Saskatchewan farmers looking to save on their energy bills by making their own biodiesel fuel be warned: check with your insurance company first.

Provincial insurer Saskatchewan Government Insurance will not cover any homeowner or farmer who decides to produce biodiesel on their property, CBC News has learned.

What is biodiesel?

Biodiesel is a safe, non-toxic, renewable and clean-burning fuel made from a variety of sources such as oilseed, animal fats from rendering facilities, and used restaurant oils and grease.

Canola and soybeans are most commonly used in the production of biodiesel, though other crops such as mustard, flax, sunflower, palm, coconut and hemp are also used.

It is biodegradable in water and produces fewer emissions and has a more pleasant odour than petroleum diesel.

Source: Government of Manitoba

SGI said it has no experience with insuring the operations and therefore can't underwrite the risk.

For farmer Neil Webster, that means his wallet takes a big hit.

Webster said he spent $13,000 fuelling his combine and tractor this year, and realized he could save as much as 50 per cent if he made his own fuel. Biodiesel is made by combining any natural oil or fat with an alcohol such as methanol or ethanol. It burns much cleaner than gasoline and traditional diesel.

He said he went as far as taking a how-to course but only afterwards was told SGI wouldn't insure him if he went ahead with his plan.

Webster, who's also a marine engineer and a health and safety officer with the Canadian Forces, said he's more than able to safely concoct a small amount of biodiesel.

"I believe I am more than qualified to handle a small little biodiesel plant that would produce about [240 litres] of diesel fuel maybe a day," Webster said.

Webster said he's now been red-flagged by SGI — a move that he said could hamper his ability to get a better deal on insurance in the future.

"And [it] also puts a red flag for people who are into biodiesel. Because of this rejection, they can reject, say if a farmer or somebody who has a fire at their farm or home … and they have biodiesel-producing equipment in their garage or shed, they may not have their claim covered," Webster said.

Production of fuel dangerous

But the executive manager of Saskatchewan's only commercial plant that makes biodiesel said it's a dangerous task.

"There's fumes that are developed through the process and these are highly combustible, so any kind of spark … will cause explosion," Zenneth Faye of the Milligan-Biotech biodiesel plant in Foam Lake, Sask., said.

However, Faye said it's possible to make biodiesel safely if it's done in a controlled environment with proper ventilation and that is up to electrical safety codes.

Despite denying Webster's request for insurance, SGI said it will now look into whether biodiesel plants are something it could insure in the future.