VIDEO: $400 MILLION BIOFUELS PLANT ON THE LINE IF AB CREDIT NOT EXTENDED TO 2017

Craig Chandler, spokesperson for Dominion Energy Services, proponent of a $400 million biofuels plant at Innisfail

Alberta’s opportunity to take the lead in North American biofuel production may be jeopardized if the provincial government does not extend a production credit program slated to expire in 2011, says a spokesperson for Dominion Energy Services, the proponent of what would become the largest plant on the continent. Craig Chandler says the $400 million project slated for the Innisfail area is not economic without the credit.

Dominion announced in 2006 it would build an integrated biodiesel and ethanol refinery in partnership with The Carlyle Group LLC, one of the world’s largest private equity funds, and its affiliate Riverstone Renewable Energy Infrastructure Fund. The complex would include a canola crushing plant, a biodiesel refinery and an ethanol refinery. Total production will be 374 million litres per year.

Parliament passed Bill C-33 several years ago, mandating that beginning this year gasoline will contain five per cent ethanol and in 2012 diesel fuel will be two per cent biodiesel. According to a Natural Resources Canada web site, as of 2002 there were five plants in Canada producing a total of 175 litres of biofuel annually.

MLA Jonathan Denis, parliamentary secretary to energy minister Mel Knight, says current Alberta production won’t meet provincial needs under the new federal requirements. Alberta currently has one producing plant,Permolex International L.P in Red Deer. The only will be to import biofuel from other provinces, probably Saskatchewan, or from the United States.

“We either produce the fuels ourselves or we import it from elsewhere,” he said. Mr. Denis supports the production credit program, but insists that it have an end date. He worries that the Province will commit to helping establish biofuel plants and then be on the hook to subsidize them for the long-term. 2017 would probably be an acceptable end for the program, he says, but the government has not yet reviewed it.

The Progressive Conservative caucus will discuss the credit in late January or early February and report to cabinet. Mr. Denis expects the program to be extended.

“I just don’t see a downside to this given what we’re dealing with,” he said.

The Alberta NDP isn’t so sure. Energy critic Brian Mason sees “some real issues around the use of food to produce fuel.” He says biofuels aren’t a great way to reduce CO2 emissions because hydrocarbons are still used in the production of the feed stock and in the manufacture of the biofuel. He prefers that industry use waste and biomass rather than take feed grains out of the human food chain.

Liberal Kent Hehr says his party supports the extension, though they too would prefer to see waste used ahead of grains. The Liberals consider biofuels part of a long-term strategy for Alberta and Canada to become carbon neutral. Mr. Hehr says the industry needs support until it becomes financially viable and he thinks a 2017 end date to the production credit is acceptable.

A Wildrose Alliance representative could not be reached for comment.

The American market is an even bigger opportunity, says Mr. Chandler. The 2007 U.S. energy bill mandated the country to use 9 billion gallons of biofuel annual by 2008 and 36 billion by 2022. Not all Americans are happy about the mandated ethanol in their gasoline, but the Obama administration’s determination to lower U.S. dependence on foreign oil and cut greenhouse emissions suggests the mandate will remain in place, says Mr. Chandler.

Given the huge productive capacity of Western Canadian agriculture, building biofuel plants in Alberta just makes sense, he said. Mr. Chandler says he is generally opposed to government grants to business. In this case, however, funding recipients are held accountable because they are only paid upon production.

The program guidelines call for nine cents per litre for plants larger than 150 million litres to a maximum of $20 million per year and a total of $75 million for the project. Smaller plants receive 14 cents per litre and a maximum of $15 million per year (the guidelines do not prescribe a project total).

Electricty produced by the plants is also subsidized. Those that produce three megawatts or more receive two cents per kilowatt hour. Production less than that amount receives six cents per kilowatt hour.

DOMINION ENERGY SPOKESPERSON CRAIG CHANDLER