News
Fuel for thought

Canada's pledge to reduce greenhouse gas emissions has brought on a stronger
commitment to renewable fuels, and that is good news for producers of agricultural
commodities who are seeing higher industrial demand for their products. But,
producers of animal fats and vegetable oils are not the only groups set to gain
from increased production of biodiesel as provincial and federal governments
move forward with their vision for a healthier environment, society as a whole
will benefit.

"Canada's biodiesel industry has grown in leaps and bounds in the past
two years," says Christine Paquette, executive director of the Biodiesel
Association of Canada (BAC). "That kind of growth is hugely significant
because, essentially, key stakeholders have built the industry from the ground
up."

Biodiesel is a non-toxic, biodegradable, cleaner-burning renewable diesel fuel
derived from agricultural commodities such as vegetable oils or animal fats.
Inventor Rudolf Diesel actually used vegetable oil to fuel the world's first
diesel engine more than a century ago, but its high level of viscosity precluded
it from long-term use. Biodiesel has also been around for many years, though
the high cost of traditional methods of production relative to more economical
fuel sources such as petroleum diesel have kept it in specialty markets in most
areas of the world.

Now, the fuel is widely used in areas of the European Union, but in Canada
it seems the industry has experienced a 'chicken and egg' situation. Canada's
government and industry have not created a market for biodiesel because there
is little supply within Canada, and there is little supply because, until recently,
there was no way to make biodiesel cheap enough for it to compete with petroleum
diesel fuel. But as the federal government continues to make headway in the
pursuit of renewable energy sources, as well as supporting the industry through
such initiatives as tax exemptions, biodiesel companies are more likely to take
advantage of that new market and set up shop.

Biodiesel has been used commercially in Canada since 2001. Toronto Hydro made
headlines when the company switched 100 fleet vehicles to biodiesel in a pilot
project, claiming a significant reduction in pollutants with virtually no downside.
Now this company and a number of municipalities including the City of Brampton
and the City of Toronto regularly use biodiesel to cut down on pollutants from
buses, utility trucks and other fleet vehicles.

The concentration of biodiesel being used differs with each user, but few companies
use pure biodiesel. Most is a blended product such as B20, a fuel containing
20 percent biodiesel and 80 percent petrol-diesel. Those higher concentration
blends are currently being imported from the US, but the eventual goal is to
produce and sell B20 to commercial fleets within Canada or at diesel pumps across
the country in a B5 blend in accordance with the fuel standard developed by
the Canadian General Standards Board.

In the near future, BAC is hoping to work with provincial governments across
the country to mandate the use of biodiesel and/or create an incentive environment
where the use and production of biodiesel will be encouraged. If all the diesel
fuel sold in Canada were to contain two percent biodiesel, that would mean a
market for approximately 500 million litres of biodiesel per year: this is still
a significant milestone.

Three new biodiesel plants in Canada are scheduled to open for business in
2005, including a 60 million litre facility in Hamilton, Ontario, spearheaded
by Biox Corporation. Biox made headlines in 2000 with the development of a novel,
more economical process for making biodiesel at ambient temperatures and atmospheric
pressures through the use of a co-solvent developed by University of Toronto
researcher, Dr. David Boocock. Boocock's system allows for continuous flow of
biodiesel production instead of the traditional batch production, which lowers
costs significantly.

"The Biox process allows us to achieve yields of 1:1, meaning one litre
of feedstock will produce one litre of biodiesel," says Scott Lewis, director
of business development, Biox Corporation. "Using the Biox process, any
feedstock containing from zero to 30 percent free fatty acids will produce the
same amount of biodiesel, and that gives us flexibility because we can purchase
whatever feedstock is the most cost effective."

Lewis says regardless of the feedstock used, taking those oils off the market
is still good news for farmers. "All ships rise with the tide," he
says. "With less feedstock on the market, price and demand begin to rise."
He also points out that biodiesel provides a market for less marketable products
such as off-spec oil, like the 2004 crop of green canola.

"With large scale production of biodiesel coming online in Ontario, we're
expecting soybean oil to become a player in this industry," says Matt McLean,
research and bio-products manager for Ontario Soybean Growers. "But the
high cost of soybean oil relative to other feedstocks such as animal fats means
it won't be a windfall for Ontario soybean producers quite yet."

OSG is working with the Soy 20/20 Project, a multi-partner initiative aiming
to explore potential value-added opportunities for soy. With biodiesel gaining
more of a stronghold, Soy 20/20 is exploring the potential for breeding an 'industrial
soybean', one that would have a higher oil content for industrial purposes such
as biodiesel.

Although many feedstocks can be used in biodiesel production, some tests have
shown a slight advantage to using soybean oil over animal fats, because the
soy oil stands up better in colder temperatures. But those advantages are only
apparent in pure biodiesel, and are virtually undetectable in blended fuels.

"Convincing the petroleum diesel industry to switch to blended fuels has
been a bit of a hurdle for this industry because of the higher costs associated
with production and feedstocks," says Lewis. "Now that the government
has come onside in a significant manner through road tax exemptions in British
Columbia and Ontario and the excise tax federally, we have more credibility
in working with the petroleum diesel companies to create a biodiesel blend that
will be distributed throughout Canada at costs competitive with petroleum diesel."

While the industry is off to a running start, Paquette says BAC still has much
work to do. Currently the focus is on drawing attention to biodiesel and garnering
support across North America. Paquette says the federal governmentÕs support
is a significant help for the cause.

"Biodiesel and renewable fuels, in general, need to be encouraged at all
levels of government and our government is vital to the process of building
a biofuels industry," says Paquette. "We're confident that by this
time next year, biodiesel will have a much more significant place on Canadian
roads."