ETHANOL
Ethanol alcohol is commercially produced through the fermentation of grain and in the United States it is principally produced by processing corn. Ethanol is a blend component in the U.S. gasoline fuel market. In 2005, approximately 140 billions gallons of gasoline was used according to the U.S. Department of Energy’s Energy Information Administration or EIA. Refiners and marketers have historically blended ethanol with gasoline to increase octane and decrease tailpipe emissions. According to the Renewable Fuels Association, or RFA, 4.0 billion gallons of ethanol were produced in the U.S. in 2005 accounting for approximately 3% of the U.S. gasoline fuel supply. The RFA reports total U.S. ethanol production capacity increased to more than 4.3 billion gallons per year or BGY in 2005 and the majority of U.S. fuel ethanol produced in 2005 was used as a gasoline additive. A typical blend of ethanol is 5.7% to 10.0% of volume in over 30% of the U.S. gasoline fuel supply. Ethanol is used as the primary blend component for E85, a fuel blend composed of up to 85% ethanol and approximately 6.0 million vehicles on the road in the U.S. today are flexible fuel vehicles or FFVs capable of utilizing such fuel. Gasoline blended with up to 10% ethanol are approved for use under the warranties of all major motor vehicle manufactures and all major manufacturers of power equipment, motorcycles, snowmobiles and outboard motors permit the use of ethanol blends in their products.

DRIED DISTILLERS GRAIN WITH SOLUBLES
A co-product of dry-mill ethanol production, DDGS is a high-protein and high-energy animal feed that is sold primarily as an ingredient in beef and dairy cattle rations. DDGS consists of the concentrated nutrients (protein, fat, fiber, vitamins and minerals) remaining after starch in corn is converted to ethanol. Over 85% of DDGS is fed to dairy cattle because it contains high “by-pass protein,” which results in more milk production. It is also used in poultry, swine and other livestock feed. It is anticipated that our facilities will utilize the latest DDGS production technology and produce high quality, or “golden,” DDGS, which commands a premium over products from older plants. Golden DDGS has higher availability of nutrients and is more easily digested than other products.

WET DISTILLERS GRAIN WITH SOLUBLES
WDGS is similar to DDGS except that the final drying stage of DDGS is bypassed and the product is sold as a wet feed containing 35% to 50% dry matter, as compared to DDGS, which contains about 90% dry matter. WDGS is an excellent livestock feed with better nutritional characteristics than DDGS because it has not been exposed to the heat of drying. The sale of WDGS is usually more profitable because the plant saves the cost of natural gas for drying. The product is sold locally because of the higher cost of transporting the product to distant markets and its reduced shelf life. As noted above, we plan to sell approximately half of our distillers grains as WDGS.

CARBON DIOXIDE
Carbon dioxide, or CO2, is produced in large quantities during the fermentation stage of ethanol production. After scrubbing the CO2 for any residual alcohol, the CO2 is either vented, or captured and sold into beverage or other industrial markets. We believe that the CO2 market in Oklahoma and Kansas is significantly different than the CO2 market surrounding the greatest concentration of ethanol production facilities (i.e., the corn belt). Currently, CO2 is being used by Oklahoma and Kansas energy companies in secondary and tertiary oil recovery operations. We are exploring opportunities to market the CO2 we will produce to these energy companies.