U.S. Markets open in 5 hrs.

USDA offers $181 mln to help build advanced biofuel refineries

WASHINGTON, Oct 21 (Reuters) - The U.S. government on Monday announced $181 million in loan guarantees to build commercial-size refineries making advanced biofuels or to retrofit existing biorefineries to produce the cleaner-burning renewable fuels.

Since 2008, the Agriculture Department has provided $684 million through the Biorefinery Assistance Program to support projects in eight states. Applications for the latest round of funding are due by Jan. 30.

"This financing will expand the number of commercial biorefineries in operation in the United States that are producing advanced biofuels from non-food sources," said Agriculture Secretary Tom Vilsack.

USDA announced the funding at a time the federal mandate for biofuels is under challenge in Congress and in the bureaucracy. The Environmental Protection Agency has said it is considering whether to scale back the mandate, now dominated by corn-based ethanol.

Advanced biofuels, made from plant materials like wood and grasses and producing fewer greenhouse gases than current fuels, were expected to match corn ethanol by the end of this decade but have been far slower to develop than expected.

The Advanced Biofuels Association lists more than 200 plants, including biodiesel makers. Valero Inc. and Darling International are partners in a plant that opened in June to produce 137 million gallons a year of renewable diesel from animal fats and cooking oil.

Michael McAdams, head of the biofuels trade group, said the offer of loan guarantees would be "incredibly helpful" to smaller companies that want to expand production.

One maker of cellulosic biofuels, KiOR Inc., announced $100 million in financing on Monday to build a second refinery at Columbus, Mississippi, to convert wood chips into fuel. The original refinery produced 357,532 gallons of gasoline, diesel and fuel oil from Jan. 1 to Aug. 31. KiOR has a target of producing 13 million gallons a year at the plant.