I've been attempting to teach an old dog new tricks lately, and I can confirm that the old adage is tried and true. But Valero Energy (NYSE:VLO) proved it's no old dog this week, by delving into the ethanol business in a major way.

Beating out ethanol giant Archer-Daniels-Midland (NYSE:ADM) with a $477 million bid, Valero is the proud new owner of seven ethanol plants in the American heartland, facilities which formed a major chunk of operations for the now-bankrupt VeraSun Energy.

I must admit, I have little regard for corn-based ethanol as a fuel source. Last year's enormous surge in corn prices alone was enough to convince this Fool that having humans and cars competing for the same fuel source can't possibly end well.

Alternative energy was a hot topic in the CAPS blogs last summer when oil prices surged, and the case against corn-based ethanol was convincingly argued through some excellent posts. Oil refiner Tesoro (NYSE:TSO) recently challenged ethanol requirements in California on the basis of reports showing that ethanol production actually increases greenhouse gas emissions … a point conceded by a spokesman for the California Air Resources Board.

Corn continues to trade above historical price levels, and gasoline demand remains depressed, making the business of ethanol production tenuous at best. Aventine Renewable Energy Holdings (NYSE:AVR) has indicated a risk of following VeraSun into bankruptcy. Even Verenium (NASDAQ:VRNM), which is partnering with BP (NYSE:BP) to build a $300 million cellulosic ethanol facility in Florida, has expressed uncertainty about its ability to proceed with operations. For the record, I consider cellulosic ethanol a far more promising technology than its corn-based predecessor, and I avidly track the progress of companies like BP and DuPont in its development.

Despite the obvious shortcomings of corn-based ethanol, the government seems to have assured steady demand for it and other biofuels. New regulations require 11.1 billion gallons of renewable fuel to join the nation's fuel supply this year, increasing to 36 billion gallons by 2022. Given those standards, and Valero's expectation for additional requirements in the future, the purchase of these assets at distressed valuations could prove strategically significant.

With integrated producers like BP and independent refiners like Valero paving the way, I see giants like ConocoPhillips (NYSE:COP) among potential bidders for any remaining ethanol assets that might move onto the auction block. In other words, a lot of old dogs could soon be learning new tricks.

Further Foolishness:

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Fool contributor Christopher Barker is all for alternative energy sources, but thinks food is best utilized as food. He can be found blogging actively and acting Foolishly within the CAPS community under the username TMFSinchiruna. He owns shares of Valero Energy. The Motley Fool's disclosure policy is processed from the cellulosic remnants of sugarcane bagasse.