Oil and gas giant BP and ethanol developer Verenium Corp. have formed a joint venture to develop a next-generation biofuel derived from inedible grasses and build what the firms say will be the world's largest refinery of its kind in Florida's Highland County.

BP and Verenium, based in Cambridge, Mass., announced their plans yesterday and said they are splitting a $45 million commitment 50-50 to launch their venture. It extends a strategic partnership between the two firms. They are already engaged to build a biofuel refinery in Mermentau, La., as a pilot project.

The 36-million-gallon-per-year refinery in Florida would be the first commercial-scale cellulosic ethanol facility. The estimated construction cost ranges from $250 million to $300 million, and the joint venture will first focus on obtaining financing for the project.

Groundbreaking for the plant is expected in 2010 with production expected to begin in 2012. The firms' ambitious plans include additional capacity and they said they intend to develop a second site in the Gulf Coast region.

"When we say that this partnership is groundbreaking, we mean it both figuratively and literally," Verenium President and CEO Carlos A. Riva said in a statement. "We are striving to move as rapidly as possible because the technology is ready and we know the marketplace is waiting."

Manufacturing of ethanol made from corn is well established, but the industry came under attack last year as its use of an edible crop was blamed for pushing food costs higher.

Verenium's specialty is developing cellulosic ethanol from nonfood feedstocks such as dedicated energy crops, agricultural waste and wood products.