Profit From Ethanol

President Bush Promotes Ethanol At Renewable Energy Conference

2008-03-23T13:20:00.000-07:00

Excerpt from speech to Washington International Renewable Energy Conference.

In 2005 the United States became the world's leading ethanol producer. Last year we accounted for nearly half of the worldwide ethanol production. I don't know if our fellow citizens understand that, but there is a substantial change taking place, primarily in the Midwest of our country.

Corn ethanol holds a lot of promise, but there's a lot of challenges. If you're a hog-raiser in the United States, you're beginning to worry about the cost of corn to feed your animals. I'm beginning to hear complaints from our cattlemen about the high price of corn. The high price of corn is beginning to affect the price of food.

And so we got to do something about it, and the best thing to do is not to retreat from our commitment to alternative fuels, but to spend research and development money on alternatives to ethanol made from other materials -- for example, cellulosic ethanol holds a lot of promise. I'm sure there are people in the industry here that will tell you how far the industry has come in a very quick period of time.

I look forward to the day when Texas ranchers can grow switchgrass on their country, and then have that switchgrass be converted to fuel. I look forward to the day when people in the parts of our country that have got a lot of forests are able to convert wood chips into fuel. And those days are coming. (Applause.)

The Department of Energy had dedicated nearly $1 billion to develop technologies that can make cellulosic ethanol cost competitive. And the interesting thing that's happened in a relatively quick period of time is that the projected cost of cellulosic ethanol has dropped by more than 60 percent. In other words, new technologies are coming. The job of the federal government is to expedite their arrival.Speech transcript on WhiteHouse.gov

Ethanol To Save The Day...........

2007-07-27T17:12:00.000-07:00

2007-06-10T16:31:00.000-07:00

Alternative fuel producer Pacific Ethanol Inc. said Friday it is asking the Securities and Exchange Commission for permission to sell up to $250 million of its stock in a public offering.

The company said it filed a shelf registration statement asking the SEC to allow the sale.

Pacific Ethanol said the terms of any offering under the statement will be set at the time of the offering.

The ethanol producer said it expects to use the proceeds from any sale under the statement for "general corporate purposes," including financing its ethanol plant construction program and acquiring ethanol production assets.

2007-05-01T08:49:00.000-07:00

Archer Daniels Midland Co.'s fiscal third-quarter earnings fell short of Wall Street's expectations, though revenue topped expectations.

ADM, which is the United States' largest ethanol producer, said higher costs for corn cut into results.

ADM is currently down 6 percent in mid day trading on the NYSE.

2007-04-16T19:06:00.001-07:00

The world's production and consumption of ethanol are expected to at least double in the next five years, former Florida Gov. Jeb Bush said Monday.

As the President of the Inter-American Ethanol Commission, which is holding a meeting in Sao Paulo, Bush said the Latin American countries, including Colombia, Peru, Guatemala and the Dominican Republic, have great potential for ethanol production growth and Brazil would easily be the leader.

Bush, brother of U.S. President George W. Bush, said he believes the trade barriers in the international ethanol market would be phased out. He said the U.S. is likely to slash tariff on ethanol from Brazil, the top exporter of the renewable fuel.

The U.S. government currently charges 0.54 U.S. dollars for each gallon of ethanol imported from Brazil.

Bush said that the main targets of the Commission, founded in Dec. 2006, is to expand the ethanol market and protect the environment. If the Commission accomplishes its targets, investors will be attracted to ethanol, he added.

2007-03-07T12:35:00.000-08:00

President Bush and his Brazilian counterpart Luiz Inacio Lula da Silva are expected to sign off on the joint creation of an "OPEC" for ethanol, the bio-fuel that has freed Brazil from dependence on imported resources.

The Brazilian daily O Estado de Sao Paulo, based in the city of Sao Paulo where the meeting will be held, said that the presidents would promote "a kind of OPEC for ethanol, with an inter-American market to guarantee a stable supply of biofuels, with diversified production throughout the region."

Brazil is the world's top producer of ethanol, which it makes from sugarcane. It has also developed biodiesel production from oil-bearing plant crops, to mix with or substitute for fossil fuels in diesel engines.

"An OPEC for ethanol is impossible, because alcohol will never be able to substitute for oil," Venezuelan expert Alfredo Michelena told IPS. "However, it could replace a small percentage of U.S. fuel consumption, equivalent to the oil supplies it receives from Venezuela," he added.

2007-03-01T10:11:00.001-08:00

Pacific Ethanol Inc., producer of the gasoline additive derived from grain, said Thursday its fourth-quarter loss narrowed, as the company sold more product at higher prices.

The company's quarterly loss to common shareholders shrunk to $4.2 million, or 11 cents per share, from $5.1 million, or 18 cents per share during the same period in 2005. The company had 10.6 million more shares outstanding in the period than they did in the same quarter a year ago.

Results included charges of $3.9 million primarily related to non-cash compensation expenses.

Revenue more than doubled to $80.6 million from $36.1 million in the year-ago period.

Analysts polled by Thomson Financial forecast profit of 5 cents per share. Thomson estimates usually exclude special items. Wall Street forecast revenue at $69.2 million.

Pacific Ethanol said fuel sales in the quarter rose 70 percent to 31.7 million gallons from 19.1 million gallons during the same period a year earlier. The growth came from the completion of its facility in Madera, Calif., and the acquisition of a 42 percent interest in Front Range Energy LLC, which owns a plant in Colorado that is operating above capacity.

The price of fuel sold by the company increased by 37 cents per gallon to $2.26 from $1.98 per gallon.

2007-02-23T09:20:00.000-08:00

"If you really want to reduce the amount of oil that you consume, you have to reduce the amount of gasoline you use," President Bush said on a road trip to push energy initiatives he announced last month in his State of the Union address.

Bush has proposed ramping up the production of alternative fuels such as ethanol made from something other than corn. The president wants to require the use of 35 billion gallons a year of ethanol and other alternative fuels, such as soybean-based biodiesel, by 2017 — a fivefold increase over current requirements.

The call for sharp increases in ethanol use will get bipartisan support in Congress. But production of ethanol from corn is expected to fall far short of meeting such an increase. So Bush envisions a major speedup of research into production of "cellulosic" ethanol made from wood chips, switchgrass and other feedstocks.

Each year, the United States consumes about 7 billion gallons of ethanol, made primarily from corn. The demand for corn for agricultural uses as well as energy, however, is causing corn prices to rise.

2007-02-14T09:18:00.001-08:00

Diversa, a biotechnology company once known for searching the world to find unique enzymes to make better drugs, is now hoping to be the leader in a hot emerging market: biofuels.

The San Diego company announced yesterday that it would buy privately owned Celunol of Cambridge, Mass., creating the nation's first end-to-end biofuels processing company to turn plants and plant waste into energy.

Diversa said its expertise making enzymes for food, drugs and industrial processing could be used to increase the efficiency of Celunol's process for turning biomass into ethanol.

The combined company will be based in Massachusetts and run by Celunol's CEO.

By 2009, the company hopes to have built the first of several biofuel plants, each of which would turn corn husks, switch grass, wood pulp and other biowaste material into 25 million to 30 million gallons of ethanol a year to be added to gasoline, helping ease the nation's demand for foreign oil.

“The global market demand for alternative fuels such as cellulosic ethanol is potentially massive,” Celunol CEO Carlos Riva said. “We believe the combined strengths of both companies will enable us to accelerate commercialization of cellulosic ethanol by leveraging our skills and proprietary knowledge into large-scale biofuels project developments.”

Under the acquisition plan, Diversa would issue 15 million new shares of its stock, valued at $155 million, to shareholders of privately owned Celunol. Diversa would also make up to $20 million in debt financing available to Celunol before the deal is finalized.

2007-02-06T12:19:00.001-08:00

Witnesses before the U.S. Senate Energy and Natural Resources Committee on Feb. 1 presented testimony that the vast majority of U.S adults say national and state governments should provide financial incentives to biofuels producers to encourage the production and availability of biofuels.

Testimony was also presented to state that there is great public support for doing more to make biofuels a realistic replacement for gasoline in the near future.

Arnold Klann, President of BlueFire Ethanol, stated that, "A great opportunity to advance the Cellulosic Ethanol Industry and wean us from our petroleum dependence is now available which can be accelerated if Congress acts to fund programs they have already authorized in the Energy Policy Act of 2005."

Last September 22nd, BlueFire joined a group of distinguished cellulosic ethanol companies in a Congressional Briefing before Congress to admonish the mistaken impression that the cellulosic ethanol industry was embryonic and still a long way off.

To the contrary, these industry representatives jointly reported that they were able to commence construction immediately on their production facilities with the assistance of the authorized Federal loan guarantees that would provide capital investors the security to make cellulosic ethanol production a reality.

"Title 15 of the Energy Policy Act of 2005, if fully funded, will advance the commercialization of producing ethanol from cellulosic materials that we are now burying in our landfills," said Klann.

"The raw material is available, the technology is ready and federal and several state governments have said they want to build cellulosic ethanol plants."

He added, "It's time to make public and private partnership work. We are working hard to advance our business plans to fuel America with its waste materials. We challenge the U.S. Government to step up and do its part now in making cellulosic ethanol happen."

2007-01-29T10:11:00.000-08:00

Across the country, ethanol plants powered by methane instead of costly natural gas or coal are on the drawing board — a movement that could be a win-win situation for the environment and the industry.

"We'll produce ethanol much more efficiently and do it in an environmentally friendly way," said Dennis Langley, CEO of Kansas-based E3 BioFuels.

Burning the methane will cut the amount of the greenhouse gas — which contributes to global warming — released into the environment.

And in addition to providing a cheap energy alternative, using methane addresses a longtime criticism that making ethanol uses too much natural gas or coal to produce.

Supporters of corn-based ethanol and other biofuels contend they burn cleaner than fossil fuels, reduce U.S. dependence on foreign oil and give farmers another market to sell their produce.

The first plant using a so-called methanol closed-loop system is set to begin operations here in February.

Capturing the gas
Under the closed-loop system at the Mead plant, manure will fall through metal slats in the cattle pens and be collected. Methane from the manure will be trapped instead of being allowed to drift into the atmosphere, and then used to generate power for the plant.

Corn and grain will be used to produce ethanol, and cattle will eat the wet distiller's grain that is a byproduct of ethanol production, closing the loop.

Langley's plant is next to a 28,000-head cattle feedlot. The cattle will produce roughly 244,000 tons of manure annually — more than enough to be the sole power source for the company's 25 million-gallon ethanol plant.

If the plant and others like it are successful, they could begin increasing expectations about the environmental impact of alternative-fuel production.

"Cows are a major source of greenhouse gas," said David Mager, vice president of Bion Environmental Technologies, a company helping livestock operations incorporate ethanol production by using manure. The company is working with about five ethanol plants now. "One-third of all methane comes from livestock."

2007-01-26T10:35:00.001-08:00

he United States "will need to have more imports of ethanol" if it is to meet the new mandate to cut gasoline use, Energy Secretary Samuel Bodman said Thursday.

In an interview with Dow Jones Newswires at the World Economic Forum's annual meeting in Davos, Bodman also said that he did not see subsidies to U.S. farmers remaining in place beyond 2010 or import tariffs on ethanol beyond 2008.

"The idea is that at some point in the future all these technologies need to stand the test of the free market," he said.

To protect domestic ethanol makers, the United States imposes a 54 cent-per-gallon tariff on imported ethanol.

2007-01-23T07:13:00.000-08:00

President Bush may up the ante tonight in his State of the Union address, many analysts think, by setting new targets for ethanol use or encouraging automakers to shift to engines capable of handling E85, a fuel that is 85 percent ethanol.

The ethanol industry is already on a roll: This year's production will surpass the mandate set for 2012 -- 7.5 billion gallons -- in the Energy Policy Act of 2005. And investors drove up the stock prices of ethanol companies yesterday in anticipation of Bush's speech. Though the stock market fell, shares of VeraSun Energy Corp. soared 7.2 percent and Pacific Ethanol Inc. jumped 7.6 percent. (One senator has invited VeraSun's chief executive to attend Bush's speech.)

But an increasing number of economists and energy experts are questioning whether the benefits of producing ethanol -- especially ethanol made from corn -- have been oversold. They say that rising ethanol production is driving up corn prices, adding to summer smog and draining investment from other energy projects.

"We think that corn-based ethanol will grow to about 10 percent of the total gasoline pool, which is a significant number. It's the same level as Indonesia's oil production," said Daniel Yergin, chairman of Cambridge Energy Research Associates. "But then you really do run into the fuel-versus-food tradeoffs, which we're already beginning to see some signs of."

There are 111 ethanol refineries nationwide, with the capacity to produce more than 5.4 billion gallons annually, according to the Renewable Fuels Association. There are 78 ethanol refineries and eight expansions under construction with a combined annual capacity of more than 6 billion gallons.

2007-01-22T07:58:00.001-08:00

U.S. President George W. Bush in his State of the Union address on Tuesday is likely to promote fuel efficient vehicles, ethanol and new technologies as a way to address global warming and reduce the country’s dependence on oil, officials said Friday.

White House aides have maintained that energy will be one of the central themes in the annual address before Congress, along with the Iraq war, health care, immigration and education issues.

The White House has refused to release specifics about the speech. But spokesman Tony Snow said Thursday that “this president believes deeply in the importance of trying to innovate our way out of a situation where we’ve been dependent on an oil source that can render us insecure.“

2007-01-19T10:53:00.001-08:00

Ethanol use soared in 2006 and as more of the biofuel comes onto the market this year, gasoline prices for consumers could drop, a U.S. oil industry lobbying group said on Friday.

The American Petroleum Institute said about 5 billion gallons of ethanol was produced in 2006, 35 percent more than the year before, and that more than 40 percent of all U.S. gasoline now includes the fuel additive.

"Part of the reason you saw the sharp decline in gasoline prices post-August into the beginning of November was the decline in ethanol prices," said the association's chief economist, John Felmy.

Ethanol's price declined by $2.50 a gallon during that period he said. Since the additive makes up one tenth of a gallon of retail gasoline it created a 25-cent price drop at the pump.

Ethanol output will be even bigger this year, with eight refineries expanding their capacity, according to industry estimates. That could mean more savings for consumers at the gasoline pump.

"There are a lot of ethanol plants under construction, and if that continues you could see significantly more supplies," Felmy told reporters.

"If you have excess supply ... if it's not absorbed based on the relative prices, you could see a (price) softening of the (ethanol) market," he also said.

Many consider ethanol, made from corn grown in U.S. fields and also from sugar in ethanol powerhouse Brazil, key to reducing the country's dependency on foreign oil. President George W. Bush is expected to call for more ethanol use during his State of the Union speech to Congress next week, according to sources.

Currently, there are 111 ethanol refineries operating nationwide that can produce more than 5.4 billion gallons annually. A sweeping energy law passed in 2005 called for 4 billion gallons to be produced in 2006, with ethanol production reaching 7.5 billion gallons by 2012.

2007-01-18T07:11:00.001-08:00

Harvest BioFuels LLC of Dallas, Texas, plans to build three ethanol plants in north-central Iowa that could produce 300 million gallons of the fuel a year, the company announced Wednesday.

Construction of a plant near Galbraith in eastern Kossuth County is scheduled to begin in April and is expected to be completed by June 2008. Construction of plants near Garner in Hancock County and near Gilmore City in Pocahontas County will begin later this year, said Bob Payne, the company's chief executive officer.

North-central Iowa is already dotted with ethanol plants, and the announcement will add to concerns that the ethanol industry is in danger of being overbuilt. The demand for corn for ethanol has pushed up grain and land prices, and pork producers and beginning farmers say they are worried that increased costs will threaten their livelihoods.

Although the three plants will be located in areas where there are several existing ethanol plants, Payne said he believes there will be enough corn for ethanol production because of increased acres planted to corn and higher yields from improved corn hybrids.

When operating at full capacity, each plant will use about 37 million bushels of corn a year. Corn will be procured through the Stateline Cooperative, which has headquarters in Burt, and 12 locations in Iowa, Payne said.

Each plant is designed to handle train shipments of ethanol and dried distillers grain for livestock feed, Payne said.

Vogelbusch, an Austrian company recognized as a world leader in ethanol fermentation and processing, will supply the technology to run the three production plants, Payne said.

About 100 ethanol facilities worldwide use Vogelbusch technology, including 14 plants in North America that produce more than 750 million gallons of fuel ethanol annually, he said.

The plants will be constructed by Austin Industrial, based in Houston, and engineered by Fru-Con of St. Louis.

2007-01-11T12:58:00.001-08:00

California Gov. Arnold Schwarzenegger ordered a cut of "at least 10 percent" in the carbon content of motor-vehicle fuels used in his state by 2020, while governors of 37 states prepared to push for a new federal rule to require greater use of ethanol fuel.

Both efforts are designed to reduce global warming and the U.S.'s reliance on imported oil, but they also could raise consumer prices for food and fuel. The initiatives also signal the increasing urgency of climate change as an issue both in state capitals and in Washington.

President Bush is expected to express more support for domestically produced ethanol when he gives his State of the Union address later this month. Meanwhile, Democratic leaders in Congress are talking up the need for alternative fuels and national emissions controls.

Announcing his carbon-reduction order in remarks prepared for delivery in his State of the State address Tuesday, Gov. Schwarzenegger said, "California has the muscle to bring about such change."

While the details of the proposal have yet to be worked out, California officials explained that the program would leave it up to oil suppliers in the state to figure out how to reduce carbon content, but that using more ethanol, which contains less carbon, would be the most likely way. The move, they estimated, would triple the size of the state's market for ethanol and other renewable fuels.

Gov. Schwarzenegger said his order would be the first standard in the world that would diminish the use of fossil fuels, which come from deposits that have been buried in the ground for millions of years, and which release carbon into the air when burned. The regulation, which the governor ordered completed by 2008, would also include incentives for more electric and hydrogen-powered vehicles. The governor acted under his state's recently passed law to regulate carbon-dioxide emissions.

Meanwhile, the 37 governors today will propose a new federal standard that would mandate substantially higher use of ethanol fuel and offer new tax incentives for the production of cellulosic ethanol, which can be made from farm wastes and wood chips, and doesn't rely on corn, the feedstock typically used by current ethanol producers.

2007-01-03T08:56:00.001-08:00

The latest ethanol plant to be built in Nebraska could help the state become the nation's second-largest producer of the renewable fuel.

But even if Illinois and Iowa remain ahead of Nebraska in the ethanol production race, the Grand Island economy will still benefit from the new plant Energy Grains Development Group plans to build.

Creighton University economics professor Ernie Goss said ethanol plants and the renewable fuels industry played a key role in Nebraska's economy in 2006, and that's likely to continue. The industry has proven especially important in rural areas where most of the plants have been built.

"It's very important in that it affects the non-metropolitan areas where there has been some weakness," Goss said.

The roughly 543 million gallons of ethanol Nebraska's plants were producing annually in 2006 trailed only Illinois' 780 million gallons and Iowa's 1.1 billion gallons, according to the trade group Renewable Fuels Association.

If the announced new plants and ethanol expansion projects are completed, the Renewable Fuels Association estimated that Nebraska's ethanol production capacity would jump to 1.05 billion gallons a year. That would be more than the 887 million-gallon capacity the trade group expects in Illinois, but it would still trail the 1.7 billion gallons the group expects Iowa producers to make.

Yet it's not immediately clear when or if Nebraska might claim the No. 2 ranking because some of the announced plants the Renewable Fuels Association includes in its figures may not become reality, and the trade group might have missed a few announcements.

Gov. Dave Heineman praised Energy Grains' plans at the company announcement on Friday.

"Projects like this have a significant impact on local economies on our state overall," Heineman said.

Wherever an ethanol plant has been located in Nebraska, Heineman said the local farm economy has been given a boost. About 40 to 50 permanent jobs were created at the plant, and 120 to 125 construction workers were employed for a year and a half to build the plant.

Goss, the economics professor, said for every job created at an ethanol plant, another job is created nearby.

Heineman said another positive aspect of the Grand Island project is that it will be locally owned.

"It's like hitting a grand-slam home run to have local investment and local commitment," Heineman said.

Energy Grains officials said they have turned down requests from outside investors because they want the plant's profits to benefit Nebraskans.

"This is doing it the hard way," said Dan Lindstrom of Kearney, who is a partner in Energy Grains. "We're interested in doing this the hard way because it's the right way and better long term for Nebraska."

The company plans to install two thermal oxidizers to reduce odors from the plant.

The Energy Grains plant will be built across the street from Grand Island's Platte Generating Station power plant, and it will produce up to 100 million gallons a year of ethanol. The location is about two miles south of Grand Island and two miles north of Interstate 80, and it has rail access.

"The ethanol plant will really blend in with the power plant," said Marlan Ferguson, president of the Grand Island Area Economic Development Corp.

2006-12-26T07:50:00.000-08:00

Cellulosic Technology Is The Future Of Ethanol

"Cellulosic technology allows the use of many, many different kinds of biomass, and we see it as where ethanol is headed," said Andrea Anderson, Yuma County's executive director.

Yuma is not the only one bullish about cellulosic ethanol.

Scientists, academics and Wall Street investors are pouring millions of dollars into researching the fuel, convinced that cellulosic ethanol could replace the United States' importation of petroleum from foreign nations.

The United States has an estimated 1 billion tons of biomass available each year, enough for 100 billion gallons of cellulosic ethanol. That potentially could replace nearly half the 140 billion gallons of gasoline the nation currently uses each year.

In contrast, traditional corn ethanol could at best replace only 20 billion gallons, about 14 percent of gasoline use a year, the U.S. Department of Energy estimates.

Currently, the nation's 105 corn- to-ethanol plants produce about 5 billion gallons a year.

President Bush has called for making cellulosic ethanol cost-competitive with corn-derived ethanol by 2012. Congress has mandated the production of 250 million gallons of cellulosic ethanol by 2013, which would require six to 10 commercial plants.

The United States does not have a commercial plant. But the National Renewable Energy Laboratory in Golden is working hard and spending millions of dollars to make that happen.

"Corn is a very good source for ethanol, but there isn't enough corn to make an impact on the transportation fuel market," said Bob Wallace, a NREL engineer who has been researching cellulosic ethanol since 2001.

Alan Greenspan, former chairman of the Federal Reserve, recently told a congressional hearing that cellulosic ethanol is the only alternative fuel that could make a dent on the nation's oil consumption.

Big investors such as Virgin Atlantic's Richard Branson and former Sun Microsystems co-founder Vinod Khosla have jumped into the fray.

A few months ago, Goldman Sachs - the world's largest investment bank - pumped $27 million into Canadian company Iogen, which is on track to build a commercial cellulosic ethanol plant near Ottawa.

But the fuel has many challenges, namely the cost.

Cellulosic ethanol's production cost (excluding transportation, distribution and taxes) is $2.20 a gallon, twice the cost of traditional corn ethanol and nearly three times the pure production cost of gasoline.

The goal is to cut the cost in half and make it comparable to corn ethanol by 2012, Wallace said.

A lot of skepticism surrounds the economic viability of a commercial-scale plant. Scientists have researched cellulosic ethanol for more than 50 years, and there have been many false starts.

It doesn't help that many investors are waiting to see how the first commercial plant works before putting in their money, and the first plant has yet to come online.

"Nobody wants to build the first plant. They want to wait until there are three or four plants to make sure the process really works," said David Wilson, a molecular biology professor at Cornell University. "It is difficult to get a plant financed."

Unlike traditional ethanol made from corn, cellulosic ethanol requires a more complicated process.

Cornstalks, stover, wheat straw or other biomass feedstock is first pulverized and treated with enzymes, which breaks down the cellulose into sugars. The sugars are fermented and purified into ethanol.

A side benefit of the process is that the biomass used to create cellulosic ethanol contains lignin, a compound that can be separated out and burned to create energy.

Fort Lupton-based PureVision Technology is looking to build the state's first cellulosic ethanol plant in Yuma.

The company has received about $3 million from the U.S. Department of Energy over the past three years and plans to build a $5 million prototype next year.

The proposed plant in Yuma would be its first commercial project. The plant would complement Yuma's corn-to-ethanol plants, one under construction and the other on the drawing board.

Farmers and ranchers, along with Yuma County commissioners, have met with PureVision to discuss the plant.

An ongoing $50,000 study by PureVision will be completed in April, and that will be followed by a comprehensive analysis to determine details such as location of the plant, its capacity and the availability of feedstock from local farmers.

"It seems the community in Yuma is forward-thinking, and they believe a cellulosic ethanol plant would complement their corn-to- ethanol plant," said Ed Lehrburger, co-founder of PureVision. "But we'd have to raise more money before that."

2006-12-21T07:17:00.000-08:00

Iowa will produce a record 1.5 billion gallons of ethanol in 2006, the Iowa Renewable Fuels Association said today.

The trade group said Iowa ethanol plants will turn out 36 percent more corn-based fuel than last year, when 1.1 billion gallons was made.

In producing the record amount of ethanol, Iowa's ethanol plants processed over 550 million bushels of corn, or about 25 percent of the state's 2.16 billion bushel corn harvest from 2005.

"There was record demand for ethanol from coast to coast this year and Iowa stepped up to fill the need," said Monte Shaw, IRFA Executive Director. "In fact, Iowa ethanol refineries will produce just over 30 percent of the entire 2006 U.S. ethanol production."

Iowa has more ethanol plants than any other state, Shaw said.

In December, U.S. BioEnergy's ethanol refinery in Albert City began production, bringing the total number of ethanol plants in the state to 26. The annual production capacity is 1.7 billion gallons.

Iowa has 16 new ethanol plants and five major expansions under construction. They will add 1.6 billion gallons to Iowa's annual production capacity. IRFA estimates that a dozen new projects could begin in 2007 adding yet another 1.4 billion gallons of capacity.

2006-12-20T07:04:00.001-08:00

China has suspended further expansion of its ethanol industry as processing corn for fuel and other industrial uses is being blamed for soaring grain prices.

With grain prices rising almost five percent in Nov., the National Development and Reform Commission (NDRC) has ordered local governments to stop approving new projects that process corn for industrial uses.

The order, from China's top economic planning body, urges local governments to use non-grain vegetation to produce bio-fuels and develop the industry more effectively.

China is now producing 10 million tons of ethanol which is mixed with 20 percent of the country's gasoline.

China processed more than 23 million tons of corn for industrial use last year, an increase of 84 percent from 2001, while output of corn only grew by 21.9 percent over the same period.

Expanding industrial demand, along with increasing need for corn by livestock and the reluctance of corn growers to sell in expectation for higher prices, have contributed to a 6.8 percent rise in the price of corn this year.

"Excessive expansion of corn growing will squeeze the production of wheat and rice," said an official with the NDRC, who would not provide his name.

The rapid expansion of the corn processing industry will hurt the industry's development, he noted.

China has approved four pilot ethanol projects, with annual output of 1.02 million tons.

Ethanol mixed with gasoline is sold in five provinces and 27 cities in China, accounting for 20 percent of the country's total gasoline consumption.

The price of major grain products, including rice, flour and cooking oil have surged recently in many Chinese cities.

Figures with the National Bureau of Statistics show that the price of grain products rose 4.7 percent in November.

2006-12-19T06:22:00.001-08:00

Shares of Tate & Lyle Plc, maker of the sucralose product Splenda, fell the most in nearly two years after the company said margins from ethanol will be ``substantially lower'' and sugar prices are unlikely to rise next year.

The company's ethanol business will be affected by the increased cost of corn and lower gasoline prices, London-based Tate said in a Business Wire statement today. Sugar prices may drop after European Union regulators last month threatened to allow more sugar into the EU at global prices, seeking to force cuts in European production.

``The statement is flagging a couple of negatives with the ethanol price and the EU,'' Julian Hardwick, an analyst for ABN Amro Holding NV in London, said in an interview. Hardwick, who recommends investors buy the stock, added that some ``aggressive'' forecasts for the company's 2007 performance ``may not have fully taken on board those issues.''

Tate is betting that sales of ethanol, the sucralose sweetener Splenda and other non-sugar products will drive profit in coming years. The company is shifting focus away from sugar because of changes to the EU's subsidy system in the next four years.

Shares of Tate & Lyle fell as much as 45 pence, or 5.5 percent, to 775.5 pence in London, their biggest drop since Jan. 28, 2004, valuing the company at 3.8 billion pounds ($7.38 billion). The stock was the worst performer on the FTSE Index of 100 leading shares today.

Tate said Nov. 1 that profit growth will slow in the second half because of rising wheat and energy costs. EU sugar stockpiles have gained since 10 countries joined the bloc in 2004, bringing in additional surpluses.

2006-12-15T08:12:00.000-08:00

Pacific Ethanol Inc. said its Chief Financial Officer William Langley will retire on Dec. 15.

The corn-based fuel maker said Langley has agreed with the company to provide consulting services for a period of eight months upon his retirement.

2006-12-14T07:22:00.001-08:00

In discussions on the next farm bill, Democrats and Republicans don't always agree. That's why the issue both sides support - promoting ethanol production and demand - is likely to carry the passage of the 2007 farm bill.

After meeting with Agriculture Secretary Mike Johanns, incoming Senate Agriculture Committee Chair Sen. Tom Harkin, D-Iowa, says "energy actually may be the engine that pulls this farm bill, or pushes it," according to the AP.

Not all politicians agree with Johanns' assertion that specialty crops, such as fruits and vegetables, should receive subsidies just like current commodity crops - corn, soybeans, wheat, rice, and cotton.

Not all Republicans agree with Harkin and incoming House Agriculture Committee Chair Rep. Collin Peterson, D-Minn., who want to make conservation programs a focus of the next farm bill, with some lawmakers suggesting that too many acres locked in conservation programs limits farmers' potential yields. With rising demands for corn due to ethanol production, there is some question as to whether farm acres would need to be taken out conservation programs. Johanns hasn't committed to an answer to this question yet.

Yet despite their disagreements on other issues, Democrats and Republicans have similar interests when it comes to ethanol policy in the next farm bill. While politicians' stances on agricultural issues are often based more on home districts than party lines - Johanns says farm bill issues are often "commodity-driven" - ethanol and other renewable fuels also bring both sides of the aisle together because of a common belief that the U.S. needs to work towards energy independence, Harkins says.

"There is a groundswell of support in this country that we need energy independence, that we have to produce more biofuels," Harkin says.

2006-12-13T07:05:00.000-08:00

Demand for ethanol for cars will attract enough support to lead to passage of a major farm bill next year, despite disagreement on subsidy payments for farmers, a key Democrat and the Republican agriculture secretary agreed Tuesday.

Popularity of corn-based ethanol has soared because of high oil and gas prices. But corn prices have risen so high, and surpluses have dropped so low, that lawmakers want to find other crops to make ethanol and keep the industry growing.

"Energy actually may be the engine that pulls this farm bill, or pushes it," Iowa Sen. Tom Harkin said Tuesday after meeting with Agriculture Secretary Mike Johanns.

Harkin will chair the Senate Agriculture Committee after Democrats take control of Congress next year, when the nation's farm programs are due for an overhaul.

Johanns argues for distributing dollars more equitably, pointing out that fruit and vegetable growers get no subsidy checks even though their crops are worth as much as subsidized crops _ corn, soybeans, wheat, rice and cotton.

Plenty of lawmakers disagree with that proposed change.

But both sides agree on the desire to spur production of ethanol, a grain alcohol that is blended with gasoline to make cleaner-burning fuel.

Harkin and other lawmakers have been talking about using new ethanol crops as a conservation tool. For example, switchgrass has promise as an ethanol source, and it could provide habitat for wild birds during nesting season.

A small amount of sorghum, another feed grain, already is used to make ethanol in the United States. Ethanol is made from sugar cane in Brazil, a country that meets roughly half its fuel demand with ethanol.

Tens of millions of acres of farmland have been taken out of production under conservation programs in the farm bill. It's up in the air whether any of those lands might be used for crops to make ethanol.

That decision hasn't been made, Johanns said.

"Not every conservation acre is going to grow corn; in fact, it's going to be a very small number of acres," Johanns said at a news conference with Harkin following their meeting. "Are there some out there? Certainly. But today, I think the gain would be quite small."

Johanns said he and Harkin have similar goals for conservation programs. Harkin's counterpart in the House, Minnesota Democratic Rep Collin Peterson, is pushing the idea of a conservation program that would pay farmers to grow around 5 million acres of switchgrass and other non-corn crops for ethanol.

The big question is whether Congress will provide money to pay for new energy or conservation programs.

Democrats are instituting a rule that says if lawmakers want to raise spending for subsidies or conservation payments, they have to pay for it with budget cuts elsewhere.

Harkin said the need for domestic sources of energy justifies enough money for farm programs.

"There is a groundswell of support in this country that we need energy independence, that we have to produce more biofuels," Harkin said. "Well, then, how do we promote that? How do we start moving in that direction?"

More ethanol and other renewable fuels are the answer, Harkin said.

A former Nebraska governor, Johanns grew up on a dairy farm in neighboring Iowa, Harkin's home state.

"You can have Republicans and Democrats absolutely in lockstep agreement on certain issues in the farm bill, and it has nothing to do with parties," Johanns said. "These issues tend to be commodity-driven."

2006-12-12T07:12:00.001-08:00

Farmers are getting the best prices for corn in more than a decade amid strong demand for ethanol and feed, the U.S. Department of Agriculture reported Monday.

Average corn prices for the year were forecast at $2.90 to $3.30 a bushel, up 10 cents from last month's estimate, according to the monthly crop report.

"We think about 50% of the corn crop has been marketed this year at an average price of about $2.70 a bushel," said Keith Collins, the USDA's chief economist. "As we look for the other 50% to be marketed, we think it could probably average about $3.50 a bushel."

The last time prices were as high was 1995, when the average was $3.24 a bushel. This year is the fifth time corn prices have risen above $3 a bushel. Last year's average was $2 a bushel.

The production forecast was unchanged at 10.7 billion bushels of corn, down from last year's 11.1 billion bushels.

The nation's ethanol fuel plants are expected to use about 20% of the corn crop, and exports should consume roughly the same share.

2006-12-10T10:55:00.000-08:00

Ethanol producer US BioEnergy Corp. plans to raise up to $159.8 million to fund the construction of new plants with an initial public offering scheduled for the week of Dec. 11.

The company expects to offer about 9.4 million shares at $15 to $17 apiece, according to a filing with the Securities and Exchange Commission. After fees and other costs, US BioEnergy expects net proceeds of $135 million, assuming a midpoint price of $16.

The Inver Grove Heights, Minn.-based company sells ethanol to oil refiners and marketers, which use the cleaner-burning fuel as an additive to gasoline. US BioEnergy currently runs three ethanol plants and has three under construction. When complete, the six plants will have capacity to produce 500 million gallons of ethanol per year.

The company is targeting 1 billion gallons of ethanol capacity in 2009.

Ethanol is an alternative fuel made from corn. Producers have recently enjoyed a strong market, helped by government subsidies and a move by refiners to replace certain chemical additives to gasoline with ethanol.

In the SEC filing, US BioEnergy highlights risks to its business including its ability to accomplish its expansion strategy and the volatility and uncertainty of commodity prices, as well as changes to current legislation.

US BioEnergy posted a loss of $4.2 million on sales of $16.4 million in 2005.

The underwriters of the IPO, which include UBS Investment Bank and Piper Jaffray, may purchase up to an additional 1.4 million shares to cover overallotments. The company expects to have 65.6 million shares outstanding after the IPO.

The stock will trade on the Nasdaq Global Market under the symbol "USBE."

2006-12-07T16:40:00.001-08:00

Scientists have engineered baker's yeast to produce ethanol faster and more efficiently, according to a Massachusetts Institute of Technology research paper published today.

The government is urging greater use of ethanol as a way to stretch domestic motor fuel supplies and make the country less dependent on foreign oil. US demand for ethanol has also jumped as the oil industry uses it to replace gasoline additive MTBE, a suspected carcinogen.

The MIT scientists made "super" baker's yeast, by adding a gene already found in the microbe, to speed up ethanol production by about 50 percent. That could allow ethanol plants either to make more of the fuel in less time, or make more of the fuel in the same time, said Dr. Hal Alper, one of authors of the paper, published in the journal Science.

The mutated yeast could help move US ethanol production beyond its current centralized location in the Midwest to areas across the country. That's because it can more efficiently ferment either corn starch, currently the main source of ethanol made in the United States, or the sugars in woody bits of plants, which are sometimes wasted.

The latter, along with switchgrass, poplar, and other sources, collectively known as biomass, can yield a new type of the fuel called cellulosic ethanol.

Currently no commercial US plants make cellulosic ethanol, though research plants have been built in other countries. Cellulosic currently costs up to three times as much as conventional ethanol, but backers say costs will come down as production rises.

The MIT scientists engineered the baker's yeast to survive high levels of ethanol and sugars found in the processing of the fuel that kill other fermenting microbes. "The end result is that you have yeast cells that are able to survive and grow in the presence of a toxic chemical," said Alper.

The research was funded by the DuPont-MIT alliance, a collaboration between the DuPont Co. and the university, the National Institutes of Health, the US Department of Energy, and others.

2006-12-06T09:08:00.000-08:00

A UBS analyst countered a government outlook on demand for ethanol Wednesday, saying the agency may be underrating the industry's rapid growth.

The Energy Information Administration's annual energy outlook, issued Tuesday, projected that ethanol demand will more than double from today's level to 11.2 billion gallons in 2012.

But analyst Chris L. Shaw said his research suggests that, if all announced plants are built, U.S. ethanol capacity could reach 12 billion gallons as soon as 2008. He believes "this would translate to a similar level of demand for 2009, as we see supply opening up new sources of demand."

The EIA data suggests the market may be underestimating ethanol supply in the coming years, he said.

According to the Ethanol Promotion and Information Council, a trade group, there are currently 53 ethanol plants under construction in the U.S., and another seven are expanding. When complete, the plants will have capacity to produce about 4.2 billion gallons of ethanol.

Currently, there are 109 ethanol plants operating in the U.S. with capacity for 5.28 billion gallons.

Shares of ethanol producers largely retreated Wednesday. In afternoon trading, Verasun Energy Corp. shares dropped $1.71, or 6.8 percent, to $23.44 on the New York Stock Exchange. Aventine Renewable Energy Holdings Inc. saw its stock lose $1.16, or 4.7 percent, to $23.39. Andersons Inc. shares fell 70 cents to $39.21.

2006-12-06T05:00:00.001-08:00

An increasing number of European nations are showing interest in promoting the production of ethanol in Africa using Brazilian technology, according to Brazil`s former minister of agriculture.

Roberto Rodrigues, the former minister, said both the Netherlands and Britain were interested in tapping Africa`s potential as a sugarcane producer for the world`s leading alternative fuel.

Rodrigues` who made his remarks moments after he was sworn in as coordinator of the Agribusiness Center at the Getulio Vargas Foundation, a leading agricultural studies university in Latin America, said that in addition to European nations, African countries are also looking to Brazil to help make ethanol production efficient.

Among those seeking Brazil`s help are agricultural officials in Sudan, he said.

'There cannot be significant trade volume of a product if it is only produced by one country,' said Rodrigues.

'Therefore it is important for other countries to start producing it (ethanol) too, with consumption taking place in the producer country and the excess being exported,' he said.

Those exports, he said, would be ideally suited for growing developing markets like India and China, where climate, soil quality limit production of sugar for ethanol.

Brazil`s current minister of agriculture, Luis Carlos Guedes Pinto, said he shares his predecessor`s sentiment and pushed for greater ethanol production at home.

Brazil is already the world`s No. 1 producer of sugarcane-based ethanol, though the minister said the country was capable of tripling its production in the coming years 'without knocking down a single tree.'

Protection of the country`s rainforest against logging and expanding agricultural interests has become a hot-button issue in Brazil over the last two decades. On Monday, Brazilian authorities pledged to protect some 37 million acres of Brazilian from loggers in the northern Amazon.

Meanwhile, Brazil`s global leadership in ethanol production had already caught the eye of Britain, which announced earlier this year it was teaming up with Brazil to promote sugar growth in Africa.

South Africa and Mozambique are reportedly on the short list of candidate nations for expanding the ethanol market in the region, said ethanol experts at the Food and Agricultural Policy Research Institute at Iowa State University.

'The commitment of both countries is to develop other (ethanol) supplier countries,' said Brazilian Industry and Trade Minister Luiz Furlan in November. 'It`s a product that needs to become more available to (global) consumers.'

British Secretary of State for Trade and Industry Alistair Darling, during his recent visit to Brazil, noted that after test-driving one of Brazil`s 'flex-fuel' cars -- vehicles that can run on either gasoline or a combination of ethanol and petroleum-based fuel -- he could 'now confront any car manufacturer in Europe who tells me that people won`t buy cars powered by ethanol.'

His endorsement bodes well for the future of ethanol in what is projected to be a lucrative EU market for the fuel.

Britain is reportedly keen on pairing up with Brazil because it us a proven leader in the global ethanol market, exporting some 18 million tons of sugar in 2005 and a worldwide in the ethanol industry.

Brazil`s prowess in the industry is well documented, as the South American country has been involved in the ethanol fuel trade since the 1970s.

In 1975, Brazil`s Pro-Ethanol Program subsidized sugar mills to produce extra product specifically for the production of the biofuel in the wake of the oil price spike experienced worldwide. But the program was slow going at first and relied on federal funding. Then, in the late 1980s, it suffered an almost terminal blow when world sugar prices peaked, souring many motorists and cane producers to ethanol.

'There is an increased interest in renewable fuels and Brazil is already a major supplier on the global market,' said FAPRI ethanol analyst Simla Tokgoz.

Both nations are also reportedly interested in developing the infrastructure needed to enhance sugar production in both nations, noted fellow FAPRI ethanol specialist Amani Elobeid.

'The viability is there,' said Elobeid, who added that Britain is a leader among EU nations investigating the feasibility of ethanol as a long-term solution to future fuel needs.

2006-12-05T09:16:00.001-08:00

China is expanding the use of ethanol as an alternative fuel to oil, but is unsure about methanol as the coal-based fuel is toxic and causes pollution, said a member of China’s top bioenergy policy-making panel.

A flurry of ethanol projects involving state-run giants, such as China National Petroleum Corp. (CNPC.YY), has spotlighted the boom in ethanol production in China, which the government sees as part of the solution to its energy dilemma as car use soars and the country becomes more reliant on foreign oil.

“China targets to use ethanol-blended gasoline for 75% of its total gasoline demand by 2010, or around 50 million metric tons out of 70 million tons,“ said Li Shizhong, deputy director of the Institute of New Energy Technology under Tsinghua University.

However, there is a policy vaccuum on methanol use, with automakers holding back from producing engines that use the alternative fuel until a national standard is in place, leading some provinces to go alone with their own specifications for blending with gasoline.

Li told Dow Jones Newswires that the goal for ethanol output will be nearly four times as much as domestic production this year. China - the world’s third-largest producer of ethanol fuel after Brazil and the U.S. - will produce 1.3 million tons of ethanol this year, equivalent to 13 million tons of ethanol-blended gasoline.

Ethanol is typically derived from corn, cassava, sweet broomcorn and other crops. China currently blends 10% ethanol with 90% gasoline, which can be used in vehicles without making changes to engines.

“The government is stipulating criteria governing access to the ethanol industry in a bid to encourage investment from both state-owned companies and private Chinese companies,“ Li said, adding that this policy is likely to be approved by the year-end.

Speaking on condition of anonymity, an official from an ethanol trade company said: “If the government opens the industry to private Chinese companies, then it is likely to make it more efficient and the government can cut subsidies to the sector.“

Li said the government currently grants subsidies of CNY1,373 ($175) a ton of ethanol to producers.

But foreign companies are likely to find their entry to the sector barred for some time as the government strives to nurture the development of the industry, he said.

Chinese state-owned oil and agriculture companies have been actively building ethanol facilities in an effort to corner the growing market.

CNPC, the country’s largest oil producer by capacity, wants to build a plant in the southwestern province of Sichuan by 2010 to produce ethanol from sweet potatoes, with an annual production capacity of 600,000 tons.

China National Cereals, Oils & Foodstuffs Corp., better know as Cofco, China’s largest grain trader, started building a CNY1 billion ($126.6 million) ethanol plant in October in southern China’s Guangxi Zhuang Autonomous Region with an annual capacity of 400,000 tons. It also plans to invest CNY1.2 billion to build another 300,000-ton ethanol plant in the northern province of Hebei.

Cofco’s latest move was the trial operation of a pilot ethanol facility in the northern region of Inner Mongolia this week, Li said.

But the growth of the ethanol industry in China has led to a clash of interests between food security and the need to diversify the country’s energy sources.

Li said the use of non-grain crops, such as cassava and sweet broomcorn, will help solve the conflict and the government is encouraging farmers to plant non-grain crops for ethanol production.

Uncertain Methanol Market

Li said methanol’s future as an alternative fuel in China remains uncertain.

Used largely as a raw material in the manufacture of products such as resins, plastics and paints, experts have cited methanol’s considerable potential when blended with gasoline due to its comparatively low cost.

But methanol is toxic and can corrode car engines and technological breakthroughs are needed to overcome these problems, Li said.

Methanol can also pollute the atmosphere when used as a fuel as one ton of methanol can yield 9.5 tons of carbon dioxide, worsening the air quality in the country, he said.

“The central government hasn’t approved methanol as a legal alternative fuel, but is still studying its proper usage,“ Li said.

He doubted a recent report by the China Chemical Industry News in November that the government had confirmed methanol as an alternative automotive fuel in a meeting held by the State Council, the country’s Cabinet.

“I attended the meeting, but it was not a decision-making meeting - only a discussion with experts,“ Li said.

“Vice-Premier Zeng Peiyan, who chaired the meeting, only said: ’We’ll continue to study the fuel,’.“

The central government is unlikely to give final approval to methanol use in cars by 2010 without better technology becoming available, he said.

But this hasn’t stopped many companies from piling into the methanol market, with CNOOC Ltd. and coal miner Shenhua Group all involved in projects.

The National Development and Reform Commission, China’s economic planning agency, expects methanol production capacity to quadruple by end-2010 to 20 million metric tons.

If domestically-produced methanol is stopped from entering the fuel market in China by then, the glut may be exported overseas, dragging down global methanol prices in the process.

2006-12-04T08:02:00.001-08:00

The Renewable Fuels Association (RFA) has announced that U.S. ethanol production in September eclipsed the record daily production average set in August, setting the new mark at 333,000 barrels per day (b/d). That is an increase of 55,000 b/d since the beginning of the year.

Additionally, demand for ethanol remained strong. The RFA estimates demand for ethanol in September was 380,000 b/d.

“The vast majority of Americans understand the importance of moving this country toward a more energy independent future,” said RFA President Bob Dinneen. “While no one is claiming that ethanol will solve all our energy concerns, it is helping to ease the impact volatile world oil markets have on U.S. consumers. By increasing the production and use of ethanol, we are becoming more reliant on America’s can-do spirit and less vulnerable to the whims of oil producers around the world.”

Currently, 109 ethanol biorefineries nationwide have the capacity to produce more than 5.2 billion gallons annually. There are 53 ethanol biorefineries and 7 expansions under construction with a combined annual capacity of more than 4.2 billion gallons.

2006-12-03T12:39:00.000-08:00

Shares of ethanol makers slipped Friday, despite higher oil prices, after a UBS Investment Research report said the industry's strong momentum could falter ahead.

"The ethanol industry has grown tremendously recently and should continue to do so over the next few years," said UBS Investment Research analyst Chris L. Shaw in a client note dated Thursday.

However, the industry's strong momentum could decline ahead, and margins could be hurt if corn prices rise, the analyst added. Also, lower oil prices could cut into demand for the alternative energy source, wrote Shaw.

"Capacity is being added at a record pace and we foresee a doubling of capacity over the next two to three years," wrote Shaw. "This rush of supply is likely to pressure ethanol pricing over the next few years."

Aventine Renewable Energy Holdings Inc. declined 63 cents, or 2.5 percent, to close at $24.88 on the Big Board.

Shares of Andersons Inc. tumbled $1.28, or 3.1 percent, to close at $39.92 on the Nasdaq, while Pacific Ethanol Inc. shed 39 cents, or 2.1 percent, to $18.56.

MGP Ingredients Inc. fell 58 cents, or 2.7 percent, to $21.23 on the Nasdaq, while Archer-Daniels-Midland Co. lost 27 cents to $34.83. Verasun Energy Corp. declined 5 cents to $25.24, also on the NYSE.

2006-12-01T08:59:00.000-08:00

The Impact Of Ethanol

A booming ethanol industry that has driven up corn prices will have long-term repercussions for cattle feeders who compete for those same feed grains to fatten their animals, market analysts told the Kansas Livestock Association Thursday.

"We are not going to fix this in one big corn-growing year," Randy Blach, executive vice president of Cattle-Fax, told nearly 1,000 cattlemen attending the group's annual convention.

Demand for corn will continue to grow as more ethanol plants are built, moving the corn markets to new, higher levels, he said.

Recently, corn prices have been around $3.50 a bushel.

"Everybody is waiting for a big correction," Blach said. "What if we don't get one?"

Unlike previous corn bull markets that were driven by supply issues, the current bull market is driven by growing demand for the crop as more and more ethanol plants are built across the nation, he said.

"We are coming on a new plateau for corn prices, and we are not going to come off that," said Bill Holbrook, an analyst for Holbrook Consulting Services.

A $1-a-bushel increase in corn prices takes $20 to $25 off the value of a 550-pound calf, Blach said.

"It is real, and I think that is basically that is what we are looking at as we look down the road," Blach said.

Not counting the government incentives, ethanol plants are making 51 cents per gallon profit from their operations, Holbrook said.

"These ethanol plants can pay $5 a bushel for corn and still make money," Holbrook said.

The high corn prices are already prompting more farmers to plant more, he said. Already, farmers are putting more fertilizer on fields so they can plant more corn in the spring. Corn requires more fertilizer than other crops.

Most of the new corn acres will replace soybean fields, which will ultimately drive up the price of soybeans, Holbrook said, given that demand also is up for soybean oil.

Holbrook said producers will not be able to substitute milo for the corn as feed as they have in the past because milo also will be more expensive, as farmers plant fewer acres of the crop and demand for it grows overseas in Mexico and other countries.

While distiller's grain, a byproduct of ethanol production, can be used as livestock feed, it comes with some drawbacks.

It is delivered wet, and transporting wet products is difficult. Feedyards close to the ethanol plants would be the ones most likely to efficiently use it, said Todd Domer, spokesman for the Kansas Livestock Association.

It also has a short shelf life, especially during hot summers. The wet grain must be used within days, and it's not economical to dry it.

Also, it's unclear how using it as feed for cattle will affect the quality of beef. Domer said research is being done in that area.

2006-11-30T09:06:00.001-08:00

The ethanol industry's growing appetite for corn has pushed prices for the grain to their highest levels in a decade amid a surge that agricultural experts say could lead farmers next spring to plant their largest corn crop in 60 years.

Farmers who plant more corn in 2007, however, will be betting that the nation's burgeoning ethanol industry won't go bust and oil prices stay high, keeping up demand for the corn used to make ethanol, said Chris Hurt, a Purdue University agricultural economist.

"It's a wonderful time for corn producers. They're extremely excited but they're also apprehensive because they've seen booms before and they don't last," he said.

More than 150 U.S. ethanol plants are either under construction, planned or in operation, and market forces are pushing up demand for corn. The crop is ground into a mash mixture that's distilled into grain alcohol to become fuel.

With a growing amount of corn being diverted from food products and livestock feed toward ethanol production, per-bushel prices have increased about $1 since mid-September.

As of Tuesday, the average price of a bushel of corn was $3.45 _ far above the $1.50 to $1.80 a bushel corn fetched at the same time last year, Hurt said.

He said the higher corn prices could boost Indiana farmers' incomes between 30 percent and 50 percent this year, with even higher increases possible in 2007.

Norman Voyles Jr., who farms about 1,800 acres in central Indiana near Martinsville, said the high corn prices are "exciting." Yet he said the price of corn would have to go even higher before he would shift soybean acreage to corn next year.

For now, he said, he's planning next year to plant his acreage about evenly in corn and soybeans. Voyles said he'd be uneasy planting corn on fields for a second consecutive year because breaking with crop rotation practices can create weed and insect problems.

Even though corn prices are higher, he and many farmers expect fuel, fertilizer and chemical suppliers to charge more for their products in response to the higher grain prices, and for cash rents for land to also rise.

"It's kind of exciting and yet all farmers kind of see a dark cloud someplace and they're always watching it," Voyles said. "I don't anticipate any kind of a windfall by any means."

The U.S. Department of Agriculture's current estimate for 2006's average farm price of corn is $3 a bushel, Hurt said. His early prediction for next year is an average farm price for a bushel of corn of $3.40, which would eclipse the current record of an average $3.24 price set during the 1995 marketing year.

He said that next year American farmers could plant up to 89 million acres of corn, about 10 million more acres than this year. If that happens, it would be the largest U.S. acreage planted in corn since 1946, when the nation helped feed post-World War II Europe.

Gary Schnitkey, a farm financial management specialist at the University of Illinois, also expects American farmers to plant significantly more corn next year, but he cautions that many factors can influence how much acreage is eventually shifted to corn.

"We've never been in a position where we've seen this much new demand for a commodity," he said.

Schnitkey said the first clear indication of how much more corn farmers will plant in 2007 will come in March when the USDA releases a spring planting report.

In October, the U.S. Energy Information Administration reported that the nation's ethanol producers averaged a record daily production of 329,000 barrels in August. The agency also said this year's total U.S. ethanol production could be nearly 4.7 billion gallons.

2006-11-28T14:14:00.000-08:00

Brazil, the world's biggest ethanol producer, may struggle to make enough of the fuel in the crop season ending March to meet domestic use because higher prices elsewhere are encouraging exports, C. Czarnikow Sugar Ltd. said.

Brazil, also the largest producer of sugar used to make ethanol, is expected to export a record 3 billion liters this crop year, from 2.4 Billion liters a year earlier. Exports to the U.S. will rise to 1.2 Billion liters, 130 Million liters more than last season, buoyed by tougher environmental legislation.

As a consequence there is a real risk that Brazilian ethanol production this season could fall short of demand. That may mean more of Brazil's sugar crop will be diverted into ethanol production, reducing global supplies of the sweetener, Czarnikow said. Refined sugar prices rose to a record in London in May, partly on speculation Brazil would use more of its crop to make the alternative fuel.

RNCOS report “Biofuel Market Worldwide (2006)” discusses the prospects of bio-fuel energy sources.

Analysts find that there’s high possibility that Brazil may not be able to meet the rising ethanol demands for crop season ending in March.

The problem isn't an issue of production capacity. It's because global demand is on the rise and higher prices outside the country are encouraging exports.

2006-11-27T11:47:00.001-08:00

Policies regulating development of China's ethanol industry have been submitted to the State Council for approval, according to the National Development and Reform Commission (NDRC).

Xiong Bilin, vice director of the NDRC's department of industry, told a conference on bio-energy that the oil alternative "gasohol" would account for more than half of China's gasoline consumption in 2010.

Gasohol is a fuel mixture of 90 percent gasoline and 10 percent ethanol, which can be mass-produced by fermentation of sugar or starch.

Policies will be issued to raise the technological standards for the industry, such as the maximum water and coal consumption and the capital minimum, according to industrial insiders.

China has become the third largest ethanol consumer after Brazil and the United States with consumption of gasohol accounting for 20 percent of its total gasoline consumption last year.

China has four special ethanol fuel producers with an annual production of 1.02 million tons. The capacity is expected to reach 3.25 million tons by 2010.

Industry insiders predict gasoline consumption of 65 million tons in 2010, with gasohol accounting for half of the total.

Gasohol has been piloted in nine provinces and the government plans to expand its use to other regions from 2006 to 2010.

Local governments will be permitted to issue tenders for gasohol production.

The NDRC has also issued policies to regulate the coal-chemical industry to prevent possible overheating of the industry this summer.

The government has stopped approvals of coal liquefaction projects with an annual capacity of less than three million tons, methanol or dimethyl ether projects under one million tons and coal-to-alkene projects under 600,000 tons.

Coal-chemical projects must meet environmental requirements and those that fail to meet safety requirements in transportation should be eliminated, said the NDRC.

2006-11-27T09:17:00.001-08:00

VeraSun Energy Corp. (VSE) has begun construction of an ethanol plant near Hartley, Iowa, that will produce 110 million gallons per year, the company said Monday in a press release.

The plant, which is scheduled to start ethanol production in the first quarter of 2008, will also make 350,000 tons of dried distillers grains annually, VeraSun said.

Distillers grains are an ethanol byproduct and are typically used as livestock feed.

The company estimates that the facility will process more than 39 million bushels of corn per year.

Construction is expected to take approximately 16 months to complete, the company said in the release.

VeraSun, which is based in Brookings, S.D., operates two ethanol plants in Aurora, S.D., and Fort Dodge, Iowa, and is building two plants in Charles City and Hartley, Iowa. The company has another facility in development in Welcome, Minn.

Shares of VeraSun closed at $22.60 on Friday.

2006-11-22T05:32:00.000-08:00

Global ethanol production is driving up prices for food commodities, from feed stocks such as sugar, to meat, said Datagro, Brazil's biggest sugar-industry forecasting firm.

U.S. production, forecast to increase more than 70 percent by 2012, will use 37 percent of the country's current corn supply to meet output needs, up 15 percent from 2006, Datagro said. Land for soy crops is increasingly being diverted to grow corn, reducing the supply of soy and driving up the price of animal feed, according to the firm. In China, competing demand for corn from the food and ethanol industry may lead the country to reduce exports and become a corn importer, Datagro said.

``World sugar, meat, corn, soy and wheat are becoming more interdependent with ethanol,'' Plinio Nastari, president of Datagro, said today at an International Sugar Organization seminar in London.

Government interest in biofuels, made from corn, sugar or vegetable oils, is motivated by a desire to replace fossil fuels, limit greenhouse gases and assist farming. Support programs are the main driver of industry growth, especially in Europe.

World ethanol production is forecast to total 34.5 million liters in 2006, representing 3 percent of global demand for gasoline, according to Datagro.

2006-11-21T07:36:00.001-08:00

Pacific Ethanol Inc. reported its first quarterly profit and topped analysts' projections, thanks to higher ethanol prices and volumes.

The Fresno, Calif.-based ethanol producer and marketer reported quarterly net income available to common shareholders of 7 cents per share, compared with a year-ago loss of 3 cents per share.

Pacific Ethanol said it was able to capitalize on price volatility during the third quarter and achieved gross margins well above what its marketing operations usually score.

Shares climbed $2.21, or 12.6 percent, to $19.70 in premarket trading after closing at $17.49 on the Nasdaq.

2006-11-20T16:11:00.001-08:00

Pacific Ethanol Inc. said Monday it swung to its first quarterly profit, as it sold more ethanol at higher prices during the third quarter.

Shares jumped $1.14, or 6.5 percent, to $18.63 in aftermarket trading after closing down 37 cents, or 2.1 percent, at $17.49 on the Nasdaq. The stock has traded between $8.95 and $44.50 over the past year.

The company reported quarterly net income available to common shareholders of $2.7 million, or 7 cents per share, compared with a prior-year loss of $922,584, or 3 cents per share. The results topped Wall Street's expectations of a quarterly loss of 3 cents per share, according to an analyst poll by Thomson Financial.

Revenue during the quarter jumped to $61.1 million from $26.4 million in the prior-year period, also beating analysts' projections of $54.2 million.

Pacific Ethanol said it benefited from increased sales of ethanol, with volumes up 6.9 million gallons to 23.1 million gallons in the current-year period. It also sold the ethanol at higher prices, up 81 cents to $2.45 per gallon from year-ago levels.

"We were able to capitalize on the volatility of prices during the third quarter and achieved gross margins well above what we typically achieve from our marketing operations," Chief Executive Neil Koehler said in a statement.

2006-11-20T07:16:00.001-08:00

Americans have chosen what they say is the best way to improve the environment and the economy, and their answer is good for Ethanol.

A national survey released today found respondents believe the most important benefit of ethanol, is that its better for the environment than other oil. More than half of respondents also indicated the American economy benefits from ethanol production. They say it lessens U.S. dependence on foreign oil.

Samuel Adam Balmanno is driving to Maryland to Utah this weekend. He says, "We are setting the price of the oil by the way we burn
it up. If we become more self-sufficient then other nations will have to lower their cost of oil and tariffs for importing it because if Americans aren't buying it, they're going to lose a lot of money. They still have to make it appealing to us."

Ethanol prices hit a two-month high this week from increasing demand for the gasoline, and less Imports of the fuel from Brazil. That's more money for the state's farmers and ethanol plants.

Governor Dave Heineman says, "Nebraska continues to be a leader in ethanol. We have more plants under construction than any other state in the country. We just announced Central Bio-Energy's opening up plants in Seward, St. Paul, and Imperial."

Ethanol production at the first plant in St. Paul, will begin in early 2008. Each plant is expected to produce 100-million gallons of ethanol each year.

2006-11-18T10:19:00.001-08:00

The Illinois Environmental Protection Agency (IEPA) is snowed under with air permit applications from ethanol plant projects -- 13 in September alone. The number of plant proposals doesn’t show any signs of slowing.

“We average meeting with over one (ethanol project group) per week. People want to build ethanol plants,” Don Sutton, permit section manager of IEPA’s bureau of air, told FarmWeek.

On Nov. 9, IEPA updated a list of ethanol and biodiesel projects that had applied for air permits, and at least a couple more applications have been received since then, Sutton said. Ethanol projects must obtain an air permit before starting construction.

On average, an ethanol project receives a permit about six months after submitting an application. Permits for controversial projects or those that go through a public hearing can take nine months, according to Sutton.

2006-11-16T09:49:00.001-08:00

Marathon Oil Corp. and Andersons Inc., a processor of corn, soybean and wheat, on Thursday said they plan to immediately begin building an ethanol plant in Greenville, Ohio.

The project is part of a larger joint venture between Andersons and Marathon Petroleum Co. LLC, a subsidiary of Houston-based Marathon Oil. Andersons said in a regulatory filing on Monday that it invested $900,000 in the ethanol partnership. The Maumee, Ohio-based company said it planned to invest another $20 million after the first site was selected.

Andersons will provide day-to-day management of the plants, as well as corn origination, risk management, and distillers dried grain solubles, an animal feed ingredient. Andersons will also provide ethanol marketing services.

Marathon did not disclose its contribution to the venture.

The first plant is expected to produce 110 million gallons of ethanol and 350,000 tons of distillers dried grain annually. The companies want to begin production by the first quarter of 2008. The plant will employ 40 people.

2006-11-15T16:47:00.001-08:00

Pacific Ethanol Inc. said Wednesday it will not file its third-quarter report on time, because it needs more time to complete its financial disclosures.

But the company, which produces and markets ethanol, said it expects the results to include record revenue and the company's first quarterly profit.

The news sent Pacific Ethanol shares up $1.36, or 7.8 percent, to $18.70 in heavy afternoon trading on the Nasdaq. Over the past year, the company's shares have traded between $8.95 and $44.50.

Pacific Ethanol expects to file its report with the Securities and Exchange Commission by Monday.

2006-11-15T06:31:00.001-08:00

U.S.

ethanol production will probably increase by at least 50% within the next five years to 7.5 billion gallons, a senior international analyst said Tuesday.

John Cropley, senior economist with U.K.-based LMC International Ltd., told Dow Jones Newswires that ethanol capacity in the U.S. had in recent years increased to about 5 billion gallons at present.

Production capacity costs about $1 to $1.50 per gallon, "and in the last few years there have been added over 2 billion gallons of new capacity in the U.S., so we're talking about $3 billion in investment," Cropley said.

He said the official U.S. target is to see renewable fuels – mostly corn-based ethanol - capacity at least 7.5 billion gallons by 2012, but many people in the market believe that's conservative and that the target will be reached much sooner.

Cropley also said that about 20% of current

U.S.

corn production is directed toward the ethanol industry, and based on the current trends for ethanol growth, at least 50% more corn will be needed for the fuel in the next five years.

2006-11-14T07:18:00.000-08:00

A Florida company struck a deal with a Chinese company today for the exclusive manufacturing and distribution of up to 600,000 metric tons of ethanol annually.

Industrial Biotechnology Corp., which creates technologies in the field of biologically produced chemicals, signed a letter of intent with Tianjin Zhongoa Group, a leading Chinese holding company. The company will produce ethanol from bio-renewable resources in Mongolia and convert it into ethanol derivatives and chemical feed stocks.

With ethanol prices at 40 to 50 cents per gallon, the deal could be worth $82.5 million a year.

2006-11-13T07:54:00.000-08:00

The consumption of ethanol gasoline in China will account for over fifty percent of total gasoline consumption by 2010, according to a plan developed by the National Development and Reform Commission (NDRC).

China is the world's third biggest producer and user of ethanol fuel in the world after Brazil and the US. It has an annual production capacity of 1.02 million tons. Ethanol gasoline consumption currently accounts for 20 percent of total gasoline consumption.

2006-11-10T08:38:00.000-08:00

With new ethanol and biodiesel plants going online monthly and increasing demand for the homegrown fuel additives, transportation companies are scurrying to provide the needed trains, trucks and storage tanks to keep up with the rapidly growing industry.

The fuel additive industry is growing from regional to national distribution, driven by a federal renewable fuels standard beginning in 2006 that is expected to double the use of ethanol and biodiesel by 2012.

The transportation system must keep up to move the raw materials to processing plants and ship the fuel from the Corn Belt to markets around the country.

“There is a challenge and there will be a challenge as both of these products begin to get more use outside of the middle section of the country,” said Scott Weiser, president of the Iowa Motor Truck Association, a trade group. “Several members of our congressional delegation have indicated there needs to be a focus on those issues of infrastructure and transportation if and when we are going to serve the rest of the nation.”

Several states offer tax incentives or funding for development and promotion of ethanol and biodiesel. They include Florida, New York, Illinois, Idaho, Delaware and Arkansas.

In New York, for example, E85 fuel, an ethanol blend, is exempt from state sales taxes and the state requires government agencies to use E85 when possible.

Other states, including Georgia, Colorado and Nebraska also require state agencies to use biofuels.

In addition to motor fuels, trends such as the growing use of biodiesel as a home heating oil in New England and some Western states could cause demand for biofuel to grow even more dramatically, said Grant Kimberley, a spokesman for the Iowa Soybean Association.

And as demand grows, so do the needs for an improved transportation network.

“It already is a challenge with just transporting the normal products the railroads transport,” Kimberley said. “We’ll have to be moving more and more renewable fuels that way unless we figure out ways to send this stuff through petroleum pipelines.”

Iowa, the nation’s leading ethanol producer, has plants that can produce more than a billion gallons of ethanol a year and plans are under way to nearly double that, according to the Iowa Corn Growers Association.

The state also recently edged out Texas as the leading biodiesel manufacturer, with the capacity to make 131 million gallons and expansion plans to add as much as 250 million gallons, Kimberley said.

Nebraska has 12 completed ethanol plants that can produce more than 600 million gallons annually.

About 75 percent of the nation’s annual production of 4.3 billion gallons of ethanol a year is moved by rail, with the remaining 25 percent transported by truck, according to the Renewable Fuels Association.

Infrastructure is growing across the country, the association said in an annual industry report released in February.

“Infrastructure is being expanded from Massachusetts to Baltimore to Atlanta. Railroad and terminal companies are working to expand their ability to accommodate larger volumes of ethanol,” the report said.

Weisner said the trucking industry also has seen an expansion around ethanol and biodiesel plants, which need abundant supplies of corn and soybeans to be shipped in and the finished product to be trucked out by tanker trucks.

Although trucks are used to transport fuels shorter distances, much of the long-distance shipping is done by rail, which is considered more efficient for shipping large volumes of fuel long distances.

Spokesmen for major rail companies, including the nation’s largest freight hauler, Union Pacific, said they are investing in track improvements near ethanol plants.

The Renewable Fuels Association’s February report predicts only expansion for the industry in the foreseeable future, requiring continual upgrade and improvement of transportation systems to move the fuel nationally.

“Once serving just niche markets in the Midwest, ethanol is now a ubiquitous component of the U.S. transportation fuels market,” association president Bob Dinneen said in the report.

2006-11-09T07:22:00.000-08:00

The productivity of Brazilian land growing sugar cane for processing into ethanol will more than double by 2023 because of new technology, according to Brazilian commodity brokerage Sociedade Corretora De Alcool Trading SA.

The capacity to convert sugar cane into ethanol will increase to 13,000 liters of ethanol per hectare of arable land, from 6,000 liters, said SCA director Jacyr Costa Filho. Sugar cane yields more ethanol than other feedstocks used to produce ethanol. Corn yields 3,700 liters of ethanol a hectare and wheat 1,130 liters.

“Sugar cane remains one of the best options for ethanol production and there is room for its continued expansion in Brazil,” Filho, who has worked over 20 years in this sector, said at the FO Licht World Ethanol Conference in Amsterdam.

Brazil is the largest ethanol producer. The rally in oil prices in that period has boosted demand for the fuel used by cars. So-called flex-fuel cars that can run on pure ethanol, gasoline or a mixture of the two account for almost 10% of the Brazil’s car fleet, Filho said.

2006-11-08T21:46:00.000-08:00

Shares of Archer Daniels Midland Co. and VeraSun Energy Corp., the two biggest U.S. ethanol producers, soared on speculation that Democratic control of the U.S. House of Representatives will boost demand.

ADM rose $1.98, or 5.8 percent, to $35.46 at 1:35 p.m. in New York Stock Exchange composite trading. A close at that level would be the biggest one-day gain since May 8. VeraSun surged $1.52, or 8.1 percent, to $20.23. Earlier the stock jumped 12 percent, the biggest increase since the shares became publicly traded in June.

``A Democrat-led House is likely to amount to a political net plus for the ethanol industry,'' Stanford Group Co. analyst Mark McMinimy wrote today in a report to clients. ``The political climate for ethanol in the Congress will shift from an environment that was already favorable to one that is promising for ethanol-friendly legislation over the coming two years.''

Democrats picked up at least 27 House seats in yesterday's election, ensuring control of the House in January, after being out of power for 12 years. Collin Peterson of Minnesota, who will take over the House Agriculture Committee, has promised to be more aggressive in seeking ethanol subsidies.

ADM Capacity

Archer Daniels currently can produce 1.1 billion gallons of ethanol a year and plans to expand capacity by 50 percent by 2008 to take advantage of increased demand for the fuel, made mostly from corn in the U.S. ADM said last month that ethanol profit surged fourfold in the quarter ended Sept. 30 to $177.6 million, as prices soared.

VeraSun, up 18 percent so far this week, also rose after the Brookings, South Dakota-based company's third- quarter profit surpassed analyst expectations.

The company late Nov. 6 said it had net income of $32 million, or 40 cents a share, in the quarter. That was 6 cents higher than the forecast of Pavel Molchanov, an energy analyst with Raymond James & Associates Inc. in Houston.

VeraSun's third-quarter results ``certainly helped to improve sentiment for the whole ethanol space,'' Molchanov said.

U.S. refiners and fuel blenders earlier this year switched to ethanol as the primary blending component in gasoline following changes in fuel rules in an energy bill passed by Congress last year. The Energy Policy Act requires refiners to almost double ethanol use to 7.5 billion gallons a year by 2012.

2006-11-08T06:51:00.000-08:00

India plans to introduce the mandatory blending of 10 per cent ethanol into gasoline across the entire country from June 2007, Petroleum Secretary M S Srinivasan said on Wednesday.

He said the use of 5 per cent ethanol mixed petrol, currently used in three states, is expected to be spread to rest of the country by Nov 15.

"We have already tied up 50 per cent of the 560 million tonnes of ethanol needed for 5 per cent mixing at Rs 21.50 a litre," Srinivasan said.

India will need 1.12 billion litres of ethanol a year for the move to 10 per cent blended petrol.

"We expect substantial availability of ethanol for 10 per cent blending as new capacities are being created and we are expecting a bumper crop of sugarcane," he said.

Agriculture Minister, Sharad Pawar, said on Wednesday that sugar production in the cane crushing season that began in October was likely to reach 22.7 million tonnes, up from 19 million tonnes in the year ago period.

Faced with the surge in production a ban on sugar exports may be lifted within the next two weeks, Pawar said.

India also plans to replace around 5 per cent of its current 40 million tonnes of annual diesel consumption with jatropha biodiesel within about five years, as it tries to limit oil imports that account for 70 per cent of its needs.

2006-11-07T04:31:00.000-08:00

The ethanol industry and high export demand is pushing U.S. acreage dedicated to corn and corn prices towards records.

Chris Hurt, Purdue University agricultural economist, is predicting that corn prices will eclipse $3 a bushel for the 2007 marketing year and could threaten the 1995 record of $3.24 a bushel.

"In terms of acreage, I've been suggesting that we may have to push acreage up to 88 million to 89 million acres of corn," Hurt said Monday in a statement. "That would be a 10 million-acre increase from 2006 and would put us at the highest acreage planted to corn in the United States since 1946. We'd be looking at a 60-year phenomenon."

About 2.1 billion bushels of the 2006 corn crop is going into ethanol production at the 106 ethanol plants across the nation.

2006-11-04T18:31:00.000-08:00

Henry Ford dubbed ethanol “the fuel of the future” and planned to run his ubiquitous Model T car on it. Unfortunately, the discovery of cheap petrol and the prohibition of alcohol in America in 1920 put the brakes on his plans.

But now ethanol, a type of alcohol, is making a comeback. It is one of two biofuels — fuels made from plants rather than pumped out of the ground — that are being driven into the limelight by fears over climate change.

Governments across Europe have encouraged biofuel for several years, but last week’s Stern report into the economic consequences of global warming gave producers an extra boost. In what Tony Blair called “the most important report on the future I have received since becoming prime minister”, Sir Nicholas Stern, a former chief economist at the World Bank, warned of a serious economic downturn unless prompt action was taken to reduce greenhouse gases.

“Stern added that extra impetus,” said Sean Sutcliffe, chief executive of Biofuels Corporation, a manufacturer of biodiesel. “He has focused minds on what can be done now — like biofuels — rather than waiting for some long-term solution like fuel cells or electric cars.”

Elliott Mannis, chief executive of D1 Fuels, a rival biodiesel group, agreed. “He (Stern) has put in place a background to the debate, and made people think directly about how we will tackle climate change.”

European governments have other reasons for liking biofuels. They may provide a lifeline to politically important farming communities, and have the potential to reduce reliance on imported fossil fuels.

But despite generous incentives, including a tax rebate of 20p a litre, their use in Britain is still minimal (see chart above). Last year the government upped the ante by introducing the Renewable Transport Fuels Obligation, which forces fuel distributors to use 5% biodiesels by 2010.

If they do not meet the target, to be progressively phased in from 2008, they will have to pay a penalty of 15p a litre — later it will be raised to 30p. Similar measures by other governments mean world production of biofuels is expected to grow from last year’s 20m tonnes to nearly 50m by 2010.

Only a cataclysmic slide in oil prices would halt biofuel’s rise. “You would need the diesel price to get down to about $10 a barrel (it is now about $80 a barrel) for fuel companies to choose not to meet the targets,” said Mariano Alarco, analyst at Goldman Sachs, the investment bank. “That is extremely unlikely. But producers have another price risk to bear in mind — the price of their feedstock.”

The risk comes from the feedstock’s alternative use. The raw materials used in making biofuels can also feed humans. Biodiesel is made from plant oils, including edible ones, while bioethanol is made from any plant that can be fermented, including corn, sugar and wheat. Such is the excitement about bioethanol in America, where some 50 new plants are estimated to be in the planning stages, that corn futures prices last week reached 10-year highs.

At present D1 makes biodiesel from soya imported from South America, but has high hopes for jatropha, a crop that produces an inedible plant oil and can be grown on marginal land. D1 has 110,000 hectares planted, and expects its first meaningful production of diesel from jatropha in 2008. “Using corn to make ethanol when you could be feeding people seems a pretty odd thing to do,” said Mannis.

Ethanol producers say Europe’s current wheat surplus makes the debate academic in the medium term. Alwyn Hughes, chief executive of Ensus, a biofuel company that plans to build an ethanol plant on Teesside, said the UK had a wheat surplus of 2m to 3m tonnes a year, with a 15m tonne surplus across the EU. “And you can add to that what the farmers in the expansion countries like Romania and Bulgaria will produce,” he said.

Biofuels’ exciting growth prospects have drawn in investors. Renova Energy, a British company with bioethanol interests in America, is trading on a price-earnings ratio of 84 — a figure the most hyped dotcom stock might have blushed at. Executive chairman Chris Thomas said the figure was an anomaly and would fall as production was stepped up. “On the prospective numbers two years out, the p/e is about 10,” he said.

Well-known entrepreneurs are also pushing into the sector, with Sir Richard Branson having invested in plants in California. Branson plans a biofuels joint venture with NTR, the Dublin infrastructure group, which insiders say could eventually lead to the development of biodiesel plants in Britain.

Although independents like D1, Biofuels and Ensus have big plans for growth, food companies and oil giants are likely to dominate European production in the near future.

Alarco at Goldman Sachs estimates that independents make only 600,000 tonnes of the 4m tonnes of biofuel produced in Europe. “At the moment the market is dominated by the agriculture business,” he said.

Oil companies are also jumping into the market with plans for large plants, and are concentrating their research and development funds on “second-stage” biofuels technology, which could use any type of biomass as a feedstock, even wood.

Hughes and Ensus’s chairman, Sir Rob Margetts, believe the environmental credentials of new businesses are all-important. “We are working on a methodology that will allow a proper look at the carbon-dioxide implications of the entire process,” said Margetts.

Jonathan Johns, head of renewable energy at Ernst & Young, said environmental soundness could make a big difference to investors. “This is a new phenomenon where ethical concerns have become extremely good business. So a biofuels business that does not have an environmentally sound source of feedstock is not in the long-term sustainable,” he said.

2006-11-04T10:04:00.000-08:00

VeraSun Energy Corp., the nation's second-largest ethanol producer, said Friday it plans to produce biodiesel, a clean-burning renewable fuel, from oil extracted from distillers grains, a co-product of the ethanol production process.

VeraSun said it will be the first company to develop a large-scale, commercial facility for biodiesel production from a co-product of ethanol making -- creating two biofuels from the same feedstock.

Removing oil from distillers grains increases the value of the oil for fuel use, the company said, and enhances the resulting distillers grains as a livestock feed by concentrating protein and reducing fat content.

"This opportunity is a natural extension to our business and consistent with our objective to be a leader in the production of renewable fuels," said Don Endres, chairman and CEO of VeraSun. "This technology is particularly strategic to VeraSun because it allows us to extend our large and low-cost producer strategy from ethanol to include biodiesel."

VeraSun is evaluating locations for a 30-million-gallon-per-year biodiesel production facility, with plans to begin construction in 2007 and production in 2008. The company also filed a provisional patent application with the Patent Office covering the production process.

Shares of VeraSun rose 29 cents, or nearly 2 percent, to close at $17.06 on the NYSE, where the stock has ranged between $14.88 and $30.75 since going public in June with an offering worth nearly $420 million.

A move toward diversification is attractive for VeraSun, as ethanol stocks have recently shifted from darlings of Wall Street to laggards as the price of crude declined. Earlier Friday, Thomas Weisel analyst Kevin Monroe started coverage of VeraSun with an "Underperform" rating, saying that although he sees the company maintaining its position as one of the top ethanol producers through 2008, VeraSun's fortunes are tied to unleaded gas prices, which are "extremely volatile."

Biodiesel can be blended with petroleum diesel to run in existing diesel engines. According to the National Biodiesel Board, production grew to 150 million gallons in 2006 from 75 million gallons in 2005. The Energy Information Administration forecasts that biodiesel demand will rise to more than one billion gallons by 2010, and double to two billion gallons by 2020.

"Creating another renewable fuel from an existing co-product of the ethanol production process makes good economic, business and environmental sense," added Endres, "We are adding to the renewable fuel supply, enhancing the content of a valuable animal feed, and creating additional value for our shareholders."

Raymond James analyst Pavel Molchanov, who rates VeraSun a bullish "Strong Buy 1," was encouraged by VeraSun's announcement, particularly as its move toward biodiesel would make the company the first to directly link ethanol and biodiesel production on a commercial scale.

"In effect, VeraSun wants to create a brand new profit center, likely increasing the profitability of its ethanol co-products," Molchanov wrote in a note to clients. "VeraSun is entering a market that is growing even more rapidly than the ethanol market."

2006-11-03T15:17:00.000-08:00

VeraSun Energy announces plans to produce biodiesel, a clean-burning renewable fuel, from oil extracted from distillers grains Co announced plans to produce biodiesel, a clean-burning renewable fuel, from oil extracted from distillers grains, a co-product of the ethanol production process.

VeraSun would be the first company to develop a large-scale, commercial facility for biodiesel production from a co-product of the ethanol production process, creating two biofuels from the same feedstock.

2006-11-03T07:15:00.000-08:00

Dallas-based White Energy Holding Company, LLC, an emerging leader in U.S. ethanol production, announced today that it has acquired a 100-million-gallon-per-year (“MGPY”) greenfield ethanol project from The Scoular Company (“Scoular”), a nationwide agricultural services company, headquartered in Omaha, Nebraska. The plant, located in Plainview, Texas, will be a “near twin” of White Energy’s other ethanol facility under construction in Hereford, Texas. The Plainview facility is fully permitted and construction is underway, with completion targeted for early 2008. White Energy also owns an operating 45-MGPY plant in Russell, Kansas, which, when combined with output of the two Texas plants, will bring White Energy’s total production capacity to 245 MGPY.

In addition to acquiring the Plainview site, White Energy has formed a long-term strategic relationship with Scoular, based in Omaha, Nebraska. Under comprehensive long-term Agreements, Scoular will provide grain procurement and distillers grain marketing services for selected White Energy plants and comprehensive risk management services for the company.

“This acquisition fits well into our expansion plans, and, with the addition of Scoular’s agricultural transportation and distribution expertise, White Energy has significantly elevated its competitive position in the renewable fuels market,” said Kevin D. Kuykendall, White Energy’s Chief Executive Officer. “The synergies offered by the close proximity of Hereford and Plainview will enable us to serve market demand in the West and Southwest and establish White Energy as a leading ethanol producer and distributor in the U.S.”

“We look forward to a partnership with this growing company,” said Randal Linville, President and Chief Executive Officer of Scoular. “White Energy is quickly becoming one of the nation’s dominant, renewable fuels companies with a compelling vision for plant location. The company’s strategic business plan, strong financial support and experienced management team, coupled with Scoular’s resources and expertise, create a solid foundation for long-term success in what is sure to become a very competitive renewable fuels environment.”

White Energy continues to pursue its goal of becoming one of the top ethanol producers by the end of 2008. Kuykendall credits the Scoular partnership with adding depth in specific facets of its ethanol business. “Within the next couple of years, White Energy plans to own and operate several ethanol facilities located close to major ethanol consumption markets,” Kuykendall said. “Ethanol and other renewable fuels offer important solutions to our nation’s growing energy problem, and White Energy is committed to being an industry leader. This means operating a business that is not only substantial but also sustainable by responding strategically in the rapidly-evolving renewable fuels market.”

2006-11-02T06:45:00.000-08:00

A Dallas-based energy company announced Wednesday intentions to build a 100-million-gallon-per-year biomass-fueled ethanol plant northwest of Muleshoe, according to a company press release.

Panda Ethanol officials said the proposed facility will generate the steam used in the ethanol manufacturing process by gasifying more than 1 billion pounds of cattle manure a year.

The refinery will be located on a 305-acre site eight miles northwest of Muleshoe. Construction will take approximately 18 months. The completion date is dependent upon financing, regulatory approvals and other conditions, according to company officials.

Panda intends to submit its request for an air permit with the Texas Commission on Environmental Quality this week, officials said.

“This facility will have a tremendous economic development impact on Muleshoe and Bailey County by providing many jobs in several areas and by nearly doubling our tax base,” said Janet Claborn, director of economic development for the Muleshoe Economic Development Corp. “This is ‘value-added’ for our agricultural community and a natural fit for our dairies and feed yards.”

When finished, the facility will annually refine approximately 38 million bushels of corn into ethanol, which is a fuel additive, Panda officials said.

Bailey County Judge Sherri Harrison said Panda representatives have been actively involved in the community since the beginning of the site selection process.

“They have proven to be good neighbors in working with the Muleshoe community to bring ethanol production to Bailey County. This is a great opportunity for Bailey County, and it has been exciting to work with Panda in locating the project here.”

ConAgra Trade Group has proposed a 110-million-gallon-a-year ethanol plant near Clovis. The company and its partners are applying for an air quality permit from the New Mexico Environment Department.

2006-11-01T15:01:00.000-08:00

Brazil, the world's biggest ethanol exporter, boosted shipments of the alternative fuel 91 percent last month on surging demand from the U.S.

Brazilian ethanol exports rose to 545 million liters (144 million gallons) last month, from 286 million liters a year earlier, the Trade Ministry said on its Web site.

Exports of raw and refined sugar from Brazil, the world's biggest producer, rose 66 percent last month to 2.29 million metric tons.

Soybean exports dropped 6 percent from a year earlier to 1.68 million tons, the ministry said. Orange juice shipments rose 22 percent to 129,100 tons.

Brazil is the second-biggest soybean producer, trailing only the U.S., and the biggest producer and exporter of orange juice.

2006-11-01T07:53:00.000-08:00

Brazil, the world's largest producer and exporter of ethanol made from sugarcane, boosted the mandatory biofuel content in gasoline sold at pumps as producers reap a record crop.

Fuel distributors will have to add a 23 percent ethanol content to all gasoline sold to service stations starting Nov. 20, rising from a 20 percent mandate now, the agriculture ministry said in a statement. Gas stations throughout the country also sell the biofuel separately to power flex-fuel cars that can run just on ethanol, gasoline or any blend of the two.

2006-10-31T13:36:00.000-08:00

Archer Daniels Midland Co., the world's biggest ethanol producer, said first-quarter profit more than doubled on higher prices for corn-based ethanol and improved soybean-processing earnings. The shares fell after the company said a recent ethanol price decline would cut earnings.

Net income rose to $402.7 million, or 61 cents a share in the three months ended Sept. 30, from $186.3 million, or 29 cents, Decatur, Illinois-based Archer Daniels Midland said today in a statement. Sales rose 9.5 percent to $9.45 billion. Analysts expected per-share profit of 55 cents, based on the average of seven estimates in a Thomson Financial survey.

Chief Executive Officer Patricia Woertz, 53, is boosting ADM's ethanol capacity by almost 50 percent to 1.6 billion gallons by 2008 to take advantage of increased demand for the alternative fuel as gasoline prices rise. Operating profit in corn bioproducts, mostly ethanol production, surged fourfold in the quarter to $177.6 million as demand soared and prices rose.

``ADM reported another quarter of excellent results across the portfolio,'' said Credit Suisse analyst David Nelson, who warned that rising corn prices may shrink ethanol and corn processing margins. ``Corn costs are ADM's biggest medium-term vulnerability,'' said Nelson in a note to clients. He rates the shares ``neutral.''

Shares of Archer Daniels fell after Chief Financial Officer Douglas Schmalz said a 51 percent decline in ethanol prices from a record high in June would shrink profit in the current quarter.

ADM dropped 19 cents, or 0.5 percent, to $38.35 at 11:32 a.m. in New York Stock Exchange composite trading. Before today, the stock had gained 58 percent in the past year, reaching a record $46.71 on May 11.

Archer Daniels ``benefited from the April to September value of our ethanol contracts,'' Schmalz said on a conference call with investors. The recent decline in ethanol pricing will be reflected in the current quarter, he said, with some of the impact being staggered throughout the year as customers renegotiate contracts.

Ethanol prices have plunged 51 percent from a record high of $4.23 a gallon in June as U.S. gasoline inventories increased. Ethanol is blended with gasoline to stretch supplies and make the fuel burn more cleanly.

Corn Profit

Overall operating profit from all corn milling, which includes sweeteners and starches, more than doubled to $290.5 million. Profit from ADM's oilseed processing business, which crushes soybeans into cooking oil and feed, soared 71 percent to $169.6 million.

U.S. refiners and fuel blenders earlier this year switched to ethanol as the primary blending component in gasoline following changes in fuel rules in an energy bill passed by Congress last year. The Energy Policy Act requires refiners to almost double ethanol use to 7.5 billion gallons a year by 2012.

Woertz told an energy conference in St. Louis earlier this month that U.S. ethanol use may eventually reach 14 billion gallons a year. Demand for the fuel was for about 4 billion gallons in 2005, according to the Renewable Fuels Association, a Washington, D.C.-based trade group.

While ethanol futures in Chicago have fallen since the June high, they are still up almost 10 percent from a year ago, trading yesterday at $2.08 a gallon. The company was able to pass on a 10 percent jump in corn prices from the previous quarter, caused mostly by increased ethanol demand. Corn futures soared to a two-year high on Oct. 27 of $3.325 a bushel and are up 66 percent from a year ago.

Soybean Processing

Soybean processing earnings improved as prices for the oilseed fell. Profit from crushing a bushel of soybeans into animal feed, cooking oil and meal rose 27 percent to 71.56 cents a bushel during ADM's first quarter, Bloomberg data shows.

Soybean futures traded in Chicago averaged $5.78 a bushel during ADM's first quarter, down 9.7 percent from a year earlier. The U.S. is the biggest grower of corn and soybeans.

ADM ``will continue to experience the challenges of dealing with volatile commodity prices,'' Woertz said in today's statement.

Schmalz said that the company will benefit from Yum! Brands Inc.'s decision to use low linolenic soybean oil such as ADM's NovaLipid in its Kentucky Fried Chicken business instead of partially hydrogenated vegetable shortening. The shortening contains trans fatty acids that have been linked to heart disease.

`A Real Opportunity'

``It's a real opportunity for our NovaLipid line,'' Schmalz said. ``We've had a very good response from our customers,'' he said.

Operating profit in ADM's Food, Feed and Industrial segment fell 45 percent to $38.1 million as earnings from cocoa, wheat milling and animal health products declined.

ADM defines operating profit for each segment as sales minus operating expenses as well as interest charges related to working capital.

Archer Daniels has about 26,800 employees and operates nearly 240 processing plants worldwide, including facilities in China. ADM's 21 domestic and 17 foreign oilseed plants can crush about 89,000 metric tons a day, or 3.3 million bushels, according to the company's annual report.

2006-10-30T21:42:00.000-08:00

Archer Daniels Midland Co. reports earnings for its fiscal first quarter on Tuesday. The following is a summary of key developments and analyst opinion related to the period.

BY THE NUMBERS: Analysts polled by Thomson Financial expect a profit of 55 cents on revenue of $8.94 billion.

ANALYST TAKE: Citigroup analyst David Driscoll said he expects ADM's oilseed business to be an important factor in earnings growth.

``Strong fundamentals in this segment are helped by strong biodiesel demand,'' he wrote in an Oct. 17 research note. Driscoll also expects ethanol to perform well because semiannual contracts for April through September were signed at higher levels than contracts last year.

Finally, the analyst said he expects ADM's high-fructose corn syrup business to improve due to a double-digit price increase for the product.

Merrill Lynch analyst Eric Serotta also believes oilseed fundamentals are strong. ``We expect corn processing operating profit to more than double driven by higher ethanol and high fructose corn syrup pricing,'' he wrote in an Oct. 18 note to clients. Serotta expects improved ethanol results compared to last year.

``Key issues we will be focusing on: global oilseed trends; net corn costs; ethanol demand and prices; and early commentary on 2007 high-fructose corn syrup pricing,'' he wrote.

OVERVIEW: During the quarter, ethanol producers' shares declined as crude oil prices eased. Bear Stearns analyst Ann Duignan said in August that ethanol prices will likely slip long term as supply increases and the industry's distribution system builds up.

In July, ADM said it would build a biodiesel plant with a capacity of 180,000 metric tons in Rondonopolis, Brazil. The plant will use soybean oil as its feedstock and will be built next to ADM's existing soybean crushing plant in the region. It is expected to be in operation by the first half of 2007.

A government mandate requires that all diesel fuel sold in Brazil include 2 percent biodiesel beginning in 2008 and 5 percent biodiesel beginning in 2013.

The Brazil plant was announced under the leadership of South American Operations President, Matthew Jansen, who, in August, was named president of ADM's grain group.

He was replaced by Domingo Lastra, who, prior to heading South American operations, was director of origination, ports, logistics and fertilizers for the region.

ADM, which also processes cocoa, said in September it would its expand its industrial chocolate making offerings in Europe by acquiring Classic Couverture, a U.K.-based chocolate maker.

WHATS AHEAD: In October, ADM said it would buy the remaining 50-percent stake in International Malting Co. it does not already own for an undisclosed amount. The company began as a joint venture between ADM and French company Lesaffre Yeast Co. to distribute malt to the brewing, distilling and food industries from plants in Australia, Canada, New Zealand and the U.S.

STOCK PERFORMANCE: Shares declined about 8 percent during the quarter but are up about 54 percent for the year.

Archer Daniels Midland, based in Decatur, Ill., processes oilseeds, corn and wheat to make soybean, peanut and other oilseed products. The company also produces ethanol from corn.

2006-10-30T08:29:00.000-08:00

E3 BioFuels will launch the first-ever closed-loop ethanol plant in Mead, Nebraska, in December.

Company officials say the facility's processes will eliminate the need for fossil fuels in ethanol production altogether. Dennis Langley, Chairman and CEO of E3 BioFuels, says the Genesis plant will begin production in December 2006 as the first-ever closed-loop system for distilling commercial quantities of ethanol using methane gas recaptured from cow manure instead of fossil fuels.

The closed-loop system -- derived from an exclusive patent co-owned by an affiliate of E3 BioFuels -- combines a 25-million-gallon ethanol refinery, beef cattle feedlot and anaerobic digesters to maximize energy efficiencies unavailable to each component on a standalone basis. The system eliminates the potential for manure to pollute watersheds, and it enables the wet distillers grain from ethanol production to be fed on-site to cattle without energy-intensive drying and transportation costs.

In the October edition of Wired magazine, venture capitalist Vinod Khosla wrote, "It may surprise you to learn that the most promising solution to our nation's energy crisis begins in the bowels of a waste trough, under the slotted concrete floor of a giant pen that holds 28,000...beef cattle.

"E3 BioFuels is about to fire up the most energy efficient corn ethanol facility in the country: a $75 million state-of-the-art biorefinery," Khosla, co-founder of Sun Microsystems, continued. "The output: a potential gusher of renewable, energy-efficient transportation fuel."

Langley said E3 BioFuels plans to build 15 more such plants near feedlots and dairy farms, of increasing size, within the next five years.

2006-10-29T07:50:00.000-08:00

It will take more than corn to meet the country's growing thirst for renewable fuels, U.S. Agriculture Secretary Mike Johanns said Thursday.

Cellulosic ethanol, an emerging technology to tap the energy found in switch grass, wood chips and plant waste, will be needed to meet future biofuel needs, Johanns told an audience at the National Future Farmers of America conference in Indianapolis.

"We can't rely solely on corn to produce ethanol," he said. "The Department of Energy predicts that total U.S. energy use will increase by more than 30 percent by 2030, so our renewable fuel production will have to increase by the same percentage just to hold its own. That's where cellulosic ethanol comes in.

"Biomass has the potential to create a great deal more energy than corn. With each passing day, we're coming closer to a cost-effective technique to releasing that energy on a broader scale."

Indiana plans to shift focus to cellulosic ethanol production after allocating $50 million the past two years to attract a dozen new corn ethanol plants and three production facilities for soybean-based biodiesel.

Gov. Mitch Daniels said the state was "playing catch-up" on the first generation of biofuels, but "we'd like to lead round two."

Purdue University researchers are among those working to perfect the enzymes needed to unlock the energy contained in the cell walls of corn stalks and other low-cost cellulosic inputs. The current federal energy bill requires that the nation's oil refiners use 4 billion gallons of renewable fuels this year and 7.5 billion gallons annually by 2012.

Daniels joined Johanns and U.S. Environmental Protection Agency Administrator Stephen Johnson on Thursday for the launch of Smartway Grow & Go, a voluntary federal program aimed at encouraging biofuel use by the U.S freight industry.

A pair of Chevrolet SUVs emblazoned with custom green-and-gold corn-cob paint effects provided bookends for the press conference stage.

"I'm very pleased to announce that GM joined the Smartway initiative just this last week," said company executive Alan Weverstad. General Motors, he said, has committed to doubling its production of flex-fuel vehicles by 2010.

South Shore Clean Cities, a local nonprofit dedicated to promoting alternative fuels, plans to promote the Smartway Grow & Go program, said Reggie Korthals, director of environmental planning for the Northwestern Indiana Regional Planning Commission.

"We're really trying to expand the public-private partnerships up here so that we can do more E85 stations, we can have more flex-fuel vehicles and just expand the partnerships," Korthals said.

The group plans to seek federal funding next year to help cities add flex-fuel vehicles to their fleets, she said.

2006-10-27T16:42:00.000-07:00

Bank of America analysts began coverage of four ethanol producers Friday, and rated only one a "Buy" as the industry braces for squeezed margins on higher raw material costs and lower pricing power.

Ethanol is an alternative fuel largely made from corn in this country and used primarily as an additive to gasoline.

Analyst Philippe Lanier began coverage of Aventine Renewable Energy Holdings Inc. with a "Buy" rating and a $50 price target -- the brokerage's only top rating among the four producers.

The ethanol industry has seen prices decline in tandem with the recent drop in oil prices. At the same time, corn costs are on the rise -- a reversal of the market earlier this year that was marked by high ethanol pricing and low corn costs. While the rest of the ethanol producers will likely feel the margin crunch from current market conditions, Lanier said Aventine may be buffered from those risks due to its distribution business.

"Aventine operates a large distribution network many of its peers lack, which results in lower costs and additional revenue, resulting in 50 percent higher profitability per gallon than its pure-play peers," he wrote in a note to clients.

Separately, Bank of America analyst Eric K. Brown started Pacific Ethanol Inc. -- which recently started operations at its first ethanol plant -- at "Sell," saying the company will likely face eroding margins and capacity uncertainty in the coming months.

"We have forecast that substantial new ethanol capacity coming online will pressure ethanol prices and drive up corn costs for Pacific Ethanol and other ethanol producers," Brown said.

He started VeraSun Energy Corp. and Andersons Inc. at "Neutral."

Shares of Aventine Renewable fell 66 cents, or 2.8 percent, to $23.12 in afternoon trading on the New York Stock Exchange, while VeraSun Energy shares rose 6 cents to $18.60.

Pacific Ethanol shares lost 65 cents, or 3.8 percent, to $16.62, and Andersons shares fell 61 cents to $37.77 on the Nasdaq.

2006-10-27T08:47:00.000-07:00

The farm-produced fuel that is supposed to help wean America from its oil addiction is under scrutiny for potentially corrosive qualities.

E85, a blend of 85 percent corn-based ethanol and 15 percent gasoline, could be eating away at metal and plastic parts in pumps being used to dispense the fuel at gasoline stations, Underwriters Laboratories, the private product-safety testing group, said this month.

BP, the British oil company, said Thursday that it would delay the expansion of E85 at its U.S. gasoline outlets until the laboratories certified an E85 dispensing system. "BP is tracking this issue very closely," company spokeswoman Valerie Corr said.

Underwriters Laboratories and the Department of Energy are holding two days of hearings next week at the testing group's headquarters outside Chicago, inviting oil companies, automakers and researchers to help develop standards for E85 equipment.

UL, which certifies the safety of everything from toasters to televisions, has temporarily withdrawn authorization for the UL-approved label on parts used in E85 dispensers. Those dispensers, it turns out, were modified from regular gasoline dispensers and were certified only for a maximum of 15 percent ethanol concentration; UL said it had never certified any E85-specific pumps.

The reversal has heightened concerns among some oil companies about the safety of E85 dispensers on the market and threatens to slow the proliferation of the fuel, which automakers, President Bush and Midwest lawmakers are pushing as a homegrown alternative to gasoline.

Ethanol is primarily used as a 10 percent additive in gasoline, but in higher concentrations like E85 it can corrode some types of metal and even make some plastics brittle over time.

E85 is offered in more than 1,000 stations, mostly in the Midwest. In September, a gas station in Tallahassee became the first in Florida to sell E85.

2006-10-26T09:40:00.000-07:00

Injecting small quantities of ethanol into car engines at moments of peak demand -- such as accelerating sharply or climbing a steep hill -- could improve the fuel economy of gasoline engines by 20 percent to 30 percent, a scientist said on Wednesday.

A team of researchers at the Massachusetts Institute of Technology is working on the system, which scientists say would allow carmakers to use smaller engines in their vehicles, reducing weight and improving fuel economy at a lower cost to consumers than by adding a hybrid engine.

"To have a big impact on reducing oil consumption, one needs a low-cost way of improving efficiency, so a lot of people buy the car," said Daniel Cohn, senior research scientist at MIT in Cambridge, Massachusetts.

He estimated that adding the ethanol injection system to a car would cost about $1,000 and that cars using the new system could be in mass production by 2011.

"We view it as a very important near-term way to reduce oil consumption," Cohn said.

Volatile U.S. retail gasoline prices -- which hit a record high above $3 per gallon this summer but have since eased to around $2.20 per gallon -- have piqued consumer interest in fuel-efficient cars.

"It's crucial that the internal combustion engine, whether it's gasoline or advanced diesel, is improved to the point where those improvements are meaningful," said Ron Cogan, editor of the Green Car Journal, a quarterly magazine focused on alternative powertrains.

Much attention has focused on hybrid cars, such as Toyota Motor Corp.'s <7203.T> Prius, which couple an electric motor with a traditional gasoline engine to improve fuel efficiency. But they are pricey -- hybrid engines can add $3,000 or more to a car's cost -- and account for just about 1 percent of new car sales in the United States.

HOW IT WORKS

The U.S's Big Three Detroit automakers -- General Motors Corp. , Ford Motor Co. and the Chrysler unit of DaimlerChrysler AG -- as well as the White House have backed the adoption of cars that can burn the 85 percent ethanol-15 percent gasoline blended fuel known as E-85 as an alternative to pure gasoline, which is made from petroleum.

But the limited supply of ethanol, which is made from plant matter, limits its usefulness as a primary fuel source. There are only 900 pumping stations nationwide that sell E-85.

The MIT scientists' plan gets around the ethanol supply issue by using small amounts of it -- so little that Cohn estimated the ethanol tank in cars using the technology would need to be refilled every three months or so.

A turbocharger is added to produce more power. The ethanol injection system with the turbocharger would give a driver more power than a conventional engine of the same size.

The higher pressures and temperatures of a turbocharged engine can lead to a problem known as knock, which occurs when the fuel and air in the engine explode prematurely, hurting performance and potentially damaging the engine.

Cohn said his group's technology avoids that problem by injecting ethanol into the engine when knock is likely to occur. The ethanol vaporizes and cools the fuel-air mixture, keeping it from exploding until the engine is ready.

"This is a very special feature of ethanol," Cohn said.

2006-10-25T09:49:00.000-07:00

Brazil, the world's biggest ethanol exporter, will more than double exports of the biofuel within six years as demand for alternative fuels rises, said Eduardo Pereira de Carvalho, head of the Centre-South Sugar and Ethanol Industry Association.

Ethanol exports — from facilities such as the tank farm in Santos, right — will rise to 7 billion litres in six years, and total output of the fuel made from sugar will double to 36 billion litres, Carvalho said yesterday in Sao Paulo. Sugar exports will rise 37 per cent in six years to 19.6 million tonnes, while sugar output will probably climb 26 per cent to 38.6 million tonnes.

2006-10-25T09:36:00.000-07:00

Makers of ethanol, an alternative fuel derived from corn, witnessed a third-quarter retreat from the strong industry conditions that characterized the second quarter: peak oil and ethanol prices, and rapid demand growth for ethanol as a gasoline additive.

Still, analysts note that ethanol prices and margins held at historical highs during the quarter despite the sequential decline and poor performance among the equities.

Ethanol producers suffered a rough third quarter in the stock market: Ethanol stocks have slid 41 percent after ethanol spot market prices plummeted 55 percent, according to a report by Friedman Billings Ramsey analyst Jacques Rousseau.

Shares of Pacific Ethanol Inc. and Verasun Energy Corp. shed 39 percent during the third quarter. Shares of Archer Daniels Midland Co. lost 8 percent, while Andersons Inc. shares fell 18 percent from July through the end of September.

Prices of the alternative fuel and gasoline additive peaked during the summer, as crude oil prices soared to an intraday high of $78.40 a barrel. As oil prices retreated, so did ethanol. Rousseau suggests ethanol prices were also "artificially high" due to refiners' rapid transition from using a chemical known as MTBE to ethanol, a gasoline additive for cleaner emissions.

When ethanol prices spiked, imports flowed in, which in turn brought ethanol prices lower through the third quarter.

Ethanol producer Hawkeye Holdings Inc. decided in September to postpone an initial public offering, citing unfavorable market conditions in a filing with the Securities and Exchange Commission, along with "the recent pullback in the energy segment in particular."

Stifel Nicolaus analyst George I. Askew noted in a report that the volatility of spot ethanol and corn prices during September and the first half of October has pressured ethanol profit margins.

"Specifically, higher corn input prices and lower ethanol output selling prices compresses ethanol profit margins, all else being equal," he said.

Ethanol averaged $2.62 a gallon in the third quarter, according to Raymond James analyst Pavel Molchanov, and corn averaged $2.52 a bushel.

The industry saw a sequentially slimmer "crush spread," or the difference between the price of a gallon of ethanol and the price of the amount of corn required to produce a gallon of ethanol, according to Molchanov. A bushel of corn produces about 2.8 gallons of ethanol using dry mill technology. Still, the spread remained at a historically high level.

Archer Daniels Midland is scheduled to report quarterly earnings on Oct. 31. Verasun Energy is expected to report on Nov. 7, and Andersons is slated to post quarterly results Nov. 11. Pacific Ethanol is expected to report results by Nov 15.

2006-10-24T03:46:00.000-07:00

The grain needed to fill the fuel tank of a typical SUV could feed a person for a year, says a leading international environmentalist.

Lester Brown, executive-director of the Washington, D.C.-based Earth Policy Institute, says a global rush to alternative fuels made from food crops is likely to increase hunger in the poorest countries.

"What has happened in the last few years is that the runaway price of oil has made the conversion of agricultural commodities into fuel for cars extraordinarily profitable," he told a conference at the University of Ottawa.

"Almost everything we eat can be converted into fuel for cars: wheat, corn, rice, soy beans, sugar cane, you name it. There have been times in recent months when the price of ethanol in the United States was double the cost of production. That's a good margin."

Last year the U.S. ethanol industry consumed 55 million tonnes of corn, more than the entire Canadian harvest, Brown said.

He said new biofuel plants are being announced somewhere in the world at a rate of more than one every day. There are 105 U.S. ethanol plants, with about 40 under construction and another 50 to 75 being planned.

Canada has also seen rapid expansion of the ethanol industry and the federal government has encouraged this with an exemption from excise tax and a pledge to require all automobile fuel to contain five per cent ethanol.

Provinces are also eager ethanol supporters. Earlier this month, Alberta allocated $209 million over four years to encourage the renewable fuels industry by 2010.

Although ethanol is usually promoted on environmental grounds, its actual environmental benefits are subject to debate, while the impact on food supplies has received scarcely any notice.

Brown said the priorities for agriculture should be food and feed, not fuel.

"There is no international body to mediate the competition between 800 million people with cars and two billion of the poorest people, who spend more than half their income on food.

"It is one of the most important, politically disruptive issues on the horizon today. The risk is that rising grain prices in low-income countries that import a lot of their grain could lead to food riots and political instability on a scale we've not seen before."

He suggested there are much greater benefits in developing wind power.

Governments could use tax policy to encourage a shift to gasoline hybrid vehicles which use electricity, and provide the electricity for these vehicles using wind power.

Brown cited U.S. government studies showing that wind power could satisfy all the country's energy needs, and suggested Canada's wind resources would be even more abundant.

Robert Hornung, president of the Canadian Wind Energy Association, says there has been a freeze on federal support for wind energy projects since April, as the new government considers its options.

He said incentives created by the former government led to a boom in the industry, pushing Canada's wind power capacity to a record 1,218 megawatts last year, enough to power 370,000 homes.

The uncertainty about the Conservative government's intentions has left many investors wondering whether to proceed with plans for new wind farms, he said.

Kory Teneycke, executive director of the Canadian Renewable Fuels Association, said he has seen no evidence that expansion of the biofuels sector could aggravate world hunger.

He said there is no shortage of food in the world, that the reasons for hunger are complex.

The renewable fuels sector is also eager for government support, and is looking for details on how the government plans to achieve its five per cent ethanol mandate.

2006-10-17T02:15:00.000-07:00

Brazil's Agriculture Minister Luis Guedes Pinto said Monday that the government will unlikely raise the ethanol mix to 25% from the current 20% by Nov. 1 as requested by the ethanol industry because of supply concerns, the local Estado newswire reported.

Brazil mixes between 20% and 25% of sugarcane ethanol in regular gasoline, but lowered the volume to 20% in March because of an ethanol shortage in the local market that was causing prices to rise. Sugar millers have been pressuring the government to raise the volume to 25% since September.

Last week, lobbyists from the Sao Paulo sugarcane industry association, Unica, emerged hopeful from a meeting with Chief of Staff Dilma Rouseff that the government would increase the mixture. A 25% ethanol mix would require an additional 100 million to 120 million liters of anhydrous ethanol per month, Dow Jones Newswires reported last week.

Unica said Brazil's main sugar-producing regions should produce between 15.7 billion and 16 billion liters of ethanol this season.

Pinto made the comment at an international conference on grain warehousing in the interior of Sao Paulo state.

Brazil is the world's leading sugarcane ethanol producer and exporter.

2006-10-11T17:55:00.000-07:00

U.S. ethanol output is not expected to drop, despite crude oil prices hitting a new low for 2006 on Wednesday, said Keith Collins, chief economist of the U.S. Agriculture Department.

"I really don't foresee any decline based on lower oil prices," said Collins at the Advancing Renewable Energy conference in St. Louis.

"Oil prices are not that low and the rate of return on ethanol production is still very strong," he added.

The monthly rate of return on invested capital in early summer for a typical dry mill ethanol plant, with 40 percent equity, was 200-250 percent, Collins said.

Even with lower oil prices reducing the return, the rate of return would still be substantial, he said.

U.S. crude oil fell fell sharply on Wednesday with November delivery crude on the New York Mercantile Exchange falling 93 cents to close at $57.67 a barrel as markets awaited a formal OPEC cut agreement, sources said.

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Ethanol production is profitable as long as crude oil prices remain above $40-$45 per barrel, said venture capitalist Vinod Khosla, another speaker at the two-day conference that attracted 1,500 participants.

"I believe ethanol is competitive with gasoline at any price of oil up to $40-$45 a barrel," said Khosla, co-founder of Sun Microsystems. "If prices do fall below that level for a while, then in fact there is a danger."

Most forecasts call for oil prices to stay well above $40 a barrel.

The fall in crude oil sent ethanol futures at the Chicago Board of Trade down 1 to 7.5 cents per gallon, with the November contract down 4.5 cents at $1.85 per gallon.

When crude oil was trading above $78 a gallon earlier this year, companies were scrambling to build new ethanol plants to meet the growing ethanol demand fueled by high oil prices, government mandates and the phaseout of the water-polluting additive MTBE.

The amount of U.S. corn used to make ethanol is forecast to rise 34 percent to 2.15 billion bushels this year, according to USDA.

"I think it's a forecast that is still on track," Collins said.

With more corn being used to make ethanol, corn ending stocks are forecast to fall 40 percent to 1.22 billion bushels. Tighter supplies have helped drive corn prices at the Chicago Board of Trade to a 2-year high.

USDA will issue a monthly report on ending stocks and production on Thursday morning.

About 1,500 people are attending the two-day alternative energy conference, sponsored by USDA and U.S. Energy Department. A speech by President George Bush will wrap up the event on Thursday.

2006-10-02T01:57:00.000-07:00

The man at the center of the ethanol building boom is about as homegrown as the cornfields that surround this little river town. So it's fitting that he and Granite Falls, 120 miles west of the Twin Cities, would share in the bounty brought by this homegrown fuel.

Ron Fagen was born 57 years ago in Maynard MN, a town of about 370 people eight miles away. He never went to college. Instead, he was drafted in 1967 and served as a construction engineering specialist with the Army in Vietnam.

When he came home, he worked in road construction, helping to build Interstate 90. He met an inspector for the state, Bud Pulsifer, and started a construction business with him, building grain bins and other projects. In 1988, he bought Pulsifer out and built his first ethanol plant in Marshall.

Today, his burgeoning company, Fagen Inc., is riding the crest of the ethanol boom. Brian Jennings, executive director of the American Coalition for Ethanol in Sioux Falls, S.D., says Fagen's company is building seven of every 10 ethanol plants in the country. "Ron and his company are central to the U.S. ethanol industry," says Jennings.

Fagen is an unabashed cheerleader for ethanol. "I think it's the best thing that's happened to the farmer since the combine," is a favorite phrase of his.

Ethanol's been a very good thing for Fagen Inc., too. The company expects to record sales of at least $750 million for the fiscal year ended Saturday, up from $420 million in 2005. Ron Fagen projects sales of around $1 billion for fiscal 2007. He says the company has enough backlog to stay busy until 2010.

Fagen Inc. has built 46 ethanol factories. Another 27 are under construction, and nine more are slated to begin rising by the end of the year.

But Fagen's bet on ethanol doesn't end there. Ron Fagen is a cofounder and 25 percent owner of US BioEnergy, an ethanol manufacturer that has its main offices in Inver Grove Heights. Two months ago, US BioEnergy disclosed plans to raise up to $300 million in an initial public offering. Fagen also has equity stakes in all the ethanol plants his company has built since 2001.

2006-09-27T09:26:00.000-07:00

As New York drivers pay higher gasoline bills, a proposed ethanol plant in Buffalo would create great new jobs, new alternative fuel and new economic life for the waterfront. Ethanol saves lives, jobs and money from an environmental point of view.

Ethanol is a homegrown fuel that replaces foreign oil, one of the dirtiest chemicals in the country, according to Environmental Defense's Web site, Ethanol plants are much cleaner than oil refineries.

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Ethanol also reduces ozone pollution from cars and trucks. Pollution went down when the state of New York replaced MTBE blends with 10 percent ethanol (E10) on Jan. 1, 2004. In the six years leading up to the use of E10, New York averaged 17 EPA 8-hour ozone exceedance days per year. In the two years since the switch to E10, New York has averaged 5.5 exceedance days per year, a 68 percent reduction.

In gasoline ethanol replaces benzene, a dangerous cancer-causing chemical, to lower the cancer risk. This is important because New York air is 1,900 times too polluted with cancer-causing chemicals, according to Scorecard.org. Ethanol also can clean up diesel fuel, another dangerous cancer pollutant. Ethanol also reduces soot particulate matter from cars and trucks, making them safer still.

The U.S. Department of Energy estimates that ethanol reduces greenhouse air pollution (GAP) by about 20 percent compared to burning gasoline, one of the largest and fastest growing sources of GAP. The 5 billion gallons of ethanol burned today is like not burning a billion gallons of gasoline, making ethanol the best carbon dioxide control program we have today.

The corn that will be processed at the new RiverWright Energy plant in Buffalo would have been shipped overseas to be fed to animals. By producing ethanol here, we can capture the fuel and jobs from corn produced in the region and ship high protein feed.

Some worry that corn is not a sustainable crop, but the corn crop today is much cleaner and requires less fertilizer than ever before. More corn is now grown with conservation tillage that reduces the number of tractor passes over the land, reducing erosion further.

In addition, the RiverWright plant will reuse an abandoned grain elevator, helping to revitalize the downtown area and preventing sprawl development.

A new report, "The New Harvest: Biofuels and Wind Power for Rural Revitalization and National Energy Security," shows that biofuels like ethanol could largely replace gasoline in light-duty cars and trucks by 2050 - if we invest now with plants like these. Corn is a start for ethanol from many other sources of starch, including prairie grasses and wood waste.

All of these reasons prove that ethanol can save lives, jobs and money. We should approve the RiverWright proposal quickly so Buffalo can start reaping the benefits.

2006-09-25T11:51:00.000-07:00

Shares of ethanol producers tumbled in Monday afternoon trading, as crude oil prices continue to ease and Prudential cut its earnings estimate for Archer-Daniels-Midland Co. due to falling ethanol prices.

Agribusiness giant ADM is one of the young ethanol industry's biggest players. Prudential analyst John M. McMillin said falling prices for ethanol pushed him to cut his earnings estimate for the fiscal year ended June 2008 to a profit $2.75 per share, down from $3.25 per share.

Wall Street overall is looking for $2.97 per share, according to an analyst poll by Thomson Financial. He kept his 2007 estimate at $2.55 per share, compared with the Street's overall view of $2.52.

The analyst also reduced his target price to $45 from $49 for the company in a research note. He reiterated his "Overweight" rating, saying the company could look to purchase some of its ethanol competitors or try to distribute their production.

McMillin said he thinks Archer-Daniels-Midland has already locked in favorable prices of $2.30 per gallon for much of its ethanol production for fiscal 2007. But he sees prices falling back to $1.85 per gallon for the following fiscal year.

Hurting ethanol companies is an increasing amount of supply and falling crude oil prices. A barrel of crude dropped 15 cents to $60.40 on the New York Mercantile Exchange, after earlier dipping as low as $59.52. Falling crude prices makes alternative fuel less attractive to customers.

Archer-Daniels-Midland shares tumbled $1.38, or 3.6 percent, to $37.10 on the New York Stock Exchange.

Among other ethanol producers, Aventine Renewable Energy Holdings Inc. fell 52 cents, or 2.6 percent, to $19.73 on the NYSE.

MGP Ingredients Inc. lost $1.38, or 5.9 percent, to $22, and Pacific Ethanol Inc. gave up $1.07, or 7.3 percent, to $13.64, both on the Nasdaq.

VeraSun Energy Corp. slipped 73 cents, or 4.4 percent, to $15.87 on the NYSE.

2006-09-23T12:38:00.000-07:00

U.S. average ethanol prices this week sank below $2 a gallon for the first time since January as gasoline futures dropped amid abundant supplies of the motor fuel.

Gasoline futures traded in New York, which reflect wholesale prices, have declined 36 percent since the start of August, reflecting a plunge in crude oil prices and slower motorist demand after the end of the summer driving season. Ethanol is blended into about four-fifths of the gasoline sold in the U.S.

"The price of gasoline has just taken a huge hit," said Chad Martin, a broker with FCStone Group Inc. in Des Moines. "That's really the underlying factor" sending ethanol prices down.

Ethanol averaged $1.9966 a gallon Friday, down from $2.2266 Sept. 15 and the lowest price since Jan. 23, based on data from distributors in Des Moines and almost 30 other Midwest locations.

The latest average was down nearly 50 percent from a record $3.9757 on July 5 and down from $2.655 a year ago.

Production from ethanol distilleries opened in the U.S. this year is keeping the fuel market sufficiently supplied for now, Martin said. Ethanol output nationwide during the first half of this year was up 23 percent from the same period in 2005, according to the Energy Department.

During June, U.S. ethanol production averaged 13.4 million gallons a day, up 8.9 percent from May and a record for any month, according to government data.

"Production levels continue to increase," Martin said. "And coming into the fourth quarter and first quarter of 2007, several new plants are going to be coming on line. That's adding some downward pressure" on prices.

On the New York Mercantile Exchange, October gasoline futures covering reformulated fuel to be blended for use with ethanol, known as RBOB, fell to $1.4929 a gallon on Sept. 20. That was down from $2.3724 on Aug. 1 and the lowest closing price for a contract closest to expiration since Feb. 27.

Gasoline supplies for the week ended Sept. 15 rose 560,000 barrels, to 207.6 million, 6.2 percent higher than a year ago, the Energy Department reported on Sept. 20. It was the fifth straight weekly gain in inventories of the motor fuel.

Gasoline prices at the pump have also dropped with crude. Regular-grade retail gasoline nationwide averaged $2.46 a gallon as of Sept. 20, down 16 percent from a month earlier, according to AAA, the nation's largest travel organization.

2006-09-22T15:30:00.000-07:00

Highwater Ethanol is looking to raise as much as $46.1 million through a public offering, according to a securities filing made Thursday.

The company said it will put the money toward construction of ethanol plant in Lamberton that will generate 50 million gallons per year. The project is estimated to cost $99.5 million.

Highwater Ethanol said it will put between 4,000 and 4,614 membership units on the market. Each unit will be priced at $10,000. The Lamberton plant will be the early-stage company's first project.

Ethanol, an alternative fuel made partly from corn or other crops, has grown in popularity nationally with the rising price of oil and the instability in the Middle East.

Interest in producing ethanol has been particularly strong in Minnesota and other Midwest states.

2006-09-21T11:22:00.000-07:00

The University of Arizona's motor pool is turning to an environmentally friendly ethanol fuel, becoming the first university west of the Mississippi to transition its fleet away from gasoline.

The UA's fleet is the first in Tucson to move to E85, a high-octane, low-emission fuel made of 85 percent corn-based ethanol and 15 percent gasoline.

About 35 of the UA's 120 vehicles are specially designed to run on ethanol, and in the future all cars new to the fleet will be "flexible fuel" vehicles, said Walt Kavanagh, assistant director of business services for Facilities Management. About 20,000 gallons are expected to be used the first year.

The switch is driven by a desire to improve energy conservation on campus and to support a renewable domestic fuel. Any savings will depend on fluctuating market costs of both gasoline and ethanol, Kavanagh said. With the recent dip in gasoline prices, E85 now costs more than gasoline.

"Facilities Management wants to be on the cutting edge," Kavanagh said. "We have no choice. We have to be out there doing the best we can."

In the four weeks since E85 was introduced to the fleet, the UA's motor pool has dispensed about 4,000 gallons of the fuel, he said. A new $52,000 fuel tank was formally dedicated Monday morning.

"The university has led the way in many, many areas of conservation, of doing things right," said Joel D. Valdez, UA senior vice president for business affairs. Valdez joked that he had dedicated numerous buildings and even landfills, but never a gas tank.

"We are proud to be leading in innovation," said Valdez, noting that he expects the university to incorporate solar energy on campus in the future.

A 10 percent ethanol, 90 percent gasoline blend is sold during the winter in the Tucson and Phoenix areas as an oxygenated fuel to reduce pollution. The UA's vehicles can use any combination of gasoline and ethanol.

Ethanol, or ethyl alcohol, is produced by the fermentation of sugars in plants, typically corn in the United States.

More than 100 ethanol plants are operating in the country, and a new plant is expected to open every six weeks for the next 36 months to meet demand, said Robert White, of the Ethanol Promotion and Information Council.

"There's no doubt ethanol continues to drop particulate pollution," he said.

In the U.S. there are 940 stations that sell ethanol and more than 6 million flexible-fuel vehicles, with an auto industry commitment to double that by 2010. Arizona's first ethanol plant, Pinal Energy, will open in Maricopa in March.

Fewer than 60 fleets and 10 universities across the country have switched to ethanol, White said.

2006-09-20T13:54:00.000-07:00

Shares of two ethanol producers that recently went public fell to record levels Wednesday, after a third ethanol company announced it was delaying its initial public offering.

Shares of Aventine Renewable Energy Holdings Inc. were down $1.09, or 4.9 percent, to $21.29 in afternoon trading at more than twice its average daily volume on the New York Stock Exchange, after bottoming out at $19.85 earlier in the day, the second consecutive session it hit a low.

Pekin, Ill.-based Aventine had previously traded between $22.30 and $42.50 since going public in June.

Meanwhile, shares of Sioux Falls, S.D.-based Verasun Energy Corp. were down 75 cents, or 4.2 percent, to $17 in heavy trading on the NYSE, after falling to $16.32 earlier.

The drop eclipsed the nation's second-largest ethanol producer's previous low of $17.71 set on Sept. 13, after going public in June.

On Monday, Hawkeye Holdings Inc., which was scheduled to sell as much as $366 million in common shares on the NYSE through an initial public offering later this week, said it had temporarily delayed the offering because of market conditions.

The price of oil has dropped in recent weeks, falling to $60.46 per barrel Wednesday on the New York Mercantile Exchange, making alternative fuel less attractive to consumers.

Two other companies have also announced plans to go public, but have yet to set dates for their offerings.

Elsewhere in the sector, shares of other ethanol-producing companies rose along with much of the rest of the stock market.

MGP Ingredients Inc. was up 60 cents, or 2.6 percent, to $24.01 and Pacific Ethanol Inc. rose 30 cents, or 2 percent, to $15.58, both on the Nasdaq. Meanwhile, Archer-Daniels-Midland Co. was up 16 cents to $38.64 on the NYSE.

2006-09-19T16:57:00.000-07:00

Ethanol production in Canada's largest grain-growing province will double in 2007, a spokesman for Terra Grain Fuels Inc. said on Monday.

Terra Grain Fuels' plant, valued at more than C$100 million ($90 million), is now under construction in Belle Plaine, Saskatchewan, and is expected to be operational by the fourth quarter of 2007, said President Tim LaFrance.

The plant will use 400,000 tonnes of feed wheat and produce 150 million litres (40 million U.S. gallons) of ethanol annually, creating about 40 jobs, LaFrance said.

Ethanol, also known as ethyl alcohol, is fuel produced from renewable crops such as wheat, sugar and corn. It can be blended with gasoline to ease demand on fossil fuels.

Ethanol demand is set to increase as the Canadian government wants 5 percent of transport fuel in the country to be from renewable sources by 2010, which is expected to require 3 billion litres of biofuel.

LaFrance's privately held Vertex Energy Limited of Calgary, Alberta, and the Drummond Group of Regina, Saskatchewan, are behind the development of Terra Grain Fuels.

The ethanol will be sold in both Canadian and U.S. markets.

Construction of the Terra Grain Fuels plant come as Husky Energy Inc. (HSE.TO: Quote, Profile, Research) prepares to bring its Lloydminster, Saskatchewan, ethanol plant on stream.

That operation will produce 130 million litres of ethanol from 350,000 tonnes of feed wheat annually. The plant, previously expected to have been operational this month, is set to start producing by the fourth quarter of 2006, said Dennis Floate, of Husky Energy.

Calgary, Alberta-based Husky is also expanding its Minnedosa, Manitoba, plant to 130 million litres of ethanol annually from 10 million litres currently produced. The plant is expected to be operational by mid-2007.

2006-09-19T09:20:00.000-07:00

Ethanol producer Hawkeye Holdings Inc. delayed an initial public offering on Monday that was scheduled to debut this week.

Ethanol stirred investor enthusiasm earlier this year amid skyrocketing oil prices, but the buzz has since cooled.

In addition to mounting criticism of the fuel as a viable alternative to gasoline, energy prices have fallen and shares of other recent ethanol listing are suffering.

"This is not unexpected, but it is a little bit discouraging from the ethanol standpoint," said Chris Manns, president of Traders Group Inc., a brokerage firm focused on financial and agricultural commodities markets.

The third largest U.S.-based ethanol producer was set to sell 15.9 million shares Thursday and raise $350 million if priced at the midpoint of a forecast range.

Assuming an offering price of $22 a share, the company would have an initial market capitalization of about $855 million, according to information included in the prospectus.

Despite a record sales and earnings year, the Iowa Falls, Iowa-based company decided to delay the IPO "in light of current conditions in the equity markets and the recent pullback in the energy segment in particular," Chief Executive Bruce Rastetter said in a statement.

The company does plan to continue with a "growth plan," which includes breaking ground in October for a new plant in Menlo, Iowa.

But the IPO delay is the latest blow for the industry.

Ethanol, which is domestically manufactured from corn, is a renewable fuel used to reduce pollution and to extend gasoline stocks.

It possess possible economic and environmental advantages over fossil fuel, but faces significant hurdles to widespread use, including high costs, limited land and water availability and mixed government and corporate support.

The June IPO of ethanol producer VeraSun Energy Corp.(VSE)rose 30 percent in its debut, bolstered by soaring gasoline prices and growing national sentiment to shrink reliance on foreign oil.

But VeraSun shares have since plunged, falling 20 percent from their offering price.

Another ethanol producer, Aventine Renewable Energy Holdings Inc. (AVR), which made its debut only weeks later, has done even worse, tumbling about 44 percent from its IPO price.

2006-09-14T15:21:00.000-07:00

Petroleo Brasileiro SA, the only major exporter of ethanol, plans to start exporting the gasoline additive to Japan in 2010, tapping demand in the world’s second-biggest economy.

Brazil’s state-controlled oil company, known as Petrobras, targets annual sales of as much as 6 million kiloliters (37.7 million barrels) of ethanol from 2012, Sillas Oliva Filho, alcohol and oxygenates manager at the company, said in an interview in Tokyo on Thursday.

Brazil wants to increase exports of the biofuel, made from sugarcane, to help the South American nation expand agricultural production and discourage poor farmers from migrating to the cities.

In April 2010, Nippon Oil Corp and Japan’s other petroleum refiners will begin supplying ethanol-blended gasoline at the pump as a way to reduce so-called greenhouse gases blamed for global warming.

‘‘Ethanol will help Japan cut carbon dioxide emissions, and help grow our agricultural business,’’ Filho said.

2006-09-09T08:54:00.000-07:00

Carlyle/Riverstone Renewable Energy Infrastructure Fund I and Bunge North America said on Friday they will jointly build ethanol plants with yearly production capacity of several hundred million gallons by the end of 2008.

The plants will be built at U.S. grain facilities controlled by Bunge, with Carlyle/Riverstone majority owner and Bunge holding a minority stake in each plant. Financial terms were not disclosed.

Riverstone Holdings LLC and Carlyle Group are co-general partners of Carlyle/Riverstone Global Energy and Power Funds.

Bunge North America is the North American arm of Bunge Ltd., a food and feed ingredient company.

2006-09-04T21:03:00.000-07:00

China is unexpectedly emerging as a major exporter of ethanol as record-high crude oil prices and a U.S. deficit in the biofuel have pushed up its international price, triggering an investment boom.

Industry officials said China's 2006 exports of ethanol, or ethyl alcohol made largely from corn or cassava, were set to exceed 500,000 tons (625 million liters or about 11,000 barrels per day).

Shipments may reach 900,000 tons (1.13 billion liters or 19,000 bpd), some traders say. It had virtually no ethanol exports for fuel last year.

Most of the ethanol cargoes go directly or indirectly to the United States due to a switch this year to use ethanol as an additive for cleaner gasoline. Some are dehydrated in Caribbean countries for use in the U.S., helped by favorable taxes.

"We predict it (2006 exports) may reach 900,000 tons," said a trader at an international house. "But due to recent softening in the international market, maybe we will revise the number down, possibly by around 100,000 tons."

However, not many are convinced that China can maintain a competitive edge for fuel ethanol exports in the future, especially if it has to keep importing cassava and as there is a ethanol plant building boom in the United States.

China is the world's third-largest ethanol producer, behind Brazil and the United States, but in the past has used most of its output domestically, much for use in alcohol or chemicals but increasingly as a gasoline blend in agricultural provinces.

Brazil exported about 450 million liters to the U.S. last year, only about 4 percent of its total production.

For many, Chinese exports of fuel ethanol came as a surprise as there were only four fuel ethanol plants until 2005. The product is heavily subsidized by Beijing, eager to develop alternative fuels to cut China's dependence on imported oil.

Yet officials said a window of opportunity had emerged, due to a surge in global ethanol prices, helped by a U.S. shortfall estimated at 2 million tons this year. Physical prices climbed to above $5.00 a gallon in May before receding toward

$2.50.

Coupled with high crude oil prices , this has encouraged small food ethanol producers to dehydrate their products for use as fuel, they said. Many have expanded capacity and built new plants.

Data and details of the trade are patchy, partly as it is difficult to distinguish between fuel ethanol and other alcohols, including hydrous ethanol, used also in liquors or chemicals.

But an official from China Songyuan Ji'an Biochemical Sales Co. Ltd., based in the country's top corn-producing province of Jilin in the northeast, told Reuters it alone would export 300,000 tons of ethanol -- or all of its output -- this year.

Of the total, most was exports of anhydrous ethanol to the United States, though there were some hydrous ethanol exports to South Korea and Japan for manufacturing liquors, said the official from Ji'an, China's top ethanol exporter.

Customs data showed exports of ethanol, including hydrous ethanol, totaled 477.65 million liters in the first seven months of this year, up 336 percent from the same period IN 2005.

THOUSANDS, DOUBTS ON FUTURE

The officials said ethanol plants were also sprouting across the country, especially with the National Development and Reform Commission, the country's top planning body, predicting Chinese fuel ethanol consumption will reach 6 million tons by 2020.

It was unclear how much ethanol China was producing this year, in addition to 1.02 million tons by the four government-sponsored plants in Jilin, Henan, Heilongjiang and Henan. Ji'an is also expanding its capacity to 450,000 tons by end-2006.

Yet the Ji'an official said China's total alcohol capacity, including fuel ethanol, would climb by 3 million tons to 10 million tons in 2006. It rose by 2 million last year.

"A lot of plants are being built," said the first trader, adding some of the new plants were focused on export business.

Another trader at a Beijing-based international house estimated there were now about a few thousand producers.

To avoid undermining the country's food security, Beijing is encouraging a shift in feedstocks away from grains, like corn, to non-grain crops, such as cassava, known also as tapioca.

In a sign of rising fuel ethanol production, one tapioca trader said Chinese 2006 cassava imports were heading toward 4.4 million tons, up by about 36 percent from last year.

China National Cereals, Oils and Foodstuffs Import and Export Co. (COFCO), the country's top state-owned trader, is also building a 200,000 tons per year (tpy) ethanol plant in the southern region of Guangxi, China's biggest cassava-producing province.

State media has said it is part of a plan by the Guangxi government to build 1 million tons of annual ethanol capacity.

COFCO is building another fuel ethanol plant in Hebei and doubling its alcohol capacity in Heilongjiang to 500,000 tons.

Domestic demand would depend on Beijing.

"You have to think if this export will last," said the second trader. "In the United states, they have lots of projects underway. The demand gap will narrow significantly next year."

2006-08-29T11:11:00.000-07:00

Panda Ethanol to Build 100 Million Gallon Ethanol Plant in Sherman County, Texas
Tuesday August 29, 8:10 am ET
Cattle Manure Used to Fuel Plant

Panda Ethanol Inc. today announced that it intends to build a 100 million gallon per year ethanol plant in Sherman County, Texas. The facility will annually refine approximately 40 million bushels of corn and milo into a clean-burning, renewable fuel for the nation's transportation needs.

The Sherman plant will generate the steam used in the ethanol manufacturing process by gasifying more than 1 billion pounds of cattle manure a year. Once complete, it will be one of the most fuel efficient ethanol refineries in the nation and equal in size to Panda's Hereford facility which is the largest biomass-fueled ethanol plant in the United States.

The Sherman facility is the fourth 100 million gallon ethanol project announced by Panda, and the third to be powered by cattle manure.

"This plant will significantly expand our ethanol production portfolio, strengthen the economy of the Texas Panhandle and enhance our nation's energy independence," said Todd Carter, chief executive officer of Panda Ethanol. "We are excited by the community's support for this project and look forward to working with state and local officials in seeing it through to completion."

Sherman County, Texas Judge Terri Beth Carter said Panda representatives have been actively involved in the community since the beginning of the site selection process. "They've done a good job answering questions and building support for this project. We're pleased they chose Sherman County as the location for their next ethanol plant."

"This facility will be an economic boon to the area" added Kathy Allen, executive director of the Sherman County Development Committee. "It will create an estimated 61 skilled jobs and 77 additional support jobs. All together, the construction and ongoing operation of the plant is expected to infuse more than $220 million into the area's economy over the next 10 years."

Panda's Sherman refinery will be located on a 1,200 acre site three miles northwest of Stratford, Texas. Construction will take approximately 18 months. The completion date is dependent upon financing, regulatory approvals and other conditions. Panda has submitted its request for an air permit with the Texas Commission on Environmental Quality.

Panda Ethanol previously announced that it successfully completed the debt and equity financing on its 100 million gallon ethanol plant in Hereford, Texas. The company has begun facility construction on the 380-acre site and anticipates ethanol production to commence in the second half of 2007. The company also announced that it has entered into a merger agreement with Cirracor, a publicly-held corporation which trades over the counter. The merger is currently expected to become effective in the fourth quarter of 2006, subject to the satisfaction of certain requirements, and the combined entity will operate under the name of Panda Ethanol Inc.

About Panda Ethanol

Panda Ethanol is headquartered in Dallas, Texas. The company is currently developing fuel ethanol refineries and biomass facilities in the United States. Panda Ethanol's largest single shareholder is Panda Energy International Inc., a privately-held company which has built over 9,000 MW of electric generation capacity at a cost of $5 billion. In 2005, Newsweek magazine named Panda one of the most eco-friendly companies in America.

2006-08-18T15:41:00.000-07:00

Independent power producer NRG Energy Inc. is considering entering the ethanol-making business.

If the Princeton, N.J.-based company proceeds, it would be one of the first moves by a power company to invest in ethanol, a low-polluting transportation fuel made from corn or sugar.

NRG is considering building an ethanol plant that would use steam from an existing power plant or from a new coal-fired boiler, Bob Henry, NRG senior vice president of operations, told Dow Jones Newswires in an interview.

"We are chasing a lot of different permutations on the theme of ethanol," Henry said.

NRG owns coal-burning power plants in Texas, New York and elsewhere in the Northeast, and plans to build new plants to boost its coal-fired generation capacity 46 percent over the next decade.

NRG's experience with handling coal and providing steam for third-party customers through its NRG Thermal subsidiary convinced executives that ethanol could be a viable investment, Henry said. Ethanol plants use steam to convert corn or sugar into a liquid that is then blended with gasoline.

"An ethanol refinery is an excellent steam host," Henry said. "You might as well take the upside of the ethanol business as well."

He declined to say when the company might decide on one or more ethanol projects.

Blue Flint Ethanol, a producer based in Underwood, N.D., is one of only a few U.S. companies pursuing a similar ethanol plant that uses steam produced from a coal-fired boiler. The company is building an ethanol plant near Underwood with an annual capacity of 50 million gallons that will use steam generated by Great River Energy's Coal Creek power plant. The plant is scheduled to start operating in March.

These plants have much lower fuel costs than other ethanol plants, as they run on steam produced by existing coal-fired power plants. By using excess steam from the power plant boiler, they eliminate the need to buy large amounts of coal just for the ethanol plant. They also cut costs by using coal, which is much cheaper than natural gas, the current dominant fuel for ethanol producers.

Environmentalists have supported the use of ethanol, because its use in automobiles results in much lower emissions, including greenhouse gases. They support ethanol plants that use steam from existing coal-fired boilers, although they're concerned that a spate of new coal-fired boilers will be built to power ethanol plants.

NRG's decision whether to manufacture ethanol will rest on how much flexibility one or more of its coal plants would have to produce ethanol, generate electricity or do both at the same time, Henry said.

The profile of the ethanol industry is changing quickly with the implementation of new laws that require U.S. gasoline refiners to blend billions of gallons of ethanol into their product each year. Whereas the first wave of ethanol plants were smaller models built by collectives of farmers, now large companies like NRG are taking a look at the industry with an eye toward building expensive, large-capacity plants that would be more efficient than their smaller-scale predecessors.

This wave of plant construction has prompted fears that the market could become oversupplied, causing a steep drop in prices. Henry said that risk is much more pronounced in the Midwest, where most production is now located, but significantly lower elsewhere.

"If you're in Southern California or Houston, you may have a totally different economic profile," he said.

Even if ethanol prices decline nationwide, less competitive plants would be driven out of business, leaving the low-cost producers a greater market share.

"The people who remain will have the most conservative, prudently designed project," Henry said. "If you're just going to be a copycat, you'll be in trouble. But if you take advantage of some inherent strengths you have, you could stick around."

2006-06-14T21:21:00.000-07:00

Shares of VeraSun, Ethanol Producer, Surge After IPO (Update2)

June 14 -- Shares of VeraSun Energy Corp., the second-largest U.S. ethanol producer, jumped as much as 34 percent on the first day after an initial public offering that tapped rising interest in alternatives to $3-a-gallon gasoline.

The shares rose as high as $30.75 after the company and stockholders yesterday sold 18.25 million at $23 each to raise $419.8 million. Brookings, South Dakota-based VeraSun had expected $21 to $22 a share, according to a June 9 filing. Stocks of ethanol makers such as Pacific Ethanol Inc. and Archer Daniels Midland Co. have nearly doubled in the past year.

``Ethanol supplies are pretty tight and demand is still rising,'' said Kevin Buente, who helps oversee a $2 billion portfolio of loans to ethanol makers and farmers at Normal, Illinois-based 1st Farm Credit Services. ``Anyone who can make ethanol will have no trouble finding buyers for it.''

VeraSun, whose revenue doubled in the first quarter, and Pacific Ethanol, which is building plants on the U.S. West Coast, are benefiting as hedge funds and other investors bet on rising interest in alternative fuels. Ethanol is being backed by President George W. Bush and by General Motors Corp. to help wean the U.S. off imported crude oil, and increased use was mandated by last year's energy bill.

The VeraSun share sale is the first this year by a U.S. ethanol producer and the largest to date by a company solely in the alternative fuels business, according to the Renewable Fuels Association, a lobbying group in Washington. Hawkeye Holdings Inc. and Aventine Renewable Energy Holdings Inc., the third- and fourth-largest U.S. producers, also plan initial stock offerings.

Decatur, Illinois-based Archer Daniels Midland is the largest U.S. producer of ethanol, which is made from corn in the U.S. and from sugar cane in Brazil.

Energy Bill

The switch to ethanol from MTBE as a gasoline additive in the U.S. resulted from rule changes in last year's energy bill. MTBE that leaked from underground storage tanks fouled drinking water and spawned lawsuits. The energy bill also requires increasing amounts of ethanol in fuel every year through 2012.

VeraSun's plants in Aurora, South Dakota, and Fort Dodge, Iowa, can produce 230 million gallons of ethanol a year. The company is building another in Charles City, Iowa, that's expected to have production capacity of 110 million gallons and begin operations in the summer of 2007.

Shares of VeraSun rose 28 percent to $29.55 at 10:48 a.m. in New York Stock Exchange composite trading. The company has a market valuation based on today's share price of more than $2 billion.

VeraSun had net income of $2.74 million during the first quarter, an increase of 62 percent from a year earlier, the company said in a government filing. Sales during the first quarter more than doubled to $109.9 million.

Morgan Stanley and Lehman Brothers Holdings Inc. were lead underwriters of the VeraSun share sale. AG Edwards & Sons Inc. assisted on the sale.

Pacific Ethanol

Shares of Pacific Ethanol, which has yet to produce any ethanol, rose $1.50, or 7.5 percent, to $21.64. They peaked in May at $42.39 after Microsoft Corp. founder Bill Gates invested $84 million in the company through his Cascade Investment LLC.

Fresno, California-based Pacific Ethanol is building a 35 million gallon-a-year plant near Fresno that will make it the biggest ethanol producer in the state. Pacific Ethanol plans four more distilleries on the West Coast by the end of 2008.

There are 101 U.S. ethanol plants today, with capacity to produce almost 4.8 billion gallons annually, according to the Renewable Fuels Association. An additional 32 distilleries and six expansions are under construction with combined capacity of more than 1.97 billion gallons, the Washington-based association said on its Web site.

2006-06-14T21:20:00.000-07:00

Ethanol plant being built in Clatskanie

After several years of discussion, construction soon will begin on an ethanol plant in Clatskanie.

Berggruen Holdings said Wednesday it is building Cascade Grain Products, which is expected to become the largest ethanol plant on the West Coast.

Berggruen plans to construct and operate the first large-scale plant in the Pacific Northwest with a 113.4-million-gallon-per-year corn-based dry mill fuel-grade ethanol plant. The plant is designed by Delta T and will be constructed by JH Kelly LLC Ethanol, a joint venture between TIC and JH Kelly Construction.

Cascade Grain is the initial plant in Berggruen's strategy to construct a series of strategically located ethanol plants.

The facility is funded by a $100 million senior secured credit from WestLB, a German banking operation, and a $20 million loan from the Oregon Department Of Energy.

The plant will serve markets in Oregon, Washington, California, Alaska, Hawaii and the Pacific Rim.

Berggruen Holdings, based in New York City, is a private company investing internationally in an extensive range of asset classes on an opportunistic basis, including direct private equity, stocks and bonds, hedge funds, private equity funds, art and real estate.

Automakers push lawmakers on ethanol fuels

2006-05-18T17:48:00.000-07:00

MAY. 18 6:42 P.M. ET The Big Three automakers pressed Congress on Thursday to help make ethanol fuels more widely available, saying that would be an immediate step toward lessening U.S. dependence on foreign oil.

Leaders of General Motors Corp., Ford Motor Co. and DaimlerChrysler AG's Chrysler Group appealed to lawmakers for incentives to increase the number of gas stations offering blends of the corn-based fuel.

"If we want a game changer, and a game changer in very short term and in big numbers, then ethanol is a very good play for this country," said Ford's chairman and chief executive, Bill Ford.

The executives endorsed a plan to have renewable fuels meet 25 percent of the nation's transportation energy needs by 2025. Rick Wagoner, GM's chairman and chief executive, said the automakers wanted to be leaders "in this historic shift from energy consumption."

Tom LaSorda, Chrysler Group's president and chief executive, said they hoped Congress could help get 20 percent to 30 percent of gas stations equipped with pumps for ethanol.

Other topics discussed during their day on Capitol Hill included health care, trade and currency manipulation by other countries.

"We really tried to make it clear to them we weren't interested in coming, asking for help for the domestic auto industry," Wagoner said. "We were interested in talking about things that would improve the competitiveness of the U.S. economy."

Senate Majority Leader Bill Frist, R-Tenn., said they had productive discussions on several subjects, including "the importance of energy independence being a long-term goal for this country."

Senate Minority Leader Harry Reid, D-Nev., said lawmakers and auto executives were confident they could work together to "bring back the American automobile industry where we think it should be and they think it should be."

"We recognize that there are problems, and we are going to work as partners with them," Reid said. "Perhaps in the last many years we have not worked together as well as we should have."

Sen. Carl Levin, a Democrat who represents thousands of autoworkers in Michigan, said the nation needs to be aggressive "in giving them support to level the playing field."

The executives arrived in vehicles powered by ethanol and decorated with images of corn stalks. The Big Three leaders said they had produced 5 million vehicles capable of running on ethanol blends and planned to bring an additional 1 million to the market this year.

The flexible fuel vehicles, capable of running on gasoline and fuel blends of up to 85 percent ethanol, face the obstacles of finding pumps that offer ethanol.

Industry officials estimate that about 685 of the 165,000 fueling stations in the U.S. offer ethanol blends.

Pump prices top $3 per gallon in many places. President Bush has sought an increase in the availability of ethanol and alternative fuels, more research for hybrid vehicle batteries and elimination of the cap on tax credits for the purchase of hybrids.

The auto executives plan to meet in June with Bush.

The administration has also asked Congress to give it the authority to change mileage rules for passenger cars, a move that could lead to higher requirements.

Wagoner said they did not have extensive talks about fuel economy standards.

The meeting came at a challenging time for the domestic automakers. GM and Ford are executing major restructuring plans that would cut a combined 60,000 jobs and close more than two dozen plants by 2012. GM, meanwhile, has stockpiled parts in case workers at auto supplier Delphi Corp. go on strike.

2006-05-18T17:47:00.000-07:00

General Motors Corp. (GM) said Thursday it's looking to potentially increase the number of vehicles it builds each year that are capable of running on ethanol.

GM powertrain chief Tom Stephens, speaking to reporters at a briefing to announce new engine and transmission initiatives, said the company currently builds 400,000 vehicles annually capable of running on both ethanol and gasoline. He said the company builds 14 different models with ethanol capacity at present and that it is looking into possibly building more.

GM, along with U.S. competitors, have been heralding an increased commitment to ethanol as an alternative fuel. High gasoline prices and the popularity of hybrid vehicles that run on a combination of gasoline and battery power have paved the way for potential demand for ethanol-powered vehicles.

However, limited commercial availability of ethanol fuel has played a role in limiting demand for vehicles that can run on the fuel.

Stephens said GM is making a concerted effort to improve its entire lineup of transmissions and engines and the company will introduce 19 new or significantly revised engines or transmissions in the 2007 model year.

The company's lineup of 2007 model year vehicles has started hitting dealerships and will continue being rolled out over the balance of the year. Stephens said GM's investment in vehicle powertrain is part of an effort to respond to "intense competitive pressure."

He said the company, which is losing market share in the U.S. and posted a $10.6 billion loss last year, remains committed to a long-term mission of being "the world leader in transportation products."

GM is banking on being able to respond to an increased demand for fuel economy. Stephens said the auto maker is the market leader when it comes to the "over-30-miles-per-gallon club." He said the company offers 14 products capable of 30 miles per gallon of fuel.

While GM claims a variety of fuel economy advantages, Chief Executive Rick Wagoner said in an interview last week that the company's image has been impacted by not having a hybrid vehicle - such as the Prius model sold by Toyota Motor Co. (TM) -sooner.

GM will soon launch its first-ever hybrid vehicle and it plans to eventually offer 10 models fitted with hybrid technology. Still, the company only sees hybrid technology as a near-term solution.

Stephens said the company is investing heavily in researching and developing hydrogen-powered vehicles, which GM expects to one day replace conventional cars that run on gasoline. Hydrogen vehicles will "take our vehicles out of the environment debate...we've got a huge program on trying to make that happen," Stephens said.

Stephens said the company is pumping a higher percentage of powertrain department resources into making fuel-economy gains.

"Based on where we spend our money," he said, "fuel economy is number one." GM is spending $8.6 billion on new products in 2006, with much of that pumped into the powertrain department.

Two new ethanol projects announced

2006-05-18T17:46:00.001-07:00

Two new ethanol projects in Iowa were announced on Thursday.

Green Plains Renewable Energy plans to build its second ethanol plant near Superior. The plant will have the capacity to produce 50 million gallons of ethanol a year, similar to a plant Great Plains Renewable Energy is building in Shenandoah. That plant is scheduled to begin producing ethanol in the spring of 2007.

Also, River/Gulf Energy said it intends to break ground during the second half of 2006, with production starting 15 months later, at an ethanol plant in Buffalo, near the Quad Cities on the Mississippi River.

Plans call for a 100 million gallon per year plant to be built there on a 100-acre industrial site that was the home of the former PCS fertilizer plant that closed several years ago.

The first phase calls for construction of a 50 million gallon a year plant with a barge dock to ship ethanol by river.

A second phase will double production of the plant, said Rich Goldstein, manager.

River/Gulf Energy is associated with River/Gulf Grain Co., a Quad Cities-based grain merchandiser and river terminal operator, and Alter Barge Line, which operates on the Mississippi River.
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Buffalo lands $100 million ethanol plant

2006-05-18T17:46:00.000-07:00

BUFFALO, Iowa — A vacant industrial site in this small town along the Mississippi River will be home to a new $100 million ethanol plant project with a twist: The ethanol and its byproduct will be shipped on barges instead of by rail.

Quad-City-based River/Gulf Energy — associated with River/Gulf Grain Co. and Alter Barge Line in Bettendorf — announced plans Monday to produce an initial 50 million gallons of ethanol per year in a new facility at the 100-acre site of the former PCS fertilizer plant, which closed several years ago.

The plant, complete with a barge dock for shipping, will start out with 35-45 workers. The company eventually will add more staff and expand to produce 100 million gallons of ethanol per year, said Jeff Goldstein of Alter Barge.

Construction is expected to begin later this year with production getting under way 15 months later, he added.

“This is something new for us,” he said. “We think it’s a way to better utilize some of our business strengths.”

The Buffalo site’s riverfront proximity was key to the developer’s choice, he said. With Alter’s experience in barge transportation and “a good relationship with the agricultural community,” the site and the project seemed like a perfect fit, he said.

A byproduct of the ethanol-making process called dry distillers grain also will be shipped by river along with the ethanol.

“We chose the river location because waterborne transportation has always been the key to the efficient shipment of bulk products,” said Rich Goldstein, who will manage the new facility.

The plant will be built by Agra Industries of Merrill, Wis., and is expected to use state-of-the-art processing technology provided by Delta T Corp. of Williamsburg, Va.

The construction process alone is expected to create about 100 local jobs.

During the first phase of the plant’s operations, the company expects to process more than 18 million bushels of corn per year with the bulk of that supply coming from the Quad-City area, Jeff Goldstein said.

“That’s very good news,” said Tom Mueller, a Taylor Ridge, Ill., farmer and president of the Rock Island County Farm Bureau. “There will be that much more demand for corn right here to be used in the Quad-City area.”

Mueller guesses the addition of a local ethanol plant might increase demand so much that the price of corn could rise by 10-15 cents per bushel. Farmers currently are receiving about $2.20 per bushel, he said.

“If that helps us, why, it also helps the Quad-Cities,” he said.

It is definitely a big project for Buffalo, which has about 1,300 residents, Mayor John Carson said. The project will bring jobs, more housing and a much-needed boost to the city’s tax base, he added.

With the site’s location across from Camp Abe Lincoln, the mayor said he asked about the possibility of emissions. Carson and Jeff Goldstein both said that only some steam will be released in the ethanol-making process, thanks to the plant’s modern production equipment.

Rep. Steve Olson, R-DeWitt, said the ethanol project is a “big plus” that will boost the economy in the Quad-City region as well as the rest of the state.

“I think the people are ready for an alternative to wean ourselves from our dependency on foreign oil,” he added.

Others are not sold on the idea. Ted Woodruff, an economics professor at St. Ambrose University in Davenport, said ethanol is subsidized by the federal government and “cannot survive on its own.”

“That, of course, is never a good sign,” he said. “It’s one of those things, like a lot of these government-subsidized projects: They’re great for the people that benefit from them, but they’re not so good for the country as a whole.”

Iowa Democrat will push for ethanol boost

2006-05-18T17:44:00.000-07:00

Senator Tom Harkin (D-IA) told reporters Thursday that if Congress doesn't pass legislation to boost America's use of ethanol and other biofuels this year, that he'll try to get it into the next farm bill. Harkin is the ranking Democrat on the Senate Agriculture Committee and was chair of the committee when the 2002 Farm Bill was drafted.

Still, Harkin, like more and more members of Congress, has his name on several bills that would dramatically increase the size of the current renewable fuel standard, which mandates that the nation use 7.5 billion gallons of ethanol by 2012. Most people involved in the ethanol industry believe it will pass that much capacity long before 2012. The industry had 4.5 billion gallons of capacity at the end of last year and more than 2 billion gallons of new or expanded capacity is being built. Harkin said Thursday that the ethanol industry is expanding at the rate of 25% a year.

Many of the bills are supported only by groups of Democratic or Republican Senators, which makes you wonder if anything more than bill introduction will happen in an election year.

Harkin held out hope that it might.

"There are a number of biofuels bills floating around in the House and Senate. Hopefully something will coalesce out of these and we get something done this year," he said.

Harkin's own bill, the Biofuels Security Act, is bipartisan, but just barely. The lone Republican co-sponsor is Senator Richard Lugar, chair of the Senate Foreign Relations Committee on one of the Senate's strongest backers of renewable fuels and energy independence. The other co-sponsors are Senators Tim Johnson of South Dakota, Joe Biden of Delaware and, according to Johnson's office, Byron Dorgan of North Dakota -- all Democrats.

One of the key features of the bill, as Johnson pointed out this week, is that it ramps up the renewable fuels standard (RFS) more quickly than current law. The Biofuels Security Act requires an RFS of 10 billion gallons by 2010, 30 billion by 2020 and 60 billion by 2030, when much more of fuel ethanol is expected to be made from biomass.

Here are other features of the bill, as described in a statement from Lugar's office, along with background on other energy bills introduced by Lugar and fellow senators:

The bill would also require all vehicles to be Flexible Fuel Vehicles (FFVs) and require the major branded U.S. gasoline companies to carry E-85 renewable fuel (motor fuel with 85% ethanol content) at 50% of their gasoline stations.

The legislation would require all U.S. marketed vehicles to be manufactured as FFVs by 2016. FFVs can use both regular gasoline and E-85 renewable fuel, and this capability ensures access to an important alternative to foreign petroleum as the nation's renewable fuels industry continues to expand rapidly.

To respond to the increase in FFVs, the legislation would require the major branded U.S. gasoline companies to carry E-85 renewable fuel at 50% of their gasoline stations by 2016. To assist with the improvements, Lugar and Harkin introduced a companion tax bill, which would increase the tax credit from 30% to 50% for gas stations that convert pumps to E-85 and offer a 75% tax credit to companies owning less than five stations.

A decade ago, Senator Lugar began pushing for a national biomass ethanol research program. Witnesses at Agriculture Committee hearings he chaired from 1996 to 1999 said this would be the most efficient method to produce ethanol. In 1999, Lugar and former CIA Director James Woolsey co-authored a seminal article that linked foreign policy and high cost of securing foreign oil flowing to the United States with the development of homegrown ethanol derived from any form of cellulose . Lugar then authored and passed the Biomass Research and Development Act of 2000, which remains the nation's premier legislation guiding renewable fuels research.

In 2005, Lugar led 21 bipartisan Senators in introducing the Biofuels Security Act to more than double the production and use of domestic renewable fuels including ethanol, biodiesel and fuels produced from cellulosic biomass. This legislation laid the groundwork for the renewable fuels section of the energy bill that passed Congress in July 2005.

Congress unleashes flurry of domestic ethanol support

2006-05-18T17:43:00.000-07:00

At least two more bills to promote ethanol and energy independence were introduced in the Senate Wednesday. One is backed by Democrats. The other is a bipartisan bill that advances ideas that also have the backing of the American Coalition for Ethanol, a group that represents ethanol makers and commodity groups.

Senate Minority Leader Harry Reid (D-NV), and Senator Maria Cantwell (D-WA) introduced the Energy Development for a Growing Economy (EDGE) bill that would provide the president authority to increase the renewable content of motor fuel to 25 percent by 2025. It calls for 25 percent of vehicles sold in the United States to run on ethanol, biodiesel or alternative fuels by 2010. The legislation also requires that 10 percent of electricity in the country come from renewable sources by 2020.

2006-05-18T17:41:00.000-07:00

Ethanol has promise, but don't write off gasoline yet

WASHINGTON - Ever since President Bush's State of the Union vow to break America's addiction to oil, interest in the corn-based fuel ethanol has soared.

A giant grains company just hired a top oil executive to be its new CEO, the IRS is giving tax breaks for the installation of ethanol pumps, and even Wall Street investment banks are getting into the game.

But don't write off gasoline yet. For the foreseeable future, ethanol is most likely to remain only a blending agent, mixed into gasoline to reduce America's dependence on foreign oil only modestly.

Numerous hurdles stand in the way before consumers can choose between ethanol and gasoline, chief among them creating a distribution system from scratch.

More than 200,000 miles of oil, gasoline and natural gas pipelines snake across the continental United States. But because ethanol absorbs water from gasoline and oil and can become contaminated, few pipeline operators are eager to push it through their vast networks.

In order to compete with gasoline, ethanol producers would have to build a parallel national pipeline network.

"To build a brand-new system like that would be an extreme challenge, and not just from a financial standpoint," said Raymond Paul, spokesman for the Association of American Operators of Pipelines.

Today, most major oil pipelines originate along the U.S. Gulf Coast, where drilling is concentrated and where the bulk of the nation's oil imports arrive.

By contrast, ethanol production is concentrated in the sparsely populated Midwest, far from consumer markets. Most of the ethanol produced today moves in tank trucks or on rail cars, in what the ethanol industry calls a "virtual" pipeline that costs more than gasoline moving through pipelines.

The costs of creating a parallel distribution system would be staggering. Paul estimates that an ongoing expansion of the oil pipeline system presently costs about $1 million per mile.

That's not to say that ethanol can't help America kick its oil habit.

Virtually any car on the road today can run on gasoline containing up to 10 percent ethanol. Most oil companies already blend a good bit of ethanol into their product. Shell USA estimates that 30 percent of the gasoline it sold last year contained ethanol, and late last year that figure climbed above 40 percent.

But there's a long way to go before ethanol can challenge gasoline.

Today, fewer than 650 fuel stations sell E85, a blend of 85 percent ethanol and 15 percent gasoline. That's a minuscule number considering that roughly 5 million flex-fuel vehicles are on U.S. roads today - cars, pickups and SUVs that can run on either gasoline or ethanol. Most are powered by gasoline, like the other 195 million cars on America's roads.

General Motors is spending millions of dollars on its "Live Green, Go Yellow" TV ad campaign, which began during the Super Bowl and continued during the Winter Olympics. GM touts nine different models with flex-fuel engines, and it says it'll manufacture 400,000 flex-fuel vehicles this year.

GM doesn't note how few places there are to buy E85 or that new flex-fuel cars won't represent much more than 10 percent of its U.S. production.

"Right now it truly is a chicken or the egg proposition," said David Barthmuss, GM's spokesman for environmental and public policy.

For E85 to take off, which comes first - more cars that can run on it or more places to buy it?

GM is helping to bring on 120 more ethanol stations this year, but it won't commit to making its entire production line flex-fuel vehicles - a goal Brazil is closing in on because it requires it.

"It doesn't make a lot of sense to go 100 percent if you don't have enough fueling stations out there," Barthmuss said. "We're trying to build that, and grow that, so more E85 ethanol is available. It's all about choice. This is not the silver bullet."

Congress has given ethanol producers a hand. A broad energy bill last year required that gasoline refiners collectively blend 4 billion gallons of ethanol into their products this year and 7.5 billion gallons by 2012, ostensibly to lower greenhouse gas emissions.

These mandates, blasted by the oil industry as handouts to ethanol producers, lock in a market for ethanol. They also allow producers to begin achieving economies of scale that justify investment in bio-refineries to convert starch crops such as corn or sorghum into a fermented and distilled final alcohol product that's ethanol.

The mandates pleased Archer Daniels Midland Co. (ADM) of Decatur, Ill., the nation's largest ethanol maker. ADM announced on May 10 that it'd soon add 550 million gallons of expanded ethanol production at facilities in Iowa and Nebraska. ADM now produces about 1 billion gallons annually, or a quarter of all U.S.-made ethanol.

Weeks earlier, ADM introduced its new CEO, Patricia Woertz. She's a novice to the grain business but brings something vital to ethanol's expansion - an oil resume. Woertz was lured away from her post as executive vice president of oil giant Chevron Corp.

Bush's brother Jeb, the governor of sugar cane-rich Florida, also talks up ethanol. He's providing corporate tax breaks to companies that make or distribute ethanol and on May 15 called for a plan to have U.S. ethanol production reach 15 billion gallons by 2015.

That target is no accident. That's about the upper limit of what scientists believe conventional ethanol production can yield in the United States. It represents about 12 percent of the 120.4 billion gallons of gasoline the Energy Department predicts Americans will consume annually by 2025. America would still be consuming 105 billion gallons of gasoline.

Enter next-generation ethanol.

Next-generation ethanol technologies could allow ethanol to be made from corn, sugar cane, naturally growing prairie grasses and virtually any kind of plant or plant waste. Backers see potential for 100 billion gallons of unconventional ethanol.

Cellulosic ethanol, or biomass, involves biologically produced enzymes that can break down virtually any plant fiber into a final ethanol product. The drawback has been the inability to produce these enzymes cheaply on a massive scale.

Two companies - Genentech Inc. of South Francisco, Calif., and Iogen Corp. in the Canadian capital of Ottawa - say they can now do it.

Iogen announced on May 1 that Wall Street banking giant Goldman Sachs & Co. had given it vote of confidence by taking a $30 million minority stake in the company.

But this boomlet could bust.

Respected oil forecaster Cambridge Energy Research Associates warns that by 2010 there could be so much new oil coming to market that prices could drop sharply. That could rob ethanol of its urgency.

"I think a lot of enthusiasm for alternatives to gasoline begins to evaporate, because we tend to be a crisis-driven society," said Bob Dineen, president of the Renewable Fuels Association. Dineen nonetheless remained upbeat about the outlook. "Enough people recognize that independent of price, our dependence on foreign oil comes at a high price."