SANTA ROSA -- A $40 million project near Charles M. Schulz-Sonoma County Airport that would convert agricultural waste such as chicken manure into natural gas, electricity and certified-organic fertilizer has run afoul of the 2013 expiration of a federal renewable-energy incentive said to be crucial to the economics of the venture.

The Sonoma County Farms to Fuel Project had a green light from local government to start construction, approval for $35 million in low-interest state bond financing, a $3.37 million state matching grant and a market for about half the estimated plant revenue. But the project has been on hold for months, after it became apparent it wouldn't be finished and on line by the end of next year, the current sunset for a federal business energy investment tax credit equal to 30 percent of project costs for renewable-energy sources, according to John Martin, chief operating officer of Kansas-based BioStar Systems, LLC (913-438-3002, biostarsystems.com). It is developing the project as OHR BioStar along with Santa Fe Springs, Calif.-based Otto H. Rosentreter Co.

"We're still committed to do the project," Mr. Martin said. "We're just waiting for financing to come together. We're a lot closer than we were six months ago because we've identified revenue streams sufficient enough to get financing in place. Now, we need the tax credit."

The Farms to Fuel plant would use an oxygen-free bacterial process to digest the manure from area farms, producing methane that would captured to make electricity via a 1.4-megawatt fuel cell. Then a patented process would separate the remainder into highly treated wastewater and capture nitrogen and other nutrients for fertilizer.

Half the estimated plant revenue would come from selling electricity via a $1 million-a-year, 20-year power purchase agreement with Sonoma County Water Agency, which owns the 5.4-acre site next to the Airport/Larkfield/Wikiup Sanitation Zone wastewater treatment plant. Excess methane -- roughly three-quarters of the volume -- would be sold to PG&E.

Half the plant revenue would come from fertilizer sales. BioStar started making organic fertilizer at a pilot plant a year ago, but distributors wouldn't buy it until it was Organic Materials Review Institute-certified. BioStar achieved that in May and started marketing it in California by mid-year through major organic fertilizer distributor True Organic Products. Full national sales channels were secured just recently.

But when it appeared that discussions with natural resources regulators over the extent of mitigation for presumed presence of habitat for endangered species would take four to six months, BioStar shifted its focus to getting its Missouri plant built to make the year-end 2013 deadline, according to Mr. Martin.

The clock is ticking for not only a federal tax credit renewal, caught in the heated debate year over spending but enjoying some bipartisan support, but also for local-government approvals. The water agency board approved the power purchase agreement and the project site lease in June of last year. Both expired in March, but the water agency would consider extending them, according to Dale Roberts, principal engineer. A conditional use permit for the project expires in May, but OHR BioStar could request an extension.

The water agency is considering approaching other energy developers in the next few months to gauge whether they would be interested in responding to a request for proposals to continue the project with the plant design locked into the use permit and environmental-impact document or go through the process of revising them, according to Mr. Roberts.

"We still think it's a good project," he said.

The urgency of completing the project to meet the water agency goal of carbon-free water distribution by 2015 just isn't what it was when first proposed two years ago because less-expensive options have emerged, according to Mr. Roberts. The agency recently renegotiated purchase agreements to get full access to 5.2 megawatts of electricity production from the central landfill biogas plant and Warm Springs Dam.