Virent, a biofuels company based in Madison, Wisconsin, has developed a potentially inexpensive way to make gasoline and other valuable chemicals out of grass and wood chips. Its approach reduces costs by simplifying or eliminating expensive processing steps, and by using natural gas to increase the amount of fuel that can be made from a given amount of biomass.

In some ways, the process is similar to the one used to refine oil. Virent has demonstrated that it can use it to make gasoline, diesel, and jet fuel, and its 100-liter-per-day gasoline pilot plant makes fuel that’s used in Formula 1 racing.

As with many other biofuels companies, Virent’s first large-scale product may not be fuel at all. It recently announced a development agreement with Coca-Cola to produce a chemical that can be used to make plastic soda bottles, and is hoping to build a plant for this purpose in 2015.

The company’s technology addresses one of the big challenges with making advanced biofuels. This is that making hydrocarbon fuels from grass requires breaking down the long cellulose molecules that make up the bulk of the raw material. Breaking the biomass down is expensive, and is normally done with enzymes that produce sugar, or using high temperatures and pressures to turn it into carbon monoxide and hydrogen gas. Virent’s process produces intermediate-sized molecules known as oligomers that require less processing. Its core technology is a way to transform those oligomers into fuel.

Making hydrocarbons from biomass requires first removing the oxygen. Virent has also developed inorganic catalysts that remove most of the oxygen from the molecules it produces. It then uses a series of chemical reactions to remove the remaining oxygen and reconfigure the molecules to take on the properties needed to make fuels like gasoline or chemicals for making plastic bottles.

The key problem with making hydrocarbons from grasses and other cellulosic sources is that they don’t have the same ratio of hydrogen and carbon atoms as fuels and chemicals made from oil; they have too much carbon. To get the ratio right, you can throw out the extra carbon or add hydrogen from an outside source, such as natural gas. Deciding which makes more sense comes down to economics. These days, natural gas is cheap, says Randy Cortright, Virent’s founder and chief technical officer, so it’s cheaper to use that, and to make use of every last carbon atom in the biomass to make fuel.