Building America’s Natural Gas Highway

January 2014, Vol. 241 No. 1

Amy Myers Jaffe, Executive Director of Energy and Sustainability, UC Davis; GE ecomagination Advisory Board Member

In late November, Lowe’s Cos. Inc., the home improvement chain, announced it would join the growing list of major trucking fleets switching to natural gas instead of diesel fuel. Walmart, UPS and FedEx are already making the move to natural gas in some trucking routes, raising the prospect that America’s natural gas highway (ANGH) could gain sufficient momentum. Clean Energy has announced its commitment to ANGH, which it says will include 150 LNG fueling stations by next year.

So far, there are 126,000 natural gas vehicles (NGVs) in the United States – less than 1% of our total vehicle fleet. According to the alternative fuels data center of the U.S. Department of Energy, there are 81 LNG filling stations in operation – 42 public and 39 private. There are 1,276 compressed natural gas (CNG) fueling stations, of which 632 are public and 644 are private. Clean Energy is the largest natural gas fuel provider in North America with more than 330 CNG fueling stations, mostly public access, serving 660 fleets and 25,000 vehicles. The company averages 200 million gallons a year in sales of CNG.

Clean Energy projects that ANGH will be able to provide fueling stations for LNG at 200- to 300-mile increments. The emerging fleet of LNG-dedicated trucks has a range of 420 miles. A typical LNG fueling facility costs $1.5 million and takes as few as 20 trucks a day to break even on the upfront capital investment.

Right now, the existing gap between natural gas and petroleum prices makes LNG an attractive alternative to diesel for the long-haul trucking industry. Citibank estimates if LNG can be offered for $1.50 per gallon of diesel equivalent (gde) less than diesel, a trucking company can save $93,000 per truck over its 800,000-mile lifetime.

Fleet owners are cautious, despite potentially attractive fuel-cost savings, due in part to worries about possible future natural gas price volatility. For America’s natural gas highway to be a lasting success, many factors need to come together:

• Engine manufacturers must meet demand in a timely manner.

• Stations need to be constructed and stay open.

• Natural gas prices need to remain low compared to oil prices.

• Trucking fleets need to be willing to take the plunge to replace vehicle stocks with NGVs.

All of that needs to happen while producers commit to major plant construction or station owners to modular designed LNG on-site manufacturing.

Currently, three major LNG plants serve transportation-fuel markets: Clean Energy’s plant at Boron, CA, serving the ports of Los Angeles and Long Beach; the LNG plant at Topock, AZ, which serves markets in California and Arizona; and Pickens Clean Energy plant at Willis, TX, which serves Dallas, El Paso, Houston and Phoenix.

Three micro-LNG facilities are under construction – two by GE and one by ConocoPhillips. In other locations, such as Oklahoma, the government has offered subsidies for station construction as well as volume commitments of government fleets to get the industry off the ground. Integrated hubs involving marine, rail and trucking may help LNG reach a tipping point of critical mass for supply-and-demand economics.

Citibank estimates that natural gas substitutions could reach 9 MMbbl/d of diesel oil by the early 2020s and 3 MMbbl/d of marine bunker fuel oil demand. Such a shift would have economic, national security and environmental benefits. Not long ago, Reuters confirmed reports that a relatively unknown Shia militia leader from southern Iraq had undertaken a mortar attack on Saudi Arabia’s eastern province, where the vast majority of Saudi oil is produced. Libyan oil exports have also been disrupted by internal political conflicts.

The conversion of rail and heavy trucking to natural gas offers interesting opportunities for the United States. Regions with a heavy use of diesel and bunker fuel (marine ECAS, ports, industrial sites, and roads with dense heavy-truck traffic or other areas where diesel is heavily used) could experience substantial air-quality improvements by switching to LNG fuel. A large-scale shift by the trucking industry to natural gas could also lay the groundwork for the inclusion of renewable bio-sourced natural gas into the transportation system through new and existing natural gas infrastructure – a trend that would support efforts by key states such as California, which is trying to promote low carbon fuels.

Preliminary research by University of California, Davis’ automotive engine analysis team indicates that a shift away from traditional diesel engines to LNG will have environmental benefits, including a significant reduction in SOx emissions (of up to 50% on an energy content, adjusted basis compared to diesel fuel) as well as a sizable reduction in fine particulate matter (About a 25% benefit). For CO2 emissions, work is ongoing, but the state of California regulations recognize a 20% benefit in exhaust CO2 emissions for natural gas trucking, compared to diesel fuel vehicle exhaust, consistent with preliminary academic studies.

Environmental regulation in California has provided momentum for alternative fuel vehicles like LNG trucks. LNG fueling stations for heavy trucks exist in over a dozen locations around the state and continue to expand. California represents 71% of U.S. LNG truck refueling facilities, and about 200,000 gallons a day of LNG were trucked into the state in the mid-2000s. Volumes have been growing steadily in recent years as port air quality restrictions come into place and companies begin in earnest to tap into the state’s carbon credit markets. Over time, just as California paved the way for a national Clean Air Act standard, it may also set the pace for alternative fuel vehicles, including in the trucking business.

The author is also a GE ecomagination Advisory Board Member.

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