Ethanol – WP Special Report

Reading Time: 5 minutes

Published: November 21, 2002

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.

About the author

Karen Briere

Karen Briere

Karen Briere grew up in Canora, Sask. where her family had a grain and cattle operation. She has a degree in journalism from the University of Regina and has spent more than 30 years covering agriculture from the Western Producer’s Regina bureau.

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