A Texas company will build the state's biggest ethanol plant in Yuma - bolstering the rural county's growing reputation as a renewable energy hub.

Panda Ethanol's 105 million- gallon-a-year plant will be Yuma's second; the first is Yuma Ethanol, which is under construction. The first plant will produce 50 million gallons a year and is expected to begin operations in June, although the owners plan to double its size later this year.

The two plants would add 70 full-time jobs in the area.

"Panda's plant will help solidify our leadership role in this new energy economy," said Andrea Anderson, Yuma County's executive director.

Panda initially had estimated the cost of the project at $120 million in 2005 but now says the cost would be more than that, given the jump in the price of steel and labor.

On Thursday, the company took the project a step further by announcing a construction agreement with German company Lurgi Inc. Once the company closes financial arrangements for the project, likely this year, it will break ground. The project is expected to be completed by the beginning of 2009.

The plant will annually refine an estimated 38 million bushels of feedstock-grade corn into ethanol - displacing an estimated 2.5 million barrels of imported oil a year.

"This agreement demonstrates our ability to meet the challenges facing a rapidly growing industry," said Todd Carter, Panda's chief executive officer.

Ethanol is blended with gasoline for use in flexible fuel vehicles, available as an option in many new models of cars and trucks. E-85, the commonly used ethanol fuel blend, includes 85 percent ethanol and 15 percent gasoline.

President Bush has proposed slashing the nation's gasoline use by 20 percent over the next decade by escalating ethanol production and imposing tougher fuel economy standards for cars.

Dubbed 20 by 10, Bush's plan mandates using 35 billion gallons of ethanol and other biofuels each year beginning in 2017, nearly five times the current goal of 7.5 billion gallons in 2012.

Colorado ranks 15th among 22 ethanol-producing states. It has four corn ethanol plants producing more than 100 million gallons. A Sterling plant went online in 2005. The owners also are constructing the Yuma Ethanol plant and plan three more.

chakrabartyg@RockyMountainNews.com or 303-954-2976