Up to $5.5 million of Canadian government funding has been awarded to SunOpta BioProcess Inc. to develop technology that will enable the company to convert wood chips into two products, fuel grade cellulosic ethanol and a healthy sugar substitute called Xylitol.

Minister of Natural Resources Lisa Raitt made the funding announcement Tuesday at SunOpta’s pre-treatment pilot facility in Waterdown. The integrated process involves five steps with the first conversion, from woodchips to a pre-treated material that resembles coffee grounds, currently being done at the Waterdown location. The company's head office and lab are located in  Norval.

The funding will allow the company to construct a demonstration plant with capacity to produce 620 tonnes of Xylitol and two million litres of cellulosic ethanol per year. The plant will likely be located somewhere in the Greater Toronto Area, closer to the source of the wood chips provided by the forestry industry, said Robert Pontius, vice-president of commercial development for SunOpta BioProcess Inc.