The Alberta government should not be subsidizing ethanol
Dear editor,
The Alberta government has spent tens of millions of taxpayer’s dollars subsidizing bio-mass ethanol plant projects. As a business model, bio-mass ethanol plants are a prime example of corporate welfare that has so far proven to be uneconomical.
Now Florida based Dominion Energy Services LLC is proposing to build an ethanol plant in Innisfail, and Aspen Bio-Energy Corp is proposing to build an ethanol plant in Rimbey. What makes them different? Can they change the current model and succeed without continuous government subsidies?
To arrive at an answer it helps to understand how the industry currently operates today. As major investors in ethanol plants, British Petroleum (BP) and Agri-business conglomerates Archer Daniels Midland (ADM) and Cargill are skilled at obtaining taxpayer subsidies to facilitate structured deals designed to eliminate or reduce their risk in bio-mass ethanol production. Unfortunately risk is never reduced. In these types of deals, risk is transferred from the owner to the taxpayers and the unsuspecting farmers who are lulled into investing in the plant believing this is a great opportunity to establish a new market.
A good example of the transfer of risk recently surfaced in Billings Montana. The bio-mass plant in Billings reportedly failed to pay farmers $1.2 million dollars, while investors enjoyed the protection of $1.9 million dollars in taxpayer grants.
In contrast to BP, Cargill, and ADM who have extremely large balance sheets and lots of experience, Dominion Energy Services and Aspen Bio-Energy have little resources and even less experience to build or manage a bio-mass ethanol plant. Dominion is owned by a Florida based hedge fund and has said it can only proceed if subsidies continue. Aspen Bio-Energy Corp appears to have less resources and less experience than Dominion. It is difficult to believe that Dominion and Aspen can succeed where BP, Cargill, and ADM have not. After all BP, Cargill, and ADM employ thousands of scientists and engineers that can research these matters.
Bio-mass ethanol plants may work or may not work without massive government subsidies. There seems to be no end to the debate surrounding this matter and little in the way of answers. Without answers it would be wise to transparently structure the deals for a bio-mass ethanol plant to advance the interests of the true risk takers – the taxpayers and farmers. Then again, we might be even wiser if the government directed its subsidies to invest in research and development in the sciences at the university level, rather than giving millions of taxpayer dollars to private companies that are skilled at filling out grant applications.
Joe Anglin, Rimbey
