Yup, and there's a new facility just 10 mi north of the house that is doing work on that very project. From what I've read, certain algae strains can provide various transportation fuel types.
A few thousand acres of corn and a few other crops are being grown around the facility to provide the cellulose needed in the process for the bio-diesel / bio-fuels production.
Though basically a research center, Novozymes, is geared towards creating specific enzymes to work with specific algae to make the conversions needed on a marketable scale for biodiesel production. The plant employs approximately 350 people and is the largest multi-purpose enzyme manufacturing plant in the United States.
You are correct. Methanol is needed in the production of algae-oil derived diesel. Cellulose derived methanol can be integrated into algae-oil production in a multitude of ways. One source that I have thought of would be the use of forest undergrowth which has been a major cause of forest fires. How much CO2 is released from a major forest fire?