October 17, 2005

Ontario finalizes Renewable Fuels Standard rule, opens ethanol growth fund

The Ontario government has finalized its Renewable Fuels Standard, enshrined in Regulation 535/05, and is now ready to accept applications under the Ontario Ethanol Growth Fund (OEGF).

"We are now issuing an invitation to all proponents with an interest in the domestic production of ethanol," said Agriculture, Food and Rural Affairs Minister Leona Dombrowsky. "Providing construction assistance of up to $32.5 million and variable operating grants will help Ontario's producers contribute to cleaner air."

The Renewable Fuels Standard regulation will require all gasoline wholesalers and importers in Ontario to achieve a 5% average of ethanol content in their gasoline as of January 1, 2007. This may be achieved through the actual blending of ethanol, or through the trading of renewable fuel credits. All ethanol blends will be required to meet technical standards and fuel specifications to ensure quality and drivability.

This requirement is projected to reduce greenhouse gas (GHG) emissions by 800,000 tonnes annually, an amount equivalent to taking 200,000 cars off the roads. Producing, refining and using a litre of ethanol-blended gasoline emits fewer greenhouse gases than a litre of ordinary gasoline.

Regulation 535/05 will also provides for simple, but enforceable, reporting of the trading of renewable fuel credits to those who are unable to reach 5%. Included in the regulation as well are incentives for cellulosic ethanol that recognize additional environmental benefits, and a phase-in period designed to allow more time for infrastructure development in northern Ontario; implementation there will be delayed until 2010.

The 12-year, $520-million Ontario Ethanol Growth Fund (OEGF) was announced in June 2005. Its purpose is to ensure that when the Renewable Fuels Standard goes into effect, Ontario ethanol plants will be producing as much as 750 million litres of ethanol annually. The OEGF will provide capital and operating assistance for ethanol facilities, support for independent retailers selling ethanol blends, and support for ethanol-related research and development.

The OEGF's capital assistance component is intended to help manufacturers address financing challenges when building new or expanding ethanol plants in Ontario. It will provide up to ten cents per litre of plant capacity, in the form of one-time capital grants or loan guarantees. A due diligence process will be used to assess applications, taking into account eligible costs, plant capacity and financial situation.

Operating grants under the OEGF will help ethanol production facilities manage fluctuating input and output prices. They will also provide operating assistance to ethanol plants in production between 2007 and 2017. The maximum value of the grants will be 11 cents per litre of ethanol produced, calculated using a formula based on fluctuating market prices of corn, ethanol and crude oil. The province will support a total production capacity of up to 750 million litres per year.

Under the OEGF, independent gasoline distributors and/or retailers who were blending ethanol prior to June 17, 2005 may qualify for assistance to help them meet the requirements of the Renewable Fuels Standard.

Finally, the OEGF's research and development fund will help farmers, environmental and bio-based businesses create research and investment opportunities in the ethanol manufacturing sector, and will help create a platform for a wider bio-based economy. More details about these two initiatives will be forthcoming.

Full details about eligibility, application procedures, proposal evaluation and disbursement of funds are available in the document "Ontario Ethanol Growth Fund: An Invitation to Proponents," which is posted on the Agriculture, Food and Rural Affairs Web site, www.omafra.gov.on.ca/english/policy/oegf/index.html.

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