Chesapeake creating $1B fund to boost natural gas use in transportation

Chesapeake Energy Corp. is creating a $1 billion venture capital fund to boost demand for natural gas as a transportation fuel. Chesapeake will start advancing its plan by investing more than $300 million in two companies, including one owned by T. Boone Pickens.
BY JAY F. MARKS jmarks@opubco.com Modified: July 11, 2011 at 9:25 pm •  Published: July 11, 2011

Chesapeake Energy Corp. and CEO Aubrey McClendon are making a bold move toward natural gas for transportation.

Chesapeake, which has long proclaimed itself “America's Champion of Natural Gas,” is creating a $1 billion venture capital fund to boost demand for natural gas in transportation.

McClendon on Monday unveiled a three-pronged plan to move the United States toward energy independence and enhanced national security by reducing foreign oil imports.

The plan calls for increased domestic oil and natural gas liquids production, additional investment in publicly accessible natural gas fueling stations and development of additional processes to make natural gas into a transportation fuel.

“Chesapeake is so convinced of the economic attractiveness of this plan that we are redirecting approximately 1 percent to 2 percent of our annual drilling cap-ex (capital expenditure budget) over the next 10 years, or at least $1 billion in total, to stimulate market adoption of CNG, LNG and (natural gas-to-liquids) fuels,” McClendon said.

Newly created Chesapeake NG Ventures Corp. will make its first investments in Clean Energy Fuels Corp. and Sundrop Fuels Inc.

Clean Energy Fuels, whose co-founder is Oklahoma-born billionaire T. Boone Pickens, will use Chesapeake's $150 million investment to accelerate its construction of liquefied natural gas fueling stations for heavy-duty trucks.

Sundrop is working to build a plant capable of producing more than 40 million gallons of “green gasoline” from natural gas and waste plant matter. Chesapeake will acquire a 50 percent stake in the Colorado-based company for $155 million.

McClendon said he expects the investment fund to make money for Chesapeake and its shareholders, while spurring others to invest in similar ventures.

“Working together, we can create a more prosperous, cleaner and safer America and, once and for all, begin to develop a sustainable energy policy based on reliance on and development of America's own energy resource bounty and break the stranglehold that OPEC oil has had on our country for nearly four decades,” he said. “Chesapeake is 100 percent committed to helping make this happen for the benefit of our shareholders and for our country.”