North West Terminal Ltd. is forging ahead with an ethanol project in Unity, Sask., despite being excluded from a federal funding program.
The original plan was to build an $80 million, 150 million litre facility next to the farmer-owned inland terminal.
The plan was scrapped when the federal government rejected North West’s application for a $10 million grant through the Ethanol Expansion Program.
“We’ve probably halved the size of our plans,” said North West general manager Jason Skinner.
“I think we’re looking at more of a medium-sized ethanol plant now. Something in the neighbourhood of 50 million litres to 90 million litres.”
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Without federal funding to kick start the venture, promoters will be forced to raise the necessary capital by reaching out to local investors and forging partnerships with other companies, a challenging prospect in uncertain times.
Skinner said it is unfortunate that a farmer-owned venture in the heart of Canada’s farm sector received none of the $46 million available through round 2 of the ethanol program, while more than $25 million was given to companies such Husky Oil and Commercial Alcohols Inc.
When he looks south of the border he sees an ethanol industry that is centered in the midwestern states and where farmers own 44 percent of the plants built or under construction.
“That doesn’t seem to be the model that we’re looking at in Canada,” he said.
“We seem to have a model where a lot of the ethanol production is getting concentrated in the hands of your larger multinational companies.”
Lionel LaBelle, president of the Saskatchewan Ethanol Development Council, said North West wasn’t the only group left out of the ethanol program.
He estimated half the projects seeking funding were unsuccessful.
“There was some frustration with that program,” he said.
Five of the 11 projects that received funding through two rounds of the program are from Ontario and took nearly half of the available money.
“Why wouldn’t we have the bulk of the ethanol industry in Western Canada?” LaBelle said.
Skinner said despite the recent setback in Ottawa, his board of directors is resolved to build a new plant in Unity, starting next summer.
North West will put money into the project but local investors will largely determine the shape it takes. Options include a stand-alone plant or a fully integrated facility where the methane generated from a connected feedlot powers the plant.
Last week the terminal mailed an expression of interest letter to a group of qualified investors in the Unity area. How people respond to that solicitation will dictate the scope of the project.
Once that process is complete North West will enter into negotiations with potential partners and financial institutions.
Skinner said the plant in the original plan would have required 15 million bushels of wheat.
The new proposal will likely need three to eight million bu. from area farmers.
