January 26, 2007 9:02 AM PST

New Zealand looks at nationwide ethanol plan

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New Zealand has kicked off a program to see if it can use ethanol to significantly reduce its oil consumption.

Two national institutes--Scion (formerly known as the New Zealand Forest Research Institute) and AgResearch (formerly known as the Pastoral Agricultural Research Institute)--are working with Diversa of San Diego, Calif., on experiments for turning wood chips and other byproducts from the country's forestry and paper businesses into cellulosic ethanol. Unlike conventional ethanol made from corn or sugar cane, the cellulosic variety comes from agricultural products with little or no other value, which drives down the cost of production.

Just as important, many cellulosic-ethanol backers are trying to figure out ways to get microbes and enzymes to convert the vegetable matter into sugar and then alcohol that can run a car. Conventional ethanol gets boiled and distilled in complex, energy-consuming processes. Diversa specializes in finding microbes with unusual properties and harnessing them for industrial or medical applications.

The institutes and the company have already conducted preliminary studies on how Diversa's enzymes interact with plant matter from New Zealand's native tree stocks.

Currently, cellulosic ethanol is made in labs, but backers say it will eventually be suitable for industrial production. Mascoma, a spin-off from Dartmouth College, will open a trial cellulosic plant in New York at the end of the year or early 2008 that is expected to produce 500,000 gallons a year when fully operational.

A cellulosic-ethanol plant could be built in New Zealand within three years or so, according to William Baum, executive vice president of business development at Diversa. Such a facility would be the company's second cellulosic venture, but Baum wouldn't elaborate on the first.

Commercial cellulosic-ethanol production "used to be five or six years out, but we could get it done in three years. The key is being able to build a plant that can do 1 (million) to 2 million gallons," he said.

The challenge lies in perfecting the enzymes and chemical processes that will convert the plant matter.

Baum added that the plan, if successful, could help New Zealand offset a significant portion of its oil imports. That's partly because of demographics and geography. The country has only about 4 million residents, a fairly low population density and a temperate climate. New Zealanders consume about 840 million gallons of gas a year.

New Zealand is on the front lines of the campaign to deal with greenhouse gases and other atmospheric concerns. Because of its location relatively close to Antarctica, residents have been familiar with the effects of the ozone hole for a number of years. The country even has a Ministry of Climate Change.

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