Innisfail project still in limbo

A company seeking to develop a $200-million ethanol plant near Innisfail has moved two steps forward but also one step back.

A company seeking to develop a $200-million ethanol plant near Innisfail has moved two steps forward but also one step back.

Alberta Ethanol and Biodiesel last month signed an agreement with Natural Resources Canada for funding under the federal ecoEnergy for Biofuels Program.

That agreement, which would give it a per-litre financial incentive for the ethanol it produces, had been identified as a prerequisite for the Innisfail project to proceed.

“We’ve signed the contract, they’ve signed the contract, so we’re pretty happy about that,” said Curtis Chandler, the CEO of Dominion Energy Services LLC, which created Alberta Ethanol and Biodiesel.

“It took way longer than anticipated,” he added. “It’s been years.”

Alberta Ethanol and Biodiesel got more good news on Monday in the form of written confirmation that it will also receive a $5-million capital grant under Alberta’s Biorefining Commercialization and Market Development Program.

However, it’s also learned that it may not get the financial support it had anticipated from the Bioenergy Producer Credit Program — Alberta’s version of the federal ecoEnergy for Biofuels Program.

The Bioenergy Producer Credit Program was slated to wrap up this year but has been extended until 2016. However, its terms are expected to change.

“There will be some difference in how it operates,” confirmed Susan Carlisle, director of alternative energy with Alberta Energy.

Details are to be announced within weeks, she added.

“We’re presenting to industry next week and giving them a short window to respond on it.”

The resulting uncertainty is causing some anxiety for Alberta Ethanol and Biodiesel, said Chandler.

“We’re going to have people in Edmonton next week to figure out how all that is going to work and how that actually is going to affect our project.”

Of greater concern may be the fact that the Innisfail project can’t commence until Alberta Ethanol and Biodiesel’s entitlement under the province’s production incentive program is known.

“We have to have the plant built by September 2012 under the federal program,” said Chandler, adding that construction is expected to take about 18 months.

If this timetable is compressed, he said, it will make the project more difficult and costly.

“We are up against a wall.”

Chandler said Alberta needs more ethanol production, especially with the province now requiring that gasoline sold here contains at least five per cent renewable alcohol.

“It’s going to either come from B.C. or the United States,” he said.

“It would be a shame to ship grain out of province and have jobs created elsewhere.”

However, the high cost of developing an ethanol plant makes production credits essential — at least during the initial years of operation when a heavy debt load must be supported, said Chandler.

First announced in 2006, the Alberta Ethanol and Biodiesel plant is expected to produce up to 140 million litres of ethanol a year, as well as 40,000 tonnes of vital wheat gluten, 145,000 tonnes of distillers dried grains and solubles, and 100,000 tonnes of marketable carbon dioxide. It would consume as much as 419,000 tonnes of feed wheat annually.

In addition to the $5 million capital grant from the province, Alberta Ethanol and Biodiesel would rely on a mix of equity and debt to finance the Innisfail plant. Farmers were invited last year to invest but failed to respond, said Chandler, who thinks poor crops were a factor.

Producer investment was not necessary for the project to proceed, he added.

“That was never factored into our economics.”

hrichards@bprda.wpengine.com