Canada company builds major waste-to-biofuel plant

* Being built in Edmonton, Alberta, under 25-yr contract

* Will use 100,000 tonnes of a city waste a year

* Private company Enerkem in business since 2000

VANCOUVER, British Columbia , Aug 31 (Reuters) - A Canadian company started construction on Tuesday on what it says is the world's first industrial-scale plant to turn municipal waste into biofuel.

Privately-owned Enerkem Inc said the C$80 million ($75 million) facility in Edmonton, Alberta, will produce enough biofuel to keep more than 400,000 cars a year running on a 5 percent ethanol fuel blend.

Canada, which has invested heavily in the biofuel industry as a way to reduce greenhouse gas emissions, is set to announce in September a 5 percent renewable content mandate for gasoline. Some of the country's provinces already have such a mandate in place.

Enerkem has signed a 25-year agreement with Edmonton to convert 100,000 tonnes of the city's solid waste into biofuels annually.

The plant, which will create 180 direct and indirect jobs, is scheduled to start operations toward the end of 2011.

Municipal waste-to-biofuels plants are on the drawing board in several U.S. states but several were halted as funds dried up during the global recession.