Canada pledges money, regulatory reform to boost biofuels

By Ed White

WINNIPEG, Manitoba, Sept 5 (Reuters) - The Canadian government on Friday promised hundreds of millions of dollars and less onerous regulations to boost biofuels production, which the country's agriculture minister said faces tough U.S. competition.

Prime Minister Mark Carney made support for biofuels and the canola industry one of six areas highlighted in an aid announcement designed to help companies deal with damage from U.S. tariffs and trade disruptions.

"We have the U.S. flooding the market with cheaper products, and we've got to do more for our guys here to ensure that they can continue to operate until we get clean fuels regulations amended," Agriculture Minister Heath MacDonald told Reuters.

Canadian canola, an ingredient in some biofuels, is also facing high duties and tariffs in China, the largest export market for canola seed.

The government pledged C$370 million ($267.79 million) in production incentives for Canadian biofuels producers and also said it would overhaul Canada's biofuels regulations.

Canadian biofuels producers and the canola industry have complained for years that the U.S. provides more incentives for biofuels production than those in Canada, discouraging Canadian output. A Canadian government investigation into U.S. biofuels supports concluded in May that U.S. programs do not qualify as "dumping and subsidizing" that have hurt Canadian producers, though.

The U.S. Renewable Fuels Association said U.S. and Canadian producers both benefit from supportive biofuel policies and should work together.

Canadian producers have also complained that regulations are confusing and an obstacle to investment in the sector. During the April election, Carney pledged to improve the situation.

Canada's largest renewable diesel facility, owned by Imperial Oil IMO.TO, which will use canola oil as one of its feedstocks, went into production in July. However, another major project was shelved this year over regulatory and trade concerns in Canada and the U.S.

Biofuels demand has become a key component in the world price of canola, as production in the U.S. and other countries has expanded in recent years and consumed a greater proportion of world vegetable oil crops.

($1 = 1.3817 Canadian dollars)