California Gas Rush

Prop 10, a November ballot initiative in California, will put $3 billion toward clean alternative-fuel vehicles, including those run on natural gas. If the measure passes, and Clean Energy Fuels CEO Andrew Littlefair said it should, that will be a boon to his company.

Clean Energy Fuels provides liquefied and compressed natural gas through its service stations, mainly for medium- and heavy-duty trucks. Prop 10 will make those vehicles more attracted to businesses, and possibly make some new customers out of them for Clean Energy. Littlefair said he could see a ripple effect work its way east as a result.

But on the retail side, there’s still plenty of room for growth for this company. General Motors, Ford and Chrysler all make natural-gas-fueled vehicles for markets in South America and Europe – GM as many as 19 makes and models, Littlefair said – but none in the U.S.

“It’s frustrating a little bit for us,” the CEO said, but he’s confident the trend will work its way to the States.

The question then, of course, is how long can Clean Energy take losses before that shift here at home takes place?

Littlefair said his company is “spending money to be in the right place at the right time” in order to build more service stations and LNG plants. He admitted this kind of development can be a drag on earnings, but “this is a very profitable business once you get into the bigger volume.”

And there will most likely come a time when CLNE teams up with other companies like Valero to get its product to the retail market rather than building stations of its own.

If “the trucking guys get it,” Littlefair said, and that’s an industry that uses 2 billion gallons of fuel at year, then eventually the consumer segment will catch on, too.

So how does nat gas compare with prices at the pump? For heavy-duty vehicles the price of gas or diesel is between $4 and $4.40. The natural-gas equivalent truck would only pay $2.25 to $2.50. For retail customers, the price in California for gas in $3.89. Natural gas would cost a driver only $2.60 to $2.70.

Presidential hopeful Barack Obama mentioned natural gas in his acceptance speech at the Democratic National Convention last Thursday, and Illinois Representative Rahm Emmanuel has introduced legislation that would provide incentives for natural gas. So Washington, while slow, is making a move toward realizing the potential this natural resource has.

“This one’s a winner.” Cramer said. “If you believe like I do that this is the fuel of the future, CLNE’s one of the best ways to play it, especially when natural gas comes down in price.”

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