U.S. sets aside up to $385 mln for bio-refineries

By Chris Baltimore

WASHINGTON (Reuters) - The U.S. Energy Department said on Wednesday it will spend up to $385 million over four years to fund six new bio-refineries which will turn cellulosic sources like wood chips and wheat straw into ethanol fuel.

In his State of the Union speech in January, President George W. Bush told lawmakers he wants to raise U.S. biofuel production five times current levels by 2017 to help reduce reliance on Middle East oil.

Bush's plan bets heavily on advances in making ethanol from wood chips and switchgrass rather than from corn -- now the dominant feedstock in most current U.S. ethanol supplies.

Corn is the main ingredient for most ethanol produced in the United States, but advances in non-food sources like switch grass are key to achieving Bush's goal of using 35 billion gallons a year of ethanol by 2017.

The plants to be located in Kansas, Florida, California, Iowa, Idaho, and Georgia will cost about $1.2 billion to build and will produce more than 130 million gallons of cellulosic ethanol per year, the department said.

"These bio-refineries will play a critical role in helping to bring cellulosic ethanol to market, and teaching us how we can produce it in a more cost-effective manner," U.S. Energy Secretary Sam Bodman said.

The goal is to make cellulosic ethanol cost-competitive with corn-based ethanol by 2012, with production costs around $1 a gallon, Bodman said.

The department has yet to finalize funding that will flow to building partners of the six plants, several of which involve partnerships with big companies like DuPont Co., Waste Management Inc., Goldman Sachs Group Inc. and Royal Dutch Shell, as well as the Energy Department's National Renewable Energy Laboratory in Colorado.

Specific information on the plants follows:

- Abengoa Bioenergy Biomass receives up to $76 million for a Kansas plant to make ethanol from feedstocks like corn stover, wheat straw, milo stubble and switchgrass.

- ALICO Inc. gets up to $33 million for a Florida plant to make ethanol from yard, wood, and vegetative wastes.

- BlueFire Ethanol Inc. gets up to $40 million for a Southern California plant to make ethanol from sorted green waste and wood waste from landfills.

- Broin Companies gets up to $80 million for an Iowa plant to produce ethanol from corn fiber, cobs, and stalks.

- Iogen Biorefinery Partners LLC gets up to $80 million for an Idaho plant to make ethanol from agricultural residues like wheat straw, barley straw, corn stover, switchgrass, and rice straw.

- Range Fuels gets up to $76 million for a Georgia plant to make ethanol and methanol from wood residues and wood-based energy crops.