[ASSURAS] From landfills using innovative techniques to create energy, we're moving on to sewage. It turns out garbage isn't the only kind of waste that can help the U.S. reduce its use of fossil fuels like oil. While petroleum is used mostly for transportation, almost 5% of the oil we consume goes into making plastics, like shopping bags and water bottles. That's where the sewage comes in -- and out. More from "energyNOW!"'s Lee Patrick Sullivan in this energyNEXT.

[SULLIVAN] Okay, there's no easy way to say this but to just come out and say it. The folks at this lab in Northern California say they can make plastic out of poop.

[TEXT ON SCREEN] West Sacramento, CA.

[BISSEL] Well, it's funny, a lot of these ideas that seem like they're really out of nowhere, they're sort of unusual ideas, have been incubating in the academic and industrial spheres for a long time.

[SULLIVAN] It's been known for some time that there's a chemical in wastewater that can be used to make plastic. And if you could extract this chemical at a reasonable cost, it could compete with the major source of plastic products -- fossil fuels. The U.S. uses the equivalent of 300 million barrels of oil a year on plastics, but the folks at Micromidas say that could change.

[BISSEL] What we said was, you know, it looks like it's ready to go. There's a gap of engineering that needs to be done to bring it to commercial scale. Why don't we take that, cross the gap, and we have something that's real?

[SULLIVAN] The something real isn't just an oil-free plastic. It's a technology that could turn the sludge that builds up in wastewater treatment plants into a valuable commodity.

Are you getting tired of all those corny reporter puns that go on? I thought of a whole list of them on my way here, like, do you consider yourself having a crappy job? If someone steals your ideas, are they stool pigeons? I have about 11 of them.

[BISSEL] Stool pigeons -- I haven't heard that one yet.

[SULLIVAN] So it's an original.

[BISSEL] That's a good one. That's original, yeah.

[SULLIVAN] But if Bissel's big idea takes off, he may have the last laugh. Wastewater sludge -- that nastiness that settles at the bottom of these large tanks -- is an expensive problem for sewer authorities across the country. Wastewater treatment plants, like this one in Sacramento, process more than 150 million gallons of wastewater a day.

[MICHAEL DONAHUE, SACRAMENTO WATER TREATMENT PLANT] You can see the clean water here, this is what goes back to the river.

[SULLIVAN] When the treated water is released into a river or to the ocean, it leaves behind sludge that's mostly burned or trucked away to places like landfills or farms.

[DONAHUE] The idea of taking wastewater sludge and turning it into a bioplastic is pretty nice. It's a pretty good idea.

[SULLIVAN] More than 4 million tons of sludge gets hauled away each year, costing sewer operators as much as $200 million annually. Micromidas says it can cut the cost of hauling sludge in half.

[BISSEL] You guys have some sludge for me to look at? Yeah, here we go! This is the stuff.

[SULLIVAN] It doesn't smell that bad.

[BISSEL] No, it’s really not.

[SULLIVAN] I've smelled a lot worse than this.

[BISSEL] It actually smells kind of nice.

[SULLIVAN] Did you just stick your nose in there?

[BISSEL] Yeah, it smells different. Smells better, actually.

[SULLIVAN] Anything for good television. Not that bad. It almost, oddly, smells a bit like melted plastic.

[BISSEL] Yeah.

[SULLIVAN] It does.

[BISSEL] Yeah, it does.

[SULLIVAN] The liquid that's extracted from the sludge contains the molecules needed to make plastic.

[BISSEL] This is what it looks like, the step right after that, it looks almost just a little bit like chicken broth.

[SULLIVAN] Okay. I bet it doesn't taste like chicken broth.

[BISSEL] I've never tasted it. You want to try?

[SULLIVAN] No, thank you.

This is where Micromidas makes its money. They add a cocktail of designer microbes, or bacteria, to the liquid.

[BISSEL] And that's, literally, we are brewing plastic.

[SULLIVAN] After it's run through a so-called extruding machine, the plastic cools and can be handled.

[BISSEL] This is what the plastic looks like.

[SULLIVAN] This was made out of poop?

[BISSEL] Right, correct.

[SULLIVAN] It has the thickness of a really thin windbreaker. Is that probably a good example?

[BISSEL] And actually, it's --

[SULLIVAN] I've got to smell it.

[BISSEL] Yeah, go ahead.

[SULLIVAN] It smells like plastic. Bissel says the company is looking for applications that don't require tough kinds of plastic, so don't look for auto parts to be made out of this stuff.

[BISSEL] Realistically, what we're looking for are tertiary packaging applications.

[SULLIVAN] "Tertiary"? What in the world does that mean?

[WOMAN] Tertiary. Latin in root, meaning "third in line." Primary packaging. Secondary packaging. Tertiary packaging.

[SULLIVAN] Now, another example of tertiary packaging is those little plastic rings that come on packs of drinks and also the plastic that wraps products on pallets at just about every single big box store in the country. Here at this one Home Depot store, they get 25,000 of these pallets delivered every single year. That's a lot of tertiary packaging.

Now, there are other bioplastics on the market, but they come from plants and are generally more expensive than petroleum-based plastics. Bissel says, plastic made from wastewater treatment sludge can compete with its petroleum counterpart, and maybe even come in cheaper. One good thing is you're never going to run out of raw materials, are you?

[BISSEL] One would hope not, yeah.

[SULLIVAN] All right. In Sacramento, California, Lee Patrick Sullivan, "energyNOW!"

[ASSURAS] A group of engineering and microbiology graduates from the University of California, Davis founded Micromidas, the company in Lee Patrick's piece. The outfit now employs 20 people, and its product is supposed to hit the market next year.