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You may never have thought about putting algae in your gas tank, but companies harnessing breakthrough technologies have discovered ways to transform algae into transportation fuels. Now that sounds green.

Algenol Biofuels Inc., a Florida-based algae-to-ethanol company, has received a $25 million grant from the U.S. Department of Energy as part of the Recovery Act. The grant will aid Algenol in developing a pilot-scale integrated biorefinery in Freeport, Texas, to make ethanol from algae.

As a result of the stimulus funding, Algenol also has the potential to create hundreds of new jobs.

“DOE is stepping in as a bridge, a co-funder to advance technology that [alternative fuel] companies can’t manage on their own. It’s a bold step, and it’s necessary,” Algenol CEO Paul Woods says.

The grant announcement was particularly significant for Paul. He has worked to produce fuel from blue-green algae since 1984. 

Decades later, the future of Paul’s dream lies here in Texas. The balmy weather and non-arable land at the Freeport pilot-site are ideal for growing blue-green algae, Paul says. During photosynthesis, algae absorb carbon dioxide, producing bio-oils that Algenol will convert into ethanol, which, in turn, will one day be used to power cars, trucks and even airplanes.

Paul believes two major problems can be solved with an algae-based ethanol supply for gasoline engines. The first would be a dramatic reduction in America’s dependence on foreign oil. The second is to offer energy price stability -- a direct contrast with the currently volatile oil market. Algenol hopes to break ground for the pilot biorefinery in 2010.  The goal is to go commercial in as little as three and a half years.

“We want to get a move on. We’re poised to enter the market,” Paul says.

In the company’s next phase, it plans to work closely with area universities like Florida Gulf Coast University and the University of Florida to train the next generation of alternative fuel experts.

“We want to hire young people, educate them, train them and give them the opportunity to have a career at a company that can change the world,” Paul says.