Government Sees Opportunities With Natural Gas Trucks Despite Resistance

A growing number of supporters for natural-gas-fueled transport vehicles, including President Obama, want to see the shift from diesel to natural gas occur, and have expressed the idea it might require taxpayer subsidies to achieve it.

Switching trucks to natural gas from diesel, which comes from oil, might make a major difference in U.S. petroleum use, as an ordinary semi-trailer truck is estimated to burn 20,000 gallons of diesel annually.

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 local governments to prod operators of buses and trash trucks to make the change. Often, buyers of these natural-gas trucks have received government subsidies that have helped defray the higher purchase price.

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 thirty percent of U.S. buses, and fewer than three percent of U.S. trash trucks, run on natural gas.

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

A major selling point on the natural gas front stems from recent discoveries of massive natural-gas caches in-country. With such an abundant availability, the concept of utilizing it instead of the long-held reliance on foreign oil appeals to those who see such alliances as a threat to national security.

The new supplies also 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 between about one-third and two-thirds the price of diesel, after adjusting prices for the different energy contents of the two fuels.

A stumbling block to this development is the prohibitive cost of trucks that run on compressed natural gas (CNG) and liquefied natural gas (LNG), as both are relatively new technologies. A garbage truck that costs $200,000 outfitted for diesel costs another $10,000—or 5 percent more—when equipped for natural gas.

In the U.S., long-haul trucks 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.

United Parcel Service Inc. (UPS), 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 forty-eight natural-gas versions at a cost of $195,000 apiece—about double the cost of a diesel model, according to UPS.

UPS bought its natural-gas trucks only after getting $4 million in federal stimulus money to help defray the cost, but doesn't plan to buy more natural-gas trucks unless the government provides additional subsidies. 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 family own 41percent of Clean Energy Fuels, the installer of natural-gas-vehicle fueling stations.

The chemical industry, which uses huge amounts of natural gas and thus wants the price to stay low, is lobbying against the bill. 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 ten percent, of the country's cars ran on natural gas—at the time, the world's largest fleet. 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.

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