Driving Economic Growth: Natural Gas Vehicles
By Randy Coleman
The United States spent almost $451 billion in 2011 on foreign oil—$1,468.27 for every American man, woman and child. Almost all of that foreign oil is consumed through vehicles on highways.
Natural gas vehicles have been around for decades both here and abroad. More than 100,000 exist in the U.S., with millions more in use around the world, and today’s vehicles have the same power as their gasoline counterparts. Meanwhile, pipelines crisscrossing the United States, including West Virginia, make transportation of gas to refueling stations possible.
The game changer for natural gas vehicles has come via shale gas development. Where America has looked since the Carter Administration to conserve natural gas, we now have an abundance of the fuel that serves to significantly lower costs and create long-term stability in the market.
The average price for compressed natural gas at the pump in a gasoline-gallon equivalent is $2.02 compared to almost $4.00 per gallon that most of us are accustomed to paying. At half the price of gasoline, natural gas becomes an option that is too attractive to ignore.
Natural gas is cleaner than gasoline and emits up to 30 percent less carbon dioxide, 75 percent less carbon monoxide, 54 percent less nitrogen oxide, 95 percent less particulate matter and 55 percent less volatile organic compounds. Unlike oil, natural gas generally requires limited processing to prepare it for use.
In 2011, the Honda Civic Natural Gas was named Green Car of the Year. During its 12 years of production, the Civic has proved there is a market for natural gas vehicles. Ford, Chevrolet and Chrysler will release their own compressed natural gas vehicles this year.
National and international companies such as AT&T, Disney, UPS, Waste Management and numerous city bus services are now using natural gas vehicles to lower their transportation costs.
In January 2012, a natural gas-powered motorcycle built by Orange County Choppers for Chesapeake Energy Corporation was on display at the West Virginia International Auto Show. Thousands of visitors took time to sit on this sleek bike and have their picture taken.
Kanawha County has announced its Kanawha Converts program. A committee representing various interests in that county is working to convert vehicles owned by public entities from gasoline to natural gas power. The annual savings will be in the hundreds of thousands of dollars.
For years, the question has been a chicken-or-egg scenario. Would car companies build natural gas vehicles, which would spur development of fuel stations, or would it be the other way around? The question, perhaps, insinuated that neither would happen, but the abundance of natural gas and low, stable prices have ensured that the fuel is a sustainable reality while oil prices have been higher for years.
Natural gas vehicles in West Virginia will most likely expand first with fleets that return to a central fueling station each day. Garbage trucks, busses, short-route delivery trucks and postal vehicles are good examples. With consumer confidence, personal vehicles will follow.
Tax credits and lower fuel costs will make natural gas vehicles even more attractive. These savings will put thousands of dollars back into the pockets of West Virginians. Equally important, we can finally free ourselves of total dependence on foreign oil.
Fill ’Er Up
By Stephen Yborra
As the country looks toward natural gas vehicles and freedom from foreign oil, consumers need to understand the basics of natural gas as a vehicle fuel and how the fueling stations function.
With the rising cost of gasoline and the growing popularity of natural gas vehicles, compressed natural gas (CNG) fuel stations have become more common. Regardless of size, whether a large public-access, fast-fill location for hundreds of vehicles or a home refueling appliance for just one car, CNG stations take low pressure natural gas, usually delivered via the local gas utility’s underground service line, and compress it to much higher pressure for storage either in the vehicle’s onboard cylinders or in on-site high-pressure CNG vessels for fast fueling vehicles.
A fast-fill CNG station typically includes a gas dryer, a compressor or two, high-pressure steel storage spheres or tubes, one or more NIST Weights & Measures-approved dispensers with hoses, various filters and a central controller and related solenoid valves. While today’s onboard cylinders store gas up to 3600 pounds-per-square-inch (psi), there are still old vehicles in service with cylinders designed for 3000psi, so many stations still include one hose to provide no more than 3000psi CNG. A properly sized and designed fast-fill CNG station can fuel at rates comparable to gasoline or diesel. The right balance of compression and storage at a station will depend on vehicle fueling patterns and the predictability of those fueling patterns, projected maximum and average hourly loads, available space and incoming gas line volumes and pressures.
A time-fill CNG system delivers fuel directly to the vehicle’s onboard cylinders over extended periods of time. Home refueling appliances are time-fill devices. Time-fill systems are attractive to fleets with vehicles that use one tank of fuel or less per day and sit idle at a central depot for 10 or more hours each day. Examples include trash trucks, food and beverage delivery trucks, school buses and municipal vehicles. The fueling rate per vehicle is determined by the production capacity of the compressor, the number of vehicles connected to the system at any one time and maximum flow limitations of fill lines, filters, et cetera. Time-fill stations do not need high-pressure storage vessels or expensive fast-fill metering capability. Instead, CNG is delivered directly through dispensing hoses mounted on posts located at vehicle parking spots. Although commonly referred to as slow-fill, a time-fill system may provide a fairly quick fill if only one vehicle is drawing down on the CNG supply.
Fully-loaded CNG cost/gasoline-gallon-equivalents (GGE) include the unregulated market price of natural gas, the regulated tariff paid to the local gas company for acquiring and delivering natural gas to the meter, compression energy, station maintenance expense and—the largest component—the amortized cost of station equipment. Compared to standard diesel and gasoline stations, CNG stations are relatively costly, thus requiring high volumes against which to amortize capital equipment cost-per-GGE. That’s why most natural gas vehicle efforts are directed at fleets that, alone or aggregated together, use sufficient fuel to justify initial investment. Increasingly, retail CNG availability is expanding to consumers, either at traditional fuel locations that target fleet accounts for base load and/or via installation of retail public-access at fleet locations. Cost reductions in home fueling appliances will further open the consumer market.
By Phil Pfister
Fleets are the backbone of our country’s current and immediate adoption of CNG as a fueling option. For fleet managers, CNG offers major financial benefits, most notably the ability to cut fuel costs in half. Companies from AT&T and Coca-Cola to UPS, Waste Management and FedEx are endorsing this fueling option as they convert their corporate vehicles to run on clean burning, American natural gas.
As many fleets have predictable fuel volumes, managers feel confident in the fuel savings they will realize with natural gas vehicles. CNG retails on average for less than $2 per gasoline gallon equivalent—a savings of more than $1.50 versus gasoline. Although natural gas vehicles (NGVs) cost more upfront, breakeven savings can typically occur within three years or less.
Chesapeake Energy Corporation offers a current example of these savings at work. As one of the nation’s leading natural gas exploration companies, it is accelerating plans to convert more than 5,000 light-duty vehicles in its fleet to run on natural gas. Many of these vehicles will be on West Virginia roads thanks to Chesapeake’s operations in the Marcellus Shale. Each converted truck will save the company $2,750 in fueling costs. When all 5,000 vehicles are converted, that’s an annual savings of nearly $14 million.
A lot has been accomplished and many steps have been taken to make NGVs a great option. However, more work must be done with both fueling infrastructure and vehicle availability. Fortunately, the marketplace and economic factors are shifting and CNG-fueled vehicles are at a major turning point.
General Motors and Chrysler announced in April that they will introduce bi-fuel (propelled by both CNG and gasoline) trucks into the market. Ford Motor Co. is offering CNG prep engines that can more readily be converted to natural gas after production. Not only are these powerful validations of the future of CNG, but they offer fleet managers more vehicles to choose from and provide increased confidence of original equipment manager (OEM)-supported technology and engineering. Special vehicle upfitters or qualified vehicle modifiers can also be contracted to modify cars and trucks to use CNG.
Related to infrastructure, fleet demand will drive more local convenience store operators to integrate CNG into their business. As an example, Chesapeake is working to identify local West Virginia retailers interested in serving as its preferred CNG fuel provider. Other local organizations, such as the Kanawha Converts Consortium and the City of Charleston, will also drive demand as they convert their vehicles.
Alternative Fuel Tax Credit
By Mark Morton
The ever-increasing costs of fueling our vehicles have given rise to an interest in alternative fuels. Whether converted, retrofitted or brand new, alternative fuel vehicles and refueling stations can be costly upfront. West Virginia offers a tax credit for qualifying taxpayers. The West Virginia alternative fuel tax credit became available in 2011 and is scheduled to end December 31, 2021. It includes:
- The purchase of a new dedicated or bi-fueled alternative fuel motor vehicle for which the purchaser then obtains a valid West Virginia vehicle registration;
- The conversion of a motor vehicle that is presently registered in West Virginia to operate exclusively on an alternative fuel and
- The construction or purchase and installation of a qualified vehicle refueling station capable of dispensing alternative fuel for alternative fuel motor vehicles.
The alternative fuel tax credit applies against a taxpayer’s West Virginia business franchise tax, corporation net income tax and personal income tax. Taxpayers can carry forward the credit to future tax years through 2021.
It is important to note the alternative fuels tax credit is not available to taxpayers obligated under federal or state law, policy or regulation to convert to the use of alternative fuel.
Alternative fuels, for the purposes of this credit, include compressed natural gas, liquefied natural gas, liquefied petroleum gas and ethanol, as well as fuel mixtures containing 85 percent or more by volume—when combined with gasoline or other fuels—of methanol, ethanol or other alcohols. Alternative fuels also include hydrogen, electricity—including power from solar energy—and natural gas hydrocarbons and derivatives.
An alternative fuel motor vehicle, meanwhile, could be new, retrofitted or converted. It operates solely on one alternative fuel, is capable of operating on a combination of alternative fuels or can run on a mix of alternative and traditional fuels.
The state tax credit for purchasing an alternative fuel vehicle weighing less than 26,000 pounds is 35 percent of the price, with a maximum of $7,500. The conversion credit for that same vehicle is 50 percent of conversion cost with a $7,500 maximum. For vehicles weighing more than 26,000 pounds, the percentages are the same, although the maximum is $25,000.
A refueling station—or a qualified alternative fuel vehicle refueling infrastructure—is used for storing and dispensing alternative fuels. The infrastructure property includes compression equipment, tanks and dispensing units. Refueling stations must be located in West Virginia to be eligible for the credit.
The home refueling station credit is 50 percent of the total cost, with a maximum of $10,000. For refueling stations located away from a home, the credit is 50 percent of the total cost and 62.5 percent if the station is meant for public use. The maximum amounts for stations away from the home decrease throughout the credit’s life.
Through December 31, 2013, the maximum is $250,000 and $312,500 for public use stations. From January 1, 2014 to December 31, 2015, the amounts are $200,000 and $250,000, respectively. Through December 31, 2021, they are $150,000 and $187,500.
By Kelly Bragg and Matthew Thomas
As an established and proven transportation fuel, natural gas powers 112,000 vehicles on U.S. roads today and more than 13 million worldwide. With about 30 separate companies making 100 light-, medium- and heavy-duty vehicles and engines, according to NGVAmerica, options for fleets and consumers have never been better.
With potential to provide enough gas for two years of consumption by the entire U.S., the Marcellus Shale underlies most of West Virginia at a depth of about one mile. The Utica Shale, another potentially rich source of natural gas, is another few thousand feet below. Although it would be more expensive to extract natural gas from the Utica Shale, its existence combined with the Marcellus Shale have led to predictions that a ready supply of natural gas will mean price stability for the long term.
Not inconsequentially, natural gas has lower ozone-forming emissions than gasoline but is comparable in power and speed and has an existing pipeline distribution system. Adding its status as a domestically produced fuel explains why fleets from Florida, New York and California, as well as Ohio, Pennsylvania and Kentucky, have adopted natural gas.
The economic impact on fleets and consumers is rooted in the fuel’s current low cost compared to petroleum-based fuels. The January 2012 Clean Cities Alternative Fuel Price Report shows a nationwide average price of $3.37 for gasoline, $3.86 for diesel and $2.13 for CNG. For a first-cut cost analysis of converting or buying CNG vehicles, Virginia Clean Cities has developed The Calculator at www.ngtoolkit.net.
Locally, Kanawha County, Charleston Area Alliance and Bridgemont Community and Technical College have renewed an interest in natural gas for transportation with the creation of the Kanawha Converts consortium, which is harnessing fast-moving developments in the market, automotive industry and energy sector. The Kanawha County Commission’s emergency management and economic development division understands that CNG positively impacts the environment by reducing greenhouse gas and particulate emissions in air breathed by the county’s citizens and the local economy by reducing county transportation costs.
Kanawha Converts will assess education, policy, training, market and financial needs for CNG vehicles and infrastructure in Kanawha County. A proper inventory of skill, types and number of technical positions required for conversions will be assembled.
“Being able to save money by converting to natural gas vehicles will put more money in the pockets of the governmental entities, businesses and residents of the county and thus be like a tax break for everyone willing to take the step,” says Ryan White, an associate at Jackson Kelly PLLC. “The best thing about this initiative is that it encourages the use of a fuel that is very prevalent in West Virginia and diverts that from money we are sending to other countries. It also can lead to the creation of jobs through local conversions and the construction of the necessary infrastructure.”