To many, algae is little more than pond scum, a nuisance to swimmers and a frustration to boaters.

But to a growing community of scientists and investors in Southern California, there is oil locked in all that slimy stuff, and several dozen companies are racing to try to figure how best to unleash it and produce an affordable biofuel.

The companies and several research labs have set up shop in the San Diego area, many of them in an area nicknamed Biotech Beach. There, around 200 biotech companies are clustered on the mesa above Torrey Pines State Beach.

Together, the companies and organizations conducting algae research employ nearly 300 people with more than $16 million in payroll and bring $33 million annually into the local economy, according to the San Diego Association of Governments, and local officials see the potential for much more.

"It's a critical industry, and it's kind of exploded," San Diego Mayor Jerry Sanders said. "There's a long pattern of huge companies being spawned ... and it's going to create a tremendous number of jobs."

National energy companies are converging on the fledgling industry. Exxon Mobil Corp. announced a $600 million partnership with La Jolla biotech company Synthetic Genomics Inc. in July. San Diego companies General Atomics and Science Applications International Corp. have received nearly $50 million from the Defense Department for algae fuel research.

Last year, $176 million was invested by venture capitalists to develop biofuel from algae, according to industry publication Biofuels Digest in Miami.

With the region's proximity to the ocean, and its history with biotech businesses, San Diego is a familiar spot for clean-energy investors, Biofuels Digest editor Jim Lane said.

"It has all the magic conditions for the emergence of business life," he said. "San Diego wants to be associated with algae, while other cities have other fish to fry and think of algae as just one of many things."

Supplementing the research is experimental aquaculture, as farming in fresh and salt water is known. The arid Imperial Valley to the east is now home to several massive algae farms, one with nearly 400 acres of ponds.

All this activity has drawn its share of doubters. Skeptics say that it's a beachcomber's fantasy, that it's too costly to cultivate any significant amount of algae, that fuel inside — whether in the form of oil, ethanol, gas or hydrogen — is too expensive to extract or produce on a large scale.

But, in recent years, San Diego, along with Silicon Valley, St. Louis and Seattle and a few other cities, have disregarded the skeptics and emerged as hotbeds of algae biofuel research.

One of the nascent industry's major annual events, the 2009 Algae Biomass Summit, is headed to San Diego next month. It is put on by the Algal Biomass Organization, a Preston, Minn., group that seeks to promote commercial uses of algae products.

Seeking to unite and enhance much of the algal work under way in San Diego County is a new research consortium. It aims to help clear barriers to commercializing algae biofuels by identifying new algae strains and harvesting methods.

The San Diego Center for Algae Biotechnology was launched in 2008 with 16 founding partners from the University of California, San Diego, the Scripps Institution of Oceanography, Salk Institute for Biological Studies, biofuel companies and more.

Until recently, "algae has been this complete backwater of scientific research," said the center's founding director, Steve A. Kay, who is also dean of biological sciences at UCSD. "But we've all woken up with the realization that we are junking the planet."

Known as "nature's solar panels," the "amazingly clever little chemical factories" soak up carbon dioxide and sunlight, which is converted into oil through photosynthesis, Kay said.

Algae, he said, can be harvested more often and at greater yields than many other potential biofuel crops such as soybeans or grasses.

Unlike food and several other biofuel sources, algae is being eyed because it can thrive in difficult environments such as salty or polluted water or in the desert, freeing up valuable agricultural space.

But the slimy stuff is no magic wand, experts say.

Expecting algae to make a meaningful dent in fossil fuel usage is still a tall order, experts said. The algal biofuel production process is often lambasted as inefficient by other biofuel competitors.

"We can certainly come very close, but we're not there yet and I'm not sure when we'll ever get there," said John R. Benemann, an algae biofuel consultant with Benemann Associates in Walnut Creek, Calif. "It's a significant challenge to get down to the price point, or even just the ballpark of fossil fuels."

The problem is translating successful lab experiments to an industrial scale. Mass algae biofuel production could require enormous pools or photobioreactors while growing a proportionally small amount of algae. Technology needs to be developed to systematically extract the oil from the organisms.

Algae-generated oil currently costs $20 to nearly $33 a gallon to produce, with some estimates soaring to $60. Conventional gasoline costs less than $5 a gallon.

"There's a valley of death between research and development and commercial development," said Lisa L. Mortenson, chief executive of Community Fuels in Encinitas, Calif.

Kai BioEnergy Corp., a San Diego company named after the Hawaiian word for "ocean," can only produce roughly 20 gallons per minute while it needs 300 gallons a minute to be commercially viable on a large scale. Still, Chairman Mario C. Larach is optimistic.

"It's just a matter of scaling at this point," he said. "If nature can do it, we can do it."