Known as “Farm to Fly,” the effort also involves private airline firms — who cite making the fuel supply chain more efficient as a key benefit — and the Federal Aviation Administration.
The White House has promoted the aviation and other biofuel programs as a way to lower greenhouse gas emissions, reduce dependence on foreign oil and grow domestic biofuel companies.
LaHood said aviation biofuels would help President Obama maintain commitments to address climate change in his second term.
"In his State of the Union Address, President Obama called on us to work together to reduce carbon emissions - developing these alternative jet fuels will do just that, while creating jobs and helping airlines save money on fuel,” LaHood said in a Monday statement.
Obama has advocated growing the domestic biofuel industry through increased federal research, which the fiscal 2014 budget plan he proposed last week would do.
Biofuel backers say cooperative federal programs like the one extended Monday are key to jump-starting production of the next-generation biofuels sought by the aviation industry.
Those biofuels are made from non-edible feedstock, such as algae. But investment in that technology has lagged behind food-based biofuel, such as ethanol made from corn, and is therefore not yet produced in large quantities.
Some commercial airliners have performed test runs with biofuel, which they combine with petroleum to create a 50-50 blend.
Use of the biofuels is not widespread, as they're still expensive — which is largely a symptom of the lack of commercial production.
While the Obama administration has put its faith in those next-generation biofuels, the industry has several opponents on Capitol Hill.
Many fiscal conservatives contend the technology is not viable. They say it's been too slow to come online and that the government is wasting money trying to grow the industry.
Those lawmakers have tried to gut Defense Department programs for drop-in biofuels. The attempts have foundered amidst opposition from Democrats and Midwestern Republicans.