First American Scientific Corp. (fka FASC)

[TRCPA]

Investment #2: Sundrop Fuels, Inc. – Biobased “Green Gasoline” Made from Natural Gas and Cellulosic Material:

August 17, 2011

http://etuo.uh.edu/ngva/?p=159

Chesapeake has agreed to invest $155 million in a 50% ownership stake in Sundrop Fuels, Inc., a privately held cellulosic biofuels company based in Louisville, Colorado. The investment over the next two years will fund construction of the largest nonfood biomass-based “green gasoline” plant in the world, capable of annually producing more than 40 million gallons of ultra-clean gasoline from natural gas and waste cellulosic material. 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.

The first $35 million tranche of Chesapeake’s investment has been funded and the remaining tranches of preferred equity will be scheduled around certain funding and operational milestones to be reached over the next two years. The investment gives Chesapeake 50% of Sundrop Fuels’ equity on a fully diluted basis. The CNGV investment will be augmented by an additional $20 million pro rata investment by a current investor, Palo Alto, California-based venture capital firm Oak Investment Partners, which along with Sundrop Fuels’ management and Menlo Park, California-based venture capital firm Kleiner Perkins Caufield & Byers, have provided substantially all of Sundrop Fuels’ capital to date.

Sundrop Fuels’ plant is a critical strategic development to initiate the commercialization of the company’s promising biofuels gasification process, which is unique among all other conversion processes in existence today. This gasification process is the foundational technology for a number of chemical processes converting natural gas to higher value chemicals and fuels. This technology will utilize a proven methanol-to-gasoline process for producing tank-ready fuel, rather than the more capital intensive Fischer-Tropsch (F-T) process.

The company expects to break ground in early 2012 and be in full production by late 2013. Full-scale commercial plants are expected to be 5-10 times the size of the initial plant, with the first such plant scheduled to break ground approximately one year after start-up of the commercial demonstration plant.

McClendon commented, “The U.S. Department of Energy has placed a priority on seeking advanced, cleanerburning, sustainable biomass-based fuels capable of becoming immediate drop-in replacements for gasoline and diesel fuels and still use our nation’s existing liquid fuel-based distribution infrastructure. After extensive evaluation and due diligence of various GTL processes during the past three years, we believe there is no doubt Sundrop Fuels’ proprietary approach will be a breakthrough to achieving affordable and scalable GTL fuels using America’s natural gas and America’s nonfood biomass to produce a tank-ready green biogasoline replacement or supplemental fuel for gasoline and diesel.

“The clean, abundant and affordable qualities of American shale natural gas are well documented. With Sundrop Fuels’ efficient synthesis gasification process, natural gas becomes the enabling technology for a safer, stronger and greener economy. Natural gas supplies the missing link – hydrogen – needed to turn our nation’s biomass waste stream into a bountiful flow of truly green biogasoline that can fuel our cars, trucks, aircraft and industry. This breakthrough technology creates extraordinary economic and environmental upside for our country by decreasing our dependence on OPEC oil and lowering greenhouse gas emissions while at the same time creating thousands of high-paying American jobs. It also creates significant upside for Chesapeake and its shareholders by providing a large new demand driver for American natural gas.

“The commercial readiness of Sundrop Fuels’ technology is indicative of Chesapeake’s approach to investing in core technologies that address fundamental process and economic issues historically associated with GTL without taking on massive R&D expenditures. This transaction will enable our country to begin producing tankready fuels from American natural gas and start reducing OPEC oil imports.”

Chesapeake Energy Corporation Unveils Bold Plan to Transform U.S. Transportation Fuels Market and Reduce OPEC Oil Imports

– August 17, 2011