Top U.S. refiner Valero Energy Corp. jumped into the ethanol business with a big splash last week. The San Antonio-based refiner successfully bid to buy ethanol plants from bankrupt ethanol maker VeraSun Energy, edging out Archer Daniels Midland for the former U.S. BioEnergy assets that VeraSun acquired in the spring of last year.

Valero said that its bid has been accepted by the bankruptcy court overseeing the VeraSun auction. In addition to the former U.S. BioEnergy assets—five plants and a sixth site under development—in its original bid, the court also approved Valero’s purchase of two additional ethanol plants from VeraSun.

Together, the ethanol plants purchased by Valero have an annual production capacity of 780 million gallons. The purchase of those plants will give Valero a dedicated supply of ethanol, the company said.

Total U.S. petroleum demand spiraled lower in February, “continuing the string of declines that has persisted for well over a year,” despite an increase in gasoline demand, the American Petroleum Institute reported in its most recent Monthly Statistical Report. Overall demand for the month, as measured by domestic deliveries, totaled 19.2 million bpd, sinking 3.0 percent from a year ago.

API reported February gasoline demand increased 2.0 percent on the year to 9.021 million bpd, likely the result of lower gasoline prices. Distillate deliveries dropped 12.0 percent from February 2008 as the business and manufacturing sectors faltered, while jet fuel deliveries dropped 6.6 percent.

With demand off, refinery inputs fell 2.9 percent from February 2008 to 14.523 million bpd—marking the lowest February level since 2002, yet industry production of gasoline reached the highest ever February level, averaging over 8.8 million bpd. Distillate fuel production for the month also reached an all-time high of 4.25 million bpd. Production of jet fuel and residual fuel production, however, declined from a year ago.