It sounds like you don't know what chelation is. Chelation is when a molecule has multiple groups that can bond to the same metal ion, something completely unrelated to this topic. An emulsion is just a bunch of very small droplets of one liquid suspended in another liquid.
Ethanol is a kind of polar solvent, somewhere in the middle between the non-polar oil and more polar water. So the oil dissolves just fine in the mildly polar ethanol, but when the polarity increases due to the addition of water, it can't stay in solution, and comes out as little droplets instead.