The two firms agreed a partnership deal in February and the plant will be built on the site of YLF's lavender farm and essential oil distillery located near Mona, Utah.
READ: Active Energy Group surges after acquiring a controlling interest in Canadian forestry company
Active Energy will use wastewater generated from the essential oil process to produce organic peat/compost.
YLF will pay AEG US$3.4mln to build the facility, which is scheduled to be in operation by the year-end.
Additional plants at other facilities are possible if it all goes well.
Michael Rowan, Active Energy executive chairman said: "The purchase of this first PeatSwitch Facility will deliver revenues to the group without impacting our ability to satisfy our other CoalSwitch and PeatSwitch product rollouts.”.