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February 12, 2016 3:58 PM, EST
Trucking’s Natural Gas Emphasis Should Be Environment, Experts Say
Daniel Acker/Bloomberg News
This story appears in the Feb. 8 print edition of Equipment & Maintenance Update, a supplement to Transport Topics.

Instead of waiting for diesel prices to rise, truck makers and their suppliers should try to cash in on the environmental benefits of natural gas, experts said.

Several suppliers are ramping up compressed natural gas operations through acquisitions, new plants and technician training at a time when diesel, trucking’s primary fuel, remains plentiful and cheap.

Robert Carrick, natural-gas sales manager for Freightliner Trucks, said the manufacturer’s 2015 nat-gas deliveries “slightly increased over 2014, and activity remains consistent.

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“Customers who are continuing to purchase [natural-gas vehicles] all have a common thread: They have their own fuel stations,” he added. “The customers who purchase fuel from the retail market have a very difficult time achieving a [return on investment] in the average life of their truck.”

Carrick said the lower wholesale natural-gas prices have not “trickled down” to the retail market, which has not aided the ROI equation.

Preston Feight, general manager of Kenworth Truck Co., said in October that his nat-gas vehicle sales are about 5% of total volume. They could rise to 15%, however, if diesel heads up again. Kenworth is a unit of Paccar Inc.

Fuel prices on Dec. 21 at Love’s Travel Stops facilities ranged from $1.799 to $2.499 for CNG, while diesel ranged from  $1.849 to $2.549 — so the fuels essentially cost the same.

The latest quarterly Clean Cities Alternative Fuel Price Report put the October national average retail price of CNG at $2.37 per diesel gallon equivalent, while diesel was only 22 cents higher at $2.59.

The average retail price of diesel has fallen even more since then, hitting $2.211 on Jan. 4, its lowest level since May 2009, the Department of Energy reported.

Some fleets have said that the price spread between natural gas and diesel has to be at least $1 per gallon for the switch to be profitable because CNG fuel mileage is lower than diesel and there is a significant cost to convert to new fuel.

Frank Bio, director of specialty vehicles and alternative fuels at Volvo Trucks in North America, wants to calculate CNG’s profitability in those new terms.

“The industry conversation needs to change from cost [per gallon versus diesel] to those other advantages of natural gas, and those advantages need to be monetized,” said Bio, who does not expect the price of diesel to climb sharply anytime soon.

The advantages are environmental benefits, a domestic fuel supply and American jobs, he said.

“I think that is absolutely correct,” said Scott Perry, vice president of supply management and global fuel products at Ryder System.

“You have to look at [natural gas as truck fuel] very comprehensively. What is the benefit from an environmental-sustainability standpoint, a price-stability standpoint? Are there are any other levers there, such as the low-carbon fuel standard [a market-based, cap-and-trade approach in California] or the use of renewable natural gas to help make that value proposition even stronger?” Perry said.

“It’s a matter of at what pace and who is going to lead that charge,” he added.

Miami-based Ryder, which ranks No. 13 on the Transport Topics Top 100 list of the largest U.S. and Canadian for-hire carriers, trained 5,000 employees last year on natural-gas awareness and technical support for Class 8 trucks, which are 95% of its leased natural-gas fleet. And 3,000 employees are scheduled for the training. Since 2012, Ryder has spent “well over $100 million” in shop conversions, buying trucks, and building and operating two of its own fuel stations, Perry said.

Bill Cashmareck, general manager of natural gas at Love’s Travel Stops, said there are not many ways today to monetize the environmental benefits. Instead, it’s about image.

“You can capitalize on a more emissions-friendly platform very vocally and gain business and sustainability benefits, but that is more marketing. And some people have taken advantage of those aspects” to win new business, he said.

Love’s has seen a 105% increase in sales of CNG year-to-date through September, compared with the same 2014 period, Cashmareck said. The gains come from adding new locations and from selling more at existing facilities.

Love’s has 28 CNG locations out of 300 total truck stops, and 70 new outlets are slated in the coming months, he said.

Columbus, Ohio-based Worthington Industries, a global metals manufacturing company, said its customers buy onboard fuel tanks and other components to integrate CNG and liquefied natural gas fuel systems in medium- and heavy-duty trucks, and they build frame rails, wheels, chassis and seats from its hot rolled, galvanized and cold rolled strip steel.

Wayne Powers, general manager of alternative fuels at Worthington, said “it is possible” to monetize the environmental benefits, “but I’d have to put some thought to it. I am not prepared to talk to that in great detail now. . . . Much of our focus has been on making CNG widely adopted for its economic benefit.”

Worthington’s pressure cylinders segment recently acquired Trilogy Engineered Solutions’ CNG fuel technology for heavy-duty trucks. Terms of the transaction were not disclosed.

Trilogy’s technology “is a perfect complement for the product line we had available . . . primarily in the refuse market,” Powers said. “What Trilogy brings to us is back-of-cab and rail-mount models for the heavy-duty, Class 8 market.”

Andrew Littlefair, CEO of Clean Energy Fuels Corp., said in a third-quarter earnings call that brand-name shippers with sustainability goals “increasingly want their contracted trucking companies to haul their products throughout the country on cleaner natural gas.”

Luis Salem, vice president of marketing at Agility Fuel Systems, said, “We should put a dollar to the environmental benefits.”

He agreed that for-hire fleets would benefit if shippers required nat-gas vehicles to haul their freight to reduce the environmental effects of the shipper’s business.

“I think there could be more [things] happening like this in the future,” Salem said.

Agility said trucking uses both fuels, which have some different characteristics. For instance, LNG has higher energy density, so trucks can carry more fuel compared with CNG, saving weight and increasing range. But LNG will vent if not used. Also, LNG has a higher cost to process, liquefy, store and deliver, and refueling requires special handling equipment.

Agility counts both Freightliner and Volvo Trucks as customers and recently opened a $20 million manufacturing facility in North Carolina close to both companies.

Freightliner’s Carrick said his company “continues to work with our partner, Agility Fuel Systems, to engineer improved fuel systems on our chassis while lowering integrated  system costs at the same time.”

Other truck makers and companies contacted did not respond in time for this article.  ?