Richard Blackwell

September 5, 2006

Sarnia, Ontario: It smells like a brewery, looks like a small petrochemical plant, and what comes out the back end is at the centre of a debate over Canada’s energy future.

The spanking new ethanol plant built by Suncor Energy Inc. on the outskirts of Sarnia, Ont., opened officially last week – it’s been operating since early summer – and is now Canada’s largest ethanol factory. It will generate about 200 million litres a year, enough to replace all of the imported ethanol Suncor has been buying to blend with gasoline it sells at gas stations across Ontario.

Suncor puts just under 10-per-cent ethanol in all the gas at its 300 Sunoco retail outlets in the province. The clean-burning fuel helps reduce engine emissions with a negligible reduction in gas mileage, the company says.

Still, ethanol has plenty of critics, even among environmentalists. Producing it takes an enormous amount of energy, they say, and without government incentives it would be entirely uneconomical.

The debate over ethanol has even spilled over into entertainment. An episode of NBC’s The West Wing early in 2005 dealt with ethanol subsidies as an issue in the fictional presidential election fight between Arnold Vinick and Matthew Santos.

That said, real-life governments have signed on in a big way and are boosting the industry with tax breaks, the promise of guaranteed markets – by setting minimum levels of ethanol in gasoline – and direct subsidies.

The new Sarnia plant, like most other ethanol factories across the country, wouldn’t exist if Ottawa hadn’t picked up some of the costs. The federal government’s ethanol expansion program, which has put more than $100-million into projects across the country, contributed $22-million of the $120-million price tag for Suncor’s new plant.

Ontario will help out with another $36-million in funding over the next three years.

On the surface, Suncor’s new ethanol plant is a model of efficiency. Every day as many as 40 trucks filled with corn kernels rumble up to unload their contents through a huge grate in the floor of the receiving shed. The corn is mostly from Ontario farmers within a 120-kilometre radius of the plant, although some is trucked in from Michigan.

The corn is then ground to expose the starch hidden under the fibre, and this is dissolved in water and cooked for 45 hours in huge tanks, along with enzymes and yeast that break down the starch into sugar, and then ferment it into alcohol. Essentially it’s a big distillery, although the end product is not whisky but a brew of 14-per-cent ethanol. The ethanol is stored on site and then shipped by truck or train to one of Suncor’s gasoline blending facilities in Ontario.

But that’s not the end of the chain. The dried remnants of the corn, which look like ground cereal, are loaded into trucks and eventually find their way by ship to Europe as animal feed. And the carbon dioxide released by the fermenting process, while it is now released into the air, will eventually be collected at a Praxair Inc. plant being built next door and sold as dry ice.

All this with a total contingent of about 40 employees.

The new Suncor plant, built on a former corn farmer’s field, will be doubled in size if the market demands warrants and the government subsidies keep on coming, said plant manager André Boucher.

But what would it take to make ethanol self-sufficient? Tom Ryley, executive vice-president of Suncor Energy Products, says ethanol could be economic “without a huge amount of government support” if corn prices were sustained at or below the current level of about $2.50 a bushel, and oil prices stayed above $70 (U.S.) a barrel. But with the price levels of those two commodities fluctuating, there is still a need for government support.

In fact, Mr. Ryley said, it was the government’s excise-tax break on ethanol that prompted Suncor to start blending it with its gasoline back in the mid-1990s. That government support for the ethanol component made it cheaper to produce the blended product.

Since then, with environmental concerns more front and centre in consumers’ minds, Suncor has also seen ethanol as a means to improve the company’s environmental performance.

But environmentalists aren’t as keen on ethanol as one might expect. Tom Adams, executive director of Toronto-based energy watchdog Energy Probe, concedes that ethanol is “a good fuel in a lot of respects” because it burns cleanly, but he still considers himself an “ethanol skeptic.”

One problem is “ethanol cannot make it on its own horsepower,” he said. “It’s highly dependent on government protection,” both from direct subsidies and the coming regulations that will force minimum levels in gasoline sold to consumers.