Exxon Mobil, the world's largest publicly traded oil company, is making a $29 billion bet that pressure to curb climate change will mean natural gas - cleaner than coal and suddenly much easier to reach - will become a crucial source of U.S. power.
Exxon agreed to buy XTO Energy in an all-stock deal at a 25 percent premium, showing how eagerly a company that is among the most conservative in a conservative industry is jumping into the market for natural gas.
As negotiators haggled in Copenhagen over carbon emissions, the deal suggested Exxon sees change coming for energy best known for heating homes.
The deal announced Monday was also the largest for the U.S. energy sector in at least four years and Exxon's biggest acquisition since it bought Mobil Corp. for $75 billion in 1999.
New found supply and looming climate legislation have been cited by utilities this year as they have shuttered old coal-fired power plants and scrapped plans to build new ones.
Climate legislation would put utilities in the crosshairs, and many are aggressively seeking new fuels like natural gas to minimize the economic hit.
"It does look like this move makes much more sense in a world where there's carbon policy because that ensures a growing market for natural gas," said Amy Jaffe, a fellow at the James A. Baker III Institute for Public Policy at Rice University.
Just this month, Progress Energy became the latest utility to announce it would close coal-fired power plants in favor of natural gas. Exxon expects global demand for gas to grow 50 percent by 2030.
"Natural gas is really well-suited to meet that growing power generation demand, both from the standpoint of its lower environmental impact, but also its capital efficiency and its flexibility," Exxon Mobil chairman and CEO Rex Tillerson said.
XTO claims about 45 trillion cubic feet of gas, much of it trapped in tight shale formations. Technology developed over the past decade has made it much cheaper to pull natural gas from those formations.