One sentence uttered by the president of the United States has given that country a leg up in wooing a $300 million US ethanol project away from Western Canada.
In his Jan. 31 state of the union address, George Bush outlined how the country plans to replace more than 75 percent of its Middle East oil imports by adopting alternative energy sources and developing new auto technology. He specifically cited ethanol production, not just from corn but from other sources like straw.
“Our goal is to make this new kind of ethanol practical and competitive within six years,” said the president.
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That statement was music to the ears of Maurice Hladik, marketing director of Iogen Corp., a Canadian company that has talked about building a large-scale, straw-based ethanol plant somewhere in North America since the turn of the century.
Over the years the company has narrowed the potential site for its 150 million litre plant to three locations: Vegreville, Alta., Birch Hills, Sask., and Idaho Falls, Idaho.
While all three remain in the running for the plant, Bush’s comments, in conjunction with a biorefinery initiative announcement that will see $150 million in the president’s 2007 budget dedicated to accelerating cellulosic ethanol projects, has given momentum to the Idaho Falls bid.
“They have moved the yardsticks down the field a little bit in their favour,” said Hladik.
Iogen has promised to build a new plant since 2000 when it announced that if all went according to plan, construction would begin on the project in the spring of 2002. Six years later, there has been only a series of similar encouraging announcements.
The delay has nothing to do with the company or its technology and everything to do with a lack of commitment from governments, said Hladik.
“For some reason or another governments can’t make up their minds to really share the risk with us.”
Shell Oil Co., Iogen’s major investment partner, will not provide funding to the project until it sees a government program providing a loan guarantee up to a maximum of $250 million.
To date that hasn’t happened, but Bush’s speech might prompt action to get paperwork rolling south of the border.
“The potential for an early tipping of the scales in the U.S. looks good, looks better than it did before the announcement.”
But Hladik emphasized it is not too late for provincial governments to respond and tip the scales back in Canada’s favour.
Eric Cline, Saskatchewan’s minister of industry and resources, said his province is the first in Canada to implement an ethanol mandate, a policy that was good enough to attract two large-scale plants, one being built by Husky Energy Inc. in Lloydminster, the other by NorAmera Bioenergy Corp. in Weyburn.
He said a $250 million guarantee is a “pretty big ask” from Iogen.
“That becomes a grant if the project doesn’t work because the taxpayers are on the hook,” said Cline.
Iogen is mistaken if it expects Saskatchewan to compete with the American treasury, he said.
“I can tell you that would not be on,” said Cline, although he added that the province could play a minor role in a guarantee offered by the federal government.
Gordon Dyck, mayor of Birch Hills, wants the newly elected Conservative government to do just that.
“It is up to the politicians to make sure that we get that momentum back,” he said.
The Birch Hills plant could employ as many as 100 people and the spin-off jobs in the bailing, trucking and construction industries could create 10 times that many jobs, he said.
“We’re quite enthusiastic. We think it is still very much on the front burner,” said Dyck.
Hladik agreed, noting that there is a lot of wiggle room between a U.S. president’s indication of support and the actual delivery of a loan guarantee. And he pointed out that Iogen would sooner build its first plant on its home turf.
“We are as interested in Western Canada as we were before this (Bush) announcement,” he said.
