ORONO – Oil hit $119 a barrel Tuesday and analysts are predicting that gasoline will reach $4 a gallon in the near future.

With fuel costs soaring, officials at the University of Maine and Red Shield Environmental LLC said at a press conference Tuesday that it’s a perfect time to kick off their partnership to build a pilot plant for ethanol production at the Old Town pulp mill.

The two announced last week that the U.S. Department of Energy had awarded RSE Pulp & Chemical, a subsidiary of Red Shield Environmental, a $30 million grant – the largest research and development grant in Maine’s history – to take UM’s research out of the lab and apply it full scale at Red Shield.

In doing so, Red Shield, formerly the Georgia-Pacific Corp. paper mill, and UM are adding to Old Town’s efforts to diversify the city’s economy while solidifying relationships with UM and serving as a national leader in the forest products industry.

“I’m very excited about what’s going on here today,” Jack Cashman, Gov. John Baldacci’s senior policy adviser, said Tuesday. “This is a state that has led the country in forest products development for a long time.”

He, along with officials from Red Shield and the university, representatives from U.S. Sens. Olympia Snowe and Susan Collins’ offices and U.S. Rep. Michael Michaud, who worked to secure the funding, were on hand Tuesday at a formal announcement of the funding at UM’s Buchanan Alumni House.

Cashman worked to get the mill back up and running when G-P announced in 2006 that it was closing the facility. He said Maine’s forestry industry has experienced some problems in recent years, but that it’s time for the state again to be a leader in the pulp and paper sector.

“We have the best wood fiber in the world here. We have the best work force in the world here,” Cashman said. “I see a rebirth in this state in the forest products industry led by the University of Maine.”

The process of making ethanol from wood byproducts is said to have significant technical and commercial advantages over competing technologies because ethanol and other chemicals can be extracted from wood chips using existing pulp facility infrastructures.

In addition, the process requires far less fossil energy to create than corn ethanol and only a fraction of what’s used to make gasoline.

“The process that’s going to be implemented in Old Town doesn’t put any more strain on the wood basket,” Cashman said.

Red Shield applied for the grant last August and was one of three companies nationwide to receive the grant funds from the Department of Energy for ethanol projects. Projects in Vonore, Tenn., and Washington County, Ky., also were funded.

The first phase of Red Shield’s project is being funded by a $10 million research grant that previously was awarded to the university. Red Shield also received a $500,000 grant in February from the Maine Technology Institute to support the development of the extraction process.

UM President Robert Kennedy expressed enthusiasm about the project Tuesday.

“We are on the leading edge of this research – in fact, I believe that with this project, we are creating the cutting edge,” Kennedy said. “As a lifelong educator, I can’t help but think of the impact of a project like this on students and the educational process.”

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