February 23, 2004

Seven ethanol projects granted $78m in federal funds to expand Canadian production

Seven proposals by Suncor, Husky Oil and four other companies to build new fuel ethanol facilities have been selected to receive a total of $78.2 million under the federal government's Ethanol Expansion program. The companies and facility locations include: Okanagan Biofuels, Kelowna, British Columbia; NorAmera BioEnergy, Weyburn, Saskatchewan; Husky Oil Operations, Lloydminster, Saskatchewan; Husky Oil Marketing, Minnedosa, Manitoba; Suncor Energy Products, Sarnia, Ontario; Seaway Grain Processors, Cornwall, Ontario; and Commercial Alcohols, Varennes, Quebec.

The 750 million litres of annual fuel ethanol capacity planned by these projects will more than quadruple Canadian production (currently about 200 million litres per year), increasing supply to almost 1 billion litres. This represents a significant step toward the government's goal of 35% of Canadian gasoline containing 10% ethanol by 2010. This requires 1.4 billion litres of fuel ethanol per year. There are currently more than 1,000 retail locations selling ethanol-blended gasoline in Canada.

Expanding the availability of fuel ethanol will help address climate change and create new economic opportunities. The seven projects will produce fuel ethanol from grain (corn or wheat) using proven technology. Ethanol produced from grain reduces greenhouse gas (GHG) emissions that contribute to climate change by up to 40% compared to gasoline. All gasoline vehicles manufactured since 1979 can use ethanol blends of up to 10%.

"By working together with the private sector to increase production of ethanol-blended gasoline, the government of Canada will ensure that our transportation sector will reduce GHG emissions that contribute to climate change," said Natural Resources Canada Minister R John Efford.

Project details and funding allocations are as follows.

Okanagan Biofuels is receiving $10 million to retrofit and existing distrillery in Kelowna into a biofuels facility with a projected annual production capacity of more than 110 million litres of fuel ethanol per year, using at least 300,000 tonnes of low-grade wheat annually as feedstock. An additional product will be distillers' dried grains.

NorAmera BioEnergy, a small player relative to other ethanol production companies in Canada, has been granted $10 million to convert the long-defunct Weyburn distillery into a$20-million state-of-the-art ethanol plant. Once the project is completed, the plant will produce 25 million litres of ethanol and 23,000 tonnes of high-protein grain residues per year. The facility will purchase about 67,000 tonnes of locally grown wheat annually.

Husky Oil Operations and Husky Oil Marketing are both subsidiaries of Calgary-based Husky Energy. The company is the only retail marketer of ethanol-blended fuels in western Canada. Husky Oil Operations' planned 130-million-litre-per-year ethanol plant, will be built adjacent to its heavy oil upgrader at Lloydminster $90 to $95 million. It will process approximately 350,000 tonnes of locally grown grain per year, using proven grain dry-milling technology. The project is receiving $7.8 million from the fund. Husky Oil Marketing's Manitoba project, allocated $6.4 million, involves the expansion of its existing ethanol production facility at Minnedosa from ten million to 80 million litres per year. Similar to the Lloydminster plant in process and operation, it will process approximately 210,000 tonnes of locally grown grain annually.

Suncor Energy Products' proposed plant in Sarnia, allocated $22 million, would be a world-class facility with a production capacity of more than 200 million litres per year, using regionally grown cord as feedstock.

Seaway Grain Processors is receiving $10.5 million for its planned facility in Cornwall. In addition to fuel-grade ethanol, the plant will market the main byproduct, high-protein grain residues, for use in animal feed. It will also capture byproduct carbon dioxide and sell it to a major industrial gas company for further processing.

Commercial Alcohols' Varennes project, allocated $18 million, involves a total investment of approximately $105 million and will be capable of producing more than 120 million litres of fuel-grade ethanol per year from more than 12 million bushels of corn. It will also produce more than 100,000 tonnes of distillers' grain and more than 90,000 tonnes of carbon dioxide for industrial use.

The federal government is also working with industry to research and develop new technology that would produce ethanol from agricultural residues (including straw and corn stalks) and forestry byproducts. Ethanol produced with this technology is expected to result in even greater GHG reductions - from 60 to 80% compared to gasoline.

The Ethanol Expansion program is part of a larger bio-fuels strategy that also includes the extension of the National Biomass Ethanol program, research and development under the biotechnology component of the Technology and Innovation Strategy, and an investment in biodiesel. The first round of the program has a total allocation of $78 million. Funding for this program is part of the $2-billion commitment to climate change action set out in the 2003 federal budget.

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