Bill Gates and Exxon Mobil are not the only high-rollers throwing green at green muck

Last Friday, the highest roller of them all – the U.S. taxpayer-awarded algae-fuel start-up Saphire Energy about $105 million in grants and loan guarantees – part of some $600 million in outlays to 18 experimental biofuel sites across the U.S.

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Underscoring its traditional petroleum know-how, Sapphire even boasts a former BP global refining executive as its president. Many critics of crop-based biofuels like corn ethanol or soybean biodiesel have a soft spot for rapid-growing algae, which they say can be produced in much higher yields without disrupting large areas of land or food prices. And they absorb carbon dioxide, to boot.

Chemistry doesn’t seem to be a problem: algae fuel blends have been successfully tested in airplanes and cars. The remaining question is logistics: how to raise, collect and crush enough fat-rich algae cells to replace significant quantities of crude oil at an acceptable price. Replacing even a run-of-the-mill 50,000 barrel a day Gulf of Mexico oil platform – which accounts for 0.25% of total U.S. oil consumption – seems like a logistical nightmare. A deepwater oil platform costs billions of dollars, but the crude doesn’t have to be grown – it’s been sitting there for millions of years waiting to be pumped out.

But bridging that gap is what the Fed money is for – and it’s clear that the government thinks it’s better spent in algae than in traditional crops; on Friday, the DOE awarded more than $120 million in grants to algae-related projects. (In addition to Sapphire, which got the single-largest amount, Algenol Biofuels and Solazyme got grants.)

The federal infusion is a big boost for Sapphire, one of the best-funded algae outfits (and backed by Bill Gates’ investment vehicles, Cascade Investment). It nearly doubles the amount it has raised from private investors.