I want my CNG

Greetings Holiday Shoppers

    Today's blue light special is natural gas.  Its "clean and abundant".  Will it become the bridge fuel for transportation?  

    There's lots of press lately about how the US is going to be energy independent based on new natural gas.   But is natural gas a substitute for oil in transportation?   Not yet.  Why now?

     Infrastructural, baby, infrastructure. 

    Lets look at trucks, the low hanging fruit.   

    There are about 2 million long haul trucks on the road.  Each uses as much fuel as 40 cars.  Some truck sectors have seen some conversion to NG (busses and garbage trucks) -but  not long haul.  One reason is filling stations, but another is cost.  A  long haul NG truck costs $195K vs $95 K for the diesel.  So no sale without a subsidy.  The Pickens plan would have converted 140,000 at a cost of $5 billion,  but that failed.  Interestingly, probably because of opposition by the chemical industry, which is very happy with low NG prices.

     Here's some interesting info.  Even though an NG truck would pay for itself in 10 years, business won't buy them.  Why not?   Too long. To justify added expense, they need it to pay off in 3.

  

"UPS bought its natural-gas trucks only after getting $4 million in federal stimulus money to help defray the cost, Mr. Britt said. At current fuel prices, the trucks should easily pay for themselves in less than the 10 years UPS expects to drive them, he says. But UPS typically expects equipment to pay off within three years.

As a result, UPS won't buy more natural-gas trucks unless the government forks over additional subsidies, said Mr. Britt. The shipper supports the pending federal bill."

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Natural-Gas Trucks Face Long Haul

Backers of Alternative Energy Seek a Shift for Diesel-Hogging Rigs, But Subsidies Remain a Hurdle

By JEFFREY BALL

An 18-wheeler can burn as much fuel in a year as 40 cars. What if it burned domestic natural gas instead of imported oil?

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That is hardly as arresting a vision of America's energy future as electric cars, whose power could conceivably could come from the wind or the sun. But a growing chorus of fans, including President Obama, says natural gas might deliver more bang for the buck—and they want taxpayers to spend billions of dollars to subsidize the shift.

The typical semi-trailer truck guzzles 20,000 gallons of diesel annually and uses the same roads day after day. So switching trucks to natural gas from diesel, which comes from oil, could make a big dent in U.S. petroleum use. And it wouldn't require building nearly as many new fueling stations as switching America's roughly 240 million cars and light trucks to something other than oil.

Like all roads to a potential alternative-energy tomorrow, however, this one is strewn with potholes.

WSJ's Jeffrey Ball reports the White House and Congress support the expansion of natural gas usage, but plans to convert 18-wheel trucks from diesel could present significant challenges. (AP Photo/Marcio Jose Sanchez)

A world in which most 18-wheelers run on natural gas instead of diesel is "going to be pretty slow in coming," said Bill Graves, president of the American Trucking Association.

For years, environmentalists have lobbied for taxpayer subsidies for natural-gas cars and trucks, arguing the fuel burns cleaner than gasoline or diesel. They have had limited success—notably in smoggy Southern California—getting regulators to prod bus and trash-truck operators, owned or contracted largely by municipalities, to make the change. Often, buyers of these natural-gas trucks have received government subsidies that have helped defray the higher purchase price.

Exact figures for the number of natural-gas vehicles on the road are hard to come by. But James Harger, chief marketing officer of Clean Energy Fuels Corp., an installer of natural-gas fueling stations that is partly owned by billionaire investor T. Boone Pickens, estimates 15% of U.S. buses and trash trucks run on natural gas.

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Bloomberg News

T. Boone Pickens on subsidies for natural-gas truckers: The government should provide five years of subsidies, 'and then get the hell out of it. It flies by then, or it's a bad idea.'

Now, Mr. Obama, some 190 Republicans and Democrats in Congress, the natural-gas industry and major trucking firms are promoting a federal bill to broaden that transformation.

In part, their argument is about energy security: Recent discoveries of massive natural-gas troves from Texas to Pennsylvania mean the country is newly awash in the fuel.

It is also about money: The new supplies have sent U.S. natural-gas prices to historic lows, just as Mideast unrest and developing-world demand have sent diesel prices skyrocketing, to an average of about $4.12 a gallon. Where natural gas is available at U.S. pumps today as a motor fuel, it typically costs about two-thirds the price of diesel after adjusting prices for the different energy contents of the two fuels.

If America could affordably manufacture natural-gas trucks and build enough fueling stations to keep them on the road, the economy could shave billions of dollars a year in imported-fuel bills, backers of the technology say. But that is a big if.

Trucks configured to burn natural gas cost more than trucks that run on diesel. They need modified engines and bigger and stronger fuel tanks. How much more they cost differs wildly depending on the type of truck.

A trash truck that costs $200,000 outfitted for diesel costs only another $10,000—or 5% more— equipped for natural gas, said Kevin Walbridge, executive vice president of operations at trash-hauler Republic Services Inc. That price premium has fallen as trash-truck manufacturers have cranked out steadily larger volumes.

Today, only about 4% of Republic's 14,700 trucks nationwide run on natural gas. The company expects to increase purchases of natural-gas trucks, depending on whether the federal government hands out more tax breaks. If the pending federal bill of incentives doesn't pass, a Republic spokesman said, "we will buy a much smaller number of natural-gas vehicles."

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Long-haul trucks present a bigger challenge. In the U.S., they consume about 10 times as much diesel as trash trucks and buses combined. The biggest guzzlers are 18-wheelers, which average six miles per gallon. Some 225,000 were sold in the U.S. last year, but many analysts expect that number to soar to 400,000 this year, as the economy improves.

United Parcel Service Inc., which runs one of the country's biggest truck fleets, pays about $95,000 for an average long-haul "tractor"—the front part of the 18-wheeler, housing the engine and driver. It recently ordered 48 natural-gas versions at a cost of $195,000 apiece—about double the cost of a diesel model, said Mike Britt, UPS's director of engineering and maintenance.

Fewer than 1,000 natural-gas 18-wheeler tractors have been sold in the U.S., industry experts say. They are "just about being hand-built, much like a Rolls Royce," Mr. Britt said. Ramping up assembly lines to build them at volume, he thinks, could "lower the price dramatically."

UPS bought its natural-gas trucks only after getting $4 million in federal stimulus money to help defray the cost, Mr. Britt said. At current fuel prices, the trucks should easily pay for themselves in less than the 10 years UPS expects to drive them, he says. But UPS typically expects equipment to pay off within three years.

As a result, UPS won't buy more natural-gas trucks unless the government forks over additional subsidies, said Mr. Britt. The shipper supports the pending federal bill.

Under the bill, a company like UPS that spent an extra $100,000 to buy a natural-gas truck would get an $80,000 tax credit.

Federal officials haven't yet officially estimated the bill's cost. But Mr. Pickens, who has spent several years barnstorming the country and talking with federal legislators to drum up support of a subsidized shift to natural-gas trucks, puts the taxpayer price tag at about $5 billion over five years, for about 140,000 trucks and the necessary fueling stations.

Mr. Pickens and his wife own 41% of Clean Energy Fuels, the installer of natural-gas-vehicle fueling stations. Mr. Pickens says his motive is more patriotic than personal. The bill's potential cost to taxpayers is "peanuts," he said, a small price to pay for what he argues would be the increased U.S. energy security that would come from shifting trucks to a domestic fuel. The government should provide five years of subsidies, he says, "and then get the hell out of it. It flies by then, or it's a bad idea."

The chemical industry, which uses huge amounts of natural gas and thus want the price to stay low, is lobbying against the bill. It worries that shifting large numbers of trucks to natural gas would increase demand for the fuel enough to push up the price that chemical companies have to pay for it. Backers of natural-gas trucks "want the government to give them a leg up," says Owen Kean, of the American Chemistry Council, an industry group.

The experience of other countries suggests natural-gas vehicles sputter without long-running government aid.

Following the 1970s oil crisis, New Zealand tweaked taxes to make gasoline and diesel pricier than natural gas at the pump, said Brett Jarman, executive director of NGV Global, the natural-gas-vehicle industry's international trade group. By the mid-1980s, about 100,000, or 10%, of the country's cars ran on natural gas —at the time, the world's largest fleet, he said.

But a new government slashed oil taxes, and natural gas lost its price advantage. Today, only about 200 natural-gas vehicles are on New Zealand's roads, said Mr. Jarman.

If countries subsidize alternative fuels but then yank that largesse, he said, "you end up with a lot of wasted money."

Write to Jeffrey Ball at jeffrey.ball@wsj.com

Corrections & Amplifications
In 2008, the U.S. used 19 million barrels of petroleum per day. A graphic in a previous version of this article incorrectly labelled this figure in gallons