The $225 million facility would bring 69 jobs to Soperton, a small town between Vidalia and Dublin that is home to the "Million Pines" festival. The venture by Range Fuels Inc. is being bankrolled by Vinod Khosla, a founder of Sun Microsystems, a maker of computer servers for the Internet.
Gov. Sonny Perdue made the announcement Wednesday during a breakfast meeting of the Georgia Agribusiness Council, noting that the new conversion process could relieve the state's dependence on imported gasoline because of the plentiful supply of pine trees.
"This will change the geopolitical balance," he said.
Executives with Colorado-based Range Fuels say their plant will generate 10 million gallons of ethanol by using the byproducts of the state's lumber, furniture and paper industries. If the process proves cost effective, Mr. Perdue said, the state has enough raw material to produce 2 billion gallons per year, equal to half its annual gasoline consumption.
Ethanol plants using other products are springing up around the state, from chicken fat to Midwestern corn. State officials estimate more than 50 companies are considering building plants in Georgia.
What's unusual about Range Fuels' announcement is its intention to create pine-based or cellulosic ethanol. Georgia Tech and the University of Georgia have spent years trying to find an economical way to convert pine through fermentation.
Range Fuels Chief Executive Mitch Mandich said his company had tested for seven years with 30 types of raw materials, from olive pits to hog manure, but settled on pine. Instead of fermentation, it uses a two-step process relying on both heat and chemicals to convert the woody material into synthetic gas and then to change the gas into ethanol.
Mr. Mandich said Soperton was picked for the company's first of many planned conversion sites because of its many pine forests, location near Interstate 16 and a railroad, and proximity to gasoline blenders in Macon and Savannah 100 miles away. Those blenders would add the ethanol to gasoline for distribution to retailers.
Turning trees into fuel is almost like spinning straw into gold in South Georgia, where pine forests planted to supply the paper industry are in need of a new market. Some paper plants are packing up and heading to South American countries where trees mature more quickly.
Georgia produces 15 percent more commercial timber than it has a demand for, according to Ken Stewart, the former head of the Georgia Forestry Commission and now commissioner of economic development for the state.
By using byproducts, the Range Fuels plant won't affect the price of timber used in pulp production and so won't risk chasing out the remaining paper factories by making materials too costly here.
Many critics of ethanol have charged that it's not economically viable if retail gasoline prices fall below $3 a gallon. Mr. Mandich, though, told reporters after the announcement that his company's process is viable now.
"When you look at new, innovative technologies, you have a cost curve that always starts high, but over time, with continued innovation and research, those costs drop down," he said. "Today, we're already competitive with corn-based ethanol."
Legislation is helping ease the economics. Mr. Perdue is pushing a bill to exempt ethanol plants from the sales tax on construction materials and equipment, as long as the factories rely on Georgia-grown raw materials.
Sen. Saxby Chambliss, R-Ga., has introduced a bill in Congress that would require the regional production of a certain amount of ethanol for federal energy goals. It would also raise the minimum threshold for the amount to be derived from cellulosic biomass.
A joint-venture partnership called Coastal Xethanol LLC is attempting to turn the former Pfizer pharmaceutical plant, which it purchased last year, into an ethanol production facility capable of making 50 million gallons a year. Company officials have said the facility will open by the end of the year and employ about 100. The company plans to produce corn-based ethanol first and later develop technology to make cellulose-based ethanol from paper mill waste.