HR 1380 - NAT GAS Act

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Frank
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HR 1380 - NAT GAS Act

Post by Frank » Thu Feb 23, 2012 2:57 pm

I've been following the T Boone Pickens and how the Pickens Plan has been implemented in H.R. 1380 (New Alternative Transportation to Give Americans Solutions Act of 2011) [and S.1863 (New Alternative Transportation to Give Americans Solutions Act of 2011)], which is commonly known as the NAT GAS Act. The NAT GAS Act makes amendments to USC Title 26 - Internal Revenue Code of 1986.

Pickens has consistently said that the USA needs its own energy plan and this involves using its own resources (see Daily Show Extended Interview - January 27, 2011). Getting off of OPEC oil and switching to an abundant domestic fuel is a worthy cause and makes a lot of sense. In many interviews, Boone Pickens often says that $4/MCF natural gas is equivalent to 7 gallons of diesel fuel. On an energy basis, $4/MCF natural gas converts to a Diesel Gallon Equivalent (DGE) price of $0.527/DGE. Lately, the price of natural gas has dropped and is now selling for less than $3/MCF (i.e., less than $0.395/DGE). A DGE is the amount of natural gas that has the same amount of energy as a gallon of diesel fuel and, yes, bulk natural gas really is currently about 1/10 of the cost of diesel fuel.

Part of the NAT GAS Act involves the allowance of significant tax credits for natural gas vehicles:
  1. $7,500 if such vehicle has a gross vehicle weight rating of not more than 8,500 pounds,
  2. $16,000 if such vehicle has a gross vehicle weight rating of more than 8,500 pounds but not more than 14,000 pounds,
  3. $40,000 if such vehicle has a gross vehicle weight rating of more than 14,000 pounds but not more than 26,000 pounds, and
  4. $64,000 if such vehicle has a gross vehicle weight rating of more than 26,000 pounds.
For heavy duty (Class 8 ) vehicles, there are pretty much only 2 ways to use to natural gas: a dedicated natural gas engine or a diesel-CNG/LNG dual fuel engine. The NAT GAS Act primarily favors new natural gas vehicles because it specifies an 80% credit of the incremental cost of the qualified CNG or LNG vehicles. In practical terms, it is impossible to qualify a retrofitted vehicle because EPA certifications for heavy duty vehicles are qualified on an engine dynamometer and NOT at the exhaust pipe of a converted vehicle using a chassis dynamometer. For existing vehicles in heavy duty fleets, this legislation precludes them from using an aftermarket diesel-CNG or diesel-LNG dual fuel conversion system, even though this type of retrofit would reduce diesel fuel use and particulate emissions and would be far more economical.

T Boone Pickens owns Clean Energy Fuels and they're not offering any bargains in natural gas fuel for vehicles. They appear to price their fuel at around 50¢/gallon less than the going price for gasoline. That $3/MCF natural gas translates to a price of $0.35/GGE (Gasoline Gallon Equivalent). The CEF station near Rochester NY is selling CNG for $2.69/GGE compared to the National Fuel Gas (a gas utility) station in Buffalo NY at $1.27/GGE. That price difference suggests to me that CEF has about $1.42/GGE more profit built into their price. Pickens and Clean Energy Fuels stand to do very well at the expense of the American taxpayer if the NAT GAS Act is passed.

With the national average price of diesel fuel going for around $3.85/gallon (and climbing), I'm not sure why Pickens needs huge subsidies to convert heavy duty trucks to natural gas. Using the Westport diesel-LNG dual fuel engine, the equivalent dual-fuel economy of these LNG trucks is similar to those running on pure diesel but is a lot cheaper per mile. I would think that today's $3/gallon fuel savings would be incentive enough for trucking fleets to convert. Perhaps, subsidies are the only way heavy duty fleets can have a reasonable return on their investment if LNG is sold at a heavily inflated price.

With natural gas at such a low price, I think the main reason that trucking companies are holding off converting their fleets to natural gas is that they're waiting for the very generous subsidies to make it even more worth their effort. Otherwise, I suspect that the poor record of previous LNG conversions in transit bus systems has made many fleets skeptical of using natural gas (see LNG Issues).

Does the US taxpayer really need to fund a huge tax credit boondoggle like the the NAT GAS Act?

If the USA really wants to get off of OPEC oil, shouldn't it consider all types domestic energy instead of skewing the market to only natural gas?

This legislation appears to be written to favor Clean Energy Fuels and Westport Innovations. Does the US taxpayer need to subsidize their (likely) massive profits?


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Re: HR 1380 - NAT GAS Act

Post by Steptoe » Thu Feb 23, 2012 11:53 pm

Havcing had the Camaro on CNG in the past...
For comercial heavey vechiles I really wonder if those converting will not be kicking themselves afterwards..
The extra weight in tanks, and size of tanks to get any sensible range....
And the of coarse there is the filling station networks.... enough of them and close enough.

And of coarse did they think to look at other countries that had introduced cng ....the impact, and what eventually happened.
End of the day the only winners are the tank manufactures and installation people both vechile and filling stations.

Yep the numbers match up ..cheaper and more eco friendly to run....but is it at the end of the day cheaper with more fills and far longer to fill up....wheels dont turn .
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Re: HR 1380 - NAT GAS Act

Post by Frank » Fri Feb 24, 2012 10:31 am

The only practical way to run a heavy duty truck (like Class 8 ) on natural gas is with LNG. There have been some success stories with LNG but also a lot of very public failures.

The big issue with LNG is the fact that is a cryogenic liquid with resulting special handling needs. A LNG truck has typically uses 26" diameter LNG dewars in place of diesel tanks and this is the most expensive part of the conversion. A single LNG tank can easily cost more than $14,000, which obviously adds significantly to the cost of a conversion. Without a huge difference in the cost of fuels, subsidies are the only way that LNG trucks can have a reasonable payback. Right now, there is a huge difference between cost of pipeline natural gas and diesel fuel (likely to grow even bigger fairly quickly) but I think the cost difference will quickly evaporate once the NAT GAS Act subsidies are enacted.

One thing that doesn't get discussed about natural gas powered trucks is maintenance. Diesel engines are fairly low maintenance but LNG adds a new aspect to repairs and PM. With the dedicated LNG engines, how often do the spark plugs last and how much do replacements cost? For the Westport diesel-LNG dual fuel engines (the ones with the combined diesel & LNG injectors), how well do those injectors hold up in commercial use and how much does it cost to service them?

Also, for the dedicated CNG and LNG trucks, what happens when they run out of fuel? How much does it cost to tow the rig back to the filling station?

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Re: HR 1380 - NAT GAS Act

Post by Steptoe » Fri Feb 24, 2012 2:46 pm

Also, for the dedicated CNG and LNG trucks, what happens when they run out of fuel? How much does it cost to tow the rig back to the filling station?
Which goes back to my post above...a filling station network, is that viable?
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Re: HR 1380 - NAT GAS Act

Post by Frank » Fri Feb 24, 2012 5:38 pm

Filling stations and trucks are a chicken & egg situation but, since CNG and LNG stations are so expensive to build, I think there needs to be natural gas trucks first before the stations will follow. The natural gas industry is already planning to put in the stations on their own (see Clean Energy LNG Stations). Relatively few businesses take advantage of CNG when it is available from low-priced public stations and I think many might be more inclined to spend $100 a hundred times than to spend $5000 once. The funny thing is that Honda dealers located near a Buffalo NY CNG station ($1.27/GGE today) don't even promote the Civic GX.

Truck fleets (like UPS, FedEx, Waste Management) that return to a home base every day are among the first to switch to LNG and I'm sure they plan their routes carefully to avoid running out of fuel.

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