With biomass, you can get ethanol out of corncobs

— -- As motor fuels go, it's a dream come true.

Instead of importing oil, America could produce ethanol out of wheat stalks, wood chips, switch grass — just about any overlooked or leftover vegetation.

The new energy law requires that 16 billion gallons of fuel from plant waste, so-called cellulosic ethanol, be produced every year by 2022.

"This is a very important step in terms of enabling the industry to take off," says Kelly Lindenboom, vice president of Verenium, a company operating one small biomass ethanol facility and building another.

At present, almost all of the 6 billion gallons of ethanol produced annually is derived from corn. Soaring demand for corn to make ethanol to mix with gasoline has caused grain prices to skyrocket. Cellulosic ethanol doesn't use corn, so it doesn't cause fuel demands to compete with the world's food supply.

But making cellulosic ethanol isn't easy. The science to make it economically feasible is still evolving. And biomass facilities are expensive. A distillery producing 10 million gallons of plant-waste ethanol can cost as much as one producing 100 million gallons from corn, says Jay Brunson, vice president of the alternative fuels group at Industrial Info Resources. "The technology has to get more affordable," he says.

That limitation, however, isn't stopping several companies from getting started. They have the advantage of being able to use a variety of feedstocks, although one usually dominates. They include:

•Corncobs. Poet, a large ethanol producer, is building a plant in Emmetsburg, Iowa, to make ethanol out of corncobs. Due to open in 2011, the facility will draw cobs from as many as 275,000 acres. Using the cob won't harm soil quality and could boost growers' incomes, Sioux Falls, S.D.-based Poet says.

Poet, with 21 U.S. facilities making mostly corn-based ethanol, says its future may depend on cellulosic. "There's a limit to the ethanol we can produce from grain," says CEO Jeff Broin.

•Wheat straw A facility to make ethanol from wheat straw is being operated by the Spanish firm Abengoa Bioenergy in York, Neb. It makes up to 250,000 gallons of ethanol a year. A bigger plant, capable of 15 million gallons a year, is under construction in Hugoton, Kan.