updated 7/19/2006 12:23:46 PM ET 2006-07-19T16:23:46

If the experiment works, Reynolds and its 500 residents will be America's first community to use renewable resources to meet the energy needs of all their homes and businesses.

"It's not like we have a blueprint to follow," said farmer William Schroeder, 52. "We're going by the seat of our pants."

Dubbed Biotown USA, the project is the brainchild of Indiana's Department of Agriculture. State officials hope to break ground in November on a $10 million (euro7.8 million) "technology suite," a privately funded center that will house the core equipment needed to turn manure and other biomass material into energy. It should generate electricity for the town by July 2007.

From there, state officials hope another $10 million (euro7.8 million) from private investors will upgrade the system so it can also produce natural gas.

Much of the technology has been implemented elsewhere in waste treatment centers and industries like paper manufacturing, researchers said. But Biotown would be the first time the machinery is combined and working in synch.

Proponents say the project will lower local utility costs and help the environment. Organizers estimate a barrel of biomass will cost about $40 (euro31.30). Crude oil edged above $75 a barrel this past week.

"Our goal, and what we're going to continue to work on, is for it to cost less," said Ryan West, who is leading the Biotown project for the Agriculture Department. "We said we'd call it a failure if energy bills went up."

If the project succeeds, Reynolds could be a prototype for reducing America's dependence on foreign oil.

"This becomes a living laboratory for us," said Bernie Engel, head of the agricultural and biological engineering department at nearby Purdue University. "Reynolds may be a demonstration location for some of this initially. And then we'll see it hopefully spreading beyond that."

First, however, it has to take hold in Reynolds.

Farmer Roger Wiese, 65, has not decided yet whether to sell 2 million gallons (7.6 million liters) of hog manure to Biotown instead of using it as fertilizer on his fields. He will agree only if he can make a profit.

"There's not enough money in agriculture that we can run it as a charity," he said. "Without it working economically, it doesn't become feasible."

State officials said they do not need total participation from local farmers. A study found there were more than 150,000 hogs within 15 miles (24 kilometers) of town, and organizers estimate the animals, along with other organic waste in the area, are enough to produce 74 times the energy Reynolds needs.

Town fire chief Rick Buschman says Biotown is "the greatest thing to hit Reynolds" in years. His family has bought a half-dozen new flex-fuel vehicles -- able to run on various fuels including ethanol-gasoline blends -- as part of a deal offered by General Motors.

"We want to participate in the program any way we can," he said.

So far, residents have bought more than 100 new cars and trucks under the program. A $400,000 (euro313,038) renovation project of the town's single gas station should add a pump for E-85 fuel -- 85 percent ethanol and 15 percent gasoline -- by the end of the summer.

"Some people are questioning if we save money," said Christine McGill, a cook, waitress and hostess at USA Family Restaurant. "To me, what if we don't? We're still saving the environment."

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