enlarge Photos by Derek Davis/Staff Photographer

Stephen Fitzpatrick displays waste wood used to produce ethyl levulinate, a chemical used to make fuel, at Biofine Technology in Gorham, which hopes to build a $113 million demo plant.

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Biofine uses waste wood, above, recycled paper and food waste to make fuel. A full-scale biorefinery could create an estimated 486 jobs.

GORHAM — Stephen Fitzpatrick reaches into a bag and scoops up a handful of ground waste wood. Beyond him stands a maze of pipes, pumps and vessels that fill a small warehouse.

In his other hand, Fitzpatrick holds a bottle of clear liquid. It has the aroma of ripe fruit, but it actually is a substitute for heating oil.

Using a proprietary process that involves chemicals, pressure, temperature and time, Fitzpatrick and his colleagues at Biofine Technology LLC say they've figured out how to turn what's essentially a sack of sawdust into heating and motor fuels, at a cost of roughly $2 a gallon.

For three years, researchers inside this anonymous building in the Gorham Industrial Park have been pursuing a vision that could radically change Maine's energy and economic future.

Maine is the most forested state in the nation. It's the most dependent on imported petroleum for home heating. And it has a paper industry struggling to survive.

That makes for a natural fit: Set up commercial versions of the Gorham pilot plant next to paper mills. Use Maine's plentiful wood supply to kick petroleum. Create thousands of jobs building, operating and supplying the plants.

Now Fitzpatrick and his team are at a pivotal point. They have applied for a $50 million federal energy grant, meant to help offset the cost of a $113 million demonstration plant that would pave the way for full-scale production in Maine. They'll find out in December whether they got the money.

"This Department of Energy grant will be the key to putting this technology into pulp mills in Maine," Fitzpatrick said. "It's a huge deal."

Efforts to build production-scale biorefineries are ramping up nationwide. The U.S. government is encouraging these plans because of their promise to convert wood, farm waste and other low-grade materials into fuel. By contrast, the ethanol now mixed in gasoline has become controversial because it relies on food crops, namely corn.

In Maine, a second biorefinery effort is under way at a former paper mill near Bangor. Old Town Fuel and Fiber is in the final stages of negotiating a $30 million federal energy grant that would cover half the cost of a similar demonstration project.

Both companies are working with the Maine Technology Institute and the Forest Bioproducts Research Initiative at the University of Maine. As it turns out, the different technologies being pursued by Old Town and Biofine complement each other, and the firms are likely to end up working together at a tech center the university is preparing to build inside the Old Town mill.

Although Old Town's ambitions have been well-publicized, the work in Gorham has gone on largely unnoticed in Maine. A reporter and photographer from the Portland Press Herald/Maine Sunday Telegram last week were the first media to tour the plant.

The Gorham plant is capable of turning a ton a day of biomass – including wood, pulp, recycled paper and food waste – into 20,000 gallons of liquid fuel a year. The demonstration plant the team wants to build would be sized to handle 50 tons a day and make 1.2 million gallons a year. It would create an estimated 125 jobs in operation and supply.

A full-scale commercial biorefinery would convert 1,000 tons a day into 28.7 million gallons of liquid fuel a year and create 486 jobs, the company estimates. No one has done this yet, although a commercial plant is being built in Georgia.

The technology being used in Gorham has been under development by Fitzpatrick since the 1980s. It was validated at a Glens Falls, N.Y., pilot plant in a partnership with a subsidiary of energy giant Royal Dutch Shell.

In 2006, Shell spent $5 million to build an upgraded test plant in Maine. Gorham was chosen because it's near the wood supply, Fitzpatrick's home in Massachusetts and two partners – Paul Nace and Norman MacIntyre of Maine BioProducts...