$175M ethanol plant planned for Hearst.

Hearst -- The head of a California eco-energy company, eager to build Ontario's first forest biomass-to-ethanol fuel plant in Hearst, says they may be kick starting an emerging green fuel industry in the North.

MEMS USA president Dr. James Latty says Ontario's "pro-environment" political atmosphere makes it "probably the best spot" in North America to build a $150-million US ethanol plant because of its large population and the provincial requirement that all motor fuel must contain ethanol by 2010.

"We're really excited about this opportunity," says Latty in a phone interview from MEMS head office in Westlake Village, CA. "We believe Canada is leading the world in ecologically responsible conversion of biomass into renewable fuels."

MEMS USA broke the news Jan. 4 that the northeastern Ontario community has been chosen as the site of their wood waste conversion facility, targeted to produce 227 million litres of fuel-grade ethanol annually to feed the Ontario market.

MEMS is an engineering and technical services company serving customers in the oil, gas and utility industries. Most of their core business is to companies along the U.S. Gulf Coast.

The project team will consist of MEMS USA and Villeneuve Construction Ltd., a well-known Hearst contractor that has come aboard as an equity partner. Villeneuve is providing a 600-acre parcel of land for the facility and to stockpile wood waste inventory.

A Canadian subsidiary, known as Hearst Ethanol One (HEO), has been formed for the purpose of designing, building and operating the plant.

How soon the groundbreaking begins depends upon how fast the Ontario government gives their approval to source wood waste. The proposed facility would consume 1,600 "wet tons" of biomass daily.

Latty says he has been reassured by government regulators and officials that permitting and all necessary early approvals "will go fairly quickly.

"There's a lot of issues and frankly we will be meeting with the Ontario Ministry (of Natural Resources) as part of our (mid-January) trip (to Ontario)."

Latty says the plant should be operational, at the latest, by 2010 when Ontario laws requiring that all gasoline sold in the province must contain 10 per cent ethanol take effect.

Latty and representatives from MEMS USA and the Town of Hearst met with Ministry of Natural Resources officials in Toronto last month for discussions on sourcing wood waste and the possibility of government loan guarantees for the project.

"Those things are going to be on the table for discussion," says Latty. "Would the project not go ahead if we didn't get those (loan guarantees)? I can't say yes or no to that question. I would say they're important."

The project's main financial backing is coming from an undisclosed European funding group, which will provide the initial start-up capital for the Hearst plant and other Canadian ethanol conversion plants.

"Europeans are watching Canada," says Latty. "We here in America, are not as advanced in any way, shape or form as Canada is in its approach to encouraging a domestic bio-renewable fuels industry."

He says if government wants a fledgling ethanol industry to succeed "it requires some level of financial support."

The abundance of wood waste in the Hearst area was a major drawing card in their site search, says Daniel Sigouin, general manager of the Hearst Economic Development Corporation. He says the California company has been scouting around Northern Ontario for a plant location for the past few months.

"The deal came together rather quickly," he says, following an introductory meeting last November in Toronto. "There's a lot of work to be done and agreements that need to be signed as far as biomass, Environmental Assessment, all that stuff."

MEMS estimates there's enough wood waste within a 30-kilometre radius of Hearst to feed the plant for 15 years.

They have already stockpiled at least 1.5 million long tons of biomass, or a three-year supply of raw materials at a site in Hearst.

The plant would be built on a 600-acre parcel of land provided by Villeneuve and during peak construction periods would employ as many as 400 workers on site with 150 jobs created once the plant is commissioned as a round-the-clock operation.

The conversion technology earmarked for the Hearst plant will use the German-made Fischer-Tropsch gasification method.

Since biomass is a source of carbon, when it's reacted with super-heated steam in a pressure vessel, synthesis gas (syngas) is produced. What comes out of the tank is "cleaned up" into ethanol fuel, which is a core technology specialty of MEMS, says Latty.

"This is something we do routinely."

The fuel would then be shipped out by truck or train.

Hearst is a major railhead, highway and pipeline junction, a factor that played heavily into MEMS site selection.

The Ontario Northland Railway has a connection running southeast to North Bay and Toronto, and the Canadian National Railway heads due south to Sault Ste. Marie and the U.S. border.

Latty says the plant will bring employment opportunities, especially for First Nations people, dispose of a "bio-blight" on the landscape, and produce ethanol for a potentially burgeoning Ontario market they estimate as a two-billion litre-a-year market demand.

"I think the opportunities are fairly broad."

He confirms his company is still "actively involved in looking at other biomass disposal opportunities" in Northern Ontario.

Latty says because Canada is a signatory to Kyoto, the government is putting steps in place to reduce greenhouse gas emissions and encourage the development of a domestic bio-renewable fuels market.

Potential government tax incentives related to the Kyoto Protocol for green energy projects don't hurt either.

Besides lowering greenhouse gas emissions, Latty says, one of the benefits for consumers is that lower operating costs to produce should allow oil companies and refineries to make high octane motor gasoline (about 110 octane) that costs less than conventional high-octane gasoline.

Latty says they will work with Villeneuve Construction to identify and locate sources of biomass they can use.

Villeneuve, a Hearst construction and haulage firm, holds a Certificate of Approval to dispose of wood waste coming from local mills. They also maintain a wood waste disposal site and are in the process of expanding it.

Latty explains the "wildcard" in the plant's operational timetable is the long lead times to order specialized equipment.

The energy industry is experiencing unprecedented growth as crude oil and natural gas prices climb, and the search for viable alternative fuel sources is intensifying.

As a result, Latty says, there is a major backlog of equipment orders and mechanical components from vendors that can be as long as 16 to 18 months.

But, he adds, Canada's forest industry needs to find an environmentally acceptable way of getting rid of forest slash and help clear Crown lands for reforestation.

"There are some challenges for employment. First Nations' people definitely need new opportunities in that area. We think we bring employment opportunities, (and) we think we'll be welcomed in the community (with) an eco-friendly facility.

"We can benefit the environment by removing what has been a problem by making a bio-renewable fuel additive that will allow Canada to meet its Kyoto Accord commitments."

www.memsusa.com

www.hearstedc.ca

www.villeneuve.on.ca

By IAN ROSS

Northern Ontario Business