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Pickens, Drillers Promote Natural Gas Cars


By Elizabeth Souder
The Dallas Morning News
December 29, 2008


T. Boone Pickens doesn't often ride the city bus.

The billionaire made an exception last month when he invited reporters to ride
along with him on one of Fort Worth's natural gas-powered buses. The
made-for-media event was part of Mr. Pickens' promotion of natural gas as a
cleaner fuel than gasoline or diesel and a way to move America off foreign oil. .

The Department of Energy’s alternative refueling station locater
Information on natural gas vehicles from the Department of Energy

CNG Now, a Web site sponsored by Chesapeake Energy
Natural Gas Vehicle Coalition

For more about the Honda Civic GX "I believe we're looked at as not very smart
by the rest of the world," Mr. Pickens said in a speech to the Fort Worth
Chamber of Commerce. The U.S. imports most of its oil, but "we operate like we
have oil" of our own.

Mr. Pickens, who owns part of a company supplying natural gas for vehicles,
leads a chorus of industry executives asking American drivers to divorce oil and
marry natural gas.

They tout the benefits to consumers: Natural gas is clean, cheap and domestic.

They don't often talk about the benefits to the industry: All those vehicles on
the road could sop up the excess natural gas supply that's causing prices to sag.

When engineers figured out a few years ago how to drill for natural gas in the
Barnett Shale in North Texas, they created a production boom. Producers drilled
wells across Texas and then began drilling in shales across the country.

"Not even two hurricanes, with their corresponding gas output reductions, have
been enough to tighten the market," Merrill Lynch analysts said in a research
note in October, titled "Too Much Domestic Gas in the U.S."

In July, natural gas prices closed at $13.58 per million British thermal units,
a high for the year. By December, prices were below $6.

The obvious answer for producers is to cut supply. And they are, by idling rigs.
The first week of December, there were 1,428 active gas rigs in the U.S.,
according to Baker Hughes, down 15 from the prior week and down 54 rigs from
last year.

But if producers could whip up demand for their product by persuading Americans
to buy natural gas vehicles, companies could boost production and still enjoy
higher market prices.

Chesapeake Energy chief executive Aubrey McClendon is shilling for natural gas
vehicles. He's made television commercials and publicly supported Mr. Pickens'
energy plan.

He's also unleashed Chesapeake's unique marketing strategy on the subject. The
company helped create an advocacy Web site, www.cngnow .com, which encourages
people to write to lawmakers about the advantages of natural gas vehicles.
Meanwhile, the second-largest producer of the Barnett Shale field has recently
slashed its drilling and leasing budget to deal with plunging natural gas prices.

Work trucks

Canadian natural gas producer EnCana, also active in the Barnett Shale, is
supporting natural gas vehicles more quietly. The Canadian company converted
some work trucks to natural gas and diesel, and it bought five of the Honda
Civic GX, the only natural gas passenger car sold in the U.S.

Meghan Rice has been driving one of the Civics on her daily commute in Dallas
for a few weeks to help test its performance. Ms. Rice, EnCana's environmental
coordinator for Texas and Louisiana, wants to know if the car can save money,
cut pollution and – ultimately – generate profit.

"Kind of, all round, how can this benefit our community? And, as well, for
EnCana, could this be a source of potential revenue for us in the long run?" she
asked.

Still, the shift to natural gas as a transportation fuel is slow.

The fuel typically costs less than gasoline or diesel, but the equipment is more
expensive, and fueling stations are few and far between.

The compressed natural gas used in vehicles currently costs about $1.21 per
gallon equivalent in North Texas, if you have a home refueling station. Public
fueling stations charge more. Compare that with the average price of $1.55 for a
gallon of gasoline last week, based on AAA figures.

To gain that advantage, drivers must invest thousands of dollars for the
equipment. The Civic GX costs about $8,000 more than a comparable gasoline
Civic, and a home refueling station, with installation, costs about $6,000.
"I would say, sure, natural gas vehicles could increase natural gas demand,"
said Elizabeth Munger, regional sales consultant for the Civic GX.

"At the rate we're going, I don't think it's anything that should cause anyone
concern, because change is slow," she said.

Slow sellers

Lute Riley Honda is one of three Texas dealers that sell natural gas vehicles to
the public and the only dealer in North Texas. Adding natural gas vehicles to a
dealer's lineup is costly and doesn't bring in a lot of sales.

"We told the dealerships what they were up against. This car isn't going to be
selling like hotcakes," Ms. Munger said. So far, the Texas dealers have sold a
few hundred cars, she said.

According to Natural Gas Vehicles for America, an advocacy group, there are
130,000 natural gas vehicles in the U.S. and 8.7 million worldwide.

It will take a lot more natural gas vehicles to significantly boost demand for
the fuel. In 2007, vehicles accounted for 0.52 percent of natural gas demand in
the U.S. Even a 100-fold increase in the number of vehicles would account for
only 4 percent of demand, the group says.

Until the U.S. has more natural gas refueling stations, the vehicles only make
sense as commuter cars or fleet vehicles that return to base each night. The
cities of Dallas and Fort Worth operate natural gas vehicles, as does UPS.
Jared Hightower is a product manager at GreenField Compression. The company, a
unit of Atlas Copco Group, makes natural gas refueling stations at its factory
in Richardson for export around the world.

He estimates the industry installed about 75 stations last year. The company
needs to hit around 500 a year to significantly cut the cost, he said.
In fact, natural gas vehicles are still so unusual that GreenField doesn't
include them in its list of company cars that employees may drive.
Mr. Hightower spent six months cutting through corporate red tape to get
permission to order his white Civic GX.

Natural gas vehicles basics

Compressed natural gas can be used to fuel all vehicle types, from garbage
trucks to buses to Honda Civics. The vehicle must be built to accommodate
natural gas or converted.

•Compressed natural gas costs about $1.21 per gallon equivalent this month for
anyone with a home refueling station in North Texas. Public stations charge
more.

•A gallon of gasoline is the energy equivalent of 126.67 cubic feet of
compressed natural gas.

•The natural gas-fueled Honda Civic GX carries a sticker price of $25,190. A
home refueling station, with installation, costs around $6,000.

•The cities of Dallas and Fort Worth use natural gas vehicles and buses, as does
UPS.

•The main drawback for using natural gas in vehicles is the lack of fueling
stations. There are about a dozen stations in North Texas. The fuel works best
for fleet vehicles that return to base each evening for refueling.

•A compressed natural gas engine can drive heavy trucks and machinery, while
hybrid electric engines cannot. Many energy experts think we could rely on
natural gas to fuel big trucks in the future and use hybrids for passenger
vehicles.

 

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