Bipartisan bills to incentivize more natural gas use in US transportation have languished over the last three years in Congress, but low natural gas prices are now persuading trucking fleet owners they don’t need to wait for tax breaks for fuel diversification to make bottom-line sense.
Analysts and lobbyists watching Congress’ “supercommittee” are pessimistic about renewal of expiring subsidies, like the excise tax credit for suppliers of compressed or liquefied natural gas (CNG/LNG) and the credit for installing fueling infrastructure for CNG or LNG. And most say proposed new subsidies, like the NATGAS (New Alternative Transportation to Give Americans Solutions) Act, will never see the light of day in this Congress.
But the continuing low price of natural gas, and prospects that the giant US shale discoveries will keep cheap gas coming, are persuading truck fleet owners to invest in fuel-switching despite federal inaction and higher up-front costs.
T. Boone Pickens, who has been working for three years with Congressional leaders to promote domestic substitutes for imported oil, told Breaking Energy, “large fleet operations are starting to move toward natural gas because the fuel is so much cheaper than imported diesel.” Read a full Q&A with Pickens.
The costs of transition are not small. Big rigs can run $45,000 to $75,000 more expensive for LNG than diesel.
Pickens argues that it still makes sense for Congress to pass the NATGAS Act, which he worked on with the Senate and House leaders, and which has 183 cosponsors from both parties. The issue for Congress, he said, is speed in reducing oil imports to run diesel trucks. The transition will happen, he said, but will it happen in five years, or 20?
“It’s insane to spend more than $1 billion a day on foreign oil” as we do now, Pickens said, terming the $5 billion for tax credits over five years in the NATGAS Act “peanuts” in comparison.
NATGAS tax credits–for converting existing fleets, buying more expensive new natural gas-fueled trucks, and installing specialized fuel pumps–would “accelerate dramatically” the ongoing shift, agreed J. Alexander, president and COO of Mansfield Oil Company. But his Gainesville, GA-based company, which last decade added biofuels to its traditional petroleum fuels line-up, is already adding natural gas fuels to meet customer demand.
Its All In The Numbers
Alexander said several large industrial and municipal customers started talking more than a year ago about transitioning parts of their fleets to natural gas–everything from trash trucks and school buses to long-haul rigs. With natural gas running $1.50 to $2.75 equivalent gallon cheaper than diesel, even before tax rebates, he said the shift is being driven by economics.
Customers also like the idea of cleaner burning engines that put out less greenhouse gas, Alexander said, and they’re finding an unanticipated bonus: that cleaner burn means natural gas engines need less maintenance. He said some customers have found that, at the 300,000 mile point where diesel engines usually need major overhauls, natural gas engines are in a lot better condition.
Nonetheless, the costs of transition are not small. Big rigs can run $45,000 to $75,000 more expensive for LNG than diesel, according to the American Trucking Associations. Fleet refueling stations need compressors to take pipeline gas and pressurize it for pumps, Alexander noted, and all that takes energy to run.
But he said his customers have found the investment pays off, and the move to natural gas “is happening at the grass-roots level.” Converting fleets to plug-in electric battery powered vehicles has also become a plausible alternative. Read more: Electrifying Transportation.
Lack of on-road fueling stations has long been an issue for expansion of natural gas vehicles, but analysts say new infrastructure is already being added across the country, especially on truck-heavy interstate routes. Pickens sits on the board of Clean Energy Fuels Corp., which installs LNG fueling stations at truck stops. Mansfield earlier this year acquired California-based GESI, which installs fueling stations for the CNG used by local vehicle fleets like delivery trucks and school buses.
Though the NATGAS Act has incentives to help with building fueling infrastructure, Pickens said “government doesn’t need to play a role” there. Just as private investors built gasoline stations as Henry Ford’s cars became more popular, he said, the private sector will “take the lead” and build to meet demand.