GM Chairman and Chief Executive Officer Rick Wagoner said he has made an undisclosed investment in a Warrenville, Ill.-based company called Coskata Inc.

Coskata aims to produce 100 million gallons a year of $1-a-gallon ethanol by 2011. Coskata makes its ethanol from bacteria from grass and woodchips.

It's the largest investment GM's made in renewable fuels but after the recent passing of the energy bill in Congress, it's imperative to increase production of renewable fuels like ethanol, Wagoner said.

The bargain price of the fuel, compared to today's $3-a-gallon gasoline, could finally convince Americans to actively seek ethanol as an alternative to imported oil, GM officials said.

Coskata is named after a beach and wildlife refuge on Nantucket and it's using patented microorganisms developed at two Oklahoma universities to create cellulosic ethanol from biomass like wood chips, shredded tires, and municipal waste. Eventually, it even hopes to take auto factory waste and parts of junked cars and turn them into ethanol.

The company expects to complete production on a refining facility this year that's connected to an existing chemical plant that will produce 40,000 gallons of cellulosic ethanol from woodchips this year.