U.S. Ethanol Imports Force out Canadian Producers, Domestic Industry at Risk: Expert

by Matthew Frank (The Carillon) Manitoba ethanol producers and experts are raising alarms that U.S. subsidized biofuel imports could push domestic biofuel production to the brink of collapse.

The province’s only ethanol plant, located in Minnedosa, 240 kilometres west of Steinbach, will no longer be profitable by 2034 and could face layoffs or potentially shut down, said senior plant manager Avi Bahl.

Owned by Calgary-based oil and gas firm Cenovus Energy, the Minnedosa Ethanol Plant produces more than 160 million litres of ethanol annually. But due to heavily subsidized U.S. ethanol being imported at cheaper prices and favoured by federal policies, he said his plant can’t compete.

In September the federal government announced $370 million in measures to incentivize biofuel production, along with amendments to the Clean Fuel Regulation. However, no details were given on what the amendments are, and ethanol wasn’t included in the measures.

The only thing that separates ethanol is whoever has the lowest carbon intensity, Bahl said, and that person gets the premium price.

If the 57-year-old plant shut down, Bahl said roughly 50 local jobs would be lost, grain farmers would lose a key buyer and Minnedosa would lose a revenue source.

Forty trucks deliver grain per day, five days a week, to sustain the plant’s ethanol production. Annually, the plant processes 385,000 tonnes of corn. Since opening in 2008, the plant has spent $1.2 billion on Manitoba grain.

He said the plant sources 85 percent of its corn from Southeastern Manitoba. Bahl would ramp production if he could, but since the province doesn’t produce enough corn domestically, he said the plant is forced to supply the rest from the U.S.

The plant is also subject to industrial carbon taxes due to its need to operate a natural gas dryer for its unavoidable ethanol byproduct, dried distilled grain.

Bahl said the only reason the dry grain is needed is because feedlots are too far away to ship it wet because it would spoil faster.

He (Robert Parsons, a University of Manitoba supply management instructor) said the federal and provincial governments need to take action by removing the Clean Fuel Regulations, slashing the industrial carbon tax and banning U.S. ethanol imports, similar to how U.S. booze was ripped from Canadian retail shelves in March.

While it would be painful for Canadians because ethanol supply would drop, preserving the industry and domestic jobs is worth the price of not relying on the U.S., Parson said.

Both B.C. and Ontario governments have already put made-in-Canada requirements on ethanol use. B.C. announced in February the five percent renewable fuel requirement for gasoline must only use Canadian-produced renewable fuels.

Ontario announced its own on Aug. 8, mandating 64 percent of its renewable fuel for gasoline be made domestically.

The federal government could increase the amount of credits for domestic ethanol production, bringing it into parity with U.S. exports, Fred Ghatala, president of Advanced Biofuels Canada said.

He said the federal relief funding isn’t enough to support the biofuel industry.

“If there is not viable Canadian biofuel production, we worry about the long term viability of the clean fuel regulations,” he told The Carillon.

Manitoba requires 10 percent renewable fuels in gasoline and five percent renewables in diesel. Ghatala said the province has a “strong opportunity” to increase that requirement, which, combined with domestic protections, could spur growth for the local biofuel industry.

Bahl said while the protection measures in B.C. and Ontario help stabilize producers there, he’s worried it will redirect the U.S. ethanol supply to provinces that don’t have similar measures, including Manitoba, and flood the market.

Canadian producers aren’t the only ones suffering from American ethanol imports. In August, one of the U.K.’s two ethanol plants shut down because it couldn’t compete with U.S. imported ethanol undercutting its prices.

Minnedosa’s plant got its start as a whiskey distillery in 1968, shipping its whiskey to the U.S. Costing $4 million at the time, the distillery owned by Canada’s Manitoba Distillery Limited was one of the province’s first distilleries.

It was opened with provincial fan-fair, as former Premier Walter Weir drove a forklift carrying the symbolic first barrel, according to a 1968 Manitoba press release.

The plant garnered international attention, with The New York Times publishing an article on the distillery’s announcement in 1960.

The distillery closed in 1973 and reopened as a ethanol fuel plant in 1981, ran by Husky Energy. Ownership transferred to Cenovus Energy when it bought out Husky Energy in 2020. READ MORE