I should probably preface my comments by saying I am a little dubious about all bio-fuels because they are a little like methadone in that they replace an element of our addiction rather than cure our addiction. If the single issue facing us was energy security I would salute these solutions right up the old flag pole, but we have also got that global warming thing as well as human and ecosystem health issues associated with the internal combustion engine and fuel burning. So when I look at bio-fuels I tend to favor those approaches that solve problems rather than create new issues for our well-being or the health of our agricultural or natural systems.
As I put the algae proposal through the above screen, I think it probably makes sense to harvest algae from existing systems such as sediment ponds, catchment basins, and sewage treatment areas, but if the plan is to build large-scale ponds on existing wildlife habitat or crop land, I would probably look askance at those proposals. All of this brings us back to alien invasive species. (Obviously. Right?)
So what if the ten-pound brains at the Defense Advanced Research Projects Agency (DARPA) started searching around for feed-stocks based on alien invasive species such as knotweed, kudzu, hydrilla, or water hyacinth? I am aware that these might not have the requisite oil content, but these are approaches that at least head us in the right direction. If they prove absolutely unworkable, then DARPA could at least look for ways that algae production could be used in conjunction with biological nutrient reduction programs at sewage treatment plants or perhaps in synergy with factory farming operations for cattle, pigs, or chickens to reduce waterway and air pollution. Lots of design options that will make good brain work better for all life on the Planet.