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Natural gas drillers target US truck, bus market

Associated Press Modified: November 25, 2012 at 2:30 pm •  Published: November 25, 2012
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But energy companies see potential.

Chesapeake Energy Corp., the nation's No. 2 producer, has been especially aggressive about targeting transportation. The Oklahoma City-based driller invested $150 million in Clean Energy, a company backed by Texas investor T. Boone Pickens that's building a nationwide network of liquefied natural gas refueling stations for long-haul truckers. Chesapeake also teamed up with General Electric on "CNG In A Box," a compressed natural gas fueling system for retailers; announced a partnership with GE and Whirlpool to develop a $500 appliance that would allow consumers to refuel their natural gas-powered cars at home; and has been working with 3M to design less expensive tanks.

"It's simply a matter of time before the U.S. meaningfully shifts from transportation systems built around consuming high-priced oil to consuming low-priced domestic natural gas," Chesapeake CEO Aubrey McClendon wrote to investors this year.

States are also promoting natural gas as a transportation fuel. Nearly two dozen state governments have formed a consortium to add natural gas-powered vehicles to their fleets, an effort launched by the governors of Oklahoma and Colorado that attracted more than 100 bids from dealerships last month.

Separately, the Pennsylvania Department of Environmental Protection is dangling $20 million worth of incentives to goose the market for medium- and heavy-duty natural gas vehicles. The three-year program, which launches Dec. 1 and is funded by a state fee on drillers, aims at putting 600 to 700 new natural gas-powered trucks and buses on the road in its first year.

State officials also hope to use the grant program to spur a network of new filling stations. Pennsylvania has only 14 publicly available stations, and more places to fill up could help stoke consumer demand.

"The big prize here is to get consumers purchasing vehicles that run off natural gas," said Geoff Bristow of the Pennsylvania DEP.

Industry officials, though, acknowledge that's a long way off.

Conventional gasoline engines are becoming more efficient, and consumers might balk at spending more on a natural gas-powered car. Plus, the United States has less than 600 natural gas filling stations available to the public, compared with 160,000 gas stations.

The only factory-made, natural gas-powered passenger car available to U.S. consumers is the Honda Civic Natural Gas. While Honda expects sales to top 2,000 this year, that's a fraction of the number of gasoline-powered Civics it moves in a single month.

Analyst Mike Omotoso of research firm LMC Automotive sees natural gas as a niche transportation fuel.

"There is very little interest in natural gas for cars," Omotoso said. "People looking for alternatives are looking at hybrids and electric vehicles."

For now, the gas industry is concentrating on heavy trucks and buses, vehicles that ply a regular route and return to the same base to fill up.

But both Kolodziej and Norman Herrera, Chesapeake's director of market development, see a future where natural gas-powered cars and SUVs are commonplace and "you have a market like transit and trash, where all the pieces are in place and all the bottlenecks have been resolved," Herrera said.