BOULDER - Two entrepreneurial engineers believe that "thinking like algae" will provide dependable domestic sources of diesel fuel and help address global climate change.

Jim Sears and Mark Allen founded Boulder-based A2BE Carbon Capture LLC with those ambitious goals in mind. They tapped more than a decade of scientific research summarized in a 1998 report by the U.S. Department of Energy.

The study characterized the production of biodiesel from algae as "an exciting new option" and "one of the only avenues available for high-volume reuse of carbon dioxide generated in power plants."

When the report appeared the retail price of petroleum-based diesel fuel was about $1.23 per gallon. With the production technologies available at that time, algae-based diesel would cost twice that.

Today, the retail price of diesel is around $2.70 per gallon. With new production methods in development, algae-based diesel looks more attractive.

A2BE is seeking $3 million to $5 million in funding to support a laboratory and an experimental bioharvesting facility. A future $10 million round of funding would lead to a commercial-scale plant in four or five years.

Because of the scale of the endeavor and the long-term return on investment involved, A2BE is focused on industrial partners with deep pockets, specialized expertise and patience. Executives expect to announce the company's first major partnership within 30 to 45 days.

"This is not a venture capital or angel play," said Allen, A2BE's chief executive. "No company with $100 million to $200 million in venture capital alone will get this to commercial scale."

The U.S. Department of Energy, which shelved its research on algae primarily for budgetary reasons, is resuming work in the area. Al Darzins, group manager of the National Bioenergy Center at the National Renewable Energy Laboratory in Golden, said the lab is nearing a new cooperative research and development agreement.

Algae are simple plantlike organisms that efficiently perform photosynthesis, the process that combines water, carbon dioxide and energy from the sun to create other forms of energy. Certain microscopic green algae store photosynthetic energy in the form of oils that can be processed into fuels for diesel engines.

Photosynthesis consumes carbon dioxide - a greenhouse gas believed to cause global climate change. Coupling power-generating plants that produce carbon dioxide with algae farms that consume it "turns a problem into a valuable product," Sears said.

Using algae isn't a quick fix. "It's a living system, and you have to scale it to operate reliably at a commercial level," Allen said. A2BE anticipates construction of a commercial-scale algae-to-biodiesel plant in 2012.

 "You have to be in partnership with an organism that can evolve faster than you can," said Sears, who invented new processes for large-scale cultivation of algae in water-conserving systems. He said the DNA of algae is almost as long as that of humans.

One researcher tried to capture algae using filters. Within weeks, the algae evolved so that the only ones that grew were small enough to escape the filter.

"Thinking like algae" means taking a systematic approach and working with life processes rather than against them, Sears said.

Engineers who try to reduce the problem to finding the right organism and investors who expect a quick return will be disappointed, he added. "Whenever you're dealing with biology, there's never an easy problem to solve," Darzins said.

He cited the need for "co-products" to make the algae-to-oil process economical. "You have to use all parts of the algae, and you have to produce oil cheaply."

A2BE believes it has addressed these concerns. "Biodiesel is only one component of the value," Allen said. A2BE's manufacturing process will produce protein that can be used in animal feed along with fertilizer and methane - without using fossil fuels.

"We achieve a neutral carbon balance even though our fuel products are ultimately burned," Sears said.

Other plant-based petroleum alternatives have grabbed headlines, but Darzins is confident in the future of algae. "Add up soy, canola and vegetable oils, and you can replace about 5 percent of the petrodiesel. Algae can fill that gap."

Algae have the potential to produce 10,000 gallons of oil per acre, "and they grow on marginal land - places that don't grow food," Darzins said. "Wherever there's a lot of sun and a lot of water, you can grow algae."

"In the future the bulk of the energy on our planet will be produced photosynthetically," Sears said.