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Truckers, regulators surprisingly on same page on fuel standards

By John D. Schulz, Contributing Editor
August 18, 2011

Truck fuel mileage standards are rising and, almost certainly, so are rates that shippers pay for trucking freight services.

The Aug. 9 announcement that the Obama administration was seeking a 20 percent increase in heavy truck fuel efficiency standards was not surprising. After all, in May of 2010, President Barack Obama had requested the Department of Transportation’s National Highway Traffic Safety Administration to develop such standards, which will be phased in during the 2014-2018 model years.

What was surprising was the level of cooperation from trucking executives, lobbyists and truck manufacturers on the issue. Usually, any costly industry regulation—and this one is expected to add about $6,200 to the cost of a $125,000 Class 8 tractor—is met with resistance if not outright disdain from officials.

Not this time. President Barack Obama’s request that the trucking industry start to become more efficient—to 6.5 miles per gallon from today’s 5 mpg average for a typical loaded semi-trailer—was actually praised by industry leaders and their chief lobbyist.

American Trucking Associations President and CEO Bill Graves called it “welcome news for the trucking industry.”

FedEx Corp. CEO Fred Smith said in a statement that the new regs were “a win for the transportation industry, for the environment and for all Americans.”

Con-way Inc. President Douglas W. Stotlar labeled it “an important milestone for our industry and our country.

What’s behind the industry love-fest? First, trucking officials were pleased that early on they were invited into the regulatory process for input. Secondly, there is money to be made—and saved—from the new rules. And third, unlike some regulations coming out of Washington, these actually make sense.

“This regulation and the process used to establish it are a model for how government and business should work together to meet energy, environment and economic goals,” said Tim Solso, chairman and CEO of Cummins, a major truck engine manufacturer.

Navistar Chairman, President and CEO Daniel C. Ustian echoed that by saying with this rule, the EPA and NHTSA have set a standard that could be used worldwide to meet fuel efficiency and greenhouse gas emissions standards.

“We have worked closely and productively with the EPA and NHTSA and look forward to continued collaboration on implementation of the new standards,” said Sean Waters, director of compliance and regulatory affairs for Daimler Trucks North America.

Commercial trucks used about 22 billion gallons of diesel last year, and account for about 20 percent of all transportation’s fuel use. The trucking industry is expected to spend a record $150 billion this year on fuel costs—a typical fill-up on a 200-gallon Class 8 tractor can run as much as $800.

Shippers are paying this tab, whether they realize it or not. Fuel surcharges are running as high as 40 percent for truckload and about 20-22 percent for LTL freight, as diesel costs hover around the $4 level.

The cost-benefit analysis for the new regulations is quite favorable. EPA estimated the new rules would cost $8 billion. But total benefits, which include less time spent refueling and lower emissions, could exceed $49 billion over the lifetime of the trucks, according to the EPA. Most truckers believe the fuel savings would pay for the higher cost of the trucks in about two years.

Not everyone was on board, however. Some fleet executives complained about the increasing costs of Class 8 trucks, which have risen from about $100,000 to more than $125,000 (before volume discounts) in recent years because of tougher emissions standards.

“I’d like to buy new equipment, but the thing is they are so doggone expensive now,” Kevin Burch, president of Dayton’s Jet Express and past chairman of the ATA’s Truckload Carriers Association, told the Dayton Daily News.

The 2014-2018 fuel efficiency standards for trucks are designed to account for the different kind of work done by different kinds of trucks.  Long haul trucks will save an average of 4 gallons for fuel for every 100 miles traveled.  Heavy-duty pickups and vehicles like buses, delivery trucks, or vans would save one gallon for every 100 miles traveled.  That is projected to save a projected 530 million barrels of oil.

The EPA says a truck driver will see a net savings of $73,000 through reduced fuel cost over the life of the truck—or about $50 billion for the industry.
 
“I’d call $50 billion in total fuel savings a significant win for a hard-working industry,” Transportation Secretary Ray LaHood wrote on his DOT blog.
 
ATA chief Graves, a former Kansas governor who is from a trucking family, said his members “have been pushing for the setting of fuel efficiency standards for some time.” He said they were pleased with the results. In 2007, ATA endorsed a sustainability program that included a proposal to set technologically feasible efficiency standards.
 
“While it is too early to know all the potential effects of this rule,” Graves said, “we do know it sets us on the path to a future where we depend less on foreign oil, spend less on fuel and contribute less to climate change.”

Jed Mandel, president of the Engine Manufacturers Association and the Truck Manufacturers Association, said his members “strongly support a uniform, national program” to address greenhouse gas emissions and fuel efficiency. The industry views that more favorably than, say, a patchwork of different state regulations that would make it impossible to sell a uniformly engineered fleet in all 50 states.
 
“We applaud EPA and NHTSA for their willingness to listen to manufacturers’ concerns related to the unique and complex aspects of the commercial engine and vehicle market and their efforts to finalize a manageable and implementable program that incorporates the principles outlined by the President and industry in May of last year,” Mandel said I a statement.
 
The final rule provides a novel program that expands the use of existing fuel efficiency improvement technologies and provides incentives for introduction of advanced technologies, accelerates improvements in medium and heavy-duty truck fuel efficiency and reduces greenhouse gas emissions, Mandel added.
 
The EPA estimated that these new standards will cut greenhouse gas emissions by 270 million metric tons. Environmentalists praised the new standards, saying they will benefit America’s economy, environment and national security.
 
“It’s great to see Washington get something so right,” Environmental Defense Fund President Fred Krupp said in a statement. “Thanks to these new standards, everybody wins: truck drivers save money at the pump, America imports less foreign oil, and we all get to breathe cleaner air.”
 
The tougher truck standards come on the heels of plans by the Obama administration to greatly increase fuel mileage standards on cars—from the current 27.5 corporate average fuel economy (CAFÉ) to about 54 mpg by 2018.

Sierra Club Executive Director Michael Brune said these rules together should create jobs and “bring the nation a step closer to moving beyond oil.”
 
Today, heavy trucks account for 6 percent of our greenhouse gas emissions, but are only about 4 percent of all vehicles on the highways.  But trucking is the fastest-growing contributor to America’s emissions, and officials said that 6 percent will continue rising unless action is taken. Trucks also consume 12 percent of U.S. oil use.

About the Author

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John D. Schulz
Contributing Editor

John D. Schulz has been a transportation journalist for more than 20 years, specializing in the trucking industry. He is known to own the fattest Rolodex in the business, and is on a first-name basis with scores of top-level trucking executives who are able to give shippers their latest insights on the industry on a regular basis. This wise Washington owl has performed and produced at some of the highest levels of journalism in his 40-year career, mostly as a Washington newsman.


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