The concept of a national highway for natural gas-fueled long-haul trucks received some roadside assistance Thursday when Shell Oil Co. and major truck stop operator TravelCenters of America LLC (TA) announced a memorandum of understanding (MOU) for Shell to provide liquefied natural gas (LNG) to the fueling station operator for sale to heavy-duty truck operators.
Pending final agreements, the companies plan to construct more than 200 LNG fueling lanes at about 100 TA sites and Petro Stopping Centers along major U.S. interstate highways throughout the nation. With final agreements, the first of the LNG lanes are expected to be operational next year.
A unit of Royal Dutch Shell plc, Shell Oil said the agreement represents the next phase in its plan to provide trucking fleet customers in North America with "robust fueling infrastructure." TA is the largest full-service truck stop chain in the United States. Last year Shell said it would sell LNG to its heavy-duty fleet customers at Flying J truck stops in Alberta, Canada beginning this year. The first LNG retail plaza in Calgary is expected to open later this year.
If natural gas is going to take advantage of its low price and other advantages it has over oil in the transportation sector, the playing field for alternative fuel transportation needs to be leveled, and a heavy dose of national legislative and regulatory policymaking can help get that done, according to Christopher Knittel, an energy economics professor at Massachusetts Institute of Technology's (MIT).
"While policy has promoted ethanol and electric vehicles (EV) as the future substitute for petroleum-based vehicles, methanol compressed natural gas (CNG) vehicles offer similar, if not greater, benefits at a lower cost," Knittel said in a preview of a paper he wrote for the upcoming national energy forum, the Hamilton Project at the Brookings Institute at Stanford University. The examination of U.S. energy policy was spurred in large part by what the conference backers called "the unprecedented increases in North American supplies of gas and petroleum."
Knittel said his paper comes at a time when natural gas and oil prices in North America are at an "historic disconnect" -- six-to-one on a per-energy-unit basis -- despite recent drops in oil prices. For the U.S. economy to take advantage of this situation, NGVs need to make significant inroads into the transportation sector, he said, outlining three principal ways this can be done: the light- and medium-duty vehicle sector could switch to CNG; the heavy-duty sector could rely on LNG; and methanol made from natural gas could also be used in the light-duty vehicles.
Kevin McCrackin, vice president for utility markets at AGL Resources' seven-utility group, told NGI that the shale-revitalized North American natural gas industry is coming together with the automobile/transportation industries in an effort to forge a robust natural gas vehicle (NGV) sector. While the market has never been stronger in his years of experience, McCrackin said the NGV market needs to respond to this stepped-up interest by providing "more efficient conversion costs, more vehicles and additional fueling infrastructure."
He said advances in home refueling devices eventually will make them more economic and they carry the potential to be "game-changers." AGL is conducting a pilot program providing 500 home fueling devices on a $60/month lease basis to customers with NGVs. "To get the light-duty NGV market going, there has to be something to make it easier for the homeowner to fuel their vehicle to reduce range anxiety," he said. "There is a significant research and development effort to develop this home fueling device at a lower cost price point [under $2,000, compared to current costs above $6,000]."
What Knittel calls the private benefits -- costs of vehicles and fuel -- are favorable for CNG but not enough to allow it to compete with other alternatives, such as EVs and hybrids, according to the MIT economist's analysis. But many public benefits, or externalities, such as lower greenhouses gas emissions, dependence on foreign oil from unstable parts of the world, and lowering local pollution need to recognized in national legislative and regulatory policies.
"The private benefits from shifting from gasoline by themselves are not enough for public policy to intervene," Knittel said. "We typically think that if the private benefits are the only thing that exists, then consumers and firms will get it more or less right." He thinks CNG and LNG as transportation fuels have some distinct public advantages. "NGV fuels have significantly lower unpriced social costs relative to their petroleum-based counterparts," said Knittel, noting that these are costs borne by society, but not by the consumers and players in the market. "That creates a disconnect, and even though society wants NGVs, they may not take off. In addition, petroleum-based vehicles have a huge advantage in have a huge fueling infrastructure."
Knittel has seven policy recommendations -- three regarding fueling and four regarding NGVs themselves -- to "level the playing field" for natural gas. They are heavily reliant on Congress and the Federal Energy Regulatory Commission spurring the national network of private-sector utilities to get further into the NGV sector. Infrastructure recommendations focus on home fueling devices, utilities opening up all of their fueling stations to the general public and finally forming an industry-wide coalition to look at coordinating LNG fueling infrastructure. Vehicle recommendations call for the use of methanol, national mandates for the numbers of NGVs that need to be able to burn gasoline, ethanol and methanol; subsidies for NGVs that recognize their external advantages; improved tax subsidies; and streamlining the NGV conversion technology.
McCrackin points out that the industry has increased its transportation fuel collaboration as evidenced by the creation in 2011 of the "Drive Natural Gas Initiative," which includes 28 utility members in the American Gas Association (AGA) and 30 production and service companies in the American Natural Gas Alliance (ANGA). Representatives of major companies from AGA and ANGA met last spring with the CEO of Chrysler Corp. to share ideas on how to expand the NGV market.
He's optimistic about the current "significant number" of certified NGV conversion suppliers, and a "big move within the last 24 months" by original equipment manufacturers (OEM) who have stepped up to create "more and more" NGVs. "There is a lot of activity now on the OEM front to begin to get into this space, and what they are looking for [from the gas industry] to support them is infrastructure.
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