June 19, 2017…

June 19, 2017

Mr. Chris Duke
Program Analyst
Ontario Ministry of Agriculture, Food and Rural Affairs
Food Safety and Environment Division
1 Stone Road West, Floor 5 NW
Guelph, Ontario, N1G 4Y2

RE: EBR Registry Number 013-0316: Proposed Agrifood Renewable Natural Gas for Transportation Demonstration Program

Dear Mr. Duke,

CCI BioEnergy Inc. (CCI) is a company founded in Ontario in 1992 with the mission to convert recovered organic resources – green bin food scraps, industrial / commercial / institutional organics, green waste, agricultural manures & crop residuals, waste water treatment residuals, and septage - into renewable energy and beneficial use soil amendment products using anaerobic digestion (AD). The philosophy that propels us is our belief that in every modern society our organics are assets.

Since July 2001 we have converted, in Ontario, more than 845,000 metric tonnes of organic resources destined for landfills. Beginning in September 2002, more than 600,000 metric tonnes of this volume came from the City of Toronto’s Source Separated Organics (SSO) Green Bin diversion program. Our staff and business partners are encouraged to see the Waste Free Ontario Act (WFOA) and this RNG Demonstration Program clearly recognizes that thinking differently about our wasted assets can make significant impacts in the journey to achieve the waste free and low-carbon economy objectives.

We think the RNG Demonstration Program can be a diversion catalyst and we will remain engaged, as we have since 2002. We commend the Ministry of Agriculture, Food and Rural Affairs (OMAFRA) and the Ontario government for the commitment to take action to develop a comprehensive plan and this Program. CCI respectfully requests that the program leaders take the following points into consideration in the process to finalize the Program. Our comments follow the structured questions recommended in the EBR document.

1.What are the best opportunities for successful agrifood RNG for transportation projects? Which businesses or organizations are best prepared to successfully deploy RNG anaerobic digesters and natural gas fuelled fleets? What other business partners and business relationships will need to be in place for projects to succeed?

It is not necessarily about the “best opportunities” but more along the lines of economies of scale and the demand in the market for the product. If there is no demand in the market, either natural demand or artificial demand, then there are no opportunities. Why? Because Natural Gas as a commodity is very inexpensive.

RNG is produced from organic materials. Organics that are anaerobically digested, produce biogas. Biogas is then upgraded by removing CO2 to the point that it is the same methane content as natural gas. The result is what we call RNG.

There are many sources of organic materials that under the current infrastructure are destined for landfill. These materials can be further processed to capture the energy and soil enhancing value as products. Under the right circumstances, the situation can arise where 100% of the material is re-directed to productive use. With the right incentives, current day technology can be advanced to the point where it is economical for generators of, what one might call small volumes of organics, to implement technology to produce vehicle fuel, ideally for their vehicles or for injection into the pipeline.

To make this advancement in technology, there needs to be an atmosphere of development and support. Support in the form of created demand which ultimately supports the economics. The Government’s stated objective ultimately is the reduction of our carbon foot print. The Government is responsible for 50% of the GHG’s that we produce. So, the biggest and perhaps most meaningful relationship that can be established is the Government procuring and implementing the use of RNG.

OMAFRA should work with other ministries to continue to develop the distributed natural gas infrastructure in the province to facilitate new sources of RNG that could come on-line, and that otherwise, would be restricted due to proximity and the associated costs to interconnect.

2.What are the key financial opportunities that will help projects to succeed?

Perhaps the most idealistic opportunity is to recognize the environmental benefit of RNG. The carbon footprint of RNG is significantly less than that of fossil fuel and natural gas. This reduction can be quantified and a price placed on the reduction, as depicted in the table below.

A prime example of this is the implementation of the Registered Identification Number (RIN) system that is utilized in the US. Distributors and users of fuels must reduce their carbon foot print and do so by purchasing RIN’s from the producers of RNG. There is a system for authenticating and registering a RIN. The Federal and State Government’s mandate the amount of low carbon fuel required in the system and then let the market sort out the value that is attached to each RIN. There are several types of RIN’s depending on the source of the carbon reducing fuel. In Canada, we are discussing a Clean Fuel Standard at the Federal level and a Low Carbon Fuel Standard at the Provincial level. These are the pathways to establishing the use and value of the carbon reduction associated with the fuel and its source. The question becomes, what is the price per unit? Given that the US will purchase the fuel from Canadians and attached a RIN to each unit, the price they pay is the same as they would pay as if the fuel was produced in the US.

As such, it seems logical that the price attached to the environmental attribute here in Canada should be the same value. Make it a parallel market. If one does not, then we will see our fuels sold to the US and the attributes will go there. Is that a problem? No, not from a financial perspective. But if one needs to demonstrate their carbon reduction, then one needs to keep the attribute. One cannot count the reduction attribute here in Canada and also at the same time in the US. That is double counting.

A result could be that while we actually did achieve the carbon reductions in reality, from an accounting perspective, we missed our goals. If there are international penalties for missing one’s pledge and commitment, then it makes a difference that we keep the attribute. We strongly believe the market should be open and competitive, so projects can monetize their environmental attributes based on site-specific carbon intensities.

There is also the use of tax incentives for the production of RNG. These can be accelerated depreciation (100% in the first year). We could also engage in the use of flow through shares that are familiar in the resource based industries in Canada.

3.At what scale would a project have to be deployed to be successful? How much RNG production? How many vehicles?

Given the number of variables, and the trend to reduce technology foot prints, this is a difficult question to answer. The ranges and scales can be very broad. Scale is directly linked to the value of the product (RNG) and the costs to produce it. If RNG carries the same price value as natural gas, then one will not see its production.

The recent price for natural gas, expressed in $/MMBtu, is $4 (US). In the US, the RIN associated with the same unit of RNG is $34 (US). Based on this type of value, one is going to see a lot of production created. The size of a project can be small.

4.Are businesses and organizations ready to develop and deploy RNG for transportation projects? Are there gaps in the supply chain? What would improve companies’ readiness?

CCI believes that businesses/organizations are ready to develop and deploy RNG for use as a transportation fuel. Companies are looking for ways to reduce costs and maximize the value in the materials that they handle on a day to day basis. Companies are also frustrated and irritated with the rising costs of energy, and the lack of opportunities to do anything about it. Creating an RNG market enables companies who deal in the world of organics, to proactively do something about it.

At present, there is no real supply chain. One needs to be created. As mentioned above, create the demand and one creates the readiness. The use of RNG for transportation is occurring on a large scale in the United States and other jurisdictions, and Ontario should not be left behind. As outlined above, currently, no market exists to sell the RNG in Ontario. Efforts to address this issue along with the conversion of fleets from diesel to CRNG should occur.

5.What barriers to do you foresee to developing a successful project? How can these barriers be overcome?

We believe the primary project barriers are:

a.Market Demand: Our comments above address this topic. There is no demand in the market today for RNG. The costs to make the product (and subsequently the value it needs to be sold at) are far greater than that of natural gas. This needs to change. Recognizing or valuing the carbon reduction value is the pathway to accomplish this. Value it through price, tax credits, grants and other incentives are ways to accomplish this.

b.Approvals: In Ontario, the current approval system for this type of project at the smaller end of the scale is a significant impediment. Our system today is set up to address large projects and for the most part, classifies organic material as a “waste” or as sewage, as opposed to a resource. As such, companies who could implement programs to further transform their organic materials into useful products such as transport fuel and bio-fertilizers, are dis-incented to do so and are treated as “law breakers”. This environment has to be changed. The government is looking to use EASR’s as a pathway. The only issue with a EASR is that, in the case of small projects, one still has to do all of the expensive studies and work so as to have this material on file should they ever be asked or audited by the MOECC. This needs to be streamlined further much like the Nutrient Management Act addresses “On Farm Digestion”. A similar approach should be developed for organizations and facilities that generate organics that could be transformed into useable products “on-site”.

c.Technology: Technology is and always will be, a barrier to new developments. But of course that is normal. It is through funding, projects, and simple demand that will see the development of technology and its advancement. The wind and solar industries is a prime example. The costs have come down considerable. This will also be the case in RNG once projects get under way.

6.How long would it take to deploy an RNG for transportation project from conception to successful operation?

On a micro scale (on-site) this can be done in a number of months with the right approvals setting. This of course assumes that approvals are not the inhibitor that they are today. CCI has assessed the timelines to deploy a large scale RNG project from conception to successful operation. Currently, the approvals process with MOECC would take approximately 1.5 years for a greenfield site. Once secured, the design, build, installation testing, and commissioning adds another 12-18 months, depending on the project dynamics.

7.Describe the types of government support needed to successfully deploy RNG for transportation projects.

CCI believes that the types of government support needed to successfully deploy RNG for transportation projects includes:

•Certainty on feedstock availability;

•Programs for low cost financing, including Government backed loans and grants

•Programs to support conversion of fleets from diesel to CNG

•Streamlining/modernization of environmental approval

•Clarity on zoning/siting requirements and certainty on interconnection costs

•Tax incentives (100% write off in year 1) (Canadian Renewable Energy Expense)

•SR&ED for pilots, right from the beginning, and flow through shares

•Market development that includes the Government procurement of RNG 8.What are some criteria or project attributes that should be considered or prioritized for a project to be supported through this program?

CCI believes that the criteria or project attributes includes focus to the farm to fork supply chain and the organics that can be recovered across it. CCI believes an RNG mandate would drive GHG reductions in the natural gas supply due to the low carbon nature of RNG. CCI recommends that the Province look at it more holistically, and focus on the displacement of the highest carbon intensity fuels first, given the Province’s mandates for 2020. We believe that RNG should be treated like other low carbon fuels in terms of their carbon intensity, and support the Province in meeting its goals for lower GHG emissions as well as the Federal Government’s vision and objectives for a CFS.

9.What should be included in the program to ensure broader uptake of RNG for transportation after the program is completed?

As with any burgeoning market, the technology that supports the development of RNG projects is advancing quickly. The costs for this technology are also changing. It would be difficult to establish a benchmark for cost/unit production of RNG as each facility has unique gas streams, infrastructure requirements and scale of operations that require a project-specific approach to technology solutions. These challenges also highlight the need to let the RNG producers develop projects by matching the needs of the project to the technology solution that suits the individual facility operations.

CCI believes that the program needs to ensure broader uptake of RNG for transportation after the program is completed include the facilitation of fleet conversion to natural gas as well as provision of incentives to procure RNG, thereby ensuring that the producers of RNG have a market.

10.Please comment on any other requirements or considerations for the Agrifood RNG for Transportation Demonstration program.

CCI would like to comment on the “mixed” messages regarding the amount of renewable content that is being pursued by the Province. On a few occasions, the Province has stated that they wanted to focus on buildings and transportation, and to replace natural gas with RNG and hydrogen. We have also seen presentations that requested up to 2% of system gas by 2020 and the technical (not economic) potential of 10% of all NG consumed in Ontario by 2030. Both are ambitious and will not be achieved under the long timelines for MOECC amendments/approvals to implement the infrastructure that delivers on the objectives.

We thank you for the opportunity to comment and would welcome the opportunity to continue the conversation.

Respectfully,

Kevin Matthews, President

[Original Comment ID: 209738]