Courtesy of Osage Bio Energy

Osage calls itself the largest ethanol distributor in the southeast, handling 100 million gallons a year — all from Midwest producers

A company with Southwest Virginia ties announced plans to become the East Coast's first large ethanol producer.

Osage Bio Energy, based in Glen Allen, intends to build four of the alternative motor fuel production plants run on barley, versus the more-controversial corn.

They will compete with Midwest ethanol producers who now dominate the East Coast market, said John Warren, a spokesman for Osage Bio Energy.

According to the $300 million business plan, a sister company in Salem known as Osage Inc. will deliver the fuel to gas stations.

Ethanol is a renewable, plant-derived transportation fuel used in gasoline blends. It is expected to receive widespread acceptance within 20 years.

The U.S. Department of Energy says ethanol helps reduce oil imports and greenhouse gas emissions and fortifies the agricultural sector.

Gasoline-market penetration for ethanol was estimated at 3 percent in 2006, but, "studies have estimated that ethanol and other biofuels could replace 30 percent or more of U.S. gasoline demand by 2030," the agency says.

A big venture capital firm, First Reserve Corp., with its U.S. headquarters in Houston, will foot the bill for the factories with a $300 million equity investment in Osage Bio Energy.

Hopewell, outside Richmond, and Mecklenburg County, near the North Carolina line, are two potential sites, Warren confirmed.

The others are expected to be in the Southeast to serve Southeast and mid-Atlantic markets.

The Renewable Fuels Association in Washington, D.C., said 147 ethanol biorefineries are operating nationwide, with 55 under construction and six expanding.

They are concentrated in the Midwest, in states such as Iowa, with one along the Eastern seaboard, in Georgia.

"We're looking forward to bringing ethanol production to the East Coast and looking forward to being able to do it in a fashion that doesn't conflict with the food-versus-fuel debate," Warren said.

Some critics contend that the ethanol industry is contributing to higher food prices by competing with food manufacturers for corn.

Some are so concerned they're calling for a rollback of targets adopted late last year to dramatically boost U.S. ethanol production.

But others disagree and point to opportunities to make ethanol from other plant fibers.

Osage said it is choosing to use barley and hopes to provide opportunities for Virginia farmers to grow it.

The company said the barley won't compete for land with food production because it will be grown during the winter.

"Currently, in the mid-Atlantic and Southeast, nearly five million acres per year remain fallow in winter months," a company news release said.

While not well known in the Roanoke Valley, Osage calls itself the largest ethanol distributor in the Southeast, handling about 100 million gallons a year -- all of it from Midwest producers, the company said.

While that might paint a picture of a Salem industry with large storage tanks, in fact the physical presence of Osage is little more than an office.

The fuel is stored elsewhere and trucked to retailers.

Paul Powell, vice president of the transportation arm of Osage called Hot-Z Transport, said in a December interview that retailers, at one time uninterested in ethanol, are clamoring for the product.

Company President Earle Spruill, who could not be reached for comment, staked his bet on ethanol long ago and his efforts are beginning to pay off, Powell said at the time.

"When people couldn't see the future of ethanol, he could," Powell said.