States Trying to Jump Start Natural Gas Vehicle Market
The states are trying to jumpstart the natural
gas vehicle market. A coalition of 22 U.S. governors
is saying that their respective states will buy at
least 10,000 such cars and trucks if the automakers
will agree to produce them.
The premise is simple, involving the increased
production of natural gas here and the displacement
of overseas petroleum. Not only is the move geared
to make the United States more energy independent
but it would also facilitate the domestic natural
gas boom. With that, comes economic opportunity and
jobs -- not to mention automobiles that would spew
fewer toxins.
By using their buying power and by giving the
automotive industry guaranteed markets, the
governors say that the price of such vehicles would
drop. Right now, they run roughly $10,000 more than
their gasoline-guzzling counterparts. But the higher
cost is attributed to the fact that each internal
combustion-oriented car must be retrofitted. If
those cars came off the assembly line, their costs
would drop.
“We asked auto manufacturers to develop products
that were more affordable and functional,” says
Oklahoma Governor Mary Fallin, who spoke at the
2012 Governor’s Energy Conference in her home
state. “With the combined purchasing power of our 22
states, we successfully provided the incentive.”
Fallin, who helped spearhead the effort along with
Colorado Governor John Hickenlooper, says that by
making the switch, Oklahoma could ultimately save up
to $20,000 per vehicle in fuel costs. As for
Hickenlooper, he is predicting that natural
gas-fueled vehicles will take off in two years,
adding that they will incorporate public and private
fleets as well as individual purchases.
Most of the participating states are those with
proven shale gas reserves and include Pennsylvania,
West Virginia and Ohio. Ohio, for example, recently
held a day-long summit to figure out a way in which
the public and private sectors could cooperate to
advance alternatively-fueled cars and trucks. One
thought: a revolving loan fund, perhaps funded by
consumers and local governments.
Altogether, the
Natural Gas Vehicle Association of America says
that 120,000 such vehicles exist in the United
States, along with 15 million of those cars and
trucks around the world. It adds that there are more
than 1,000 fueling stations here -- just the
beginning with the emergence of the shale gas boom.
Tax Incentives
In fact, the U.S. Energy Information Administration
and the Potential Gas Committee are estimating that
this country has at least 100 years worth of proven
natural gas reserves. That equates to 2,179 trillion
cubic feet. To boot: The current future contract
price for natural gas is about $3 per million Btus
compared to $90 for a barrel of oil. In practical
terms, that’s the equivalent of $1.50-$2.00 a gallon
“Currently, natural gas vehicles cost more to buy
than comparable gasoline or diesel powered vehicles.
But they cost less to operate. The more miles a
vehicle is driven each year, the faster the payback
and the more likely the owners can justify the
investment,” says the association, before Congress.
To be sure, the barriers to entry are formidable --
but they are coming down. They include a lack of
vehicle offerings as well as a shortage of fueling
stations. To get there, the natural gas vehicle
group says that it will require enormous capital and
a belief that those alternatively-fueled cars and
trucks are the path forward. In the United States,
Honda has a car that runs exclusively on compressed
natural gas gas while Chrysler and General Motors
have ones that use both that and petroleum.
The trade group is lauding those governors who have
coalesced to get natural gas vehicles into the fast
lane. But it says that the federal government also
has a role here. To that end, it is lobbying for
tougher air emissions rules, federal fleet programs
and federal tax incentives to encourage purchases.
Earlier this year, Congress failed to pass
legislation that would have given tax incentives
worth $3.4 billion and $5 billion to long haul
trucks that convert from the traditional combustion
engine to those that run on natural gas.
Conservative groups opposed the bill, saying the
price tag remains too high and that those matters
are best left to the free market.
That measure won a majority of votes in the U.S.
Senate and had 180 co-sponsors in the U.S. House.
Supporters will go back to the drawing board in
effort to get the bill over hump -- with the backing
of President Obama, who would add $1 billion to
build infrastructure and provide tax credits for
those buying such vehicles.
If the overarching goal is to cut foreign oil
dependence while reducing the level of emissions,
natural gas vehicles have a distinct advantage. And
while that fuel is both cheap and abundant in the
United States, the task of displacing
petroleum-based automobiles remains monumental.
EnergyBiz Insider has been awarded the Gold for
Original Web Commentary presented by the American
Society of Business Press Editors. The column is
also the Winner of the 2011 Online Column category
awarded by Media Industry News, MIN. Ken Silverstein
has been named one of the Top Economics Journalists
by Wall Street Economists.
Twitter: @Ken_Silverstein
energybizinsider@energycentral.com
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