Ethanol

The Obama administration on Tuesday proposed renewable-fuel standards that could reduce the $3 billion a year in federal tax breaks given to producers of corn-based ethanol. The move sets the stage for a major battle between Midwest grain producers and environmentalists who say the gasoline additive actually worsens global warming.

The increased use of ethanol could cost the government up to $900 million for food stamps and child nutrition programs, a congressional report says. Higher use of the corn-based fuel additive accounted for about 10% to 15% of the rise in food prices from April 2007 to April 2008, according to the nonpartisan Congressional Budget Office. That translates into higher costs for food programs for the needy.

. -- A smooth road curves toward the hulking ethanol mill that One Earth Energy will open in June. But the path to profitability might be rocky, as the fledgling company could face much larger rivals that have snapped up bankrupt mills at steep discounts. Valero Energy Corp., the country's largest oil refiner, broke into the farm-grown business last month, buying seven ethanol mills and a development site from bankrupt VeraSun Energy Corp. at a 70% markdown.

A Sacramento company that once was among the nation's fastest-growing ethanol producers says it could run out of cash within a month. Pacific Ethanol Inc. said in a Securities and Exchange Commission filing that it might not be able to continue past April 30 without renegotiating its debts or finding new sources of cash. The company said a bankruptcy filing was possible.

Ethanol investors met with Gov. Arnold Schwarzenegger this week in an effort to derail California's far-reaching proposal to slash carbon emissions from transportation fuels. The meeting, the latest volley in a national campaign against the regulation, was attended by Silicon Valley mogul Vinod Khosla and former Secretary of State Bill Jones, chairman of the board of Sacramento-based Pacific Ethanol Inc.

Former Iowa Gov. Tom Vilsack, who aggressively campaigned for Sen. Hillary Rodham Clinton before his state's caucuses in January, will be named Agriculture secretary by President-elect Barack Obama, three Democratic officials confirmed Tuesday. The formal announcement was expected this morning at a news conference in Chicago. Vilsack declined to comment on the report. "Those questions should be answered by the transition office and the president-elect," he said.

The air smells clean and sweet off the sprawling corn and spearmint fields, but for this unincorporated town of 156, it is the smell of failure: the failure to reap the rewards of the ethanol boom. Construction crews were scheduled to start digging up the sandy soil next spring to make way for an ethanol distillery plant in San Pierre.

VeraSun Energy Corp., the second-largest U.S. ethanol producer, filed for bankruptcy protection after making bad hedging bets on corn, a raw material used to make the fuel. The petition for Chapter 11 bankruptcy in Wilmington, Del., listed both assets and debt of more than $1 billion. The Sioux Falls, S.D.-based producer and seller of ethanol, which was formed in 2001, has 16 production facilities in eight states and an annual capacity of about 1.

Fuel maker Tesoro Corp. on Tuesday sued California air regulators to block a new regulation that is expected to sharply boost ethanol use in the state's gasoline starting in 2010. The San Antonio-based company, which operates refineries in Los Angeles and the Bay Area city of Martinez, said the new fuel specifications could conflict with the state's push to cut greenhouse gas emissions and could have ramifications for the environment and U.S. food prices.