January 30, 2007

The Hon. James Flaherty, P.C., M.P.
Minister of Finance
21st Floor, East Tower, 140 O'Connor Street
Ottawa, Ontario
K1A 0G5

Dear Minister Flaherty:

I write to you regarding our government’s commitment to developing the biofuels industry in Canada and the importance of the biofuels plan as a component of the 2007 budget.

On December 20th, 2006, federal Agriculture Minister Chuck Strahl, and former Minister of the Environment Rona Ambrose, announced two key pieces of our government’s biofuels strategy, including regulations for a five per cent mandate of renewable content in transportation fuels, as well as an important farmer program to encourage participation and ownership in biofuels facilities

I urge you to create a tax instrument that will allow for the building of these plants in Canada. This would ensure that Canadian producers of ethanol and biodiesel are competitive in other jurisdictions, particularly in the United States. Currently, American ethanol and biodiesel producers enjoy tax measures and a tax regime that provide a competitive advantage over Canadian producers. I am asking you, as Canada’s Finance Minister, to take the steps necessary to level that playing field.

The gap between Canada and the United States could be addressed by creating a refundable tax credit to fuel producers of $0.10/litre for ethanol and $0.20/litre for biodiesel. Based on the volumes required to meet our commitment of the five per cent requirement of renewable fuel content, the projected cost would be approximately $2.7 billion over the next 10 years.

Conversely, according to the Canadian Renewable Fuels Association, should the government choose to maintain the current tax treatment in place for biofuels, the cost of meeting the government’s biofuels mandate would be approximately $2.1 billion in tax expenditures over the next 10 years. However, this course of action will not result in plants being built in Canada, with much of this money (approximately $760 million) from these exemptions going to foreign renewable fuels producers in the U.S. and Brazil. Canada would then be forced to import biofuels to meet the five per cent mandate.

The bottom line is that all of the benefits associated with a producer payment option will actually save the government $50 million over the next five years, compared to maintaining the status quo option.

As a Member of Parliament representing a riding which could benefit greatly from the biofuels industry, I ask that you take the initiative in the 2007 budget to ensure Canadian farmers can compete.

Sincerely,