one of the following:

(a) gasoline, diesel fuel or heating distillate oil, as the case may be, sold for or delivered for use in aircraft;

(b) gasoline, diesel fuel or heating distillate oil, as the case may be, sold for or delivered for use in competition vehicles;

(c) gasoline, diesel fuel or heating distillate oil, as the case may be, sold for or delivered for use in scientific research;

(d) gasoline, diesel fuel or heating distillate oil, as the case may be, sold for or delivered for use as feedstock in the production of chemicals, other than fuels, in a chemical manufacturing facility;

(e) diesel fuel or heating distillate oil, as the case may be, sold for or delivered for use in military combat equipment;

(f) gasoline sold for or delivered for use in Newfoundland and Labrador, the Northwest Territories, Yukon, Nunavut and that part of Quebec that is north of latitude 60°N;

(g) diesel fuel or heating distillate oil, as the case may be, sold for or delivered for use in the Northwest Territories, Yukon, Nunavut and that part of Quebec that is north of latitude 60°N;

(h) gasoline, diesel fuel or heating distillate oil, as the case may be, for export; and

(i) gasoline, diesel fuel or heating distillate oil, as the case may be, in transit through Canada, from a place outside Canada to another place outside Canada.

Exclusion of renewable fuel

(5) Despite subsections (1) and (2), a primary supplier may subtract from their gasoline pool or distillate pool, as the case may be, a volume of renewable fuel that is in a batch of fuel, or of an excess portion of a batch of fuel referred to in subsection (3), in the pool if they have a record that establishes that that volume is renewable fuel.

Reduction for use of biocrude — gasoline

(6) A primary supplier may subtract from their gasoline pool for a gasoline compliance period 20% of the volume, if any, of biocrude other than triglyceride-derived biocrude that they used as feedstock to produce liquid petroleum fuel during the gasoline compliance period.

Reduction for use of biocrude — distillate

(7) A primary supplier may subtract from their distillate pool for a distillate compliance period

(a) 20% of the volume, if any, of biocrude other than triglyceride-derived biocrude that they used as feedstock to produce liquid petroleum fuel during the distillate compliance period; and

(b) 85% of the volume, if any, of triglyceride-derived biocrude that they used as feedstock to produce liquid petroleum fuel during the distillate compliance period.

COMPLIANCE UNITS

Representing renewable fuel

7. (1) Compliance units, which represent litres of renewable fuel, created under Part 2 are used to establish compliance with section 5.

Use of compliance units

(2) A compliance unit may only be used to establish compliance with section 5 in respect of the compliance period during which it was created under any of sections 13 to 16 or into which it was carried forward or carried back under any of sections 21 to 24.

Use of distillate compliance units for gasoline compliance

(3) Distillate compliance units may be used to establish compliance with subsection 5(1) for a gasoline compliance period to the extent that they are assigned as the value for the description DtGDG in subsection 8(1).

VOLUME OF RENEWABLE FUEL

Gasoline pool

8. (1) The volume of renewable fuel in a primary supplier’s gasoline pool for a gasoline compliance period is to be calculated according to following formula:

RFG = CreG + RecG – TrG – CanG + CFG + CBG + DtGDG

where

RFG is the volume, expressed in litres, of renewable fuel in their gasoline pool;

CreG is the volume, expressed in litres, that is equal to the number of gasoline compliance units that they created during the gasoline compliance period;

RecG is the volume, expressed in litres, that is equal to the number of gasoline compliance units, in respect of the gasoline compliance period, that they received in trade;

TrG is the volume, expressed in litres, that is equal to the number of gasoline compliance units, in respect of the gasoline compliance period, that they transferred in trade to another primary supplier;

CanG is the volume, expressed in litres, that is equal to the number of gasoline compliance units, in respect of the gasoline compliance period, that they are required to cancel;

CFG is the volume, expressed in litres, that is equal to the number of gasoline compliance units that they carried forward into the gasoline compliance period;

CBG is the volume, expressed in litres, that is equal to the number of gasoline compliance units that they carried back into the gasoline compliance period; and

DtGDG is the volume, expressed in litres, that is equal to the number, if any, of distillate compliance units that they assign as the value for this description for the gasoline compliance period.

Distillate Pool

(2) The volume of renewable fuel in a primary supplier’s distillate pool for a distillate compliance period is to be calculated according to following formula:

RFD = CreD + RecD – TrD – CanD + CFD + CBD – DtGDD

where

RFD is the volume, expressed in litres, of renewable fuel in their distillate pool;

CreD is the volume, expressed in litres, that is equal to the number of distillate compliance units that they created during the distillate compliance period;

RecD is the volume, expressed in litres, that is equal to the number of distillate compliance units, in respect of the distillate compliance period, that they received in trade;

TrD is the volume, expressed in litres, that is equal to the number of distillate compliance units, in respect of the distillate compliance period, that they transferred in trade to another primary supplier;

CanD is the volume, expressed in litres, that is equal to the number of distillate compliance units, in respect of the distillate compliance period, that they are required to cancel;

CFD is the volume, expressed in litres, that is equal to the number of distillate compliance units that they carried forward into the distillate compliance period;

CBD is the volume, expressed in litres, that is equal to the number of distillate compliance units that they carried back into the distillate compliance period; and

DtGDD is the volume, expressed in litres, that is equal to

(a) for distillate compliance periods other than the first one, the value that they assigned for the description DtGDG in subsection (1) for the gasoline compliance period that is the same period as the distillate compliance period, and

(b) for the first distillate compliance period, the total of the values that they assigned for the descriptions DtGDG in subsection (1) for gasoline compliance periods that overlapped with the distillate compliance period.

REGISTRATION AS A PRIMARY SUPPLIER

Registration

9. (1) A primary supplier must register by sending to the Minister a registration report that contains the information set out in Schedule 1 at least one day before, during any period of 12 consecutive months in a gasoline compliance period, they produce or import, or produce and import combined, their 400th m3

(a) of gasoline; or

(b) of diesel fuel or heating distillate oil, or any combination of them.

Change of information

(2) If the information provided in the registration report — other than the information referred to in item 1 of Schedule 1 — changes, the primary supplier must send a notice to the Minister that provides the updated information no later than five days after the change.

PART 2

COMPLIANCE UNIT TRADING SYSTEM

PARTICIPANTS

Types

10. Participants in the trading system are

(a) primary suppliers; and

(b) elective participants.

Elective participants

11. (1) An elective participant is a person other than a primary supplier who

(a) does one or more of the following:

(i) blends, in Canada, renewable fuel with liquid petroleum fuel,

(ii) produces, in Canada, a liquid petroleum fuel — other than gasoline, diesel fuel and heating distillate oil — by using biocrude as a feedstock,

(iii) imports into Canada a liquid petroleum fuel — other than gasoline, diesel fuel and heating distillate oil — that has renewable fuel content,

(iv) sells, in Canada, neat renewable fuel to a neat renewable fuel consumer for use as fuel in a combustion device, and

(v) uses, as fuel in a combustion device in Canada, neat renewable fuel that they produced or imported; and

(b) registers by sending to the Minister a registration report that contains the information set out in Schedule 2 at least one day before they first create a compliance unit.

Change of information

(2) If the information provided in the registration report — other than the information referred to in item 1 — of Schedule 2 changes, the elective participant must send a notice to the Minister that provides the updated information no later than five days after the change.

Withdrawal

(3) An elective participant may end their participation in the trading system if they

(a) send to the Minister a notice stating that they will end their participation as of a specified date;

(b) provide any report or notice that is required by these Regulations; and

(c) cancel, as of that specified date, all their compliance units.

CREATION OF COMPLIANCE UNITS

Participants who may create

12. (1) Only the following participants may create a compliance unit:

(a) the owner of the fuel that resulted from the blending referred to in section 13;

(b) the importer of the batch referred to in section 14;

(c) the user of biocrude as feedstock to produce the fuel referred to in section 15; or

(d) the seller of the neat renewable fuel or the participant referred to in section 16.

Single creator

(2) If there is more than one person described in any of paragraphs (1)(a) to (d), the creator of the compliance unit is the participant who, under a written agreement between all those persons, is designated to be the creator of the compliance unit. Without that agreement, no compliance unit is created.

Blending in Canada — gasoline compliance units

13. (1) Subject to subsection (3), a single gasoline compliance unit is created for each litre of renewable fuel on its blending in Canada with a batch of liquid petroleum fuel other than diesel fuel or heating distillate oil.

Blending in Canada — distillate compliance units

(2) Subject to subsection (3), a single distillate compliance unit is created for each litre of renewable fuel on its blending in Canada with a batch of diesel fuel or heating distillate oil.

Confirmation of creation

(3) The creation of a compliance unit under subsection (1) or (2) is confirmed on the recording of

(a) the information set out in subsection 32(1) related to the resulting blended batch and, if the resulting blended batch is high-renewable-content fuel, subsection 32(3); and

(b) this creation of the compliance unit in the compliance unit account book in accordance with section 31.

No recording, no creation

(4) Without that recording, the compliance unit is deemed never to have been created.

Importation — gasoline compliance units

14. (1) Subject to subsection (3), a single gasoline compliance unit is created for each litre of renewable fuel that is contained in a batch of liquid petroleum fuel other than diesel fuel or heating distillate oil on its importation into Canada.

Importation — distillate compliance units

(2) Subject to subsection (3), a single distillate compliance unit is created for each litre of renewable fuel that is contained in a batch of diesel fuel or heating distillate oil on its importation into Canada.

Confirmation of creation

(3) The creation of a compliance unit under subsection (1) or (2) is confirmed on the recording of

(a) the information set out in subsection 32(2) related to the imported batch and, if the imported batch is high-renewable-content fuel, subsection 32(3); and

(b) this creation of the compliance unit in the compliance unit account book in accordance with section 31.

No recording, no creation

(4) Without that recording, the compliance unit is deemed never to have been created.

Triglyceride-derived biocrude

15. (1) Subject to subsection (3), seventeen distillate compliance units are created for each 20 litres of triglyceride-derived biocrude on its use as feedstock to produce liquid petroleum fuel in Canada.

Other biocrude

(2) Subject to subsection (3), a single gasoline compliance unit and a single distillate compliance unit are created for each five litres of biocrude, other than triglyceride-derived biocrude, on its use as feedstock to produce liquid petroleum fuel in Canada.

Confirmation of creation

(3) The creation of a compliance unit under subsection (1) or (2) is confirmed on the recording of

(a) the information set out in subsection 32(4) related to the use of biocrude as feedstock; and

(b) this creation of the compliance unit in the compliance unit account book in accordance with section 31.

No recording, no creation

(4) Without that recording, the compliance unit is deemed never to have been created.

Neat renewable fuel — gasoline compliance units

16. (1) Subject to subsection (3), a single gasoline compliance unit is created for each litre of a batch of neat renewable fuel on its

(a) sale in Canada to a neat renewable fuel consumer for use as fuel in a combustion device other than a diesel engine or domestic-type burner; or

(b) use in Canada as fuel in a combustion device other than a diesel engine or domestic-type burner by a participant who produced or imported the fuel.

Neat renewable fuel — distillate compliance units

(2) Subject to subsection (3), a single distillate compliance unit is created for each litre of a batch of neat renewable fuel on its

(a) sale in Canada to a neat renewable fuel consumer for use as fuel in a diesel engine or domestic-type burner; or

(b) use in Canada as fuel in a diesel engine or domestic-type burner by a participant who produced or imported the fuel.

Confirmation of creation

(3) The creation of a compliance unit under subsection (1) or (2) is confirmed on the recording of

(a) the information set out in subsection 32(5) related to the sale for use, or the use, as fuel in a combustion device of the batch of neat renewable fuel, as the case may be; and

(b) this creation of the compliance unit in the compliance unit account book in accordance with section 31.

No recording, no creation

(4) Without that recording, the compliance unit is deemed never to have been created.

Limitation

17. (1) Despite sections 13 to 15, no compliance unit may be created in respect of

(a) a resulting blended batch or imported batch of gasoline, or a batch of gasoline produced from biocrude used as feedstock, if the volume of renewable fuel in the batch comprises more than 86% of the total volume of the batch;

(b) a resulting blended batch or imported batch of liquid petroleum fuel other than gasoline, or a batch of liquid petroleum fuel other than gasoline produced from biocrude used as feedstock, if the volume of renewable fuel in the batch comprises more than 80% of the total volume of the batch; and

(c) a batch of renewable fuel that results from blending.

Limitation — Municipal solid waste

(2) Despite sections 13 to 16, no compliance unit may be created in respect of renewable fuel, or biocrude, that was in whole or in part produced from municipal solid waste unless the participant has written records that demonstrate, based on random sampling made at least once every three years, that the municipal solid waste

(a) has a biogenic carbon content of greater than 50% of the total carbon content, by mass; and

(b) does not contain any pesticides, paints, petroleum oils, solvents, sludges that contain heavy metals, material from tires or radioactive, corrosive, explosive or infectious materials.

OWNERSHIP OF COMPLIANCE UNITS

Ownership of compliance units

18. (1) On creation, a compliance unit is owned by the participant who created it.

Single owner

(2) At any given time, a compliance unit may only have a single owner.

Maximum number of gasoline compliance units

19. (1) The number of gasoline compliance units that a primary supplier may own at the end of each month during a gasoline compliance period may not exceed the greater of

(a) six multiplied by the number of litres in the primary supplier’s gasoline pool at the end of that month, determined as if the compliance period ended at the end of that month, and

(b) 0.01 multiplied by the number of litres in the primary supplier’s gasoline pool for the preceding gasoline compliance period.

Maximum number of distillate compliance units

(2) The number of distillate compliance units that a primary supplier may own at the end of each month during a distillate compliance period may not exceed the greater of

(a) six multiplied by the number of litres in the primary supplier’s distillate pool at the end of that month, determined as if the compliance period ended at the end of that month, and

(b) 0.004 multiplied by the number of litres

(i) in the case of the first distillate compliance period, in the primary supplier’s distillate pool determined using the pre-distillate compliance period as if it were the distillate compliance period in question, and

(ii) in any other case, in the primary supplier’s distillate pool for the preceding distillate compliance period.

TRADING OF COMPLIANCE UNITS

To primary suppliers

20. (1) A compliance unit may only be transferred in trade to a primary supplier.

When trading permitted

(2) A compliance unit created during, or carried forward into, a compliance period may be transferred in trade only if the trade occurs during the trading period in respect of the compliance period.

CARRY FORWARD OF COMPLIANCE UNITS

Carry forward — primary suppliers (gasoline)

21. (1) Before the end of the trading period in respect of a gasoline compliance period, a primary supplier may carry forward their surplus gasoline compliance units — up to a maximum of 0.01 multiplied by the number of litres in their gasoline pool for that gasoline compliance period — into the next gasoline compliance period.

Surplus gasoline compliance units

(2) The number of surplus gasoline compliance units referred to in subsection (1) is the number that equals the number of litres determined according to the following formula:

RFG – (0.05 × PG)

where

RFG is the volume, expressed in litres, that the primary supplier determined for the description RFG in accordance with subsection 8(1) for that gasoline compliance period; and

PG is the number of litres in the primary supplier’s gasoline pool for that gasoline compliance period, as determined in accordance with section 6.

Carry forward — primary suppliers (distillate)

22. (1) Before the end of the trading period in respect of a distillate compliance period, a primary supplier may carry forward their surplus distillate compliance units — up to a maximum of 0.004 multiplied by the number of litres in their distillate pool for that distillate compliance period — into the next distillate compliance period.

Surplus distillate compliance units

(2) The number of surplus distillate compliance units referred to in subsection (1) is the number that equals the number of litres determined according to the following formula:

RFD – (0.02 × PD)

where

RFD is the volume, expressed in litres, that the primary supplier determined for the description RFD in accordance with subsection 8(2) for that distillate compliance period; and

PD is the number of litres in the primary supplier’s distillate pool for that distillate compliance period, as determined in accordance with section 6.

Carry forward into first distillate compliance period

(3) A primary supplier may carry forward into the first distillate compliance period their distillate compliance units that were created during the pre-distillate compliance period and that have not been assigned, under subsection 7(3), as the value for the description DtGDG in subsection 8(1). The number of distillate compliance units that may be so carried forward may not exceed 0.004 multiplied by the number of litres in the primary supplier’s distillate pool determined using the pre-distillate compliance period as if it were the distillate compliance period in question.

Carry forward — elective participants

23. An elective participant may, before the end of the trading period in respect of a compliance period, carry forward their compliance units — up to a maximum of the number of compliance units that they created during the compliance period — into the next compliance period. For greater certainty, no distillate compliance units may be carried forward into the first distillate compliance period.

CARRY BACK OF COMPLIANCE UNITS

Carry back

24. (1) Before the end of a trading period in respect of a compliance period, a primary supplier may carry back into the compliance period their compliance units that they created during the last three months of the trading period.

No carry back in consecutive periods

(2) However, a primary supplier who carried back compliance units under subsection (1) into a compliance period may not carry back compliance units into the next compliance period. For greater certainty, they may do so into the compliance period subsequent to that next compliance period.

Maximum carried back

(3) The maximum number of compliance units that may, under subsection (1), be carried back is

(a) for gasoline compliance units, 0.0025 multiplied by the number of litres in the primary supplier’s gasoline pool for the gasoline compliance period; and

(b) for distillate compliance units, 0.001 multiplied by the number of litres in the primary supplier’s distillate pool for the distillate compliance period.

CANCELLATION OF COMPLIANCE UNITS

Carry back

25. (1) For each compliance unit that a primary supplier carried back into a compliance period, the primary supplier must, before the end of the trading period in respect of the compliance period, cancel compliance units that were created by the primary supplier during the subsequent compliance period as follows:

(a) two gasoline compliance units for each gasoline compliance unit carried back; and

(b) two distillate compliance units for each distillate compliance unit carried back.

Exports

(2) For each litre of renewable fuel in a batch of liquid petroleum fuel exported by a participant, or by one of their affiliates who is not a participant, during a compliance period, the participant must, before the end of the trading period in respect of the compliance period, cancel compliance units that were created during, or carried forward or carried back into, the compliance period as follows:

(a) one distillate compliance unit, if the liquid petroleum fuel was diesel fuel or heating distillate oil; and

(b) one gasoline compliance unit or one distillate compliance unit, in any other case.

PART 3

RECORDS AND REPORTING

GENERAL

Ministerial request for samples and information

26. Any person who produces, imports or sells gasoline, diesel fuel, heating distillate oil, other liquid petroleum fuel, renewable fuel or biocrude must, on the Minister’s request, provide to the Minister

(a) a sample of the fuel or biocrude;

(b) a copy of any record required to be made by the person under these Regulations;

(c) the name and civic address of any person from whom the fuel or biocrude was acquired and the date of acquisition; or

(d) a copy of the measurement standard or method used to determine a volume under these Regulations.

Electronic report or notice

27. (1) A report or notice that is required under these Regulations must be sent electronically in the format specified by the Minister and bearing the electronic signature of an authorized official.

Paper report or notice

(2) If the Minister has not specified an electronic format or if it is impractical to send the report or notice electronically in accordance with subsection (1) because of circumstances beyond the person’s control, the report or notice must be sent on paper, signed by an authorized official, and in the format specified by the Minister. However, if no format has been so specified, it may be in any format.

Non-application — auditor’s report

(3) Subsections (1) and (2) do not apply to the auditor’s report referred to in section 28.

AUDITOR’S REPORT

Auditing of records and reports

28. (1) A participant, or a producer or importer of renewable fuel, must have their records and reports that are required under these Regulations in respect of each compliance period audited by an auditor. The audit must assess whether the participant’s, the producer’s or the importer’s practices and procedures are, in the auditor’s opinion, appropriate to ensure, and to demonstrate, compliance with these Regulations.

Auditor’s reports

(2) The participant, the producer or the importer must obtain a report, signed by the auditor, in respect of the audit that contains the information set out in Schedule 3. They must, on or before June 30 following the end of the compliance period, send the auditor’s report to the Minister.

Non-application

(3) During the period before the first distillate compliance period, subsections (1) and (2) do not apply to a primary supplier who, during that period, does not produce or import gasoline or create, or receive in trade, a compliance unit.

PRIMARY SUPPLIERS

Records of batches — gasoline pool and distillate pool

29. A primary supplier must make a record of every batch of gasoline, diesel fuel or heating distillate oil that they produce or import during a gasoline compliance period. The record must contain the following information:

(a) the volume, expressed in litres, of the batch;

(b) the volume, expressed in litres, of renewable fuel, if any, in the batch;

(c) whether the batch was finished gasoline, unfinished gasoline, diesel fuel or heating distillate oil;

(d) the production facility at which the batch was produced or the province where the importation of the batch occurred;

(e) the date or dates on which the primary supplier imported the batch, dispatched the batch from that production facility or sent the batch to a fuel dispensing device within that production facility;

(f) if the entire volume of the batch is subtracted under subsection 6(4), the paragraph of that subsection that describes the fuel; and

(g) if a portion of the volume of the batch is subtracted under subsection 6(4), the paragraph of that subsection that describes the fuel and the volume, expressed in litres, of the portion.

Annual report

30. For each compliance period during which a primary supplier produces or imports gasoline, diesel fuel or heating distillate oil, they must, on or before April 15 following the end of the compliance period, send a report to the Minister that contains the information set out in Schedule 4 for the compliance period.

PARTICIPANTS

Compliance unit account book

31. (1) For each trading period in respect of a compliance period, a participant must make a record in a compliance unit account book of their gasoline compliance units and of their distillate compliance units, as the case may be, that they

(a) created during, or carried forward into or carried back into, the compliance period;

(b) transferred in trade, received in trade, or cancelled during the trading period in respect of the compliance period; and

(c) for distillate compliance units, used to establish compliance with subsection 5(1) for a gasoline compliance period because they were assigned, under subsection 7(3), as the value for the description DtGDG in subsection 8(1).

Information

(2) The participant must, in the compliance unit account book for each month of the trading period in respect of a compliance period, make a record of the month and its calendar year and — in respect of any compliance units created in, or carried forward or carried back into, the compliance period — a record of

(a) for each blending facility at which the participant created compliance units, the number of compliance units created because of the blending of renewable fuel with liquid petroleum fuel;

(b) for each province via which the participant imported liquid petroleum fuel having renewable fuel content, the number of compliance units they created because of that importation;

(c) for each production facility, the number of compliance units that the participant created because of the production of liquid petroleum fuel from biocrude used as feedstock;

(d) the number of compliance units that the participant created under section 16 in respect of neat renewable fuel;

(e) the number of compliance units that the participant received in trade from each other participant;

(f) the number of compliance units that the participant transferred in trade to each primary supplier;

(g) the number of compliance units that the participant carried forward under sections 21 to 23;

(h) the number of compliance units that the participant carried back under subsection 24(1);

(i) the number of compliance units that the participant, under subsection 25(1), cancelled because of the carry back of compliance units;

(j) for each province via which exportation occurred, the number of compliance units that the participant cancelled under subsection 25(2);

(k) in the case of an elective participant who withdraws from participation in the trading system, the number of compliance units cancelled when they withdrew; and

(l) in the case of a primary supplier, the number they assigned, under subsection 7(3), as the value for the description DtGDG in subsection 8(1).

When record made

(3) The record must be made within 15 days after the end of the month in respect of which the information is required to be recorded.

Cumulative information

(4) In addition, the record must, for each period that begins on the first day of the compliance period and ends at the end of the month in respect of which the information is required to be recorded under subsection (2), include

(a) the number of compliance units referred to in each of paragraphs (2)(a) to (l);

(b) the number of compliance units that the participant created, carried forward, carried back, transferred in trade, received in trade or cancelled, as the case may be; and

(c) the balance of the participant’s compliance units.

Format

(5) The compliance unit account book must be in a format specified by the Minister. However, if no format is so specified, it may be in any format.

Records for blended fuel

32. (1) A participant who creates a compliance unit under section 13 must make a record of the following information for each batch of the resulting blended fuel:

(a) the civic address, if any, and name, if any, of the facility where the blending occurred or, if the blending occurred in a mobile facility, the province where it occurred;

(b) the date on which the batch was blended;

(c) the volume, expressed in litres, of the liquid petroleum fuel that was blended with the renewable fuel and which of the following types of fuel it was:

(i) finished gasoline,

(ii) unfinished gasoline,

(iii) diesel fuel,

(iv) heating distillate oil, or

(v) another type of liquid petroleum fuel, in which case, the type;

(d) the type and volume, expressed in litres, of renewable fuel that was blended with the liquid petroleum fuel and, if known,

(i) the name, civic address and telephone number of the person from whom the renewable fuel was acquired and of the person who produced the renewable fuel, and

(ii) if known, each type of renewable fuel feedstock that was used to produce the renewable fuel; and

(e) the content of renewable fuel in the batch, expressed as per cent by volume.

Records for imported fuel

(2) A participant who creates a compliance unit under section 14 must make a record of the following information for each batch of the imported fuel:

(a) the province via which the importation occurred and the port of entry;

(b) the date that the batch was imported and, if known, the name, civic address and telephone number of the person from whom the batch was acquired and of the person who produced the batch;

(c) the volume, expressed in litres, of the batch and which of the following types of fuel it was:

(i) finished gasoline,

(ii) unfinished gasoline,

(iii) diesel fuel,

(iv) heating distillate oil, or

(v) another type of liquid petroleum fuel, in which case, the type;

(d) for the renewable fuel in the batch,

(i) the type of renewable fuel,

(ii) the volume, expressed in litres, of the renewable fuel, and

(iii) if known, each type of renewable fuel feedstock that was used to produce the renewable fuel and the country of origin of that renewable fuel; and

(e) the content of renewable fuel in the batch, expressed as per cent by volume.

Records for high-renewable-content fuel

(3) A participant who creates a compliance unit under section 13 or 14 must make a record of the following information for each batch of high-renewable-content fuel that resulted from blending or was imported, as the case may be:

(a) information that establishes that the batch was

(i) sold in Canada for use as fuel in a combustion device and was identified as being high-renewable-content fuel on the fuel dispensing device that dispensed the batch or in a document provided to the consumer of the batch, or

(ii) used in Canada by the participant as fuel in a combustion device;

(b) the type of combustion device, namely, a diesel engine, a domestic-type burner, a spark-ignition engine, a boiler, a furnace or other type; and

(c) the civic address of each facility to which the batch was delivered to be dispensed into a fuel tank of a combustion device and the date of that delivery.

Records for biocrude as feedstock

(4) A participant who creates a compliance unit under section 15 must, once per month, make a record that contains the following information related to the use of biocrude as feedstock during the previous month:

(a) the civic address and name, if any, of the production facility; and

(b) for each of type of biocrude so used

(i) the month and year of that use,

(ii) the volume, expressed in litres,

(iii) the name of each person from whom the biocrude was acquired, if any,

(iv) the name of each person who produced the biocrude, if known, and

(v) if known, each type of renewable fuel feedstock that was used to produce the biocrude and the country of origin of that biocrude.

Records for neat renewable fuel

(5) A participant who creates a compliance unit under section 16 must make a record of the following information for the batch of neat renewable fuel in question:

(a) information that establishes that the batch was

(i) sold in Canada for use as fuel in a combustion device and was identified as being neat renewable fuel on the fuel dispensing device that dispensed the batch or in a document provided to the consumer of the batch, or

(ii) used in Canada by the participant as a fuel in a combustion device;

(b) the type of combustion device, namely, a diesel engine, a domestic-type burner, a spark-ignition engine, a boiler, a furnace or other type;

(c) the type of neat renewable fuel and the volume, expressed in litres, of the batch;

(d) the date on which the batch was so sold or used;

(e) the name and the civic address of the neat renewable fuel consumer in respect of the batch;

(f) the civic address of each facility where the neat renewable fuel was dispensed into the fuel tank of the combustion device;

(g) the name, civic address and telephone number of the person, if any, from whom the neat renewable fuel was acquired and of the person who produced the neat renewable fuel, if known; and

(h) if known, each type of renewable fuel feedstock that was used to produce the neat renewable fuel.

Records for trades

(6) For each trade, a participant who transfers in trade, or receives in trade, compliance units must record the following information:

(a) the name of the primary supplier who received compliance units in trade;

(b) the name of the other participant who transferred the compliance units in trade to the participant;

(c) the date of the trade and the compliance period in respect of which the trade is made;

(d) the number of gasoline compliance units traded, if any; and

(e) the number of distillate compliance units traded, if any.

Record re section 19

(7) Within 15 days after the end of each month during a compliance period, a primary supplier must make a record of the number calculated in accordance with subsection 19(1) or (2), as the case may be, for that month.

Records for exports

(8) For each batch of renewable fuel, or of liquid petroleum fuel that has renewable fuel content, that is exported by a participant or by one of their affiliates who is not a participant, the participant must make a record of

(a) the province from which the batch was exported;

(b) which of the following types of fuel was exported:

(i) renewable fuel, in which case, the type of renewable fuel and, if known, each type of renewable fuel feedstock that was used to produce that renewable fuel,

(ii) finished gasoline,

(iii) unfinished gasoline,

(iv) diesel fuel,

(v) heating distillate oil, or

(vi) another type of liquid petroleum fuel, in which case, the type; and

(c) the volume, expressed in litres, of the batch of renewable fuel or of the renewable fuel content in the batch, as the case may be.

Documents establishing renewable fuel

(9) A person who creates a compliance unit based on a litre of renewable fuel must have documentation that establishes that the fuel is renewable fuel as defined in subsection 1(1).

Documents establishing biocrude

(10) A person who creates a compliance unit based on a volume of biocrude must have documentation that establishes

(a) in the case of biocrude other than triglyceride-derived biocrude, that it is biocrude as defined in subsection 1(1); and

(b) in the case of triglyceride-derived biocrude, that it is triglyceride-derived biocrude as defined in subsection 1(1).

Annual report

33. For each compliance period in respect of which a compliance unit is created, carried forward, carried back, transferred in trade, received in trade, or cancelled by a participant, the participant must, on or before April 15 following the end of the compliance period, send a report to the Minister that contains the information set out in schedule 5 for the compliance period.

PRODUCERS OR IMPORTERS OF RENEWABLE FUEL

Registration

34. (1) A producer in, or an importer into, Canada of renewable fuel must register by sending to the Minister a registration report that contains the information set out in Schedule 6 at least one day before they produce or import, or produce and import combined, their 400th m3 of renewable fuel during any period of 12 consecutive months in a gasoline compliance period.

Change of information

(2) If the information provided in the registration report — other than the information referred to in item 1 of Schedule 6 — changes, the producer or importer must send a notice to the Minister that provides the updated information no later than five days after the change.

Record-keeping

(3) The producer or importer must — for each batch of renewable fuel that they produce in, import into, or sell in, Canada during a gasoline compliance period — make a record of the following information:

(a) the type of renewable fuel;

(b) if known, each type of renewable fuel feedstock that was used to produce the renewable fuel;

(c) the volume of the batch, expressed in litres;

(d) for a batch produced, the civic address of the facility at which it was produced and the date or dates on which they dispatched the batch from that facility or sent the batch to a fuel dispensing device within that facility;

(e) for a batch imported, the province via which importation occurs, the date of importation of the batch and its country of origin;

(f) the date of sale, if any, of the batch and the name of the person to whom it was sold;

(g) whether the batch of renewable fuel is to be exported and, if so

(i) in the case that the fuel is sold by the producer or the importer prior to its exportation, the province in which the fuel was located when ownership to the fuel was transferred, and

(ii) in any other case, the province via which the exportation is to occur; and

(h) if known, whether the batch of renewable fuel is to be blended with liquid petroleum fuel at a facility in Canada and, if so, the name of the person, or persons, who is to own the resulting blended fuel and the civic address of the facility.

Annual report

(4) For each gasoline compliance period during which the producer or importer produces or imports renewable fuel, they must, on or before February 15 following the end of the compliance period, send a report to the Minister that contains the information set out in Schedule 7 for the gasoline compliance period.

REGISTRANTS

Report on measurement methods

35. (1) A person who sends a registration report must send to the Minister a report on measurement methods, signed by an authorized official, that contains the information set out in Schedule 8 on or before the day on which they send the registration report. The report must provide that information for each facility, and for each province via which importation occurs, that is, or is to be, identified in the registration report.

Change of information

(2) If the information provided in the report on measurement methods — other than the information reported under item 1 of Schedule 8 — changes, the person must send a notice to the Minister that provides the updated information no later than five days after the change.

SELLERS OF FUEL FOR EXPORT

Record-keeping

36. (1) A person other than a participant, or a producer or importer of renewable fuel, who, during a gasoline compliance period, sells for export a batch of renewable fuel, or of liquid petroleum fuel that has renewable fuel content, must record

(a) which of the following types of fuel was so sold:

(i) renewable fuel, in which case, the type of renewable fuel and, if known, each type of renewable fuel feedstock that was used to produce that renewable fuel,

(ii) finished gasoline,

(iii) unfinished gasoline,

(iv) diesel fuel,

(v) heating distillate oil, or

(vi) another type of liquid petroleum fuel, in which case, the type; and

(b) the volume, expressed in litres, of the batch of renewable fuel or of the renewable fuel content in the batch of liquid petroleum fuel, as the case may be.

Annual report

(2) For each gasoline compliance period during which the person sold for export a batch referred to in subsection (1), they must, on or before February 15 following the end of the compliance period, send a report to the Minister that contains the following information for the compliance period, for each type of renewable fuel and for each province in which the fuel was located when ownership of the fuel was transferred:

(a) the volume, expressed in litres, of renewable fuel sold for export, for each type, if known, of renewable fuel feedstock; and

(b) the volume, expressed in litres, of renewable fuel content in each type of liquid petroleum fuel sold for export, for each type of renewable fuel.

Non-application

(3) Subsections (1) and (2) do not apply to a person who, during a gasoline compliance period, sells for export less than 1000 m3 of renewable fuel or of liquid petroleum fuel that has renewable fuel content.

RECORD-MAKING AND RETENTION OF INFORMATION

When records made

37. Except as otherwise provided for in these Regulations, records must be made as soon as practiceable but no later than 15 days after the information to be recorded became available.

Retention of records

38. (1) A person who is required to make a record or send a report or notice, under these Regulations, must keep the record or a copy of the report or notice, as well as any supporting documents that relate to the information contained in that record or copy, for at least five years after they make it. The record or copy must be kept at the person’s principal place of business in Canada or at any other place in Canada where it can be inspected. If the record or copy is kept at one of those other places, the person must provide the Minister with the civic address of that other place.

Supporting documents

(2) Every participant must keep supporting documents evidencing the information recorded under section 31 in its compliance unit account book and recorded under sections 29 and 32, including, without being limited to,

(a) data and calculations of volumes recorded;

(b) dated metered-values, bills of lading, invoices, sales receipts, records of payment and records of transactions for gasoline, diesel fuel, heating distillate oil, renewable fuel and biocrude that are used, blended, sold, imported, or acquired from or transferred to another fuel supplier or facility; and

(c) dated contracts, records of transfer, invoices, records of payment and agreements for transfers of gasoline, diesel fuel, heating distillate oil, renewable fuel, biocrude and compliance units.

COMING INTO FORCE

Registration

39. (1) Subject to subsections (2) and (3), these Regulations come into force on the day on which they are registered.

Gasoline requirements and trading system

(2) Subsection 5(1), sections 6 and 7, subsection 8(1), sections 12 to 25 and 28 to 33, subsections 34(3) and (4) and section 36 come into force on September 1, 2010.

Distillate requirements

(3) Subsections 5(2) and 8(2) come into force on a day to be fixed by amendment to this subsection.

SCHEDULE 1
(Subsection 9(1))

REGISTRATION REPORT — INFORMATION REQUIRED FROM A PRIMARY SUPPLIER

1. Information respecting the primary supplier:

(a) their name and civic address;

(b) the name, title, civic and postal addresses, telephone number and, if any, e-mail address and fax number, of their authorized official; and

(c) the name, title, civic and postal addresses, telephone number and, if any, e-mail address and fax number, of a contact person, if different from the authorized official.

2. For each production facility at which the primary supplier produces gasoline, diesel fuel or heating distillate oil, the civic address and name, if any, of the facility.

3. For each production facility at which the primary supplier produced, and for each province via which they imported, during the calendar year before the calendar year in which the report is sent, any of the following fuels, the volume, expressed in litres, so produced or imported of:

(a) finished gasoline;

(b) unfinished gasoline;

(c) diesel fuel; and

(d) heating distillate oil.

4. For each use, export or transit described in any of paragraphs 6(4)(a) to (i) of these Regulations, during the calendar year before the calendar year in which the report is sent, the volume, expressed in litres, of each of gasoline, diesel fuel and heating distillate oil, if known,

(a) produced at each of the primary supplier’s production facilities; and

(b) that they imported, for each province via which importation occurred.

5. The information required under Schedule 2 other than that required under its item 1.

SCHEDULE 2
(Subsection 11(1))

REGISTRATION REPORT — INFORMATION REQUIRED FROM A PARTICIPANT

1. Information respecting the participant:

(a) their name and civic address;

(b) the name, title, civic and postal addresses, telephone number and, if any, e-mail address and fax number, of their authorized official; and

(c) the name, title, civic and postal addresses, telephone number and, if any, e-mail address and fax number, of a contact person, if different from the authorized official.

2. For each non-mobile facility in Canada at which renewable fuel is blended with a liquid petroleum fuel and the resulting blended fuel is owned, in whole or in part, by the participant, the following information:

(a) the civic address and name, if any, of the facility;

(b) for each type of liquid petroleum fuel with which a renewable fuel was blended — during the calendar year before the calendar year in which the report is sent — at the facility to result in liquid petroleum fuel other than high-renewable-content fuel

(i) the volume, expressed in litres, if known, of the liquid petroleum fuel with which the renewable fuel was blended,

(ii) the volume, expressed in litres, if known, of the renewable fuel blended,

(iii) the type of renewable fuel and, if known, each type of renewable fuel feedstock that was used to produce the renewable fuel, and

(iv) a description of the primary use of the products that resulted from the blending; and

(c) for each type of liquid petroleum fuel with which a renewable fuel was blended — during the calendar year before the calendar year in which the report is sent — at the facility to result in high-renewable-content fuel

(i) the volume, expressed in litres, if known, of the liquid petroleum fuel with which the renewable fuel was blended,

(ii) the volume, expressed in litres, if known, of the renewable fuel blended,

(iii) the type of renewable fuel and, if known, each type of renewable fuel feedstock that was used to produce the renewable fuel, and

(iv) a description of the primary use of the products that resulted from the blending.

3. For each fleet of mobile facilities in Canada in which renewable fuel is blended with a liquid petroleum fuel and the resulting blended fuel is owned, in whole or in part, by the participant, the following information:

(a) the type and number of mobile facilities;

(b) the province, or provinces, where the blending occurs; and

(c) for each type of liquid petroleum fuel with which a renewable fuel was blended in one or more of the fleet’s mobile facilities during the calendar year before the calendar year in which the report is sent

(i) the volume, expressed in litres, if known, of the liquid petroleum fuel with which the renewable fuel was blended,

(ii) the volume, expressed in litres, if known, of the renewable fuel blended,

(iii) the type of renewable fuel and, if known, each type of renewable fuel feedstock that was used to produce the renewable fuel, and

(iv) a description of the primary use of the products that resulted from the blending.

4. For each facility in Canada at which biocrude is used by the participant as feedstock to produce liquid petroleum fuel, the following information:

(a) the civic address and name, if any, of the facility, and

(b) for each type of biocrude used by the participant as feedstock at the facility during the calendar year before the calendar year in which the report is sent

(i) if known, each type of renewable fuel feedstock that was used to produce the biocrude,

(ii) the volume, expressed in litres, if known, of biocrude used, and

(iii) a description of the primary use of the products produced at the facility.

5. For each province via which the participant imported — during the calendar year before the calendar year in which the report is sent — liquid petroleum fuel with renewable fuel content, and for each type of liquid petroleum fuel imported, the following information:

(a) the volume, expressed in litres, if known, of the liquid petroleum fuel imported;

(b) the volume, expressed in litres, if known, of renewable fuel in the liquid petroleum fuel imported;

(c) the type of renewable fuel and, if known, each type of renewable fuel feedstock that was used to produce that renewable fuel and the country of origin of that renewable fuel; and

(d) a description of the primary use of the products imported.

6. If, during the calendar year before the calendar year in which the report is sent, the participant sold neat renewable fuel in Canada to a neat renewable fuel consumer for use as fuel in a combustion device, or used neat renewable fuel in Canada as fuel in a combustion device, for each type of neat renewable fuel, the following information:

(a) if known, the total volume, expressed in litres, so sold or used and the volume, expressed in litres, by each type of renewable fuel feedstock that was used to produce that neat renewable fuel; and

(b) if known, the type of combustion device in which the neat renewable fuel was so used, namely, a diesel engine, a domestic-type burner, a spark-ignition engine, a boiler, a furnace or other type.

7. The volume, expressed in litres, of renewable fuel or biocrude in Canada, as the case may be, owned by the participant as of the last day of the month before the report is sent.

8. The civic address, or addresses, at which records, copies of reports or notices, and any supporting documents required under these Regulations are kept.

SCHEDULE 3
(Subsection 28(2))

AUDITOR’S REPORT — INFORMATION REQUIRED

1. The name, civic address and telephone number of the participant or of the producer or importer of renewable fuel.

2. The name, civic address, telephone number and qualifications of the auditor and, if any, the auditor’s fax number and e-mail address.

3. The procedures followed by the auditor to assess the validity of the information sent under these Regulations and a statement of the auditor’s opinion as to whether, as the case may be, the participant’s, the producer’s or the importer’s practices and procedures were appropriate to ensure, and demonstrate, compliance with these Regulations.

4. A statement by the auditor that they have assessed whether the participant, producer or importer, as the case may be, has determined volumes in accordance with the information on measurement methods that the participant, producer or importer sent under section 35 of these Regulations.

5. For primary suppliers, the auditor’s assessment of whether the primary supplier has determined

(a) the volume of their gasoline pool and of their distillate pool in accordance with section 6 of these Regulations; and

(b) the volume of renewable fuel in their gasoline pool and in their distillate pool in accordance with section 8 of these Regulations.

6. (1) For participants, a statement by the auditor that the auditor has reviewed

(a) all the participant’s documentation in respect of their transfers in trade or receipt in trade of compliance units; and

(b) the participant’s compliance unit account book.

(2) The auditor’s assessment of whether entries in the participant’s compliance unit account book are evidenced by the other records and documents required under these Regulations.

7. The auditor’s assessment of the extent to which the participant, producer or importer, as the case may be, has complied with these Regulations in respect of the gasoline compliance period or distillate compliance period, as the case may be.

8. A description by the auditor of the nature and date, if the auditor is able to determine the date, of any inaccuracy in the participant’s, the producer’s or the importer’s records, as the case may be, and of any other deviation from the requirements of these Regulations by the participant, producer or importer.

SCHEDULE 4
(Section 30)

ANNUAL REPORT — INFORMATION REQUIRED FROM A PRIMARY SUPPLIER

1. Information respecting the primary supplier:

(a) their name and civic address;

(b) the name, title, civic and postal addresses, telephone number and, if any, e-mail address and fax number, of their authorized official; and

(c) the name, title, civic and postal addresses, telephone number and, if any, e-mail address and fax number, of a contact person, if different from the authorized official.

2. The volume, expressed in litres, of their gasoline pool and the value of each of the descriptions set out in subsection 8(1) of these Regulations.

3. The volume, expressed in litres

(a) in the case of the first gasoline compliance period, in their distillate pool determined using the pre-distillate compliance period as if it were the distillate compliance period; and

(b) in any other case, of their distillate pool.

4. The value of each of the descriptions set out in subsection 8(2) of these Regulations.

5. For each production facility and for each province via which importation occurred, the volume, expressed in litres, other than any volume referred to in paragraphs 6(a) and (b), of the following fuels produced at the facility or imported:

(a) finished gasoline;

(b) unfinished gasoline;

(c) diesel fuel; and

(d) heating distillate oil.

6. For each fuel described in any of paragraphs 6(4)(a) to (i) of these Regulations

(a) the sum, expressed in litres, of the volumes subtracted under subsection 6(4) of these Regulations of each of gasoline, diesel fuel and heating distillate oil

(i) for each production facility, and

(i) for each province via which importation occurred; and

(b) the sum of the sums obtained under subparagraphs (a)(i) and (ii).

SCHEDULE 5
(Section 33)

ANNUAL REPORT — INFORMATION REQUIRED FROM A PARTICIPANT

1. Information respecting the participant:

(a) their name and civic address;

(b) the name, title, civic and postal addresses, telephone number and, if any, e-mail address and fax number, of their authorized official; and

(c) the name, title, civic and postal addresses, telephone number and, if any, e-mail address and fax number, of a contact person, if different from the authorized official.

2. For each non-mobile facility in Canada at which the participant created a compliance unit by blending renewable fuel with a liquid petroleum fuel, the following information:

(a) the civic address and name, if any, of the facility;

(b) for each type of liquid petroleum fuel with which a renewable fuel was blended at the facility to result in liquid petroleum fuel other than high-renewable-content fuel

(i) the volume, expressed in litres, of the liquid petroleum fuel with which the renewable fuel was blended,

(ii) the volume, expressed in litres, of the renewable fuel blended,

(iii) the type of renewable fuel and, if known, each type of renewable fuel feedstock that was used to produce that renewable fuel, and

(iv) the number of gasoline compliance units and of distillate compliance units that were created under section 13 of these Regulations; and

(c) for each type of liquid petroleum fuel with which a renewable fuel was blended at the facility to result in high-renewable-content fuel

(i) the volume, expressed in litres, of the liquid petroleum fuel with which the renewable fuel was blended,

(ii) the volume, expressed in litres, of the renewable fuel blended,

(iii) the volumetrically-weighted average of renewable fuel content in the resulting high-renewable-content fuel, expressed as volume per cent,

(iv) the type of renewable fuel and, if known, each type of renewable fuel feedstock that was used to produce that renewable fuel, and

(v) the number of gasoline compliance units and of distillate compliance units that were created under section 13 of these Regulations.

3. For each province in which the participant created a compliance unit by blending renewable fuel with liquid petroleum fuel in a mobile facility that is part of a fleet, the following information:

(a) the type and number of those mobile facilities;

(b) the province, or provinces, where the blending occurred; and

(c) for each type of liquid petroleum fuel with which a renewable fuel was blended to result in liquid petroleum fuel other than high-renewable-content fuel

(i) the volume, expressed in litres, of the liquid petroleum fuel with which the renewable fuel was blended,

(ii) the volume, expressed in litres, of the renewable fuel blended,

(iii) the type of renewable fuel and, if known, each type of renewable fuel feedstock that was used to produce that renewable fuel, and

(iv) the number of gasoline compliance units and of distillate compliance units that were created under section 13 of these Regulations; and

(d) for each type of liquid petroleum fuel with which a renewable fuel was so blended to result in high-renewable-content fuel

(i) the volume, expressed in litres, of the liquid petroleum fuel with which the renewable fuel was blended,

(ii) the volume, expressed in litres, of the renewable fuel blended,

(iii) the volumetrically-weighted average of renewable fuel content in the resulting high-renewable-content fuel, expressed as volume per cent,

(iv) the type of renewable fuel and, if known, each type of renewable fuel feedstock that was used to produce that renewable fuel, and

(v) the number of gasoline compliance units and of distillate compliance units that were created under section 13 of these Regulations.

4. For each province in which the participant created a compliance unit by importing a batch of liquid petroleum fuel with renewable fuel content, the following information:

(a) for each type of liquid petroleum fuel other than high-renewable-content fuel that was imported,

(i) the volume, expressed in litres, of the liquid petroleum fuel imported,

(ii) the volume, expressed in litres, of the renewable fuel in the batch imported,

(iii) the type of renewable fuel and, if known, each type of renewable fuel feedstock that was used to produce the renewable fuel and the country of origin of that renewable fuel, and

(iv) the number of gasoline compliance units and of distillate compliance units that were created under section 14 of these Regulations; and

(b) for each type of high-renewable-content fuel imported,

(i) the volume, expressed in litres, of the liquid petroleum fuel imported,

(ii) the volume, expressed in litres, of the renewable fuel in the batch imported,

(iii) the volumetrically-weighted average of renewable fuel content in the imported high-renewable-content fuel, expressed as volume per cent,

(iv) the type of renewable fuel and, if known, each type of renewable fuel feedstock that was used to produce the renewable fuel and the country of origin of that renewable fuel, and

(v) the number of gasoline compliance units and of distillate compliance units that were created under section 14 of these Regulations.

5. For each production facility in Canada at which the participant created a compliance unit by using biocrude as feedstock, and for each type of biocrude, the following information:

(a) the civic address and name, if any, of the facility;

(b) the volume, expressed in litres, of biocrude used as feedstock and, if known, by each country of origin of that biocrude; and

(c) the number of gasoline compliance units and of distillate compliance units created under section 15 of these Regulations.

6. For each facility in Canada at which the participant created a compliance unit by using neat renewable fuel, and for each province in which the participant created a compliance unit by selling neat renewable fuel to a neat fuel consumer, the following information:

(a) the civic address and name, if any, of the facility, or the province, as the case may be;

(b) the volume, expressed in litres, of neat renewable fuel sold to each neat renewable fuel consumer, the name of the neat renewable fuel consumer and, if known, each type of combustion device in which the neat renewable fuel was used as fuel;

(c) the volume, expressed in litres, of neat renewable fuel used as fuel by the participant and, if known, by each type of combustion device in which the neat renewable fuel was so used; and

(d) the number of gasoline compliance units and of distillate compliance units created under section 16 of these Regulations.

7. For each other participant from whom the participant received compliance units in trade, the name of that other participant and the number of gasoline compliance units and of distillate compliance units so received during the trading period in respect of the compliance period.

8. For each primary supplier to whom the participant transferred compliance units in trade, the name of that primary supplier and the number of gasoline compliance units and of distillate compliance units so transferred in trade during the trading period in respect of the compliance period.

9. (1) The number of gasoline compliance units and of distillate compliance units, if any, that were, in respect of a compliance period

(a) carried forward into the next compliance period;

(b) carried forward into the compliance period from the preceding compliance period;

(c) carried back into the compliance period; and

(d) carried back from the compliance period into the preceding compliance period.

(2) In addition, for the first distillate compliance period, the number of distillate compliance units carried forward into that period, if any.

10. The number of gasoline compliance units and of distillate compliance units, if any, cancelled

(a) under subsection 25(1) of these Regulations due to the primary supplier having carried back compliance units; and

(b) under paragraph 11(3)(c) of these Regulations due to the elective participant withdrawing from the trading system.

11. For each province from which the participant, or one of their affiliates who is not a participant, exported a liquid petroleum fuel with renewable fuel content

(a) the volume, expressed in litres, exported, by type of liquid petroleum fuel;

(b) in the case of exported diesel fuel and heating distillate oil, the volume, expressed in litres, of renewable fuel contained in those fuels, by each type of renewable fuel and by each type of renewable fuel feedstock, if known, that was used to produce that renewable fuel;

(c) in the case of exported liquid petroleum fuel other than diesel fuel and heating distillate oil, the volume, expressed in litres, of renewable fuel contained in that fuel, by each type of renewable fuel and by each type of renewable fuel feedstock, if known, that was used to produce that renewable fuel; and

(d) the number of gasoline compliance units and of distillate compliance units cancelled under subsection 25(2) of these Regulations.

12. If the participant is a primary supplier, for each month during the compliance period

(a) the number of gasoline compliance units owned by the primary supplier at the end of the month and the number calculated in accordance with subsection 19(1) of these Regulations; and

(b) the number of distillate compliance units owned by the primary supplier at the end of the month and the number calculated in accordance with subsection 19(2) of these Regulations.

13. The number of gasoline compliance units and of distillate compliance units owned by the participant at the end of the trading period in respect of the compliance period.

14. The following information by each type of renewable fuel and biocrude and by each province in which the acquisition or transfer took place:

(a) the name of any person from whom the participant acquired, in Canada, renewable fuel or biocrude during the compliance period and the volume, expressed in litres, of that fuel or biocrude so acquired from each person;

(b) the name of any person to whom the participant transferred, in Canada, ownership of renewable fuel or biocrude during the compliance period and the volume, expressed in litres, of that fuel or biocrude so transferred to each person; and

(c) the volume, expressed in litres, of renewable fuel and of biocrude, in Canada, owned by the participant at the end of the compliance period.

SCHEDULE 6
(Subsection 34(1))

REGISTRATION REPORT — INFORMATION REQUIRED FROM A PRODUCER OR IMPORTER OF RENEWABLE FUEL

1. Information respecting the producer or importer:

(a) their name and civic address;

(b) the name, title, civic and postal addresses, telephone number and, if any, e-mail address and fax number, of their authorized official; and

(c) the name, title, civic and postal addresses, telephone number and, if any, e-mail address and fax number, of a contact person, if different from the authorized official.

2. For each facility in Canada at which the producer produces renewable fuel

(a) the civic address and name, if any, of each facility;

(b) the type of renewable fuel produced and each type of renewable fuel feedstock that was used to produce the renewable fuel; and

(c) the volume, expressed in litres, if known, of each type of renewable fuel produced during the calendar year before the calendar year in which the report is sent.

3. For each province via which the importer imports renewable fuel

(a) the type of renewable fuel imported and, if known, each type of renewable fuel feedstock that was used to produce the renewable fuel and the country of origin of that renewable fuel; and

(b) the volume, expressed in litres, if known, of each type of renewable fuel imported during the calendar year before the calendar year in which the report is sent.

4. The civic address, or addresses, at which records, copies of reports or notices, and any supporting documents required under these Regulations are kept.

SCHEDULE 7
(Subsection 34(4))

ANNUAL REPORT — INFORMATION REQUIRED FROM A PRODUCER
OR IMPORTER OF RENEWABLE FUEL

1. Information respecting the producer or importer:

(a) their name and civic address;

(b) the name, title, civic and postal addresses, telephone number and, if any, e-mail address and fax number, of their authorized official; and

(c) the name, title, civic and postal addresses, telephone number and, if any, e-mail address and fax number, of a contact person, if different from the authorized official.

2. For each facility in Canada at which renewable fuel was produced and for each province via which renewable fuel was imported, the volume, expressed in litres, of each type of renewable fuel produced or imported during the gasoline compliance period and, if known, each type of renewable fuel feedstock that was used to produce it and, if imported, the country of origin of that renewable fuel.

3. For each province in which the producer or importer, during the gasoline compliance period, sold — or produced, or imported, for export — renewable fuel and for each type of renewable fuel and for each type of renewable fuel feedstock, the volume, expressed in litres,

(a) sold;

(b) sold for blending at another facility in Canada, if known;

(c) sold for export; and

(d) produced, or imported, for export.

4. The name of each person to whom renewable fuel referred to in paragraphs 3(a) to (c) was sold and the volume, expressed in litres, so sold, for each province in which the fuel was located when ownership of the fuel was transferred.

SCHEDULE 8
(Subsection 35(1))

REPORT ON MEASUREMENT METHODS — INFORMATION REQUIRED

1. Information respecting the person:

(a) their name and civic address;

(b) the name, title, civic and postal addresses, telephone number and, if any, e-mail address and fax number, of their authorized official; and

(c) the name, title, civic and postal addresses, telephone number and, if any, e-mail address and fax number, of a contact person, if different from the authorized official.

2. For each facility in Canada at which the person is, under these Regulations, to determine a volume of fuel or of biocrude, the civic address, name, if any, and type of the facility.

3. For each province via which the person is to import a volume of fuel

(a) the location of each point of entry into Canada within that province;

(b) the mode of transportation used for the importation, namely, by cargo tanker, railway car, boat, marine vessel or by another mode of transportation, in which case, that mode; and

(c) if, for the purposes of these Regulations, the volume of the batch is to be determined at a facility

(i) in Canada, its civic address, name, if any, and type of the facility, and

(ii) in a country other than Canada, the name of that country and the type of the facility.

4. For each facility referred to in item 2 or paragraph 3(c)

(a) a description of each point within the facility at which the determination of volume is to be made;

(b) a description of how the volume of a batch of fuel is identified at that facility;

(c) if the volume is to be determined in accordance with paragraph 4(1)(a) of these Regulations,

(i) a description of the measurement device, if any, including the type and manufacturer,

(ii) a statement that the device has been installed and inspected in accordance with the Weights and Measures Act and the regulations made under that Act, and

(iii) the frequency of calibration for the device, if any, and the name, civic address and telephone number of the person who last calibrated it, if any;

(d) if the volume is to be determined in accordance with paragraph 4(1)(b) of these Regulations,

(i) a description of the measurement standard or method that is to be used, including the title and the organization that publishes it, and if known, the published repeatability and the published precision, and,

(ii) the number, page or other identifier of the measurement standard or method in the American Petroleum Institute’s Manual of Petroleum Measurement Standards;

(e) if the volume is to be determined in accordance with subsection 4(2) of these Regulations,

(i) a detailed explanation as to why no measurement device, standard or method referred to in subsection 4(1) of these Regulations would allow the person to determine the volume in accordance with that subsection, and

(ii) a detailed description of the measurement device, standard or method that the independent person is to use to determine the volume and its repeatability and precision;

(f) the temperature to which the volume is to be corrected; and

(g) for biocrude, the methodology for measuring and subtracting the water content of the biocrude.

[15-1-o]

Footnote 1
Environment Canada, 2009, A Climate Change Plan for the Purposes of the Kyoto Protocol Implementation Act.

Footnote 2
Additional information on the Renewable Fuels Strategy is available at www.ecoaction.gc.ca/ECOENERGY-ECOENERGIE/renewablefuels-carburantsrenouvelables-eng.cfm.

Footnote 3
Environment Canada’s GHG emission inventory can accessed from www.ec.gc.ca/pdb/GHG/inventory_e.cfm.

Footnote 4
Health Canada (2009), Health risks and benefits associated with the use of 10 percent ethanol-blended gasoline in Canada (draft report)

Footnote 5
Spent pulping liquor is defined in the Regulations as meaning “a by-product of the chemical process of turning wood into pulp that consists of wood residue and pulping agents.”

Footnote 6
Note that compliance units created from blending renewable fuel in diesel fuel and heating distillate oil can be used for compliance with the 5% requirement.

Footnote 7
Pool refers to the respective total volumes of gasoline or diesel fuel and heating distillate oil that are produced and imported during a compliance period.

Footnote 8
Canada’s 2007 Greenhouse Gas Inventory: A Summary of Trends can be accessed from: www.ec.gc.ca/pdb/GHG/inventory_report/2007/som-sum_eng.cfm.

Footnote 9
The notice of intent can be accessed from http://gazette.gc.ca/archives/p1/2006/2006-12-30/html/notice-avis-eng.html.

Footnote 10
Additional information on the program is available at www.ecoaction.gc.ca/index-eng.cfm.

Footnote 11
Ibid.

Footnote 12
Additional information on the program is available at www.sdtc.ca/en/index.htm.

Footnote 13
Note that the preceding numbers for production, sales, imports and exports do not add up due to inventory changes, the refineries own consumption of products, and other reasons.

Footnote 14
ÉcoRessources Consultants (2009), Cost-Benefit Analysis of the Proposed Regulations to Require Renewable Fuel Content in Canadian Fuels.

Footnote 15
The emission factors were calculated as the difference in GHG emissions between conventional gasoline and 10 % ethanol blended gasoline using NRCan’s GHGenius model.

Footnote 16
Additional information is available from www.oee.nrcan.gc.ca/transportation/fuels/ethanol/safety.cfm?attr=16.

Footnote 17
Although blending of biodiesel can be used to meet the 5% renewable fuel requirement in gasoline, for the analysis, it is assumed that most of this 5% requirement would be met through the blending of ethanol in gasoline.

Footnote 18
Cost estimates are based on a study done for NRCan — (S&T)² Consultants and Meyers Norris Penny LLP (2004), Economic, Financial, Social Analysis and Public Policy for Fuel Ethanol — Phase I.

Footnote 19
Energy content of E10 blended gasoline is 2.2% lower in comparison to conventional gasoline, after adjusting for vehicle efficiency and fuel economy improvements.

Footnote 20
Calculated as a difference in BAU and regulated scenario gasoline demand.

Footnote 21
Watkiss and Downing (2008), “The Social Cost of Carbon: Valuation estimates and their use in UK policy.” IAJ The Integrated Assessment Journal, Bridging Sciences & Policy, Vol. 8, Iss. 1 (2008), pp. 85–105.

Footnote 22
ECX price of carbon of 15 euros was converted to Canadian dollars using an exchange rate of 1 euro = $1.58.

Footnote 23
UK price of carbon range of £25 to £76 was converted to Canadian dollars using an exchange rate of £1 = $1.76.

Footnote 24
A 3% discount rate was used for estimating the present value of benefits.

Footnote 25
Health Canada (2009), “Health Risks and Benefits Associated with the Use of 10% Ethanol-blended Gasoline in Canada.”

Footnote 26
The health endpoints included acute exposure mortality, acute respiratory symptom days, adult chronic bronchitis cases, asthma symptom days, cardiac emergency room visits, cardiac hospital admissions, child acute bronchitis episodes, chronic exposure mortality, elderly cardiac hospital admissions, minor restricted activity days, emergency room visits due to respiratory illnesses, hospital admissions due to respiratory illnesses, and days of restricted activity.

Footnote 27
(S&T)2 Consultants and Meyers Norris Penny LLP (2004), Economic, Financial, Social Analysis and Public Policy for Fuel Ethanol — Phase I.

Footnote 28
The summary of the comments is available at www.ec.gc.ca/ceparegistry/documents/part/RF-CR_com/ov-ap.cfm.

Footnote 29
The information presented can be accessed at www.ec.gc.ca/cleanair-airpur/default.asp?lang=En&n=C95BCB29-1.

Footnote 30
Technical issues raised and the means proposed to address them can be accessed from www.ec.gc.ca/ceparegistry/documents/participation/renewable_fuels/default.cfm.

Footnote a
S.C. 2004, c. 15, s. 31

Footnote b
S.C. 1999, c. 33

Footnote c
S.C. 2008, c. 31, s. 2