RALEIGH, N.C. — A massive, long-vacant International Paper plant in Nash County could become the site for an ethanol production plant with investors looking to spend as much as $50 million to bring the plant on line.

Another ethanol refinery may also be built in Rocky Mount, according to the general manager for the local operation.

If the plans materialize, the two refineries would help make North Carolina a more significant player in development and production of high-tech solutions to growing demands for energy.

Xethanol, a publicly traded New York company focused on ethanol produced through use of cellulose rather than grains such as corn, said Wednesday that it will work with Aganol Biorefineries to convert the plant to ethanol production. Financial terms were not disclosed. Aganol is based in Spring Hope.

The Xethanol effort is the second recently announced ethanol effort in North Carolina. Agri-Ethanol of Raleigh is building a grain-based ethanol plant in Beaufort County and has announced financing of up to $3 billion from unnamed investors.

“The deal was struck last week,” said Doug McCullagh, general manager for Aganol Biorefineries. The local company also is known as Carolina Fiberboard. He will serve in the same capacity for the Xethanol subsidiary to be known as BlueRidge BioFuels. Each refinery will operate as a company, and the Spring Hope facility will be known as Spring Hope BioFuels, McCullagh said. “The management team is in place,” he added.

Demand for ethanol is growing as oil prices continue to soar. Some 5 billion gallons of ethanol was produced in 2005, double the amount generated in 2002, according to U.S. Department of Agriculture Statistics With new plants scheduled to come online, production is forecast to surpass 7 billion gallons a year.

The former International Paper Plant is located near Spring Hope. It has been vacant since 1998. The facility, which employed 191 people when it was closed, covers 212 acres and includes 200,000 square feet of factory buildings.

“We’re looking forward to bringing the plant back to life,” McCullagh said.

Once final permits are in place, a pilot production facility is expected to be operational within six months, McCullagh said. As many as 60 jobs will be created once the plant achieves full production, he added. The production target is 35 million gallons per year.

“We may put up to $50 million into the facility at Spring Hope,” McCullagh added.

BlueRidge BioFuels does not plan to stop with one plant, either. “This is only our first plant,” McCullagh said. Negotiations are already underway to acquire another vacant industrial complex in Rocky Mount, and the company also is looking at a site in Virginia, he said.

The plants will use furniture and forestry products as the raw material to produce ethanol.

“It is a perfect facility for us on a lot of different fronts,” McCullagh said of the Spring Hope location. “A lot of the equipment we need is there. Second is the location. We are really happy with the municipal and county governments’ help out there.”

The Spring Hope location is beneficial since it is close to production sources for the state’s furniture and forestry industries, McCullagh explained.

The plant, which once produced fiberboard, already has so-called “pulp digesters” that can be used as part of the ethanol production process, Xethanol said in a statement. Acid hydrolysis technology will be used to convert the wood pulp into fermentable sugars. At some point, the company said it would utilize an enzyme-based process to produce ethanol.

Cellulosic ethanol is an emerging technology, and McCullagh said it offers several advantages over grain-based ethanol. “It’s less costly to produce, it’s cleaner, and it’s not going to upset markets as corn does,” McCullagh said.

In a Department of Energy analysis published in 2002, cellulosic technology was cited as a key to reducing the production costs of ethanol.
“The ability to produce ethanol from low-cost biomass will be key to making it competitive as a gasoline additive,” the analysis said. “If Department of Energy goals are met, the cost of producing ethanol could be reduced by as much as 60 cents per gallon by 2015 with cellulosic conversion technology.”

Christopher d’Arnaud-Taylor, the chairman and chief executive officer of Xethanol, said in a statement that purchasing an existing facility would save “both time and money”.

Xethanol recently acquired a production facility operated by Pfizer in Augusta, GA. that it plans to turn into a refinery by mid-2007. Production is targeted at 50 million gallons a year. Xethanol also has two plants in Iowa.

Xethanol trades on AMEX under the symbol XNL. The company came under criticism this week when Sharesleuth.com, a website operated by billionaire Mark Cuban, noted that several major stockholders had been disciplined by the Securities and Exchange Commission. The website also questioned whether Xethanol had produced significant quantities of ethanol.

Aganol: www.aganol.com

Xethanol: www.xethanol.com