Lloyd. ethanol plant gets $71M

Biofuel production facing challenges

Husky Energy's ethanol plant in Lloydminster got a boost from Ottawa on Friday, receiving up to $71.8 million in assistance under the federal government's EcoEnergy program to sustain biofuel production in the face of volatile feed grains markets.

"I can make gasoline cheaper than I can ethanol," explained Bob Baird, vice-president of upgrading and refining for Husky at a news conference to announce the aid.

With ethanol plants in Lloydminster and Minnedosa, Man., Calgary-based Husky is Western Canada's largest ethanol producer, making 260 million litres a year, which is added to its Husky and Mohawk gasoline.

Last year, the Lloydminster plant purchased $22 million worth of low-quality grain from area grain producers. But price volatility has added a huge risk to the ethanol business.

The federal assistance works out to 10 cents per litre of production, an amount that will be reduced as profitability in the ethanol market improves.

"At a time when the market is depressed, this allows us to offset production costs and compete in the marketplace," said Baird. It also makes investment more sustainable by partially offsetting the risk associated with fluctuating commodity prices.

"Ethanol is a fledgling business. It is new and we have to support it in a fashion that will sustain it over the long term," he said. "Without this program, Husky would have to evaluate its operations, but we have been in this business for 25 years and this is one of our marketing advantages. I don't think we would drop out, since we have the infrastructure and know-how."

Federal Agriculture Minister Gerry Ritz said the goal of the $1.5-billion subsidy program is to help farmers take "full opportunity of emerging biofuels opportunities."

Ritz said Canadian targets for ethanol and other biofuels will consume less than five per cent of the nation's grain production.

"The vagaries of the weather" at this point are a bigger problem than the prospect of biofuels eating into Canada's food grains, said Ritz.

Baird said the grain bought by Husky is destined for feedlots, "and we are just taking the starch out of it" -- a boon for feedlot owners, who don't like starch in the feed.

"We do make feed grain afterwards with our distiller dried grain for feedlots, which is high in protein content," said Baird. "For the farmer, it provides a second channel to put his grain."

Ritz sees a bright future for ethanol in Canada once more provinces insist it must be added to gasoline.

Alberta currently has not mandated any amount, but is considering making five per cent the standard.

"Ontario has said 20 per cent, but are now backing off," he said.

"I think five per cent is doable, but it does take facilities two or three years to get into production," he said.

source: thestarphoenix