At its full impact, an ethanol incentive plan would cost the
Saskatchewan government close to $22.5 million a year and possibly have
a detrimental impact on the province’s main oil refinery.
Provincial energy minister Andrew Thomson says the province has an
opportunity to benefit from ethanol production, but there are
implications that must be weighed when developing policy.
“It is an interesting opportunity for Saskatchewan that we have a
chance to lead nationally on this, but it is complex issue also,” he
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said in an interview.
An ethanol industry proposal created by the Saskatchewan Agrivision
Corp. estimates that forgoing the 15 cent per litre fuel tax on ethanol
would cost the province $22.5 million, based on all gasoline used in
the province having a 10 percent ethanol blend.
The Agrivision blueprint recommends the province phase in the ethanol
mandated blend over several years, so the cost of the fuel tax rebate
would be lower in the early years. However, Agrivision also recommends
paying fuel retailers a 4.5-cents-per-litre incentive in the program’s
early years to cover the extra costs of preparing the infrastructure
for ethanol – largely cleaning storage tanks.
“Using incentives to develop an industry is pretty common,” said
ethanol task force chair Lionel LaBelle, who noted the oil industry
benefits from tax rebates for drilling wells.
Brad Wildeman, chief executive officer of Pound-Maker AgVentures in
Lanigan, Saskatchewan’s only commercial ethanol producer, said similar
ethanol incentives are available in other provinces and states. Other
major prairie ethanol producers are the Mohawk plant at Minnedosa,
Man., and API Grain Processors in Red Deer.
Thomson said the province is considering its ethanol options.
“Obviously, given the financial situation of the province, the request
of the nature being made for a rebate on fuel tax is significant and we
need to weigh that against other economic opportunities we may have.”
The impact on Federated Co-operative’s refinery has to be considered.
In the United States, ethanol is largely replacing MTBE, a fuel
additive with environmental problems. In Canada, ethanol would replace
gasoline and so the impact on refineries would be greater, he said.
Thomson would prefer the federal government set fuel standards, giving
a level field for all refiners in all provinces.
He also noted that the Agrivision plan calls for smaller ethanol
plants. While new technology has made ethanol production more efficient
than a decade ago, he said facilities still need to be large enough to
capture econ-omies of scale so that adding ethanol to fuel will not
cause retail prices to increase.
LaBelle said gasoline costs should not rise because the cost of the
ethanol will be partly offset by its ability to boost the octane level
of a lower-cost, lower-octane gasoline component of the blend.
The government and Agrivision agree ethanol exports also hold promise.
California will require oxygenated fuels by 2003, and it is expected
that millions of litres of ethanol will be imported to meet that need.
