November 3, 2006 4:34 PM PST

VeraSun to squeeze ethanol, biodiesel from same corn

Ethanol producer VeraSun Energy has said it will build a plant that can produce biodiesel from the oil from distillers' grains--the waste product from ethanol.

In effect, the same corn being fed into the plant to produce ethanol will help make a second alternative energy. VeraSun said it will be the first company to do this.

The announcement, and ultimate implementation, could help resolve one of the lingering problems in cleaner car fuels produced from plants: Namely, that making money off them is going to take a lot of work. Ethanol provides fewer miles per gallon than gasoline, and several analysts have predicted that producers will have to move from corn and sugar cane to switchgrass to make ethanol more economical. (An acre of corn produces about 480 gallons of ethanol, according to Ceres, an agri-fuel company.)

"We are not convinced that the general public is willing to continue purchasing biofuels unless they are price competitive with petroleum fuels," said James Peeples, vice president of marketing for PMC Marketing Group, an ethanol and biodiesel distributor, earlier this month.

Biodiesel producers, meanwhile, worry that the popularity of their product could lead to a rise in the price of cooking oil. It takes 7.5 pounds of vegetable oil to produce a gallon of biodiesel.

Brookings, S.D.-based VeraSun is currently evaluating a site for a facility that can produce 30 million gallons of biodiesel a year. Production is slated to begin in 2008. VeraSun did not indicate whether it would get all of the feedstock for its biodiesel facility that it would need from the ethanol waste product.

VeraSun held an IPO in June, selling shares for $23. The shares rose to $30 on the first day of trading, but the stock now trades in the $17 to $18 range.

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