BOARDMAN, Ore. (AP) -- The federal government said Thursday it would guarantee a large share of the financing for an eastern Oregon plant that would turn poplar trees and agricultural waste into ethanol.

The $235 million loan guarantee is for ZeaChem Inc. of Lakewood, Colo., which plans to produce 25 million gallons of the fuel a year at Boardman along the Columbia River. It has been working on a smaller demonstration plant there.

The plant differs from conventional corn ethanol refineries in not using food for fuel, The Oregonian (http://bit.ly/xxngZL) reported.

The refinery is expected to cost a total of $390 million and employ 65, as well as 118 in the construction. It would go online in 2014.

The announcement from Agriculture Secretary Tom Vilsack follows President Barack Obama's State of the Union pledge Tuesday to develop domestic energy sources.

Alternative energy projects are getting closer scrutiny in Congress because of the bankruptcy filing of Solyndra Corp., a California solar firm that got a $535 million loan guarantee in 2009.

"One highlighted example shouldn't poison the well of a lot of good work," said Vilsack. He said the Agriculture Department makes 930,000 home, farm and business loans a year, with a default rate of less than 3 percent.

In 2007, Congress set a 2022 target of 16 billion gallons of cellulosic fuels such as ZeaChem proposes to produce.

The federal government provides a $1.01 subsidy per gallon and requires blending ethanol into conventional gasoline. Oregon also offers tax credits for suppliers of the feedstocks used to make the fuel.

Development has been slow. The National Research Council estimated just 6.6 million gallons of cellulosic fuel production last year. A council committee said the 16 billion gallon figure is unlikely to be met and raised concern about the environmental impact of large-scale production.

Most ethanol is made from corn, a practice criticized by environmentalists and some farmers for increasing food prices, using up land and requiring large amounts of fertilizer.

ZeaChem says it uses a natural bacterium to break down biomass. The company's CEO, Jim Imbler, said the fermentation doesn't produce carbon dioxide, a greenhouse gas. He said the ethanol will cost much less than corn ethanol, and Oregon could support half a dozen cellulosic refineries, a boon to hard-hit rural areas.

Boardman officials said they had sought out development that might make other communities hesitate.

"We're used to cow manure smell and potato waste smell and if the dust blows," said City Manager Karen Pettigrew. "That's the advantage of a rural community -- we're not so environmentally worried that we turn down everything that comes by."

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Information from: The Oregonian, http://www.oregonlive.com

Copyright 2012 The AP.

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