Questar Corp. subsidiary Questar Transportation Services Co. (QTS) and Applied LNG Technologies LLC (ALT) last week signed a memorandum of understanding (MOU) to jointly look for new liquefied natural gas (LNG) market opportunities in the Rockies.

QTS, a natural gas midstream field services operator, and ALT, a subsidiary of Applied Natural Gas Fuels Inc., said they would combine their expertise to expand the market for Rockies gas.

“The MOU sets the stage for ALT and QTS to jointly work with Rockies gas producers to develop LNG projects to serve large fleet owners and industrial users with a domestically produced, more environmentally friendly fuel that costs less than gasoline or diesel fuels,” said Questar Corp. Executive Vice President R. Allan Bradley. “We hope to build on the leading role our affiliate, Questar Gas, has developed expanding CNG refueling capability in Utah,” where Questar is headquartered.

QTS and ALT intend to “accelerate market expansion of LNG products and services in the Rockies, primarily in the transportation and manufacturing sectors,” according to the MOU. The business framework ostensibly would increase net-to-the-well prices for Rockies producers supplying gas to this new market.

Utah is considered one of the most advanced states in the use of natural gas vehicles (NGV); a state law allows Utah regulators to authorize a gas rate for NGVs that is below the actual cost of service, creating a subsidy by spreading the costs to other gas customers (see NGI, March 30, 2009).

Questar last year was operating 19 CNG refueling stations in the state; there are close to 30 CNG refueling stations in Utah now. In the Salt Lake City area, an estimated 10,000 vehicles now run on CNG.

Questar Gas now provides retail gas distribution service to almost 900,000 customers in Utah, southwestern Wyoming and a small portion of southeastern Idaho. Historically, about half of the natural gas sold to Questar Gas retail customers comes from Questar-owned supplies.

The agreement “establishes a promising collaboration between two long-time natural gas providers,” said ALT CEO Cem Hacioglu. “It will help us meet the growing demand from our nation’s large trucking fleets, industrial users of propane and oil, and intermodal transportation and rail companies for proven alternatives to traditional fuels that are also less expensive and produce fewer harmful emissions.”

ALT owns a production facility in Topock, AZ, that currently produces more than 2 million gallons/month of vehicle-grade LNG. Its customer base includes municipal and transit fleets, various refuse companies, major ports and other commercial trucking fleets.

“These projects are expected to provide large fleet owners and industrial customers with domestically produced, eco friendly fuel at a much lesser cost than that of gasoline or diesel,” said Zacks Equity Research. “We remain optimistic about this promising collaboration that brings together two eminent natural gas providers. The deal will be beneficial in satisfying the growing demand of gas from various American intermodal transportation and rail companies and industrial consumers of propane and oil.”

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