For nearly 20 years, a government laboratory built a living, respiring library of carefully collected organisms in search of something that could grow quickly while producing something precious: oil.

But now that collection has largely been lost.

National Renewable Energy Laboratory scientists found and isolated around 3,000 species algae from construction ditches, seasonal desert ponds and briny mashes across the country in a major bioprospecting effort to find the best organisms to convert sunlight and carbon dioxide into fuel for cars.

Despite meager funding, the Aquatic Species Program (.pdf), initiated under President Jimmy Carter, laid the scientific foundation for making diesel-like fuel from the fat that microscopic algae accumulate in their cells. Fifty-one varieties were carefully characterized as potential high-value strains, but fewer than half of those remain.

“Just when they started to succeed is when the plug got pulled,” said phycologist Jeff Johansen of John Carroll University, who collected algal strains for the program in the 1980s. “We were growing them in ponds and we were going to grow enough to have them made into a diesel fuel.”

The program was part of the huge investment that Jimmy Carter made into alternative energy in the late 1970s. All kinds of research avenues were explored, but when the funding shriveled during later years, knowledge, experts and know-how were lost. The setback highlights the problems created by inconsistent funding for energy research. Now, President Obama has trumpeted the American Recovery and Reinvestment Act, also known as the stimulus package, as the largest increase in scientific research funding in history. Scientists roundly applauded the billions of dollars that went into energy research, development and deployment. But what about when the stimulus money runs out in two years?

“One caution is that much of this has been funded with the stimulus package,” said Ernie Moniz at a Google-hosted panel on energy in late November. “So, we’re going to have to see what happens after these next two years, because what we need is not a drop, but a further increase in R&D commensurate with the task at hand.”

And that’s exactly what didn’t happen in the last big energy R&D push.

Algae comes back

While the valuable NREL archive of algae biodiversity languished in a Hawaii basement, the world around it changed. Genetic and genomic research and understanding skyrocketed. Oil demand grew, particularly in massive developing countries like China, India and Indonesia. Oil usage outpaced new oil field finds. Interest in algae-based biofuels exploded. Venture capital and corporate money flowed back into the field. On January 2, 2008, oil hit $100 a barrel for the first time. Despite some ups-and-downs, the price of oil remains substantially higher than it was through much of the 1990s. As a result, more than 50 companies are now at work on some aspect of biofuel production from algae.

In the latest move, Exxon Mobil decided to invest $600 million into a joint venture with Craig Venter’s Synthetic Genomics for research into next-gen algal fuels.

Over the past few years, Darzins has revived the program at NREL. They’ve been hard at work on the biology of microalgae. Graduate student Lee Elliott of the Colorado School of Mines has collected 500 new species in just the last year and a half. To a certain extent, the problems of maintaining a microorganismal library have been solved. Cryogenic freezing techniques were developed at the University of Texas UTEX Culture Collection of Algae. The NREL team has been able to freeze and then revive 91 percent of their microorganisms.

Despite the lost decade, algal oil makers are optimistic that they are about to ride a steep cost curve down to much, much cheaper biofuel. As they apply new biological knowledge and optimize growing algae, the cost will drop. And as they capture economies of scale, the costs will drop again. In the best-case scenario, when all is said and done, algal biofuel could cost $50 per barrel. But that won’t happen anytime soon, and it could take a decade.

Or maybe it will remain expensive for a long, long time. There are some legitimate reasons to be skeptical of algal biofuel’s potential for large-scale oil production.

So far, nobody has been able to make fuel from algae for a cost anywhere close to cheap, let alone competitive. Some researchers question whether any kind of energy-conversion process based on photosynthesis will ever play a major role in our transportation energy system. One life-cycle analysis found algal biofuels would not have a positive energy balance, in other words, you’d have to put more energy in than you would get out. The prominent startup GreenFuel, which grew out of Harvard and MIT research, went bust earlier this year after blowing through $70 million.

We just don’t know how well algal biofuel production might work. It’s true that the 18 years of research at the National Renewable Energy Laboratory yielded a lot of knowledge, but it resulted in nothing resembling a commercial product or process.

“The cultivation of microalgae for production of biofuels generally, and algal oils specifically, is not a near-term commercial prospect,” John Benemann, an algae scientist who worked on the final report of the Aquatic Species Program, wrote in an e-mail to Wired.com. “Larger-scale algal biofuels production still requires considerable, long-term R&D.”
So many questions, so little time

Just $25 million was invested over the life of the Aquatic Species Program, which is just 5.5 percent of the total money the DOE dedicated to biofuels over that time. Adjusted for inflation, the program’s total budget in today’s dollars was less than $100 million. To put this tiny number in oil industry context, Exxon Mobil made $142 million in profit each day of 2008.

“They came up with this idea and in four years, they almost demonstrated the technological feasibility, and then the funding fell out,” said Johansen, the phycologist who collected algae for the program. “The maximum of funding was about $4 million a year. When I left, it was $800,000 a year. Now, there is all this biofuel work going on, and they are all going back to that public domain research. It kind of drives me crazy.”

The neglect of the Aquatic Species Program and subsequent resurgence of algal biofuel interest is one of many examples that show that the lack of coherent, consistent energy policy has left the world’s most oil-dependent nation scrambling in times of crisis.

Johansen even went so far as to say that “if the Reagan and Bush administrations had not ended” the growth of the algal biofuels program, our country would have algal biofuels now.

Even under far less optimistic scenarios, if the Aquatic Species Program had been fully funded from its start until now, there is no question that we’d know a lot more about the potential, and limitations, of algal biofuels.

Instead, we’re left with some lessons learned, a partially missing library of microorganisms, and a lot of questions that investors and entrepreneurs want answered before the next oil price spike.