Washington, 18 July 2011

Energy executives, politicians and others who are pushing to create a prominent role for natural gas-powered cars and trucks in the US have long pondered a “chicken-or-egg”-type question: should they focus on building the vehicles first, or the fueling stations and other specialized infrastructure they need to thrive?

“We think the most important thing right now is to get the infrastructure in place,” Aubrey McClendon, CEO Chesapeake Energy, the U.S.’ second-largest gas producer, said Sunday on the Platts Energy Week, an independent, all-energy television news and talk program that airs in the United States.

The head of a major U.S. gas producer says America could begin to sharply reduce its need for imported oil by building a relatively small number of compressed natural gas and liquefied natural gas fueling stations across the country.

There are currently more than 120,000 convenience stores and other retailers in the U.S. that sell fuel for conventional gasoline-powered cars and trucks, according to the U.S. Census Bureau. But McClendon said the U.S. would only need about 1,000 compressed natural gas (CNG) and liquefied natural gas (LNG) stations to form a “reliable national grid” for gas-powered vehicles across America’s 47,000-mile-long interstate highway system.

“When you get to that point, we believe the trucking industry can make a full transition away from diesel made from imported oil, and toward a domestic resource like natural gas,” McClendon said, speaking from his company’s headquarters in Oklahoma City.

To that end, McClendon announced last Monday that Chesapeake would invest $150 million in Clean Energy Fuels, a California-based company that is building LNG fueling stations at truck stops across the U.S. Chesapeake’s investment, which will bankroll about 150 new LNG fueling stations, is part of a larger, $1-billion initiative to significantly ramp up its production of gas and oil from deep shale, tight sands and other “unconventional” geologic formations.

McClendon hopes that Chesapeake’s increased gas production, along with its investment in LNG and CNG fueling stations, will trigger a “tipping point” that will give automakers the confidence they need to bolster their production advanced, gas-powered vehicles. He said he expects truck stops, convenience stores and other gas drillers to make additional investments in LNG and CNG infrastructure because the cost of the domestically produced fuel will be half that of gasoline and diesel refined from imported oil.

“The guy who’s the first guy to say to his customers, ‘I can save you 50% on your fuel’ is going to be a pretty popular guy,” McClendon said. “It needs someone to take the lead, and we’re going to do that.”

Notably, McClendon said the U.S. can build a gas-centered transportation infrastructure largely through private investment, without new financial incentives from the federal government. That puts him at odds with well-known Texas oilman T. Boone Pickens, who supports legislation pending on Capitol Hill that would provide tax credits to boost sales of gas-powered cars and trucks, among other things.

Still, McClendon said his approach is “compatible” with that legislation, known as the Nat Gas Act (H.R. 1380).

“The private sector is going to take the lead here,” he said. “I’ve hoped for the last three years the government would take the lead, but for various reasons, they’ve chosen not to. So if the government does come in and passes the Nat Gas Act, which I believe they should, then it will simply accelerate what we are attempting to do.”

McClendon also rejected the notion that shifting the U.S. transportation fleet from gasoline and diesel to natural gas would hurt the chemical industry, which uses gas as a feedstock for countless manufactured goods. The CEOs of 11 major chemical companies made that claim last week in a letter to U.S. lawmakers, saying such an approach would “inject volatility” into the gas markets.

“I’ve seen the letter; I think it’s a little narrow thinking,” McClendon said. “My personal view … is that there’s plenty of natural gas out there, and that the chemical companies – fertilizer, plastics companies, people who have been our traditional consumers over the years – don’t need to worry about additional markets opening up for natural gas. I believe there will be plenty for everybody.”

Appearing separately on Sunday’s program was Mario Lugo, president of Trendsetter Engineering, who explained how his company has built a 165,000-pound piece of equipment that has the potential to prevent future disasters like BP’s runaway Macondo oil well in the Gulf of Mexico. Capped this month a year ago, the 2010 Macondo deepwater oil rig disaster is deemed the biggest marine oil spill in U.S. history.

On this week’s “Energy Watch,” a segment that offers an update on prominent topics in energy, Roger Ballentine, president of the consulting firm Green Strategies and an adviser to the American Council On Renewable Energy, discussed renewable energy investments, innovations and government aid.

During the “Market Spotlight” segment, Platts Associated Editor, Samantha Santa Maria, talked about the bidding war for the natural gas pipeline company Southern Union, with intense competition between two would-be buyers, Energy Transfer Equity and Williams Companies.

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