In the never-ending search to find alternatives to buying oil from the Middle East, research-and-development money from government and private sectors has increasingly landed on pond scum. But you still can't fill up your car with it.

The possibility and worth of algae as a biofuel was the topic of a panel at this week's E3 Conference at the RiverCentre in St. Paul. (MinnPost was a media sponsor and I was a panelist on another topic.)

Clayton McNeff, CEO and director of ZirChrom Separations, Inc., and one of the inventors of the Mcgyan Reactors, was one of the speakers. You may have read about the process by which McNeff and his associates, using an idea from an Augsburg College student, process algae to biofuel. The company has a plant in Isanti, Minn., under construction scheduled to open in 2009.

The trick for McNeff and other scientists around the country is to take the manufacture of biofuel from algae from the laboratory to commercial production while keeping the cost low enough to compete with regular diesel fuel.

The issue of cost
The Isanti plant will have a 4 million gallon per-year capacity, he said. Estimates of the per-gallon costs of converting algae to fuel range as low as $2, which looked pretty good when diesel fuel was over $4.50 but not as good these days, when a gallon of diesel is under $2.70. (Regular gas, which is below $1.70 per gallon, is cheaper than diesel fuel.)

Tom Byrne, president of Byrne and Co., a Preston, Minn., firm that helps with financing such projects, said capital costs are a major issue. "We really are pushing it to commercial utilization at this point," he said.

With algae as the source, "you are actually growing a plant," he reminded the audience, which means fertilizer, land and other agricultural inputs.

None of the algae-to-biofuel models make sense, McNeff said, until they work at the farm level.

A range of other challenges
Attorney Mark Hanson checked off several other challenges to the industry, including growing the algae in difficult climates, harvesting, extracting the oil, contamination and disease, and legal risks.

The person who successfully delivers the first gallon of biofuel to the market at a competitive price may go down in history as the next Getty or Rockefeller. "The search continues," McNeff said.

"At our summit a year ago, a number of speakers had these issues solved," Byrne said. "This year at the summit they shared why they didn't work."