DES MOINES, Iowa ---  The Iowa Power Fund board agreed April 9 to enter negotiations to fund the state's first biodiesel project that uses algae as a feedstock, the Gazette reported.

Green Plains Renewable Energy has proposed a pilot plant that would use three byproducts from the company's Shenandoah plant --- waste water, waste carbon dioxide and waste heat from dryers --- to grow algae. The algae would be harvested and processed into biodiesel.

The Iowa Power Fund board authorized final negotiations for a $2.19 million state grant for phase 1 of the two-phased project.

The project would initially call for development of a 100-square-meter pilot plot for algae growth. If developed at commercial scale, the project would eventually cover about 250 acres. The algae impoundments would be covered by mobile greenhouses to sequester carbon.

Green Plains' partner in the project is GreenFuel Technologies, based in Cambridge, Mass. GreenFuel has worked with Arizona Public Service Co. to develop an algae-based bioreactor that produces ethanol biodiesel from power plant gases and ethanol in Arlington, Ariz., the Gazette reported.