Wichita Ethanol plants in six states, including one in Kansas, will be using a cutting-edge technology that turns crop residue and other vegetation into ethanol.
The technology makes cellulosic ethanol, rather than corn ethanol. Cellulose, the main ingredient in a plant's cell walls, is the world's most common organic compound.
Environmentalists tout it as a cleaner, more efficient source of fuel than corn ethanol, while the ethanol industry hopes it will be a promising fuel alternative.
"That's the beauty of it," said Steven Bantz, senior engineer with the Union of Concerned Scientists, a nonprofit environmental group. "The environmental impact of some of these feed stocks is so much lower."
Chris Standlee, executive vice president of Abengoa Bioenergy, said there is a limit to how much corn can be devoted to fuel and not food. His Chesterfield, Mo., company will build a Kansas plant.
"There's only so many gallons you can realistically produce without competing with other uses of the grain supply," he said. "What we believe is, if we can develop alternative feed stocks and convert that to ethanol, then we've really done something."
The Department of Energy announced last month it awarded up to $385 million in grants to six companies, including Abengoa, to help develop the first cellulosic ethanol plants.
In addition to Kansas, the other states getting them are Florida, Georgia, Iowa, Idaho and California.
Spain-based Abengoa will receive about $76 million toward its $300 million project. The company has not announced the location, but expects construction to start next year and finish in 2010.
The Kansas plant is expected to add about 120 jobs and $45 million to the state's economy, said Ray Hammarlund, director of agricultural marketing and community development for the Kansas Department of Commerce.
Although the output of the Kansas plant will be only 50 million gallons of cellulosic ethanol, the goal is to show the product can be economically viable.
That's why the Energy Department grants are so crucial, said Matthew Hartwig, a spokesman for the Renewable Fuels Association, the ethanol industry trade association.
"Part of the problem is breaking the material down," he said. "It's expensive. The capital costs are also four to five times the costs of (building) a traditional corn-based ethanol plant. It's not a proven commercial technique, so lenders, creditors and investors are just a little bit hesitant."