It’s Chapter 11 for Ethanol-Maker Aventine

The idea seemed really promising a few years ago.

Ethanol producer Aventine Renewable Energy Holdings has filed for Chapter 11 bankruptcy, according to, among others, the Wall Street Journal. Last month, it warmed that this might happen if it couldn’t raise further funds. The company lists $799 in assets and $491 in liabilities.

“The ethanol industry currently suffers from poor operating margins as a result of supply exceeding existing demand, including the 2009 renewable fuel standard mandate,” Aventine said. “Ethanol demand has been negatively affected by low gasoline prices, which has all but eliminated the discretionary consumption of ethanol.”

Chalk it up to commodity pricing. Corn has steadily declined in price, but so has gas. Even with generous federal subsidies, corn ethanol producers are suffering.

In fact, even when gas was at $4 a barrel it was tough for corn ethanol makers to make any money. In January 2006, ethanol sold for $3 a barrel, while a bushel of corn cost $2. In early 2007, ethanol sold for $2 per barrel and corn went for $4.20 a bushel, said Michael Eckhart of the American Council on Renewable Energy back in 2007. “We have seen the most profitable space in the fuel business disappear in a year,” said Eckhart.

Corn is also one of the most inefficient ways to produce ethanol. Sugar ethanol, however, is not imported to the U.S. in great volumes because of tariffs and cellulosic ethanol remains in the development stage. Companies like Range Fuels and others continue to push out commercial production. Manufacturers are nowhere near the federal goals for production.

Verasun and others are suffering similar problems.

Still, don’t count ethanol out. The U.S. has a mandate of producing 36 billion gallons of biofuels by 2022.