FOR ETHANOL PRODUCTION IN SASKATCHEWAN

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					GREENPRINT


FOR ETHANOL PRODUCTION IN SASKATCHEWAN
                                                            contaminants, for Saskatchewan and for Canada,

MESSAGE F R O M        T H E
                                                            by promoting the development of a solid ethanol
                                                            industry. Ethanol has great potential for improving
                                                            the environment while achieving a more diversified
                                                            economy in rural Saskatchewan with value-added

MINISTER                                                    jobs.

                                                            Many communities and individuals already
                                                            understand the benefits of a strong ethanol industry
                                                            in Saskatchewan and want to see the acceleration
                                                            of this industrial sector. The Government of
                                                            Saskatchewan will support the ethanol industry
                                                            through effectively eliminating the provincial fuel
                                                            tax on ethanol, specifically the ethanol included in
                                                            blended fuel produced and consumed in
                                                            Saskatchewan. Further, Saskatchewan will also
                                                            become the first jurisdiction in Canada to establish
                                                            the legal framework to allow for mandating an
                                                            ethanol blend in gasoline sold in the province. This
                                                            will enable us to implement such a mandate at a
                                                            time that makes sense for the ethanol industry and
                                                            Saskatchewan’s economy as a whole.

                                                            Saskatchewan’s ethanol markets need to be export-
                                                            driven, and we are taking the necessary steps to
I am pleased to present Greenprint for Ethanol              ensure these markets are reached. We will continue
Production in Saskatchewan, a strategy that will            to work with the federal government in order to
create new opportunities for Saskatchewan and               create an equal system for interprovincial export
notably enhance the province’s economy.                     opportunities for Saskatchewan. The following
                                                            information provides background on ethanol, the
This Greenprint was developed after extensive               potential for an ethanol industry in Saskatchewan
consultations with business, industry and residents         and details on the province’s strategy to develop
of the province.                                            this important industry.


As announced in March 2002 by the Honourable
Andrew      Thomson,        the   Government       of       Sincerely,
Saskatchewan is committed to building the
framework to develop this important industry for
our residents and for our future – an industry driven
by the private sector, built on sound business cases        Eldon Lautermilch
and with the goal of creating more jobs and wealth          Minister of Industry and Resources
in Saskatchewan.                                            April 2002


Ethanol is an environmentally responsible energy
source that will reduce the amount of greenhouse
gas emissions. The provincial government is taking
a leading role in reducing environmental



                                                        1
AN INDUSTRY                  FOR SASKATCHEWAN
The provincial strategy, Greenprint for Ethanol Production in Saskatchewan, will create a framework
to stimulate investment in Saskatchewan’s ethanol industry. Further, this strategy will secure the
significant environmental benefits that stem from the increased use of ethanol as an additive to
conventional gasoline for Saskatchewan.


   WHAT IS ETHANOL?
Increasingly referred to as the fuel of the future, ethanol is a high-octane, water-free alcohol that is produced
mainly from the fermented sugar or converted starch that is found in many Saskatchewan products, including
wheat and other cereal crops. In the future, technologies may emerge to bring straw and wood by-products
online as potential ethanol-producing ingredients through alternative processes. Containing 35 per cent
oxygen, ethanol results in a more complete fuel combustion, which reduces harmful emissions. Ethanol can offer
many economical and environmental advantages for Saskatchewan.

The process of ethanol production is quite simple. It requires converting starch to sugars through the use of
enzymes. The sugar-blend is then fermented by adding yeast. The process yields fuel ethanol, which can be
used in automobiles and other machinery.



          CROPS               STARCH              SUGAR                DISTILL
          Saskatchewan                                                                      FUEL
        products including
                             Crops are finely    Separated into       Distilled and
        wheat and other        ground into      their component       fermented to        ETHANOL
           cereal crops           starch              sugars          make ethanol




   WHY ETHANOL?
Advancements in technology have reduced the production                 $0.60
costs of ethanol by 50 per cent over the last 20 years. The
average production cost of ethanol from existing technology
is now at 35 to 45 cents per litre. In the future, this may
                                                                       $0.40
decline to below 30 cents per litre. With these advances in
technology, ethanol is becoming more cost competitive with
gasoline on the open market. Ongoing research and
                                                                       $0.20
development progress should further increase the
competitiveness of ethanol. It is important that ethanol be
produced in an efficient, cost-productive manner in order to
protect consumers from higher prices.                                  $0.00
                                                                                1980      2002       2005




                                                       2
 Ethanol burns cleaner than gasoline. When                greenhouse gas emissions when used. Common
 blended with gasoline, ethanol can reduce motor          blends of ethanol-blended gasoline can:
 vehicle greenhouse gas emissions by as much as
 30 per cent. Equally important, the use of ethanol       • Reduce carbon monoxide exhaust emissions
 can help inject new life into Saskatchewan’s               by up to 20 per cent.
 agricultural industry by creating meaningful job         • Cut down smog-creating compounds up to
 opportunities, primarily for the province’s rural          15 per cent.
 residents, and new marketing opportunities for           • Achieve a net reduction of up to 10 per cent
 Saskatchewan’s grain producers and wood-                   in carbon dioxide emissions.
 product companies.
                                                          These compounds and emissions have a damaging
 Additionally, the rising cost of gasoline and new        effect by producing ground-level, ozone-forming
 technological developments have made ethanol             emissions and greenhouse gases.
 more economically viable and environmentally
 responsible as an energy source. This is important       Ethanol burns cleaner than conventional gasoline
 as the public is placing increased emphasis on           and reduces the damage caused by exhaust fumes
 environmentally responsible products in order to         and other emissions. This, in turn, decreases the
 decrease greenhouse gas emissions and the effects        strain placed on the environment.
 of global warming.
                                                          The cycle of ethanol production yields carbon
 There are many environmental advantages to using         dioxide, which can be captured for use in other
 ethanol-blended fuels. Most notably, ethanol is a        manufacturing processes or can be absorbed by
 renewable resource with the ability to reduce            future crops of wheat for ethanol production.




“More than
      15 per cent of
 U.S. motor fuels
  contain ethanol”                                        -American Renewable Fuels Association




                                                      3
    WHAT CAN ETHANOL DO?
Ethanol has many benefits when used.
Currently, in the United States, more than 15
per cent of motor fuels contain ethanol. There
                                                       “Farmers
are misconceptions about usability and
functionality of ethanol-blended gasoline in
automobiles and other fuel machinery. North
American manufacturers have tested vehicles
                                                         give
and all approve the use of ethanol-blended
gasoline – some even recommend the use of
oxygenated fuels such as ethanol. Ethanol-                 high
                                                          marks
blended gasoline is less toxic than conventional
gasoline and has already been sold and used
in cars throughout Canada and the United
States. Blended gasoline could be easily




                                                        to Sask.
introduced to consumers through the existing
fuel infrastructure, and ethanol blends with
gasoline for seamless motor fuel transition.
Further, the use of ethanol-blended gasoline
eliminates the requirement and expense of
gasoline antifreeze as the blended gasoline
contains alcohol. In fuel-injected engines, the
use of ethanol can aid in maintaining a cleaner
                                                         ethanol
engine.


                                                            plan”
                                                          -Regina Leader-Post, March 22, 2002




                                                   4
  WHY SASKATCHEWAN?
Saskatchewan is an ideal place for the production of             accessible power and water supplies, Saskatchewan
ethanol. In fact, Saskatchewan has the potential to              has all the required ingredients in place for a solid
become a world leader in the field. With abundant                ethanol industry. Additionally, Saskatchewan has a
raw materials and resources necessary for the                    government, communities and a private sector that
production of ethanol, combined with reasonably                  are committed to the creation of a meaningful
priced land, an extensive road and rail                          ethanol industry for the province.
transportation infrastructure system and readily




   WHY NOW?
Currently, Saskatchewan is well-positioned to                    production. Developing this industry will assist our
develop a thriving ethanol industry. Recent advances             province’s grain producers by sustaining or
in technology have lowered the production costs of               expanding farm incomes with new market
ethanol substantially. It is expected that this trend will       opportunities.
continue, lowering the production costs of ethanol in
the coming years.                                                Advances in the production and manufacturing of
                                                                 ethanol not only have cut the costs of making
The governments of Canada and the United States                  ethanol, but also have created new products. For
have both made commitments to increase the                       example, the by-products of ethanol are ideally
amount of ethanol production in the years ahead.                 suited to be used as feed for livestock, thus
There will be a drastic increase in demand for                   contributing to the growth of another industry in
ethanol coming from the United States as it works                Saskatchewan. Innovations are continually occurring
to meet legislative commitments outlined in The                  that will create expanded opportunities for ethanol
Clean Air Act to reduce smog in major cities                     and ethanol by-products.
throughout the country. Additionally, international
agreements, such as the Kyoto Accord, have been                  Saskatchewan is currently in the position to build the
established to reduce the amount of greenhouse                   necessary capacity to best service these emerging
gas emissions. Many are looking for further                      markets and capitalize on future opportunities. The
reliance on ethanol as renewable fuel sources are                public is increasing its emphasis on renewable fuel
investigated and legislated.                                     sources, and governments, in turn, are drafting
                                                                 more environmentally responsible legislation. Now
Ethanol also has the ability to assist Saskatchewan’s            is the time for Saskatchewan to build an ethanol
agricultural industry. Farmers have endured low                  industry.
prices and international subsidies for many years.
Ethanol will create a new market for grain




                                                             5
THE GREENPRINT
    OUR VISION FOR THE ETHANOL INDUSTRY
 The provincial strategy on the production of ethanol in Saskatchewan will create jobs across Saskatchewan,
 add value to our agricultural industry and create a healthier environment. The strategy will foster a climate
 favourable to investment in order to grow the industry. This strategy will create hundreds of direct jobs in
 addition to other economic spinoffs, including opportunities for feedlot operations and the retailing of by-
 products that have further market potential.




“This plan should
     help Saskatchewan
    build a strong
 ethanol industry ”               -Bliss Baker, Canadian Renewable Fuels Association



 The private sector will play a leading role in defining what Saskatchewan’s ethanol industry will look like and
 how it will operate. Government and industry can work together in order to maximize the potential of the
 industry in Saskatchewan.




                                                       6
The Greenprint for Ethanol Production in                      With this balance in mind, the provincial
Saskatchewan will encourage the development of                government is creating the legal framework to
the ethanol industry by executing the following steps:        implement a mandatory blend when it makes sense
                                                              for the industry. Having the legal framework in
                                                              place will allow the province to act quickly when
   TAX INCENTIVES                                             the time is right. In the interim, government will
                                                              continue to seek advice from the industry, the
It is essential to remove the negative economic               industry can develop, and existing oil and gas
impacts of the fuel tax on ethanol to remain                  companies can adapt their marketing, production
competitive with other provinces and jurisdictions            and business operations to address a mandated
with existing incentive programs.                             ethanol-gasoline blend.

The effective elimination of the fuel         tax on
Saskatchewan-produced and consumed            ethanol             OPENING UP MARKETS
provides long-term incentives for existing   facilities
and for other producers to expand              current        Many companies consulted in the development of
production levels.                                            this strategy noted the importance of Saskatchewan
                                                              furthering discussions with other provinces in order
Until the industry grows, we will continue with the           to establish joint agreements on the removal of the
current program that provides rebates to offset the           fuel tax on ethanol. The Government of
taxes paid. As the industry develops, the program             Saskatchewan will continue discussions with other
will be expanded to respond accordingly.                      provinces to reduce provincial trade barriers.

While this may initially result in foregone provincial        In order to develop and expand the Canadian
revenue, it will result in increased economic activity        market for ethanol, the federal government must
for the long term.                                            take the lead and work with the provinces to create
                                                              an open market between the provinces.

   MANDATING THE                                              With a mandated 10 per cent ethanol blend,
   ETHANOL BLEND                                              Saskatchewan offers a market for 130 million litres
                                                              of ethanol. But export markets exist in other parts of
The issue of a mandatory ethanol blend in gasoline            Canada, such as Ontario, and in the United States,
has been the topic of considerable discussion                 including Minnesota and California. Saskatchewan
during the consultations that took place during the           ethanol, if exported to the United States, can be
Greenprint’s development. While a mandated                    cost competitive.
blend certainly creates a demand for ethanol,
ensuring this is introduced at a time when the local
industry can meet the demand is critical to                      WORKING WITH COMMUNITIES
maximize Saskatchewan’s share of the industry.
                                                              The Government of Saskatchewan will work with
Before the Government of Saskatchewan proceeds                communities and investors to establish ethanol
to legislate the sale of blended gasoline,                    plants here in the province. This includes creating a
Saskatchewan’s ethanol industry must first develop            single access point for those seeking the required
to a level that does not require importing ethanol to         environmental and operating permits to build
meet the required demand. It is essential not to rely         ethanol production facilities.
on imports in order to grow Saskatchewan’s
ethanol opportunity to the highest level possible.




                                                          7
THE FUTURE
    OF SASKATCHEWAN’S ETHANOL INDUSTRY
   INDUSTRY SIZE
There are no specific limits to the size of an ethanol industry in Saskatchewan. Currently, Saskatchewan’s
ethanol production is around 12 million litres per year. Analysis has shown the industry could, with a mandated
ethanol blend, easily grow to 130 million litres, which could result in two to three smaller or mid-size plants. If
the industry experiences reasonable export growth, it could grow to 400 million litres within the next few years.
In the longer term, the industry could grow further as Saskatchewan has the agricultural resources to support a
very large industry.

The United States has seen its industry grow to over 2.3 billion gallons of production capacity with plants
located in 19 states. Saskatchewan and Canada may see similar growth potential as governments implement
environmentally responsible legislation.

With the scenario of a 400-million-litre ethanol industry, consultants predict that production could reasonably
be generated by four to eight additional plants, depending on plant size. Industry experts have also indicated
that the 80-million-litre facilities are efficient for the industry. There would be opportunities for these facilities to
co-exist with feedlot operations.


   ECONOMIC IMPACT

The economic benefits of Saskatchewan’s ethanol industry will have a substantial impact on Saskatchewan’s
economy. For a 400-million-litre/year industry, this impact includes:

• Demand for 1.08 million tonnes of wheat feedstock annually.
• Creation of up to 450 jobs in Saskatchewan, most occurring in the rural areas, plus spinoff employment in
  the livestock sector and other industries.
• Generating $272.8 million in construction overall.

At 400 million litres per year, the most likely scenario would yield a total economic output of $346 million per
year, representing an increase of $139 million per year in Saskatchewan’s Gross Domestic Product.



        Activity                                   Anticipated Annual Economic Outcome
                                            Production of            Production of           Production of
                                          130M Litres/Year         400M Litres/Year          1B Litres/Year


        Primary Production                     $9M                      $86M                   $395M
        Operation and Output                  $74M                     $224M                   $568M
        Construction                         $11.7M                     $36M                    $74M

        Total                                $94.7M                    $346M                  $1,037M



                                                           8
   EXPORT POTENTIAL
Several jurisdictions in the United States have               its intentions to increase domestic production from
mandated the use of ethanol in their states and cities.       200 million litres to beyond 1 billion litres in the next
Minnesota has mandated the use of ethanol since               10 years. In the United States, projections estimate
1997, and has subsequently witnessed                          that demand for ethanol will increase to over 15
overwhelming growth within this sector. As                    billion litres by 2015. After Saskatchewan develops
Saskatchewan develops an ethanol industry using its           a strong industry, other jurisdictions will be looking to
vast resource and human potential, export                     the province to fill that demand. With governments
opportunities mean further income and growth for              committed to environmentally responsible legislation,
rural Saskatchewan.                                           Saskatchewan’s producers will have more and more
                                                              market opportunities opened for further exporting.
Saskatchewan’s ethanol industry must be export-               The Government of Saskatchewan will continue to
driven for maximum success and growth, and                    call on the federal government to introduce a
Saskatchewan can grow the ethanol industry to meet            national mandate in order to provide an even
the increasing demand from outside the province.              exporting system for retailers and wholesalers right
For example, the federal government has announced             across Canada.




   FUTURE OPPORTUNITIES
a) Livestock                                                    opportunity for a profitable partnership exists for
  The growth of the ethanol industry can assist in              both the ethanol production facility and the cattle
  the development of a livestock industry, creating             feedlot operation.
  even more jobs in rural Saskatchewan. Ethanol
  production creates many useful co-products,                 b) Additional By-products
  which can be used as a protein or energy                      Other by-products or co-products of ethanol
  component of livestock feed. The option of a                  include a number of products that have a wheat
  smaller ethanol plant co-located with a feedlot is            gluten component. This covers a wide range
  ideally suited to Saskatchewan. In turn, an                   including packaging and coatings for food, a



                                                          9
  stain removal and stabilizing ingredient in                  importing diesel fuels. Used in diesel engines,
  laundry detergent, a moisturizing agent and                  biodiesel can be produced through the use of
  vitamin E ingredient in cosmetics and a                      animal fats and virgin and recycled vegetable
  component of biodegradable cat litter. Further               oils from crops including soybeans, canola, corn
  uses include a patented fibre/protein co-product             and sunflowers. Biodiesel, a biodegradable and
  used in food products and wheat germ, as well as             non-toxic substance, can further improve the air
  agents for use in medicine, health research,                 quality when substituted for traditional fuels.
  pharmaceuticals and biotechnology. Phytate and               Biodiesel is currently being tested in a number of
  phytate derivatives, which are found in both                 cities, and potential markets being investigated
  wheat germ and bran, can even be used in                     include mass transit, marine and mining vehicles,
  applications including X-ray technology, food                and machinery.
  preservation and toxic waste disposal efforts.
  Ongoing research on the uses of the by-products              Ethanol-blended diesel has also been investigated
  and co-products of ethanol may uncover                       as an environmentally responsible fuel source.
  additional uses and applications.                            Ethanol-blended diesel, often referred to as
                                                               e-diesel, has similar benefits to the use of ethanol
c) Biodiesel and Ethanol-blended Diesel                        in that a portion of it is made from a renewable
  Biodiesel provides even further opportunities for            resource and can lower greenhouse gas emissions
  the expansion of Saskatchewan’s rural economy                when used. Ongoing development with the use of
  and can also decrease the dependence on                      e-diesel is underway throughout Canada.



   EXPANDING OUR OPPORTUNITIES

Ethanol represents an opportunity to create an               the framework constructed to allow private business
industry that offers both economic and environmental         and industry substantial room to develop the future of
partnerships. But it has other possibilities for             ethanol production in Saskatchewan. There is much
partnerships – between agricultural and non-                 potential for Saskatchewan to grow this sector – one
agricultural production, between research and future         that has the promise to be a significant contributor to
manufacturing, and between the private sector and            future prosperity.
communities. The environment is being created and



   FOR MORE INFORMATION
For more information on ethanol, the benefits of ethanol and other related industries, please contact:

Saskatchewan Industry and Resources
2103 – 11th Avenue
Regina, SK S4P 3V7
Phone (306) 787-2232
Fax (306) 787-2159
Web site: www.ir.gov.sk.ca

Some information produced with the permission of the Canadian Renewable Fuels Association
(www.greenfuels.org) and the American Renewable Fuels Association (www.ethanolrfa.org).




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