BROOKINGS, S.D. -- VeraSun Energy Corporation, the nation's second-largest ethanol producer, plans to produce biodiesel from oil extracted from distillers grains, a co-product of the ethanol production process.

VeraSun said it would be the first company to develop a large-scale, commercial facility for biodiesel production from a co-product of the ethanol production process, creating two biofuels from the same feedstock.

VeraSun identified an opportunity to use oil extracted from distillers grains, undervalued as a feed component, as an excellent feedstock for biodiesel. Removing the oil from distillers grains both increases the value of the oil for fuel use, and enhances the resulting distillers grains as a livestock feed by concentrating protein and reducing fat content.

"This opportunity is a natural extension to our business and consistent with our objective to be a leader in the production of renewable fuels," said Don Endres, chairman and CEO of VeraSun. "This technology is particularly strategic to VeraSun, because it allows us to extend our large and low-cost producer strategy from ethanol to include biodiesel."

VeraSun is currently evaluating locations for a 30-million-gallon-per-year biodiesel production facility, with plans to begin construction in 2007 and begin production in 2008. The company has contracted with Lurgi PSI Inc. for design and engineering services for the biodiesel facility, and with Crown Iron Works Company for oil extraction equipment.

As a result of the exclusivity provisions in these contracts, VeraSun expects to be the first to develop large-scale facilities using this technology. The company has also filed a provisional patent application with the U.S. Patent Office for the production process.

"We have been conducting research and development in the biodiesel area for years, testing and evaluating various technologies," said Matt Janes, vice president of technology at VeraSun. "We're confident this process will allow for large-scale, low-cost, and high-quality biodiesel production."

Endres said, "Creating another renewable fuel from an existing co-product of the ethanol production process makes good economic, business and environmental sense. We are adding to the renewable fuel supply, enhancing the content of a valuable animal feed, and creating additional value for our shareholders."

VeraSun Energy Corporation, committed to becoming America's source for renewable fuels, is the second-largest ethanol producer in the U.S., based on production. The company has two operating production facilities located in Aurora, S.D., and Fort Dodge, Iowa; is constructing a third facility in Charles City, Iowa; and has two additional facilities under development in Welcome, Minn., and Hartley, Iowa. Upon completion of the new facilities, VeraSun will have an annual production capacity of approximately 560 million gallons of ethanol per year.

The company markets VeraSun E85, a blend of 85-percent ethanol and 15-percent gasoline for Flexible Fuel Vehicles (FFVs), directly to fuel retailers under the brand VE85(TM). VeraSun's branded E85 is now available at more than 80 retail locations.

SOURCE: VeraSun Energy Corporation via PR Newswire.