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Ethanol-maker gets USDA backing for NC fuel plant

Wed, 08/22/2012 - 11:13am
EMERY P. DALESIO - AP Business Writer - Associated Press

A company that wants to turn grasses grown on North Carolina hog farms into motor fuel on Wednesday got the federal backing it wanted before building an ethanol plant supporters think could mark a milestone in the state's rural economy.

The U.S. Agriculture Department said Wednesday it has approved a loan guarantee worth $99 million for Wilmington-based Chemtex International Inc., backing a larger bank loan for the $170 million project. The company plans to build an ethanol plant near Clinton in Sampson County that will convert high-energy grass varieties into 20 million gallons of ethanol a year. Production is expected to start in 2014.

The Chemtex facility is expected to create 65 full time jobs with estimated average salaries of more than $48,000 per year. Median household income in Sampson County, home to about 64,000 people, was nearly $36,000 in 2010, according to the U.S. Census Bureau. Another 250 jobs are anticipated for people who grow and deliver the feedstock grasses, maintain equipment, and related tasks.

The project will help reduce dependence on foreign oil, increase farm income, and create rural jobs, the USDA said. The department is "focused on the production of renewable energy from a wide variety of non-food sources, including energy grasses," Agriculture Secretary Tom Vilsack said in a statement.

The company is signing up hog farms to grow the grasses on up to 30,000 acres of hog spray fields, turning that land into a new cash crop for farmers. Water used to suspend and carry hog waste is sprayed on nearly 100,000 acres of farm fields in Sampson, Duplin, and Wayne counties.

Farmers now grow Coastal Bermuda grass to soak up the water-borne nutrients, and landowners must be persuaded to switch to growing energy grasses including miscanthus and switchgrass. The USDA previously approved $4 million that will pay farmers in 11 southeastern North Carolina counties most of their costs of planting the energy grasses the ethanol plant needs.

County leaders have approved financial incentives to attract the ethanol plant. State lawmakers this year briefly considered a special tax break allowing a company to deduct 25 percent from its North Carolina tax bill of the cost of constructing and equipping the facility.

The biofuel refinery is the ninth to get USDA support as the Obama administration spurs the development of plant-based ethanol from plants other than corn. Other ethanol plants in Michigan, Oregon, Florida, Nevada, Iowa, and New Mexico are using feedstocks including farm field leftovers like wheat straw, low-value trees, municipal solid waste, and algae.

The North Carolina announcement comes at a time that the effects of U.S. drought and global demand have pushed the price of corn so high it's idled a half-dozen ethanol plants in the Midwest's Corn Belt this year. North Carolina's first ethanol plant went bankrupt last year despite $35 million in USDA loan guarantees and millions more in loans and private investment after corn prices surged.

More than 95 percent of the nation's ethanol plants use corn starch as their basis for the biofuel.

Earlier this month, more than 150 members of Congress signed a letter co-sponsored by U.S. Rep. Mike McIntyre, D-N.C., urging Environmental Protection Agency Administrator Lisa Jackson to relax government rules requiring that a certain percentage of corn production go to making ethanol for transportation fuel. Poultry-state governors have complained that ethanol is driving up costs for animal producers as well as consumers.

Though federal tax credits for ethanol producers are expiring, demand persists as the military tries to go green. The Navy, USDA and the U.S. Energy Department are pumping $500 million into producing fuels to power the country's warships and planes and cut the military's reliance on foreign oil.

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Emery Dalesio can be reached at http://twitter.com/emerydalesio

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