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Controversies Continue to Swirl over Corn Ethanol

Rising corn prices and slack demand have hurt producers. And biofuel makers face a limit on how much ethanol can be blended with gas

Progress is being made on next-generation biofuels, but for the traditional corn ethanol industry, times are tough. Industry's facilities are 20% idle, taking 2 billion gallons a year worth of capacity off line. Bankruptcies are up. The biggest bankrupt producer, VeraSun Energy (VSUQ), was forced to sell seven of its plants, which were bought by oil refining giant Valero Energy (VLO)at bargain prices. "It's frustrating," says Rodney M. Weinzierl, executive director of the Illinois Corn Growers Assn. "The impact on the rural economy is tremendous."

Why the stumble? After all, corn ethanol was once heralded as a savior—a way to reduce dependence on foreign oil while slowing global warming and helping farmers. And until the troubles kicked in last year, new facilities were being built at a rapid pace.