The biofuel boom that never was
2013-05-15 10:53:50
Seven years ago, Alberta's agricultural heartland eagerly awaited the birth of a new industry. Huge investments were announced for biofuel plants for Vegreville, Rimbey and Stettler. An ethanol and biodiesel refinery to be built in Innisfail promised to be the largest of its kind in North America.
Sadly for these towns-and the farmers who might have supplied the plants with feedstock-none of these projects has come to fruition. In March, the president of Dominion Energy Services, lead proponent of the Innisfail plant, unceremoniously returned a $4.6-million grant to the Alberta government, having never broken ground. "It was a bit of a mess," Curtis Chandler says of misaligned government incentives meant to help the industry bloom.
Following the lead of the Bush administration in the U.S., Canada's federal and provincial governments set minimum renewable-fuel content standards and allotted hundreds of millions of dollars to support fledging producers with credit programs. But today the enthusiasm has waned. "The overall industry hasn't developed at the speed we thought it would," says Kimberly Budd, a spokesperson for Alberta Energy.
The Alberta government closed its producer credit program to new applicants last month. It will have issued $440 million by the time it winds up in 2016. The province requires 5% renewable-fuel content in gasoline and 2% in diesel, which amounts to 400 million litres a year. But Alberta produces only 51 million litres a year today, and imports the rest.
Dominion's plant alone would have produced 150 million litres. But private funding for such projects evaporated after the financial crisis in 2008. The owner of a biodiesel demonstration facility in Airdrie who had ambitions to build as many as 12 plants in Western Canada has dropped those plans and converted the existing facility to make canola oil-for cooking purposes. Western Biodiesel Inc. stopped production at its High River facility in 2010; it recently went into receivership.
The biggest issue, Chandler says, was that the federal and provincial programs weren't properly aligned. Funding under Alberta's producer credit was based on the number of successful applicants each year, making financing a "moving target." The federal renewable fuels program insisted on a prohibitively tight construction timeline.
Not every biofuel plant proposal has gone bust. There are two renewable-fuels facilities operating and four more under way in Alberta. North America's largest biodiesel plant, spearheaded by Archer Daniels Midland, should be operating in Lloydminster by the end of the year.
The prospects for growth beyond that point are slim, though. The U.S. ethanol industry is so overbuilt that plants are idling today. (A few years ago, "you could have named your dog 'Ethanol' and taken it public," Chandler says.) As for biodiesel, new construction is unlikely without government assistance. Not only is Alberta's program kaput, Ottawa no longer accepts applicants to its renewable-fuels program. The Canadian Renewable Fuels Association lobbied to reopen it to feed biodiesel plant construction, but the federal government opted not to earlier this year.
"We had the ability to create an additional billion dollars in economic growth, and create over a thousand new jobs," says president Scott Thurlow. "None of those benefits will come to light." The association hopes the feds will consider raising the biodiesel content requirement to 5% from 2% to stimulate additional demand. Unless that happens, we'll still be awaiting the biofuels boom.