They believe techniques borrowed from oil refining and other chemical industries will allow them to crack open big biological molecules, transforming them into ethanol or, even more interesting, into diesel and gasoline. Those latter fuels could be transported in existing pipelines and burned in existing engines without fuss. Advocates of the chemical methods say they may be flexible enough to go beyond traditional biomass, converting old tires or even human waste into clean transport fuel.
This isn't the first time I've heard of using waste biomass to make fuels, nor is it the first time I've seen the emphasis on Chemistry rather than Biology. So lets look chemically at what they are trying to make. No matter what the fuel is, whats happening is the oxidation of carbon to release the energy in the carbon-carbon bond.
Ethanol: Has one carbon carbon bond and already has one carbon-oxygen bond. It burns to CO2 more readily because of that carbon-oxygen bond. But it doesn't have as much energy as other hydrocarbons because it only has one c-c bond. Ethanol is usually made using the same process we've always used, brewers yeast digesting sugars. This only produces so much ethanol, because eventually the ethanol concentrations kill the yeast. Some research is looking into using bacteria to make the ethanol rather than the yeast.
Diesel and gas: These are both hydrocarbons, diesel with ten to fifteen carbons and gasoline with 5 to 12. There are no carbon-oxygen bonds and you are more likely to get carbon monoxide, but there are so many more carbon-carbon bonds mean there is a lot more energy in there. I don't know exactly how you get those out of biomass, but I'm guessing that most of it comes from different lipids, thought I don't know how they get broken down. I'm guessing that this is where the chemical processes come in.
The real question is about how well this is going to work. In my opinion its all a matter of time. This is one of those things where the market is going to make this look better and better. The price of oil is going to come up, thats just the way it is with finite resources. Is this specific process viable? At this point just about anything that doesn't burn oil is on the table and really only time will tell.