Oct. 15--A year ago, the bottom dropped out for America's ethanol industry when corn prices surged, lending for new plants nearly disappeared, and prices for gasoline fell sharply -- negating ethanol's cost-advantage for consumers. A number of plant owners filed for bankruptcy.

Now experts say the industry is rebounding, and it could be the best time in years for a well-capitalized company, with deep-pocketed investors, to introduce a second-generation ethanol refinery.

Such a ground-breaking facility is being introduced today outside Madison, Westmoreland County.

Coskata Inc. will show a pilot plant that produces ethanol by burning anything containing carbon -- not just corn.

"We are showing a successful scale-up using our process that runs on multiple materials and produces fuel-grade ethanol," said Wes Bolson, Warrenville, Ill.-based Coskata's business development and marketing manager.

Coskata's process -- which uses a plasma torch that burns nearly as hot as the sun -- was developed by former Westinghouse Electric Corp. The torch vaporizes fuel placed in a device known as a gasifier.

Waltz Mill is home to Coskata's partner, Westinghouse Plasma Corp., now a unit of Calgary, Alberta Canada's Alter NRG Corp.

Corn, and to a lesser extent sugar cane, were the primary fuels used to power first-generation ethanol bio-refineries. The Coskata process allows the use of virtually any carbon-based substance as varied as wood chips, landfill waste -- even old tire -- as feedstock.

Supporters of the plant, built on the grounds of successor Westinghouse Electric Co.'s Waltz Mill nuclear-services facility, point to its financial backers as proof that its process is a winner.

Among the backers are General Motors Co.; venture-capital company Khosla Ventures, founded and led by Sun Microsystems Inc. founder Vinod Khosla; and the investment giant The Blackstone Group. The $30 million bio-refinery was built entirely with private funds, Coskata said.

"General Motors, Khosla Ventures and the Blackstone Group -- that's the stamp of validation," said Todd Alexander, a partner in the New York office of law firm Chadbourne & Parke LLP, who specializes in renewable energy.

Depending on what fuel is used, Coskata Chief Executive Officer Bill Roe said his process will produce ethanol for less than $1 a gallon -- with all production costs included -- vs. the current average price for gasoline in Western Pennsylvania that sells in the $2.50 a gallon range.

Using non-food fuels to produce ethanol is the industry's Holy Grail, said attorney Alexander, adding that producing the fuel for less than $1.50 a gallon could key tens of billions of dollars in investment in such a low-cost process.

Coskata said he plans to license its process to interested customers.

"We believe we have the lowest production costs of any ethanol ever produced, and the reason is the varied feedstocks we can use in our process," Roe said.

Roe, though, admits that financial markets still aren't embracing the ethanol industry. Investors are waiting for a success exhibited by a refiner that has grown beyond using corn.

"There will be a lot of investment in second-generation, non-corn-based ethanol refineries," Alexander said.

Rick Stouffer can be reached via e-mail or at 412-320-7853.

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