New York: Will pay for bacteria

The 15,000-square-foot facility should be open toward the end of 2007 or early 2008. When it's fully operational, it will churn out about 500,000 gallons of biomass ethanol a year, said Mascoma President Colin South.

That's a drop in the bucket compared to the 150 billion gallons of petroleum that Americans consume every year, South admitted. Around 6 billion gallons of ethanol get consumed in the U.S. annually. But South asserts that biomass ethanol is a very new phenomenon.

"It's a small plant, but it's the first of its kind," he said.

Mascoma, a spin-off of New Hampshire's Dartmouth College, is one of a number of companies trying to make ethanol more economically sound. Ethanol--an alcohol that can be added to car fuel--releases fewer tailpipe emissions than gas. However, in the U.S., ethanol generally gets made from corn, which could also be sold as food. And it takes a considerable amount of water and energy to grow the corn, distill the corn mash into sugar and then turn that sugar into ethanol. (Ethanol production also releases carbon dioxide, a greenhouse gas.)

Churning ethanol out of waste products significantly lowers the cost of the raw material. South estimated that the biomass used in Mascoma's processes will cost 60 percent or less than the feedstocks for traditional ethanol.

Just as important, Mascoma and others believe that exploiting genetically enhanced microbes to convert corn into sugar, rather than relying on traditional industrial processes, will reduce production costs and factory energy consumption. Microbes, after all, can be viewed as miniature chemical factories. Other microbe companies include Ceres, LiveFuels, Dyadic International, Diversa and Synthetic Genomics.

Mascoma's twist on the microbe manufacturing formula is that several of the steps required to turn biomass into ethanol can be combined, thereby further cutting costs. The company's primary organism is Thermoanaerobacterium saccharolyticum, which breaks down plant material in a warm environment.

The deal also marks another landmark for the administration of New York Governor George Pataki, who has been working to turn the state into a high-tech hub with tax breaks, R&D incentives and grants. In the past few years, the state has landed deals with, among others, Advanced Micro Devices.

In Rochester, Mascoma will work with Genencor, which specializes in industrial enzymes, and nearby Cornell and Clarkson universities. Enzymes can help accelerate or alter the process of the "cell factories," said Jack Huttner, vice president of biorefineries at Genencor. Genencor has other similar deals in the works, Huttner added.

"It has been the most aggressive state in putting incentives on the table," South said.