In January of this year the Defense Advanced Research Project Agency (DARPA) awarded a $25 million contract to SAIC and a variety of sub contractors to work on making fuel from algae. Now fellow BNET blogger Chris Morrison writes that NASA is taking a shot at this as well.
In perhaps an illustration of how groups of people approach things differently DoD is funding the whole kit and caboodle. They are looking at developing a process from growing the algae to processing to making a gallon of gas, oh for less then $3. This might be a hint that some in the government believe that regular gas will be back over $3 at some point. Anyway, NASA is doing it through a little more simple process as Chris's post explains.