SANTA CRUZ - Near the end of a line of windswept buildings, on Santa Cruz's Westside, sits a lab that may hold the key to everything from galactic space travel to peace in the Middle East.

For two years, a team of NASA researchers have been using a borrowed state Department of Fish and Game lab to test a potential new energy source by using treated wastewater to grow algae, which can produce a fuel that has already been tested on jets and may one day be used for spaceships.

Called the OMEGA Project, the $10 million study is being headed by Santa Cruz resident Jonathan Trent, a NASA scientist who has assembled a team of 20 researchers to explore the one of the most talked-about potential sources of biofuels.

Trent said his research shows promise, and because it uses treated human wastewater to feed the algae and grow fuel - a process which also leaves the water even cleaner - and could provide a sustainable solution to the problem of scarce resources as humans push deeper into space.

MOJAVE, Calif. -- The sign into town, slightly weathered, says "Gateway to Space!"

Beyond it lies the Mojave Air and Space Port, once a Marine auxiliary air station during World War II, now an incubator for the tinkerers and dreamers in the New Space movement. Adherents believe that the next phase of space exploration will be led by nimble, ambitious entrepreneurs -- a new generation of people like Bill Hewlett and Dave Packard, who helped create the electronics industry in a garage -- and that this is their moment to come together and make it happen.

"It's very similar to the Silicon Valley effect," said Stuart O. Witt, the chief executive of the space port for the past decade, explaining how half a dozen outer space start-ups came to cluster at Mojave, a small desert town about 90 miles north of Los Angeles.

This is where the first private, piloted spacecraft, SpaceShipOne, launched in 2004. Virgin Galactic is now conducting flight tests of a larger version, called SpaceShipTwo, that will take tourists on jaunts 62 miles up, giving them a brief bout of weightlessness. Small start-ups here are also developing new rocket fuels and trying to transform a discarded second stage of a rocket into a prototype moon lander.