Zeachem has completed an Oregon demonstration plant that later this year is expected to help turn Pacific Northwest poplar into chemicals and ethanol motor fuel.

"The plant came in on time and significantly under budget," said Jim Imbler, chief executive officer of the Colorado-based company.

The plant in Boardman, Ore., across the Columbia River from Washington, is the core of an ambitious effort to demonstrate the technical and commercial viability of using wood as a feedstock for a biorefining operation.

The just-completed facility turns sugars into two high-value chemicals that can be used in paints, lacquers and other products. Those sugars now must be obtained from traditional sources, such as corn.

But a separate part of the complex, scheduled to open last this year, will turn wood cellulose into sugars.

Unlike the privately funded first phase, that next development is financed by a $25 million federal grant, which also funds a tail-end process that will enable Zeachem to convert one of the chemicals into ethanol motor fuel.

The company expects to produce about 50,000 gallons of the cellulosic ethanol this year, a Zeachem spokesman said Friday. Ultimately, the demonstration plant is projected to be able to produce up to 250,000 gallons annually.

Zeachem intends these demonstration efforts to serve as a steppingstone for a much larger commercial operation that would draw upon poplar that's already grown on irrigated acreage near Boardman.

Currently, the major feedstock for ethanol that's blended into motor fuel is corn.

The federal government — under both the Bush and Obama administrations — has made major grants and loan guarantees to help spur development of a new generation of ethanol plants turning wood, corn cobs and other abundant cellulose material into ethanol motor fuel.

But efforts to develop cellulosic ethanol have been fraught with technological problems, and many companies have missed their initial production deadlines.

One, Georgia-based Ranger Fuels, ended up in liquidation last year after receiving up to $156 million in federal loan guarantees and grants, according to Bloomberg News.

In December, the Environmental Protection Agency projected that less than 11 million gallons of cellulosic ethanol would be produced in 2012, far short of the 500 million gallons initially called for in a law passed by Congress to help spur development.

And a National Academy of Sciences report released last year projected that the cellulosic ethanol industry, "absent major innovations or technological changes," was unlikely to meet a much more ambitious federal mandate of 16 billion gallons of production by 2022.

Zeachem's biorefinery use a bacteria akin to that which enables termites to feast on wood, one of many approaches that have been used to turn cellulose into fuel.

Imbler said it's a "blue-collar" bug that's tough enough to get the job done. He said production costs at a future commercial plant could be less than $1 per gallon of cellulosic ethanol.

Zeachem also has been awarded $12 million in federal grants as part of a separate research effort to turn cellulosic ethanol into a jet fuel or a gasoline fuel.

Seattle Times reporter

Hal Bernton can be reached

at 206-464-2581