Clean Energy Fuels Corp. announced that BP p.l.c. will acquire the upstream portion of Clean Energy’s renewable natural gas business and sign a long-term supply contract with Clean Energy to support the firm’s continuing downstream renewable natural gas business. The deal enables both companies to accelerate the growth in renewable natural gas supply and meet the growing demand of the natural gas vehicle fuel market.

Renewable natural gas fuel, or biomethane, is produced entirely from organic waste. As a fuel for natural gas vehicle fleets, it is estimated to result in 70% lower greenhouse gas emissions than from equivalent gasoline or diesel-fueled vehicles.

Under terms of the agreement, BP will pay $155 million for Clean Energy’s existing biomethane production facilities, its share of two new facilities and its existing third-party supply contracts for renewable natural gas. Closing the transaction is subject to regulatory approval. Clean Energy will continue to have access to a secure and expanding supply to sell to the growing customer base of its Redeem™-branded renewable natural gas 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,” said 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 is both 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,” said Clean Energy’s President/CEO Andrew Littlefair. “This transaction will help to take it to the next level. 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.”

The company will buy renewable natural gas fuel from BP and collect royalties on gas purchased from BP and sold as Redeem at it stations. This royalty payment is in addition to any payment under BP’s contractual obligation.