GLADSTONE has been named one of three possible sites for a biofuel production plant.
The plan follows Premier Annastacia Palaszczuk's first trade mission to the US.
While on tour this week, the Premier began negotiations with Navy officials to supply US ships with biofuel - namely ethanol - produced in Queensland.
Mackay, Gladstone and Townsville were named possible sites for the plant if a deal is secured with the Pentagon.
MP Glenn Butcher said Gladstone was in the box seat for the plant given the size of its port and available land.
"They're looking for big, deep water ports," Mr Butcher said.
"And if they are looking to build an ethanol plant we've got that land (the Gladstone State Development Area) sitting right here in our backyard."
Mr Butcher said he had not yet seen any formal documentation of the project.
The proposal follows a motion calling for an ethanol mandate on all fuel, which won bi-partisan support in the Queensland Parliament last month.
The plan is to mix ethanol with all grades of fuel sold across the state, however the ethanol-to-fuel percentage has not yet been decided.
The motion was introduced by LNP's Andrew Powell, member for Glass House.
Two out of Australia's three ethanol plants are in Queensland - at Dalby and Sarina (35km south of Mackay - and have a combined capacity to produce 140 mega litres of ethanol each year.
But a 5% ethanol mandate on fuel is predicted to create demand for 200 mega litres per year.
Mr Powell said expansions at existing facilities may cope with increased demand but higher mandates would "require further industry development".
Queensland produces 95% of the nation's sugarcane.
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