The biorefinery is being built in Georgia, home to large swaths of private forest land. It will initially make 20 million gallons per year of ethanol from sawdust, pine trees and wood bits left over from cutting down lumber. It is slated to eventually grow to 100 million gpy of production.

Mitch Manditch, the CEO of Range Fuels, said ideally the plant would use mostly wood waste as a feedstock.

"That's our preference, just to keep costs down, because no one else wants that wood," he said in a telephone interview.

Making cellulosic ethanol currently costs about twice as much as US traditional ethanol made mostly from corn. But industry experts estimate that costs will fall enough to let cellulosic become a commercial fuel in several years, one that will emit less greenhouse gases and won't use up prime farm land like corn-based ethanol does.

ETHANOL GLUT

US ethanol refining capacity has shot up 30 percent since Jan 1. to 7 billion gpy as the Bush administration offers companies incentives to make a domestic source of fuel. Record oil prices near US$100 a barrel and concerns about greenhouse gases have also fueled a rise to cellulosic ethanol.

But the boom has helped lead to low ethanol prices and high corn prices that have crushed margins for making the fuel. Since wood waste is far cheaper as a feedstock, Range hopes the plant would eventually be more profitable than corn biorefineries.

Cellulosic ethanol is made from breaking down the woody bits of plants. A whole new range of crops that grow on marginal lands, such as switchgrass, can be used.

When the final Range plant is completed, it will cost several hundred million dollars, Manditch said. The plant will receive up to US$76 million from the DOE.

Range is funded in part by venture capitalists including Vinod Khosla, a top Silicon Valley investor who is also helping to fund US biofuels company Cilion and other alternative energy companies.

Manditch said Range will use a thermal conversion process to make the fuel, unlike most other companies that are planning to make it with enzymes to break down the tough feedstocks. He said Range Fuel ethanol will emit about 75 to 80 percent less greenhouse gas than ethanol made from corn. Part of the emissions are saved because the plant will not ferment the feedstock, a process used in corn ethanol, he said.

The thermal process can also break down other feedstocks, such as switchgrass, Manditch said.