Dallas Tonsager, U.S. Department of Agriculture undersecretary for rural development, exhibited a sense of accomplishment Thursday while touring the ZeaChem Inc. demonstration plant at the Port of Morrow.

The Colorado-based company the previous day announced receipt of a $232.5 million loan guarantee from USDA. That allows ZeaChem to finance construction of a commercial biorefinery capable of producing 25 million gallons of biofuels a year. The plant, expected to be running in 2014, would turn hybrid poplar trees and agricultural waste, such as wheat straw, into industrial chemicals and fuel for aircraft and automobiles.

We want to have an industry that is strategic and significant, Tonsager said. We want an industry that Americans can build on in the future … thats exactly what were doing here.

The federal government is already deeply invested in the project. Not counting the loan guarantee, grants to ZeaChem from the USDA?and U.S. Department of Energy since 2009 amount to $37 million.

The new plant, expected to rise next to the demonstration plant, is budgeted to cost about $390 million to build, said ZeaChem President and CEO?Jim Imbler. He toured the site with Tonsager and USDA rural development director for Oregon Vicki Walker, along with Boardman and Morrow County officials.

Imbler said a loan from California-based Silicon Valley Bank is pegged to the success of the demonstration plant, the first phase of which, or core, was completed Jan. 4. The core manufactures acetic acid, then stearifies it to become ethyl acetate, which is commonly used in paints, lacquers and thinners, Imbler said.

The next phase, adding refinery equipment to produce cellulosic ethanol, a biofuel, should be complete this summer. The company expects the demonstration plant to produce 250,000 gallons of biofuels per year by 2013. Its construction is funded in part by a $25 million Energy Department grant in 2009. ZeaChem in 2011 also received a $12 million share of a $40 million USDA grant to a consortium led by the University of Washington.

It has always been our intent for the demo plant to be the beginning of a longer-term project, Imbler said.

The loan guarantee allows the company to seek financing from other backers, preferably in the form of equity rather than debt, Imbler said. He said the lender will assess the plant operation and the companys ability to reach its targets.

Its a very methodical process and well be executing that throughout the year,?he said.

Silicon Valley Bank, founded in 1983, specializes in lending to startups and connecting venture capitalists with prospective firms, according to Reuters.

Building the commercial facility is expected to generate 188 construction jobs; operating it once its built will require another 65 full-time jobs, according to USDA Rural Development. The plant could generate another 242 indirect construction and operation jobs.

Tonsager said the impact of a project like this on a town the size of Boardman, population 3,500, is enormous.

It creates jobs and brings a market to the products, Tonsager said.

Having grown up in the Midwest, he said, he has seen first-hand how similar projects positively effected communities.

However, housing for the expected influx of workers is an issue for Boardman. The nearby port already employs more than 1,500 employees, many of whom commute from Hermiston or Tri-Cities in?Washington. USDA Rural Development is already helping address the housing shortage in Boardman through the Oregon Solutions project, said Jill Rees, a USDA public affairs specialist.