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On a hot summer day, the air hangs heavy inside Plasco Energy Group's hangar-like building on the outskirts of Ottawa, with the pervasive stench of garbage more suggestive of a town dump than a leading-edge technology centre.Blair Gable/The Globe and Mail

Perhaps Neil Young could put on a benefit concert.

Blind River, after all, is where the famous Canadian rock star blew the transmission out of "Mort," his 1948 Buick Roadmaster hearse back in the Sixties. That experience inspired Long May You Run – the haunting song Mr. Young performed at the closing ceremonies for the Vancouver Winter Games.

The singer is also an environmental activist, all for the same green energy that has put this pretty little Northern Ontario community in a situation that has its 3,549 citizens wondering how their $18-million ended up in a garbage dump more than 600 kilometres out of town.

It is a story that begins, as so many such tales do, as something that seemed like a good idea at the time…

In 2010, encouraged by a provincial initiative to encourage green energy, Blind River arranged to borrow $49.5-million from Canada Mortgage and Housing Corporation. CMHC was offering low-interest loans for infrastructure projects as part of the federal government's Economic Action Plan.

The town already had its own small hydro dam and a wind turbine. This loan would allow Blind River to build a massive solar farm that would create jobs – much needed in the area – and give its people low-cost, renewable and clean energy. All very admirable.

Quickly, however, the best-laid plans began to go wrong. The solar farm couldn't get approval to hook into the provincial grid. Solving the conductivity problem would prove hugely expensive, so the town looked for an alternative.

The dam, the turbine and the CMHC loan were all transferred over to North Shore Power Group, which the municipality would take over and own and where the mayor and councillors would be represented on the board. North Shore turned to smaller solar initiatives with some success, investing about $25-million in some 70 new projects that led to a welcome 17 jobs, with more such projects still in development.

The town had other pressing infrastructure needs, particularly in necessary upgrades, but North Shore had to keep up payments on the CMHC loan, which had a 4.03-per-cent interest rate and was locked in until 2025. The anticipated revenue flow from the solar farm had not materialized.

So North Shore came up with what seemed an ingenious solution: It would invest the remaining money at a higher interest rate (roughly 7 per cent) and meet the CMHC payments with money earned from this smart investment. Not only would it make money on the investment but it would be part of yet another green energy initiative – an ambitious plan to turn the city of Ottawa's garbage into energy.

Plasco Energy Group had a process called "plasma gasification" that could turn vast amounts of waste into electrical power. Entrepreneur Rod Bryden, a former owner of the Ottawa Senators, convinced the city to let a Plasco wholly owned subsidiary, Plasco Trail Road Inc., build a pilot project on city lands.

If all worked out as expected, then the city would enter into an agreement whereby Trail Roads would take the city's garbage, turn it into electricity, sell the power and pay a royalty to the city. Everyone would win.

But there were delays. Plasco saw costs rise and target dates revised. A 2008 demonstration seemed to work fine. In 2010, with the Plasco plant still not running as promised, the provincial Ministry of the Environment found problems with smog-causing emissions.

But still they believed. Ottawa gave extensions. Investors – some of them major players in the field – bought in, as did North Shore Power Group in 2011. North Shore says all was entirely above board and that CMHC agreed that the investment was an allowable use of the funds. North Shore had an engineering review from an internationally recognized expert; it had expert advice from national investment firms; and it had security in that the loan was in the form of a sale leaseback transaction tied to the Plasco Trail Road equipment.

Others clearly had faith, as well, as investors continued to pour millions into the project well after the Blind River money arrived. The city of Ottawa was convinced enough to strike a 20-year deal with the company to take up to 300 tonnes a day of waste once everything was up and running.

Trouble was, it couldn't get up and running permanently. More investment was needed but wasn't forthcoming. Mr. Bryden left the company a year ago, and rumours swirled through 2014 that the grand plan was on increasingly shaky legs.

Concerns were rising in Blind River with a municipal election looming in October. Andre Berthelot, an area lawyer, put his name in for mayor and produced a long, well-researched paper he titled, "A Bit of A Pickle – How Blind River Got Backed into a Corner." In the document, Mr. Berthelot spelled out the concerns.

Others, however, did not share Mr. Berthelot's views. Alex Solomon, another candidate for mayor, told an all-candidates meeting that the investment was all done with proper guidance.

"We did our due diligence," Mr. Solomon told the gathering. "We didn't just decide to do this. We're proud of it. I'm proud of it. And we will continue to work to make sure that it is a viable project – and it is."

Mr. Berthelot was convinced it was not viable: "I've tried to get at the documents provided to the municipality regarding any 'due diligence' by the North Shore Group. The town advised me that it would try to get those materials from North Shore Group but never did so. The North Shore Power Group refused outright, although some documentation they would release if I signed a confidentiality agreement. I refused to do that."

North Shore contends there are no "secret" third-party reports being hidden.

Mr. Berthelot says the debate split the town into two camps. "I was a leper," he told The Globe and Mail this week. "I was not well regarded by many members of council."

In the Oct. 27 election, Mayor Sue Jensen was returned to office with 643 votes. Mr. Berthelot was second with 580, Mr. Solomon with 380.

On Feb. 10, Ottawa Mayor Jim Watson announced his city was done with Plasco, as the company had filed for creditor protection. Among the listed creditors was a little town on the shores of Lake Huron, owed $17.92-million.

Mrs. Jensen, the mayor, did not respond to requests for an interview, nor did certain members of council. The Ottawa Citizen encountered the same non-response.

"I think they're embarrassed to a point where they don't want to talk about it," Mr. Berthelot said.

Graeme Lowry, the CEO of North Shore Power Group, agreed to answer questions by e-mail, pointing out that the collapse had caught the town by "surprise" and that he, personally, was "deeply saddened" by events, as he still firmly believes that Plasco could have been "a clean-tech game changer."

Mr. Lowry said the town has restructured the remaining loan with CMHC that makes the debt more "affordable." A town council amending agreement obtained by The Globe says the previous annual payments were $4,461,429, but will now fall to $1,115,324 a year – the final one due on March 1, 2037.

Mr. Berthelot is pleased that the arrangement should keep North Shore from defaulting on the loan, but the 22 years of built-in debt is a concern. Much will depend on how much can be recovered from the security – "if anything is, in fact, realized."

North Shore has hired the law firm of Blake, Cassels & Graydon to aid in recovering its money in a possible selloff of assets.

"We are doing all that is prudent," Mr. Lowry said.

Mr. Berthelot remains unconvinced. "Faith is a fine thing," he said. "You have to have it – and hope, as well. But it should be tempered by reality occasionally so that you know what you need to do."

It is a story far from over for little Blind River, the town made famous around the world by Neil Young, a town that now might just as soon never again hear the mournful harmonica lead-in to Long May You Run:

"We've been through/ some things together/ With trunks of memories/ still to come…"