BROOKINGS, S.D. --- VeraSun Energy Corp., the nation's second-largest ethanol producer, today announced plans to produce biodiesel from oil extracted from distillers grains, a co-product of the ethanol production process. VeraSun plans call for development of a large-scale commercial facility for biodiesel production from a co-product of the ethanol production process, creating two biofuels from the same feedstock. VeraSun identified an opportunity to use oil extracted from distillers grains, undervalued as a feed component, as a feedstock for biodiesel. Removing the oil from distillers grains both increases the value of the oil for fuel use, and enhances the resulting distillers grains as a livestock feed by concentrating protein and reducing fat content. "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," said Don Endres, chairman and CEO of VeraSun. VeraSun is now evaluating locations for a 30-million-gallon-per-year biodiesel production facility, with plans to start construction in 2007 and begin production in 2008. The company has contracted with Lurgi PSI Inc. for design and engineering services for the biodiesel facility, and with Crown Iron Works Company for oil extraction equipment. VeraSun has also filed a provisional patent application with the U.S. Patent Office for the production process. Biodiesel can be blended with petroleum diesel to run in all 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 projects biodiesel demand will increase to more than 1 billion gallons by 2010 and double to 2 billion gallons by 2020. "We have been conducting research and development in the biodiesel area for years, testing and evaluating various technologies," said Matt Janes, vice president of technology at VeraSun. "We're confident this process will allow for large-scale, low-cost and high-quality biodiesel production." "Creating another renewable fuel from an existing co-product of the ethanol production process makes good economic, business and environmental sense," added Endres.

Originally posted on Fleet Financials