Pacific Ethanol's recently opened Madera, Calif. facility.

Pacific Ethanol Inc. (NYSE: PEIX), the largest West Coast-based marketer and producer of ethanol, announced the U.S. Department of Energy has included Pacific Ethanol in a matching award totaling $24.32 million to build the first cellulosic ethanol demonstration plant in the Northwest United States.

The plant is designed to employ a technology to produce 2.7 million gallons of ethanol annually from wheat straw, wood chips and corn stover, all of which are fuel resources available near the company's existing corn-based ethanol facility in Boardman, Ore. The pilot plant will be co-located at that site.

Pacific Ethanol’s partners in the plant are BioGasol ApS and the Joint BioEnergy Institute (Lawrence Berkley National Laboratory and Sandia National Laboratory). BioGasol ApS, an engineering and biotechnology company founded in January 2006 to commercialize cellulosic ethanol production technology validated in a pilot facility at the Denmark Technology University in Copenhagen, has developed the proprietary technology and the Joint BioEnergy Institute will be providing support and specific research and development on enzyme technology.

Current plans call for the plant’s completion in 4th quarter 2009 and matching criteria will include in-kind contributions that will be finalized with further negotiations with the Department of Energy. The plant will use feedstocks available within a 50 mile radius of the facility, according to Tom Koehler, vice president of communications and government affairs.

“Our strategy of destination plants has always been to exploit the vast amounts of biomass that are available for use in the regions where we operate,” said Neil Koehler, CEO of Pacific Ethanol, in a statement. "Our objective is to utilize a successful cellulosic demonstration plant to scale up the technology throughout our network of production facilities.

BioGasol is already engaged in a demonstration plant in Denmark, expected to begin producing ethanol plant in early 2009.