With tighter national renewable fuel standards on the way, industry analysts believed it was just a matter if time before traditional refiners like Valero stepped into ethanol production.
The nation's renewable fuel standard ensures demand for ethanol by calling for 11.1 billion gallons of renewable fuel to be blended into gasoline this year, with that number climbing to 36 billion gallons by 2022.
The current financial state of the ethanol industry allowed Valero to pick up Verasun's assets on the cheap.
"These are high-quality, relatively new assets in good locations for buying feedstocks," Bill Klesse, Valero's chairman and chief executive, said in a statement. "We expect increases in the Renewable Fuels Standard to continue."Overproduction, tight credit markets and the recession have pummeled the biofuel industry and helped put Sioux Falls-based VeraSun under bankruptcy protection. Other ethanol companies are also feeling the pinch. Cambridge, Mass.-based Verenium Corp., which is teaming up with oil giant BP PLC to build a $300 million cellulosic ethanol plant in Highlands County, Florida, said in a filing this week it may have to "curtail or cease operations" if it cannot raise additional capital.