Chesapeake, partners set Sundrop biofuel plant site

(Reuters) - Sundrop Fuels Inc, a biofuel startup financed by Chesapeake Energy Corp CHK.N> and venture capitalists, selected a site in Louisiana to build its first commercial production facility.

Sundrop expects to break ground for the $500 million facility, which will use wood waste combined with hydrogen from natural gas to produce gasoline, in the fall of 2012, a spokesman for the project said on Wednesday.

Sundrop plans to buy 1,200 acres of land near Alexandria in central Louisiana to build the plant that will be financed in part through the sale of tax-exempt private activity bonds issued by Louisiana.

Louisiana Governor Bobby Jindal announced the project on Tuesday.

Sundrop will use a gasification process to convert cellulosic feedstock into synthesis gas, which will then be made into biobased green gasoline.

Chesapeake, the second-largest producer of natural gas in the United States, announced its $155 million investment in Sundrop in July. The funds are aimed at stimulating demand for natural gas in the transportation market.

Natural gas prices have been depressed by huge supplies of the fuel.

Venture capital firms Kleiner Perkins Caulfield & Byers and Oak Investment Partners are also investors in Sundrop.

(Reporting by Anna Driver in Houston; Editing by Lisa Von Ahn)