Ice Essence is made in an Essence Refiner; the materials needed are 2 Ice, 2 Snow Blocks, and 1 Arcane Ash. It can also be acquired by killing the Ice Guardian.

In the essence refiner, this is the placement required to successfully create the essence.

Screenshot 3

Snow and ice can be switched.

Ice essence2

The Ice Essence also costs 100 neutral essence, which is made using by burning Vinteum Dust in the Obelisk.