Mandryk: Moe’s canola crushing dreams crushed by FCL plant cancellation

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The collapse of the Federative Co-operatives Ltd.-AGT Food canola crushing plant after last week’s Viterra Ltd. takeover is bad news for Premier Scott Moe.

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First, there was the takeover of Viterra Ltd. by Bunge Ltd., which will likely cost Saskatchewan farmers and put 200 good-paying Regina head office jobs in peril.

Then, there was last week’s news that the much-ballyhooed Federated Co-operatives Ltd. (FCL)/AGT Food canola crush plant outside Regina has been put on hold, indefinitely.

That’s a whole spate of bad luck for Premier Scott Moe’s government … although, governments do tend to contribute to their own misfortunes.

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In this case, however, it wasn’t just provincial government policies. A lot of government policies on both sides of the border have put us where we are today. Moe’s problem is that he might have been caught up in his own hype.

On Monday, the NDP Opposition criticized the Sask. Party government for not protecting jobs  — a tad unfair, given there wasn’t much the province could do to stop either event. For example, a provincial government doesn’t have regulatory authority to reject a corporate takeover bid.

That said, it wasn’t so long ago that Moe was bragging about the plans for billions of dollars worth of canola crushing facilities.

One gets why. Cargill, Richardson International, Louis Dreyfus Corp., Viterra Ceres Global Ag. Corp. and, of course, FCL-AGT were all talking about or making major investment announcements.

The hype from Moe’s government was rather relentless, scoffing at any notion that all of these projects might not be viable.

In fact, Moe and company were rather insistent that $10 billion worth of canola projects only came about because of the economic climate created by his conservative-minded government. This was the line, even as some of these projects started to get cancelled.

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Last week came the biggest cancelation news — “pausing for the foreseeable future” the plans for a renewable diesel facility and joint-venture canola crush plant on the outskirts of Regina that Moe crowed would create 2,500 construction jobs, 150 permanent jobs and $4.5 billion in direct and indirect economic benefits.

FCL CEO Heather Ryan cited “escalating costs,” leaving the door open a crack for a future collaboration with AGT, which would have supplied the feedstock.

But sources say the two companies amicably split ways on proceeding with this project months ago when it became obvious it was no longer viable. The Sask. Party government likely knew — or at least should have — that this day was coming well before the October election.

The issue for both companies? The FCL press release called it “regulatory and political uncertainty, potential shifts in low-carbon public policy and escalating costs.”

So what does that really mean? Well, the viability of this interesting project that would have converted canola oil to renewable diesel and canola meal to aquafeed was tied to supports and policies of federal governments on both sides of the border.

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For FCL, the soon-to-be-gone federal Liberal government support for biodiesel was always key. Unfortunately, compliance obligations for refineries were forcing FCL’s hand on this project, according to various industry sources. To do nothing would have cost hundreds of millions in taxes.

Sources say one of the biggest factors was the U.S. Inflation Reduction Act, which started the demise of the FCL-AGT project because it was rendered less competitive.

Combined with the federal Liberal government’s inability for the past two years to pass clear, clean fuel standards and a renewable fuels production tax credit meant the foundation for this project’s viability was never really firmly established.

And then there was post-COVID-19 inflation. While the rest of us might have struggled having to pay four or five per cent more, sources say some construction costs for such projects increased 40 to 50 per cent because building schools, hospitals and other “shovel-ready projects“ took up scarce construction resources.

Yes, a whole lot of bad luck and bad timing went into the cancelation of the FCL-AGT project.But a whole lot of other things done by governments — including the provincial government — really didn’t help.

Mandryk is the political columnist for the Regina Leader-Post and the Saskatoon StarPhoenix.

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