Chevron, Mascoma enter ethanol feedstock agreement

WASHINGTON Sept 14 (Reuters) - Biofuels company Mascoma Corp said on Monday it has entered a two-year feedstockagreement with a unit of Chevron Corp (CVX.N) that will help it make advanced cellulosic ethanol.

Mascoma hopes to produce commercial levels of cellulosic ethanol, an advanced biofuel made from the woody bits of nonfood crops, by 2013. It already makes small amounts of the fuel at a pilot plant in Rome, New York.

Under the agreement Chevron Technology Ventures (CTV), a unit of Chevron, will provide lignocellulosic feedstock to Mascoma, which will then covert them to cellulosic fuel.

Mascoma will then supply CTV with lignin, an energy-rich chemical compound derived from woody biomass, which the company will then evaluate for potential uses.

"The upgrading of our byproduct lignin to high value transportation fuels is an important step in our effort to prove the effectiveness of integrated biorefineries," Jim Flatt, the president of Mascoma said in a release.

Mascoma would not immediately say how much money was involved in the agreement.

Oil companies have been forming links with companies that make ethanol and biodiesel as U.S. mandates call for increasing amounts of biofuels to be mixed into the country's gasoline and diesel.

Currently no commercial levels of cellulosic are made in the United States, though the government requires the blending of 100 million gallons of the fuel in 2010.

(Reporting by Timothy Gardner; Editing by David Gregorio)