The federal government has finally put meat on the bones of last December’s $200 million announcement to encourage producer involvement in the biofuel sector.
The EcoAgriculture Biofuels Capital Initiative is a four-year program providing repayable contributions of up to $25 million to help farmers participate in the fledgling industry. The program runs through March 31, 2011.
“This is the first program to give farmers capital assistance to construct or expand biofuel facilities,” said agriculture minister Chuck Strahl during the April 23 launch of the program.
Funding will be available to corporations, individuals and partnerships using agricultural feedstock to produce biofuel if those ventures have a farmer investment amounting to at least five percent of the eligible program costs.
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Reaction to the initiative has been largely positive.
“We’ve been anxiously awaiting this announcement,” said Jason Skinner, general manager of North West Terminal Ltd., a farmer-owned inland terminal in Unity, Sask., that is building a 25 million litre ethanol facility in that community.
“This type of program is certainly needed to help farmer projects like ours actually get off the ground because one of the big challenges for us is accessing enough equity and senior debt,” he said.
Kory Teneycke, executive director of the Canadian Renewable Fuels Association, said it’s just what growers needed.
“We are proud to support the EcoABC program as it will help farmers invest directly in biofuel facilities, not just supplying them with grain.”
Brian Tischler, president of the Canadian Canola Growers Association, said Strahl’s announcement was another step in the right direction.
“This program is an important initiative from a grower perspective. The policy environment on renewable fuel is now more clearly defined and we can expect to see significant investments here in Canada to get the industry up and running in the near future.”
Agriculture Canada will be administering the program. The EcoABC contributions will be paid after the facility has been constructed and is producing at its capacity. Eligible project costs must be incurred after the date a contribution agreement is signed.
Skinner said while the money will not be available up-front, it will have the same impact as a loan guarantee, giving banks the confidence they need to lend money to biofuel projects.
The timing couldn’t be better for North West Terminal. The group has raised $16.4 million under a share offering for its $42 million project and needs to secure bank financing before it can close the offering.
Skinner wants to have a close look at the details of the EcoABC initiative, but he anticipates his company will be applying for a share of the federal government’s $200 million repayable contribution.
“We certainly appreciate this,” he said.
Skinner also appreciated the federal government’s recognition that farmers need to play more of a role in the emerging biofuel industry than delivering their crops to the plants. But he did have one criticism.
“I’m surprised the amount of producer ownership declared is so low. It would be nice to see that higher.”
Repayment of the contribution will begin Jan. 1, three years after the eligible facility starts producing at capacity, and will continue for seven years or until the original contribution has been fully reimbursed.
