Agricultural bioscience company Targeted Growth and biofuel producer Green Earth Fuels announced a joint venture Tuesday that the companies said will produce biodiesel for 20 percent less than current costs.

The joint venture, called Sustainable Oils, plans to produce up to 100 million gallons of biodiesel by 2010.

The newly minted company will make the fuel from camelina, a distant relative of canola known for its oily properties and its ability to grow on marginal land with minimal water.

Key to pulling off the venture will be selling Targeted Growth's camelina seeds, which have been genetically enhanced to produce 20 percent more oil than traditional biodiesel crops such as soybeans.

"We unlocked one of the key genetic mechanisms for understanding why plants grow," said Tom Todaro, CEO of the Seattle-based company.

Cells have a natural signal that tells them when to stop their dividing process. The company has capitalized on the knowledge by convincing the plant's cells to divide for longer periods.

With further research and development, the seeds could eventually increase the plants' yield by 50 percent, Todaro said.

The majority of the joint venture's camelina crops are first expected to be grown in Montana.

Houston-based Green Earth Fuels will bring its knowledge about producing and distributing biodiesel.

Although Targeted Growth and Green Earth Fuels didn't disclose how much each invested in Sustainable Oils, Todaro said the companies basically hold equal ownership.

Biodiesel producers are on the hunt for alternative feed stocks as they lose margins to rising prices for vegetable-oil sources such as soybeans. On Tuesday, soybeans hit a 34-year high, according to the news agency Bloomberg.

Some industry watchers and humanitarian associations blame the rise in prices on the biofuels industry competing with the food industry for the same crops, while others blame speculative trading.

But whatever the reason may be, prices on products such as palm and rapeseed oil have been so expensive that "it's been difficult to use these big commodities to produce biodiesel," said Will Thurmond, president of the research firm Emerging Markets Online.

And this has put the pressure on bidiesel companies to look for alternatives. Among the big contenders, he said, is jatropha, a hardy drought-resistant plant with seeds containing up to 40 percent oil.

It's also poisonous to humans and, therefore, won't be a factor in the "food vs. fuel" debate.

According to Todaro, Targeted Growth's camelina crops also don't compete with food crops. They are designed to be part of a farmer's crop rotation and planted when the land would normally lay fallow.

But Thurmond doesn't know any company that's been able to use camelina on a large scale. He speculates it's because there wasn't enough demand for it or because it was too expensive to produce.

"It also remains to be seen whether or not camelina will be an affordable feed stock over the long term," he said.

Testing the possibilities also will require large-scale biodiesel production. And, for that, Sustainable Oils will no doubt rely on the capital brought in by its parent companies.

In total, Targeted Growth has raised more than $40 million in funding from the likes of Capricorn Management, AllianceBernstein, GrowthWorks Canadian Fund and Integra Ventures.

Green Earth Fuels has about $150 million of capital, Todaro said. Investors include Riverstone Holdings, The Carlyle Group and Goldman Sachs.