UNITY, Sask. – Mervin Slater wants farmers to participate in what has become a thriving energy sector in this eastern Saskatchewan community.
However, he doesn’t mean erecting more pump jacks in their fields. Slater envisions producers mining the resources above the soil, converting their cereal crops into ethanol.
“The oil wells that are out here will stop pumping some time,” Slater said. “They will go dry.”
Ethanol is the fuel of the future, he added, and a way to make farming viable again.
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His optimism is shared by Rick Bullerwell, fellow board member of Unity’s farmer-owned North West Terminal Ltd., site of a proposed $75 million ethanol plant.
Bullerwell’s commitment to the project was reinforced recently when he paid 25 cents for a 16-gram package of a wheat-based snack food.
“I worked that out and it was $600 per bushel. This ethanol plant isn’t going to make my wheat worth that much but it is going to push me up the chain
a little higher and extract a little bit more out of my bushel instead of sending it to the flour mill in
Korea.”
In addition to putting more money in farmers’ pockets, the 150 million litre plant would add 40 jobs to a town of 2,500 people and generate economic spinoffs for the construction and trucking industries and many other local businesses, Bullerwell said.
What is being proposed for Unity has been done dozens of times in the United States, where there are more than 100 plants either operating or under construction, half of which are owned by farmers.
By the end of 2005, the U.S. will have 15 billion litres of ethanol capacity compared to 221 million litres of output in Canada.
Expansion has been fast and furious in the U.S., fueled by federal incentives and the emergence of new markets in populous states such as New York and California, which use ethanol as a replacement for a banned fuel oxygenate additive.
But of late there have been disturbing developments south of the border. Coming off its most profitable year, the U.S. ethanol sector entered 2005 full of optimism. Then out of nowhere prices for the alternative fuel began to plummet.
Some blame it on a reluctance by oil companies to blend the competitive fuel into their petroleum products; others on overly ambitious expansion plans that will see another 3.5 billion litres of capacity come on line over the next 18 months.
Either way, the new economic reality is placing debt-laden plants in a financial squeeze and is making it tough for proposed new ventures to secure funding. Industry analysts feel the sector could be heading toward a period of retraction.
Most feel it is a temporary imbalance that will be rectified if the U.S. government adopts the renewable fuels mandate contained in a comprehensive energy bill before Congress.
But that bill has to wend its way through a time-consuming political maze and there is no guarantee what will come out the other end. Meanwhile, some suggest ethanol prices could be depressed for a few years.
Even though the U.S. oversupply situation could drag down Canadian ethanol values, the Unity proponents believe there is still plenty of room for expansion.
Five facilities are now making fuel ethanol in Canada, including three small plants in the West that have a combined capacity of 48 million litres, one-third the size of the plant proposed for Unity.
If it receives funding through the federal Ethanol Expansion Program, the Unity project will join a list of six other plants that have received government money to add another 650 million litres of capacity, bringing Canada’s total close to the one billion litre mark.
