Mendota Heights, Minn.-based Bison Renewable Energy, broke ground Tuesday on the $12 million plant just west of Hull, in northwest Iowa.
The company claims the plant will develop a new source of renewable energy, help protect the environment, create 70 jobs and pump money into the area farm economy.
It is the first of at least 20 such plants the company plans to build nationwide over the next few years, said Steve Nelson, Bison Renewable's finance director.
Nelson said Sioux County was chosen for the plant because, per square mile, it is one of the top five livestock producing counties in the country.
"There's a healthy livestock environment in this county," Nelson said.
The company raised capital from more than 200 local investors.
Bison Renewable Energy plans to contract with area livestock producers for manure, which will account for about half of the raw materials used in the plant. The other half will come from other waste, such as animal fat and from other area industrial plants.
If the plant were to run entirely on manure, it would use the equivalent of waste from about 1.6 million hogs a year.
The plant is expected to be operational by the end of 2008.
Supporters said burning the methane produced from the manure and other waste is better for the environment than letting it naturally escape into the environment because it has a greater effect on the environment than carbon dioxide, which is created when methane is burned.
It also creates a byproduct that can be used to fertilize crops.
The methane produced at the Hull plant would be compressed and inserted into a nearby Northern Natural Gas pipeline. Bison has a contract with Xcel Energy to buy the natural gas.
The Minneapolis-based Xcel serves about 1.8 million natural gas customers in eight Midwestern states.