| LOS ANGELES, March 22
LOS ANGELES, March 22 U.S. truckers considering
natural gas as an alternative to high-priced diesel say the cost
of vehicles that run on the cheap and cleaner-burning fuel is
still too high for them to see a timely payback on their
A push to run more of the nation's truck fleet on cleaner,
domestically produced natural gas is rapidly gaining momentum.
Suppliers like T. Boone Pickens' Clean Energy Fuels
, Royal Dutch Shell and China's private ENN
Group are scrambling to build natural gas fueling stations along
U.S. highways, while Cummins-Westport Inc will begin later this
year selling a 12-liter natural gas engine able to power the
biggest trucks on the road.
Truck companies too, are enthusiastic - up to a point.
The trucks that will sport the new engine, made by a joint
venture of Cummins Inc and Westport Innovations Inc
, will have expensive tanks for storing compressed or
liquefied natural gas. With the industry still reeling from an
economic slump that pushed margins below 5 percent, truckers
have little ability to make big bets on new equipment.
Customers like household products giant Procter & Gamble
and building materials maker Owens Corning,
however, are increasingly demanding that their products be
hauled on cleaner trucks using cheaper fuel.
Natural gas trucks' greenhouse gas emissions are about 20
percent lower than those of diesel trucks. But truck companies
must fork over an extra $40,000 to $80,000 per natural gas truck
- a big markup considering a heavy-duty diesel truck starts at
President Barack Obama wants to begin a federal incentive
program that would help pay for the new trucks, but budget woes
make that unlikely.
Big natural gas-producing states such as Pennsylvania, West
Virginia and Texas, as well as environmentally conscious
California, offer programs to get heavy-duty, natural gas trucks
up and rolling. But none foots the bill entirely, and in an era
of fiscal tightening, truckers fear the subsidies may not last.
Replacing diesel with natural gas can save truckers about
$1.50 per gallon, and experts say a truck that runs at least
80,000 miles a year could see a payback in two years. But factor
in the cost of modifying maintenance facilities and the still
unknown value for second-hand natural gas trucks and the math
isn't so clear cut.
"We can't make the economics work," said Randy Mullett, a
vice president at Con-way Inc, one of the country's
largest trucking companies. "The upfront cost is too high."
Con-way is testing two compressed natural gas trucks in the
Chicago area and plans to add three or four liquefied natural
gas (LNG) trucks in Texas, where state incentives will help
offset the added costs. But Mullett said fueling big rigs with
natural gas is "not the slam dunk that it's presented to be."
MOVING BEYOND TRASH
Heavy-duty trucks are big fuel consumers, running more than
130 billion miles a year in the United States and averaging
about 6.5 miles per gallon, according to the American Trucking
Associations. With about 200,000 such trucks sold each year, and
turnover of fleet vehicles about every five years, the
opportunity to reduce diesel fuel consumption and tailpipe
emissions by switching to natural gas is huge.
New techniques unlocking vast reserves of natural gas from
shale have produced a boom in U.S. supplies and driven prices
down sharply, increasing the transportation industry's interest
in using natural gas as its primary fuel.
Earlier this month, BNSF Railway Co said it would run some
locomotives on liquefied natural gas to save fuel costs, and
Lockheed Martin said it was developing new fuel tanks
for ships, trains and trucks powered with LNG.
Heavy-duty truck maker Kenworth, a unit of Paccar Inc
, has a "very large backlog" of orders for natural gas
vehicles, according to national sales manager Andy Douglas.
Cummins-Westport, meanwhile, has been growing about 30 percent a
year, and the addition of the 12-liter engine should give it "a
pretty good growth spurt for the next few years," said Jim
Arthurs, the joint venture's president.
The waste industry has already made a big push into natural
gas, with about half of the garbage trucks sold in the United
States last year running on it. Natural gas works well for
garbage trucks because they are able to refuel overnight at
dedicated stations at their home bases. Trucking companies say
they could lose precious time and fuel going out of their way to
find a natural gas fueling station near their routes.
Clean Energy, ENN and Shell have committed to building a
network of natural gas stations along U.S. highways, but they
need to know that there will be a sufficient number of trucks
using those stations to justify their investment.
Waste Management Inc began converting its fleet to
compressed natural gas (CNG) about three years ago. It is adding
700 to 1,000 natural gas trucks each year, saving roughly
$30,000 a year per truck on fuel and maintenance, according to
spokeswoman Jennifer Andrews.
The company has "not seen the costs of natural gas trucks
come down at all," Andrews said, but added that it had received
significant revenue from government grant programs.
STATE INCENTIVES HELP
Some trucking companies said incentives are the only way
they can add natural gas trucks to their fleet.
C.R. England, a family-owned truck company based in Salt
Lake City, Utah, has been running five LNG trucks between
Ontario, California and Las Vegas since late 2011 but has yet to
make back the close to $80,000 premium it spent per vehicle.
The company is hoping it will win a grant from Pennsylvania
to help it add five CNG trucks to serve Hershey Co. The
state is awarding grants of up to $25,000 per vehicle to cover
up to half of the added cost of a natural gas truck.
C.R. England would probably not seek to buy any more natural
gas trucks without such an incentive, said Allen Nielsen,
director of fuel for the company.
Even United Parcel Service Inc, which has 93
LNG-fueled big rigs, said it has taken advantage of state
incentives to buy most of them. Though the lack of a fueling
infrastructure is a key impediment to adoption of natural gas
trucks, the director of UPS' global energy group, Mike
Whitlatch, said "the cost of the vehicle is probably the largest
CUSTOMERS PUSHING HARD
Truckers can't rely on their customers for help, either.
"We're trying to push pretty hard," said Sean Turner,
purchasing group manager at Procter & Gamble Co, which is
running 22 CNG trucks at a Pennsylvania factory that makes
Pampers diapers and Bounty paper towels. The company's truck
partner, which it would not name, made the investment, Turner
Owens-Corning is talking to nearly all its trucking partners
about switching to natural gas, according to Dave Uncapher,
sourcing and operations leader for the Toledo, Ohio company.
Some who balked at the proposal have lost "a piece" of the
building material maker's business, he said.
Not only do customers want to see more predictable, and
hopefully lower, fuel costs, many also have internal goals to
reduce the carbon and tailpipe emissions of their supply chains.
Dillon Transport Inc, a privately held company based in Burr
Ridge, Illinois, agreed to Owens Corning's request, adding 25
LNG trucks in Texas about a year ago.
To help offset the additional costs, Dillon is aiming to run
its natural gas trucks 300,000 miles a year. The average for big
trucks is about 68,000 miles a year, according to federal data.
But the company's marketing director, Phil Crofts, said the
question of recovering the extra cost of a natural gas truck is
murky, because there is no market for used LNG trucks and the
conversion of maintenance facilities adds to the costs.
The natural gas trucks are more about distinguishing itself
in the market, Crofts said. The deal with Owens Corning has
helped Dillon land a contract with fertilizer producer Mosaic Co
to run 50 CNG trucks at the Port of Tampa. That, plus
the Owens Corning business, has helped boost volumes 35 percent.
"This business is not like the cell phone business or the
iPad business where there are great new markets going out
there," Crofts said. "For us to grow we've got to be taking
somebody else's business."
(Reporting by Nichola Groom; Editing by Patricia Kranz and