The trial, which council hopes to commence by the end of the month, involves algae being grown to produce oil which is then transformed into biodiesel, a fuel which can be used on its own or blended with traditional diesel.

A series of six, 30 square metre ponds will be established on a trial site at NMIT, containing different varieties of local algae collected from local streams, dams and lakes.

If the trial proves a viable solution to spiralling fuel costs, council may look at establishing a biodiesel plant in Ararat.

Ararat Rural City Council natural resources officer, Daryl Sherger said the aim of the trial was to determine which species of algae will grow best in the conditions and will produce the best oil.

"Algae is generally made up of one third oil, but this varies between species,'' Mr Sherger said.

"The oil content remains constant per kilogram of algae, but it's the growth rate, how many kilograms per square metre that we want to know.

"Algae has a huge growth rate, it's 20 times more productive than any other terrestrial plant.''

This productivity could see the algae produce anywhere between 60,000 to 90,000 litres of oil per hectare per year.

The harvesting process sees the algae removed from the ponds, being pressed to remove the oil, which is then processed through a biodiesel plant to modify the oil into biodiesel.

Oil produced from the trial algae ponds will be sent to Donald, where a recently established biodiesel plant will sample and trial the oil.

Mr Sherger said Ararat boasts a huge groundwater resource, ensuring water will not be an issue during the trial.

"A lot (of local algae) are adapted to salty water because a lot of our creeks are saline,'' Mr Sherger said.

With salinity affecting a fair patch of land surrounding Ararat, particularly to the south, the possibility of farmers establishing their own ponds on land which is otherwise useless is a possibility.