Straw ethanol plant cancelled

Farmers skeptical

Shell, Iogen behind plans | Commercialization of new technology more difficult than expected

Farmers are shrugging off news of the demise of a cellulose ethanol project that never seems to get off the ground. 

Royal Dutch Shell is scrapping plans to build a 40 million litre facility in Portage la Prairie, Man., which would have used technology provided by Iogen Energy, a company Shell jointly owns with Iogen Corp.

Iogen Corp. will continue to employ 110 people at its Ottawa headquarters, but 150 jobs will be lost at Iogen Energy.

Iogen refused to comment on the development. A Shell spokesperson said the companies have agreed to a revised plan and will continue to pursue a cellulosic ethanol project with Iogen Energy and other collaborators. 

The demise of the Portage la Prairie plant is the latest in a long list of failures for a project talked about since the turn of the century.

The plan was to build a plant that would turn cereal straw into ethanol, but that is proving more difficult than developers had envisioned.

The Americans are also having problems. The U.S. Environmental Protection Agency established cellulose ethanol mandates of 100, 250 and 500 million gallons for 2010, 2011 and 2012, respectively, but they have since been reduced to 6.5, 6.6 and 10.45 million gallons.

Iogen and Shell have been raising the hopes of farmers across North America that they could finally get some value from the straw in their fields.

In 2005, they contracted 800,000 tonnes of straw with growers in Birch Hills, Sask., Idaho Falls, Idaho and Vegreville, Alta., in anticipation of building a plant in one of those locations. Those contracts lapsed without being exercised.


In 2009, the partners settled on building a plant at a former pulp mill in Prince Albert, Sask. 

They quickly renewed contracts with about 600 area growers for a plant that would require 300,000 tonnes of cereal straw.

Negotiations with Domtar, the mill’s owner, fell through and the project moved to Portage la Prairie. By this time, the proposal was a fraction of the original dream of a 220 million litre facility. A Shell spokesperson said it was contemplating about a 40 million litre facility.

Once again the company started contracting straw with area farmers.

Rolf Penner, a grower from Morris, Man., signed up some of his cereal acres, although he was never completely sold on the venture.

“I took the whole thing with a large grain of salt,” he said. “I was a little skeptical as to how it was going to work or whether it was going to work.”

And then there was the “pain in the butt factor.” Penner never got a good answer from Shell about who was going to bale the straw and when it would be removed from his fields. 

The contract he signed contained two pricing options, but details on both were “a little fuzzy.”


All in all, he wasn’t shattered to find out that the project had collapsed.

“There wasn’t a lot of money coming our way and it had the potential to have a lot of headaches,” he said.

Penner farms in heavy clay soil where minimal till is a more popular practice than zero till. Some people bale their straw and others burn it, but most chop it up and incorporate it into the soil.

“Straw management is always an issue. It would be nice if there is some magic solution to it, but if this isn’t it, then it’s not it,” he said.

Some farmers in Penner’s area have been removing his straw for use on their own fields. Last year he received a small amount of compensation for the product for the first time. 

“It’s nickel and dime stuff. It’s nothing major,” he said.

Still, it was nice to be paid for a waste product. Penner thinks the threat of competition from the Iogen plant may have prompted the sudden change in practice, but that threat has now been removed.