Under a new agreement announced today, BP PLC will acquire the upstream portion of Clean Energy Fuels Corp.’s renewable natural gas (RNG) business and sign a long-term supply contract with Clean Energy to support the firm’s continuing downstream RNG business.
According to Clean Energy, the deal enables both companies to accelerate the growth in RNG, or biomethane, supply and meet the growing demand of the natural gas vehicle (NGV) fuel market.
As a fuel for NGV fleets, including heavy-duty trucks, RNG is estimated to result in 70% fewer greenhouse-gas emissions than equivalent gasoline- or diesel-fueled vehicles.
Under terms of the agreement, BP will pay $155 million for Clean Energy’s existing biomethane production facilities in Canton, Mich., and North Shelby, Tenn.; its share of two new facilities under construction in Oklahoma City and Atlanta; and its existing third-party supply contracts for RNG.
Closing the transaction is subject to regulatory approval. Clean Energy says it will continue to have access to a secure and expanding supply to sell to the growing customer base of its Redeem-branded RNG fuel through a long-term supply contract with BP.
“Demand for renewable natural gas is growing quickly, and BP is pleased to expand our supply capability in this area,” says Alan Haywood, CEO of BP’s supply and trading business. “BP is committed to supporting developments towards a lower-carbon future, and working with Clean Energy, we believe we will be well-positioned to participate in the growth of this lower-carbon fuel in the U.S.”
Clean Energy, in turn, will be able to expand its Redeem customer base at its North American network of natural gas fueling stations, allowing customers to take advantage of the ease and affordability of switching to a fuel that both is renewable and can significantly reduce greenhouse-gas emissions compared with diesel.
“We started our Redeem fueling business from scratch less than four years ago and have grown it into a significant enterprise. This transaction will help to take it to the next level,” says Andrew Littlefair, Clean Energy’s president and CEO.
“BP’s investment in and focus on renewable natural gas supply will ensure that Clean Energy can meet the growing demand of our customers for low-carbon, renewable fuel,” comments Littlefair.
As agreed, Clean Energy will buy RNG fuel from BP and collect royalties on gas purchased from BP and sold as Redeem at its stations. This royalty payment is in addition to any payment under BP’s contractual obligation.
Launched in its California stations in October 2013, Clean Energy sold 60 million gasoline gallon equivalents of its Redeem fuel in 2016 across multiple states to customers including UPS, Republic Services, Ryder, Kroger and the City of Santa Monica’s transit agency. Clean Energy asserts that Redeem is the cleanest transportation fuel commercially available for heavy-duty vehicles in the U.S. today.