But a year-and-a-half later, the biofuel renaissance is reeling. Skyrocketing oil prices nearing $150 last summer and volatile grain markets trimmed profit margins into oblivion at dozens of American ethanol plants.
VeraSun Energy, a once promising biofuel company based in Sioux Falls, South Dakota, filed for bankruptcy late last year. Only months later, a major oil company is picking up the pieces.
The nation's largest independent oil refiner is now a major player in the American ethanol sector. Valero Energy, a petroleum refiner and gasoline distributor, acquired seven ethanol plants from the bankrupt biofuel company VeraSun Energy in a court-structured auction this week.
If the $477 million deal is finalized, Valero would become the first traditional refiner to obtain primary ownership of domestic ethanol plants. While the corn-based biofuel is most commonly used as a 10 percent ethanol to 90 percent gasoline blend, some industry experts have characterized the oil and ethanol sectors as not only competitors but business adversaries.
Valero executives have previously taken a negative tone towards the ethanol sector. In March 2008, Valero CEO Bill Klesse (Cles-ee) blasted U.S. energy policy towards ethanol. Klesse said:
"All of these programs are just a huge transfer of wealth from our industry to the Midwest farms."
The Valero CEO added that ethanol would cause much more damage to the environment and contribute higher amounts of greenhouse gases than oil production.
Speaking with Market to Market this week, Valero spokesman Bill Day did not refute his company's previous criticism of the ethanol industry. Day added that…"Ethanol production will be a small part of what we do so it's unclear how much advocacy for either higher blends or overall ethanol production we will have."
Day also restated Valero's opinion that the ethanol industry would not be viable without heavy government subsidies, tariffs, and a renewable fuel standard.
In acquiring seven ethanol plants, Valero's main bidding competitor was biofuel giant Archer Daniels Midland. ADM, one of the nation's largest producers of ethanol, sought to purchase all of VeraSun's biofuel plants as opposed to Valero's strategy of targeting only facilities the oil refiner deemed "most viable".
Ag Star Financial and a group of previous VeraSun lenders will likely purchase the bankrupt company's remaining ethanol plants throughout the Midwest.