Ethanol from plant cellulose has the same chemical properties as ethanol made from corn or sugar cane, but it can be produced from a variety of nonedible materials such as cereal straw, sawdust and switchgrass.

In the United States, corn is the dominant feedstock used to make ethanol. As the number of corn-fed ethanol plants has mushroomed, the price of the crop has risen sharply this year.

"Chevron is investing in cellulosic biofuels, because we believe they will play a role in meeting future energy growth," said Chevron Chief Executive Dave O'Reilly in a statement.

"We believe this partnership will accelerate the achievement of that reality," he said.