A novel system, ―Environment-Enhancing Energy (E2-Energy), for algal biofuel production is proposed that integrates algal biomass production during wastewater treatment and hydrothermal liquefaction of that biomass into bio-crude oil. This novel system resolves several key bottlenecks for large-scale algal biofuel production including the contamination of target high-oil algal cultures, high nutrient cost inputs, as well as the significant energy inputs for dewatering/extraction. This approach could ultimately replace petroleum imports using only waste inputs and carbon dioxide from the atmosphere. A series of algae cultivation and hydrothermal liquefaction experiments have been conducted to confirm several key characteristics of this novel system and have been presented previously (WEFTEC 2011). In this study, a mathematical model for E2-Energy was also developed using the STELLA modeling tool in order to simulate the continuous operation of E2-Energy system and the result showed that this process effectively leverages the waste nutrients for maximum biomass production and carbon capture, and the biomass produced could be up to 8 times of the original mass of biosolids in the wastewater, and could ultimately replace petroleum imports using only waste inputs and carbon dioxide from the atmosphere.