Michael Burnham, Greenwire senior reporter

Biofuels developer GreenShift Corp. announced a deal yesterday with United Ethanol LLC to extract up to 1.5 million gallons per year of crude corn oil from the mealy grains that remain after corn has been brewed into ethanol.

New York-based GreenShift would install industrial equipment at United Ethanol's Milton, Wis., corn ethanol refinery to extract the pungent, yellow oil from distillers grains. GreenShift would sell the feedstock to domestic biodiesel producers, GreenShift's Chief Financial Officer Edward Carroll said.

"It's not a food-grade oil, so it's a great [fuel] feedstock," Carroll added.

Greenshift has installed similar oil-extraction equipment in 10 corn ethanol refineries throughout the country. By the end of the year, the company will extract and sell more than 10 million gallons of crude corn oil to biodiesel refiners, Carroll projected.

Crude corn oil has traditionally been used to enhance animal feed, but the oil is being used increasingly to make biodiesel as petroleum prices rise.

Last fall, GreenShift (OTCBB: GSHF) entered a joint venture with Minneapolis-based Global Ethanol Inc. to extract 10 million gallons of crude corn oil annually from ethanol refineries in Iowa and Michigan. The oil would be used as feedstock in a biodiesel plant that the companies are building in Lakota, Iowa (Greenwire, Nov. 15, 2007).

Carroll said the 100-million-gallon-a-year refinery is slated to begin producing fuel this summer.