Aiming to be one of the first companies out the door with second generation biofuel production capacity, Glen Allen, Virginia, Osage Bio Energy has just received a healthy $300 million commitment from First Reserve Corporation to build four facilities that will produce barley-based ethanol and a specialty protein feed. The company is the first to pursue the commercial-scale development of barley to ethanol bio-refineries.

Osage Bio Energy was spun off from parent company Osage, one of the Southeast’s largest ethanol distributors, in early 2007. The startup claims its brand of ethanol improves on the much criticized corn ethanol in several ways: It can be grown locally and, most importantly, doesn’t compete for land for food production.

The Southeast and Mid-Atlantic contain nearly five million acres that remain fallow during the winter months; barley, a winter crop that requires less fertilization than its counterpart, corn, would therefore incur little environmental cost, the company reasons. Producing the ethanol locally would also significantly cut down on transportation costs.

While there may be some truth to Osage’s arguments, barley-based ethanol would still pose several risks, as Earth2Tech notes. According to the USDA, its abrasive hull, low-starch content and high viscosity in fermentation make it a less than ideal biofuel candidate — and dramatically raise production costs. The government agency also found that the distillation byproduct was unsuitable for feeding livestock — potentially disrupting the company’s plan to sell the co-product as a protein-rich cattle feed.

[Press release via Earth2Tech]