CODY- Plans to build an ethanol plant in Greybull took a step forward last week as Big Horn Basin Ethanol announced a lease agreement with a Canadian company that may provide up to $45 million for the project.

Terms of the deal call for Bronte Renewable of Ontario to own the plant and BHBE to lease and operate it, said BHBE President Tom Johnson.

BHBE would make fixed lease payments to Bronte Renewable, and would see additional revenues if market forces or plant efficiencies allowed for increased profits, Johnson said.

Assisting in the project financing is Excelsior Capital, a North Carolina commercial financing and merchant banking company, Johnson said.

The three companies have begun a 90-day due diligence period that will include drafting construction contracts and other documents. If all parties are satisfied at the end of that period, the deal will be made final, said Greybull Mayor Frank Houk.

For two years, project backers have pursued financing, including through local and regional banks and state bonds.

"I would say that this is probably more solid good news than I've had for a while. I'm guardedly optimistic, and I will be very happy when a shovel hits the ground," Houk said.

If the deal works out, construction would start by July 2008 and be completed by September 2009, Johnson said.

Previous funding efforts had centered on securing $34 million in capital financing, but Johnson said rising material and construction costs had boosted the project cost estimate to $45 million.

He said the plant would produce up to 25 million gallons of ethanol a year.

Backers have said such a plant would employ up to 33 full-time workers, process 7.5 million bushels of corn annually and use 470,000 gallons of water each day.

The town of Greybull has signed a contract to allot a portion of an existing but previously unused Bighorn River water right to BHBE that should satisfy the plant's needs, Houk said.

"I think there is adequate water supply to do what we need to do. But we're certainly going to watch it very closely," Johnson said, alluding to the ongoing dispute over tight water supplies on the Bighorn River.

Johnson said the company plans to buy at least 25 percent of its corn from Wyoming growers, but he was unsure what that would mean to corn prices for those who use it as feed for livestock.

The plant has been permitted by the Wyoming Department of Water Quality to operate using natural gas, with previously announced plans to use coal still under discussion, but not at the permit stage, Johnson said.

The plant would produce wet and dry distiller's grains that could be used in feedlots and dairies, he said, and the company is working to schedule a meeting soon to educate local producers on the issue.

Houk said a Wyoming Business Council grant will provide up to $1.5 million to construct a raw water line to be shared by BHBE and the town.

Cleanup is about 80 percent complete at the former Amoco refinery site that will host the BHBE plant as part of a new industrial park, Houk said.

Most contaminated surface soil has been remediated, and plans call for BP, the company performing the voluntary cleanup, to begin removing concrete and other debris from the site, he said.

About a dozen people present at the announcement expressed concerns about possible pollution, noise and traffic from the plant, said BHBE Treasurer Ron Fiene.

Some also said there had not been sufficient public notice about the project.

Fiene said he was surprised at some of the concerns, since the project has been widely publicized for two years.

Houk said several public meetings have been held, including meetings at the time Greybull sold land to BHBE and when the town applied for a WBC grant.

He said the town will schedule a public forum early next year to allow residents to give input and let BHBE offer more information about the proposed plant.