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With Incentives or Not, Execs See NGVs Gaining in Truck Fleets

May 21, 2012
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Natural gas offers a long-term, sustainable solution for fueling commercial trucking fleets -- with or without federal incentives -- Ryder Systems Inc. CEO Greg Swienton said last Thursday on the final day of the alternative clean transportation conference, otherwise known as the ACT Expo, in Long Beach, CA. He echoed what other alternative fuel stakeholder executives stressed at the three-day conference.

The infrastructure and vehicles are being developed to meet increasing demand, particularly in the heavy-duty trucking sector, but how fast that happens is unclear, Swienton told the 2,500 conference attendees. Natural gas vehicles (NGV) -- either compressed natural gas (CNG) or liquefied natural gas (LNG) -- are a good fit for many of Ryder's 14,000 customers who rent or lease trucks on a scale that runs from local mom-and-pop businesses to major national, long-haul fleets, he said.

Swienton said it is "lunacy" to continue to rely on mostly imported petroleum products when the United States has "vast and domestic" natural gas supplies. "We at Ryder really believe that natural gas is a long-term, sustainable solution for commercial transportation." Ryder helped raise the focus on NGVs when it ordered 202 heavy-duty NGVs for its national fleet truck and equipment rentals last year. "This is why we are taking a long-term view."

Regardless of the changes in gas prices, he thinks in the long run there is going to be "a meaningful differential" between natural gas prices and the cost of gasoline and diesel.

As for the needed fueling infrastructure, Swienton said he thinks it will "pick up" whether or not Congress passes legislation to create some sort of incentives for using natural gas more in the transportation sector. "I think we would all love if Congress could pass the NATGAS Act and get the infrastructure up, but I think political and economic realities are not going to let that happen. Nevertheless, over time, I think the infrastructure will be there because the economics will support it."

Ryder knows something about fleets and fueling with 200,000 vehicles, 14,000 customers and 800 maintenance shops, half of which supply diesel fuel to the trucks it rents and leases to customers. Ryder's annual diesel consumption amounts to 300 million gallons and it annually spends $1.3-1.5 billion for vehicles.

"The interest [in NGVs] among our customers now is really, really high, " Swienton said. Ryder's customers and potential customers can try NGVs without having to take on a lot of risk, said Swienton, noting they can rent or lease NGVs to "test the technology without individually making a really big bet."

The natural gas industry, from production fields to distribution utilities, is beginning to ramp up efforts to smooth the road to greater use of gas as a transportation fuel, according to Encana Corp. Vice President David Hill, who told NGI last week that the company was leading by example.

The Calgary-based producer, which has operations across the United States and Canada, had on display at the Expo its mobile, 5,000-gallon LNG transportation fueling station, six of which are in commercial operation in Canada, Louisiana and Texas (see NGI, April 11, 2011). One of the units is at a Peterbilt natural gas truck factory in Texas that the long-haul truck manufacturer uses to fuel its vehicles as they come off the production line, and others are deployed in the oil and natural gas fields to fuel service drilling fleets.

The Encana mobile unit is built with totally open architecture that other companies can pick up and develop, too. "We want more of these out there because it stimulates the market," said Hill.

"It's a way to have the natural gas fueling capability without building a permanent station which would be very expensive," he said. "These cost about a half-million dollars, compared to a big LNG station, which would cost between $1.5 million and $3 million for a permanent station. We have built a permanent station as well, but we like the mobile concept because it can move with the fleet. It's flexible. When work dries up in one place and they move the trucks, you just take this [trailer-mounted] unit with the trucks."

Separately, in an animated panel discussion on the conference's last day, experts confirmed that Wall Street is embracing natural gas in the transportation fueling sector. Panelists agreed that for the most part NGVs aren't a "science project" anymore, and the bulk of their research and development work has been completed.

WR Securities Managing Director Craig Decker said after almost two decades of handling major transactions in the trucking space it is clear to him that using CNG or LNG in transportation is now a "viable, proven technology." Decker said he has seen the alternative fuel space become bigger, led by the robust interest in natural gas for trucking fleets.

As the company that provided the bulk of the technology for the first ever [circa 1964] LNG liquefaction plant in Alaska, Shell LNG's James Burns, general manager, said his company has a lot of expertise globally to help expand the use of LNG in transportation.

Chart Industries CEO Samuel Thomas, who helms a cryogenics equipment supplier, said his company has always participated in LNG, particularly on the processing and liquefaction side. Equipment tied to the NGV market became a much bigger part of his company's business last year, comprising 25% of new business.

"We anticipate the natural gas side of our business doubling in size and becoming half of our total business during the next three to five years," Thomas said. "A large part of that [up to 80%] will come from LNG and natural gas-related transportation.

David Hames, general manager for marketing and strategy at Daimler Trucks North America, said with its current version of expanded models of CNG trucks for the first time the company's engineers designed a dedicated NGV from the very first design meetings. "The models coming onboard were always intended to be run on natural gas, so natural gas as a power train is designed in from the outset," Hames said.

Shell LNG's Burns said it was important that suppliers, infrastructure builders and truck manufacturers partner or at least participate in alliances so no matter what size the NGV market grows to, each key segment will be able to provide the resources needed. "We want to be in the position down the road where there are no concerns about where the infrastructure is going to be, no concerns about reliability, and also no concerns about the long-term value of the trucks and related equipment," he said.

"We have the fuel question pretty much handled now," Decker said. "How do we get past the 'chicken-egg' dilemma regarding infrastructure and trucks?"

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