The P.E.I. government is loaning the Irvings $15 million for a natural gas project at its Cavendish Farms plant in New Annan.
The plant would use the natural gas for heating. Cavendish Farms expects to reduce greenhouse gas emissions by 28 per cent with the change.
"It will allow Cavendish Farms to switch to a less expensive, cleaner source of energy, and will reduce greenhouse gases by 21,000 tonnes a year," said P.E.I. Energy Minister Richard Brown in a news release.
"It is equivalent to taking 4,200 cars a year off the road. This single action will reduce the province's greenhouse gas emissions by one per cent."
The gas would be compressed into large cylinders in New Brunswick, and then trucked to the Island.
Robert Irving, president of Cavendish Farms, said using natural gas at the potato processing plant should reduce energy costs by 30 per cent.
He called it a "major, major milestone" for his company.
"As we know, crude oil [price] continues to rise today and it's a major challenge for anyone using heavy fuel as an energy source," Irving said.
He said the loan will get work underway two years sooner than anticipated.
Much of the loaned money, which comes from the Century Fund, would go into building a receiving station for the trucks.
The province is loaning the money to the Irvings for five years at a four per cent interest rate.
"We get a good return on our money here," Brown said. "This project alone will possibly make $1 million, $1.5 million, in interest payments."
Brown said this could be just the beginning of natural gas use on the Island. Brown said the Irvings would be talking to other large energy users on the Island about converting to natural gas and growing the market.
One target for these talks is Maritime Electric, and in particular its power generators on the Charlottetown waterfront.
If the market grows sufficiently, said Brown, it could lead to a natural gas pipeline to the Island in the future.