DEPOSIT AGREEMENT

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EXHIBIT 10.42






                                DEPOSIT AGREEMENT

                                     BETWEEN

                              PACIFIC ETHANOL, INC.

                                       AND

                                  COMERICA BANK







                              DATED APRIL 13, 2006



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                              PACIFIC ETHANOL, INC.

                                DEPOSIT AGREEMENT


         THIS DEPOSIT AGREEMENT is made on the 13th day of April, 2006 (the
"AGREEMENT"), by and between Pacific Ethanol, Inc., a Delaware corporation (the
"COMPANY"), and Comerica Bank, a Michigan banking corporation, in its capacity
as depository bank (the "Bank"). Certain capitalized terms used herein are
defined in Section 5.14 of this Agreement.

         WHEREAS, the Company and Cascade Investment, L.L.C., a Washington
limited liability company (the "PURCHASER") have entered into a Purchase
Agreement, dated as of November 14, 2005 (the "PURCHASE AGREEMENT"), pursuant to
which the Purchaser has purchased from the Company, and the Company has sold to
the Purchaser, the Preferred Shares (as defined in the Purchase Agreement);

         WHEREAS, pursuant to the terms of the Purchase Agreement, $80,000,000
of the purchase price paid by the Purchaser to the Company in consideration of
the Preferred Shares is to be deposited into a restricted cash account (the
"RESTRICTED CASH ACCOUNT") to be held by the Bank and applied in the manner
provided in this Agreement;

         WHEREAS, to induce the Purchaser to acquire the Preferred Shares, the
Company has agreed to enter into this Agreement, establish the Restricted Cash
Account and utilize the amounts maintained in the Restricted Cash Account in
accordance with this Agreement; and

         WHEREAS, the parties hereto desire to set forth the terms of the
Restricted Cash Account and to select Bank as the depository bank to act in
accordance with the terms of this Agreement.

         NOW, THEREFORE, in consideration of the premises, representations,
warranties and the mutual covenants contained in this Agreement and the Purchase
Agreement, and for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties agree as follows:

                                   ARTICLE I.

                    ESTABLISHMENT OF RESTRICTED CASH ACCOUNT

             SECTION 1.01 Selection of depository bank. The Company hereby
selects Bank as the depository bank under this Agreement, and Bank agrees to
assume and perform the obligations of Bank under this Agreement.

             SECTION 1.02 Establishment of Restricted Cash Account. Subject to
the terms and conditions set forth in this Agreement, on the date hereof the
Purchaser has deposited with Bank an amount equal to $80,000,000 (the "DEPOSIT
AMOUNT") by wire transfer of immediately available funds to the account of the
Bank referenced on EXHIBIT A attached hereto. The Deposit Amount, together with
any and all interest, income and other earnings thereon, is referred to as the
"DEPOSIT FUND." The Bank shall hold, invest, manage, administer, distribute and
dispose of the Deposit Fund in accordance with the terms and conditions of this
Agreement.



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             SECTION 1.03 Investment and Liquidation of Deposit Fund.

                  (a) Pending disbursement, the Bank shall invest and reinvest
the Deposit Fund in Permitted Investments, and liquidate such Permitted
Investments, pursuant to and in accordance with the written instructions of an
Authorized Officer of the Company as provided to the Bank from time to time.
Interest, income and other earnings, if any, earned on the investment of any
Deposit Fund moneys shall be credited to the Restricted Cash Account. The Bank
shall not be liable for any loss resulting from any investment made, or any sale
or redemption of any investment made, in accordance with instructions received
from an Authorized Officer of the Company or in accordance with paragraph (b) of
this Section 1.03.

                  (b) If and when cash is required to be disbursed in accordance
with this Agreement, and cash is not otherwise available in the Restricted Cash
Account, the Bank is authorized, without instructions from an Authorized Officer
of the Company, to cause Permitted Investments to be sold or otherwise
liquidated into cash (without regard to maturity) in such manner as the Bank
shall direct; provided that the Bank shall attempt to liquidate any and all
investments as so needed in such manner as will minimize, to the extent
reasonably practicable, the costs, penalties and losses associated with any such
liquidation.


                                   ARTICLE II.

                    REPRESENTATIONS, WARRANTIES AND COVENANTS

         SECTION 2.01 Representations and Warranties of the Company. Each
submission of a requisition to the Bank shall constitute a representation and
warranty by the Company that all of the information contained in such
requisition is true and correct.

         SECTION 2.02 Covenant of the Company. The Company covenants and agrees
that it shall not withdraw moneys from the Restricted Cash Account or utilize
any moneys that have been withdrawn from the Restricted Cash Account except in
accordance with the terms and provisions of this Agreement and the applicable
requisition under which such moneys are to be withdrawn.


                                  ARTICLE III.

                  DISBURSEMENT FROM THE RESTRICTED CASH ACCOUNT

         SECTION 3.01 Disbursements for Payment of Construction Costs. The Bank
is hereby authorized and directed to disburse moneys in the Restricted Cash
Account to or upon the order of the Company, from time to time, upon receipt by
it of a requisition signed by two Authorized Officers of the Company, which
requisition shall state with respect to each payment to be made: (1) the
requisition number, (2) identify the ethanol production facility in respect of
which such requisition is being made, (3) the name and address of the Person to
whom payment is due or has been made, (4) the aggregate amount paid or to be
paid to such Person, (5) an accurate description of the work performed, services


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rendered, materials, equipment or supplies delivered or any other purpose for
which such payment was or is to be made, with invoices with respect thereto
attached, (6) the proposed date of payment and the payment or wire instructions
for the payment or transfer of such amounts by the Bank to such Person, (7) that
each obligation, item of cost or expense mentioned therein has been properly
incurred and has been paid or is then due and payable (or is required to be
deposited at this time as equity in a Subsidiary project financing under a
binding agreement with a third party which is not an Affiliate) as an item of
the Cost of Construction, is a proper charge against the Restricted Cash
Account, and has not been the basis of any previous payment therefrom, (8) all
amounts previously drawn from the Restricted Cash Account under Construction
Cost Requisitions (i) have been applied to pay the Costs of Construction listed
on the applicable Construction Cost Requisition with respect to which such
amounts were drawn or (ii) have not yet been expended and are still available to
the Company or a Subsidiary of the Company for the payment of Costs of
Construction, (9) that the amount of such requisition, together with all amounts
previously drawn from the Restricted Cash Account under Construction Cost
Requisitions relating to the ethanol production facility in respect of which the
drawing is being made, does not exceed the Project Limit, and (10) that the
Purchaser shall have approved, in writing, the terms of the debt, if any,
incurred by the Company or a Subsidiary of the Company to finance a portion of
the Costs of Construction of the ethanol production facility in respect of which
the drawing is being made . A form of Construction Cost Requisition is attached
hereto as EXHIBIT B.

         SECTION 3.02 Disbursements for Payment of Acquisition Costs. The Bank
is hereby authorized and directed to disburse moneys in the Restricted Cash
Account to or upon the order of the Company and consented to by the Purchaser,
from time to time, upon receipt by it of a requisition signed by two Authorized
Officers of the Company, with a consent thereto signed by an officer of the
Purchaser, which requisition shall state with respect to each payment to be
made: (1) the requisition number, (2) the name and address of the Person to whom
payment is due or has been made, (3) the aggregate amount paid or to be paid to
such Person, (4) the proposed date of payment and the payment or wire
instructions for the payment or transfer of such amounts by the Bank to such
Person, and (5) that such payment obligation has been incurred in connection
with the acquisition of an ethanol production facility by the Company or a
Subsidiary of the Company and is currently payable, is a proper charge against
the Restricted Cash Account, and has not been the basis of any previous payment
therefrom. A form of Acquisition Cost Requisition is attached hereto as EXHIBIT
C.

         SECTION 3.03 Disbursements upon Redemption of Preferred Shares. The
Bank is hereby authorized and directed to disburse all moneys in the Restricted
Cash Account to or upon the order of the Company upon receipt by it of a written
requisition signed by two Authorized Officers of the Company, which instrument
shall state (1) the name and address of the Person to whom payment shall be
made, (2) the aggregate amount to be paid to such Person, (3) the proposed date
of payment and the payment or wire instructions for the payment or transfer of
such amounts by the Bank to such Person, and (4) that such payment is being made
to fund the payment of the redemption price of the Preferred Shares on the date
that the Preferred Shares are being redeemed in accordance with the terms and
provisions thereof, is a proper charge against the Restricted Cash Account, and
has not been the basis of any previous payment therefrom.

         SECTION 3.04 Bank's Reliance on Requisitions. In paying any requisition
under this Article III, the Bank may rely as to the completeness and accuracy of
all statements in such requisition upon the approval of such requisition by an
Authorized Officer of the Company, execution thereof to be conclusive evidence
of such approval, and the Company hereby covenants and agrees to indemnify and
save harmless the Bank from any liability incurred in connection with the
payment of any requisition so executed by an Authorized Officer of the Company.


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         SECTION 3.05 Records of Disbursements. The Bank shall keep and maintain
adequate records pertaining to all requisitions and disbursements from the
Restricted Cash Account and, if requested by the Company or the Purchaser, shall
promptly provide such requestor with a copy of each such requisition submitted
to the Bank for payment under this Article III.

                                   ARTICLE IV.

                     RIGHTS AND DUTIES OF BANK; TERMINATION

             SECTION 4.01 Rights and Duties of Bank. It is understood and agreed
that the Bank:

                  (a) undertakes to perform only those duties as are expressly
set forth in this Agreement;

                  (b) shall not be required to take any action which is contrary
to this Agreement or applicable law;

                  (c) shall not be liable for any action taken or omitted to be
taken in good faith by it hereunder, except to the extent that any loss or
damage results from the Bank's gross negligence or willful misconduct; and

                  (d) shall be protected in acting upon any document, instrument
or signature believed by it to be genuine, and it may be assumed that any person
purporting to give any notice or instructions in accordance with this Agreement
has been duly authorized to do so. The Bank may consult with legal counsel, and
the advice or opinion of such counsel shall be full and complete authorization
and protection in respect of any action taken or suffered by it hereunder and in
good faith in accordance therewith.

             SECTION 4.02 Termination. The Bank may terminate this Agreement at
any time by giving thirty (30) days' written notice to the Company and the
Purchaser, and, in the event of such termination, the Company and the Purchaser
shall jointly select a successor depository bank. Company and Purchaser may
terminate Bank's obligations hereunder at any time with or without cause by
joint action of both the Company and the Purchaser. No such resignation or
removal shall become effective until a successor depository bank shall have
executed an instrument by which it shall have assumed all of the rights and
obligations of the Bank hereunder.

             SECTION 4.03 Compensation of Bank. The Company shall pay to the
Bank compensation as shall be agreed to from time to time by the Company and the
Bank, and shall reimburse the Bank for reasonable fees, costs and expenses,
including reasonable attorneys' fees, incurred by the Bank in connection with
the performance of its duties and obligations under this Agreement.

             SECTION 4.04 Indemnity. The Company agrees to indemnify, defend and
hold harmless the Bank, its Affiliates and their respective directors, managers,
officers, members, stockholders, employees, Affiliates, agents, trustees,
advisors (including, without limitation, attorneys, accountants and financial
advisors), attorneys-in-fact, successors and assigns (collectively, "Indemnified
Parties") from and against any and all losses, claims, liabilities, damages,


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deficiencies, costs or expenses (including, without limitation, interest,
penalties, reasonable attorneys' fees, disbursements and related charges and any
costs or expenses that an Indemnified Party incurs to enforce its right to
indemnification) (collectively, "Losses") based upon, arising out of or
otherwise in respect of the execution, delivery and performance of this
Agreement, except that the Company shall not be required to indemnify, defend
and hold harmless the Bank or any other Indemnified Party against any Losses
resulting from its own gross negligence or willful misconduct.

                                   ARTICLE V.

                                  MISCELLANEOUS

             SECTION 5.01 No Assignment. No assignment of any rights or
delegation of any obligations provided for in this Agreement may be made by any
party without the express written consent of the Company, the Bank and the
Purchaser. This Agreement shall be binding upon the successors and permitted
assigns of the parties.

             SECTION 5.02 Further Assurances. The Company and the Bank each
agree to execute and deliver such other documents or agreements as may be
necessary or desirable for the implementation of this Agreement and the
consummation of the transactions contemplated hereby.

             SECTION 5.03 Notices. Any notice, request, demand or other
communication required or permitted to be given to the Company, the Bank or the
Purchaser pursuant to the provisions of this Agreement will be in writing and
will be effective and deemed given under this Agreement on the earliest of: (a)
the date of personal delivery, (b) the date of transmission by facsimile, with
confirmed transmission and receipt, (c) two (2) days after deposit with a
nationally-recognized courier or overnight service and (d) five (5) days after
mailing via first-class mail. All notices not delivered personally or by
facsimile will be sent with postage and other charges prepaid and properly
addressed to the Company, the Bank or the Purchaser, as applicable, at the
following address: (i) if to the Company, to Pacific Ethanol, Inc., 5711 N. West
Ave., Fresno, CA 93711, attention: Neil Koehler, with a copy to Rutan & Tucker
LLP, 611 Anton Boulevard, 14th Floor, Costa Mesa, CA 92626, attention: Larry A.
Cerutti, facsimile (714) 546-9035, (ii) if to the Bank, to Comerica Bank,
attention: Robert Harlan, Vice President, 5200 N. Palm Avenue #320, Fresno, CA
93704 with a copy to Comerica Bank, attention: Phil Ellis, Senior Counsel-Senior
Vice President, 15303 Ventura Blvd, Sherman Oaks, CA 91403 and (iii) (i) if to
the Purchaser, to Cascade Investment, L.L.C., 2365 Carillon Point, Kirkland, WA
98033, attention: Michael Larson, with a copy to Thelen Reid & Priest LLP, 875
Third Avenue, New York, NY 10022, attention: John T. Hood, facsimile (212)
603-2001. The Company, the Bank and the Purchaser (and their permitted assigns)
may change such address for receipt of future notices hereunder by giving
written notice to the Company, the Bank and the Purchaser.

             SECTION 5.04 Governing Law. This Agreement shall be governed by,
and construed, interpreted and enforced in accordance with, the laws of the
state in which the Deposit Fund is located, without giving effect to the
principles of conflicts of laws thereunder which would specify the application
of the law of another jurisdiction.

             SECTION 5.05 Jury Trial Waiver; Reference Provision; Consent to
Service of Process.


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                  (a) THE PARTIES HERETO ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY
JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER
CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR
CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVES ANY
RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR
ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS AGREEMENT OR THE SUBJECT MATTER
THEREOF.

                  (b)      Reference Provision.

             (i) In the event that the Jury Trial Waiver provision contained in
                 the Agreement is not enforceable, the parties elect to proceed
                 under this Reference Provision.

             (ii)With the exception of the items specified in clause (iii),
                 below, any controversy, dispute or claim (each, a "Claim")
                 between the parties arising out of or relating to the Agreement
                 will be resolved by a reference proceeding in California in
                 accordance with the provisions of Section 638 ET SEQ. of the
                 California Code of Civil Procedure ("CCP"), or their successor
                 sections, which shall constitute the exclusive remedy for the
                 resolution of any Claim, including whether the Claim is subject
                 to the reference proceeding. Except as otherwise provided in
                 the Agreement, venue for the reference proceeding will be in
                 the state or federal court in the county or district where
                 venue is otherwise appropriate under applicable law (the
                 "Court").

             (iii) The matters that shall not be subject to a reference are the
                 following: (i) non-judicial foreclosure of any security
                 interests in real or personal property, (ii) exercise of
                 self-help remedies (including, without limitation, set-off),
                 (iii) appointment of a receiver and