Terrabon's composting centers, where biomass is converted into acids, can be located near sources of biomass--such as municipal landfills or farms. The acids--or solid salts made from these acids--would then be shipped to a refinery for conversion to biofuels. Terrabon also has a partnership with Valero, the major oil refiner based in San Antonio, which will help in this stage of the process.

One potential disadvantage of Terrabon's method is that it would be extremely difficult, if not impossible, to improve the organisms via the powerful genetic engineering tools other biofuels companies are using. That's because it uses a complex mix of organisms, rather than a single organism, each of which plays a role in breaking biomass down into sugar and converting the sugar to acids. Cesar Granda, Terrabon's chief technology officer, calls the mix a "black box," because the company doesn't understand exactly how it works, at the level of the individual microbes and their genetic make-up.

McMillan says the success of the company will depend in part on the costs and energy required for transporting raw materials and converting acids into fuels. He also says the carbon-dioxide emissions from the chemical process could be higher than with other advanced biofuels. One step in particular, hydrogenation, requires hydrogen, which is typically derived from fossil fuels. Depending on the source of the hydrogen, and the energy required in other steps, it may be difficult for Terrabon's fuels to qualify as advanced biofuels and so qualify for key federal incentives.

Terrabon, which has been operating a pilot-scale plant in Bryan, TX, plans to begin building a 55-ton-per-day facility in Port Arthur, TX, starting early next year. With the help of Valero's Port Arthur refinery, that facility is expected to produce about 1.3 million gallons of biofuel a year when finished in 2011.