STUTTGART, Ark.—Work is to begin later this month on an $80 million plant that is to convert rice products to ethanol. The plant is to employ about 200 people.

The plant will use rice hulls and rice straws to produce ethanol and commercial silica. Colusa Biomass Inc. CEO Tom Bowers said a smaller version of the plant will be built over the coming four months. The company will use the smaller plant to fine tune the production process, then build the full-scale plant, which is to be in production by late 2009.

Construction of the full-scale plant is to begin in December.

Bowers, who addressed the Arkansas Plant Board on Wednesday, said the facility will use a patented process to extract silica/sodium oxide from rice straw. The compound is used electronics industry and to make solar panels.

“This is the first (rice-to-energy plant) worldwide. No one has ever done that before, and that’s one of the problems in the financing,” Bowers said after the meeting.

Currently, farmers either burn their rice straw or plow it back into the ground.

The facility is to be built on a 40-acre site in Stuttgart’s industrial park. The plant is designed to produce 12.5 million gallons of fuel ethanol and 152,000 tons of silica/sodium oxide annually, Bowers said.

State Agriculture Secretary Richard Bell, a former chief executive of Riceland Foods Inc. in Stuttgart, has been an advocate of turning the rice products into energy, particularly considering the rising price of corn that is used for ethanol. Also, high soybean prices have led soy diesel producers to blend tallow or lard to bring down the cost of raw materials.

Rice hulls and rice straw would not be under such price pressure, though some of the hulls are used by chicken producers.

Cellulosic ethanol produced from rice hulls would cost 43 cents per gallon in raw material, factoring the hulls at $40 per ton, Bell said earlier. A ton of rice hulls yields 92 gallons of ethanol, he said.

“This is one of the more exciting things in the biofuels industry that is happening to us,” Bell said after Bowers spoke at the meeting in Little Rock.

The project is receiving federal incentives from the farm bill, up to $2 million in state incentives and money from investors. The Legislature approved the state portion last year.