EnerTech Environmental, a company working to turn human and industrial wastes into energy, said Wednesday it has agreed to build a demonstration facility in Masdar, a green city being built in the United Arab Emirates.

EnerTech’s plant will process the sewage sludge produced by the several thousand workers laboring to build the city, which is in the country's capital, Abu Dhabi.

Although the amount of waste the plant will process is still being finalized, Brian Dooley, director of marketing for the Atlanta-based company, said the project is just the first step.

"Once residents start populating the city, that's when we would talk about building a larger facility" that can handle the needs of the entire city, he said. The city is expected to house 47,500 people.

To turn sludge into energy, EnerTech has developed what it calls the SlurryCarb, which the company says duplicates the natural process that turns organic material into fossil fuel.

Here's how it works: The company applies heat and pressure to high-moisture biosolids – in this case sewage sludge -- which ruptures the cellular structure and splits off carbon dioxide in a reaction called "carbonization." The company removes the water that was once trapped inside the cell walls and is left with what EnerTech calls "E-Fuel," which can replace coal or other fossil fuels to supply energy.

The company claims the E-Fuel contains 95 percent more energy than the process used to produce it.

The company already has a pilot plant in Japan, and in April started construction on what it considers its first commercial-scale plant in Rialto, Calif.

The Rialto plant, which will turn 833 tons of sewage sludge into 167 tons of E-Fuel per day, is expected to start operating in 2009, Dooley said.

Still, the contract with Masdar, a city that made headlines around the world for its goal to be a sustainable zero-carbon, zero-waste oasis in the desert, is a score for the company.

It probably didn’t hurt that Masdar, through the Masdar Clean Tech Fund, is already a company investor. In January, the fund, along with Citigroup's Sustainable Development Investments, led EnerTech's $42 million funding round (see EnerTech Grabs $42M to Turn Sewage Into Energy).

EnerTech isn't the only company looking to turn waste into fuel.

Companies like BlueFire Ethanol are working to use cellulosic waste that would have otherwise ended up in a landfill. In May, BlueFire said it has plans to break ground on its first commercial cellulosic-ethanol plant in the coming months (see BlueFire to Break Ground).

And on Wednesday, chemical maker DuPont and enzyme maker Genencor said they are teaming up to develop technology to make cellulosic ethanol, a fuel made from nonfood sources like corncobs and wood chips.

The two companies said they would initially dole out a total of $140 million over three years.