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Valero shows confidence in ethanol’s future

By Staff | Apr 10, 2009

Some doomsayers saw the VeraSun bankruptcy as powerful evidence that the ethanol boom had run its course and the industry’s future was far from bright.

That conclusion is proving to be quite wrong.

The decision by San Antonio, Texas-based Valero Energy Corp. to invest $477 million to buy VeraSun plants in Iowa, Minnesota and South Dakota shows a strong commitment by North America’s largest petroleum refining and marketing company to ethanol’s long-run prospects.

There’s no question that demand for ethanol has slowed somewhat due to relatively low oil prices. Even so, no one expects oil to remain this affordable for very long. Once the recession abates, demand for energy will begin to grow more rapidly, oil prices will go up and the role of ethanol as an alternative to foreign oil will increase.

Valero’s management understands the energy marketplace well. Investing in renewable energy is part of the company’s strategy for success in a rapidly changing business environment. The acquisition of the former VeraSun plants is indicative of how Valero’s leaders view the future.

“These are high-quality, relatively new assets in good locations for buying feedstocks,” said Valero Chairman and Chief Executive Officer Bill Klesse, in a statement released March 18. “We expect increases in the Renewable Fuels Standard to continue. We are also pleased to have such high-quality people join Valero.”

According to information released by Valero in March, the Fortune 500 company owns and operates 16 refineries throughout the United States, Canada and the Caribbean with a combined throughput capacity of approximately 3 million barrels a day. The company has about 5,800 retail and branded wholesale outlets in the same regions that operate under various brand names.

The five former VeraSun operational properties Valero has acquired are capable of producing 780 millions gallons of ethanol per year. Together with a sixth site that was under development, they will make Valero a major ethanol manufacturer.

Farm News welcomes Valero to the Midwest. This vote of confidence in the future of ethanol is very good news for Iowa and the region as a whole.

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