California Gov. Arnold Schwarzenegger isn't the only head of a U.S. state to support the funding of biofuels with taxpayer dollars.

On Tuesday, Pennsylvania Gov. Edward Rendell announced $10 million worth of grants to fuel homegrown biodiesel, supporting infrastructure and alternative fuel technologies. The announcement comes after North Carolina in July established a nonprofit corporation to grow its biofuels industry and set a target of getting 10 percent of its liquid fuels from biofuel sources within the state by 2017 (see North Carolina Goes Greener).

In total, 24 projects received funding in Pennsylvania (see Pennsylvania's Biofuel Winners). The impact of the grants will get an extra boost from $108 million more in private money.

"This year, Pennsylvania will spend nearly $30 billion to purchase gas and liquid fuels from beyond our borders," Rendell said in a statement. "Rather than sending that money abroad, we're making a commitment to work toward energy independence and invest that money here."

The move helps push Pennsylvania deeper into the ranks of states looking to support the adoption of biofuels. Over the weekend, Schwarzenegger signed a bill that will pump about $125 million annually into alternative fuels and vehicle technology (see Schwarzenegger Fuels Green Vehicles).

The Pennsylvania grants are targeted at helping the state meet a goal previously set by Rendell. Under the PennSecurity Fuels Initiative, the governor wants the state to produce and consume nearly 1 billion gallons of biofuel by 2017. The amount is equal to what the state will import from the Persian Gulf by that time. The initiative is still awaiting legislative action.

Rendell's plans also include a financial incentive for producers. The state's biodiesel and ethanol producers will be able to pocket an extra $0.05 per gallon for up to 12.5 million gallons made in a year's time.

BioFuel Energy Halts Ethanol Plant

BioFuel Energy Corp. has called off its third ethanol plant, citing a glut of ethanol that has sent prices tumbling (see Earth2Tech post).

The news comes after VeraSun Energy also suspended construction of a plant earlier this month and after Akron Riverview Corn Processors and E85 halted ethanol plants this summer (see Ethanol Margins Suffer).

Besides ethanol prices that have fallen to about $1.60 per gallon, compared to $3.90 per gallon in the spring, companies have had to contend with high prices for the crops needed to make ethanol. Corn prices have grown from $2 per bushel two years ago to around $3.50 per bushel today.

BioFuel Energy (NSDQ: BIOF), which still plans to build two other plants, said share prices also influenced its decision. Shares fell more than 35 percent in 30 days.

"We have been surprised and disappointed by the sharp decline in our share price over the past 90 days," said Chairman Thomas Edelman in a statement, adding that stock prices for the entire ethanol sector have dropped.

BioFuel shares rose 12.7 percent to $5.24 on the news Monday, then fell slightly to $5.23 per share in recent trading Tuesday.

PetroSun Plans to Churn Out 180M Gallons of Oil From Algae

Amid high prices for biofuels crops (see BioFuel Energy Halts Energy Plant), Phoenix-based startup PetroSun said Tuesday it's on track to churn out at least 180 million gallons of algal oil per year once its plants are completed next year.

While production of biodiesel has grown rapidly, the ultimate size of the market is limited by a lack of available crops. Some scientists and entrepreneurs see oil from algae as a potential savior, because algae could theoretically yield far more oil than crops such as soy, palm and canola, which are currently used for biodiesel.

A number of companies have jumped into the space, including Solazyme, Aurora BioFuels, GreenFuel Technologies, LiveFuels and Global Green Solutions -- to name just a few.

But so far, the ability to squeeze large amounts of oil from algae cheaply and quickly enough to be profitable has escaped them. Analysts say the ability is still years away.

So PetroSun's claim that it is ready to produce large amounts of the stuff is a bold one that's sure to raise skeptics' eyebrows.

The company said it will use the oil to make biodiesel -- both by selling the oil to biodiesel manufacturers and by refining the oil itself in the PetroSun Biofuels Refining division -- and added that the algae biomass could be used to make ethanol.

In August, PetroSun said it was planning to file patent applications for its algae-cultivation and algal oil-extraction technologies.