Pickens pitching skeptical truckers on conversion to natural gas

The natural gas bandwagon is boarding with T. Boone Pickens in the driver’s seat trying to convince a skeptical trucking industry that this is the fuel of the future because it’s clean, abundant, made in America—and cheap.

So why isn’t everybody aboard the push to convert at least some of the 8.5 million Class 6, 7 and 8 tractors from diesel to compressed natural gas (CNG) or liquefied natural gas (LNG)?

That’s the answer that Pickens wants to know. The 83-year-old Pickens, one of America’s richest men is targeting the trucking industry as the place to make an immediate and lasting dent. The U.S. trucking industry is on track to spend a record $155 billion on fossil fuels this year and Pickens said the industry is rip for an alternative—his alternative that is the basis of his Pickens Plan to make a dent on this country’s reliance on unstable sources of important gasoline and diesel.

The American Trucking Associations is so impressed with Pickens’ plan that it is called for an alternative fuels “summit” among industry leaders in December. Right now, natural gas costs about half what diesel costs. That differential is getting some trucking executives’ attention.

“The trucking industry is very, very ready—they are very ready to save half their fuel (costs),” said Sharon Banks, CEO and founder of Cascade Sierra Solutions, an Oregon-based non-profit company dedicated to reducing emission from trucking companies through financial incentives to help subsidize the cost of upgrading or converting trucks to run on alternative fuels.

“Compared to where interest levels were just a few years ago, it has completely turned around.” Banks said on a recent conference call with investors organized by Stifel Nicolaus, Baltimore.

Not everyone is convinced, however. Doug Stotlar, president and CEO of Con-way Inc., a $5.3 billion trucking and logistics concern, is among the skeptics.

“There are lots of things in his sales pitch that Pickens is leaving out,” Stotlar told LM. He mentioned lack of sufficient fueling infrastructure, the lengthy time it takes to refuel and the additional cost of buying new Class 8 trucks that could run on natural gas, diesel—or both.

“In our world, we can’t afford a 20-minute fueling window for our trucks,” Stotlar said, saying CNG and LNG are more suited to local trucks such as garbage and utility vehicles.

LNG allows carriers to carry much more fuel in less space. But it must be chilled to minus-260 degrees Fahrenheit so tanks have to be highly insulated. “It’s like hauling around a giant Thermos bottle on top of your trucks to avoid loss through evaporation,” Stotlar said.  CNG is not chilled and has more limited range, perhaps 300-400 mile range, compared to up to 600 miles in range for LNG. Another possibility is run dual-fuel engines that run on both diesel and natural gas, but they could cost as much as $140,000 per truck.

Some fleets already have decided. Waste Management, the nation’s garbage hauler, already is buying trucks that will run on cheaper natural gas and says 80 percent of its new trucks over the next 10 years will run on natural gas. By 2017, it will run more trucks on natural gas than diesel.
     
Vetter Transport, a fuel hauler based in British Columbia, recently invested in 50 new Peterbilt trucks designed to run on LNG and is enjoying significant operational savings. Banks said since 2008, Vetter has enjoyed a 75 percent cost savings as it hauls.

Saddle Creek Logistics, based in Lakeland, Fla., bought 40 CNG trucks a couple of years ago. Saddle Creek is so pleased with their performance that it is buying 40 more this year because of similar cost savings, according to Banks.

Scott Perry, a vice president at Ryder System, Miami, one of the nation’s largest truck-leasing companies, recently told the Wall Street Journal that the economics favoring natural gas are “overwhelming.” Because of new drilling techniques, the cost of natural gas has dropped by nearly one half in the past year.
    
“We have so much natural gas, we are going to see $5 diesel before we’ll see $3 natural gas,” Pickens told the Arkansas Trucking Report.
  
Today, the typical Class 8 truck burns approximately 25,000 gallons of fuel annually, getting 5.9 miles per gallon. Switching to compressed natural gas could save up to $20,000 per truck per year, according to Banks. CNG currently costs about $1.90 per gallon, about half the cost of diesel.

“I think it’s a perfect storm—natural gas is lower in diesel particulates, it’s domestic and if we develop a large demand, we can convert from using foreign fuel, which would be a great boon for our economy,” Banks said.

Barriers against conversion to natural gas include lack of infrastructure for fueling, limited financing for new truck purchases, and education of maintenance workers on such trucks and Congress’s unwillingness to give the industry an investment tax credit for such purchases.
  
But the industry seems to be moving anyway. Navistar, an industry leader in Class 8 trucks, recently announced it would start building a full line of heavy-duty trucks powered by natural gas. Major competitors Paccar (builders of the Peterbilt and Kenworth brands), Freightliner and Caterpillar have plans to do the same.