Panda Ethanol has secured nearly US$160 million (HK$1.25 billion) in financing to build an ethanol plant that will be fired by mountains of manure in Hereford, a cattle town in the Texas panhandle.

"We've located a project in what I would call the Saudi Arabia of manure," said Todd Carter, the company's chief executive officer.

The plant will "gasify" 454 million kilograms of manure a year to make 100 million gallons of ethanol. The manure will save the plant nearly 365,000 barrels of oil equivalent per year. Panda hopes to get it running by late next year.

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Companies are racing to build ethanol plants as the oil industry uses the fuel as a replacement for gasoline additive MTBE, a suspected carcinogen. Growing US motor fuel demand means ethanol production will need to grow by about 1.5 billion gallons per year.

Some environmentalists have questioned the green benefits of ethanol because some of the fuel's refineries use electricity from plants fired by coal, the dirtiest fossil fuel.

But Carter's "poop to pump" ethanol plant will fuel 90 percent of its own energy needs by heating up manure until it releases methane, which it will then burn to make steam to fuel the plant.

Some environmentalists worry runoff from farms that group large numbers of cattle together can pollute water supplies. But Carter said the plant will turn what already exists in the region into something useful. Ash from the process can be used to make cow bedding and cement, he said.

REUTERS