May 21--Sunoco Inc. has made the winning bid for a bankrupt New York ethanol plant, giving the Philadelphia oil refiner the chance to join the fast-growing but financially troubled renewable-fuels industry at a fraction of the cost to build a plant from scratch.

Sunoco's bid of $8.5 million was the top bid for the facility on the site of a former Miller brewery near Syracuse, Sunoco spokesman Thomas Golembeski said yesterday. He said it would supply 25 percent of the ethanol Sunoco needs to blend into gasoline to meet renewable-fuels standards.

Sunoco's price is a huge bargain. It cost the developer, Northeast Biofuels L.P., $200 million to build the plant. Construction began in 2006, but it was problem-riddled and never completed, though some production occurred last year. Northeast owes creditors $172 million, according to bankruptcy documents.

Golembeski said Sunoco might have to spend $10 million to $20 million to get the plant to full production of 100 million gallons annually by early next year. He said he did not know how many it would employ. At the time of the bankruptcy filing in January, the plant employed 57, court documents said.

The purchase is scheduled to close June 15, if certain conditions are met, Golembeski said.

Sunoco is following Valero Energy Corp., the nation's largest oil refiner and owner of refineries in Paulsboro and in Delaware City, into the ethanol sector.

Last month, Valero, based in San Antonio, Texas, bought seven large ethanol plants in the Midwest from bankrupt VeraSun Energy Corp., the nation's second-largest producer of ethanol, for $477 million. That was 30 percent of what it would cost to build the plants, Valero's chief financial officer Mike Ciskowski said in a conference call.

Valero and Sunoco are capitalizing on a collapse in the U.S. ethanol industry, which overexpanded during the energy-price bubble, tripling production from 2003 through last year. That caused the price of corn, the main source of ethanol, to soar, spurring many ethanol producers to sign contracts to protect against even higher prices.

Then the energy bubble burst last summer and the price for a gallon of ethanol swooned from more than $3 to less than $2, squeezing the life from a large number of ethanol producers.

On Monday, four operating subsidiaries of Pacific Ethanol Inc., of Sacramento, Calif., filed for Chapter 11 bankruptcy protection, joining at least 10 ethanol producers in Bankruptcy Court, according to MarketWatch.

Golembeski said Sunoco was attracted to the Northeast Biofuels plant in Volney, N.Y., because it was close to Sunoco's main operations in the Northeast.

He said the company hoped to save some money in the shipment of ethanol from the Midwest, where most of the nation's ethanol is made and where corn production is concentrated.

The downside for corn-based ethanol production in the Northeast is that the corn -- as much as 40 million bushels a year -- will likely have to be shipped to the Syracuse area.

Despite the ethanol industry's problems, demand for the fuel will grow, as dictated by the federal renewable-fuels standard, which calls for an increase from nine billion gallons last year to 36 billion gallons by 2022.

"We think this is a good value. We also view this as a first step into an area of possible growth for the company," Golembeski said.

Contact staff writer Harold Brubaker at 215-854-4651 or hbrubaker@phillynews.com.

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