Natural-Gas Vehicles On The Road To Acceptance

With nearly 12 million vehicles around the world running on compressed natural gas these days, but only 120,000 of them in the U.S., opportunity looms in a country that is weary of expensive crude oil from increasingly unfriendly nations and home to a vast supply of natural gas.

“Without question, natural gas will allow our country to transition our transportation system away from expensive and carbon-heavy gasoline and diesel towards carbon-light, affordable American produced natural gas,” says Aubrey K. McClendon, CEO of Chesapeake Energy.

2011 Honda Civic NVG
Source: Honda
2011 Honda Civic NVG

McClendon’s company, the second-largest natural gas producer in the country, is trumpeting the discovery in the past three years of what most energy experts call a 120-year supply of inexpensive domestic natural gas that can be brought to the surface with revolutionary new drilling technologies. Thirty-two of the 50 US states now produce their own natural gas.

Chesapeake and other producers also are actively engaged in the buildout of filling stations that serve CNG-powered vehicles. The current paucity of them—less than 1,000 nationwide versus 200,000 gasoline stations—is viewed by most experts as the chief impediment to more widespread use.

“Producers like Encana, Chesapeake, Apache and Pioneer are aggressively seeding the market,” says Rich Kolodziej, president of Natural Gas Vehicles America, a Washington, D.C.-based trade association. “They have the self-interest to get out and cause stations to be built, by underwriting some of the cost.

“It all comes down to taking risk off the back of the station operator,” he adds. “Service station operators serve customers, they don’t create them. For natural gas to gain acceptance as an everyday transportation fuel, someone has to beat the bushes to create customers.”

The tax compromise signed by President Obama in December contained several CNG provisions, including a tax credit of up to $30,000 for a filling station operator to add a pump.

Electric cars face the same obstacle, the so-called “range anxiety” that causes consumers to think they’ll end up stranded somewhere without the ability to re-fuel. Diesel-powered autos faced and overcame a similar obstacle.

Natutal gas has its, well, natural, selling points. It is both a clean and efficient fuel, which many say makes it a viable alternative, given that transportation accounts for a fifth of US greenhouse gas emissions.

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CNG has 30 percent less carbon dioxide and 97 percent less carbon monoxide than gasoline with almost no particulate matter. It’s roughly half the cost of gasoline or diesel. The Honda —the only gas-powered car consumers can buy in a U.S. dealer’s showroom—gets the equivalent of 32 miles per gallon.

"Consumer Reports" weighed in on CNG as a fuel during its review of the Civic GX. “Compared with gasoline, it has much cleaner emissions while providing similar fuel economy, performance, and driveability,” the report said. “If the natural-gas infrastructure in your area is well developed, and if you plan to use the car mostly for routine commuting, then the GX makes sense economically and environmentally.”

Despite the lack of both filling stations and widespread consumer acceptance, the CNG industry is growing rapidly.

In 2010, according to NGV America, 360 million “equivalent gallons” of compressed natural gas were sold for vehicle travel, the second consevcutove 25-percent annual increase.

Growth in the number of vehicles, however, has been less dynamic. That’s because the industry currently targets high-use urban fleet vehicles: Light, medium, heavy-duty trucks that deliver goods, taxis, courier services, shuttles.

Detroit Auto Show 2011 - A CNBC Special Report
Detroit Auto Show 2011 - A CNBC Special Report

Natural gas is very attractive to companies that use heavy mileage trucks, averaging 30,000 miles a year, says Norm Herrera, manager of corporate development for Oklahoma City-based Chespeake Energy. “Whenever you can compete on the price of fuel, it becomes attractive.”

Chesapeake, like Verizon, AT&T and many other corporations with large vehicle fleets, is in the midst of converting 3,300 trucks to CNG over the next four years.

As part of its conversion strategy, Chesapeake approaches private retailers and guarantees a minimum monthly sales volume of CNG if they put in a pump and open it to public refueling, while refilling their fleet vehicles there.

Most of the world’s natural gas vehicles are bi-fuel; the engine is a standard gasoline internal- combustion one that runs on either gasoline or CNG from a separate cylinder in the trunk. The driver simply flips a switch on the dashboard.

Fiat, Puegot, Volkswagen,Toyota and others sell bifuel cars all over the world, just not in the United States.

“A bifuel vehicle with the ability to switch from natural gas to gasoline is our preferred alternative,” says Chesapeake’s Herrera. “We want our drivers to be able to fill up with natural gas 80 percent of the time. We think that sweet spot takes away range anxiety.”

Chesapeake Energy's promotional campaign
Source: Chesapeake Energy
Chesapeake Energy's promotional campaign

General Motors is rolling out two CNG-powered fleet vans this year. Mike McGarry, the company's marketing manager for alternative fuels, says the automaker testing to see if it makes "practical economic sense" to convert passenger cars to natural gas. (GM, like Honda, is more focused on electric vehicles.)

Chrysler may be willing to take a bigger step.

During a speech in Detroit last summer, Sergio Marchionne, now CEO of Chrysler and its minority investor Fiat, suggested that natural-gas engines would provide a good short-term alternative while automakers perfected electric cars, as well as lessen US depedence on foreign oil. (Fiat has an 80 percent market share of CNG-powered cars in the European Union.)

Even with high-profile boosters such as Marchionne and Boone Pickens, broader support and adoption will require help from the government, as is the case with most new technologies, especially alternative fuels.

“Without a shared vision in which government assists industry with customer incentives and the development of infrastructure, the potential for [natural gas] vehicles in the U.S. will continue to be limited,” Marchionne said.

“If the federal government did ten percent of what they’re doing right now for electric vehicles, in terms of resources and policy positions and incentives, for natural gas vehicles, we’d see significant growth," adds NPV America’s Koloziej.