WASHINGTON - The biofuel company Gevo is about to break ground in the southwest corner of Minnesota on a system that will make it the first in the country to commercially produce a gasoline additive called isobutanol.

Gevo believes isobutanol could become an important alternative to regular gasoline. It burns more powerfully and efficiently than ethanol and runs just fine in existing automobile engines.

The plant in Luverne appears to be everything the Obama administration wants to reduce America's dependence on fossil fuels and foreign oil -- except for one thing.

The plant will use corn to produce isobutanol.

So the federal government refuses to provide loan guaranties to support the innovation.

Attempts to dethrone King Corn in the renewable fuels market are more frequent and forceful than they used to be. Corn ethanol no longer qualifies as an innovative technology that garners broad federal subsidies. When the administration recently announced its plans to increase the market share of renewable fuels, it trumpeted "breaking ground on at least four commercial-scale cellulosic or advanced biorefineries over the next two years."

Those priorities matter in Minnesota, which helped develop the corn ethanol industry and now produces 1 billion gallons a year at 21 corn ethanol plants. Many of them are owned by farmer cooperatives. The state won't get one of the new biorefineries, although some of its farmers may participate in one in northern Iowa.

The bigger question is how corn ethanol fares going forward.

Rep. Collin Peterson, a Democrat who represents Minnesota's rural Seventh Congressional District, believes corn ethanol represents the country's most economically viable renewable energy in the next several decades.

"It's not going to be some high-tech gang from Silicon Valley that's going to make this work," Peterson said of next-generation renewable fuels. "You need farmers."

Still, Peterson says that U.S. Energy Secretary Steven Chu "has announced that corn ethanol is dead."

At a Senate Energy Committee hearing last week, some speakers questioned the bill sponsored by Minnesota's two senators, Al Franken and Amy Klobuchar, as well as Iowa Sen. Tom Harkin.

The bill requires automakers to build flex-fuel engines and mandates installation of ethanol pumps in service stations nationwide. Critics call the bill an overcommitment to corn.

On the day of the hearing, the New York Times published a story that said using corn and other crops for ethanol causes hunger and higher food prices. The day before the hearing, environmental activists of the Environmental Working Group circulated a position paper that claimed corn ethanol cost more to produce than it saved in fossil fuel use.

"That's just not true," Franken said in an interview. "The yields go up and up. We're meeting the need for feed."

Franken said his bill safeguards the utility and availability of ethanol from any source. In fact, there is not enough productive capacity in corn ethanol to meet the country's long-term goals for renewable fuels.

Any gridlock over renewable fuels is a win for oil companies, said Rep. Tim Walz, a Democrat whose southern Minnesota district encompasses 11 corn ethanol plants.

"The problem with our energy policy is that it is a disincentive to renewables," Walz explained. "We steer you to oil because oil has tax breaks."

Walz would take away those breaks and use the revenue that results to fund renewable fuel projects. That would help makers of ethanol or other renewable fuels make whatever transition they need to make from corn.

"The Holy Grail is cellulose," said Ralph Groschen of the Minnesota Department of Agriculture.

In the world of renewable energy, cellulose means whatever grows naturally in renewable supplies. Theoretically, this is the 50-state solution to American energy independence -- biorefineries that convert anything from sawdust to saw grass into alternatives to gasoline.

The problem, say guys like Kelly Nixon, is turning theory into practice. Nixon runs the Central Minnesota Ethanol Coop in Little Falls. That corn ethanol plant hoped to add a facility that made ethanol from the wood of fast-growing poplar trees.

Peterson says those trees, which now litter the state's countryside, were planted specifically to feed ethanol plants that remain unaffordable and unsustainable.

"We looked at the cost, and it was too expensive without millions from [the federal government]," Nixon said. "I think the little guys are probably out [of the cellulosic conversion business]."

The future for the big guys looks brighter. Mascoma, a biofuel company, bought out another company that would have partnered with the Little Falls ethanol plant on cellulosic conversion. Now, it has a deal with the oil company Valero to produce 40 million gallons of ethanol a year from a wood-driven plant in Michigan.

The project is supposed to produce 70 skilled jobs on-site, 700 spin-off jobs and a technology that rivals the cost of oil production. The company hopes to get a government guarantee to back a private construction loan.

In Emmetsburg, Iowa, near the Minnesota border, Poet LLC, the world's leading corn ethanol producer, seeks a similar federal guarantee for a private loan. Poet plans to break ground this year on a $200 million attachment to its existing Emmetsburg corn ethanol plant.

The new addition will use corncobs, husks and leaves left over from harvest to make ethanol. Some 450 farmers, including many from Minnesota, are expected to make a second pass over harvested fields with balers and bring the baled waste to the Poet plant for conversion to biofuel, said Jim Sturdevant, who directs the program.

If the program succeeds in Iowa, Poet will take it to other plants including four in Minnesota.

"Then," said Sturdevant, "we'll go to wood waste, paper mills and rice hulls" as an ethanol source.

Cellulosic ethanol has the potential to produce 80 billion gallons of gasoline alternatives per year, Sturdevant said. That's roughly four times what is generally viewed as the maximum output for corn ethanol.

On the other hand, Poet and many other smaller companies have no plans to abandon the fuel stock that built their business.

"Even though some people may believe corn has fallen from grace," Sturdevant said, "we believe it's here to stay."

Jim Spencer • 202-408-2752