There was much hope riding on the little pellet of pulverized garbage.

In 2008, a Vaughan-based company Dongara Developments opened up a $50-million plant that would sort, shred, fiberize and compress household garbage into clean-burning fuel pellets . It was touted as a remarkably clean solution to every city’s messy garbage problem.

York Region, impressed, signed a 20-year contract to have Dongara process a maximum of 100,000 tonnes of garbage every year. Fuelled by the chance to improve the region’s diversion rate, York was willing to pay a premium of $95 a tonne, almost $30 more than it would cost to truck it to a landfill.

The idea was that the pellets could be used by businesses, such as greenhouses, looking for cheaper and cleaner alternatives to coal.

“It was very innovative technology,” said Laura McDowell, director of environmental promotion and protection for York Region.

But as of this year, the garbage-to-pellet technology is no longer part of York Region’s waste management strategy. It quietly cancelled the contract with Dongara last summer, after the company reported that it was shutting down.

Making the pellets was the easy part, the company said. The problem was passing the regulatory hurdle that deemed the pellets to be garbage and not fuel.

“The composition of the material never changed after it had been processed into pellets. They weren’t treating it, or adding anything to it; it remained waste throughout the process,” said Kate Jordan, a spokeswoman for the Ministry of Environment. “It was just in a different form of waste, a pellet form.”

Thus any company that wanted to use the pellets as fuel had to be designated a waste-management facility by the province, she said.

“This prohibited us from selling to anyone in Ontario, which meant that we had to look for suitable customers beyond the borders of Ontario,” said Casey Urbonas, CEO of Dongara Developments.

He said a “tremendous amount” of pellets was shipped to the United States, where such stringent requirements don’t exist. But over time, the transportation cost became too much. “You want to have a solution … that is local,” Urbonas said.

It was a quick end to an innovative company that had a bumpy five-year history. In 2009, a Star investigation found the company was dumping truckloads of garbage into landfills instead of processing it — while charging the region premium rates. And despite millions in upgrades and specialized equipment, Dongara was unable to meet the processing volume it promised to the region. In 2013, only 55,000 tonnes was shipped to Dongara for processing, half of what was agreed in the contract.

“The biggest challenge from being able to process residual waste is really the inconsistency of it,” said McDowell. “They were really committed to working through those challenges … but I think it was so complex, and at the end the marketability was a factor in us pulling away from it.”

Which is why, despite the 20-year commitment with Dongara, the region had started to look around for other waste-management options.

“We knew that Dongara was experiencing some challenges, so we put into place our contingency plans,” said McDowell. Now, the region will be sending some of its residual garbage to landfill, and some to incineration. As of next year, 30,000 tonnes will go to the Durham-York Energy Centre , an energy-from-waste facility currently being built in Clarington.

While pellets are no longer being made, confusion remains around the future of the company.

The ministry says the site has been cleaned up, its waste-management approval placed on hold, and the plant cannot currently process or store pellets. According to the region, the company shut down last June when the contract was cancelled.

The City of Vaughan, which owns the land at the intersection of Highways 407 and 427, is leasing it to Dongara for $5,000. The city said the rent payments are up to date.

Urbonas said the company is in “pause mode” and has not shut down.

“We are in the process of reorganizing. So we’re not producing anything for the balance of this year, but the plan is to be producing in 2015,” he said.

He wouldn’t specify whether future plans include garbage pellets.

The ministry said no other company in Ontario is looking into pelletizing technology at this time.

Correction – November 5, 2014: This article was edited from a previous version that said 15,000 tonnes of garbage will go to Durham-York Energy Centre. As well, the previous version of the article mistakenly said York Region signed a 20-year contract to have Dongara process at least 100,000 tonnes of garbage every year. In fact, Dongara was to process a maximum of 100,000 tonnes per year.