Colorado biofuel startup Sundrop Fuels Inc. on Monday announced it will get $175 million in new investment, with the lion’s share coming from natural gas company Chesapeake Energy Corp.bizWatch
Chesapeake (NYSE: CHK), based in Oklahoma City, announced the company is creating Chesapeake NG Ventures Corp. (CNGV) to oversee $1 billion in new investment over the next 10 years in wider uses of natural gas.
Chesapeake said it plans to fund the investment by redirecting between 1 percent and 2 percent of its annual drilling budget toward projects that increase demands for natural gas.
Chesapeake is actively drilling for oil in the fledgling Niobrara oil play along the Colorado-Wyoming border.
Chesapeake said its first investments include $155 million over three years into Sundrop Fuels, based in Louisville. Chesapeake is buying a 50 percent stake in the private company.
Oak Investment PartnersbizWatch , a venture capital firm based in Palo Alto, Calif., that has funded Sundrop Fuels in the past, will invest an additional $20 million in Sundrop, according to Chesapeake.
Chesapeake said it’s also planning to invest $150 million over three years in Clean Energy Fuels Corp., a Seal Beach, Calif., company that builds natural gas fueling stations in several states around the country, including Colorado.
Chesapeake called its plan “an achievable, scalable and affordable pathway toward a transportation future that runs on America’s own abundant supplies of natural gas and oil from deep shale and other unconventional formations.”
Chesapeake said its investment in Sundrop Fuels will pay for the construction of the “largest nonfood biomass-based ... green gasoline‚ plant in the world.”
The plant, to be built in an unnamed state, will use natural gas and waste cellulosic material to produce more than 40 million gallons a year.
Construction on the “commercial demonstration plant” will start in early 2012, with operations expected to begin in late 2013, Chesapeake said.
“The investment promises to accelerate the development of an affordable, stable, room-temperature, natural gas-based fuel for immediate use in today’s automobiles, diesel engine vehicles and aircraft,” Chesapeake said.
Sundrop uses a proprietary “ultrahigh-temperature heat transfer process” to turn cellulosic material, such as woody material and agricultural waste, into a gas, which is then converted into a biofuel.
The company had been testing the use of the sun’s heat to get the high temperatures needed for its process. But natural gas, or electricity, also can be used to generate heat, according to Sundrop’s website.
Sundrop says its fuel is a “drop-in” fuel, meaning it can be shipped in the nation’s existing pipeline and tanker infrastructure as well as burned in existing vehicle and aircraft engines.
The company doesn’t use corn, used to produce ethanol, in its process, according to the company’s website.
“Sundrop Fuels technology exemplifies the role of clean-burning, hydrogen-rich natural gas coupled with non-food biomass to realize the nation’s goals for affordable renewable transportation fuels that are fully compatible with today’s engines and distribution infrastructure,” Wayne W. Simmons, Sundrop’s CEO, said in a statement.
“Teaming with industry leader Chesapeake will position Sundrop Fuels to make a significant contribution to America’s renewable fuels standards by bringing mass quantities of domestically produced, badly-needed advanced biofuels to the competitive market,” he said.
Sundrop says its method of producing fuel is faster and yields more fuel compared to other methods. The company said it plans to open a commercial-scale refinery, capable of producing 200 million gallons per year.
© 2011 American City Business Journals, Inc.
