State development and innovation minister Tony McGrady said the plant once operational could produce 40,000 litres a day of ethanol, made from sugarcane waste, and create an extra $6.5 million in new sales annually.

It would be Queensland’s first ethanol production plant north of Townsville.

Spurned by the North American-Australia Free Trade Agreement earlier this year, the sugar industry has turned to ethanol as an alternative revenue source. When mixed with diesel fuel at 10% ethanol to 90% diesel, ethanol creates E10 unleaded fuel.

E10, currently sold at 24 outlets across Queensland, was also being tested by Caltex as part of 12-month marketing trial in Cairns until May 2005.

Ethanol accounts for 1.2% of all vehicle fuel used in the USA and about 0.2% of Australian fuels.

“Ethanol is the way to go,” McGrady said.

“It has the potential to provide a real future for our sugar industry and create jobs at our mills. E10 makes great sense all around - it will provide Queenslanders with a pro-environment fuel choice and provide our sugar cane farmers and millers with a new product that will help ensure their future livelihoods."