Earlier this year, the Saskatchewan government passed a series of
regulations aimed at promoting ethanol production and expanding the
province’s livestock industry. Proponents say an expanded ethanol
industry will create jobs, add value to raw agricultural commodities
and revitalize the rural economy. There are no fewer than nine ethanol
production plants on the drawing board in Saskatchewan and Manitoba,
but questions are being asked about the stability of feedgrain
supplies, the feasibility of markets for ethanol byproducts and the
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role of government as an investor and promoter of the industry. In this
special report, Western Producer Regina reporter Karen Briere examines
the future of ethanol production in Saskatchewan and across the
Prairies.
BELLE PLAINE, Sask. – Forget shiny new spades. On the Prairies, ethanol
is big business, and for that dignitaries need excavators to
symbolically turn sod.
When Saskatchewan premier Lorne Calvert and Denver, Colorado,
businessperson Pat Broe donned hard hats to perform the honors in a
wheat field midway between Regina and Moose Jaw in early October, it
marked the beginning of what they predicted will be a world-class
ethanol industry.
The provincial government, through Crown Investments Corp., and Broe
Companies intend to build three $55 million, 80-million-litre plants.
They will put up 40 and 60 percent of the cost, respectively.
Work has begun at Belle Plaine and announcements are expected in early
2003 for plants near Tisdale, in the province’s northeast, and in the
Melville-Yorkton area.
For decades, Calvert said, Saskatchewan people have dreamed of adding
more value to the agricultural commodities they produce.
“Today we take another piece of that dream and turn it into an economic
reality.”
The partners in the Belle Plaine venture say the benefits of an
expanded ethanol industry in Saskatchewan are many.
Investment in ethanol will create long- and short-term jobs, fuel a
growing livestock feeding industry and create another market for
low-quality feedgrains produced in Saskatchewan.
Beyond that, the province will be contributing to a greener environment
by encouraging production of a cleaner burning fuel.
But it isn’t all sweetness and light.
Soon after the ground had been broken at Belle Plaine, provincial
Liberal leader David Karwacki repeated his long-standing
concern that imported U.S. corn, not
locally grown grain, would be used to fuel Saskatchewan’s ethanol
industry.
And what of the 30 or more Saskatchewan communities that were
considering locally funded ethanol plants as a way to create jobs and
economic activity in their areas?
“For a lot of small communities, they saw a great opportunity to have
(their own plant),” said Brad Wildeman, president of Pound-Maker
Agventures, the province’s only ethanol plant.
“Their hopes are dashed. They’re simply not going to be able to get in
the game.”
The province of Saskatchewan announced its plan to develop an ethanol
industry last March, after years of debate.
According to the plan, the industry would be driven by the private
sector, with the goal of creating more jobs and wealth, said
then-energy minister Andrew Thomson.
The plan called for the removal of the fuel tax on ethanol produced and
consumed in Saskatchewan and mandatory ethanol blended gasoline.
“What this policy does not do is pick winners and losers,” Thomson said
at the time.
“Nor does it dictate the size and location of these facilities. I think
the policy will provide a good foundation for us to have a mix of
plants of various sizes around the province.”
But some say the government’s actions since then run counter to its
stated objectives.
The opposition Saskatchewan Party raised the issue in the legislature
earlier this spring, suggesting the efforts of community groups to
build small plants with integrated feedlots were being threatened by
the government’s decision to finance larger operations, like the one at
Belle Plaine.
If the province produces 400 million L of ethanol a year, as Thomson
suggested it would, then the three large, government-backed plants
could produce
approximately 240 million L – more than half the province’s supply.
Last month, the province added details to its plan when it passed the
Ethanol Fuel Act regulations. Those call for fuel volumes to contain
2.5 percent ethanol by July 1, 2004. That will gradually rise to 7.5
percent by April 1, 2005.
The regulations also say that distributors must buy at least 30 percent
of their ethanol from plants that produce 25 million L per year or less.
“I wonder if the production is going to be on stream, particularly for
the smaller plants,” mused Saskatchewan Party energy critic Lyle
Stewart.
“The regulations seem to pose more questions than they provide answers.
What happens if (fuel distributors) claim they can’t obtain it (from
small plants)?”
It remains to be seen how much ethanol will be produced by smaller
plants but there are several projects on the drawing board.
In July, Moose Jaw-based NorAmera BioEnergy Corporation announced it
had purchased a former distillery in Weyburn and would, by next summer,
begin producing up to 12 million L of ethanol. The company has no plans
to add a feedlot, but it is looking at doubling the plant capacity in
future.
Last week, officials from Alberta-based Canadian BioEnergy confirmed
they
hope to establish three new facilities in
Saskatchewan.
Those plants, which would include ethanol production and integrated
feedlot operations, would each produce about 23 million L a year and
would feed
approximately 20,000
cattle annually.
The proposed plants would be located near Nokomis, Porcupine Plain, and
in the Abbey-Cabri area.
A fourth group near Unity has also expressed interest in developing a
plant, said Grant Olsen, vice-president of Canadian BioEnergy.
Financing would come from a variety of sources with a heavy emphasis on
community investment.
Olsen, who helped design the Pound-Maker facility in Lanigan, Sask.,
said
business plans are being developed and community groups are looking at
ways
to raise capital.
Canadian BioEnergy is also involved in a proposed project in Russell,
Man., where Manitoba BioRefiners Inc. is studying the feasibility of a
24-million L facility.
Elsewhere in Manitoba, the Parkland Agricultural Resources Co-operative
has signed an agreement with a Toronto-based company, Outlook Resources
Ltd., to study the feasibility of an 80-million L facility near Dauphin.
Saskatchewan Agrivision Corp., a coalition of farm and business leaders
that promotes value-added processing, did its own assessment of the
province’s ethanol industry.
Last February, the organization called for five or six plants, each
producing between 25 and 30 million L a year and integrated with
feedlots.
“Our initial goal was to use it as a real social stepping stone,”
president Red Williams said. But he acknowledged that many of the
communities considering ethanol probably wouldn’t be able to come up
with the capital to finance such ventures.
He said he understands why the province jumped at the chance to partner
with Broe.
“Rural Saskatchewan needs to attract $20 billion worth of investment in
the next 20 years,” he said.
“We have to move with some alacrity and we have to jolt some of these
industries.”
Williams noted there is provision, through government regulations, for
producer-owned facilities.
The province’s minister of industry and resources agrees.
“It’s part of a package that can attract investment,” said Eldon
Lautermilch.
“We can use it as a tool to ensure we can move the province up the food
chain.”
He said the fact the government will own between 15 and 40 percent of
each plant means there will be benefits for all residents.
“We as a government have chosen to take an equity position, which means
we are part owners,” he said.
“We share the risk but also share in the potential for profits.”
At the Saskatchewan Research Council’s petroleum branch, senior
scientist Keith Hutchence has studied ethanol for years. He also
retains an interest in the family farm.
He said three-quarters of a full-time job is created for every million
L produced at an ethanol plant.
“The overall effect is three times that,” he said. “It probably could
make a town viable.”
Hutchence said the province has to look to the land for new
opportunities.
“The oil is going to go into decline. That’s inevitable. Potash and
uranium won’t save the economy. The only real resource Saskatchewan has
got is the land.”
Williams added that if Ottawa implements a national mandate,
Saskatchewan will be ideally positioned.
“That will solve all our problems,” he said.
