With its natural gas supplies more than adequate for the time being, government and industry in Pennsylvania are following a national trend by looking for ways to increase natural gas demand over the coming decade.

The Marcellus Shale Coalition (MSC) proposed a $200 million program last Tuesday that would expand natural gas vehicle (NGV) infrastructure across Pennsylvania, adding up to 5.4 Bcf of demand. While the industry group said many of its ideas could be accomplished by the private sector, Pennsylvania lawmakers boosted the effort on Wednesday by re-introducing a package of legislation to promote NGVs in the state.

In a Natural Gas Vehicles Roadmap, the MSC pitched the idea of a Pennsylvania Clean Transportation Corridor (PCTC), a network of fueling stations connecting major urban areas across the state that would make it easier for big fleet and individual drivers to make the switch from gasoline to natural gas.

The proposal calls for building up to 17 fueling stations and 850 NGVs at a cost of $208 million, paid for through various public-private partnership arrangements. (The report also includes a less aggressive development plan that cuts the buildout and cost of the project roughly in half.) That would build on the limited NGV infrastructure already in place in the state, including more than 20 fueling stations.

“The private sector is going to drive a tremendous amount of this and already has been,” MSC President Kathryn Klaber said during a teleconference last Tuesday announcing the program.

The MSC developed the report in partnership with member companies Chesapeake Energy Corp., EQT Corp., Range Resources Corp., three of the largest players in the basin, and UGI Utilities Inc.

While envisioning the PCTC as the foundation for a regional hub from Quebec to Chicago, Klaber said “it’s important that we put together the right road map for the Commonwealth and its infrastructure needs.”

The road map aims to harness a variety of factors unique to Pennsylvania: its location as the Keystone State connecting the Northeast and the Midwest, its large trucking industry that comes from the many warehouses and distribution centers in the state, and its position atop the prolific Marcellus Shale formation.

Marcellus Shale production is expanding rapidly in Pennsylvania. Companies in the state produced 256 Bcf from the Marcellus in the last six months of 2010, after producing 180 Bcf over the previous year, according to information from the state Department of Environmental Protection (see NGI, Feb. 28).

Looking to avoid a “chicken and egg” situation between NGVs and the fueling stations to serve them, the road map envisions using heavy-duty fleets for public works, airport operations and public transit to justify initial construction, and allowing public access to fueling stations to expand the system. While the road map lays out a five-year timeline, the MSC said the program could be implemented in as little as 18 months.

The corridor would connect Philadelphia, Pittsburgh, Harrisburg, Allentown and Scranton, and serve the major interstates in Pennsylvania, like I-76, I-80 and I-81, forming the foundation of a regional hub.

At full buildout, the MSC believes the PCTC would displace 9.2 million gallons of diesel fuel with about 1.4 Bcf of natural gas each year, saving fleet operators an estimated $9.2 million in annual fuel costs. The MSC also believes the program could create up to 1,350 jobs in Pennsylvania and improve air quality in a state with five urban areas ranked among the 25 most polluted in the country by the American Lung Association.

To help achieve the goal, the MSC is recommending policies such as incentive programs for the state and its municipalities to convert fleets and allowing single-passenger NGVs to use high-occupancy vehicle lanes, as well as revisions to existing policies, like aspects of the Clean Vehicles program that the MSC believes harm the economics of some NGVs, particularly those that run on compressed natural gas or more than one fuel.

Many of those policies are covered by Marcellus Works, a package of seven bills proposed by Pennsylvania House Republicans last Wednesday. Marcellus Works includes tax credits, grants and loans to help convert fleets to run on natural gas and to build new fueling stations across the state, as well as changes to existing regulations. The program is estimated to cost $50 million using “taxes already imposed on the industry.”

“This plan is truly a win-win for everyone,” Rep. Stan Saylor of York said. “This is an opportunity for Pennsylvania to take the lead on clean energy and it is an opportunity for Pennsylvania to encourage the development and growth of small businesses and the much-needed jobs they will bring.”

The Marcellus Works measures are:

House Republicans proposed similar legislation last year, during the final months of the administration of Gov. Ed Rendell, as a way to create economic benefits from natural gas by imposing a severance tax (see NGI, Sept. 27, 2010). Current Gov. Tom Corbett is a staunch opponent of a severance tax.

Support for NGVs appears to be peaking. Also last Wednesday, four members of the U.S. House of Representatives introduced legislation that, if enacted, will set the nation on course to rely on natural gas for some of the country’s transportation needs over the next seven years (see separate story).

Reps. John Sullivan (R-OK), Dan Boren (D-OK), John Larson (D-CT) and Kevin Brady (R-TX) officially submitted the New Alternative Transportation to Give Americans Solutions Act (NAT GAS Act) to Congress. The HR 1380 legislation has 76 co-sponsors and reportedly has the support of President Obama.

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