Two centuries ago, wood served as our energy fuel for the American frontier, providing home heat and powering commercial furnaces and eventually steam engines. Last week, the legislature approved an incentive package for facilities to advance wood — an abundant renewable energy source in Mississippi — from the old blacksmith’s furnace to modern automobiles. Once refined, the final product is not an additive or blend like ethanol or biodiesel; it is indistinguishable from traditional gasoline except that it will be cleaner.

There is nothing magical about making petroleum-like oil from wood, because the basic building blocks are the same carbon and hydrogen molecules found in fossil fuels. The trick is to convert these molecules into useable fuels economically and efficiently in a few seconds, just as nature did under heat and pressure over millions of years.

The KiOR company cracked the code, and KiOR explains the process like this: wood biomass (timber, wood waste, even sawdust) from areas near the facility is hauled in and processed.

The biomass is fed into a reactor using a similar process found in traditional refineries and combined with a proprietary catalyst developed by KiOR. The reaction produces renewable crude oil, light gas, water and coke. These materials go into a separator that burns off the coke to reclaim the catalyst for continued use. Meanwhile, the other materials enter a condenser where the renewable crude liquefies and the light gases are transferred to be burned and create electricity for the facility. KiOR then transports the renewable crude to traditional refineries where it can be turned into gasoline or diesel just like its chemical cousin we drill from the ground. KiOR claims their process is capable of this conversion for about $2/gallon ready for the pump.

Millions of dollars in private funding built the KiOR demonstration plant in Pasadena, Texas, that produces about 600 gallons of crude oil from renewable feedstocks such as wood chips or agricultural residues. Khosla Ventures, who founded KiOR with the Netherlands-based research network BIOeCON, also is an investor in Soladigm, which recently announced the construction of a plant in north Mississippi to produce energy efficient windows.

KiOR will initially build three Mississippi facilities: Columbus, Newton and Bude and expects to build two additional facilities in coming years. KiOR will invest more than $500 million in Mississippi and has committed to create 1,000 direct and indirect jobs in the state.

Why in Mississippi? One of my co-panelists at a July Power Lunch forum on renewable energy sponsored by Advance Mississippi explained it well.

“We’ve got the wood. We need the demand for it,” said Keith Williams from The Molpus Woodlands Group.

Mississippi’s timber industry spans more than 18 million acres with 26 billion cubic feet of wood, an 18 percent increase from 1977. KiOR won’t strain our supply for traditional timber needs; meanwhile we can create domestic energy.

The legislature’s incentive package is not just a signal to the rest of the country that Mississippi is the hottest place to build a biofuels business, it also shows our leaders realize the value of our state’s natural resources. This bold move demonstrates the willingness of state leadership to advance our technological base and bring jobs built on a highly skilled workforce.

KiOR’s first facility is expected to be in operation at the end of 2011 at the Port of Columbus in Lowndes County. This area has adequate infrastructure and wood availability for the plant to produce 33,600 gallons per day of renewable crude oil. The Newton and Bude plants constructed within the next five years will be double or triple the capacity of the Columbus plant. And while 100,000 gallons per day may sound like a lot, remember the United States consumes about 800,000,000 gallons of oil per day, over half of which is imported.

Bringing new technologies such as KiOR’s to a commercial reality is vitally important for our national security and reducing our dependence on foreign oil. Three other significant companies, BlueFire Renewables Rentech and Enerkem, have also announced plans to build biofuels production facilities in Mississippi, but they each have a different technology than KiOR.

The abundant availability of woody biomass in Mississippi is attracting companies to our state and our current policy vision to make renewable energy dreams a reality will benefit our economy and security.

Sumesh Arora, Ph.D. is director of the Strategic Biomass Solutions at the Mississippi Technology Alliance, a non-profit public-private partnership dedicated to driving innovation and technology-based economic development in Mississippi. He is an advisory board member of Advance Mississippi, a coalition advocating sensible energy policy to fuel economic opportunity in Mississippi.