Lots of NatGas for Cars, Just Nowhere to Pump It

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There's a groundswell of excitement over natural gas, and the possibility that the cheaper and cleaner fuel may eventually overtake gasoline as the mother's milk of fossil fuel-powered vehicles.

There's only one small problem: Where would a natgas-powered car fill up?

The would-be natgas transportation revolution is stymied by the dearth of fueling stations available. According to the U.S. Department of Energy, there are only 32 liquid natural gas (LNG) fueling stations in the country, and 585 that provide compressed natgas (CNG). Those figures pale in comparison to the approximately 121,000 traditional gas stations that dot the U.S. landscape.

Major automakers have sold an increasing number of natgas cars – yet the sum is negligible when compared with their massive car, truck and SUV sales. Ford sold a record 11,600 natural gas vehicles last year, while General Motors, Chrysler and Honda have added to their natgas-powered compliment.

(Read more: Start Your Engines: NatGas Revs for Transportation)

"Natural gas vehicle sales are in the tens of thousands. It's going to take a long time to build to a critical mass," said Michael Peterson, a managing director of energy & metals research at investment bank MLV & Co.

"It would be much quicker if we had some policy changes from Washington," he said, adding that clarity on other alternative fuel sources could help spark a sense of urgency. The Capitol "is the one place where we could have material and immediate change in the demand profile for natural gas."

This week, the U.S. Energy Information Administration released estimates showing that US shale production is going nothing short of gangbusters, leading to an abundance of natural gas. Meanwhile, Citigroup enthused recently that natural gas – a key exponent of the shale boom – is on the cusp of revolutionizing transportation.

Small Steps

Elements of the transportation sector are starting to warm to natgas vehicles – in what could be a sign of things to come.

In Pennsylvania – home to the massive Marcellus Formation that accounts for more than 7 billion cubic feet of gas per day – the state has invested $10 million in grants to incentivize projects "which will convert or purchase natural gas vehicles weighing less than 14,000 pounds, as well as convert or purchase" other environmentally-friendly vehicles.

"The idea there is to bridge this gap to make natural gas fueling stations available to the public," said Michael Krancer, a lawyer who heads Blank Rome's energy practice and the state's former environmental protection chief.

Calling it a "chicken and egg situation" where the public won't flock to natgas unless they have ways to power their vehicles, Krancer said that fueling stations, along with government incentives that factor in natgas-powered vehicles into fuel efficiency standards, would be key to "unlocking" the natgas market to everyday consumers.

"It is all unfolding in front of our eyes right now. It is happening and it might be perceived as being slow, but it is happening," Krancer said.

Andrew Littlefair, president and CEO of Clean Energy Fuels, a network of natural gas stations that cater specifically to truck fleets, said the passenger applications of natural gas are limited.

"You really can't think about the 118,000 gas stations servicing the gas market, because we don't have makes and models (of natgas) cars," Littlefair said. "Its really a fleet business."

Yet given the growing adoption of natgas vehicles in mass transit and trash hauling, the day could arrive when natural gas stations rival the ubiquity of regular gasoline outposts. According to Littlefair, about 30 percent of the transit buses nationwide are now powered by natural gas, while 65 percent of new trash haulers — which consumes about 2 billion gallons of gas annually — run on natural gas.