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Natural gas vehicles face chicken-and-egg syndrome

While the push is under way in some states to provide roadside battery charging for the thousands of electric cars on the highways, another alternative, the natural-gas-powered vehicle, mostly sits idle.

Anyone who has watched television in the past decade knows about the Chevy Volt and hybrids like the Ford Fusion or the Toyota Prius. But only Honda sells a natural-gas-powered car in the U.S., and it generates little of the kind of buzz reserved for the cars that run on electric power.  Meanwhile, the trucking industry, which could realize enormous fuel savings, is expressing little confidence that natural gas will play a role in its future.

Natural gas vehicles represent less than one-tenth of 1 percent of all vehicles on U.S. roads. Observers of the energy industry say the scarcity of fueling stations has hampered the market for natural gas cars and trucks. There is also a general lack of awareness that natural gas could be significantly cheaper than conventional fuels.

The investment website Seeking Alpha wrote that natural gas vehicles “on a grand scale is indeed a dream.”

Natural gas vehicles have two great virtues over conventional gas-powered vehicles: less polluting emissions, and an abundant domestic fuel supply that has driven prices significantly below that of conventional gasoline – $1.50 to $2 less per gallon.

But you can’t drive a natural-gas truck or car very far unless you can find a place to fill it up. And that means not just one place, but a network of places. To serve truck fleets, it has to be a network that will keep a long-distance hauler supplied with fuel.

The capital to set up such a network has not been assembled, although new efforts are under way.  Meanwhile, on a much smaller scale, a few entrepreneurs are building local fueling stations, designed primarily to allow their own businesses to benefit from the fuel cost savings.

Some want to change that situation by building their own infrastructure, on whatever scale they need. Both small entrepreneurs and large companies are yielding to the temptation to compete for drivers’ dollars by offering a fuel that, at current prices, would save $1.50 to $2 a gallon.

In Kenner, La., a local plumber, Steve Chambers, bought off of Craigslist a fleet of used natural-gas trucks and some gas compressors. He built his own natural-gas compressor station to fuel his fleet, now up to 15 vehicles, according to New Orleans City Business.

In Enid, Okla., the Autry Technology Center helped David Yelle, a pumper working for Chesapeake Energy Corp. start a business, Fuel Conversion Solutions OK, which installs CNG conversion kits, according to the Journal Record of Oklahoma. Also in Oklahoma, six Love’s Travel Stops & Country Stores will install CNG fueling stations by mid-July.

Love’s is a multi-state chain of truck stops.

Finance & Commerce of Minnesota reports that four local waste haulers are replacing diesel trucks with compressed natural gas (CNG) vehicles. Matt Walter, the president of MacNeilus, the nation’s largest manufacturer of garbage- and cement-hauling trucks, told Finance & Commerce that he expects half of the vehicles made by MacNeilus will run on CNG.

Larger companies are also signaling a desire to tap into the natural gas glut. General Electric Co. and Chesapeake Energy Corp. recently announced that they would collaborate on projects to improve access both to CNG and liquefied natural gas (LNG), which can be used by the trucking industry, according to the Journal Record.

That project will include building 250 modular CNG compression stations that the joint venture has trademarked as “CNG in a Box,” which would directly convert natural gas from a pipeline into CNG ready for fueling; a similar liquefied natural gas compression unit; and a home refueling unit for CNG vehicles.

According to the firms’ announcement, installing these modules at existing fueling stations and other locations “will provide the core infrastructure to enable expanded access to CNG.”

Clean Energy, co-founded by T. Boone Pickens, is raising money to build “America’s Natural Gas Highway,” a network of 150 new LNG fueling stations along U.S. interstate highways and in major urban areas. By comparison, as of 2002, according to the Census Bureau, there were 117,000 gasoline stations in the U.S. But 150 stations would at least be a start.

Two Detroit manufacturers plan to roll out CNG-burning pickup trucks in 2012. Chrysler will sell a version of its Ram truck, while General Motors will sell CNG versions of two pickups, the Chevrolet Silverado and GMC Sierra 2500 HD.

A group of 13 state governors led by Oklahoma Governor Mary Fallin and Colorado Governor John Hickenlooper of Colorado have signed a memorandum pledging to issue a multi-state bid request for natural gas vehicles to supply participating states’ fleets. Fallin said the plan to purchase up to 5,000 fleet cars and trucks is a “game changer for both the automobile industry and the energy industry.”

However, to many energy market watchers, this activity won’t be enough to overcome the chicken-and-egg syndrome.

“If there are no cars, then why would there be refueling stations? And if there are no refueling stations, then why would there be cars?” said HIS Cambridge Energy Research Associates researcher Tiffany Goode in the Fuel Fix blog.

According to a survey commissioned by PLS Logistics, a freight-management firm, executives at freight carriers are aware of the potential for LNG to be used to fuel their trucks, with nearly 30 percent reporting they were “actively researching” the technology. However, of the 100 executives surveyed by PLS, none said they were planning to purchase an LNG-powered vehicle in 2012.

The primary barrier the study found was “the inadequacy of the LNG fueling infrastructure,” which was mentioned by more than half the executives. The cost of an LNG truck, estimated at $30,000-$50,000 higher than for a conventional truck, was mentioned by a quarter of the respondents.

Pain may finally break through such barriers. Gas prices might be high now, but perhaps they aren’t high enough. As Seeking Alpha wrote, “Perhaps the onus rests on a consistently high gasoline price – as much as it is on a low-cost natural gas environment – to push on development going forward.”

— John Stodder is the roving Web editor for The Dolan Co.

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