From: Reuters
Published December 5, 2007 04:49 PM

Nebraska ethanol plant run on cow power shuts

NEW YORK (Reuters) - In the latest setback for biofuels producers, a Nebraska ethanol plant powered by a gas derived from cow manure filed for bankruptcy last Friday, court records show.

E3 Biofuels-Mead LLC, filed for bankruptcy on Friday in U.S. Bankruptcy Court for the District of Kansas.

The company's plant in Mead, Nebraska suffered an explosion in a boiler earlier in the year. That kept the 25 million gallon per year plant running only at about half capacity, a source close to the plant's operations said in an interview. He said the plant has shut until it can get finances in order.

E3 billed the plant as environmentally friendly because it provided its own fuel from cow manure. It made ethanol from corn and fed the crop waste to 28,000 cows on site. Then it made a biogas from the manure, of which it had large supplies, obviating the need for outside natural gas or coal to fire the plant.

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The novel "closed loop" system worked, the source said, but the operation never recovered from the explosion.

"The shame of it is that the boiler had had an explosion which is just a purely mechanical issue in making ethanol, which has been known since the 1920s," said the source. He said that the company was making 25 percent more gas than the plant needed.

Miserable margins for making the alternative fuel have delayed plans for several ethanol plants this autumn. While corn prices are roughly double what they were last year, this year's boom in ethanol capacity, of about one third to more than 7.2 billion gallons per year, has glutted supply of the renewable fuel and kept prices low, analysts say.

VeraSun's 110 million gpy Reynolds, Indiana plant, Glacial Lakes Energy's in South Dakota, and Chippewa Valley Ethanol Co's 40 million gpy expansion of its biorefinery in Minnesota all postponed plans this fall.

E3 did not return phone calls asking when it planned to come back up. The bankruptcy documents showed it had 200 to 999 creditors and liabilities of up to $100 million.

"They just need more time to fix their plant," said the source, adding that bad credit markets also made the business tough.

(Reporting by Timothy Gardner; Editing by David Gregorio)

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