Producing areas can lead the way in natural gas vehicle (NGV) use in their own backyard, building out from trucking corridors to include natural gas fueling for smaller vehicles.

Just as “the dairy farmer’s kids always drink milk,” the natural gas industry can be its own best customer, Stephen Yborra, director of Market Development for NGVAmerica, told the members of the Pennsylvania Independent Oil and Gas Association (PIOGA) last week.

“You’re getting that gas out of the ground, and you’ve got a great opportunity… to actually be users of the fuel,” Yborra said at the PIOGA winter meeting on Feb. 7. As the director of marketing development for a natural gas vehicle (NGV) trade group, Yborra argues that transportation is where the industry can have “the biggest impact” on the chronically low prices dogging the industry, including the Marcellus Shale. As of Friday, Marcellus gas in southwestern Pennsylvania and West Virginia traded for an average price of $2.61/Mcf, up 2 cents, according to NGI’s Shale Price Index.

Although touting both the environmental and economic benefits, Yborra said that efficiencies in diesel technology are forcing NGV promoters to make the case for savings. With projections that the oil-to-gas price ratio will remain around 20 to 1 for the foreseeable future, “conservatively we say you can save up to 30 to 50% if you switch to natural gas,” Yborra said. “Hell, you can probably actually save about 70%.”

Because gas is competing against mostly foreign oil for the transportation market, but is battling domestic coal and diesel products in the electricity sector, NGVs can make a case for energy security, in addition to environmental and economic benefits, he said.

“No one is going around fueling their vehicles with coal,” he said.

While the number of fueling stations is rising, with more than 200 set to be added this year, the biggest challenge is making them available to the public. “We need to figure out how to build that overall ubiquitousness of stations so we can build confidence among all the other small businesses that will never put in their own station,” he said. To make this happen, the NGV industry is focusing on fuel-hungry vehicles that travel a lot around a small area, such as trips to and from warehouses or on local routes. That includes freight trucks, buses, taxis, utility and municipal fleets and delivery trucks, a segment that could use between 57,000 to 73,000 gallons of gas equivalent a year.

As the Keystone State, connecting the northeast to the south and the Midwest, Pennsylvania is a “major part of the flow of commerce in the United States.” Building out fueling hubs around the routes of those large vehicles would create circumferences inside which smaller NGVs could refuel. “If you keep doing this at various markets along the interstates, eventually those circumferences of driving distance start touching each other. And now it becomes a corridor,” Yborra said. That corridor is something the Marcellus Shale industry is working toward in Pennsylvania (see Shale Daily, April 6, 2011) just as the Haynesville and Barnett shales industries are attempting to build out in Texas, Oklahoma and Arkansas, he said.

When the Marcellus Shale Coalition pitched its Pennsylvania Clean Transportation Corridor, it hoped to avoid a “chicken and egg” situation between NGVs and fueling stations by relying on heavy-duty fleets to justify infrastructure, but Yborra said recent regulatory changes allowing for retrofitting certain legacy diesel fleets to run on gas means “it’s not chicken or egg. It’s a chicken-egg omelet: you do it at the same time.”

To make that work, the industry must create economies of scale, even if it means holding hands with competitors, and to be the driving force to improve access to fueling stations. “We need to build the amount of utilization of current infrastructure, he said. Additionally, Yborra believes that any public money set aside for fueling stations should be conditioned on access by small fleets and the general public. “I believe there should be strings tied to those grants,” he said. “Don’t give them any grant money unless they say they’re going to put in an outside-the-fence dispenser with credit card payment capability.”

With Pennsylvania Gov. Tom Corbett signing off on an omnibus Marcellus bill Monday that enhances regulations and increases fees (see related story), industry advocates such as PIOGA plan to expand their focus from gas policies to gas markets.

“Usually we’ve been a reactive organization, dealing with specific things that are hitting us in Harrisburg and [Washington, DC], but we’ve got more things to look at now,” PIOGA President Lou D’Amico said at the winter meeting. “We have to do what we can to encourage the market for natural gas to develop…We’re going to be focusing on those markets, trying to find a place for that gas: burn it, use it, get our prices up.”

Several natural gas advocacy organizations met in Washington, DC, this week to urge the federal government to extend the proposed economic incentive program for electric vehicles to include NGVs and other alternative fuel vehicles (see Daily GPI, Feb. 14). At the meeting, Tom Hassenboehler, vice president of policy development and legislative affairs for America’s Natural Gas Alliance, said there is bipartisan support in Congress for making changes to support NGVs.

“We’ve got lots of allies in Congress, both on the Republican side and the Democratic side, who recognize the benefits of natural gas and want to help promote the use of it to increase our energy security,” Hassenboehler said.

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