Shares for the company fell to 12 cents on the news, and the company reports it is working to raise more capital.

In addition, it is seeking equity financing or a buyer for all or part of the company, but will choose bankruptcy if those efforts fail.

VeraSun, a larger ethanol maker, slipped into bankruptcy last northern autumn.

The challenge is shrinking ethanol margins as gasoline prices have fallen.

And despite the renewable fuel standard, the price for the renewable fuel hasn't kept pace with production costs.

The company reported a fourth-quarter loss of $US36.9 million compared to a profit of $3.3m a year earlier.

The company reports it does not have the cash to make a $15m interest payment, or to pay more than $24m it owes a builder for plant construction.

The news comes as a bipartisan group of 12 US senators led by Democrat Tom Harkin, and Republicn Chuck Grassley, is asking the US Environmental Protection Agency not to propose regulations assuming that greater US biofuel use would raise carbon dioxide emissions.

The challenge is figuring the "indirect land use changes" created by the rising use of crops for fuel.

They argue the data and methods for those calculations are not adequately developed, and thus should not be used in ways to make it harder for ethanol and biodiesel to meet requirements of the Energy Independence and Security Act of 2007, according to a press statement.

In the statement, Harkin notes the renewable fuel standard is "essential to breaking our over-dependence on oil".

He adds that the renewable fuel standard has put the US on a clear path of producing and using steadily increasing levels of a variety of biofuels over the next 15 years.

However, the emissions rules in the standard were to ensure that the new fuels would also be good for the climate.

However, Harkin adds that for this approach to work "we simply must have valid data and methods for calculating emissions".

Grassley adds that "it defies common sense that EPA would publish a proposed rulemaking with harmful conclusions for biofuels based on incomplete science and inaccurate assumptions."