Transformation of the former distillery plant in the southeastern corner of Weyburn to an ethanol plant could begin as early as this spring.

Friday's announcement of a $3.5 million federal grant from Natural Resources Canada was a "huge milestone" for the project, said Brad Hill, spokesman for the NorAmera BioEnergy Corp. of Moose Jaw, that company that will retrofit and operate the new plant.

NorAmera bought the former distillery from the city last year.

"We're very excited," said Hill. "It's an important part of the financing. We're very hopeful we can start construction in the spring."

NorAmera BioEnergy was one of seven companies across Canada about to share $78 million in federal grants to build ethanol fuel producing facilities. The grants are the first round of a new federal financing program to expand the use of ethanol in Canada to help reduce greenhouse gas emissions.

City officials are equally enthusiastic about the announcement.

City manager Bob Smith said he expects all the loose ends to be tied up and start dates will be announced within a month.

"This is a big step forward (for the company)," said Smith. "It's very positive news for Weyburn and for the ethanol industry in Saskatchewan."

Deputy mayor Rob Stephanson said the new plant will mean more jobs and economic spin-off for both the city and the agriculture sector.

"A lot of work has gone on in the last decade to get something in that property. To have federal support behind it is probably a good indication it's a very positive project," he said.

"I would hope the overall state of the economy and the way things have been going in the city in the last number of years will show that Weyburn is seen as a place where things are happening," he added.

One project tends to build on another and this development should help the city's reputation even more, he said.

Hill said the retrofit will take about eight to nine months for completion and require about 40 workers.

When it's finished, the new $20 million ethanol plant is expected to create 20 full-time jobs and purchase about 67,000 tonnes of locally-grown feed wheat every year.

The plant is expected to produce about 25 million litres of fuel-grade ethanol a year and 23,000 tonnes of high-protein grain residues. The Weyburn facility will be the smallest of the seven projects given grants by the federal government.

Hill said before construction dates are announced, the company is waiting for the Saskatchewan government to officially change its legislation requiring ethanol-blended fuel by April 1.

"We expect that to happen shortly," he said.

Contracts with farmers to produce the wheat will be fleshed out and more information announced in the coming months, he said. "We're very confident we will have ample sources of feedstocks."