A Nicola Valley pellet plant that received federal funding promises of $2.5 million is more than a year behind schedule, has yet to begin operation and has recently been hit by lawsuits from suppliers.

Highland Pellet has been served with a notice of claim from an Ontario-based firm that supplied and constructed a pellet plant in Merritt. It has filed notices of liens, claiming it is owed $1.63 million.

Another company, United Agri Systems Canada Inc., is seeking $1 million related to another pellet plant in Ontario that Highland agreed to complete and operate.

A representative from Okanagan-Coquihalla MP Dan Albas’s office confirmed Highland Pellet was promised $2.5 million from the federal government’s community adjustment fund in March 2010. It was supposed to have been operational by March last year.

Calls to Highland Pellet owner Rob McDonald were not returned. A company official told a Nicola Valley newspaper in November last year that problems arose with drying of the material. He forecasted it would be open last month.

When it was announced in 2010 the plant was forecasted to provide 36 jobs, with another 12 in the bush.

“It’s not fully operational,” said Merritt Mayor Susan Roline, acknowledging she is disappointed the promised jobs have not been delivered.

“They had a few startups… . (But) they’ve had a problem getting equipment here.”

Roline said information circulating in the community points to problems with implementing the design. There was also speculation about disputes with contractors.

“We haven’t heard anything since last summer.”

Roline said McDonald, a veteran Merritt businessman, used his autowrecking business property in a partnership with Ontario investors.

Manufacturing plants to convert low grade timber into merchantable product began to emerge in the wake of the B.C. pine beetle devastation. Government and industry saw the manufacture of feedstock for pellet-fuel fireplaces and burners as a way to get value out of otherwise unmerchantable timber.

But the industry has a mixed record of plant closures and financial failures, including at the former SBC Firemaster pellet plant in Kamloops. Shuswap Nation Tribal Council also failed to start an operation after it was given access to fibre and promised government assistance.

Bob Simpson, independent MLA from Cariboo North, is a member of a government committee on the bio-economy in B.C. He said there is demand in Europe and Asia but margins are slim.

“The business model is predicated on waste.”

While some plants are operational, including in the Quesnel area, Simpson said one company announced it would build eight plants in the central Interior but those plans never came to fruition.

“They often struggle in the business case,” said the former forest company executive. “If government money is involved…sometimes it distorts what happens.”

Simpson also said the industry is struggling with moisture content of pellets. Material that is dry when it leaves a factory may rehydrate on route, changing is energy value. The solution being suggested is a process called torrefaction, which turns pellets into a charcoal-like material.