The U.S. Department of Energy has set a goal of replacing 30 percent of gasoline used in the United States with fuels from renewable biological sources by 2030, and President Bush has made ethanol production a priority. So it is hardly surprising that some biotech startup companies are positioning themselves to take advantage of an anticipated booming market for biofuels.

While much of the focus is on ethanol, LS9, of San Carlos, CA, is using the relatively new field of synthetic biology to engineer bacteria that can make hydrocarbons for gasoline, diesel, and jet fuel. Hydrocarbon fuels are better suited than ethanol to existing delivery infrastructure and engines, and their manufacture would require less energy. To make biological production of hydrocarbons a reality, the company is bringing together leaders in synthetic biology and industrial biotechnology.

LS9 is at a very early stage: the company was formed in 2005, but its existence was announced only this winter. It plans to engineer microbes to incorporate gene pathways that other microbes, plants, and even animals use to store energy. Other startups, such as Amyris, of Emeryville, CA, and SunEthanol, of Amherst, MA, are also trying to use synthetic biology to develop microorganisms that produce biofuels. Stephen del Cardayre, a biochemist and LS9’s vice president for research and development, says LS9 microbes produce and excrete hydrocarbons that are useful as fuels.

Now the company is working to customize the rate of production and the products themselves. e certainly have gone beyond what we think anybody else was even thinking of doing” in terms of producing hydrocarbons from microbes, says George Church, a geneticist at Harvard Medical School and one of LS9’s two founders. The other is Chris Somerville, professor of plant biology at Stanford University.

The company has $5 million in funding from Khosla Ventures, of Menlo Park, CA, and Flagship Ventures, of Cambridge, MA. Its acting CEO, Douglas Cameron, is former director of biotechnology research at Cargill and chief scientific officer at Khosla Ventures. Flagship CEO Noubar Afeyan cautions that no one can tell the extent to which any biofuel will displace fossil fuels. “That is a subject of great debate and great prognostication,” he says. “The opportunity is so large that I don’t have to believe in much more than a few percentage points of market penetration for it to be worth our investment.”

The company is looking for areas where synthetic biology’s potential to produce specific types of molecules will pay off. This could mean making high-performance jet fuel, Afeyan says, or it could mean creating gasoline that has no pollution-causing sulfur content. Beyond custom-developing hydrocarbons, LS9 foresees licensing its technology. In particular, the company might someday forge agreements with ethanol producers, whose manufacturing plants could be put to more profitable and efficient use making hydrocarbon fuels.

LS9 is counting on the fact that ethanol is not really the best biofuel. Del Cardayre notes that ethanol can’t be delivered through existing pipelines. It also contains 30 percent less energy than gasoline, and it must be mixed with gasoline before being burned in conventional engines. LS9’s fuels would have none of these disadvantages. What’s more, LS9’s fuels might be produced more efficiently than ethanol. For example, at the end of ethanol fermentation, the mixture has to be distilled to separate ethanol from water. LS9’s products would just float to the top of a fermentation tank to be skimmed off. Overall, the LS9 process consumes about 65 percent less energy than today’s ethanol production, the company says.

LS9 now needs to prove that its technology is economical and can produce fuels on a large scale, says Jim McMillan, principal biochemical engineer in the National Renewable Energy Laboratory’s Bioenergy Center, based in Golden, CO. “I don’t doubt that [making hydrocarbon fuel from microbes] can be done; the question is how quickly and at what cost,” he says. LS9 says it hopes to bring its hydrocarbon biofuels to market in four or five years.