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Jon LeSage

Jon LeSage

Jon LeSage is a California-based journalist covering clean vehicles, alternative energy, and economic and regulatory trends shaping the automotive, transportation, and mobility sectors.

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Oil Major BP Buys Boone Pickens’ Clean Energy Assets

BP is investing $155 million in production facilities for Clean Energy Fuels Corp.’s Redeem-branded renewable natural gas.

The deal supports both companies’ role in the future of RNG, or biomethane, for fleets and transport companies to hit emissions regulation targets and to help fulfill growing fuel demand in the natural gas vehicle market.

BP is paying for Clean Energy’s existing biomethane production facilities, its share of two new facilities, and its existing third party supply contracts for RNG. The oil company will continue to subcontract the operations of these facilities to Clean Energy.

Clean Energy will buy RNG from BP and collect royalties on gas purchased from BP and sold as Redeem fuel at it stations. Clean Energy will have access through a long-term supply contract with BP.

Clean Energy will be able to expand its Redeem customer base at its North American network of natural gas fueling stations. The fuel product, which is produced entirely from organic waste, was launched in October 2013. The natural gas fueling company sold 60 million gasoline gallon equivalents of Redeem in 2016.

Customers such as UPS, Republic Services, Ryder, Kroger and the City of Santa Monica’s transit agency use the fuel, which has about 70 percent lower greenhouse gas emissions than equivalent gasoline or diesel fueled vehicles. Clean Energy says it’s the cleanest transportation fuel commercially available for heavy duty vehicles in the U.S. today.

Using RNG also gives fleets and transport companies access to California’s low carbon fuel standards and cap-and-trade funding programs. Other governments are adopting the standard calling on fleets to reduce carbon emissions by 10 percent, no matter what the fuel may be. Related: Iraq To Start Drilling In Highly Contested Persian Gulf

In late November, Canada announced that the country will adopt a national clean fuels standard. The national standard looked at adoption of similar guidelines in California, Oregon, and British Columbia, according to a report.

BP is rejuvenating its commitment to renewable energy and fuels, which was thought to have subsided in recent years. Along with biomethane, the company is investing in other sustainable energy including biofuels and wind energy.

Clean Energy Fuels Corp.’s history goes back to 1997. T. Boone Pickens, founder and chief executive of Mesa Petroleum for 40 years, started up the company as Pickens Fuel Corp, the predecessor to Clean Fuels. That company went public in 2007.

Pickens, now the founder of BP Capital, has been selling his shares of the natural gas company including 1.98 million shares, or 13 percent, in December. He continues to be Clean Energy’s largest shareholder and sits on the board of directors. Selling shares may have something to do with losses in the value of Pickens’ oil and gas assets and a wind energy project in recent years.

Pickens has become a visible champion of natural gas vehicles as a stable, clean, and domestic fuel – and much better than the volatility that foreign oil imports can occasionally cause. Related: Will Exxon’s New $20 Billion Strategy Pay Off?

Frost & Sullivan has released a report supporting natural gas as a viable alternative fuel for truck and bus operators.

“Abundant natural gas from the shale gas revolution, as well as stricter emission and fuel efficiency standards are steering fleets in North America toward lucrative alternative powertrain,” says the report. “This trend is augmented by increased government incentives across major US states and the rise of fueling infrastructure.”

High upfront costs, low oil prices, and availability of efficient hybrid electric powertrains, present hurdles for adoption rates natural gas vehicles, according to the report.

By Jon LeSage for Oilprice.com

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