Saskatchewan moved last week to cut its ethanol fuel subsidy and bring it in line with neighbouring provinces.
Economy minister Bill Boyd said the final decision to phase out the program hasn’t been made, but budget documents and the government website indicate the program will end.
A recent review of the program, required by provincial ethanol legislation, also recommended it end.
For this year it has been cut from a $24 million annual expenditure to $16 million and the subsidy reduced from 15 cents per litre to 10 cents.
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“We wanted to bring it in line with the other provinces at 10 cents a litre, so we’ve done that the first year here,” Boyd said after the March 20 budget speech. “We’ll continue to have ongoing discussions with the industry about the eventual phasing out of the program.”
Since it was implemented in 2002, the program has paid out $127 million to ethanol distributors who blend fuel at the mandated 7.5 percent rate.
Six distributors participated in the voluntary program: Consumers’ Co-op Refineries Ltd., Parkland Industries Ltd., Imperial Oil Ltd.-Esso, Suncor Inc.-Petro-Canada, Shell Canada and Husky Oil Ltd.
All except Husky were required to buy 30 percent of their ethanol from plants with capacity of less than 25 million litres per year. Husky is also an ethanol producer.
Saskatchewan has five plants with total capacity of 344.75 million litres, which far exceeds average provincial use of a 177 million litres per year.
However, production has been less than capacity at an average 253 million litres in 2009-11, according to the ethanol review.
The largest ethanol plant is Terra Grain Fuels in Belle Plaine at 150 million litres capacity, followed by Husky in Lloydminster at 130 million litres. North West Terminal at Unity produces 25.25 million litres, Nor-Amera at Weyburn produces 24.50 million litres and Pound-Maker at Lanigan produces 15 million litres.
The ethanol strategy’s original goals included production capacity of 400 million litres per year and a market of 1.08 million tonnes per year of grain.
Boyd said the strategy has done its job.
“We believe that it’s met the goals that were set out originally,” he said.
“I would say this is an industry that we think the taxpayers have put a very significant amount of money into over the years. We think it’s at a stage now where the industry has to either be viable or non-viable.”
Manitoba is expected to phase out its program by 2015 and Alberta the year after that. Both pay their subsidies to ethanol producers.
