A subsidiary of natural gas giant Encana Corp. last week clinched a deal to be the sole fuel supplier to a California-based water company that will use trucks powered with liquefied natural gas (LNG) to service Haynesville Shale producers.

Encana’s announcement coincided with a flurry of recent news by some of the largest natural gas producers in the country, some of which are finding a market for the abundant shale gas resources they have unearthed.

Encana Natural Gas Inc.’s new mobile LNG fueling stations would be used to power a heavy-duty natural gas vehicle (NGV) truck fleet owned by Heckmann Water Resources (HWR), a Heckmann Corp. subsidiary. With the transaction Heckmann would become the largest LNG fleet operator in North America, said Encana.

The Calgary-based producer’s Eric Marsh, senior vice president of the USA Division, said the initiative would be a “major step” to encourage companies that service the energy industry to convert vehicles into NGVs that could run on LNG or compressed natural gas (CNG).

“Due to sweeping technological breakthroughs, North American natural gas provides an abundant, affordable fuel alternative at a cost that is 20-40% lower than gasoline or diesel in many regions,” Marsh said. “As part of the emerging transportation switch to natural gas, we are converting a large number of the more than 1,300 trucks and passenger vehicles in our own fleet to run on CNG.”

Under the agreement with HWR, Encana initially would dispense LNG to the truck fleet using mobile fueling stations, which consist of an insulated LNG tank and dispensing equipment built on a trailer that could be parked at operating locations across the Haynesville Shale.

Encana said it would build its first “permanent and public” LNG fueling station in the Shreveport, LA, area later this year. Also this year Encana plans to open four additional CNG stations, one each in Wyoming and Colorado and two in Western Canada. Last November Encana opened its first CNG fueling station in Red River Parish, LA.

Heckmann has ordered 200 LNG trucks for an undisclosed price from Peterbilt Motors Corp. of Denton, TX, which are powered by Westport HD Systems from Westport Innovations Inc. of Vancouver, BC. Although the purchase price initially is higher than that of diesel trucks, “the significantly reduced life-cycle operating cost of NGVs typically delivers payback in less than two years in field applications,” Heckmann officials said. “Additionally, because of cleaner combustion the average operating life of NGVs is considerably longer.”

CEO Richard J. Heckmann said his company was created to buy and build companies in the water sector. Last year it partnered with midstream operator Energy Transfer Partners LP to treat produced water in the Marcellus and Haynesville shales (see NGI, Feb. 15, 2010). The company also last year acquired Complete Vacuum and Rental Inc. to expand its shale water services (see Shale Daily, Nov. 11, 2010).

There are “abundant natural gas resources here in our own country, produced by our own citizens,” said the CEO. “Programs like the one we have established with Encana are critical in bringing attention to the phenomenal opportunity available in the U.S. to rid our nation of the foreign oil tax. With Encana, we will do our part by converting our fleet to NGVs, and we encourage all companies to identify solutions that will eliminate our country’s dependence on oil imported from the Middle East.”

When LNG is deployed in upstream natural gas operations, he said “critical infrastructure is created and additional market demand for natural gas is stimulated in fleet transportation, including light-duty commercial fleets and other heavy-duty off-road operations, as well as natural gas drilling rigs, pressure pumping services and freight transportation. Beyond the natural gas sector, momentum also builds for increased natural gas use in other sectors, such as mining and construction, and the cumulative benefits of expanded natural gas use result in multiple economic and environmental benefits for society.”

“This is the first LNG truck order by a natural gas industry service provider,” said Westport Innovations CEO David Demers. “HWR and Encana are leading the way to leverage the clean, abundant and domestically available natural gas. The fuel is inexpensive relative to diesel and its availability for this application makes an economic win-win for both HWR and Encana, as well as the significant environmental benefits including up to 30% lower greenhouse gas emissions.”

The Westport HD system, which is to be used in the fleet trucks, consists of a 15-liter engine that incorporates proprietary fuel injectors, LNG fuel tanks with integrated cryogenic fuel pumps and associated electronic components to facilitate robust performance and reliable operation. According to Westport, the engine is certified and compliant with 2010 U.S. Environmental Protection Agency and California Air Resources Board emission standards in North America.

Apache Corp., which wants to spur demand for North America’s ample gas resources, said early this month it would invest in Houston’s NGV infrastructure (see NGI, April 4). And Chesapeake Energy Corp. said Tuesday it was on track to convert its entire corporate fleet of 4,200 vehicles to CNG by 2014.

Phase One of Chesapeake’s initiative, which involved converting the vehicle fleet in Oklahoma, Chesapeake’s home state, was completed in late March. The NGV fleet now numbers 800 and is to be used by field operations teams that oversee drilling programs in the Anadarko Basin of western Oklahoma.

“As President Obama stated…, our country can no longer afford to lurch from energy crisis to energy crisis so we must take aggressive actions immediately to begin reducing OPEC oil imports,” said CEO Aubrey McClendon. “With fuel prices expected to exceed $4.00/gal nationwide as unrest continues in the Middle East, if ever it was time for American-produced natural gas to begin replacing expensive OPEC oil, it is now.”

All of Chesapeake’s top 15 senior executives now drive NGVs, McClendon noted.

To prepare for the fleet conversion in Oklahoma Chesapeake worked with several fuel retailers to add NGV fueling stations to existing public facilities on major streets and highways. Last year the company and its retail partners opened 14 public CNG stations throughout the state, which brought the available public CNG stations to 42. The company expects to have “hundreds more stations” open across the country in the next few years to support the transition to CNG by large fleet operators.

Phase Two of the NGV plan is to convert fleets that serve Chesapeake’s Barnett and Haynesville shale operations. The company would replicate the Oklahoma model by partnering with local fuel retailers in these areas to build public CNG fueling stations. Phases Three and Four of the initiative call for converting company fleets in its Marcellus Shale operations in Pennsylvania and West Virginia, as well as oil and gas operations in Colorado, Wyoming and South Texas.

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