* Substitute for foreign oil currently uses too much land, water
* Future innovation, efficiencies might change this assessment
* Key investments, loan guarantees by Obama administration

By Roberta Rampton and Deborah Zabarenko

WASHINGTON, Oct 24 (Reuters) - Biofuels made from algae, promoted by President Barack Obama as a possible way to help wean Americans off foreign oil, cannot be made now on a large scale without using unsustainable amounts of energy, water and fertilizer, the U.S. National Research Council reported on Wednesday.